-----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, Wpl30y+E1TZy9RNUsVeM/WnGy/yC0O6AhY5whj6+SzOO4xVTeUh824cO2T1mUUWC 7wpIgklng+XHF1eX2OAdZQ== 0000950128-97-000981.txt : 19971001 0000950128-97-000981.hdr.sgml : 19971001 ACCESSION NUMBER: 0000950128-97-000981 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 47 FILED AS OF DATE: 19970930 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITADEL BROADCASTING CO CENTRAL INDEX KEY: 0001042742 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 860703641 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-36771 FILM NUMBER: 97688601 BUSINESS ADDRESS: STREET 1: 1015 EASTMAN DRIVE CITY: BIGFORK STATE: MT ZIP: 59911 BUSINESS PHONE: 6027315222 MAIL ADDRESS: STREET 1: 140 SOUTH ASH AVENUE CITY: TEMPE STATE: AZ ZIP: 85281 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITADEL LICENSE INC CENTRAL INDEX KEY: 0001044404 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-36771-01 FILM NUMBER: 97688602 BUSINESS ADDRESS: STREET 1: 1015 EASTMAN DR CITY: BIGFORK STATE: MT ZIP: 59911 BUSINESS PHONE: 6027315222 MAIL ADDRESS: STREET 1: 140 SOUTH ASH AVE CITY: TEMPE STATE: AZ ZIP: 85281 S-4 1 CITADEL BROADCASTING S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1997 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 CITADEL BROADCASTING COMPANY (Exact name of Registrant as specified in its charter) NEVADA 4832 86-0703641 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
CITADEL LICENSE, INC. (Exact name of Registrant as specified in its charter) NEVADA 4832 86-0837753 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
------------------------ 1015 Eastman Drive Bigfork, Montana 59911 (406) 837-5360 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Lawrence R. Wilson President and Chief Executive Officer Citadel Broadcasting Company 1015 Eastman Drive Bigfork, Montana 59911 (406) 837-5360 (Name, address, including zip code, and telephone number, including area code, of agent for service) COPIES TO: Bryan D. Rosenberger, Esq. Eckert Seamans Cherin & Mellott, LLC 42nd Floor, 600 Grant Street Pittsburgh, PA 15219 (412) 566-6000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] CALCULATION OF REGISTRATION FEE
========================================================================================================================= PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER NOTE OR SHARE(1) OFFERING PRICE(1) FEE - ------------------------------------------------------------------------------------------------------------------------- 10-1/4% Series B Senior Subordinated Notes due 2007 $101,000,000 100% $101,000,000 $30,606 - ------------------------------------------------------------------------------------------------------------------------- 13-1/4% Series B Exchangeable Preferred Stock, no par value 1,000,000(2) $100 $100,000,000 $30,304 - ------------------------------------------------------------------------------------------------------------------------- 13-1/4% Exchangeable Debentures due 2009(3) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------- Guarantee of 10-1/4% Series B Senior Subordinated Notes due 2007(4) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------- Guarantee of 13-1/4% Exchange Debentures due 2009(4) -- -- -- -- =========================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee. (2) The Registration Statement also covers such indeterminable number of shares of the Company's 13-1/4% Series B Exchangeable Preferred Stock (the "Series B Exchangeable Preferred Stock") as may be issued and delivered to holders of Series B Exchangeable Preferred Stock as an in-kind dividend payment on the Series B Exchangeable Preferred Stock. No additional registration fee is payable in respect thereof. (3) The Registration Statement covers the Company's 13-1/4% Exchange Debentures due 2009 (the "Exchange Debentures") to be issued and delivered to the holders of Series B Exchangeable Preferred Stock when and if the Company exchanges the Exchange Debentures for the Series B Exchangeable Preferred Stock and such indeterminable number of Exchange Debentures as may be paid in lieu of cash interest on the Exchange Debentures. Pursuant to Rule 457(i), no registration fee is required with respect to the Exchange Debentures. (4) Pursuant to Rule 457(n), no registration fee is required with respect to the Guarantees. ------------------------ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS 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. ================================================================================ 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1997 PROSPECTUS CITADEL LOGO CITADEL BROADCASTING COMPANY OFFER TO EXCHANGE 10-1/4% SENIOR SUBORDINATED NOTES DUE 2007 FOR 10-1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007 AND 13-1/4% SERIES A EXCHANGEABLE PREFERRED STOCK FOR 13-1/4% SERIES B EXCHANGEABLE PREFERRED STOCK THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED - -------------------------------------------------------------------------------- Citadel Broadcasting Company, a Nevada corporation (the "Company"), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letters of Transmittal (the "Exchange Offer"), to exchange (i) its 10-1/4% Series B Senior Subordinated Notes due 2007 (the "Series B Notes") for an equal principal amount of its outstanding 10-1/4% Senior Subordinated Notes due 2007 (the "Series A Notes"), of which an aggregate of $101,000,000 in principal is outstanding as of the date hereof, and (ii) one new share of its 13-1/4% Series B Exchangeable Preferred Stock (the "Series B Exchangeable Preferred Stock") for each outstanding share of its 13-1/4% Series A Exchangeable Preferred Stock (the "Series A Exchangeable Preferred Stock"), of which 1,000,000 shares are outstanding as of the date hereof. The form and the terms of each of the Series B Notes and the Series B Exchangeable Preferred Stock will be the same as the form and terms of each of the Series A Notes and the Series A Exchangeable Preferred Stock, respectively, except that (i) each of the Series B Notes and the Series B Exchangeable Preferred Stock will bear a "Series B" designation and will bear different CUSIP Numbers from the Series A Notes and the Series A Exchangeable Preferred Stock, (ii) the Series B Notes and the Series B Exchangeable Preferred Stock will have been registered under the Securities Act of 1933, as amended (the "Securities Act"), and, therefore, will not bear legends restricting their transfer, and (iii) holders of the Series B Notes and the Series B Exchangeable Preferred Stock will not be entitled to certain rights of holders of Series A Notes and Series A Exchangeable Preferred Stock, respectively, under the Registration Rights Agreements (as defined), which rights will terminate as to holders of the Series B Notes and Series B Exchangeable Preferred Stock upon consummation of the Exchange Offer. Series B Notes will evidence the same debt as the Series A Notes and will be entitled to the benefits of the indenture (the "Notes Indenture") dated as of July 1, 1997 governing the Series A Notes and the Series B Notes. The Series A Notes and the Series B Notes are sometimes referred to herein collectively as the "Notes." The Series A Exchangeable Preferred Stock and the Series B Exchangeable Preferred Stock are sometimes referred to herein collectively as the "Exchangeable Preferred Stock." The Series A Notes and the Series A Exchangeable Preferred Stock are sometimes referred to herein collectively as the "Series A Securities." The Series B Notes and the Series B Exchangeable Preferred Stock are sometimes referred to herein collectively as the "Series B Securities." Interest on the Series B Notes will accrue from and including their issuance date. Additionally, interest on the Series B Notes will accrue from the last interest payment date on which interest was paid on the Series A Notes surrendered in exchange therefor or, if no interest has been paid on the Series A Notes, from the date of original issuance of such Series A Notes to but not including the issuance date of the Series B (continued on next page) SEE "RISK FACTORS" WHICH BEGINS ON PAGE 20 OF THIS PROSPECTUS, FOR A DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR SERIES A SECURITIES IN THE EXCHANGE OFFER. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1997. 3 Notes. Interest on the Notes is payable semi-annually on January 1 and July 1 of each year, commencing January 1, 1998. The Notes are unconditionally guaranteed (the "Subsidiary Notes Guarantees") on a senior subordinated basis by Citadel License, Inc., a wholly owned subsidiary of the Company ("Citadel License"), and will be guaranteed by any future Restricted Subsidiaries (as defined). The Notes are unsecured senior subordinated obligations of the Company and are subordinated to all Senior Debt (as defined) of the Company, including indebtedness under the Credit Facility (as defined). As of June 30, 1997, on a pro forma basis, after giving effect to the Recent 1997 Acquisitions (as defined), the Pending Transactions (as defined) and the sale of the Series A Securities (the "Original Offerings"), the aggregate amount of Senior Debt of the Company would have been approximately $113.6 million. The Company has not issued, and does not have any firm arrangement to issue, any significant Debt (as defined) that would be subordinate to the Notes, except as described below in connection with the exchange, at the Company's option, of the Exchangeable Preferred Stock for the Exchange Debentures (as defined). Dividends on the Series B Exchangeable Preferred Stock will accumulate from and including its issuance date. Additionally, dividends on the Series B Exchangeable Preferred Stock will accumulate from the last dividend payment date on which dividends were paid on the Series A Exchangeable Preferred Stock surrendered in exchange therefor or, if no dividends have been paid on the Series A Exchangeable Preferred Stock, from the date of original issuance of such Series A Exchangeable Preferred Stock to but not including the issuance date of the Series B Exchangeable Preferred Stock. Dividends on the Exchangeable Preferred Stock are payable semi-annually on January 1 and July 1 of each year, commencing January 1, 1998, at a rate per annum of 13-1/4% of the liquidation preference per share. Dividends may be paid, at the Company's option, on any dividend payment date occurring on or prior to July 1, 2002, either in cash or in additional shares of Exchangeable Preferred Stock. Thereafter, all dividends will be payable only in cash. The Notes are redeemable, in whole or in part, at the option of the Company, at any time on or after July 1, 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior to July 1, 2000, the Company may, at its option, redeem a portion of the Notes with the net proceeds of one or more Public Equity Offerings (as defined), at a redemption price equal to 110.25% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided, however, that after any such redemption there is outstanding at least $75.0 million aggregate principal amount of the Notes. Upon the occurrence of a Change of Control (as defined), the Company will be required to make an offer to purchase all of the then outstanding Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date. See "Description of the Notes." The Exchangeable Preferred Stock is redeemable, in whole or in part, at the option of the Company, at any time on or after July 1, 2002, at the redemption prices set forth herein, plus accumulated and unpaid dividends, if any, to the date of redemption. In addition, at any time prior to July 1, 2000, the Company may, at its option, redeem up to an aggregate of 35% of the shares of Exchangeable Preferred Stock with the net proceeds of one or more Public Equity Offerings, at a redemption price equal to 113.25% of the liquidation preference thereof, plus accumulated and unpaid dividends, if any, to the date of redemption; provided, however, that after any such redemption there is outstanding at least $75.0 million aggregate liquidation preference of the Exchangeable Preferred Stock. The Company is required, subject to certain conditions, to redeem all of the Exchangeable Preferred Stock outstanding on July 1, 2009, at a redemption price equal to 100% of the liquidation preference thereof, plus accumulated and unpaid dividends, if any, to the date of redemption. Upon the occurrence of a Change of Control, the Company will be required to make an offer to purchase all of the then outstanding shares of Exchangeable Preferred Stock at a price equal to 101% of the liquidation preference thereof, plus accumulated and unpaid dividends, if any, to the repurchase date. Subject to certain conditions, the Exchangeable Preferred Stock is exchangeable in whole, but not in part, at the option of the Company, on any dividend payment date, for the Company's 13-1/4% Subordinated Exchange Debentures due 2009 (including any such securities paid in lieu of cash interest, as described herein, the "Exchange Debentures"). Interest on the Exchange Debentures will be payable at a rate of 13-1/4% (continued on next page) 4 per annum and will accrue from the date of issuance thereof. Interest on the Exchange Debentures will be payable semi-annually in cash or, at the option of the Company, on or prior to July 1, 2002, in additional Exchange Debentures, on each January 1 and July 1, commencing on the first such date after the exchange of the Exchangeable Preferred Stock for the Exchange Debentures. The Exchange Debentures mature on July 1, 2009, and are redeemable, in whole or in part, at the option of the Company, at any time on or after July 1, 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior to July 1, 2000, the Company may, at its option, redeem up to an aggregate of 35% of the aggregate principal amount of the Exchange Debentures with the net proceeds of one or more Public Equity Offerings, at a redemption price equal to 113.25% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided, however, that after any such redemption there is outstanding at least $75.0 million aggregate principal amount of the Exchange Debentures. Upon the occurrence of a Change of Control, the Company will be required to make an offer to purchase all of the then outstanding Exchange Debentures at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date. The Exchange Debentures will be unsecured subordinated obligations of the Company and will be subordinated to all existing and future Senior Debt and Senior Subordinated Debt (as defined), including the Notes, of the Company and will rank pari passu with or senior to all future Debt of the Company that expressly provides that it ranks pari passu with or junior to the Exchange Debentures. As of June 30, 1997, on a pro forma basis, after giving effect to the Recent 1997 Acquisitions, the Pending Transactions and the Original Offerings, the aggregate amount of Senior Debt and Senior Subordinated Debt (including the Notes) of the Company would have been approximately $214.6 million, and no Debt of the Company would have been pari passu with or subordinated to the Exchange Debentures. See "Description of the Exchangeable Preferred Stock and Exchange Debentures." The Company will accept for exchange any and all validly tendered Series A Securities not withdrawn prior to 5:00 p.m., New York City time, on , 1997, unless extended by the Company in its sole discretion (the "Expiration Date"). Tenders of Series A Securities may be withdrawn at any time prior to the Expiration Date. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Series A Notes or any minimum number of shares of Series A Exchangeable Preferred Stock being tendered for exchange. In the event the Company terminates the Exchange Offer and does not accept for exchange any Series A Securities, the Company will promptly return all previously tendered Series A Securities to the holders thereof. The Exchange Offer is subject to certain customary conditions. See "The Exchange Offer--Conditions." The Company has agreed to pay all expenses incident to the Exchange Offer. The Company will not receive any proceeds from the Exchange Offer. The Series A Securities were originally issued and sold on July 3, 1997 in transactions which were not registered under the Securities Act in reliance upon exemptions from the registration requirements of the Securities Act. Accordingly, the Series A Securities may not be reoffered, resold or otherwise pledged, hypothecated or transferred in the United States unless registered under the Securities Act or unless an applicable exemption from the registration requirements of the Securities Act is available. The Series B Securities are being offered hereunder to satisfy the obligations of the Company under the Registration Rights Agreements. See "The Exchange Offer--Purpose and Effect of Exchange Offer." Based on no-action letters issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties, the Company believes the Series B Notes and the Series B Exchangeable Preferred Stock issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without further registration under the Securities Act and without delivery of a prospectus that satisfies the requirements of Section 10 of the Securities Act, provided that such Series B Securities are acquired in the ordinary course of such holder's business and that such holder does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of such Series B Securities. Eligible holders wishing to accept the Exchange Offer must represent (continued on next page) 5 to the Company that such conditions have been met. Each broker-dealer that receives Series B Securities pursuant to the Exchange Offer in exchange for Series A Securities acquired for its own account as a result of market-making or other trading activities (a "Participating Broker-Dealer") may be a statutory underwriter and must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Series B Securities. The Letters of Transmittal state that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Series B Securities received in exchange for Series A Securities where such Series A Securities were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 120 days after the Expiration Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." Holders of Series A Notes and Series A Exchangeable Preferred Stock whose Series A Notes and Series A Exchangeable Preferred Stock are not tendered and accepted in the Exchange Offer will continue to hold such Series A Notes and Series A Exchangeable Preferred Stock and will be entitled to all the rights and preferences and will be subject to the limitations applicable thereto under the Notes Indenture governing the Series A Notes and the Series B Notes and the certificate of designation governing the Series A Exchangeable Preferred Stock and Series B Exchangeable Preferred Stock (the "Certificate of Designation"), respectively. Following consummation of the Exchange Offer, the holders of Series A Notes and Series A Exchangeable Preferred Stock will continue to be subject to the existing restrictions upon transfer thereof under the Securities Act. There has been no previous public market for the Series A Securities or the Series B Securities. The Company does not intend to list the Series B Securities on any securities exchange or to seek approval for quotation through any automated quotation system. There can be no assurance that an active market for the Series B Securities will develop. See "Risk Factors--Lack of Established Trading Market." Moreover, to the extent that Series A Securities are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Series A Securities could be adversely affected. THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF SERIES A NOTES OR SERIES A EXCHANGEABLE PREFERRED STOCK IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. 6 CERTAIN OF THE MATTERS DISCUSSED UNDER "PROSPECTUS SUMMARY," "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," "BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS CONTAIN FORWARD-LOOKING STATEMENTS CONCERNING THE COMPANY'S OPERATIONS, ECONOMIC PERFORMANCE AND FINANCIAL CONDITION, INCLUDING, AMONG OTHER THINGS, THE COMPANY'S BUSINESS STRATEGY. THESE STATEMENTS ARE BASED ON THE COMPANY'S EXPECTATIONS AND ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED DUE TO A NUMBER OF FACTORS, INCLUDING THOSE IDENTIFIED UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. MARKET AND STATION DATA Unless otherwise indicated herein, (i) all metropolitan statistical area ("MSA") rank information and information concerning the number of stations and station groups in a market have been obtained from Investing in Radio 1997 Market Report (1st ed.) (the "1997 BIA Report") published by BIA Publications, Inc. ("BIA"); (ii) all audience share and primary demographic share and rank information have been obtained from the Spring 1997 Radio Market Report (the "Arbitron Reports") published by The Arbitron Company ("Arbitron"); (iii) station and station group market revenue share and rank information for the Albuquerque, Colorado Springs, Eugene, Modesto, Reno, Salt Lake City and Spokane markets are given for the first six months of 1997 and have been obtained from the June 1997 Miller, Kaplan Market Revenue Report, a publication of Miller, Kaplan, Arase & Co., Certified Public Accountants; (iv) station and station group market revenue share and rank information for the Allentown/Bethlehem, Billings, Boise, Harrisburg, Little Rock, Medford, Tri-Cities, Wilkes-Barre/Scranton and York markets are given for 1996 and have been obtained from BIA's -- Master Access Radio Database, version 2.0 (data as of June 26, 1997); (v) station and station group market revenue share and rank information for the Providence market is given for the first six months of 1997 and has been obtained from the June 1997 Radio Revenue Report, a publication of Hungerford, Aldrin, Nichols & Carter, P.C., Certified Public Accountants ("Hungerford"); (vi) market revenue is given for the period indicated and, with respect to a particular market, has been obtained from the same source from which station group market revenue share and rank information have been obtained for such market, except that market revenue data for 1996 and 1995 for the Albuquerque, Colorado Springs, Eugene, Modesto, Reno, Salt Lake City and Spokane markets and for the Providence market have been obtained from the December 1996 Miller, Kaplan Market Revenue Report and Hungerford's December 1996 Radio Revenue Report, respectively; and (vii) unless otherwise noted, information concerning the number of viable stations in a market has been obtained from Duncan's Radio Market Guide (1997 ed.) ("Duncan's") compiled by Duncan's American Radio, Inc. Duncan's defines "viable stations" as stations which are active and viable competitors for advertising dollars in the market. If the total number of viable stations within a market was not a whole number, that number was rounded up to the nearest whole number. A radio station's designated market may be different from its community of license. If a radio station's call letters have changed during the time the Company has owned or operated the station, the station is described herein by its call letters currently in use, unless otherwise indicated. "Broadcast cash flow" consists of operating income (loss) before depreciation, amortization and corporate expenses. "EBITDA" consists of operating income (loss) before depreciation and amortization. Although broadcast cash flow and EBITDA are not measures of performance calculated in accordance with generally accepted accounting principles ("GAAP"), management believes that they are useful in evaluating the Company because they are measures widely used in the broadcast industry to evaluate a radio company's operating performance. However, broadcast cash flow and EBITDA should not be considered in isolation or as substitutes for net income, cash flows from operating activities and other income or cash flow data prepared in accordance with GAAP as a measure of liquidity or profitability. i 7 (This page intentionally left blank) 8 PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in connection with, the more detailed information and financial statements and notes thereto appearing elsewhere in this Prospectus. Unless the context otherwise requires, the term the "Company" refers to Citadel Broadcasting Company and its subsidiary, and the term "Citadel Communications" refers to Citadel Communications Corporation, the Company's parent. Unless the context otherwise requires, the term "operate," as used in connection with the Company's radio station activities, includes the provision of programming and the sale of advertising pursuant to local marketing agreements ("LMA") or the sale of advertising pursuant to joint sales agreements ("JSA"). Investors should consider carefully the information set forth under "Risk Factors" in this Prospectus. Certain terms used in this Prospectus are defined herein under the caption "Glossary of Certain Defined Terms." THE COMPANY The Company is a radio broadcasting company that focuses on acquiring, developing and operating radio stations in mid-sized markets. Upon completion of the Pending Transactions (as defined), the Company will own or operate 68 FM and 31 AM radio stations in 18 markets and will have the right to construct one additional FM station, and the Company's stations will comprise the leading radio station group in terms of revenue share in 13 of those markets. The Company's primary strategy is to secure and maintain a leadership position in the markets it serves and to expand into additional mid-sized markets where it believes a leadership position can be obtained. Upon entering a market, the Company seeks to acquire additional stations which, when integrated with its existing operations, allow it to reach a wider range of demographic groups that appeal to advertisers, enhance operating performance and achieve substantial cost savings. Since January 1, 1993, the Company has completed 17 station acquisitions in markets where it already owned stations, and it is currently party to agreements to acquire nine additional stations in markets in which it currently owns radio stations. The Company chooses programming formats for its stations that are intended to maximize each station's cash flow. The Company's stations broadcast a number of formats including country, news/talk, adult contemporary, rock and oldies, each of which is designed to appeal to a specific audience in each market. The Company's portfolio of stations is diversified in terms of format, target demographics and geographic location. Because of the size of its portfolio and its individual radio station groups, the Company believes it is not unduly reliant upon the performance of any single station. The Company also believes that the diversity of its portfolio of radio stations helps insulate the Company from downturns in specific markets and changes in format preferences. The Company believes that mid-sized markets represent attractive opportunities because, as compared to the 50 largest markets in the United States, they are generally characterized by (i) lower radio station purchase prices as a multiple of broadcast cash flow, (ii) fewer sophisticated and well-capitalized competitors, including both radio and competing advertising media such as newspapers and television and (iii) less direct format competition due to the smaller number of stations in any given market. The Company believes that the attractive operating characteristics of mid-sized markets coupled with the opportunity to establish or expand in-market radio station groups create the potential for substantial revenue growth and cost efficiencies. As a result, management seeks to achieve broadcast cash flow margins that are comparable to the higher margins that historically were generally achievable only in the 50 largest markets. STATION PORTFOLIO The Company currently owns 49 FM and 22 AM radio stations, sells advertising on behalf of four FM and five AM radio stations pursuant to JSAs and provides programming and sells advertising on behalf of three FM radio stations and one AM radio station pursuant to LMAs. The Company has entered into agreements to purchase (the "Pending Acquisitions") six FM and three AM radio stations in its existing markets and 11 FM and four AM radio stations, one FM license and related assets in new markets. In 1 9 addition, the Company has entered into agreements to sell (such sales collectively with the Pending Acquisitions, the "Pending Transactions") four FM and three AM radio stations. Upon completion of the Pending Transactions, the Company will own 62 FM and 26 AM radio stations in 18 mid-sized markets, operate six FM and five AM additional radio stations in its markets pursuant to LMAs or JSAs and have the right to construct one additional FM radio station. The following chart sets forth certain information with respect to the radio stations owned or operated by the Company after giving effect to the Pending Transactions:
COMBINED NUMBER OF COMBINED MARKET STATIONS MARKET REVENUE ----------- AUDIENCE -------------- MSA RANK FM AM SHARE(1) SHARE RANK -------- --- --- --------- ----- ---- EXISTING MARKETS(2): Albuquerque, NM.................................. 71 5 3 38.0% 58.0 % 1 Allentown/Bethlehem, PA(3)(6).................... 65 2 0 16.9 24.1 2 Billings, MT..................................... 238 4 1 50.5 58.3 1 Colorado Springs, CO(4).......................... 95 5 2 43.0 63.5 1 Eugene, OR....................................... 146 2 1 18.7 32.4 1 Harrisburg, PA(5)................................ 73 1 0 7.4 12.2 4 Medford, OR...................................... 201 4 2 30.9 55.3 1 Modesto, CA...................................... 122 4 1 31.6 62.2 1 Providence, RI(6)................................ 31 4 2 26.4 36.4 1 Quincy, IL....................................... NA 3 1 NA NA NA Reno, NV......................................... 131 3 1 36.5 47.4 1 Salt Lake City, UT(6)............................ 35 4 2 20.1 22.7 1 Spokane, WA(4)................................... 87 4 4 43.1 53.6 1 Tri-Cities, WA................................... 200 4 1 28.0 40.2 1 Wilkes-Barre/Scranton, PA(6)(7).................. 62 7 5 23.6 33.1 2 York, PA(5)...................................... 103 1 1 6.9 11.1 3 -- -- TOTAL..................................... 57 27 NEW MARKETS: Boise, ID(8)..................................... 129 4 1 29.1% 36.4 % 1 -- -- Little Rock, AR(9)............................... 82 8 3 29.9 37.9 1 -- -- TOTAL..................................... 12 4 -- -- TOTAL STATIONS............................ 69 31 == ==
- --------------- NA -- Information not available. (1) Combined market audience share has been derived from Arbitron surveys of persons ages 25 to 54, listening Monday through Sunday, 6:00 a.m. to 12:00 midnight. (2) A market is not included if the Company has entered into an agreement to sell all of its radio stations in such market. (3) Does not include one station to be sold. (4) Includes four stations in Colorado Springs and four stations in Spokane for which the Company sells advertising under a JSA. (5) Harrisburg and York are adjacent markets with numerous overlapping radio signals. (6) Includes one station in Providence, two stations in Salt Lake City, five stations in Wilkes-Barre/Scranton and one station in Allentown/Bethlehem with respect to which the Company has entered into agreements to acquire. (7) Includes two stations for which the Company provides programming and sells advertising under an LMA and one station for which the Company sells advertising under a JSA (all of which the Company has an option to acquire). (8) The Company has entered into agreements to acquire all of these stations. (9) The Company has entered into agreements to acquire all of these stations. One station is not yet operational. Three of these stations serve the surrounding communities outside of Little Rock. 2 10 OPERATING STRATEGY In order to maximize its radio stations' appeal to advertisers, and thus the revenue and cash flow of its stations, the Company has implemented the following strategies: Ownership of Strong Station Groups. The Company seeks to secure and maintain a leadership position in the markets it serves through the ownership of multiple stations in a market. By strategically coordinating programming, promotional and selling strategies among a group of local stations, the Company attempts to capture a wide range of demographic groups which appeal to advertisers. The Company believes that the diversification of its programming formats and its collective inventory of available advertising time strengthen relationships with advertisers and increase the Company's ability to maximize the value of its inventory. The Company believes that its ability to leverage the existing programming and sales resources of its strong station groups enables it to enhance the growth potential of both new and underperforming stations while reducing the risks associated with undertaking means of improving station performance, including launching new formats. The Company also believes that operating leading station groups allows it to attract and retain talented local management teams, on-air personalities and sales personnel, which it believes are essential to operating success. Furthermore, the Company seeks to achieve substantial cost savings through the consolidation of facilities, management, sales and administrative personnel and operating resources (such as on-air talent, programming and music research) and through the reduction of other redundant expenses. The Company believes that having multiple stations in a market also enhances its ability to sell the advantages of radio advertising versus other advertising media. Aggressive Sales and Marketing. The Company seeks to maximize its share of local advertising revenue in each of its markets by implementing and maintaining strong sales and marketing programs. The Company provides extensive training for its sales personnel through in-house sales and time management programs, and it retains various independent consultants who hold frequent seminars for and are available for consultation with the Company's sales personnel. The Company also emphasizes regular, informal exchanges of ideas among its management and sales personnel across its various markets. Because advertising time is perishable, the Company seeks to maximize its revenue through the utilization of sophisticated inventory management techniques that allow it to provide its sales personnel with frequent price adjustments based on regional and local market conditions. To further strengthen its relationships with advertisers, the Company also offers and markets its ability to create customer traffic through on-site events staged at, and broadcast from, an advertiser's business. Targeted Programming. To maintain or improve its position in each market, the Company combines extensive market research with an assessment of its competitors' vulnerabilities in order to identify significant and sustainable target audiences. The Company then tailors the programming, marketing and promotion of each station to maximize its appeal to its target audience. Within each market, the Company attempts to build strong franchises through (i) the creation of distinct, highly visible profiles for its on-air personalities, particularly those broadcasting during morning "drive time" traditionally between 6:00 a.m. and 10:00 a.m., (ii) the formulation of recognizable "brand names" for select stations such as the "Bull" and "Cat Country" and (iii) active involvement in community events and charities. The Company has achieved particular success in programming country formats and currently operates the leading country station in ten of its 13 existing markets where it programs country music. Decentralized Operations. The Company believes that radio is primarily a local business and that much of its success is the result of the efforts of regional and local management and staff. Accordingly, the Company decentralizes its operations. Each of the Company's regional and local station groups is managed by a team of experienced broadcasters who understand radio format trends, demographics and competitive opportunities of the particular market. Regional and local managers are responsible for preparing annual operating budgets, and a portion of their compensation is linked to meeting or surpassing operating targets. Corporate management approves each station group's annual operating budgets and imposes strict financial reporting requirements to track station performance. Corporate management is responsible for long range planning, establishing Company policies and serving as a resource to local management. The Company has implemented local sales reporting systems at each station to provide local and corporate management with daily sales information. 3 11 ACQUISITION STRATEGY As the Company has achieved a leading position in most of the markets it currently serves, the Company expects that, in addition to acquiring additional radio stations in existing markets, it will emphasize the acquisition of radio stations in new markets which present opportunities for the Company to apply its operating strategies. The Company believes that such acquisitions will enable it to achieve, among other things, greater size and geographic diversification. The Company anticipates that it will continue to focus on mid-sized markets rather than attempt to expand into larger markets. Although competition among potential purchasers for suitable radio station acquisitions is intense throughout the United States, the Company believes that less competition exists, particularly from the larger radio operators, in mid-sized markets as compared to larger markets, affording the Company relatively more attractive acquisition opportunities in these markets. There can be no assurance, however, that the Company will be able to identify suitable and available acquisition opportunities or that it will be able to consummate any such acquisition opportunities. In evaluating acquisition opportunities in new markets, the Company assesses its potential, over time, to build leading radio station groups in those markets. The Company believes that the creation of strong station groups in local markets is essential to operating success and generally will not consider entering a new market unless it believes it can acquire multiple stations in the market. The Company also analyzes a number of additional factors which it believes are important to its success, including the number and quality of commercial radio signals broadcasting in the market, the nature of the competition in the market, the Company's ability to improve the operating performance of the radio station or stations under consideration and the general economic conditions of the market. The Company believes that its acquisition strategy, if properly implemented, could have a number of benefits, including (i) diversification of revenue and broadcast cash flow across a greater number of stations and markets, (ii) improved broadcast cash flow margins through the consolidation of facilities and the elimination of redundant expenses, (iii) enhanced utilization of its senior management team, (iv) improved leverage in various key vendor negotiations, (v) greater appeal to top industry management talent and (vi) increased overall scale which should facilitate the Company's capital raising activities. CORPORATE HISTORY AND RECENTLY COMPLETED TRANSACTIONS The Company was incorporated in Nevada in 1991, and in 1992 it acquired all of the radio stations then owned or operated by Citadel Associates Limited Partnership and Citadel Associates Montana Limited Partnership (collectively, "Predecessor") and certain other radio stations. Lawrence R. Wilson, Chief Executive Officer of the Company, was a co-founder and one of the two general partners of Predecessor. In 1993, Citadel Communications was incorporated and the Company was reorganized as a wholly owned subsidiary of Citadel Communications. The Company acquired ownership of additional radio stations in each of 1993, 1994, 1996 and 1997. On July 3, 1997, the Company purchased all of the issued and outstanding capital stock of Tele-Media Broadcasting Company ("Tele-Media") which owned or operated 16 FM and ten AM radio stations in Pennsylvania, Rhode Island and Illinois (the "Tele-Media Acquisition"). The purchase price for the Tele-Media Acquisition was approximately $114.4 million, which included the repayment of certain indebtedness of Tele-Media and the redemption of certain corporate bonds and warrants of Tele-Media (collectively, the "Tele-Media Bonds"). Upon consummation of the Tele-Media Acquisition, Tele-Media was merged with and into the Company. Effective as of January 1, 1997, Citadel Communications acquired Deschutes River Broadcasting, Inc. ("Deschutes") which owned 18 radio stations in Montana, Oregon and Washington. The total consideration paid was approximately $26.0 million. Following the acquisition, Deschutes was operated as a sister company to the Company until June 20, 1997 when Deschutes was merged with and into the Company (the "Subsidiary Merger"). The Company also acquired (i) two FM radio stations and one AM radio station in Albuquerque, New Mexico and one FM radio station in Modesto, California in four separate transactions in June 1996; (ii) one FM radio station in Colorado Springs, Colorado and one FM radio station in Albuquerque, New Mexico in 4 12 two separate transactions in October 1996; (iii) two FM radio stations and one AM radio station in Salt Lake City, Utah in two separate transactions in February 1997 and April 1997; (iv) one FM radio station in Reno, Nevada in July 1997; (v) one FM radio station in Tri-Cities, Washington in September 1997; and (vi) one FM radio station in Providence, Rhode Island in September 1997. Prior to their acquisition by the Company, seven of these stations had been operated by the Company under an LMA or JSA. The aggregate purchase price paid for these stations and related assets was approximately $58.4 million, consisting of approximately $54.2 million in cash and the balance in shares of preferred stock of Citadel Communications. The Tele-Media Acquisition and the other acquisitions which have occurred since June 30, 1997 are collectively referred to herein as the "Recent 1997 Acquisitions." The Company sold the Series A Securities on July 3, 1997 in order to finance acquisitions by the Company, repay certain indebtedness of the Company and provide cash for working capital purposes. Concurrently with the closing of the Original Offerings, the Company entered into amendments to the Credit Facility which allow for borrowings of up to $150.0 million (although the actual amount which may be borrowed under the Credit Facility is limited under the Certificate of Designation, the Notes Indenture and, if the Exchange Debentures are issued, the indenture governing the Exchange Debentures (the "Exchange Indenture")). See "Description of Indebtedness -- Existing Loan Agreement," "Description of the Notes" and "Description of the Exchangeable Preferred Stock and Exchange Debentures." THE PENDING TRANSACTIONS The Company has entered into various agreements to purchase (collectively, the "In-Market Acquisitions") (i) one FM radio station in Providence, Rhode Island, (ii) one FM radio station in Allentown/ Bethlehem, Pennsylvania (which acquisition would include the sale by the Company of one AM radio station in Allentown/Bethlehem), (iii) three FM and two AM radio stations in Wilkes-Barre/Scranton, Pennsylvania and (iv) one FM radio station and one AM radio station in Salt Lake City, Utah (collectively, the "In-Market Acquisition Stations"). The Company currently operates six of the In-Market Acquisition Stations under LMAs. The purchase price for these stations is approximately $37.2 million, consisting of approximately $36.7 million in cash and the assets of one AM radio station. The Company has also entered into various agreements with respect to several transactions (collectively, the "Little Rock Acquisitions") which, if consummated would result in the Company owning an aggregate of seven FM and three AM radio stations and the right to construct one FM radio station in Little Rock, Arkansas (collectively, the "Little Rock Stations"). The Company would also acquire ownership of the Arkansas Radio Network, a state-wide news network. The aggregate purchase price for the Little Rock Stations, the Arkansas Radio Network and certain related assets is approximately $37.9 million, consisting of approximately $27.9 million in cash and the balance in shares of a newly created series of preferred stock of Citadel Communications. The Company operates six of the Little Rock Stations under LMAs pending their acquisition. In addition, the Company has entered into various agreements to purchase (the "Boise Acquisition") four FM radio stations and one AM radio station in Boise, Idaho (collectively, the "Boise Stations"). The purchase price for such stations is approximately $28.5 million in cash. The Company has entered into an agreement to sell its two FM radio stations in Johnstown, Pennsylvania and its two FM and two AM radio stations in State College, Pennsylvania for the aggregate sale price of approximately $8.5 million in cash. In addition, the Company has entered into an agreement to sell one AM radio station in Allentown/Bethlehem in connection with the pending acquisition of one FM radio station in such market. See "The Pending Transactions." 5 13 THE EXCHANGE OFFER Registration Rights Agreement.................. The Series A Securities were originally sold by the Company on July 3, 1997 in transactions exempt from the registration requirements of the Securities Act. The Series A Exchangeable Preferred Stock and $100,000,000 aggregate principal amount of the Series A Notes were sold to Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities Inc. (collectively, the "Initial Purchasers") pursuant to a Purchase Agreement dated as of June 30, 1997 by and among the Company, Citadel Communications and the Initial Purchasers (the "Purchase Agreement"). The Initial Purchasers subsequently sold such Series A Notes and Series A Exchangeable Preferred Stock to qualified institutional buyers in reliance on Rule 144A under the Securities Act. The Company issued $1,000,000 aggregate principal amount of the Series A Notes to the holders of the Tele-Media Bonds in connection with the closing of the Tele-Media Acquisition. The Company, Citadel License and the Initial Purchasers entered into a Notes Registration Rights Agreement dated July 3, 1997 (the "Notes Registration Rights Agreement") and a Preferred Stock Registration Rights Agreement dated July 3, 1997 (the "Preferred Stock Registration Rights Agreement" and, together with the Notes Registration Rights Agreement, the "Registration Rights Agreements") which grants the holders of the Series A Notes and the Series A Exchangeable Preferred Stock, respectively, certain exchange and registration rights. The Exchange Offer is intended to satisfy such rights. The holders of the Series B Securities are not entitled to any exchange or registration rights with respect to the Series B Securities. See "The Exchange Offer-- Purpose and Effect of the Exchange Offer." The Exchange Offer......... The Company is offering to exchange (i) an equal principal amount of Series B Notes for each such principal amount of Series A Notes that are properly tendered and accepted and (ii) one share of Series B Exchangeable Preferred Stock for each share of Series A Exchangeable Preferred Stock that is properly tendered and accepted. The Company will issue Series B Securities on or promptly after the Expiration Date. As of the date hereof, there is $101,000,000 aggregate principal amount of Series A Notes outstanding and there are 1,000,000 shares of Series A Exchangeable Preferred Stock outstanding. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Series A Notes or any minimum number of shares of Series A Exchangeable Preferred Stock being tendered for exchange. Based on no-action letters issued by the staff of the Commission to third parties, the Company believes the Series B Notes and the Series B Exchangeable Preferred Stock issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without further registration under the Securities Act and without delivery of a prospectus that satisfies the requirements of Section 10 of the Securities Act, provided that such Series B Securities are acquired in the ordinary course of such holder's business and that such holder does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of such Series B Securities. 6 14 Each Participating Broker-Dealer that receives Series B Securities for its own account pursuant to the Exchange Offer in exchange for Series A Securities where such Series A Securities were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities may be a statutory underwriter and must acknowledge that it will deliver a prospectus in connection with any resale of such Series B Securities. The Letters of Transmittal state that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by Participating Broker-Dealers in connection with such resales of Series B Securities. The Company has agreed that, for a period of 120 days after the Expiration Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." Any holder who tenders in the Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the Series B Securities could not rely on the position of the staff of the Commission communicated in no-action letters and, in the absence of an exception therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Failure to comply with such requirements in such instance may result in such holder incurring liability under the Securities Act for which the holder is not indemnified by the Company. Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1997, unless the Exchange Offer is extended by the Company in its reasonable discretion, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. Accrued Interest on the Notes...................... Interest on the Series B Notes will accrue from and including their issuance date. Additionally, interest on the Series B Notes will accrue from the last interest payment date on which interest was paid on the Series A Notes surrendered in exchange therefor or, if no interest has been paid on the Series A Notes, from the date of original issuance of such Series A Notes to but not including the issuance date of the Series B Notes. Accordingly, holders who exchange their Series A Notes will receive the same interest payment on the next interest payment date (expected to be January 1, 1998) that they would have received had they not accepted the Exchange Offer. Accumulated Dividends on the Exchangeable Preferred Stock.................... Dividends on the Series B Exchangeable Preferred Stock will accumulate from and including its issuance date. Additionally, dividends on the Series B Exchangeable Preferred Stock will accumulate from the last dividend payment date on which dividends were paid on the Series A Exchangeable Preferred Stock surrendered in exchange therefor or, if no dividends have been paid on the Series A Exchangeable Preferred Stock, from the date of original issuance of such Series A Exchangeable Preferred Stock to but not including the issuance date of the Series B Exchangeable Preferred Stock. Accordingly, holders who exchange their Series A Exchangeable Preferred Stock will receive the same dividend 7 15 payment on the next dividend payment date (expected to be January 1, 1998) that they would have received had they not accepted the Exchange Offer, except that if such dividend is not paid in cash, it will be paid in shares of Series B Exchangeable Preferred Stock instead of shares of Series A Exchangeable Preferred Stock. Conditions to the Exchange Offer...................... The Exchange Offer is subject to certain customary conditions. See "The Exchange Offer--Conditions." The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such conditions. Procedures for Tendering Series A Securities...... Each holder of Series A Notes and/or Series A Exchangeable Preferred Stock wishing to accept the Exchange Offer must complete, sign and date the respective Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Series A Securities and any other required documentation to the exchange agent (the "Exchange Agent") at the address set forth herein. A separate Letter of Transmittal is required for the tender of Series A Notes and Series A Exchangeable Preferred Stock. Series A Securities may be physically delivered, but physical delivery is not required if a confirmation of a book-entry transfer of such Series A Securities to the Exchange Agent's account at The Depository Trust Company is delivered in a timely fashion. By executing a Letter of Transmittal, each holder will represent to the Company that, among other things, the Series B Securities acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Series B Securities, whether or not such person is the holder, that neither the holder nor any such other person is engaged in, or intends to engage in, or has an arrangement or understanding with any person to participate in, the distribution of such Series B Securities and that neither the holder nor any such person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. Each Participating Broker-Dealer that receives Series B Securities for its own account in exchange for Series A Securities where such Series A Securities were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Series B Securities. See "The Exchange Offer--Purpose and Effect of the Exchange Offer" and "Plan of Distribution." Special Procedures for Beneficial Owner........... Any beneficial owner whose Series A Securities are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing a Letter of Transmittal and delivering his Series A Securities, either make appropriate arrangements to register ownership of the Series A Securities in such owner's name or obtain a properly completed bond power, in the case of Series A Notes, or stock power, in the case of Series A 8 16 Exchangeable Preferred Stock, from the registered holder. The Transfer of registered ownership may take considerable time and may not be completed prior to the Expiration Date. See "The Exchange Offer--Procedures for Tendering." Guaranteed Delivery Procedures................. Holders of Series A Securities who wish to tender their Series A Securities and whose Series A Securities are not immediately available or who cannot deliver their Series A Securities, the Letters of Transmittal or any other documents required by the Letters of Transmittal to the Exchange Agent prior to the Expiration Date, must tender their Series A Securities according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures." Acceptance of the Series A Securities and Delivery of the Series B Securities............... Subject to the satisfaction of the conditions to the Exchange Offer, the Company will accept for exchange any and all Series A Securities which are properly tendered in the Exchange Offer prior to the Expiration Date. The Series B Securities issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Withdrawal Rights.......... Tenders of Series A Securities may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer--Withdrawal of Tenders." Effect on Holders of the Series A Securities........ Following the consummation of the Exchange Offer, holders of the Series A Securities eligible to participate in the Exchange Offer but who do not tender their Series A Securities will not have further exchange rights and such Series A Securities will continue to be subject to certain restrictions on transfer. To the extent that Series A Securities are tendered and accepted in the Exchange Offer, the trading market for untendered Series A Securities could be adversely affected. Consequences of Failure to Exchange................. The Series A Securities that are not exchanged pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Series A Securities may be resold only (i) to the Company, (ii) pursuant to Rule 144A or Rule 144 under the Securities Act or pursuant to another exemption under the Securities Act, (iii) outside the United States to a foreign person pursuant to the requirements of Rule 904 under the Securities Act or (iv) pursuant to an effective registration statement under the Securities Act. See "The Exchange Offer--Consequences of Failure to Exchange." Shelf Registration Statement.................. Under certain circumstances, including if any holder of the Series A Securities (other than an Initial Purchaser) is not eligible under applicable securities laws to participate in the Exchange Offer, and such holder has provided information regarding such holder and the distribution of such holder's Series A Securities to the Company for use therein, the Company has agreed to register the Series A Securities with a shelf registration statement and use its best efforts to cause it to be declared effective by the Commission. The Company has agreed to maintain the effectiveness of any such shelf registration statement for, under certain 9 17 circumstances, a maximum of two years, to cover resales of the Series A Securities held by any such holders. See "The Exchange Offer--Purpose and Effect of the Exchange Offer." Exchange Agent............. The Bank of New York is serving as the Exchange Agent in connection with the Exchange Offer. See "The Exchange Offer--Exchange Agent." NOTES: General.................... The Exchange Offer applies to $101,000,000 aggregate principal amount of the Series A Notes. The form and terms of the Series B Notes will be the same as the form and terms of the Series A Notes except that (i) the Series B Notes will bear a "Series B" designation and a different CUSIP Number from the Series A Notes, (ii) the Series B Notes will have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof and (iii) holders of the Series B Notes will not be entitled to certain rights of holders of Series A Notes under the Notes Registration Rights Agreement which rights will terminate as to holders of the Series B Notes upon consummation of the Exchange Offer. The Series B Notes will evidence the same debt as the Series A Notes, will be entitled to the benefits of the Notes Indenture and will be treated as a single class thereunder with the Series A Notes. See "Description of the Notes." Securities Offered......... $101,000,000 in aggregate principal amount of 10-1/4% Series B Senior Subordinated Notes due 2007. Maturity Date.............. July 1, 2007. Interest Payment Dates..... January 1 and July 1 of each year commencing January 1, 1998. Optional Redemption........ The Notes are redeemable at the option of the Company, in whole or in part, at any time on or after July 1, 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior to July 1, 2000, the Company may, at its option, redeem a portion of the Notes with the net proceeds of one or more Public Equity Offerings, at a redemption price equal to 110.25% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided, however, that after any such redemption, there is outstanding at least $75.0 million aggregate principal amount of the Notes. Ranking.................... The Notes and the Subsidiary Notes Guarantees are subordinated to (i) all Senior Debt of the Company (including indebtedness under the Credit Facility) and (ii) the guarantees of such Senior Debt. As of June 30, 1997, after giving pro forma effect to the Recent 1997 Acquisitions, the Pending Transactions and the Original Offerings, the Company would have had Senior Debt outstanding of approximately $113.6 million. See "Use of Proceeds," "Risk Factors -- Substantial Leverage" and "-- Subordination of Notes; Ranking" and "Capitalization." Change of Control.......... Upon a Change of Control, the Company will be required, subject to certain conditions, to make an offer to purchase all outstanding Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date. 10 18 Certain Covenants.......... The Notes Indenture contains certain covenants which, among other things, will restrict the ability of the Company and its subsidiaries with respect to: (i) the incurrence of additional debt; (ii) restricted payments; (iii) dividend and other payment restrictions affecting certain subsidiaries; (iv) asset dispositions; (v) Asset Swaps (as defined); (vi) transactions with Affiliates (as defined); (vii) issuances and sales of stock of certain subsidiaries; (viii) liens; and (ix) consolidations, mergers or sales of assets. For more complete information regarding the Notes, see "Description of the Notes." 11 19 EXCHANGEABLE PREFERRED STOCK: General.................... The Exchange Offer applies to the 1,000,000 shares of Series A Exchangeable Preferred Stock plus any additional shares of Series A Exchangeable Preferred Stock issued as dividends prior to the Expiration Date. The form and terms of the Series B Exchangeable Preferred Stock are the same as the form and terms of the Series A Exchangeable Preferred Stock except that (i) the Series B Exchangeable Preferred Stock will bear a "Series B" designation and a different CUSIP Number from the Series A Exchangeable Preferred Stock, (ii) the shares of Series B Exchangeable Preferred Stock will have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof and (iii) holders of Series B Exchangeable Preferred Stock will not be entitled to certain rights of holders of Series A Exchangeable Preferred Stock under the Preferred Stock Registration Rights Agreement which rights will terminate as to holders of the Series B Exchangeable Preferred Stock upon consummation of the Exchange Offer. See "Description of Exchangeable Preferred Stock and Exchange Debentures." Securities Offered......... 1,000,000 shares of 13-1/4% Series B Exchangeable Preferred Stock, no par value. Liquidation Preference..... $100 per share, plus accumulated and unpaid dividends. Dividends.................. 13-1/4% per annum. All dividends will be payable semi-annually on January 1 and July 1 of each year, commencing January 1, 1998. On or prior to July 1, 2002, dividends are payable in additional shares of Exchangeable Preferred Stock having an aggregate liquidation preference equal to the amount of such dividends, or, at the option of the Company, in cash. Thereafter, all dividends will be payable only in cash. Dividends on the Exchangeable Preferred Stock will accumulate and be cumulative from the date of issuance thereof. Voting Rights.............. Except as required by law, or with respect to the authorization of any new class of Senior Stock (as defined), the holders of the Exchangeable Preferred Stock are not entitled to any voting rights except in the event that, after July 1, 2002, two or more semi-annual dividends payable on the Exchangeable Preferred Stock are in arrears and unpaid, or upon the occurrence of certain other events (including failure to comply with certain covenants and failure to pay the mandatory redemption price when due), then the holders of a majority of the then outstanding shares of Exchangeable Preferred Stock, voting separately as a class with the holders of shares of any Parity Stock (as defined) having similar voting rights, will be entitled to elect two additional directors of the Company, who shall serve until such time as all dividends in arrears or any other failure, breach or default giving rise to such voting rights is remedied or waived. Mandatory Redemption....... The Company will be required to redeem the Exchangeable Preferred Stock on July 1, 2009 (subject to the legal availability of funds therefor) at a redemption price equal to the liquidation preference thereof, plus accumulated and unpaid dividends, if any, to the date of redemption. Optional Redemption........ The Exchangeable Preferred Stock is redeemable at the option of the Company, in whole or in part, at any time on or after July 1, 2002, at the 12 20 redemption prices set forth herein, plus accumulated and unpaid dividends, if any, to the date of redemption. In addition, at any time prior to July 1, 2000, the Company may, at its option, redeem shares of Exchangeable Preferred Stock having an aggregate liquidation preference of up to 35% of the aggregate liquidation preference of all shares of Exchangeable Preferred Stock issued in the Exchangeable Preferred Stock Offering or issued as a dividend on the Exchangeable Preferred Stock, at a redemption price equal to 113.25% of the liquidation preference thereof, plus accumulated and unpaid dividends, if any, to the date of redemption, with the net proceeds of one or more Public Equity Offerings; provided, however, that after any such redemption, there is outstanding at least $75.0 million in aggregate liquidation preference of the Exchangeable Preferred Stock. Ranking.................... The Exchangeable Preferred Stock ranks: (i) senior to all common stock of the Company and to all other capital stock of the Company, the terms of which expressly provide that it ranks junior to the Exchangeable Preferred Stock; (ii) on a parity with any capital stock of the Company the terms of which expressly provide that it will rank on a parity with the Exchangeable Preferred Stock; and (iii) junior to all capital stock of the Company the terms of which do not expressly provide that such stock will rank junior to, or on a parity with, the Exchangeable Preferred Stock. See "Risk Factors -- Substantial Leverage," and "-- Limitations on the Ability to Pay Dividends." Exchange Provisions........ The Exchangeable Preferred Stock is exchangeable, subject to certain conditions, at the option of the Company, in whole but not in part, on any dividend payment date, for the Exchange Debentures in an aggregate principal amount equal to the liquidation preference, plus accumulated and unpaid dividends, if any, to the date of exchange. Change of Control.......... Upon a Change of Control, the Company will be required, subject to certain conditions, to make an offer to purchase the shares of Exchangeable Preferred Stock at a purchase price equal to 101% of the liquidation preference, plus accumulated and unpaid dividends, if any, to the repurchase date. Certain Covenants.......... The Certificate of Designation contains certain covenants which, among other things, will restrict the ability of the Company and its subsidiaries with respect to: (i) the incurrence of additional debt; (ii) restricted payments; (iii) issuances and sales of stock of certain subsidiaries; and (iv) consolidations, mergers or sales of assets. EXCHANGE DEBENTURES: Issue...................... 13-1/4% Exchange Debentures due July 1, 2009, issuable in exchange for the Exchangeable Preferred Stock, in an aggregate principal amount equal to the then effective liquidation preference of the shares of Exchangeable Preferred Stock, plus accumulated and unpaid dividends, if any, to the date fixed for the exchange thereof (the "Exchange Date"), plus any additional Exchange Debentures issued in lieu of cash interest. Maturity Date.............. July 1, 2009. Interest Payment Dates..... Interest on the Exchange Debentures will be payable semi-annually on January 1 and July 1 of each year, commencing on the first such date 13 21 after the Exchange Date. On or prior to July 1, 2002, interest is payable in additional Exchange Debentures having an aggregate principal amount equal to the amount of such interest, or, at the option of the Company, in cash. Thereafter, all interest will be payable in cash. Interest on the Exchange Debentures will accrue from the date of issuance thereof. Optional Redemption........ The Exchange Debentures will be redeemable at the option of the Company, in whole or in part, at any time on or after July 1, 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time prior to July 1, 2000, the Company may, at its option, redeem Exchange Debentures having an aggregate principal amount of up to 35% of the aggregate principal amount of Exchange Debentures issued upon exchange of the Exchangeable Preferred Stock or in payment of interest on the Exchange Debentures, at a redemption price equal to 113.25% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, with the net proceeds of one or more Public Equity Offerings; provided, however, that after any such redemption, there is outstanding at least $75.0 million in aggregate principal amount of the Exchange Debentures. Ranking.................... The Exchange Debentures will be subordinated in right of payment to the Senior Debt and Senior Subordinated Debt (including the Notes) of the Company. See "Risk Factors -- Substantial Leverage" and "-- Subordination of Exchange Debentures." Subsidiary Guarantees...... The Subsidiary Debentures Guarantees (as defined) of the Exchange Debentures will, to the extent set forth in the Exchange Indenture (as defined), be subordinated in right of payment to the prior payment in full of all Senior Debt and Senior Subordinated Debt of the Subsidiary Debentures Guarantors (as defined), upon terms substantially comparable to the subordination of the Exchange Debentures to all Senior Debt and Senior Subordinated Debt. Change of Control.......... Upon a Change of Control, the Company will be required, subject to certain conditions, to make an offer to purchase the Exchange Debentures at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date. Certain Covenants.......... The Exchange Indenture contains certain covenants which, among other things, will restrict the ability of the Company and its subsidiaries with respect to: (i) the incurrence of additional debt; (ii) restricted payments; (iii) dividend and other payment restrictions affecting certain subsidiaries; (iv) asset dispositions; (v) Asset Swaps; (vi) transactions with Affiliates; (vii) issuances and sales of stock of certain subsidiaries; (viii) liens; and (ix) consolidations, mergers or sales of assets. For more complete information regarding the Exchangeable Preferred Stock and the Exchange Debentures, see "Description of the Exchangeable Preferred Stock and Exchange Debentures." USE OF PROCEEDS The Company will not receive any cash proceeds from the issuance of the Series B Securities pursuant to the Exchange Offer. 14 22 RISK FACTORS Investors should consider all of the information in this Prospectus before tendering their Series A Securities in the Exchange Offer. In particular, investors should carefully consider the factors set forth under "Risk Factors" prior to tendering their Series A Securities in the Exchange Offer. 15 23 SUMMARY HISTORICAL FINANCIAL DATA The summary historical financial data of the Company and its Predecessor presented below as of and for the years ended December 31, 1992, 1993, 1994, 1995 and 1996 are derived from the consolidated financial statements of the Company and Predecessor, which consolidated financial statements have been audited by KPMG Peat Marwick LLP, independent certified public accountants. The summary historical financial data of the Company presented below as of June 30, 1997 and for the six months ended June 30, 1996 and 1997 are derived from unaudited consolidated financial statements of the Company which, in the opinion of management, contain all necessary adjustments of a normal recurring nature to present the financial statements in conformity with GAAP. The consolidated financial statements of the Company as of December 31, 1995 and 1996 and for each of the years in the three-year period ended December 31, 1996 and the independent auditors' report thereon, as well as the unaudited consolidated financial statements of the Company as of June 30, 1997 and for the six months ended June 30, 1996 and 1997, are included elsewhere in this Prospectus. The financial results of the Company and its Predecessor are not comparable from year to year because of the acquisition and disposition of various radio stations by the Company and the reorganization in July 1992 when the Company commenced operations. The summary historical financial data below should be read in conjunction with, and is qualified by reference to, the Company's Consolidated Financial Statements and related notes, "Selected Historical Financial Data," "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ----------------------------------------------------- ------------------ 1992(1) 1993 1994 1995 1996 1996 1997 -------- -------- ------- ------- ------- ------- ------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Net revenue........................ $ 13,688 $ 21,376 $32,998 $34,112 $45,413 $19,348 $27,181 Station operating expenses......... 10,421 17,081 24,331 26,832 33,232 14,797 19,321 Depreciation and amortization...... 4,395 5,245 7,435 4,891 5,158 1,974 3,907 Corporate general and administrative................... 732 961 2,504 2,274 3,248 1,256 1,272 -------- -------- -------- -------- -------- -------- -------- Operating income (loss)............ (1,860) (1,911) (1,272) 115 3,775 1,321 2,681 Interest expense (2)............... 1,393 2,637 4,866 5,242 6,156 2,779 3,594 Other income, net.................. 40 149 657 781 414 36 73 -------- -------- -------- -------- -------- -------- -------- Income (loss) before extraordinary item............................. (3,213) (4,399) (5,481) (4,346) (1,967) (1,422) (840) Extraordinary loss (3)............. -- -- -- -- (1,769) -- -- -------- -------- -------- -------- -------- -------- -------- Net income (loss).................. $ (3,213) $ (4,399) $(5,481) $(4,346) $(3,736) $(1,422) $ (840) ======== ======== ======== ======== ======== ======== ======== Net loss per common share.......... $ (80) $ (110) $ (137) $ (109) $ (93) $ (36) $ (21) ======== ======== ======== ======== ======== ======== ======== Shares used in per share calculation...................... 40,000 40,000 40,000 40,000 40,000 40,000 40,000 ======== ======== ======== ======== ======== ======== ======== Cash dividends declared per share............................ $ -- $ -- $ -- $ -- $ -- $ -- $ -- ======== ======== ======== ======== ======== ======== ======== OTHER DATA: Deficiency of earnings to fixed charges (4)...................... $ 3,213 $ 4,399 $ 5,481 $ 4,346 $ 1,966 $ 1,422 $ 840
DECEMBER 31, ------------------------------------------------------ JUNE 30, 1992 1993 1994 1995 1996 1997 ------- ------- -------- -------- -------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) BALANCE SHEET DATA: Cash and cash equivalents............... $ 1,244 $ 857 $ 1,538 $ 1,005 $ 1,588 $ 277 Working capital (deficiency)............ 2,235 1,701 3,382 2,928 (4,195) (9,034) Intangible assets, net.................. 14,543 17,454 20,080 15,093 51,802 84,283 Total assets............................ 28,515 36,120 46,397 37,372 102,244 123,421 Long-term debt (including current portion).............................. 22,026 30,468 47,805 43,046 91,072 103,641 Shareholder's equity (deficit).......... 4,870 3,492 (4,782) (9,249) 5,999 10,909 Book value per share.................... $ 122 $ 87 $ (120) $ (231) $ 150 $ 273 ======== ======== ========= ========= ========= =========
16 24 (1) In July 1992, the Company acquired all of the radio stations then owned or operated by Predecessor and certain other radio stations. In 1993, Citadel Communications was incorporated and the Company was reorganized as a wholly owned subsidiary of Citadel Communications. The Statement of Operations Data for the year ended December 31, 1992 represents the combined operating results from the audited Statement of Operations of Predecessor for the period January 1, 1992 to July 23, 1992 and the Company from July 24, 1992 to December 31, 1992. Net revenue for Predecessor for the period January 1, 1992 to July 23, 1992 and the Company from July 24, 1992 to December 31, 1992 totaled $5.7 million and $8.0 million, respectively. Net income (loss) for Predecessor for the period January 1, 1992 to July 23, 1992 and the Company from July 24, 1992 to December 31, 1992 totaled $300,000 and $(3.5) million, respectively. (2) Includes debt issuance costs and debt discount amortization of $35,000, $139,000, $287,000, $132,000 and $371,000 for the years ended December 31, 1992, 1993, 1994, 1995 and 1996, respectively, and $302,000 and $38,000 for the six months ended June 30, 1996 and 1997, respectively, (3) On October 9, 1996, the Company extinguished its long-term debt of $31.3 million, payable to a financial institution, and its note payable to a related party of $7.0 million. The early retirement of the long-term debt resulted in a $1.8 million extraordinary loss due to prepayment premiums and the write-off of debt issuance costs. (4) Fixed charges include interest expense on debt, amortization of financing costs, amortization of debt discount, 33% of rent expense, and dividend requirements with respect to the Exchangeable Preferred Stock. 17 25 SUMMARY PRO FORMA FINANCIAL DATA The following table presents summary unaudited pro forma financial data of the Company as of and for the periods indicated. The summary pro forma operating data reflect adjustments to the summary historical operating data of the Company to give effect to (i) the June 1996 acquisitions of two FM radio stations and one AM radio station in Albuquerque and one FM radio station in Modesto, the October 1996 acquisitions of one FM radio station in Colorado Springs and one FM radio station in Albuquerque, the February 1997 acquisition of one FM radio station in Salt Lake City, the April 1997 acquisition of one FM radio station in Salt Lake City, the Recent 1997 Acquisitions, the Subsidiary Merger, and the Original Offerings (collectively the "Completed Transactions") and (ii) the Pending Transactions, as if such transactions had occurred on January 1, 1996. The summary pro forma balance sheet data as of June 30, 1997 give effect to the Recent 1997 Acquisitions, the Original Offerings and the application of the net proceeds therefrom and the Pending Transactions, as if such transactions had occurred on that date. The summary pro forma financial data are not necessarily indicative of either future results of operations or the results that would have occurred if those transactions had been consummated on the indicated dates. The following financial information should be read in conjunction with the historical consolidated financial statements and related notes of the Company, "Unaudited Pro Forma Condensed Consolidated Financial Statements," "Selected Historical Financial Data," "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus. 18 26 SUMMARY PRO FORMA FINANCIAL DATA
PRO FORMA ---------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ---------------------- 1996 1996 1997 ------------ -------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) OPERATING DATA: Net revenue................................................. $105,959 $ 49,616 $ 56,397 Station operating expenses.................................. 75,836 37,191 41,280 Depreciation and amortization............................... 25,236 12,499 15,899 Corporate general and administrative........................ 3,248 881 1,260 -------- -------- -------- Operating expenses.......................................... 104,320 50,571 58,439 -------- -------- -------- Operating income (loss)..................................... 1,639 (955) (2,042) Interest expense............................................ 18,012 9,053 8,740 Other (income) expense, net................................. (443) (36) (125) -------- -------- -------- Income (loss) before income taxes........................... (15,930) (9,972) (10,657) Income taxes (benefit)...................................... -- -- -- Dividend requirement for Exchangeable Preferred Stock....... (13,825) (6,691) (7,607) -------- -------- -------- Income (loss) from continuing operations applicable to common shares.......................................... $(29,755) $(16,663) $(18,264) ======== ======== ======== Pro forma income (loss) per common share.................... $ (744) $ (417) $ (457) ======== ======== ======== Pro forma weighted average number of shares outstanding..... 40,000 40,000 40,000 ======== ======== ======== OTHER DATA: Broadcast cash flow......................................... $ 30,123 $ 12,425 $ 15,117 EBITDA...................................................... 26,875 11,544 13,857
PRO FORMA JUNE 30, 1997 --------------------- (IN THOUSANDS) BALANCE SHEET DATA: Cash and cash equivalents...................................... $ 2,923 Working capital................................................ 15,829 Intangible assets, net......................................... 287,585 Total assets................................................... 358,264 Long-term debt (including current portion)..................... 214,584 Exchangeable Preferred Stock................................... 96,350 Shareholder's equity........................................... 25,159
19 27 RISK FACTORS Investors should carefully examine this entire Prospectus and should give particular attention to the risk factors set forth below in evaluating whether to tender their Series A Securities for Series B Securities in the Exchange Offer. This Prospectus contains forward-looking statements that involve risks and uncertainties. Those statements appear in a number of places in this Prospectus and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) the realization of the Company's business strategy; (ii) the sufficiency of cash flow to fund the Company's debt service requirements and working capital needs; (iii) anticipated trends in the radio broadcasting industry; (iv) potential acquisitions by the Company and the successful integration of both completed and future acquisitions; and (v) government regulation. Forward-looking statements are typically identified by the words "believe," "expect," "anticipate," "intend," "estimate," and similar expressions. Readers are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contained in the forward looking statements as a result of various factors. The accompanying information contained in this Prospectus, including without limitation, the information set forth under the headings "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and "The Pending Transactions," identifies important factors that could cause such differences. SUBSTANTIAL LEVERAGE. The Company is highly leveraged. At June 30, 1997, after giving pro forma effect to the Recent 1997 Acquisitions, the Pending Transactions and the Original Offerings, the Company would have had outstanding total debt of approximately $216.3 million, Exchangeable Preferred Stock with an aggregate liquidation preference of $100.0 million and shareholder's equity of approximately $25.2 million. The Company's high degree of leverage will have important consequences for the holders of the Notes and the Exchangeable Preferred Stock, including the following: (i) the ability of the Company to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes, if needed, may be impaired; (ii) a substantial portion of the cash flow of the Company will be used to pay interest expense, which will reduce the funds which would otherwise be available to fund operations and future business opportunities; (iii) the Company may be more highly leveraged than its competitors which may place it at a competitive disadvantage; (iv) the Company's high degree of leverage will make it more vulnerable to a downturn in its business or in the economy in general and (v) certain of the Company's borrowings will be at variable rates of interest (including the borrowings under the Credit Facility) which will expose the Company to the risks associated with fluctuating interest rates. See "Capitalization," "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Indebtedness" and the Company's Consolidated Financial Statements and the notes thereto. The Company's ability to satisfy its debt obligations and to pay cash dividends on, and to satisfy the redemption obligations in respect of, the Exchangeable Preferred Stock, will depend upon its future financial and operating performance, which, in turn, is subject to prevailing economic conditions and financial, business and other factors, certain of which are beyond its control. If the Company's cash flow and capital resources are insufficient to fund its debt service obligations, the Company may be forced to reduce or delay planned acquisitions and capital expenditures, sell assets, obtain additional equity capital or restructure its debt. There can be no assurance that the Company's operating results, cash flow and capital resources will be sufficient for payment of its debt service and other obligations in the future. In the absence of such operating results and resources, the Company could face substantial liquidity problems and might be required to sell material assets or operations to meet its debt service and other obligations, and there can be no assurance as to the timing of such sales or the proceeds that the Company could realize therefrom or that such sales can be effected on terms satisfactory to the Company or at all. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Description of Indebtedness." SUBORDINATION OF NOTES; RANKING. The Notes will be unsecured senior subordinated obligations of the Company and will be subordinated to all existing and future Senior Debt of the Company, including 20 28 indebtedness under the Credit Facility. The Company actively intends to pursue additional acquisitions of radio stations. The Company would likely seek to finance all or a portion of such additional acquisitions through the use of existing debt capacity or additional debt financing or from the proceeds of selective asset sales. Additional indebtedness may be incurred by the Company subject to the limitations contained in the Credit Facility and the Notes Indenture, and any such additional indebtedness may constitute Senior Debt. See "Description of the Notes -- Certain Covenants." As of June 30, 1997, on a pro forma basis after giving effect to the Recent 1997 Acquisitions, the Pending Transactions and the Original Offerings, the Company would have had approximately $113.6 million in Senior Debt outstanding. Upon any payment or distribution of assets of the Company upon liquidation, dissolution, reorganization or any similar proceeding, the holders of Senior Debt will be entitled to receive payment in full, in cash or cash equivalents, before the holders of the Notes are entitled to receive any payment. In addition, the Company may not pay principal of, premium, if any, or interest on or any other amounts owing in respect of the Notes, make any deposit pursuant to defeasance provisions or purchase, redeem or otherwise retire the Notes, if any Specified Senior Debt (as defined in the Notes Indenture) is not paid when due or any other default on Specified Senior Debt occurs and the maturity of such indebtedness is accelerated in accordance with its terms unless, in either case, such default has been cured or waived, any such acceleration has been rescinded or such indebtedness has been repaid in full. Moreover, under certain circumstances, if any non-payment default exists with respect to Specified Senior Debt, the Company may not make any payments on the Notes for a specified period of time, unless such default is cured or waived or such indebtedness has been repaid in full. LIMITATIONS ON THE ABILITY TO PAY DIVIDENDS. The Company is and will be restricted under the Notes Indenture and the Credit Facility from paying dividends or repurchasing, redeeming or otherwise acquiring any shares of capital stock, including the Exchangeable Preferred Stock, and from repurchasing, redeeming or otherwise acquiring for value the Exchange Debentures unless certain financial tests are met and then only in accordance with a formula based on cash flow and only in the absence of a default. See "Description of the Notes," "Description of Indebtedness" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." The Company may elect to pay dividends on the Exchangeable Preferred Stock on any dividend payment date occurring on or before July 1, 2002 by issuing either additional shares of Exchangeable Preferred Stock or cash. After July 1, 2002, dividends may be paid only in cash. In the event that, after July 1, 2002, cash dividends on the Exchangeable Preferred Stock are in arrears and unpaid for two or more semi-annual dividend periods (whether or not consecutive), holders of Exchangeable Preferred Stock will be entitled to certain voting rights. See "Description of the Exchangeable Preferred Stock and Exchange Debentures -- Exchangeable Preferred Stock -- Voting Rights." SUBORDINATION OF EXCHANGE DEBENTURES. The payment of principal, premium, if any, and interest on, and any other amounts owing in respect of, the Exchange Debentures, if issued, will be subordinated in right of payment to the prior payment in full of all existing and future Senior Debt and Senior Subordinated Debt (including the Notes) of the Company. Upon any payment or distribution of assets of the Company to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets or any bankruptcy, insolvency or similar proceedings of the Company, the holders of all Senior Debt and Senior Subordinated Debt will first be entitled to receive payment in full of all amounts due or to become due on or in respect of such Senior Debt and Senior Subordinated Debt before the holders of Exchange Debentures are entitled to receive any payment of principal of or interest on the Exchange Debentures or on account of the purchase or redemption or other acquisition of Exchange Debentures by the Company. In addition, the Subsidiary Debentures Guarantees will, to the extent set forth in the Exchange Indenture, be subordinated in right of payment to the prior payment in full of all senior debt and senior subordinated debt of the Subsidiary Debentures Guarantors, upon terms substantially comparable to the subordination of the Exchange Debentures to the Notes and all Senior Debt. By reason of such subordination, in the event of insolvency, creditors of the Company or a Subsidiary Debentures Guarantor who are not holders of Senior Debt or Senior Subordinated Debt or the Exchange 21 29 Debentures may recover less, ratably, than the holders of Senior Debt and Senior Subordinated Debt and may recover more, ratably, than the holders of the Exchange Debentures. At June 30, 1997, after giving effect to the Recent 1997 Acquisitions, the Pending Transactions and the Original Offerings, the amount of Senior Debt and Senior Subordinated Debt (including the Notes) outstanding would have been approximately $214.6 million. NO ASSURANCE OF CONSUMMATION OF THE PENDING ACQUISITIONS. The consummation of each of the Pending Acquisitions is subject to certain conditions, including approval of the Federal Communications Commission (the "FCC"). Although the Company believes these closing conditions will be satisfied in each case, there can be no assurance thereof. See "Business -- Federal Regulation of Radio Broadcasting" and "The Pending Transactions." RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS. The Notes Indenture contains certain restrictive covenants, including limitations which restrict the ability of the Company to incur additional debt, incur liens, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of their assets. In addition, the Credit Facility contains certain other and more restrictive covenants than those contained in the Notes Indenture, including certain limitations on future acquisitions and capital expenditures without lender consent. This may adversely affect the Company's ability to pursue its acquisition strategy. The Credit Facility also requires the Company to maintain specific financial ratios and to satisfy certain financial condition tests. The ability of the Company to meet those financial ratios and financial conditions can be affected by events beyond its control, and there can be no assurance that those tests will be met. A breach of any of these covenants could result in a default under the Credit Facility and/or the Notes Indenture. In the event of a default under the Credit Facility, the lenders thereunder could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. In the event of a default under the Credit Facility, if the Company were unable to repay those amounts, the lenders thereunder could proceed against the collateral granted to them to secure that indebtedness. If the maturity of borrowings under the Credit Facility were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay in full such indebtedness and other indebtedness of the Company, including the Notes. Substantially all of the assets of the Company are pledged as collateral under the Credit Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources," "Description of Indebtedness -- Existing Loan Agreement" and "Description of the Notes -- Certain Covenants." HISTORY OF NET LOSSES. The Company had a net loss of $3.7 million and $0.8 million for the year ended December 31, 1996 and the six months ended June 30, 1997, respectively. After giving effect to the Subsidiary Merger, the Pending Transactions, other acquisitions completed by the Company after January 1, 1996 and the Original Offerings as if they had occurred at January 1, 1996, on a pro forma basis, the Company would have had a consolidated net loss of approximately $29.8 million and $18.3 million for the year ended December 31, 1996 and the six months ended June 30, 1997, respectively. Such net losses have resulted primarily from significant charges for depreciation and amortization relating to the acquisition of radio stations and interest charges on outstanding debt. The Company expects to continue to experience net losses in the foreseeable future, principally as a result of depreciation, amortization and interest expense associated with completed and anticipated future acquisitions, including the Pending Acquisitions. Such losses may be greater than those experienced historically by the Company. LIMITATIONS ON ACQUISITION STRATEGY; ANTITRUST CONSIDERATIONS. The Company intends to pursue growth through the acquisition of radio station groups and individual radio stations in mid-sized markets. See "Business -- Acquisition Strategy." The Company cannot predict whether it will be successful in pursuing such acquisition opportunities or what the consequences of any such acquisitions would be. The Company is currently evaluating certain acquisitions; however, other than as described in "The Pending Acquisitions," the Company currently has no binding commitments to acquire any specific business or other material assets. Although the Company believes that its acquisition strategies are reasonable, there can be no assurance that it will be able to implement its plans without delay or that, when implemented, its efforts will result in the increased broadcast cash flow or other benefits currently anticipated by the Company's management. In 22 30 addition, there can be no assurance that the Company will not encounter unanticipated problems or liabilities in connection with such stations. The Company's acquisition strategy involves numerous other risks, including difficulties in the integration of operations and systems and the management of a large and geographically diverse group of stations, the diversion of management's attention from other business concerns and the potential loss of key employees of acquired stations. There can be no assurance that the Company's management will be able to manage effectively the resulting business or that such acquisitions will benefit the Company. Depending upon the nature, size and timing of future acquisitions, the Company may be required to raise additional financing. There can be no assurance that the Credit Facility, the Notes Indenture or any other loan agreements to which the Company may become a party or subject to will permit such additional financing or that such additional financing will be available to the Company or Citadel Communications on terms acceptable to its management or at all. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." The Company competes and will continue to compete with many other buyers for the acquisition of radio stations. Many of those competitors have significantly greater financial and other resources than those of the Company. In addition, if, as management believes may happen, the prices sought by sellers of radio stations continue to rise, the Company may find fewer acceptable acquisition opportunities. In addition to the risks associated with the acquisition of radio stations, the Company also is aware that the Federal Trade Commission ("FTC") and the United States Department of Justice ("DOJ"), which evaluate transactions to determine whether those transactions should be challenged under the federal antitrust laws, have been increasingly active recently in their review of radio station acquisitions, particularly where an operator proposes to acquire additional stations in its existing markets. There can be no assurance that the DOJ or the FTC will not require the restructuring of future acquisitions. The Company has received two civil investigative demands ("CIDs") from the Antitrust Division of the DOJ. One CID addresses the Company's acquisition of KRST-FM in Albuquerque, New Mexico, and the second CID addresses the Company's JSA relating to stations in Spokane, Washington and Colorado Springs, Colorado. The Company has provided the requested information in response to each CID, and, at present, has been given no indication from the DOJ regarding its intended future actions. At this time, the Company is unable to quantify the effect, if any, that such proceedings may have on the Company's business, results of operations and financial condition. See "Business -- Legal Proceedings." As part of its increased scrutiny of radio station acquisitions, the DOJ has stated publicly that it believes that LMAs and other similar agreements customarily entered into in connection with radio station transfers prior to the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), could violate the HSR Act. Since then, the DOJ has stated publicly that it will apply its new policy prohibiting LMAs in connection with purchase agreements until the expiration or termination of the HSR waiting period prospectively only. The Company is also aware that on November 7, 1996, the FCC issued a Further Notice of Proposed Rulemaking, which among other things, reviews the regulations of the FCC governing the attribution of broadcast interests, including the attribution of ownership as a result of time brokerage agreements and LMAs. At this time, no determination can be made as to what effect, if any, this proposed rulemaking will have on the Company. See "Business -- Federal Regulation of Radio Broadcasting -- Proposed Changes." DEPENDENCE ON KEY PERSONNEL. The Company's business is dependent upon the performance of certain key individuals, particularly Lawrence R. Wilson, the Chief Executive Officer. The loss of the services of Mr. Wilson would have a material adverse effect on the Company, including causing an event of default under the Credit Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Description of Indebtedness -- Existing Loan Agreement." The Company has entered into an employment agreement with Mr. Wilson, expiring in June 2001. See "Management -- Employment Agreement." In addition, the Company and Citadel Communications together have purchased key-man life insurance covering Mr. Wilson in the amount of $5.0 million. Notwithstanding the foregoing, should there be an event of default under the Credit Facility as a result of the death, disability or termination of employment of Mr. Wilson (which the lender thereunder could declare if, within 90 days after such death, disability or employment termination, the Company has not replaced Mr. Wilson with a person 23 31 acceptable to the lender in its reasonable discretion), it is unlikely that the proceeds of such policy would be sufficient to repay the outstanding indebtedness under the Credit Facility. The Company employs three regional presidents, 18 general managers, a number of sales managers, sales personnel and program directors, and several high-profile on-air announcers, whose services are also important to the Company. The Company sometimes enters into employment agreements, including non-competition agreements, with its on-air announcers. However, there can be no assurance that the Company will be able to retain any such employees or that such non-competition agreements would be enforceable. IMPORTANCE OF CERTAIN MARKETS. In 1996, the Company derived 33.7% of its net revenue and 38.8% of its broadcast cash flow from the Albuquerque market, and 16.7% of its net revenue and 24.1% of its broadcast cash flow from the Modesto market. On a pro forma basis after giving effect to completed acquisitions and the Pending Transactions, such radio stations in Albuquerque and Providence would have generated approximately 16.4% and 12.9%, respectively, of the Company's net revenue in 1996 and approximately 20.2% and 16.0%, respectively, of the Company's broadcast cash flow in 1996. A significant decline in net revenue from the Company's stations in these markets, as a result of a ratings decline or otherwise, could have a material adverse effect on the Company's financial position and results of operations. COMPETITIVE CONDITIONS. The financial success of each of the Company's radio stations is dependent, to a significant degree, upon its audience ratings and share of the overall radio advertising revenue within its geographic market. The radio broadcasting industry is a highly competitive business. Each of the Company's radio stations competes for audience share and revenue directly with other AM and FM radio stations, as well as with other media, within its market, including television, newspapers, direct mail and outdoor advertising. The audience ratings and advertising revenue of the Company's individual stations are subject to change. Any adverse change in a particular market affecting advertising expenditures or an adverse change in the relative market positions of the stations located in a particular market could have a material adverse effect on the revenue and broadcast cash flow of the Company's stations located in that market and on the Company's operating results as a whole. There can be no assurance that any one of the Company's radio stations will be able to maintain or increase its current audience ratings and radio advertising revenue market share. See "Business -- Advertising Sales" and "-- Competition." The radio broadcasting industry is also subject to competition from new media technologies that may be developed or introduced, such as the delivery of audio programming by cable television systems, the introduction of terrestrial digital audio broadcasting services and the introduction of satellite digital audio radio services which may provide a medium for the delivery of multiple new audio programming formats by terrestrial and satellite means, respectively, to local and national audiences. The Company cannot predict the effect, if any, that any such new technologies may have in the radio broadcasting industry. See "Business -- Competition" and "-- Federal Regulation of Radio Broadcasting -- Proposed Changes." Companies that operate radio stations must be alert to the possibility of another station changing its format to compete directly for listeners and advertisers. Typically, other well-capitalized stations compete in the same geographic markets as the Company. Another station's decision to convert to a format similar to that of one of the Company's radio stations in the same geographic area may result in lower ratings and advertising revenue, increased promotion and other expenses and, consequently, lower broadcast cash flow. ABILITY TO FINANCE REPURCHASE IN THE EVENT OF CHANGE OF CONTROL. In the event of a Change of Control, the Company would be required to offer to purchase all outstanding Notes and all outstanding Exchangeable Preferred Stock or Exchange Debentures, as the case may be, at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date, or 101% of the liquidation preference, plus accumulated and unpaid dividends, if any, to the repurchase date. The source of funds for any such purchase would be the available cash of the Company or cash generated from other sources. However, there can be no assurance that the Company would be able to obtain such funds through a refinancing of the Notes or the Exchangeable Preferred Stock or, if applicable, the Exchange Debentures, or otherwise, or that the purchase would be permitted under the Credit Facility. See "Description of the Notes," and "Description of the Exchangeable Preferred Stock and Exchange Debentures." REPURCHASE OF CAPITAL STOCK OF CITADEL COMMUNICATIONS. Pursuant to the terms of the Stockholders Agreement (as defined), on or after August 1, 2000, certain shareholders of Citadel Communications have the 24 32 right to require Citadel Communications to purchase all or a portion of certain shares of capital stock of Citadel Communications owned by them for a price determined in accordance with the Stockholders Agreement. The source of funds for any such purchase would be dividends or other payments from the Company or borrowings by Citadel Communications. However, there can be no assurance that sufficient funds would be available at the time of any such tender to make any required repurchases of capital stock tendered or, if applicable, that restrictions in the Credit Facility and/or the Notes Indenture would permit Citadel Communications to make such required repurchases. In the event that Citadel Communications is unable to repurchase shares tendered by or on behalf of ABRY Broadcast Partners II, L.P. ("ABRY II") or ABRY Citadel Investment Partners, L.P. ("ABRY/CIP"), such entities are entitled, among other things, to solicit offers and make presentations and proposals to prospective buyers of Citadel Communications and enter into negotiations and/or agreements regarding the potential sale of Citadel Communications. See "Management -- Compensation Committee Interlocks and Insider Participation -- Stockholders Agreement" and "Security Ownership of Certain Beneficial Owners." GOVERNMENT REGULATION. The broadcasting industry is subject to extensive federal regulation that, among other things, requires approval by the FCC for the issuance, renewal, transfer of control and assignment of broadcasting station operating licenses and limits the number of broadcasting properties that the Company may acquire in any market. Additionally, the Communications Act of 1934, as amended (the "Communications Act"), and FCC rules will operate to impose limitations on alien ownership and voting of the capital stock of the Company. The Telecommunications Act of 1996 (the "Telecommunications Act") creates significant new opportunities for broadcasting companies but also creates uncertainties as to how the FCC and the courts will enforce and interpret the Telecommunications Act. The FCC generally applies its ownership limits to "attributable" interests held by an individual, corporation, partnership or other association. The interests of the Company's officers, directors and shareholders are generally attributable to the Company. Certain of the Company's officers and directors may acquire attributable broadcast interests, which will limit the number of radio stations that the Company may acquire or own in any market in which such officers or directors hold or acquire attributable broadcast interests. In addition, the number of radio stations the Company may acquire in any market is limited by FCC rules and may vary depending upon whether the interests in other radio stations or certain other media properties of certain individuals affiliated with the Company are attributable to those individuals under FCC rules. Moreover, under the FCC's cross-interest policy, the FCC in certain instances may prohibit one party from acquiring an attributable interest in one media outlet and a substantial non-attributable economic interest in another media outlet in the same market, thereby prohibiting a particular acquisition by the Company. Citadel Communications' and the Company's Certificates of Incorporation each contain provisions which permit restrictions on the ownership, voting and transfer of such entity's capital stock in accordance with the Communications Act and the rules and regulations of the FCC to prohibit the ownership or voting of more than a certain percentage of such entity's outstanding capital stock by or for the account of aliens or their representatives or by a foreign government or representative thereof or by any corporation organized under the laws of a foreign country, or by or for corporations of which any officer is an alien, more than one-fourth of its directors are aliens, or which more than one-fourth of its capital stock is owned of record or voted by aliens, or by any other entity (i) that is subject to or deemed to be subject to management influence by aliens or (ii) the equity of which is owned, controlled by, or held for the benefit of, aliens in a manner that would cause Citadel Communications or the Company to be in violation of the Communications Act or the FCC's regulations. The Company's business will be dependent upon maintaining its broadcasting licenses issued by the FCC, which are ordinarily issued for a maximum term of eight years. Although it is rare for the FCC to deny a renewal application, there can be no assurance that the future renewal applications of the Company will be approved or that such renewals will not include conditions or qualifications that could adversely affect the Company. Moreover, governmental regulations and policies may change over time and there can be no assurance that such changes would not have a material adverse impact upon the Company. See "Business -- Federal Regulation of Radio Broadcasting." 25 33 CONTROL BY PRINCIPAL SHAREHOLDERS. The principal shareholders of Citadel Communications are parties to various agreements pursuant to which the Boards of Directors of Citadel Communications and the Company are constituted and by which certain corporate actions are governed. Pursuant to such agreements, a super-majority vote of the Citadel Communications' Board of Directors is required for the taking by Citadel Communications or the Company of certain actions. Additionally, the prior vote or written consent of the holders of a majority of the Series D Preferred Stock (as defined) of Citadel Communications is required for Citadel Communications or the Company to take certain actions. ABRY II and ABRY/CIP own all of the outstanding Series D Preferred Stock and, therefore, have the power to veto any corporate action which requires a majority vote or written consent of the holders of the Series D Preferred Stock. See "Management -- Board Composition and Governance Matters" and "Security Ownership of Certain Beneficial Owners." CERTAIN FEDERAL INCOME TAX CONSEQUENCES. Dividends on the Exchangeable Preferred Stock that are paid to Non-U.S. Holders may be subject to a 30% withholding tax. Unless a Non-U.S. Holder provides the Company with appropriate documentation indicating its exemption from the withholding tax, in the event any distribution is made with respect to the Exchangeable Preferred Stock in the form of additional shares of Exchangeable Preferred Stock, such Non-U.S. Holder will be required to pay the Company the amount of any such withholding tax and, in the event such payment is not timely made, the Company will withhold a number of shares of Exchangeable Preferred Stock sufficient to reimburse it for the withholding tax obligation. For purposes of this Prospectus, a Non-U.S. Holder is any holder that is not a "U.S. holder" as defined under "Certain Federal Income Tax Considerations." The Company does not presently have any earnings and profits (as determined for U.S. Federal income tax purposes) and cannot predict whether or when it will have such earnings and profits. Distributions on the Exchangeable Preferred Stock will not be eligible for the dividends-received deduction available to corporate holders until such time, if any, as the Company has sufficient earnings and profits allocable to the Exchangeable Preferred Stock. See "Certain Federal Income Tax Considerations." LACK OF ESTABLISHED TRADING MARKET. There has not been any public market for the Series A Securities. The Series B Securities will constitute a new issue of securities with no established trading market. The Company does not intend to list the Series B Securities on any securities exchange or to seek their admission to trading in any automated quotation system. The Initial Purchasers have advised the Company that they currently intend to make a market in the Series B Securities, but they are not obligated to do so and may discontinue such market-making at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and may be limited during the Exchange Offer and at certain other times. Accordingly, no assurance can be given that an active public or other market will develop for the Series B Securities or as to the liquidity of the trading market for the Series B Securities. If a trading market does not develop or is not maintained, holders of the Series B Securities may experience difficulty in reselling the Series B Securities or may be unable to sell them at all. If a market for the Series B Securities develops, any such market may be discontinued at any time. If a public trading market develops for the Series B Securities, future trading prices of the Series B Securities will depend on many factors, including, among other things, prevailing interest rates, the Company's operating results and the market for similar securities. Depending on prevailing interest rates, the market for similar securities and other factors, including the financial condition of the Company, the Series B Notes may trade at a discount from their principal amount and shares of Series B Exchangeable Preferred Stock may trade at a discount from their initial offering price. FRAUDULENT TRANSFER CONSIDERATIONS. Under applicable provisions of the United States Bankruptcy Code or comparable provisions of state fraudulent transfer and conveyance laws, if the Company, at the time it issued the Notes, or, if applicable, the Exchange Debentures, or a guarantor under the Notes or the Exchange Debentures (a "Guarantor"), at the time it issued a Guarantee (a "Guarantee"), (a) incurred such indebtedness with the actual intent to hinder, delay or defraud creditors or (b)(i) received less than reasonably equivalent value or fair consideration therefor and (ii)(A) was insolvent at the time of such 26 34 incurrence, (B) was rendered insolvent by reason of such incurrence (and the application of the proceeds thereof), (C) was engaged or was about to engage in a business or transaction for which the assets remaining with the Company or such Guarantor, as the case may be, constituted unreasonably small capital to carry on its business or (D) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature, then, in each such case, a court of competent jurisdiction could avoid, in whole or in part, the Notes or, if issued, the Exchange Debentures, or such Guarantee or, in the alternative, fashion other equitable relief such as subordinating the Notes or, if issued, the Exchange Debentures, or such Guarantee to existing and future indebtedness of the Company or such Guarantor. The measure of insolvency for purposes of the foregoing would likely vary depending upon the law applied in such case. Generally, however, the Company or such Guarantor would be considered insolvent if the sum of its debts, including contingent liabilities, was greater than all of its assets at a fair valuation, or if the present fair-salable value of its assets was less than the amount that would be required to pay the probable liabilities on its existing debts, including contingent liabilities, as such debts become absolute and matured. Based upon financial and other information currently available to it, the Company believes that the Notes and the Subsidiary Notes Guarantee of Citadel License were incurred for proper purposes and in good faith, and that, after issuance of the Notes and the Subsidiary Notes Guarantee, the Company and Citadel License are solvent and have sufficient capital for carrying on their business and are able to pay their debts as they mature. However, there can be no assurance that a court passing on such issues would agree with the determination of the Company. Any Guarantor which is a subsidiary of the Company may be released from its Guarantee at any time upon any sale, exchange or transfer in compliance with the provisions of the Notes Indenture by the Company of the capital stock of such Guarantor or substantially all of the assets of such Guarantor to a non-affiliate; provided that such Guarantor is released from its guarantees of other Debt of the Company or any Restricted Subsidiary of the Company. See "Description of the Notes -- Guarantees." FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES; CONSEQUENCES OF FAILURE TO EXCHANGE Issuance of the Series B Securities in exchange for the Series A Securities pursuant to the Exchange Offer will be made only after a timely receipt by the Company of such Series A Securities, properly completed and duly executed Letters of Transmittal and all other required documents. Therefore, holders of the Series A Securities desiring to tender such Series A Securities in exchange for Series B Securities should allow sufficient time to ensure timely delivery. The Company is under no duty to give notification of defects or irregularities with respect to the tenders of Series A Securities for exchange. Series A Securities that are not tendered or are tendered but not accepted will, following the consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof and, upon consummation of the Exchange Offer, certain registration rights under the Registration Rights Agreements will terminate. In addition, any holder of Series A Securities who tenders in the Exchange Offer for the purpose of participating in a distribution of the Series B Securities may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transactions. Each holder of the Series A Securities (other than certain specified holders) who wishes to exchange the Series A Securities for Series B Securities in the Exchange Offer will be required to represent in the Letters of Transmittal that (i) it is not an affiliate of the Company, (ii) the Series B Securities to be received by it are being acquired in the ordinary course of its business and (iii) at the time of commencement of the Exchange Offer, it has no arrangement with any person to participate in the distribution (within the meaning of the Securities Act) of the Series B Securities. Each Participating Broker-Dealer that receives Series B Securities for its own account in exchange for Series A Securities, where such Series A Securities were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Series B Securities. See "Plan of Distribution." To the extent that Series A Securities are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Series A Securities could be adversely affected. See "The Exchange Offer." 27 35 USE OF PROCEEDS The Exchange Offer is intended to satisfy certain of the Company's obligations under the Registration Rights Agreements. The Company will not receive any cash proceeds from the issuance of the Series B Securities in the Exchange Offer. The net proceeds to the Company from the issuance of $100,000,000 aggregate principal amount of the Series A Notes and the Series A Exchangeable Preferred Stock were approximately $193.1 million. Of these net proceeds $113.4 million was used to pay the cash portion of the purchase price for the Tele-Media Acquisition, approximately $51.8 million was used to repay certain indebtedness of the Company and the balance was used for acquisitions, including expenses related thereto, and working capital purposes. The Company did not receive any cash proceeds from the issuance of $1,000,000 aggregate principal amount of the Series A Notes in connection with the Tele-Media Acquisition. 28 36 CAPITALIZATION The following table sets forth the unaudited capitalization of the Company as of June 30, 1997 (i) on an actual basis, (ii) on a pro forma basis to give effect to the Recent 1997 Acquisitions and the Original Offerings and (iii) on a pro forma basis as further adjusted to give effect to the Pending Transactions. This table should be read in conjunction with the Company's Consolidated Financial Statements and related notes, "Unaudited Pro Forma Condensed Consolidated Financial Statements" and other information included elsewhere in this Prospectus. Dollars in the table below are shown in thousands.
JUNE 30, 1997 ----------------------------------------- PRO FORMA FOR THE PRO FORMA RECENT 1997 AS FURTHER ACQUISITIONS ADJUSTED AND FOR THE ORIGINAL PENDING ACTUAL OFFERINGS TRANSACTIONS -------- ----------- ------------ (IN THOUSANDS) Cash and cash equivalents................................ $ 277 $ 25,111 $ 2,923 ======== ======== ======== Long-term debt, including current portion: Credit Facility........................................ $ 89,584 $ 50,584 $113,584 Note payable to parent company(1)...................... 12,817 -- -- Other obligations...................................... 1,240 1,240 1,740 Notes(2)............................................... -- 101,000 101,000 -------- -------- ======== Total long-term debt..................................... 103,641 152,824 216,324 Exchangeable Preferred Stock............................. -- 96,350 96,350 Shareholder's Equity..................................... 10,909 15,159 25,159 -------- -------- ======== Total capitalization..................................... $114,550 $ 264,333 $337,833 ======== ======== ========
- --------------- (1) Represents advances previously made by Citadel Communications to the Company which were repaid out of the proceeds of the Original Offerings. (2) Includes $1.0 million principal amount of Notes issued to the holders of the Tele-Media Bonds. 29 37 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements reflect the results of operations and balance sheet of the Company after giving effect to the Completed Transactions and the Pending Transactions. The pro forma condensed consolidated financial statements are based on the historical consolidated financial statements of the Company and the financial statements of those entities acquired or to be acquired, or from which assets were or will be acquired, in connection with the Completed Transactions and the Pending Acquisitions, and should be read in conjunction with the financial statements and the notes thereto of (i) the Company, (ii) Tele-Media Broadcasting Company, (iii) Deschutes River Broadcasting, Inc., (iv) Snider Corporation, (v) Snider Broadcasting Corporation and subsidiary and CDB Broadcasting Corporation, (vi) Maranatha Broadcasting Company, Inc.'s, Radio Broadcasting Division and (vii) Pacific Northwest Broadcasting Corporation and Affiliates which are included elsewhere in this Prospectus. In the opinion of management, all adjustments necessary to fairly present this pro forma information have been made. For pro forma purposes, the Company's consolidated statements of operations for the year ended December 31, 1996 and the six months ended June 30, 1996 and 1997 have been adjusted to give effect to the Completed Transactions and the Pending Transactions as if each occurred on January 1, 1996. For pro forma purposes, the Company's consolidated balance sheet as of June 30, 1997 has been adjusted to give effect to the Recent 1997 Acquisitions, the Original Offerings and the Pending Transactions as if each had occurred on June 30, 1997. The unaudited pro forma information is presented for illustrative purposes only and is not indicative of the operating results or financial position that would have occurred if the Completed Transactions and the Pending Transactions had been consummated on the dates indicated, nor is it indicative of future operating results or financial position if the aforementioned transactions are completed. The Company cannot predict whether the consummation of the Pending Transactions will conform to the assumptions used in the preparation of the unaudited pro forma condensed consolidated financial statements. 30 38 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS)
THE COMPANY ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR ACTUAL THE COMPLETED THE COMPLETED THE PENDING PRO FORMA THE COMPANY TRANSACTIONS(1) TRANSACTIONS TRANSACTIONS(2) THE COMPANY ----------- --------------- --------------- --------------- ----------- Net revenue................................. $45,413 $ 48,845 $ 94,258 $11,701 $ 105,959 Station operating expenses.................. 33,232 35,497 68,729 7,107 75,836 Depreciation and amortization............... 5,158 13,758 18,916 6,320 25,236 Corporate general and administrative........ 3,248 -- 3,248 -- 3,248 ------- -------- -------- ------- -------- Operating expenses........................ 41,638 49,255 90,893 13,427 104,320 ------- -------- -------- ------- -------- Operating income (loss)..................... 3,775 (410) 3,365 (1,726) 1,639 Interest expense............................ 6,156 6,540 12,696 5,316 18,012 Other (income) expense, net................. (414) (29) (443) -- (443) ------- -------- -------- ------- -------- Income (loss) before income taxes........... (1,967) (6,921) (8,888) (7,042) (15,930) Income taxes (benefit)...................... -- -- -- -- Dividend requirement for Exchangeable Preferred Stock........................... -- (13,825) (13,825) -- (13,825) ------- -------- -------- ------- -------- Income (loss) from continuing operations applicable to common shares............... $(1,967) $ (20,746) $ (22,713) $(7,042) $ (29,755) ======= ======== ======== ======= ========
31 39 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (1) Represents the net effect of (a) the acquisition of Deschutes, (b) the Tele-Media Acquisition, (c) the acquisitions of KTBL-FM, KHFM-FM, KNML-AM and KRST-FM in Albuquerque, (d) the acquisition of KHOP-FM in Modesto, (e) the acquisition of KKLI-FM in Colorado Springs, (f) the acquisitions of KENZ-FM and KBER-FM in Salt Lake City, (g) the acquisition of KNHK-FM in Reno, (h) the acquisition of KTHK-FM in Tri-Cities, (i) the acquisition of WDGE-FM in Providence and (j) the consummation of the Original Offerings as if each transaction had taken place as of January 1, 1996. Depreciation and amortization for such acquisitions are based upon preliminary allocations of the purchase price to property and equipment and intangible assets which will be amortized over periods of 1-25 years. Actual depreciation and amortization may differ depending on the final allocation of the purchase price; however, management does not believe these differences will be material. Dollars in the table below are shown in thousands.
OTHER THE THE COMPLETED ORIGINAL COMPLETED DESCHUTES(a) TELE-MEDIA(b) ACQUISITIONS(c) OFFERINGS TRANSACTIONS ------------ ------------- --------------- --------- ------------ Net revenue........................ $ 11,442 $31,385 $ 6,018 $ -- $ 48,845 Station operating expenses......... 9,412 22,720 3,365 -- 35,497 Depreciation and amortization...... 1,759 8,233 3,766 -- 13,758 Corporate general and administrative................... 489 291 -- (780)(d) -- ------------ ------------- ------- --------- ----------- Operating expenses............... 11,660 31,244 7,131 (780) 49,255 ------------ ------------- ------- --------- ----------- Operating income (loss)............ (218) 141 (1,113) 780 (410) Interest expense................... 1,556 9,669 3,105 (7,790)(e) 6,540 Other (income) expense, net........ (29) -- -- -- (29) ------------ ------------- ------- --------- ----------- Income (loss) before income taxes............................ (1,745) (9,528) (4,218) 8,570 (6,921) Income taxes (benefit)............. -- -- -- -- -- Dividend requirement for Exchangeable Preferred Stock..... -- -- -- (13,825)(f) (13,825) ------------ ------------- ------- --------- ----------- Income (loss) from continuing operations applicable to common shares........................... $ (1,745) $(9,528) $(4,218) $(5,255) $(20,746) ============ ============= ======= ======== ===========
(a) Represents the effect of the acquisition of Deschutes. Dollars in the table below are shown in thousands.
ADJUSTMENTS FOR ACQUISITIONS PRO FORMA AND ADJUSTMENTS FOR DISPOSITIONS ACTUAL DESCHUTES COMPLETED BY DESCHUTES(i) ACQUISITION DESCHUTES(vi) DESCHUTES ------------ --------------- --------------- --------- Net revenue................................. $ 9,511 $ -- $ 1,931 $11,442 Station operating expenses.................. 8,002 (66)(ii) 1,476 9,412 Depreciation and amortization............... 1,173 586(iii) -- 1,759 Corporate general and administrative........ 705 (216)(iv) -- 489 ---------- ------- ------- --------- Operating expenses........................ 9,880 304 1,476 11,660 ---------- ------- ------- --------- Operating income (loss)..................... (369) (304) 455 (218) Interest expense............................ 1,144 412(v) -- 1,556 Other (income) expense, net................. (127) -- 98 (29) ---------- ------- ------- --------- Income (loss) before income taxes........... (1,386) (716) 357 (1,745) Income taxes (benefit)...................... -- -- -- -- ---------- ------- ------- --------- Income (loss) from continuing operations.... $ (1,386) $ (716) $ 357 $(1,745) ========== ======= ======= =========
(i) Represents the audited historical results of Deschutes for the period from January 1, 1996 through December 31, 1996. (ii) Reflects lower fees, as a percentage of national advertising sales, paid by the Company to a national representative for national advertising sales. (iii) Represents increased depreciation and amortization resulting from the purchase price allocation. (iv) Reflects the elimination of management fees paid by Deschutes. (v) Represents increased interest expense that would have been incurred if the acquisition of Deschutes had occurred on January 1, 1996. (vi) Gives effect to the historical operating results of stations acquired in Medford, Eugene, Tri-Cities and Billings during 1996 and stations in Bozeman which were sold in November 1996. Prior to the acquisition dates, 32 40 Deschutes operated stations in Billings and Tri-Cities under a JSA or LMA. Deschutes received fees for such services. Includes net revenue and station operating expenses for stations operated under JSAs to reflect ownership of the stations as of January 1, 1996. Net revenue and station operating expenses for stations operated under LMAs are included in the Deschutes' historical consolidated financial statements. For those stations operated under JSAs or LMAs and subsequently acquired, associated fees and redundant expenses were eliminated and estimated occupancy costs were included to adjust the results of operations to reflect ownership of the stations as of January 1, 1996. (b) Represents the net effect of the Tele-Media Acquisition, including stations acquired by Tele-Media. Dollars in the table below are shown in thousands.
PRO FORMA ADJUSTMENTS FOR ADJUSTMENTS FOR ACQUISITIONS ACTUAL TELE-MEDIA COMPLETED BY TELE-MEDIA(i) ACQUISITION TELE-MEDIA(vi) TELE-MEDIA ------------- --------------- --------------- ---------- Net revenue............................. $26,424 $ -- $ 4,961 $ 31,385 Station operating expenses.............. 18,293 (457)(ii) 4,884 22,720 Depreciation and amortization........... 3,494 4,739(iii) -- 8,233 Corporate general and administrative.... 804 (513)(iv) -- 291 ------------- ------- ------ ---------- Operating expenses.................... 22,591 3,769 4,884 31,244 ------------- ------- ------ ---------- Operating income (loss)................. 3,833 (3,769) 77 141 Interest expense........................ 10,750 (1,081)(v) -- 9,669 ------------- ------- ------ ---------- Income (loss) before income taxes....... (6,917) (2,688) 77 (9,528) Income taxes (benefit).................. -- -- -- -- ------------- ------- ------ ---------- Income (loss) from continuing operations............................ $(6,917) $(2,688) $ 77 $ (9,528) ============= =========== =========== ==========
(i) Represents the audited historical results of Tele-Media for the period January 1, 1996 through December 31, 1996. (ii) Includes the elimination of $197,000 of expenses to reflect lower fees, as a percentage of national advertising sales, paid by the Company to a national representative for national advertising sales and the elimination of $260,000 of expenses associated with the litigation between the Company and Tele-Media. Had the Tele-Media Acquisition occurred on January 1, 1996, these expenses would not have been incurred. (iii) Represents increased depreciation and amortization resulting from the purchase price allocation. (iv) Reflects the elimination of management fees paid to affiliates by Tele-Media of $804,000, the recording of corporate overhead of $400,000 which represents the Company's estimate of the incremental expense necessary to oversee the Tele-Media stations and the elimination of $109,000 of expenses associated with the litigation between the Company and Tele-Media. Had the Original Offerings and the Tele-Media Acquisition occurred on January 1, 1996, these expenses would not have been incurred. (v) Reflects the elimination of Tele-Media interest expense of $10.8 million and the recording of interest expense of $9.7 million that would have been incurred if the acquisition of Tele-Media had occurred on January 1, 1996. (vi) Represents the historical operating results of the Wilkes-Barre/Scranton stations acquired by Tele-Media in February and April 1997. (c) Reflects adjustments for the acquisitions of KTBL-FM, KHFM-FM, KNML-AM and KRST-FM in Albuquerque, KHOP-FM in Modesto, KKLI-FM in Colorado Springs, KENZ-FM and KBER-FM in Salt Lake City, KNHK-FM in Reno, KTHK-FM in Tri-Cities and WDGE-FM in Providence. Prior to the acquisition dates, the Company operated KTBL-FM, KHOP-FM, KRST-FM, KTHK-FM, KNHK-FM, KENZ-FM and KBER-FM under a JSA or LMA. The Company receives fees for such services. Includes net revenue and station operating expenses for stations operated under JSAs to reflect ownership of the stations as of January 1, 1996. Net revenue and station operating expenses for stations operated under LMAs are included in the Company's historical consolidated financial statements. For those stations operated under JSAs or LMAs and subsequently acquired, associated fees and redundant expenses were eliminated and estimated occupancy costs were included to adjust the results of operations to reflect ownership of the stations as of January 1, 1996. (d) Represents the elimination of $780,000 of professional expenses associated with the Company's capital raising activities in 1996. (e) Reflects the reduction of the Company's pro forma interest expense, the recording of interest expense related to the Notes and recording of the amortization of deferred financing costs of $3.3 million related to the Notes. (f) Reflects the recording of the dividends related to the Exchangeable Preferred Stock as if the Original Offerings had taken place on January 1, 1996. 33 41 (2) Represents the net effect of (a) the Little Rock Acquisitions, (b) the acquisition of WLEV-FM in Allentown and the disposition of WEST-AM also in Allentown, (c) the Boise Acquisition, (d) the acquisition of KBEE-FM and KFNZ-AM in Salt Lake City, (e) the acquisition of WEMR-AM and WEMR-FM in Wilkes-Barre/Scranton, (f) the acquisition of WSGD-FM, WDLS-FM and WCDL-AM in Wilkes-Barre/Scranton, (g) the acquisition of WDGF-FM in Providence and (h) the disposition of the Johnstown and State College stations, as if each transaction had taken place as of January 1, 1996. Depreciation and amortization for such acquisitions are based upon preliminary allocations of the purchase price to property and equipment and intangible assets which will be amortized over periods of 1-25 years. Actual depreciation and amortization may differ depending on the final allocation of the purchase price; however, management does not believe these differences will be material. Dollars in the table below are shown in thousands.
LITTLE ROCK ALLENTOWN BOISE OTHER PENDING ACQUISITIONS(a) TRANSACTIONS(b) ACQUISITION(c) ACQUISITIONS(d) DISPOSITIONS(e) TRANSACTIONS --------------- --------------- -------------- -------------- --------------- ------------ Net revenue..... $ 8,364 $ 1,598 $ 4,152 $1,000 $(3,413) $ 11,701 Station operating expenses...... 5,638 918 3,035 579 (3,063) 7,107 Depreciation and amortization... 2,715 1,538 2,002 663 (598) 6,320 ------- ------- ------- ------ ------- ------------ Operating expenses.... 8,353 2,456 5,037 1,242 (3,661) 13,427 ------- ------- ------- ------ ------- ------------ Operating income (loss)........ 11 (858) (885) (242) 248 (1,726) Interest expense....... 1,181 1,941 2,405 506 (717) 5,316 ------- ------- ------- ------ ------- ------------ Income (loss) before income taxes......... (1,170) (2,799) (3,290) (748) 965 (7,042) Income taxes (benefit)..... -- -- -- -- -- -- ------- ------- ------- ------ ------- ------------ Income (loss) from continuing operations.... $(1,170) $(2,799) $ (3,290) $ (748) $ 965 $ (7,042) ============ ============= =========== ============ ============ ==========
(a) Gives effect to the Little Rock Acquisitions as if such transactions had taken place on January 1, 1996. (b) Gives effect to the acquisition of WLEV-FM in Allentown and the disposition of WEST-AM also in Allentown as if such transactions had taken place on January 1, 1996. (c) Gives effect to the Boise Acquisition as if such transaction had taken place on January 1, 1996. (d) Gives effect to (i) the acquisition of KBEE-FM and KFNZ-FM in Salt Lake City, (ii) the acquisition of WEMR-AM and WEMR-FM in Wilkes-Barre/Scranton, (iii) the acquisition of WSGD-FM, WDLS-FM and WCDL-AM in Wilkes-Barre/ Scranton and (iv) the acquisition of WDGF-FM in Providence, as if each transaction had taken place on January 1, 1996. (e) Gives effect to the disposition of the Johnstown and State College stations as if such transaction had taken place on January 1, 1996. 34 42 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (DOLLARS IN THOUSANDS)
THE COMPANY ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR ACTUAL THE COMPLETED THE COMPLETED THE PENDING PRO FORMA THE COMPANY TRANSACTIONS(1) TRANSACTIONS TRANSACTIONS(2) THE COMPANY ----------- --------------- ---------------- --------------- ----------- Net revenue................................ $19,348 $ 24,237 $ 43,585 $ 6,031 $ 49,616 Station operating expenses................. 14,797 18,678 33,475 3,716 37,191 Depreciation and amortization.............. 1,974 7,366 9,340 3,159 12,499 Corporate general and administrative....... 1,256 (375) 881 -- 881 ----------- --------------- -------- ------- ----------- Operating expenses....................... 18,027 25,669 43,696 6,875 50,571 ----------- --------------- -------- ------- ----------- Operating income (loss).................... 1,321 (1,432) (111) (844) (955) Interest expense........................... 2,779 3,616 6,395 2,658 9,053 Other (income) expense, net................ (36) -- (36) -- (36) ----------- --------------- -------- ------- ----------- Income (loss) before income taxes.......... (1,422) (5,048) (6,470) (3,502) (9,972) Income taxes (benefit)..................... -- -- -- -- -- Dividend requirement for Exchangeable Preferred Stock.......................... -- (6,691) (6,691) -- (6,691) ----------- --------------- -------- ------- ----------- Income (loss) from continuing operations applicable to common shares.............. $(1,422) $ (11,739) $(13,161) $(3,502) $ (16,663) =========== ============ ============= ============ ===========
35 43 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (1) Represents the net effect of (a) the acquisition of Deschutes, (b) the Tele-Media Acquisition, (c) the acquisitions of KTBL-FM, KHFM-FM, KNML-AM and KRST-FM in Albuquerque, (d) the acquisition of KHOP-FM in Modesto, (e) the acquisition of KKLI-FM in Colorado Springs, (f) the acquisitions of KENZ-FM and KBER-FM in Salt Lake City, (g) the acquisition of KNHK-FM in Reno, (h) the acquisition of KTHK-FM in Tri-Cities, (i) the acquisition of WDGE-FM in Providence and (j) the consummation of the Original Offerings as if each transaction had taken place as of January 1, 1996. Depreciation and amortization for such acquisitions are based upon preliminary allocations of the purchase price to property and equipment and intangible assets which will be amortized over periods of 1-25 years. Actual depreciation and amortization may differ depending on the final allocation of the purchase price; however, management does not believe these differences will be material. Dollars in the table below are shown in thousands.
OTHER THE THE COMPLETED ORIGINAL COMPLETED DESCHUTES(a) TELE-MEDIA(b) ACQUISITIONS(c) OFFERINGS TRANSACTIONS ------------- ------------- --------------- --------- ------------ Net revenue............................... $ 5,391 $14,632 $ 4,214 $ -- $ 24,237 Station operating expenses................ 4,747 11,301 2,630 -- 18,678 Depreciation and amortization............. 880 3,899 2,587 -- 7,366 Corporate general and administrative...... 205 200 -- (780)(d) (375) ------------- ------------- ------- --------- ------------ Operating expenses...................... 5,832 15,400 5,217 (780) 25,669 ------------- ------------- ------- --------- ------------ Operating income (loss)................... (441) (768) (1,003) 780 (1,432) Interest expense.......................... 778 4,835 1,930 (3,927)(e) 3,616 ------------- ------------- ------- --------- ------------ Income (loss) before income taxes......... (1,219) (5,603) (2,933) 4,707 (5,048) Income taxes (benefit).................... -- -- -- -- -- Dividend requirement for Exchangeable Preferred Stock......................... -- -- -- (6,691)(f) (6,691) ------------- ------------- ------- --------- ------------ Income (loss) from continuing operations applicable to common shares............. $(1,219) $(5,603) $(2,933) $ (1,984) $(11,739) ============= ============= =========== ======= ============
(a) Represents the effect of the acquisition of Deschutes. Dollars in the table below are shown in thousands.
ADJUSTMENTS FOR PRO FORMA ACQUISITIONS AND ADJUSTMENTS FOR DISPOSITIONS ACTUAL DESCHUTES COMPLETED BY DESCHUTES(i) ACQUISITION DESCHUTES(vi) DESCHUTES ------------ --------------- ---------------- --------- Net revenue.......................................... $3,909 $ -- $1,482 $ 5,391 Station operating expenses........................... 3,496 (34)(ii) 1,285 4,747 Depreciation and amortization........................ 427 453(iii) -- 880 Corporate general and administrative................. 293 (88)(iv) -- 205 ------ ------ ------ --------- Operating expenses................................. 4,216 331 1,285 5,832 ------ ------ ------ --------- Operating income (loss).............................. (307) (331) 197 (441) Interest expense..................................... 378 400(v) -- 778 ------ ------ ------ --------- Income (loss) before income taxes.................... (685) (731) 197 (1,219) Income taxes (benefit)............................... -- -- -- -- ------ ------ ------ --------- Income (loss) from continuing operations............. $ (685) $(731) $ 197 $(1,219) ====== ====== ====== =========
(i) Represents the unaudited historical results of Deschutes for the period from January 1, 1996 through June 30, 1996. (ii) Reflects lower fees, as a percentage of national advertising sales, paid by the Company to a national representative for national advertising sales. (iii) Represents increased depreciation and amortization resulting from the purchase price allocation. (iv) Reflects the elimination of management fees paid by Deschutes. (v) Represents increased interest expense that would have been incurred if the acquisition of Deschutes had occurred on January 1, 1996. (vi) Gives effect to the historical operating results of stations acquired in Medford, Eugene, Tri-Cities and Billings during 1996 and stations in Bozeman which were sold in November 1996. Prior to the acquisition dates, Deschutes operated stations in Billings and Tri-Cities under a JSA or LMA. Deschutes received fees for such services. Includes net revenue and station operating expenses for stations operated under JSAs to reflect ownership of the stations as of January 1, 1996. Net revenue and station operating expenses for stations operated under LMAs are included in the Deschutes' historical consolidated financial statements. For those stations operated under JSAs or LMAs and subsequently acquired, associated fees and redundant expenses were eliminated and estimated occupancy costs were included to adjust the results of operations to reflect ownership of the stations as of January 1, 1996. 36 44 (b) Represents the net effect of the Tele-Media Acquisition, including stations acquired by Tele-Media. Dollars in the table below are shown in thousands.
ADJUSTMENTS PRO FORMA FOR ADJUSTMENTS FOR ACQUISITIONS ACTUAL TELE-MEDIA COMPLETED BY TELE-MEDIA(i) ACQUISITION TELE-MEDIA(vi) TELE-MEDIA ------------- --------------- --------------- ---------- Net revenue......................................... $11,950 $ -- $ 2,682 $ 14,632 Station operating expenses.......................... 8,613 (87)(ii) 2,775 11,301 Depreciation and amortization....................... 2,093 1,806(iii) -- 3,899 Corporate general and administrative................ 358 (158)(iv) -- 200 ------------- ------- ------- ---------- Operating expenses................................ 11,064 1,561 2,775 15,400 ------------- ------- ------- ---------- Operating income (loss)............................. 886 (1,561) (93) (768) Interest expense.................................... 4,956 (121)(v) -- 4,835 ------------- ------- ------- ---------- Income (loss) before income taxes................... (4,070) (1,440) (93) (5,603) Income taxes (benefit).............................. -- -- -- -- ------------- ------- ------- ---------- Income (loss) from continuing operations............ $(4,070) $(1,440) $ (93) $ (5,603) ============= =========== ======= ==========
(i) Represents the unaudited historical results of Tele-Media for the period January 1, 1996 through June 30, 1996. (ii) Includes the elimination of $87,000 of expenses to reflect lower fees, as a percentage of national advertising sales, paid by the Company to a national representative for national advertising sales. (iii) Represents increased depreciation and amortization resulting from the purchase price allocation. (iv) Reflects the elimination of management fees paid to affiliates by Tele-Media of $358,000 and the recording of corporate overhead of $200,000 which represents the Company's estimate of the incremental expense necessary to oversee the Tele-Media stations. (v) Reflects the elimination of Tele-Media interest expense of $5.0 million and the recording of interest expense of $4.8 million that would have been incurred if the acquisition of Tele-Media had occurred on January 1, 1996. (vi) Represents historical operating results of the Wilkes-Barre/Scranton stations acquired by Tele-Media in February and April 1997. (c) Reflects adjustments for the acquisitions of KTBL-FM, KHFM-FM, KNML-AM and KRST-FM in Albuquerque, KHOP-FM in Modesto, KKLI-FM in Colorado Springs, KENZ-FM and KBER-FM in Salt Lake City, KNHK-FM in Reno, KTHK in Tri-Cities and WDGE-FM in Providence. Prior to the acquisition dates, the Company operated KTBL-FM, KHOP-FM, KRST-FM, KTHK-FM, KNHK-FM, KENZ-FM and KBER-FM under a JSA or LMA. The Company receives fees for such services. Includes net revenue and station operating expenses for stations operated under JSAs to reflect ownership of the stations as of January 1, 1996. Net revenue and station operating expenses for stations operated under LMAs are included in the Company's historical consolidated financial statements. For those stations operated under JSAs or LMAs and subsequently acquired, associated fees and redundant expenses were eliminated and estimated occupancy costs were included to adjust the results of operations to reflect ownership of the stations as of January 1, 1996. (d) Represents the elimination of $780,000 of professional expenses associated with the Company's capital raising activities in 1996. Had the Original Offerings and the Tele-Media Acquisition occurred on January 1, 1996, these expenses would not have been incurred. (e) Reflects the reduction of the Company's pro forma interest expense, the recording of interest expense related to the Notes and recording of the amortization of deferred financing costs of $3.3 million related to the Notes. (f) Reflects the recording of the dividends related to the Exchangeable Preferred Stock as if the Original Offerings had taken place on January 1, 1996. (2) Represents the net effect of (a) the Little Rock Acquisitions, (b) the acquisition of WLEV-FM in Allentown and the disposition of WEST-AM also in Allentown, (c) the Boise Acquisition, (d) the acquisition of KBEE-FM and KFNZ-AM in Salt Lake City, (e) the acquisition of WEMR-AM and WEMR-FM in Wilkes-Barre/Scranton, (f) the acquisition of WSGD-FM, WDLS-FM, and WCDL-AM in Wilkes-Barre/Scranton, (g) the acquisition of WDGF-FM in Providence and (h) the disposition of the Johnstown and State College stations, as if each transaction had taken place as of January 1, 1996. Depreciation and amortization for such acquisitions are based upon preliminary allocations of the purchase price to property and equipment and intangible assets which will be amortized over periods of 37 45 1-25 years. Actual depreciation and amortization may differ depending on the final allocation of the purchase price; however, management does not believe these differences will be material. Dollars in the table below are shown in thousands.
LITTLE ROCK ALLENTOWN BOISE OTHER PENDING ACQUISITIONS(A) TRANSACTIONS(B) ACQUISITION(C) ACQUISITIONS(D) DISPOSITIONS(E) TRANSACTIONS --------------- -------------- --------------- --------------- --------------- ------------ Net revenue.... $ 4,282 $ 686 $ 2,220 $ 141 $(1,298) $ 6,031 Station operating expenses..... 3,131 436 1,252 39 (1,142) 3,716 Depreciation and amortization... 1,357 769 1,001 331 (299) 3,159 ------ ------- ------- ------ ------- ------------ Operating expenses... 4,488 1,205 2,253 370 (1,441) 6,875 ------ ------- ------- ------ ------- ------------ Operating income (loss)....... (206) (519) (33) (229) 143 (844) Interest expense...... 591 970 1,203 253 (359) 2,658 ------ ------- ------- ------ ------- ------------ Income (loss) before income taxes........ (797) (1,489) (1,236) (482) 502 (3,502) Income taxes (benefit).... -- -- -- -- -- -- ------ ------- ------- ------ ------- ------------ Income (loss) from continuing operations... $ (797) $ (1,489) $(1,236) $(482) $ 502 $ (3,502) ============ ============ ============= ============ ============ ==========
(a) Gives effect to the Little Rock Acquisitions as if such transactions had taken place on January 1, 1996. (b) Gives effect to the acquisition of WLEV-FM in Allentown and the disposition of WEST-AM also in Allentown, as if such transactions had taken place on January 1, 1996. (c) Gives effect to the Boise Acquisition as if such transaction had taken place on January 1, 1996. (d) Gives effect to (i) the acquisition of KBEE-FM and KFNZ-AM in Salt Lake City, (ii) the acquisition of WEMR-AM and WEMR-FM in Wilkes-Barre/Scranton, (iii) the acquisition of WSGD-FM, WDLS-FM and WCDL-AM in Wilkes-Barre/ Scranton and (iv) the acquisition of WDGF-FM in Providence, as if the acquisitions had taken place on January 1, 1996. (e) Gives effect to the disposition of the Johnstown and State College stations as if such transaction had taken place on January 1, 1996. 38 46 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (DOLLARS IN THOUSANDS)
THE COMPANY ADJUSTMENTS FOR AS ADJUSTED FOR ADJUSTMENTS FOR ACTUAL COMPLETED COMPLETED THE PENDING PRO FORMA THE COMPANY TRANSACTIONS(1) TRANSACTIONS TRANSACTIONS(2) THE COMPANY ----------- ---------------- ---------------- ---------------- ----------- Net revenue.............................. $27,181 $ 22,479 $ 49,660 $ 6,737 $ 56,397 Station operating expenses............... 19,321 17,705 37,026 4,254 41,280 Depreciation and amortization............ 3,907 8,833 12,740 3,159 15,899 Corporate general and administrative..... 1,271 (11) 1,260 -- 1,260 ----------- -------- -------- ------- ----------- Operating expenses..................... 24,499 26,527 51,026 7,413 58,439 ----------- -------- -------- ------- ----------- Operating income (loss).................. 2,682 (4,048) (1,366) (676) (2,042) Interest expense......................... 3,594 2,488 6,082 2,658 8,740 Other (income) expense, net.............. (72) (53) (125) -- (125) ----------- -------- -------- ------- ----------- Income (loss) before income taxes........ (840) (6,483) (7,323) (3,334) (10,657) Income taxes (benefit)................... -- -- -- -- -- Dividend requirement for Exchangeable Preferred Stock........................ -- (7,607) (7,607) -- (7,607) ----------- -------- -------- ------- ----------- Income (loss) from continuing operations applicable to common shares............ $ (840) $(14,090) $(14,930) $ (3,334) $ (18,264) ========== ============= ============= ============= ==========
39 47 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (1) Represents the net effect of (a) the Tele-Media Acquisition, including stations acquired by Tele-Media, (b) the acquisitions of KENZ-FM and KBER-FM in Salt Lake City, (c) the acquisition of KNHK-FM in Reno, (d) the acquisition of KTHK-FM in Tri-Cities, (e) the acquisition of WDGE-FM in Providence and (f) the consummation of the Original Offerings as if each transaction had taken place as of January 1, 1996. Depreciation and amortization for such acquisitions are based upon preliminary allocations of the purchase price to property and equipment and intangible assets which will be amortized over periods of 1-25 years. Actual depreciation and amortization may differ depending on the final allocation of the purchase price; however management does not believe these differences will be material. Prior to the dates of their acquisition, the Company operated KENZ-FM and KBER-FM, KNHK-FM and KTHK-FM under a JSA and LMAs. The Company receives fees for such services. Includes net revenue and station operating expenses for stations operated under JSAs to reflect ownership of the stations as of January 1, 1996. Net revenue and station operating expenses for stations operated under LMAs are included in the Company's historical consolidated financial statements. For those stations operated under JSAs or LMAs and subsequently acquired, associated fees and redundant expenses were eliminated and estimated occupancy costs were included to adjust the results of operations to reflect ownership of the stations as of January 1, 1996. Dollars in the table below are shown in thousands.
PRO FORMA ADJUSTMENTS FOR ACTUAL ACTUAL TELE-MEDIA OTHER THE ORIGINAL THE COMPLETED DESCHUTES(A) TELE-MEDIA(B) ACQUISITION ACQUISITIONS(G) OFFERINGS TRANSACTIONS ------------ ------------- --------------- --------------- ------------ ------------- Net revenue............ $ 5,229 $16,241 $ -- $ 1,009 $ -- $ 22,479 Station operating expenses............. 4,954 12,713 (543)(c) 581 -- 17,705 Depreciation and amortization......... 1,053 2,208 4,739(d) 833 -- 8,833 Corporate general and administrative....... 323 454 (788)(e) -- -- (11) ------------ ------------- ------- ------- ------------ ------------- Operating expenses... 6,330 15,375 3,408 1,414 -- 26,527 ------------ ------------- ------- ------- ------------ ------------- Operating income (loss)............... (1,101) 866 (3,408) (405) -- (4,048) Interest expense....... 570 5,911 (1,076)(f) 831 (3,748)(h) 2,488 Other (income) expense, net.................. (19) (34) -- -- -- (53) ------------ ------------- ------- ------- ------------ ------------- Income (loss) before income taxes......... (1,652) (5,011) (2,332) (1,236) 3,748 (6,483) Income taxes (benefit)............ -- -- -- -- -- -- Dividend requirement for Exchangeable Preferred Stock...... -- -- -- -- (7,607)(i) (7,607) ------------ ------------- ------- ------- ------------ ------------- Income (loss) from continuing operations applicable to common shares............... $ (1,652) $(5,011) $(2,332) $(1,236) $ (3,859) $ (14,090) ============ ============= ============== ============== =========== =============
(a) Represents the unaudited historical results for Deschutes for the period January 1, 1997 through June 30, 1997. (b) Represents the unaudited historical results of Tele-Media for the period January 1, 1997 through June 30, 1997, including the historical operating results of the Wilkes-Barre/Scranton stations acquired by Tele-Media in February and April 1997 which had been operated under LMA/JSA agreements since August and December 1996. (c) Includes the elimination of $85,000 of expenses to reflect lower fees, as a percentage of national advertising sales, paid by the Company to a national representative for national advertising sales and the elimination of $211,000 of LMA/JSA fees related to the Wilkes-Barre/Scranton stations and $247,000 of expenses associated with the litigation between the Company and Tele-Media. Had the Tele-Media Acquisition occurred on January 1, 1996, these expenses would not have been incurred. (d) Represents increased depreciation and amortization resulting from the purchase price allocation. (e) Reflects the elimination of management fees paid to affiliates by Tele-Media of $454,000 and the recording of corporate overhead of $200,000 which represents the Company's estimate of the incremental expense necessary to oversee the Tele-Media stations and the elimination of $534,000 of expenses associated with the litigation between the Company and Tele-Media. Had the Original Offerings and the Tele-Media Acquisition occurred on January 1, 1996, these expenses would not have been incurred. (f) Reflects the elimination of Tele-Media interest expense of $5.9 million and the recording of interest expense of $4.8 million that would have been incurred if the acquisition of Tele-Media had occurred on January 1, 1996. (g) Gives effect to the acquisitions of KBER-FM and KENZ-FM in Salt Lake City, KNHK-FM in Reno, KTHK-FM in Tri-Cities and WDGE-FM in Providence as if such transactions had taken place on January 1, 1996. (h) Reflects the reduction of the Company's pro forma interest expense, the recording of interest expense related to the Notes and recording of the amortization of deferred financing costs of $3.3 million related to the Notes. (i) Reflects the recording of the dividends related to the Exchangeable Preferred Stock as if the Original Offerings had taken place on January 1, 1996. 40 48 (2) Represents the net effect of (a) the Little Rock Acquisitions, (b) the acquisition of WLEV-FM in Allentown and the disposition of WEST-AM, also in Allentown, (c) the Boise Acquisition, (d) the acquisition of KBEE-FM and KFNZ-AM in Salt Lake City, (e) the acquisition of WEMR-AM and WEMR-FM in Wilkes-Barre/Scranton, (f) the acquisition of WSGD-FM, WDLS-FM and WCDL-AM in Wilkes-Barre/Scranton, (g) the acquisition of WDGF-FM in Providence and (h) the dispositions of the Johnstown and State College stations, as if each transaction had taken place as of January 1, 1996. Depreciation and amortization for such acquisitions are based upon preliminary allocations of the purchase price to property and equipment and intangible assets which will be amortized over periods of 1-25 years. Actual depreciation and amortization may differ depending on the final allocation of the purchase price; however, management does not believe these differences will be material. Dollars in the table below are shown in thousands.
LITTLE ROCK ALLENTOWN BOISE OTHER PENDING ACQUISITIONS(a) TRANSACTIONS(b) ACQUISITION(c) ACQUISITIONS(d) DISPOSITIONS(e) TRANSACTIONS --------------- --------------- -------------- --------------- --------------- ------------ Net revenue.... $ 4,228 $ 771 $ 2,812 $ 154 $ (1,228) $ 6,737 Station operating expenses..... 3,023 479 1,920 16 (1,184) 4,254 Depreciation and amortization... 1,357 769 1,001 331 (299) 3,159 ------- --------------- -------------- ------- --------------- ------------ Operating expenses... 4,380 1,248 2,921 347 (1,483) 7,413 ------- --------------- -------------- ------- --------------- ------------ Operating income (loss)....... (152) (477) (109) (193) 255 (676) Interest expense...... 591 970 1,203 253 (359) 2,658 ------- --------------- -------------- ------- --------------- ------------ Income (loss) before income taxes........ (743) (1,447) (1,312) (446) 614 (3,334) Income taxes (benefit).... -- -- -- -- -- -- ------- --------------- -------------- ------- --------------- ------------ Income (loss) from continuing operations... $ (743) $ (1,447) $ (1,312) $ (446) $ 614 $ (3,334) ============ =============== ============== ============ =============== ============
(a) Gives effect to the Little Rock Acquisitions as if such transaction had taken place on January 1, 1996. (b) Gives effect to the acquisition of WLEV-FM in Allentown and the disposition of WEST-AM also in Allentown as if such transactions had taken place on January 1, 1996. (c) Gives effect to the Boise Acquisition as if such transaction had taken place on January 1, 1996. (d) Gives effect to (i) the acquisition of KBEE-FM and KFNZ-FM in Salt Lake City, (ii) the acquisition of WEMR-AM and WEMR-FM in Wilkes-Barre/Scranton, (iii) the acquisition of WSGD-FM, WDLS-FM and WCDL-AM in Wilkes-Barre/Scranton and (iv) the acquisition of WDGF-FM in Providence, as if each transaction had taken place on January 1, 1996. (e) Gives effect to the disposition of the Johnstown and State College stations as if such transaction had taken place on January 1, 1996. 41 49 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 1997 (DOLLARS IN THOUSANDS)
THE COMPANY ADJUSTMENTS FOR AS ADJUSTED FOR THE RECENT 1997 THE RECENT 1997 ACQUISITIONS AND ACQUISITIONS AND ADJUSTMENTS FOR ACTUAL ORIGINAL ORIGINAL THE PENDING PRO FORMA THE COMPANY OFFERINGS(1) OFFERINGS TRANSACTIONS(2) THE COMPANY ----------- ---------------- ---------------- --------------- ----------- Assets Cash and cash equivalents................ $ 277 $ 24,834 $ 25,111 $ (22,188) $ 2,923 Accounts receivable, net................. 16,030 2,000 18,030 -- 18,030 Other current assets..................... 1,144 -- 1,144 -- 1,144 ----------- -------- -------- --------------- ----------- Total current assets..................... 17,451 26,834 44,285 (22,188) 22,097 Property and equipment, net......................... 19,059 9,750 28,809 14,025 42,834 Intangible assets, net................... 84,283 115,579 199,862 87,723 287,585 Other assets, net........................ 2,628 3,120 5,748 -- 5,748 ----------- -------- -------- --------------- ----------- $ 123,421 $155,283 $278,704 $ 79,560 $ 358,264 ========== ============= ============= ============ ========== Liabilities and Shareholder's Equity Note payable to parent company........... $ 12,817 $(12,817) $ -- $ -- $ -- Current maturities of notes payable...... 7,500 (7,500) -- -- -- Other current liabilities................ 6,168 -- 6,168 100 6,268 ----------- -------- -------- --------------- ----------- Total current liabilities................ 26,485 (20,317) 6,168 100 6,268 Notes payable, less current maturities... 82,084 69,500 151,584 63,000 214,584 Other long-term obligations, less current maturities............................. 1,053 -- 1,053 400 1,453 Exchangeable preferred stock............. -- 96,350 96,350 -- 96,350 Deferred tax liability................... 2,890 5,500 8,390 6,060 14,450 Shareholder's equity..................... 10,909 4,250 15,159 10,000 25,159 ----------- -------- -------- --------------- ----------- $ 123,421 $155,283 $278,704 $ 79,560 $ 358,264 ========== ============= ============= ============ ==========
42 50 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (1) Represents the net effect of (a) the Tele-Media Acquisition, (b) the acquisition of KNHK-FM in Reno, (c) the acquisition of KTHK-FM in Tri-Cities, (d) the acquisition of WDGE-FM in Providence and (e) the consummation of the Original Offerings, as if each transaction had taken place on June 30, 1997. The preliminary allocation of purchase prices is based on estimated fair values. Dollars in the table below are shown in thousands.
THE RECENT 1997 ACQUISITIONS AND TELE-MEDIA OTHER ORIGINAL ORIGINAL ACQUISITION ACQUISITIONS OFFERINGS OFFERINGS ----------- ------------ --------- ------------- Assets Cash and cash equivalents................................. $(114,429) $ (2,020) $ 141,283(d) $ 24,834 Accounts receivable, net.................................. 2,000 -- -- 2,000 ----------- ------------ --------- ------------- Total current assets...................................... (112,429)(a) (2,020) (141,283) 26,834 Property and equipment, net............................... 9,000 750 -- 9,750 Intangible assets, net.................................... 109,929 5,650 -- 115,579 Other assets, net......................................... -- (130)(c) 3,250(e) 3,120 ----------- ------------ --------- ------------- $ 6,500 $ 4,250 $ 144,533 $ 155,283 ========== =========== ======== ============= Liabilities and Shareholder's Equity Note payable to parent company............................ $ -- $ -- $ (12,817)(f) $ (12,817) Current maturities of notes payable....................... -- -- (7,500)(g) (7,500) ----------- ------------ --------- ------------- Total current liabilities................................. -- -- (20,317) (20,317) Notes payable, less current maturities.................... 1,000(b) -- 68,500(h) 69,500 Exchangeable Preferred Stock.............................. -- -- 96,350(i) 96,350 Deferred tax liability.................................... 5,500 -- -- 5,500 Shareholder's Equity...................................... -- 4,250 -- 4,250 ----------- ------------ --------- ------------- $ 6,500 $ 4,250 $ 144,533 $ 155,283 ========== =========== ======== =============
(a) Represents purchase price of $114.4 million and $1.0 million of acquisition costs, net of $2.0 million of purchased accounts receivable and $1.0 million of obligations to the holders of the Tele-Media Bonds. (b) Represents the $1.0 million of obligations to holders of the Tele-Media Bonds exchanged for $1.0 million of Notes. (c) Represents an escrow deposit made prior to an acquisition. (d) Reflects the net proceeds from the Original Offerings of $193.1 million, after deducting fees and expenses of $6.9 million and the use of proceeds from the Original Offerings to repay $39.0 million of outstanding indebtedness under the Credit Facility and $12.8 million of note payable to parent company. (e) Represents deferred financing costs related to the Original Offerings. (f) Reflects the payment of $12.8 million of note payable to parent company from the net proceeds of the Original Offerings. (g) Reflects the reclassification of the current portion of the Credit Facility to long-term debt pursuant to the July 1997 amendments to the Credit Facility done in conjunction with the Original Offerings. (h) Represents the issuance of $100.0 million of Notes under the Original Offerings and the repayment of $39.0 million of indebtedness under the Credit Facility and the reclassification of the current portion of the Credit Facility to long-term debt pursuant to the July 1997 amendments to the Credit Facility. (i) Represents the issuance of $100.0 million of Exchangeable Preferred Stock under the Original Offerings, after deducting fees and expenses of $3.7 million. 43 51 (2) Represents the net effect of the Pending Transactions, and the preliminary allocation of purchase prices, based on fair values. Dollars in the table below are shown in thousands.
LITTLE ROCK ALLENTOWN BOISE OTHER PENDING ACQUISITIONS TRANSACTIONS(B) ACQUISITION ACQUISITIONS(C) DISPOSITIONS(D) TRANSACTIONS ------------ -------------- ----------- --------------- --------------- ------------ Assets Cash and cash equivalents..... $(14,500) $ -- $ -- $ (7,688) $ -- $(22,188) Property and equipment, net............. 8,216 150 5,000 1,812 (1,153) 14,025 Intangible assets, net............. 32,984 22,850 27,360 11,876 (7,347) 87,723 ------------ -------------- ----------- --------------- --------------- ------------ $ 26,700 $ 23,000 $ 32,360 $ 6,000 $ (8,500) $ 79,560 ========= =========== ========= ============ ============ ========== Liabilities and Shareholder's Equity Other current liabilities..... $ -- $ -- $ 100 $ -- $ -- $ 100 Notes payable, less current maturities...... 14,000 23,000 28,500 6,000 (8,500) 63,000 Other long-term obligations, less current maturities...... -- -- 400 -- -- 400 Deferred tax liability....... 2,700 -- 3,360 -- -- 6,060 Shareholder's Equity.......... 10,000(a) -- -- -- 10,000 ------------ -------------- ----------- --------------- --------------- ------------ $ 26,700 $ 23,000 $ 32,360 $ 6,000 $ (8,500) $ 79,560 ========= =========== ========= ============ ============ ==========
(a) Represents the non-cash portion of the purchase price to be paid in 360,636 shares of a newly created series of preferred stock of Citadel Communications the benefit of which will be contributed to the Company. (b) Represents the acquisition of WLEV-FM in Allentown and the disposition of WEST-AM also in Allentown. (c) Represents the net effect of (i) the acquisition of KBEE-FM and KFNZ-AM in Salt Lake City, (ii) the acquisition of WEMR-AM and WEMR-FM in Wilkes-Barre/Scranton, (iii) the acquisition of WSGD-FM, WDLS-FM and WCDL-AM in Wilkes-Barre/ Scranton and (iv) the acquisition of WDGF-FM in Providence. (d) Represents the disposition of the Johnstown and State College stations. 44 52 SELECTED HISTORICAL FINANCIAL DATA The selected historical financial data of the Company and Predecessor presented below as of and for the years ended December 31, 1992, 1993, 1994, 1995 and 1996 are derived from the consolidated financial statements of the Company and Predecessor, which consolidated financial statements have been audited by KPMG Peat Marwick LLP, independent certified public accountants. The selected historical financial data of the Company presented below as of June 30, 1997 and for the six months ended June 30, 1996 and 1997 are derived from unaudited consolidated financial statements of the Company which, in the opinion of management, contain all necessary adjustments of a normal recurring nature to present the financial statements in conformity with GAAP. The consolidated financial statements of the Company as of December 31, 1995 and 1996 and for each of the years in the three-year period ended December 31, 1996 and the independent auditors' report thereon, as well as the unaudited consolidated financial statements of the Company as of June 30, 1997 and for the six months ended June 30, 1996 and 1997, are included elsewhere in this Prospectus. The financial results of the Company and Predecessor are not comparable from year to year because of the acquisition and disposition of various radio stations by the Company and the reorganization in July 1992 when the Company commenced operations. The selected historical financial data below should be read in conjunction with, and is qualified by reference to, the Company's Consolidated Financial Statements and related notes, "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------------- ----------------- 1992(1) 1993 1994 1995 1996 1996 1997 -------- -------- ------- ------- ------- ------- ------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Net revenue..................... $ 13,688 $ 21,376 $32,998 $34,112 $45,413 $19,348 $27,181 Station operating expenses...... 10,421 17,081 24,331 26,832 33,232 14,797 19,321 Depreciation and amortization... 4,395 5,245 7,435 4,891 5,158 1,974 3,907 Corporate general and administrative................ 732 961 2,504 2,274 3,248 1,256 1,272 -------- -------- ------- ------- ------- ------- ------- Operating income (loss)......... (1,860) (1,911) (1,272) 115 3,775 1,321 2,681 Interest expense(2)............. 1,393 2,637 4,866 5,242 6,155 2,779 3,594 Other income, net............... 40 149 657 781 414 36 73 -------- -------- ------- ------- ------- ------- ------- Income (loss) before extraordinary item............ (3,213) (4,399) (5,481) (4,346) (1,966) (1,422) (840) Extraordinary loss(3)........... -- -- -- -- (1,769) -- -- -------- -------- ------- ------- ------- ------- ------- Net income (loss)............... $ (3,213) $ (4,399) $(5,481) $(4,346) $(3,735) $(1,422) $ (840) ======== ======== ======= ======= ======= ======= ======= Net loss per common share....... $ (80) $ (110) $ (137) $ (109) $ (93) $ (36) $ (21) ======== ======== ======= ======= ======= ======= ======= Shares used in per share calculation................... 40,000 40,000 40,000 40,000 40,000 40,000 40,000 ======== ======== ======= ======= ======= ======= ======= Cash dividends declared per share......................... $ -- $ -- $ -- $ -- $ -- $ -- $ -- ======== ======== ======= ======= ======= ======= ======= OTHER DATA: Deficiency of earnings to fixed charges(4).................... $ 3,213 $ 4,399 $ 5,481 $ 4,346 $ 1,966 $ 1,422 $ 840
DECEMBER 31, -------------------------------------------------- JUNE 30, 1992 1993 1994 1995 1996 1997 ------- ------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) BALANCE SHEET DATA: Cash and cash equivalents........ $ 1,244 $ 857 $ 1,538 $ 1,005 $ 1,588 $ 277 Working capital (deficiency)..... 2,235 1,701 3,382 2,927 (4,195) (9,034) Intangible assets, net........... 14,543 17,454 20,080 15,093 51,802 84,283 Total assets..................... 28,515 36,120 46,397 37,372 102,244 123,421 Long-term debt (including current portion)....................... 22,026 30,468 47,805 43,046 91,072 103,641 Shareholder's equity (deficit)... 4,870 3,492 (4,782) (9,249) 5,999 10,909 Book value per share............. $ 122 $ 87 $ (120) $ (231) $ 150 $ 273 ======= ======= ======== ======== ======== ========
45 53 - --------------- (1) In July 1992, the Company acquired all of the radio stations then owned or operated by Predecessor and certain other radio stations. In 1993, Citadel Communications was incorporated and the Company was reorganized as a wholly owned subsidiary of Citadel Communications. The Statement of Operations Data for the year ended December 31, 1992 represents the combined operating results from the audited Statement of Operations of Predecessor for the period January 1, 1992 to July 23, 1992 and the Company from July 24, 1992 to December 31, 1992. Net revenue for Predecessor for the period January 1, 1992 to July 23, 1992 and the Company from July 24, 1992 to December 31, 1992 totaled $5.7 million and $8.0 million, respectively. Net income (loss) for Predecessor for the period January 1, 1992 to July 23, 1992 and the Company from July 24, 1992 to December 31, 1992 totaled $300,000 and $(3.5) million, respectively. (2) Includes debt issuance costs and debt discount amortization of $35,000, $139,000, $287,000, $132,000 and $371,000 for the years ended December 31, 1992, 1993, 1994, 1995 and 1996, respectively, and $302,000 and $38,000 for the six months ended June 30, 1996 and 1997, respectively. (3) On October 9, 1996, the Company extinguished its long-term debt of $31.3 million, payable to a financial institution, and its note payable to a related party of $7.0 million. The early retirement of the long-term debt resulted in a $1.8 million extraordinary loss due to prepayment premiums and the write-off of debt issuance costs. (4) Fixed charges include interest expense on debt, amortization of financing costs, amortization of debt discount, 33% of rent expense, and dividend requirements with respect to the Exchangeable Preferred Stock. 46 54 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion and analysis of the financial condition and results of operations of the Company should be read in conjunction with the Company's consolidated financial statements and notes thereto included elsewhere in this Prospectus. This Prospectus contains forward-looking statements, including statements regarding, among other items, (i) the realization of the Company's business strategy, (ii) the sufficiency of cash flow to fund the Company's debt service requirements and working capital needs, (iii) anticipated trends in the radio broadcasting industry, (iv) potential acquisitions by the Company and the successful integration of both completed and future acquisitions and (v) government regulation. Forward-looking statements are typically identified by the words "believe," "expect," "anticipate," "intend," "estimate" and similar expressions. Readers are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contained in the forward looking statements as a result of various factors. The principal source of the Company's revenue is the sale of broadcasting time on its radio stations for advertising. As a result, the Company's revenue is affected primarily by the advertising rates its radio stations charge. Correspondingly, the rates are based upon the station's ability to attract audiences in the demographic groups targeted by its advertisers, as measured principally by periodic Arbitron Radio Market Reports. The number of advertisements that can be broadcast without jeopardizing listening levels (and the resulting ratings) is limited in part by, among other things, the format of a particular station. Each of the Company's stations has a general pre-determined level of on-air inventory that it makes available for advertising, which may be different at different times of the day and tends to remain stable over time. Much of the Company's selling activity is based on demand for its radio stations' on-air inventory and, in general, the Company responds to this demand by varying prices rather than by changing the available inventory. In the broadcasting industry, radio stations often utilize trade (or barter) agreements to exchange advertising time for goods or services (such as other media advertising, travel or lodging), in lieu of cash. In order to preserve most of its on-air inventory for cash advertising, the Company generally enters into trade agreements only if the goods or services bartered to the Company will be used in the Company's business. The Company has minimized its use of trade agreements and has generally sold over 90% of its advertising time for cash. In addition, it is the Company's general policy not to preempt advertising spots paid for in cash with advertising spots paid for in trade. In 1996, the Company's radio stations derived approximately 87.0% of their net broadcasting revenue from local and regional advertising in the markets in which they operate, and the remainder resulted principally from the sale of national advertising. Local and regional advertising is sold primarily by each station's sales staff. To generate national advertising sales, the Company engages a national advertising representative firm. The Company believes that the volume of national advertising revenue tends to adjust to shifts in a station's audience share position more rapidly than does the volume of local and regional advertising revenue. During the year ended December 31, 1996 and the six months ended June 30, 1997, no single advertiser accounted for more than 6.3% of the net revenue of any of the Company's station groups or more than 0.9% of total net revenue of the Company. The Company's financial results are dependent on a number of factors, including the general strength of the local and national economies, population growth, ability to provide popular programming, local market and regional competition, relative efficiency of radio broadcasting compared to other advertising media, signal strength and government regulation and policies. The Company's quarterly revenue varies throughout the year, as is typical in the radio broadcasting industry. The Company's first calendar quarter typically produces the lowest revenue for the year, and the second and fourth calendar quarters generally produce the highest revenue for the year. The advertising revenue of the Company is typically collected within 120 days of the date on which the related advertising is aired and its corresponding revenue is recognized. Most accrued expenses, however, are paid within 45 to 47 55 60 days. As a result of this time lag, working capital requirements have increased as the Company has grown and will likely increase further in the future. The primary operating expenses incurred in the ownership and operation of radio stations include employee salaries and commissions, programming expenses and advertising and promotion expenses. The Company also incurs and will continue to incur significant depreciation, amortization and interest expense as a result of completed and future acquisitions of stations, including the Pending Acquisitions, and due to existing and future financings, including the Notes and the Exchangeable Preferred Stock and borrowings under the Credit Facility. The Company's consolidated financial statements tend not to be directly comparable from period to period due to the Company's acquisition activity. "Broadcast cash flow" consists of operating income (loss) before depreciation, amortization and corporate expenses. "EBITDA" consists of operating income (loss) before depreciation and amortization. Although broadcast cash flow and EBITDA are not measures of performance calculated in accordance with GAAP, management believes that they are useful to an investor in evaluating the Company because they are measures widely used in the broadcast industry to evaluate a radio company's operating performance. However, broadcast cash flow and EBITDA should not be considered in isolation or as substitutes for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP as a measure of liquidity or profitability. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996 Net Revenue. Net revenue increased approximately $7.9 million or 40.9% to $27.2 million in the period ended June 30, 1997 from $19.3 million in the period ended June 30, 1996. The inclusion of revenue from the acquisitions of radio stations and revenue generated from LMAs and JSAs entered into during 1996 and 1997 provided approximately $6.2 million of the increase. For stations owned and operated over the comparable period in 1996 and 1997, net revenue improved approximately $1.7 million or 10.4% to $18.1 million in 1997 from $16.4 million in 1996 primarily due to increased ratings and improved selling efforts. Station Operating Expenses. Station operating expenses increased approximately $4.5 million or 30.4% to $19.3 million in the period ended June 30, 1997 from $14.8 million in the period ended June 30, 1996. The increase was primarily attributable to the inclusion of station operating expenses of the radio station acquisitions and the LMAs and JSAs entered into during 1996 and 1997. Broadcast Cash Flow. As a result of the factors described above, broadcast cash flow increased approximately $3.4 million or 75.6% to $7.9 million in the period ended June 30, 1997 from $4.5 million in the period ended June 30, 1996. As a percentage of net revenue, broadcast cash flow increased to 28.9% in the period ended June 30, 1997 from 23.5% in the period ended June 30, 1996. Corporate General and Administrative Expenses. Corporate general and administrative expenses were $1.3 million in the period ended June 30, 1997 and 1996. EBITDA. As a result of the factors described above, EBITDA increased approximately $3.3 million or 100.0% to $6.6 million in the period ended June 30, 1997 from $3.3 million in the period ended June 30, 1996. Depreciation and Amortization. Depreciation and amortization expense increased approximately $1.9 million or 95.0% to $3.9 million in the period ended June 30, 1997 from $2.0 million in the period ended June 30, 1996, primarily due to radio station acquisitions consummated during 1996 and 1997. Interest Expense. Interest expense increased approximately $0.8 million or 28.6% to $3.6 million in the period ended June 30, 1997 from $2.8 million in the period ended June 30, 1996, primarily due to interest expense associated with additional borrowings to fund acquisitions consummated during 1996 and 1997. Net Loss. As a result of the factors described above, net loss decreased approximately $0.6 million or 42.9% to $0.8 million in the period ended June 30, 1997 from $1.4 million in the period ended June 30, 1996. 48 56 YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 Net Revenue. Net revenue increased approximately $11.3 million or 33.1% to $45.4 million in 1996 from $34.1 million in 1995. The inclusion of revenue from the acquisitions of radio stations and revenue generated from LMAs and JSAs entered into during 1996 provided approximately $7.8 million of the increase. For stations owned and operated over the comparable period in 1995 and 1996, net revenue improved approximately $3.5 million or 11.8% to $34.2 million in 1996 from $30.6 million in 1995 primarily due to increased ratings and improved selling efforts. Station Operating Expenses. Station operating expenses increased approximately $6.4 million or 23.9% to $33.2 million in 1996 from $26.8 million in 1995. The increase was primarily attributable to the inclusion of station operating expenses of the radio station acquisitions and the LMAs and JSAs entered into during 1996. Broadcast Cash Flow. As a result of the factors described above, broadcast cash flow increased approximately $4.9 million or 67.1% to $12.2 million in 1996 from $7.3 million in 1995. As a percentage of net revenue, broadcast cash flow increased to 26.9% in 1996 from 21.4% in 1995. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased approximately $0.9 million or 39.1% to $3.2 million in 1996 from $2.3 million in 1995. Substantially all of the increase was due to professional expenses incurred in 1996 related to the Company's capital raising activities and a lawsuit. EBITDA. As a result of the factors described above, EBITDA increased approximately $3.9 million or 78.0% to $8.9 million in 1996 from $5.0 million in 1995. Depreciation and Amortization. Depreciation and amortization expense increased approximately $0.3 million or 6.1% to $5.2 million in 1996 from $4.9 million in 1995, primarily due to radio station acquisitions consummated during 1996. Interest Expense. Interest expense increased approximately $1.0 million or 19.2% to $6.2 million in 1996 from $5.2 million in 1995, primarily due to interest expense associated with additional borrowings to fund acquisitions consummated during 1996. Net Loss. As a result of the factors described above, net loss decreased approximately $0.6 million or 12.2% to $3.7 million in 1996 from $4.3 million in 1995. Included in the net loss for 1996 is approximately $0.4 million of interest earned on loans advanced by the Company to Deschutes prior to the acquisition of Deschutes by Citadel Communications and a $1.8 million extraordinary loss related to the repayment of long-term debt. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 Net Revenue. Net revenue increased approximately $1.1 million or 3.3% to $34.1 million in 1995 from $33.0 million in 1994. The inclusion of revenue from the acquisitions of radio stations entered into during 1994 provided approximately $3.5 million of the increase. This increase was offset by a reduction of $3.5 million of revenue from the Company's Billings and Bozeman stations that were disposed of in February 1995. For stations owned and operated over the comparable period in 1994 and 1995, net revenue improved approximately $1.1 million or 5.2% to $22.2 million in 1995 from $21.1 million in 1994 primarily due to increased ratings and improved selling efforts. Station Operating Expenses. Station operating expenses increased approximately $2.5 million or 10.3% to $26.8 million in 1995 from $24.3 million in 1994. Approximately $1.6 million of the increase was attributable to operating expenses incurred by the Company's Salt Lake City stations in relation to station format and call letter changes that occurred in May 1995, while the remainder was primarily due to the inclusion of station operating expenses of the radio station acquisitions and the LMAs and JSAs entered into during 1994. 49 57 Broadcast Cash Flow. As a result of the factors described above, broadcast cash flow decreased approximately $1.4 million or 16.1% to $7.3 million in 1995 from $8.7 million in 1994. As a percentage of net revenue, broadcast cash flow decreased to 21.4% in 1995 from 26.4% in 1994. Corporate General and Administrative Expenses. Corporate general and administrative expenses decreased approximately $0.2 million or 8.0% to $2.3 million in 1995 from $2.5 million in 1994. The decrease is primarily a result of professional fees related to the Company's capital raising activities that were incurred in 1994. EBITDA. As a result of the factors described above, EBITDA decreased approximately $1.2 million or 19.4% to $5.0 million in 1995 from $6.2 million in 1994. Depreciation and Amortization. Depreciation and amortization expense decreased approximately $2.5 million or 33.8% to $4.9 million in 1995 from $7.4 million in 1994, primarily due to the inclusion in 1994 of the amortization of certain intangible assets, related to acquisitions consummated during 1994, with amortizable lives of less than one year. Interest Expense. Interest expense increased approximately $0.3 million or 6.1% to $5.2 million in 1995 from $4.9 million in 1994, primarily due to interest expense associated with additional borrowings to fund acquisitions consummated during 1994. Net Loss. As a result of the factors described above, net loss decreased approximately $1.2 million or 21.8% to $4.3 million in 1995 from $5.5 million in 1994. Included in the net loss for 1995 was an approximate $0.8 million gain related to the dispositions of the Company's Billings and Bozeman stations. LIQUIDITY AND CAPITAL RESOURCES For the six months ended June 30, 1997, net cash provided by operations increased to $2.3 million, compared to approximately $0.3 million for the 1996 period due to increased depreciation and amortization charges included in operations. Net cash used in operations increased to approximately $1.4 million for the year ended December 31, 1996 from $0.4 million in 1995. This increase resulted primarily from the reduction in the net loss in 1996 and an increase in accounts receivable. For the six months ended June 30, 1997, net cash used in investing activities, primarily for station acquisitions, was $15.5 million, compared to $18.7 million in the prior year period. Net cash used in investing activities for the year ended December 31, 1996, primarily for station acquisitions, was $61.2 million, compared to net cash provided by investing activities of $4.8 million in the prior year. For the six months ended June 30, 1997, net cash provided by financing activities was $11.9 million, primarily from proceeds from the issuance of notes payable in such period, compared to $20.9 million in the prior year period. Net cash provided by financing activities for the year ended December 31, 1996 was approximately $63.1 million, due primarily to proceeds from the issuance of notes payable, compared to net cash used in financing activities of $4.9 million in the prior year. The Company's acquisition strategy has required, and will continue in the foreseeable future to require, a significant portion of the Company's capital resources. The Company and its parent, Citadel Communications, have financed the Company's past acquisitions through bank financing, private sales of equity and debt securities and proceeds from asset sales. The Company frequently evaluates potential acquisitions of stations and station groups, including station swap opportunities. The Company expects that any required financing for acquisitions will be provided through the incurrence of debt, the sale of equity securities, internally generated funds or a combination of the foregoing. There can be no assurance, however, that external financing will be available to the Company on terms considered favorable by management or that cash flow from operations will be sufficient to fund the Company's acquisition strategy. The Company used the net proceeds from the Original Offerings to, among other things, fund certain acquisitions, including related acquisition costs, and to reduce outstanding indebtedness. See "Risk Factors -- Limitations on Acquisition Strategy; Antitrust Considerations." 50 58 Management believes that the net proceeds from the Original Offerings together with cash from operating activities and revolving loans under the Credit Facility should be sufficient to permit the Company to meet its financial obligations and to fund its operations for the next twelve months. In addition to acquisitions and debt service, the Company's principal liquidity requirements will be for working capital and general corporate purposes, including capital expenditures, which are not expected to be material in amount. In addition to debt service requirements under the Credit Facility, which are described under "Description of Indebtedness -- Existing Loan Agreement," the Company is required to pay interest on the Notes. The Exchangeable Preferred Stock does not require cash dividends through July 1, 2002 since the Company may issue additional shares of Exchangeable Preferred Stock in lieu of cash dividends. Recently Issued Accounting Pronouncements In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings per Share" ("SFAS No. 128"). This statement establishes standards for computing and presenting earnings per share ("EPS"), and supersedes APB Opinion No. 15. The Statement replaces primary EPS with basic EPS and requires dual presentation of basic and diluted EPS. The Statement is effective for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted. After adoption, all prior period EPS data shall be restated to conform to SFAS No. 128. The pro forma effect of the Company adopting SFAS No. 128 is that both basic and diluted EPS would have been $(137) for the year ended December 31, 1994, $(109) for the year ended December 31, 1995 and $(93) for the year ended December 31, 1996 and $(36) for the six months ended June 30, 1996 and $(21) for the six months ended June 30, 1997. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." This statement establishes the definition of and requirements for disclosure of comprehensive income and becomes effective for the Company for the year ending December 31, 1998. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for disclosure about operating segments in annual financial statements and selected information in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas and major customers. This statement supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise." The new standard becomes effective for the Company for the year ending December 31, 1998, and requires that comparative information from earlier years be restated to conform to the requirements of this standard. 51 59 BUSINESS GENERAL The Company is a radio broadcasting company that focuses on acquiring, developing and operating radio stations in mid-sized markets. Upon completion of the Pending Transactions, the Company will own or operate 68 FM and 31 AM radio stations in 18 markets and will have the right to construct one additional FM station, and the Company's stations will comprise the leading radio station group in terms of revenue share in 13 of those markets. The Company's primary strategy is to secure and maintain a leadership position in the markets it serves and to expand into additional mid-sized markets where it believes a leadership position can be obtained. Upon entering a market, the Company seeks to acquire additional stations which, when integrated with its existing operations, allow it to reach a wider range of demographic groups that appeal to advertisers, enhance operating performance and achieve substantial cost savings. Since January 1, 1993, the Company has completed 17 station acquisitions in markets where it already owned stations, and it is currently party to agreements to acquire nine additional stations in markets in which it currently owns radio stations. The Company chooses programming formats for its stations that are intended to maximize each station's cash flow. The Company's stations broadcast a number of formats including country, news/talk, adult contemporary, rock and oldies, each of which is designed to appeal to a specific audience in each local market. The Company's portfolio of stations is diversified in terms of format, target demographics and geographic location. Because of the size of its portfolio and its individual radio station groups, the Company believes it is not unduly reliant upon the performance of any single station. The Company also believes that the diversity of its portfolio of radio stations helps insulate the Company from downturns in specific markets and changes in format preferences. The Company believes that mid-sized markets represent attractive opportunities because, as compared to the 50 largest markets in the United States, they are generally characterized by (i) lower radio station purchase prices as a multiple of broadcast cash flow, (ii) fewer sophisticated and well-capitalized competitors, including both radio and competing advertising media such as newspapers and television, and (iii) less direct format competition due to the smaller number of stations in any given market. The Company believes that the attractive operating characteristics of mid-sized markets coupled with the opportunity to establish or expand in-market radio station groups create the potential for substantial revenue growth and cost efficiencies. As a result, management seeks to achieve broadcast cash flow margins that are comparable to the higher margins that historically were generally achievable only in the 50 largest markets. STATION PORTFOLIO The Company currently owns 49 FM and 22 AM radio stations, sells advertising on behalf of four FM and five AM radio stations pursuant to JSAs and provides programming and sells advertising on behalf of three FM radio stations and one AM radio station pursuant to LMAs. The Company has entered into agreements to purchase the six FM and three AM In-Market Acquisition Stations, the eight FM and three AM Little Rock Stations (which includes one FM license), the Arkansas Radio Network and the four FM and one AM Boise Stations. In addition, the Company has entered into agreements to sell four FM and three AM radio stations. Upon completion of the Pending Transactions, the Company will own 62 FM and 26 AM radio stations in 18 mid-sized markets, operate six FM and five AM additional radio stations in its markets pursuant to LMAs or JSAs and have the right to construct one additional FM radio station. 52 60 The following table sets forth certain information about stations currently owned by or operated by the Company, the In-Market Acquisition Stations, the Little Rock Stations and the Boise Stations.
STATION STATION AUDIENCE RADIO RANK IN SHARE IN GROUP RADIO GROUP RADIO GROUP/ STATION PRIMARY PRIMARY PRIMARY MARKET RANK IN STATION CALL MSA PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC REVENUE MARKET LETTERS(1) RANK FORMAT TARGET(2) TARGET(3) TARGET(3) SHARE(4) REVENUE(4) - --------------------- ---- ------------------------ ----------- ----------- ----------- --------- ----------- EXISTING MARKETS: ALBUQUERQUE, NM...... 71 58.0% 1 KKOB-AM............ News/Talk A 25-54 4t 5.8% KKOB-FM............ Adult Contemporary W 25-54 3t 7.2 KMGA-FM............ Adult Contemporary W 25-54 2 7.6 KHTL-AM............ News/Talk A 35-64 28t 0.4 KTBL-FM............ Country A 25-54 9t 5.3 KHFM-FM............ Classical A 25-54 11t 3.7 KNML-AM............ Sports M 25-54 19t 1.0 KRST-FM............ Country A 25-54 1 10.9 COLORADO SPRINGS, CO................. 95 63.5% 1 KKFM-FM............ Classic Rock M 25-54 1 16.1% KKMG-FM............ Contemporary Hits W 18-34 1 17.0 KVUU-FM(5)......... Adult Contemporary W 18-49 4t 7.9 KSPZ-FM(5)......... Oldies A 25-54 6 6.0 KVOR-AM(5)......... News/Talk A 25-54 11t 3.1 KTWK-AM(5)......... Nostalgia A 25-54 20t 0.5 KKLI-FM............ Soft Adult Contemporary W 25-54 1 10.6 MODESTO, CA(6)....... 122 62.2% 1 KATM-FM............ Country A 25-54 1 18.6% KHKK-FM/ KDJK- FM(7)............ Rock Oldies A 25-54 5 5.2 KBUL-AM............ Sports M 25-54 13 1.4 KHOP-FM............ Album Oriented Rock A 18-34 2 9.7 RENO, NV............. 131 47.4% 1 KBUL-FM............ Country A 25-54 1 13.5% KKOH-AM............ News/Talk A 25-54 5 7.8 KNEV-FM............ Adult Contemporary W 18-49 2 9.3 KNHK-FM............ Rock Oldies A 25-54 2 9.8 SALT LAKE CITY, UT... 35 22.7% 1 KFNZ-AM(8)(9)...... Sports M 25-54 9t 4.3% KUBL-FM............ Country A 25-54 5 5.4 KBEE-FM(8)(9)...... Adult Contemporary W 18-49 3 8.4 KCNR-AM............ Children's C 4-11 -- -- KBER-FM............ Album Oriented Rock A 18-34 8t 5.0 KENZ-FM............ Rock Alternative A 18-34 4 7.7 SPOKANE, WA.......... 87 53.6% 1 KDRK-FM............ Country A 25-54 4t 8.2% KAEP-FM............ Rock Alternative A 18-34 2 13.1 KJRB-AM............ Talk A 35-64 12t 2.4 KGA-AM............. News/Talk A 25-54 10 3.2 KKZX-FM(5)......... Classic Rock M 25-54 1 16.9 KEYF-AM/FM(5)(7) Oldies A 25-54 4t 8.2 KUDY-AM(5)......... Talk/Religion A 25-54 -- -- BILLINGS, MT......... 238 58.3% 1 KCTR-FM/ KDWG-AM(7)....... Country A 25-54 1 23.7% KKBR-FM............ Oldies A 25-54 3 13.4 KBBB-FM............ Adult Contemporary W 25-54 5 6.4 KMHK-FM............ Rock Oldies A 25-54 5 7.2 EUGENE, OR........... 146 32.4% 1 KUGN-AM............ News/Talk A 35-64 8 3.8% KUGN-FM............ Country A 25-54 2 9.1 KEHK-FM............ Rock Oldies A 25-54 6t 6.4
53 61
STATION STATION AUDIENCE RADIO RANK IN SHARE IN GROUP RADIO GROUP RADIO GROUP/ STATION PRIMARY PRIMARY PRIMARY MARKET RANK IN STATION CALL MSA PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC REVENUE MARKET LETTERS(1) RANK FORMAT TARGET(2) TARGET(3) TARGET(3) SHARE(4) REVENUE(4) - --------------------- ---- ------------------------ ----------- ----------- ----------- --------- ----------- MEDFORD, OR.......... 201 55.3% 1 KAKT-FM............ Country A 25-54 8 4.8% KBOY-FM............ Classic Rock M 25-54 2 11.3 KCMX-AM............ News/Talk A 35-64 8t 3.5 KCMX-FM............ Adult Contemporary W 25-54 2t 7.8 KTMT-AM............ Sports M 25-54 10t 1.9 KTMT-FM............ Contemporary Hits W 18-34 1t 16.0 TRI-CITIES, WA....... 200 40.2% 1 KEYW-FM............ Adult Contemporary A 25-54 6t 7.0% KFLD-AM............ Sports M 25-54 7t 4.2 KORD-FM............ Country A 25-54 4t 7.8 KXRX-FM............ Album Oriented Rock M 18-34 1 24.2 KTHK-FM............ Rock Oldies A 25-54 13t 1.6 PROVIDENCE, RI....... 31 36.4% 1 WPRO-AM............ News/Talk A 25-54 8 2.9% WPRO-FM............ Contemporary Hits A 18-49 1 10.8 WWLI-FM............ Adult Contemporary W 25-54 1 13.1 WLKW-AM............ Nostalgia A 35-64 8 4.2 WDGE-FM............ Rock Alternative A 18-34 7 4.3 WDGF-FM(8)(9)...... Adult Contemporary W 18-49 8 3.5 ALLENTOWN/ BETHLEHEM, PA................. 65 24.1% 2 WCTO-FM............ Country A 25-54 3 12.2% WLEV-FM(8)(9)...... Adult Contemporary W 25-54 4 6.9 HARRISBURG, PA....... 73 12.2% 4 WRKZ-FM............ Country A 25-54 3 7.4% YORK, PA............. 103 11.1% 3 WQXA-FM............ Rock M 18-34 2 3.0% WQXA-AM............ Nostalgia A 35-64 -- -- WILKES-BARRE/ SCRANTON, PA....... 62 34.1% 2 WMGS-FM............ Adult Contemporary W 25-54 2 14.0% WARM-AM/ WKQV-AM(7)(10)... News/Talk A 25-54 20t 1.0 WZMT-FM/ WKQV-FM(7)(10)... Album Oriented Rock M 18-34 2 17.6 WAZL-AM............ News/Talk A 35-64 -- -- WBHT-FM/ WEMR-FM(7)(8) (9)(10).......... Contemporary Hits W 18-34 3 10.8 WSGD-FM/ WDLS-FM(7)(8)(9).. Oldies A 25-54 11 2.4 WCDL-AM(8)(9)...... Country A 35-64 -- -- WEMR-AM(8)(9)...... Country A 35-64 -- -- QUINCY, IL........... NA NA NA WQCY-FM............ Country A 25-54 NA NA WMOS-FM............ Album Oriented Rock M 18-34 NA NA WTAD-AM............ News/Talk A 25-54 NA NA WBRJ-FM............ News/Talk A 25-54 NA NA
54 62
STATION STATION AUDIENCE RADIO RANK IN SHARE IN GROUP RADIO GROUP RADIO GROUP/ STATION PRIMARY PRIMARY PRIMARY MARKET RANK IN STATION CALL MSA PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC REVENUE MARKET LETTERS(1) RANK FORMAT TARGET(2) TARGET(3) TARGET(3) SHARE(4) REVENUE(4) - --------------------- ---- ------------------------ ----------- ----------- ----------- --------- ----------- NEW MARKETS: LITTLE ROCK, AR(9)(11).......... 82 37.9% 1 KARN-AM/ KARN-FM/ KKRN-FM/ KRNN-AM(7)....... News/Talk/Sports A 25-54 11 3.5% KIPR-FM............ Urban A 18-49 3 9.6 KESR-FM............ Contemporary Hits A 18-34 7 4.7 KYTN-FM............ Christian Contemporary A 12+ 16 2.2 KAFN-FM............ NA NA NA NA KEZQ-AM............ Nostalgia A 35-64 17t 1.3 KURB-FM............ Adult Contemporary A 25-54 3 9.5 KVLO-FM............ Soft Adult Contemporary W 25-54 6 6.3 BOISE, ID(9)......... 129 36.4% 1 KIZN-FM............ Country A 25-54 1 8.7% KZMG-FM............ Contemporary Hits W 18-34 3 12.3% KKGL-FM............ Classic Rock M 25-54 -- -- KQFC-FM............ Country A 25-54 3 7.7% KBOI-AM............ News/Talk A 35-64 2t 10.1%
- --------------- t -- Tied with one or more other radio stations. NA -- Information not available. (1) Does not include information for stations under contract to be sold by the Company or for a market if the Company has entered into an agreement to sell all of its stations in such market. (2) The letter "A" designates adults, the letter "W" designates women, the letter "M" designates men and the letter "C" designates children. The numbers following each letter designate the range of ages included within the demographic group. (3) The generally accepted method of measuring the relative size of a radio station's audience is by reference to total persons, within specific demographic groups, Monday - Sunday, 6:00 a.m. - 12:00 midnight Average Quarter Hour ("AQH") shares, as published by Arbitron. Arbitron periodically samples radio listeners in defined market areas, principally through the use of diaries returned by selected listeners. A station's AQH share is a percentage computed by dividing the average number of persons listening to a particular station for at least five minutes during an average quarter hour in a given time period by the average number of such persons for all stations in the market area. Station Rank by Primary Demographic Target is the ranking of a station among all stations in its target demographic group based upon the station's AQH shares. Arbitron compiles ratings data for various demographic groups. All information concerning ratings and audience listening information used in this Prospectus is given pursuant to the method described above and derived from the Arbitron Reports. (4) Radio Group Market Revenue Share was derived for each radio group by summing the market share of revenue of each station included within the group. Radio Group Rank in Market Revenue is the ranking, by radio group market revenue, of each of the Company's radio groups in its market among all other radio groups in such market. (5) The Company sells advertising on behalf of the listed stations under a JSA. (6) KBUL-AM, KHKK-FM/KDJK-FM, KHOP-FM and KATM-FM also broadcast in the adjacent Stockton, California market where, in the Spring 1997 Arbitron Report, they ranked 13, 5, 2 and 1 in their primary demographic targets, respectively. (7) Combined stations are simulcast. (8) The listed stations other than WBHT-FM in Wilkes-Barre/Scranton are In-Market Acquisition Stations. The Company currently operates six of the In-Market Acquisition Stations under LMAs. (9) The consummation of each of the Pending Acquisitions is subject to certain conditions, including FCC approval. Although the Company believes these closing conditions are customary for transactions of this type and will be satisfied, there can be no assurance that such closing conditions will be satisfied. (10) WKQV-FM, WKQV-AM and WBHT-FM in Wilkes-Barre/Scranton are operated pursuant to an LMA or a JSA, and the Company has the option to purchase these stations. (11) The Company currently operates six of the Little Rock Stations under LMAs. KARN-FM, KKRN-FM and KRNN-AM simulcast with KARN-AM. KAFN-FM is not yet operational. Three of the Little Rock Stations serve the surrounding communities outside of Little Rock. 55 63 CORPORATE HISTORY The Company was incorporated in Nevada in 1991, and in 1992 it acquired all of the radio stations then owned or operated by Predecessor and certain other radio stations. Lawrence R. Wilson, Chief Executive Officer of the Company, was a co-founder and one of the two general partners of Predecessor. In 1993, Citadel Communications was incorporated and the Company was reorganized as a wholly owned subsidiary of Citadel Communications. The Company acquired ownership of additional radio stations in each of 1993, 1994, 1996 and 1997. Effective as of January 1, 1997, Citadel Communications acquired Deschutes, which was operated as a sister company to the Company until June 20, 1997 when Deschutes was merged with and into the Company in the Subsidiary Merger. Upon consummation of the Tele-Media Acquisition, Tele-Media was merged with and into the Company. Citadel License holds the Company's radio broadcast licenses and does not conduct any independent business operations. The Company's principal executive offices are located at 1015 Eastman Drive, Bigfork, Montana 59911, and its telephone number is (406) 837-5360. OPERATING STRATEGY In order to maximize its radio stations' appeal to advertisers, and thus the revenue and cash flow of its stations, the Company has implemented the following strategies: Ownership of Strong Station Groups. The Company seeks to secure and maintain a leadership position in the markets it serves through ownership of multiple stations in a market. By strategically coordinating programming, promotional and selling strategies among a group of local stations, the Company attempts to capture a wide range of demographic groups which appeal to advertisers. The Company believes that the diversification of its programming formats and its collective inventory of available advertising time strengthen relationships with advertisers and increase the Company's ability to maximize the value of its inventory. The Company believes that its ability to leverage the existing programming and sales resources of its strong station groups enables it to enhance the growth potential of both new and underperforming stations while reducing the risks associated with undertaking means of improving station performance, including launching new formats. The Company also believes that operating leading station groups allows it to attract and retain talented local management teams, on-air personalities and sales personnel, which it believes are essential to operating success. Furthermore, the Company seeks to achieve substantial cost savings through the consolidation of facilities, management, sales and administrative personnel and operating resources (such as on-air talent, programming and music research) and through the reduction of other redundant expenses. The Company believes that having multiple stations in a market also enhances its ability to sell the advantages of radio advertising versus other advertising media. Aggressive Sales and Marketing. The Company seeks to maximize its share of local advertising revenue in each of its markets by implementing and maintaining strong sales and marketing programs. The Company provides extensive training for its sales personnel through in-house sales and time management programs, and it retains various independent consultants who hold frequent seminars for and are available for consultation with the Company's sales personnel. The Company also emphasizes regular, informal exchanges of ideas among its management and sales personnel across its various markets. Because advertising time is perishable, the Company seeks to maximize its revenue through the utilization of sophisticated inventory management techniques that allow it to provide its sales personnel with frequent price adjustments based on regional and local market conditions. To further strengthen its relationship with advertisers, the Company also offers and markets its ability to create customer traffic through on-site events staged at, and broadcast from, an advertiser's business. Targeted Programming. To maintain or improve its position in each market, the Company combines extensive market research with an assessment of its competitors' vulnerabilities in order to identify significant and sustainable target audiences. The Company then tailors the programming, marketing and promotion of each station to maximize its appeal to its target audience. Within each market, the Company attempts to build strong franchises through (i) the creation of distinct, highly visible profiles for its on-air personalities, particularly those broadcasting during morning "drive time" traditionally between 6:00 a.m. and 10:00 a.m., 56 64 (ii) the formulation of recognizable "brand names" for select stations such as the "Bull" and "Cat Country" and (iii) active involvement in community events and charities. The Company has achieved particular success in programming country formats and currently operates the leading country station in ten of its 13 existing markets where it programs country music. Decentralized Operations. The Company believes that radio is primarily a local business and that much of its success is the result of the efforts of regional and local management and staff. Accordingly, the Company decentralizes its operations. Each of the Company's regional and local station groups is managed by a team of experienced broadcasters who understand the musical tastes, demographics and competitive opportunities of the particular market. Regional and local managers are responsible for preparing annual operating budgets, and a portion of their compensation is linked to meeting or surpassing operating targets. Corporate management approves each station group's annual operating budget and imposes strict financial reporting requirements to track station performance. Corporate management is responsible for long range planning, establishing Company policies and serving as a resource to local management. The Company has implemented local sales reporting systems at each station to provide local and corporate management with daily sales information. ACQUISITION STRATEGY In February 1996, as a result of the passage of the Telecommunications Act, radio broadcasting companies were permitted to increase their ownership of stations within a single market from four to a maximum of between five and eight stations, depending on market size. The Telecommunications Act also eliminated the national ownership restriction that generally had limited companies to the ownership of no more than 40 stations (20 AM and 20 FM) throughout the United States. As the Company has achieved a leading position in most of the markets it currently serves, the Company expects that, in addition to acquiring additional radio stations in existing markets as permitted by the Telecommunications Act, it will emphasize the acquisition of additional radio stations in new markets which present opportunities for the Company to apply its operating strategies. The Company believes that such acquisitions will enable it to achieve, among other things, greater size and geographic diversification. The Company anticipates that it will continue to focus on mid-sized markets rather than attempt to expand into larger markets. Although competition among potential purchasers for suitable radio station acquisitions is intense throughout the United States, the Company believes that less competition exists, particularly from the larger radio operators, in mid-sized markets as compared to larger markets, affording the Company relatively more attractive acquisition opportunities in these markets. There can be no assurance, however, that the Company will be able to identify suitable and available acquisition opportunities or that it will be able to consummate any such acquisition opportunities. In evaluating acquisition opportunities in new markets, the Company assesses its potential, over time, to build leading radio station groups in those markets. The Company believes that the creation of strong station groups in local markets is essential to operating success and generally will not consider entering a new market unless it believes it can acquire multiple stations in the market. The Company also analyzes a number of additional factors which it believes are important to its success, including the number and quality of commercial radio signals broadcasting in the market, the nature of the competition in the market, the Company's ability to improve the operating performance of the radio station or stations under consideration and the general economic conditions of the market. The Company believes that its acquisition strategy, if properly implemented, could have a number of benefits, including (i) diversification of revenue and broadcast cash flow across a greater number of stations and markets, (ii) improved broadcast cash flow margins through the consolidation of facilities and the elimination of redundant expenses, (iii) enhanced utilization of its senior management team, (iv) improved leverage in various key vendor negotiations, (v) greater appeal to top industry management talent and (vi) increased overall scale which should facilitate the Company's capital raising activities. The consummation of certain acquisitions requires special approval of the Company's Board of Directors or certain of its shareholders. See "Management -- Board Composition and Governance Matters." 57 65 RADIO 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 serves primarily as a medium for local advertising. During the past decade, local advertising revenue as a percentage of total radio advertising revenue has ranged from approximately 74% to 78%. The growth in total radio advertising revenue tends to be fairly stable and has generally grown at a rate faster than the Gross Domestic Product (the "GDP"). Total radio advertising revenue in 1996 of $12.4 billion represented an 8.2% increase over 1995, as reported by the Radio Advertising Bureau ("RAB"). Radio is considered an efficient 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 certain demographic and psychographic groups. By capturing a specific listening audience share of a market's radio audience, with particular concentration in a targeted demographic group, a station is able to market its broadcasting time to advertisers seeking to reach a specific audience. Advertisers and stations utilize data published by audience measuring services, such as Arbitron, to estimate how many people within particular geographical markets and demographic groups listen to specific stations. Stations determine the number of advertisements broadcast hourly that will maximize available revenue dollars without jeopardizing listening levels. Although the number of advertisements broadcast during a 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 and regional advertising sales through direct solicitations of local advertising agencies and businesses. To generate national advertising sales, a station 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 obtained. According to the RAB's Radio Marketing Guide and Fact Book for Advertisers, 1997, radio reaches approximately 95% of all Americans over the age of 12 each week. More than one-half of all radio listening is done outside the home, in contrast to other advertising mediums, and three out of four adults are reached by car radio each week. The average listener spends approximately three hours and 20 minutes per day listening to radio. The highest portion of radio listenership occurs during the morning, particularly between the time a listener wakes up and the time the listener reaches work. This morning "drive time" period reaches more than 80% of people over 12 years of age 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, as compared to AM, is generally clearer and provides greater tonal range and higher fidelity. 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. STATION PORTFOLIO The following is a description of each of the radio stations currently owned or operated by the Company, the In-Market Acquisition Stations, the Little Rock Stations and the Boise Stations and the markets they serve. The stations owned by the Company include those acquired in January 1997 when Deschutes was acquired by Citadel Communications and those acquired in July 1997 when Tele-Media was acquired by the Company. Information is not given for stations under contract to be sold by the Company or for a market if the Company has entered into an agreement to sell all of its stations in such market. Market revenue information is given for the first six months of 1997 where available. 58 66 CURRENTLY OWNED OR OPERATED STATIONS AND THE IN-MARKET ACQUISITION STATIONS Albuquerque, New Mexico. The Company owns five FM and three AM radio stations in Albuquerque.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED/LMA TARGET TARGET - ------------------------------- ----------- --------------- ----------- --------------- KKOB-AM........................ News/Talk 1994 A 25-54 4(tie) KKOB-FM........................ A/C 1994 W 25-54 3(tie) KMGA-FM........................ A/C 1994 W 25-54 2 KHTL-AM........................ News/Talk 1994 A 35-64 28(tie) KHFM-FM........................ Classical 1996 A 25-54 11(tie) KNML-AM........................ Sports 1996 M 25-54 19(tie) KRST-FM........................ Country 1996/1996 A 25-54 1 KTBL-FM........................ Country 1996/1995 (JSA) A 25-54 9(tie)
Albuquerque has an MSA rank of 71, and had market revenue of approximately $28.7 million in 1996 and approximately $15.9 million in the first six months of 1997, an approximate 9.4% and 10.5% increase over 1995 and the first six months of 1996, respectively. There are 36 stations in the Albuquerque market, 29 of which are owned by multiple station owners. There are 17 viable FM and four viable AM stations in this market. The eight stations owned by the Company rank first in the market in terms of their combined gross revenue, with approximately 58.0% of the market revenue in the first six months of 1997. The Company entered the Albuquerque market in May 1994 with the purchase of KKOB-FM, KKOB-AM, KHTL-AM and KMGA-FM. At the time of purchase, the KKOB-AM format included news/talk with a mix of adult contemporary ("A/C") music. After the acquisition, the Company eliminated music from the station making it exclusively news/talk. Larry Ahrens, the morning talk show host, has been on the air with KKOB-AM for 17 years and has been the number one host in the market for over 10 years. KKOB-AM features the University of New Mexico men's football and basketball games, as well as Dallas Cowboys football games. In April 1997, KKOB-AM celebrated its 75th anniversary on the air. KKOB-FM celebrated 30 years on the air in the summer of 1997. KKOB-FM is the heritage A/C station in the market and has a veteran morning team, "John and the Bean," which has been on the air with the station for more than six years. Use of the term "heritage" refers to a station or on-air show that is firmly established in its format and market and has been so for many years. In 1996, the Company expanded its ownership in the Albuquerque market with the purchase of KHFM-FM, KNML-AM, KRST-FM and KTBL-FM. KNML-AM had an all Associated Press news format at the time of acquisition which was changed to an all sports format in October 1996. The station carries the Albuquerque Dukes baseball games. KRST-FM is the heritage country station in the market, and has achieved double digit market revenue shares since 1989. The Company received a CID from the DOJ in connection with the acquisition of KRST-FM. See "-- Legal Proceedings." Colorado Springs, Colorado. The Company owns three FM radio stations and sells advertising on behalf of two FM and two AM radio stations under a JSA in Colorado Springs.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED/LMA TARGET TARGET - ------------------------------- ------------ --------------- ----------- --------------- KKFM-FM........................ Classic Rock 1986 M 25-54 1 KKMG-FM........................ CHR 1994/1990 W 18-34 1 KKLI-FM........................ Soft A/C 1996 W 25-54 1 KVUU-FM........................ A/C 1996 (JSA) W 18-49 4(tie) KSPZ-FM........................ Oldies 1996 (JSA) A 25-54 6 KVOR-AM........................ News/Talk 1996 (JSA) A 25-54 11(tie) KTWK-AM........................ Nostalgia 1996 (JSA) A 25-54 20(tie)
59 67 Colorado Springs has an MSA rank of 95, and had market revenue of approximately $14.8 million in 1996 and approximately $7.9 million in the first six months of 1997, an approximate 8.7% and 17.4% increase over 1995 and the first six months of 1996, respectively. There are 19 stations in the Colorado Springs market, 13 of which are owned by multiple station owners. There are 11 viable FM and two viable AM stations in this market. The three stations owned by the Company plus the four stations marketed under a JSA, rank first in the market in terms of their combined gross revenue, with approximately 63.5% of the market revenue in the first six months of 1997. Predecessor entered the Colorado Springs market in January 1986 with the purchase of KKFM-FM. At the time of purchase, KKFM-FM had a nominal share of market advertising revenue and audience and, prior to the Company's purchase, operated with negative broadcast cash flow. After purchasing KKFM-FM, the Company changed the format to the current classic rock format and revamped the sales and management staff. KKFM-FM is currently the number one station in its primary demographic target of men ages 25-54, as well as adults ages 25-54. KKFM-FM is the only classic rock station in the market and has the heritage morning show, "The Mark Brothers," who have been on the air with the station for over six years. In December 1990, the Company began programming and selling the available advertising time for KKMG-FM, "Magic," pursuant to an LMA. In May 1994, the Company established an FM duopoly in the market when it purchased KKMG-FM, which is currently the leading station in its primary demographic target of women ages 18-34. KKMG-FM, which is the only station in the market with a contemporary hit radio ("CHR") format, together with KKFM-FM, permit the Company to appeal to a wide spectrum of advertisers in the market. In January 1996, the Company began to sell all of the advertising time for two additional FM and two additional AM radio stations in Colorado Springs under a JSA. KSPZ-FM broadcasts oldies, KVUU-FM broadcasts A/C, KVOR-AM carries a news/talk format and KTWK-AM broadcasts a nostalgia format. The Company received a civil investigative demand from the DOJ in connection with the JSA relating to these stations. See "-- Legal Proceedings." The Company's 1996 acquisition of KKLI-FM, which has an A/C format, helped to fill out an already well-covered market, particularly among women listeners. Modesto, California. The Company owns four FM radio stations and one AM radio station in Modesto.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED/LMA TARGET TARGET - --------------------------------- ------------- ------------ ----------- --------------- KATM-FM.......................... Country 1992 A 25-54 1 KBUL-AM.......................... Sports 1992 M 25-54 16 (tie) KDJK-FM.......................... Rock Oldies 1993 A 25-54 Simulcast with KHKK-FM KHKK-FM.......................... Rock Oldies 1993/1993 A 25-54 5 KHOP-FM.......................... AOR 1996 A 18-34 2
Modesto has an MSA rank of 122, and had market revenue of approximately $13.7 million in 1996 and approximately $6.8 million in the first six months of 1997, an approximate 13.1% and 2.3% increase over 1995 and the first six months of 1996, respectively. There are 16 stations in the Modesto market, ten of which are owned by multiple station owners. There are nine viable FM and two viable AM stations in this market. The five stations owned by the Company rank first in the market in terms of their combined gross revenue, with approximately 62.2% of the market revenue in the first six months of 1997. The Company owns three stations serving the Modesto market (KATM-FM, KHKK-FM and KHOP-FM) with sufficiently strong signals to attract additional advertising revenue from advertisers that desire coverage of other markets in California's central valley region. To further increase the operating performance of such stations, the Company changed several formats and call letters during 1996 in an effort to place the most popular formats on its strongest signals. 60 68 The Company entered the Modesto market in July 1992 with the purchase of KATM-FM, "Cat Country," and KBUL-AM. Promptly after purchasing KATM-FM, the Company switched its easy listening format to the current contemporary country format, and it has ranked number one in the market among persons 12 and older since the switch. The Company recently switched the format of KBUL-AM to its current sports format. In April 1993, the Company began programming and selling the advertising time for KHKK-FM pursuant to an LMA. The Company established an FM duopoly in the market when it purchased KHKK-FM in October 1993. The purchase included KDJK-FM, licensed to Mariposa, an area adjacent to Modesto, which simulcasts with KHKK-FM. KHKK-FM/KDJK-FM began broadcasting an album-oriented rock ("AOR") format in October 1992. In April 1996, the Company moved KHKK-FM's AOR format to KHOP-FM, a 1996 acquisition. Reno, Nevada. The Company owns three FM radio stations and one AM radio station in Reno.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED/LMA TARGET TARGET - ---------------------------------- ------------ ------------ ----------- --------------- KBUL-FM........................... Country 1992 A 25-54 1 KKOH-AM........................... News/Talk 1992 A 25-54 5 KNEV-FM........................... A/C 1993/1993 W 18-49 2 KNHK-FM........................... Rock Oldies 1997/1997 A 25-54 2
Reno has an MSA rank of 131, and had market revenue of approximately $14.0 million in 1996 and approximately $7.3 million in the first six months of 1997, an approximate 8.8% and 13.1% increase over 1995 and the first six months of 1996, respectively. There are 26 stations in the Reno market, 20 of which are owned by multiple station owners. There are 13 viable FM and two viable AM stations in this market. The four stations owned by the Company rank first in the market in terms of their combined gross revenue, with approximately 47.4% of the market revenue in the first six months of 1997. The Company entered the Reno market in April 1992 with the purchase of KBUL-FM. KBUL-FM is the heritage country station in the market and is currently the only station with a country format. J.J. Christy, the morning show personality, celebrated ten years with the station in September 1997. In July 1992, the Company purchased KKOH-AM, and began programming and selling the available advertising time for KNEV-FM, "Magic," under an LMA for a brief period before purchasing it in May 1993. In March 1994, with the acquisition of the news/talk format and certain other assets of a competing station in Reno, the Company began broadcasting the acquired format on KKOH-AM. KKOH-AM will celebrate its 69th year in 1997 and has a heritage morning show host, Ross Mitchell. The station carries sports broadcasting for the University of Nevada, Reno, and San Francisco 49ers football. In fall 1992, the Company changed the format of KNEV-FM to its current A/C format. In July 1997, the Company acquired KNHK-FM which had been off the air until the fourth quarter of 1996, at which time it began broadcasting a mixed music format. In January 1997, the Company began broadcasting a rock oldies format on the station pursuant to an LMA. Salt Lake City, Utah. The Company owns three FM radio stations and one AM radio station in Salt Lake City. The Company also operates one FM and one AM In-Market Acquisition Station under an LMA in Salt Lake City. 61 69
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED/LMA TARGET TARGET - ----------------------- ----------------- ------------------- ----------- --------------- KCNR-AM................ Children's 1988 C 4-11 -- KUBL-FM................ Country 1988 A 25-54 5 KBEE-FM................ A/C Pending/1992 W 18-49 3 KFNZ-AM................ Sports Pending/1992 M 25-54 9 (tie) KBER-FM................ AOR 1997/1996 A 18-34 8 (tie) KENZ-FM................ Rock Alternative 1997/1996 (JSA) A 18-34 4
Salt Lake City has an MSA rank of 35, and had market revenue of approximately $52.5 million in 1996 and approximately $27.6 million in the first six months of 1997, an approximate 18.4% and 16.1% increase over 1995 and the first six months of 1996, respectively. There are 43 stations in the Salt Lake City market, 26 of which are owned by multiple station owners. There are 16 viable FM and five viable AM stations in this market. The six stations owned by the Company rank first in the market in terms of their combined gross revenue, with approximately 22.7% of the market revenue in the first six months of 1997. Predecessor entered the Salt Lake City market in March 1988 with the purchase of KCNR-AM and KUBL-FM. Until August of 1990, KCNR-AM simulcast the programming of KUBL-FM. At that time, an all news format was programmed. KCNR-AM eventually moved to an all talk format and, in November 1996, it became an affiliate of Disney Radio and began broadcasting programming for children. Its primary target demographic is children ages 4-11 with a secondary target audience of women ages 25-34. At the time of purchase, KUBL-FM had nominal shares of market advertising revenue and audience and, prior to the Company's purchase, operated with negative broadcast cash flow. After purchasing the station, the Company changed its format. In rebuilding the station, the Company brought in new management, bolstered the sales staff and hired a popular morning team. In February 1994, another station in the market changed its format to compete directly with KUBL-FM for listeners and advertisers, causing a decrease in KUBL-FM's Arbitron station audience share. The Company responded by changing the station's format to country in May 1995. The Spring 1997 Arbitron Report rated KUBL-FM the number one country station in the market. In April 1992, the Company began programming and selling the available advertising time pursuant to an LMA for KFNZ-AM and KBEE-FM. The Company exercised its option under the LMA to purchase KBEE-FM and KFNZ-AM for a total purchase price of approximately $2.9 million. See "The Pending Transactions -- The In-Market Acquisitions." KFNZ-AM has a sports format and carries all of the professional sports teams in the market including Utah Jazz basketball, Utah Grizzlies hockey and Salt Lake City Buzz baseball. KBEE-FM has a strong presence in the market with its morning personality, Mick MacKay, who has been with the station for eight years and is part of the "Wake Up Club" morning show. The Company believes the 1997 acquisitions of KBER-FM, the heritage rock station in the market, and of KENZ-FM will give the Company an increased presence, and, therefore, a greater ability to compete in the Salt Lake City market. 62 70 Spokane, Washington. The Company owns two FM and two AM radio stations and sells advertising on behalf of two FM and two AM radio stations under a JSA in Spokane.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED/LMA TARGET TARGET - ------------------------------- ----------------- ------------ ----------- --------------- KDRK-FM........................ Country 1992 A 25-54 4 (tie) KGA-AM......................... News/Talk 1992 A 25-54 10 KAEP-FM........................ Rock Alternative 1993 A 18-34 2 KJRB-AM........................ Talk 1993/1993 A 35-64 12 (tie) KKZX-FM........................ Classic Rock 1996 (JSA) M 25-54 1 KEYF-FM........................ Oldies 1996 (JSA) A 25-54 4 (tie) KEYF-AM........................ Oldies 1996 (JSA) A 25-54 Simulcast with KEYF-FM KUDY-AM........................ Talk/Religion 1996 (JSA) A 25-54 --
Spokane has an MSA rank of 87, and had market revenue of approximately $13.7 million in 1996 and approximately $6.9 million in the first six months of 1997, an approximate 3.2% and 7.7% increase over 1995 and the first six months of 1996, respectively. There are 25 stations in the Spokane market, 20 of which are owned by multiple station owners. There are 12 viable FM and five viable AM stations in this market. The four stations owned by the Company plus the four stations marketed under a JSA rank first in the market in terms of their combined gross revenue, with approximately 53.6% of the market revenue in the first six months of 1997. The Company entered the market in July 1992 with the purchase of KDRK-FM, "Cat Country," and KGA-AM. KDRK-FM is the heritage country station in the market, broadcasting a country format since 1979. KGA-AM is the flagship station for the Spokane Chiefs hockey team. In May 1993, the Company purchased KAEP-FM and in July 1993 began programming and selling the available advertising time for KJRB-AM under an LMA for a brief period before purchasing it in October 1993. KAEP-FM is the only station with an adult alternative format in the market. KJRB-AM is the flagship station for the Spokane Indians, a semi-professional baseball team. Pursuant to a JSA, in January 1996, the Company began selling all of the advertising time for two additional FM and two additional AM radio stations in Spokane. KEYF-FM/AM simulcasts an oldies format, KUDY-AM is a talk/religion station and KKZX-FM carries a classic rock format. The Company received a CID from the DOJ in connection with the JSA relating to these stations. See "-- Legal Proceedings." Billings, Montana. As a result of the acquisition of Deschutes and the Subsidiary Merger, the Company owns four FM radio stations and one AM radio station in Billings.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED TARGET TARGET - ------------------------------------- ------------ --------- ----------- --------------- KCTR-FM.............................. Country 1997 A 25-54 1 KDWG-AM.............................. Country 1997 A 25-54 Simulcast with KCTR-FM KKBR-FM.............................. Oldies 1997 A 25-54 3 KBBB-FM.............................. A/C 1997 W 25-54 5 KMHK-FM.............................. Rock Oldies 1997 A 25-54 5
Billings has an MSA rank of 238, and had market revenue of approximately $5.8 million in 1996, an approximate 7.4% increase over 1995. There are 14 stations in the Billings market, ten of which are owned by multiple station owners. There are seven viable FM and three viable AM stations in this market. The five 63 71 stations owned by the Company rank first in the market in terms of their combined gross revenue, with approximately 58.3% of the market revenue in 1996. Deschutes entered the Billings market in 1995 when it acquired KCTR-FM, KDWG-AM and KKBR-FM from the Company. The Company had owned the stations since 1988, 1988 and 1993, respectively. KCTR-FM and KDWG-AM, which simulcast a country format, "Cat Country," are currently the leaders in the Billings market. KKBR-FM is the number three station in the Billings market in its primary demographic target of adults ages 25-54. In September 1996, Deschutes acquired KMHK-FM. At the time of the acquisition, KMHK-FM broadcast an AOR format. However, after the acquisition, the format was changed to rock oldies. This change in format established KMHK-FM as the only rock oldies station in the Billings market. In November 1996, Deschutes acquired KBBB-FM. At the time of the acquisition, KBBB-FM broadcast a country music format. Deschutes converted the station to an A/C format. The station is the only A/C station in Billings and complements the Company's country franchise. Eugene, Oregon. As a result of the acquisition of Deschutes and the Subsidiary Merger, the Company owns two FM radio stations and one AM radio station in Eugene.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED TARGET TARGET - ----------------------------------- ------------ ------------ ----------- --------------- KEHK-FM............................ Rock Oldies 1997 A 25-54 6 (tie) KUGN-AM............................ News/Talk 1997 A 35-64 8 KUGN-FM............................ Country 1997 A 25-54 2
Eugene has an MSA rank of 146, and had market revenue of approximately $10.1 million in 1996 and approximately $4.2 million in the first six months of 1997, an approximate 3.5% increase over 1995 and an approximate 9.6% decrease from the first six months of 1996. There are 19 stations in the Eugene market, 14 of which are owned by multiple station owners. There are eight viable FM and three viable AM stations in this market. The three stations owned by the Company rank first in the market in terms of their combined gross revenue, with approximately 32.4% of the market revenue in the first six months of 1997. Deschutes acquired KUGN-AM/FM and KEHK-FM in September 1996. KUGN-AM/FM have been the heritage radio stations in Eugene for the last 20 years. KUGN-AM has been the leading news/talk station over much of this time, but ratings gradually declined over the last six years when the station lost an important sports contract with the University of Oregon. The station regained the contract in the fall of 1995 and hired a high profile personality from a competitor (the "voice of University of Oregon sports") to give it increased visibility in the Eugene market. KUGN-FM is the heritage country radio station in Eugene and was the only country station in the market until 1993, when a competitor switched formats to program country music. Less than six months after the acquisition of the station, Deschutes modified its programming and KUGN-FM has been consistently ranked in the top three among persons ages 12 and over and 25-54. KEHK-FM was a "new-age" alternative music station targeted at adults ages 35-49. However, due to unsatisfactory results in the spring 1996 ratings period, Deschutes changed the station's format to a rock oldies format. The new format contributed to an increase in the station's audience share to 6.4% based on the Spring 1997 Arbitron Report. 64 72 Medford, Oregon. As a result of the acquisition of Deschutes and the Subsidiary Merger, the Company owns four FM and two AM radio stations in Medford.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED TARGET TARGET - ---------------------------- ------------------ ------------- ----------- ---------------- KAKT-FM..................... Country 1997 A 25-54 8 (tie) KBOY-FM..................... Classic Rock 1997 M 25-54 2 KCMX-AM..................... News/Talk 1997 A 35-64 8 (tie) KCMX-FM..................... A/C 1997 W 25-54 2 (tie) KTMT-AM..................... Sports 1997 M 25-54 10 (tie) KTMT-FM..................... CHR 1997 W 18-34 1 (tie)
Medford has an MSA rank of 201, and had market revenue of approximately $5.7 million in 1996, an approximate 5.6% increase over 1995. There are 17 stations in the Medford market, 11 of which are owned by multiple station owners. According to the 1997 BIA Report, there are six viable FM stations in this market. The six stations owned by the Company rank first in the market in terms of their combined gross revenue, with approximately 55.3% of the market revenue in 1996. Deschutes entered the Medford market in 1995 when it acquired KBOY-FM and KAKT-FM. KBOY-FM is the heritage classic rock station in the market and is the number two station among men ages 25-54. KAKT-FM had broadcast a satellite-delivered hot A/C format; however, in January 1996, Deschutes changed the station's format to country, "Cat Country," to compete directly with the market leader. Deschutes acquired four additional stations in the Medford market in July 1996. KTMT-FM is the only CHR format station in the market, KCMX-FM broadcasts an A/C format, KCMX-AM broadcasts a news/talk format and KTMT-AM broadcasts a sports/talk format that includes University of Oregon football and basketball, Oakland A's baseball and San Francisco 49ers football games. Two of these four stations are ranked in the top seven in the Medford market among persons ages 25-54. The programming of all of these stations has been adjusted to improve their audience appeal. In addition, the Company believes opportunities exist to modify the programming of certain stations to reduce their competitive overlap with other Company stations and thereby increase the Company's aggregate audience share. Tri-Cities, Washington. As a result of the acquisition of Deschutes, the Subsidiary Merger and the September 1997 acquisition of KTHK-FM, the Company owns four FM radio stations and one AM radio station in Tri-Cities.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED/LMA TARGET TARGET - ----------------------------- ------------- ---------------- ------------ ---------------- KFLD-AM...................... Sports 1997 M 25-54 7 (tie) KORD-FM...................... Country 1997 A 25-54 4 (tie) KXRX-FM...................... AOR 1997 M 18-34 1 KEYW-FM...................... A/C 1997 A 25-54 6 (tie) KTHK-FM...................... Rock Oldies 1997/1997 A 25-54 13 (tie)
Tri-Cities (includes the communities of Richland, Kennewick and Pasco, Washington) has an MSA rank of 200, and had market revenue of approximately $5.4 million in 1996, an approximate 1.9% increase over 1995. There are 16 stations in the Tri-Cities market, 12 of which are owned by multiple station owners. According to the 1997 BIA Report, there are six viable FM stations in this market. The five stations owned by the Company rank first in the market in terms of their combined gross revenue, with approximately 40.2% of the market revenue in 1996. 65 73 Deschutes entered the Tri-Cities market in 1994 when it acquired KORD-FM, KFLD-AM and KXRX-FM in two separate transactions. KORD is the heritage country station in the market. KFLD broadcasts a sports format, which includes Seattle Mariners and Seattle SuperSonics games. When Deschutes acquired KXRX, it had been a country music station. Shortly after the acquisition, Deschutes changed the station's format from country to AOR, so it would not compete with KORD. Branded "97 Rock," the station became the number two ranked in the market among persons ages 18-34 in less than six months. Deschutes further increased its presence in the market with the October 1996 acquisition of KEYW-FM, a hot A/C station. Previously, this station was not a significant performer in the market. According to the Spring 1997 Arbitron Report, the station was ranked number two among persons ages 12 and over and ages 18-34. Providence, Rhode Island. As a result of the Tele-Media Acquisition and the September 1997 acquisition of WDGE-FM, the Company owns three FM and two AM radio stations in Providence. The Company also operates one FM In-Market Acquisition Station under an LMA in Providence.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED/LMA TARGET TARGET - ----------------------------- ---------------- ---------------- ------------ ---------------- WLKW-AM...................... Nostalgia 1997 A 35-64 8 WWLI-FM...................... A/C 1997 W 25-54 1 WPRO-AM...................... News/Talk 1997 A 25-54 8 WPRO-FM...................... CHR 1997 A 18-49 1 WDGE-FM...................... Rock Alternative 1997 A 18-34 7 WDGF-FM...................... A/C Pending/1997 W 18-49 8
Providence has an MSA rank of 31, and had market revenue of approximately $37.9 million in 1996 and approximately $18.8 million in the first six months of 1997, an approximate 8.6% and 6.0% increase over 1995 and the first six months of 1996, respectively. There are 30 stations in the Providence market, 19 of which are owned by multiple station owners. There are 10 viable FM and three viable AM stations in this market. The four stations owned by the Company combined with the two In-Market Acquisition Stations in this market rank first in the market in terms of their combined gross revenue, with approximately 36.4% of the market revenue in the first six months of 1997. WPRO-AM and WPRO-FM are heritage stations in the Providence market. WPRO-AM carries Rush Limbaugh, as well as many of the local sports franchises including the Boston Red Sox, the Boston Bruins and Providence College sports. WPRO-FM is a heritage CHR station with a long running morning show and several airstaff members that have been at the station for more than 15 years. WPRO-AM has averaged just less than a 5% share over the past three years of persons ages 12 and over, and WPRO-FM has averaged a 7% share of persons ages 12 and over in the past several years. WDGE-FM began broadcasting in 1995 with an alternative rock format. In April 1997, the station added the syndicated Mancow morning show. WDGF-FM broadcast a jazz format until May 1996 when it began simulcasting the programming of WDGE-FM. In February 1997, the station changed to a rhythmic A/C format called "The Beat." Both stations are class A FM radio stations covering most of the Providence metro area. 66 74 Allentown/Bethlehem, Pennsylvania. As a result of the Tele-Media Acquisition, the Company owns one FM radio station and one AM radio station in Allentown. The Company has entered into agreements to acquire one FM In-Market Acquisition Station in Allentown and to sell WEST-AM, which is not included in the chart below.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED TARGET TARGET - ----------------------- ------------------ ------------------ ------------- ----------------- WCTO-FM................ Country 1997 A 25-54 3 WLEV-FM................ Lite A/C Pending/1997 W 25-54 4
Allentown/Bethlehem has an MSA rank of 65, and had market revenue of approximately $22.0 million in 1996, an approximate 2.8% increase over 1995. There are 18 stations in the Allentown market, 11 of which are owned by multiple station owners. There are five viable FM and three viable AM stations in this market. WLEV-FM and WCTO-FM rank second in the market in terms of their combined gross revenue, with approximately 24.1% of market revenue in 1996. Because of the small number of viable stations in this market, most are format-exclusive and, therefore, have no direct competitors in the market. WCTO-FM broadcast an A/C format until July 1997 when the Company began programming the market's only country format on the station. WLEV has been an Allentown mainstay for approximately 30 years. The station had historically broadcast an easy listening format targeting adults ages 45 and over with a mostly instrumental music mix. In 1991, the format was changed slightly to include more vocals in the mix. Harrisburg, Pennsylvania and York, Pennsylvania. As a result of the Tele-Media Acquisition, the Company owns one FM radio station in Harrisburg and one FM radio station and one AM radio station in York. Harrisburg and York are adjacent markets with numerous overlapping radio signals. The Company intends to operate these stations as a single station group.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED TARGET TARGET - --------------------------- ------------------ -------------- ------------- ----------------- WRKZ-FM (Harrisburg)....... Country 1997 A 25-54 3 WQXA-FM (York)............. Rock 1997 M 18-34 2 WQXA-AM (York)............. Nostalgia 1997 A 35-64 --
Harrisburg has an MSA rank of 73, and had market revenue of approximately $23.8 million in 1996, an approximate 3% increase over 1995. There are 23 stations in the Harrisburg market, 12 of which are owned by multiple station owners. There are eight viable FM and three viable AM stations in this market. WRKZ-FM ranks fourth in the market in terms of gross revenue, with approximately 12.2% of the market revenue in 1996. York has an MSA rank of 103, and had market revenue of approximately $15.8 million in 1996, an approximate 6% increase over 1995. There are 12 stations in the York market, 10 of which are owned by multiple station owners. There are seven viable FM stations and one viable AM station in this market. The two stations owned by the Company rank third in the market in terms of their combined gross revenue, with approximately 11.1% of the market revenue in 1996. Both WRKZ-FM and WQXA-FM have strong signals in the Harrisburg and York markets and in the adjacent Lancaster market. WQXA-FM has four years remaining on a five year contract with Howard Stern for the morning show. The Company believes that WRKZ-FM and WQXA-FM have a competitive advantage in the Harrisburg and York markets because they comprise two of the only three signals that have good coverage of each of Harrisburg, York and Lancaster. Wilkes-Barre/Scranton, Pennsylvania. As a result of the Tele-Media Acquisition, the Company owns two FM and two AM radio stations and operates two FM radio stations and one AM radio station under an LMA and a JSA in Wilkes-Barre/Scranton, respectively. The Company also operates one FM In-Market 67 75 acquisition station and one AM In-Market Acquisition Station pursuant to an LMA and has entered into an agreement to acquire two FM In-Market Acquisition stations and one AM In-Market Acquisition station in Wilkes-Barre/Scranton.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED/LMA TARGET TARGET - --------------------------- ------------------ -------------- ------------- ----------------- WMGS-FM.................... A/C 1997 W 25-54 2 WARM-AM.................... News/Talk 1997 A 25-54 20 (tie) WZMT-FM.................... AOR 1997 M 18-34 2 WAZL-AM.................... News/Talk 1997 A 35-64 -- WBHT-FM.................... CHR 1997(LMA) W 18-34 3 WKQV-FM.................... AOR 1997(LMA) M 18-34 Simulcast with WZMT-FM WKQV-AM.................... News/Talk 1997(JSA) A 25-54 Simulcast with WARM-AM WSGD-FM.................... Oldies Pending A 25-54 11 WDLS-FM.................... Oldies Pending A 25-54 Simulcast with WSGD-FM WCDL-AM.................... Country Pending A 35-64 -- WEMR-FM.................... CHR Pending/1997 W 18-34 Simulcast with WBHT-FM WEMR-AM.................... Country Pending/1997 A 35-64 --
Wilkes-Barre/Scranton has an MSA rank of 62, and had market revenue of approximately $23.3 million in 1996, an approximate 5.9% increase over 1995. There are 40 stations in the Wilkes-Barre/Scranton market, 28 of which are owned by multiple station owners. There are 10 viable FM and four viable AM stations in this market. The seven stations owned or operated by the Company combined with the five In-Market Acquisition Stations in this market rank second in the market in terms of their combined gross revenue, with approximately 34.1% of market revenue in 1996. The Company believes that WMGS-FM, which carries a traditional A/C format, has one of the three strongest signals in the market. Tele-Media changed the format on WZMT-FM from classic rock to AOR when it started operating the station under an LMA in August 1996, and also added Howard Stern to the morning drive show. WZMT-FM's format is simulcast on WKQV-FM, which extends WZMT-FM's coverage of the Wilkes-Barre/Scranton area. WBHT-FM broadcasts a CHR format which the Company recently began simulcasting on WEMR-FM to extend WBHT-FM's coverage to the northern portion of the market. WARM-AM carries broadcasts for several significant sports franchises, including the Philadelphia Phillies and the Philadelphia Eagles. WDLS-FM and WSGD-FM simulcast an oldies format called "Oldies 94." Quincy, Illinois. As a result of the Tele-Media Acquisition, the Company owns three FM radio stations and one AM radio station in Quincy.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED TARGET TARGET - --------------------------- ------------------ -------------- ------------- ----------------- WQCY-FM.................... Country 1997 A 25-54 NA WTAD-AM.................... News/Talk 1997 A 25-54 NA WMOS-FM.................... AOR 1997 M 18-34 NA WBRJ-FM.................... News/Talk 1997 A 25-54 NA
MSA rank, market revenue, station ownership and viable station data are not available for the Quincy market. 68 76 WTAD-AM has a strong AM signal. The station has a full-time farm programming director serving this agriculturally-oriented community. WMOS-FM was off the air at the time Tele-Media purchased the station. In March 1995, the station was put back on the air with new call letters and an AOR format. THE LITTLE ROCK STATIONS Upon consummation of the Little Rock Acquisitions, the Company will own seven FM and three AM radio stations in Little Rock and will have the right to construct and operate one additional FM radio station in Little Rock.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED/LMA TARGET TARGET - ------------------------ ----------------- ---------------- --------------- ----------------- KARN-AM................. News/Talk/Sports Pending/1997 A 25-54 11 KARN-FM................. News/Talk/Sports Pending/1997 A 25-54 Simulcast with KARN-AM KKRN-FM................. News/Talk/Sports Pending/1997 A 25-54 Simulcast with KARN-AM KRNN-AM................. News/Talk/Sports Pending/1997 A 25-54 Simulcast with KARN-AM KIPR-FM................. Urban Pending/1997 A 18-49 3 KESR-FM................. CHR Pending/1997 A 18-34 7 KYTN-FM................. Christian Pending A 12+ 16 Contemporary KEZQ-AM................. Nostalgia Pending A 35-64 17(tie) KURB-FM................. A/C Pending A 25-54 3 KVLO-FM................. Soft A/C Pending W 25-54 6 KAFN-FM................. Not Applicable Pending Not Applicable Not Applicable
Little Rock has an MSA rank of 82, and had market revenue of approximately $19.7 million in 1996, an approximate 2.1% increase over 1995. There are 32 stations in the Little Rock market, 20 of which are owned by multiple station owners. There are 12 viable FM and two viable AM stations in this market. The ten operating Little Rock Stations rank first in the market in terms of their combined gross revenue, with approximately 37.9% of market revenue in 1996. KARN-AM broadcasts a news/talk/sports format and has affiliations with the CBS Radio Network and the Arkansas Radio Network. The station has one of the largest radio news staffs in Arkansas. Each of KARN-FM, KKRN-FM and KRNN-AM serve the surrounding communities outside of Little Rock and currently simulcast the programming of KARN-AM. KIPR-FM, "Power 92," broadcasts the market's only urban format, and KESR-FM targets the demographic group of adults ages 18 to 34 with its "Star 102" CHR format. KURB-FM broadcasts an A/C format. KVLO-FM complements KURB-FM with a lite A/C format. Management believes that KVLO-FM is an underdeveloped station and that there is potential to increase station performance. KEZQ-AM currently broadcasts a nostalgia format. KAFN-FM has not yet commenced broadcasting. The current owners hold a permit to construct such station. The sellers of KYTN-FM intend to retain the KYTN call letters and its current christian contemporary format. The Company has not determined the format that it will program for the station. Upon consummation of the acquisition of KARN-AM/FM, KKRN-FM and KRNN-FM, the Company will also own the Arkansas Radio Network, which was established in 1968 and is a state-wide news network with affiliates in nearly every county in Arkansas. The Arkansas Radio Network feeds hourly newscasts in addition to agricultural programs, market reports, weather and special events. 69 77 THE BOISE STATIONS Following the Boise Acquisition, the Company will own four FM radio stations and one AM radio station in Boise.
STATION RANK IN STATION PRIMARY PRIMARY PROGRAMMING YEAR DEMOGRAPHIC DEMOGRAPHIC STATION CALL LETTERS FORMAT ACQUIRED TARGET TARGET - ------------------------ ----------------- ---------------- --------------- ----------------- KIZN-FM................. Country Pending A 25 - 54 1 KZMG-FM................. CHR Pending W 18 - 34 3 KKGL-FM................. Classic Rock Pending M 25 - 54 -- KQFC-FM................. Country Pending A 25 - 54 3 KBOI-AM................. News/Talk Pending A 35 - 64 2 (tie)
Boise has an MSA rank of 129, and had market revenue of approximately $14.3 million in 1996, an approximate 10.0% increase over 1995. There are 24 stations in the Boise market, 18 of which are owned by multiple station owners. There are ten viable FM and four viable AM stations in this market. The five Boise Stations rank first in the market in terms of their combined gross revenue, with approximately 36.4% of market revenue in 1996. KBOI-AM has a 50,000 watt signal for its News/Talk format and has been coined "The Station To Depend On." The station is also the Boise State University sports station. KQFC-FM also has a strong signal and has consistently been the number one rated country station in the market. KKGL-FM, known as "The Eagle," broadcasts a classic rock format. ADVERTISING SALES Virtually all of the Company's revenue is generated from the sale of local, regional and national advertising for broadcast on its radio stations. In 1996, approximately 87.0% of the Company's net broadcasting revenue was generated from the sale of local and regional advertising. Additional broadcasting revenue is generated from the sale of national advertising, network compensation payments and other miscellaneous transactions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- General." The major categories of the Company's advertisers include telephone companies, restaurants, fast food, automotive and grocery. Each station's local sales staff solicits advertising either directly from the local advertiser or indirectly through an advertising agency. The Company pays a higher commission rate to the sales staff for generating direct sales because the Company believes that through direct advertiser relationships it can better understand the advertiser's business needs and more effectively design an advertising campaign to help the advertiser sell its product. The Company employs personnel in each of its markets to produce commercials for the advertisers. National sales are made by a firm specializing in radio advertising sales on the national level in exchange for a commission from the Company that is based on the Company's gross revenue from the advertising obtained. Regional sales, which the Company defines as sales in regions surrounding the Company's markets to companies that advertise in the Company's markets, are generally made by the Company's local sales staff. Depending on the programming format of a particular station, the Company estimates the optimum number of advertisements available for sale. The number of advertisements that can be broadcast without jeopardizing listening levels (and the resulting ratings) is limited in part by the format of a particular station. The Company's stations strive to maximize revenue by managing their on-air inventory of advertising time and adjusting prices based on local market conditions and on the Company's ability, through its marketing efforts, to provide advertisers with an effective means of reaching a targeted demographic group. Each of the Company's stations has a general target level of on-air inventory that it makes available for advertising. This target level of inventory for sale may be different at different times of the day but tends to remain stable over time. Much of the Company's selling activity is based on demand for its radio stations' on-air inventory and, in general, the Company responds to this demand by varying prices rather than by varying its target inventory level for a particular station. Therefore, most changes in revenue are explained by demand-driven pricing changes rather than by changes in the available inventory. 70 78 The Company believes that radio is one of the most efficient and cost-effective means for advertisers to reach specific demographic groups. Advertising rates charged by radio stations are based primarily on (i) a station's share of audiences in the demographic groups targeted by advertisers (as measured by ratings surveys estimating the number of listeners tuned to the station at various times), (ii) the number of stations in the market competing for the same demographic groups, (iii) the supply of and demand for radio advertising time and (iv) certain qualitative factors. Rates are generally highest during morning and afternoon commuting hours. A station's listenership is reflected in ratings surveys that estimate the number of listeners tuned to the station and the time they spend listening. Each station's ratings are used by its advertisers and advertising representatives to consider advertising with the station and are used by the Company to chart audience growth, set advertising rates and adjust programming. The radio broadcast industry's principal ratings service is Arbitron, which publishes periodic ratings surveys for significant domestic radio markets. These surveys are the Company's primary source of ratings data. COMPETITION The radio broadcasting industry is highly competitive. The success of each of the Company's stations depends largely upon its audience ratings and its share of the overall advertising revenue within its market. The Company's audience ratings and advertising revenue are subject to change, and any adverse change in a particular market affecting advertising expenditures or an adverse change in the relative market positions of the stations located in a particular market could have a material adverse effect on the revenue of the Company's radio stations located in that market. There can be no assurance that any one of the Company's radio stations will be able to maintain or increase its current audience ratings or advertising revenue market share. The Company's 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 a specific demographic group in each of its markets, the Company is able to attract advertisers seeking to reach those listeners. Companies that operate radio stations must be alert to the possibility of another station changing its format to compete directly for listeners and advertisers. Another station's decision to convert to a format similar to that of one of the Company's radio stations in the same geographic area may result in lower ratings and advertising revenue, increased promotion and other expenses and, consequently, lower broadcast cash flow for the Company. Factors that are material to a radio station's competitive position include management experience, the station's local audience rank in its market, transmitter power, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other radio stations in the market area. The Company attempts to improve its competitive position in each market by extensively researching its stations' programming, by implementing advertising campaigns aimed at the demographic groups for which its stations program and by managing its sales efforts to attract a larger share of advertising dollars. However, the Company competes with some organizations that have greater financial resources than the Company. Recent changes in the FCC's policies and rules permit increased ownership and operation of multiple local radio stations. Management believes that radio stations that elect to take advantage of joint arrangements such as LMAs or JSAs may in certain circumstances have lower operating costs and may be able to offer advertisers more attractive rates and services. Although the Company currently operates multiple stations in each of its markets and intends to pursue the creation of additional multiple station groups, the Company's competitors in certain markets include operators of multiple stations or operators who already have entered into LMAs or JSAs. The Company also competes with other radio station groups to purchase additional stations. Some of these groups are owned or operated by companies that have substantially greater financial and other resources than the Company. Although the radio broadcasting industry is highly competitive, some barriers to entry exist (which can be mitigated to some extent by changing existing radio station formats and upgrading power, among other 71 79 actions). The operation of a radio broadcast station requires a license from the FCC, and the number of radio stations that can operate in a given market is limited by the availability of FM and AM radio frequencies allotted by the FCC to communities in that market, as well as by the FCC's multiple ownership rules regulating the number of stations that may be owned and controlled by a single entity. The FCC's multiple ownership rules have changed significantly as a result of the Telecommunications Act. For a discussion of FCC regulation and the provisions of the Telecommunications Act, see " -- Federal Regulation of Radio Broadcasting." The Company's stations also compete for advertising revenue with other media, including newspapers, broadcast television, cable television, magazines, direct mail, coupons and outdoor advertising. In addition, the radio broadcasting industry is subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems, by satellite and by digital audio broadcasting ("DAB"). DAB may deliver by satellite to nationwide and regional audiences, multi-channel, multi-format, digital radio services with sound quality equivalent to compact discs. The delivery of information through the presently unregulated Internet also could create a new form of competition. 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 disks. A growing population and greater availability of radios, particularly car and portable radios, have contributed to this growth. There can be no assurance, however, that the development or introduction in the future of any new media technology will not have an adverse effect on the radio broadcasting industry. The FCC has recently authorized spectrum for the use of a new technology, satellite digital audio radio services ("DARS"), to deliver audio programming. DARS may provide a medium for the delivery by satellite or terrestrial means of multiple new audio programming formats to local and national audiences. It is not known at this time whether this digital technology also may be used in the future by existing radio broadcast stations either on existing or alternate broadcasting frequencies. The Company cannot predict what other matters might be considered in the future by the FCC, nor can it assess in advance what impact, if any, the implementation of any of these proposals or changes might have on its business. See "-- Federal Regulation of Radio Broadcasting." FEDERAL REGULATION OF RADIO BROADCASTING Introduction. The ownership, operation and sale of broadcast stations, including those licensed to the Company, are subject to the jurisdiction of the FCC, which acts under authority derived from the Communications Act. The Communications Act was amended in 1996 by the Telecommunications Act to make changes in several broadcast laws. Among other things, the FCC assigns frequency bands for broadcasting; determines whether to approve changes in ownership or control of station licenses; regulates equipment used by stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of stations; and has the power to impose penalties for violations of its rules under the Communications Act. The following is a brief summary of certain provisions of the Communications Act and of specific FCC regulations and policies. Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of "short" (less than the maximum) license renewal terms or, for particularly egregious violations, the denial of a license renewal application, the revocation of a license or the denial of FCC consent to acquire additional broadcast properties. Reference should be made to the Communications Act, FCC rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of broadcast stations. License Grant and Renewal. Until recently, radio broadcast licenses were granted for maximum terms of seven years, but acting under the authority of the Telecommunications Act, the FCC recently revised its rules to extend the maximum term for future renewals to eight years. Licenses may be renewed through an application to the FCC. Prior to the Telecommunications Act, during certain periods when a renewal application was pending, competing applicants could file for the radio frequency being used by the renewal applicant. The Telecommunications Act prohibits the FCC from considering such competing applications if 72 80 the FCC finds that the station has served the public interest, convenience and necessity, that there have been no serious violations by the licensee of the Communications Act or the rules and regulations of the FCC, and that there have been no other violations by the licensee of the Communications Act or the rules and regulations of the FCC that, when taken together, would constitute a pattern of abuse. Petitions to deny license renewals can be filed by interested parties, including members of the public. Such petitions may raise various issues before the FCC. The FCC is required to hold hearings on renewal applications if the FCC is unable to determine that renewal of a license would serve the public interest, convenience and necessity, or if a petition to deny raises a "substantial and material question of fact" as to whether the grant of the renewal application would be prima facie inconsistent with the public interest, convenience and necessity. Also, during certain periods when a renewal application is pending, the transferability of the applicant's license is restricted. The Company is not currently aware of any facts that would prevent the timely renewal of its licenses to operate its radio stations, although there can be no assurance that the Company's licenses will be renewed. The FCC classifies each AM and FM station. An AM station operates on either a clear channel, regional channel or local channel. A clear channel is one on which AM stations are assigned to serve wide areas. Clear channel AM stations are classified as either: Class A stations, which operate on an unlimited time basis and are designated to render primary and secondary service over an extended area; Class B stations, which operate on an unlimited time basis and are designed to render service only over a primary service area; and Class D stations, which operate either during daytime hours only, during limited times only or on an unlimited time basis with low nighttime power. A regional channel is one on which Class B and Class D AM stations may operate and serve primarily a principal center of population and the rural areas contiguous to it. A local channel is one on which AM stations operate on an unlimited time basis and serve primarily a community and the suburban and rural areas immediately contiguous thereto. Class C AM stations operate on a local channel and are designed to render service only over a primary service area that may be reduced as a consequence of interference. The minimum and maximum facilities requirements for an FM station are determined by its class. FM class designations depend upon the geographic zone in which the transmitter of the FM station is located. In general, commercial FM stations are classified as follows, in order of increasing power and antenna height: Class A, B1, C3, B, C2, C1 and C. 73 81 The following table sets forth the market, call letters, FCC license classification, antenna height above average terrain (HAAT), power and frequency of each of the stations owned or operated by the Company, assuming the consummation of the Pending Transactions, and the date on which each station's FCC license expires.
HAAT EXPIRATION FCC IN POWER IN DATE OF MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY FCC LICENSE(3) - ---------------------- ------- ----- ------ ------------- ---------- -------------- Albuquerque, NM....... KKOB-AM B NA 50.0 770 kHz 10-01-97 KKOB-FM C 1265 20.2 93.3 MHz 10-01-97 KHTL-AM B NA 1.0/0.5 920 kHz 10-01-97 KMGA-FM C 1259 22.5 99.5 MHz 10-01-97 KTBL-FM C 1276 20.4 103.3 MHz 10-01-97 KHFM-FM C 1260 20.0 96.3 MHz 10-01-97 KRST-FM C 1268 22.0 92.3 MHz 10-01-97 KNML-AM B NA 1.0/0.5 1050 kHz 10-01-97 Colorado Springs, CO.................. KKFM-FM C 698 71.0 98.1 MHz 04-01-05 KKMG-FM C 695 57.0 98.9 MHz 04-01-05 KKLI-FM C2 678 1.6 106.3 MHz 04-01-05 KVUU-FM(4) C 610 68.0 99.9 MHz 04-01-05 KSPZ-FM(4) C 649 72.0 92.9 MHz 04-01-05 KVOR-AM(4) B NA 5.0/1.0 1300 kHz 04-01-05 KTWK-AM(4) B NA 3.3/1.5 740 kHz 04-01-05 Modesto, CA........... KBUL-AM B NA 1.0 970 kHz 12-01-97 KATM-FM B 152 50.0 103.3 MHz 12-01-97 KHKK-FM B 152 50.0 104.1 MHz 12-01-97 KDJK-FM A 624 0.071 103.9 MHz 12-01-97 KHOP-FM B 193 29.5 95.1 MHz 12-01-97 Reno, NV.............. KKOH-AM B NA 50.0 780 kHz 10-01-97 KNEV-FM C 695 60.0 95.5 MHz 10-01-97 KBUL-FM C 699 72.0 98.1 MHz 10-01-97 KNHK-FM C 809 44.7 92.9 MHz 10-01-97 Salt Lake City, UT.... KCNR-AM B NA 10.0/0.195 860 kHz 10-01-97 KUBL-FM C 1140 26.0 93.3 MHz 10-01-97 KENZ-FM C 869 45.0 107.5 MHz 10-01-97 KBER-FM C 1140 25.0 101.1 MHz 10-01-97 KFNZ-AM(4) B NA 5.0 1320 kHz 10-01-97 KBEE-FM(4) C 894 40.0 98.7 MHz 10-01-97 Spokane, WA........... KGA-AM A NA 50.0 1510 kHz 02-01-98 KDRK-FM C 725 56.0 93.7 MHz 02-01-98 KJRB-AM B NA 5.0 790 kHz 02-01-98 KAEP-FM C 582 100.0 105.7 MHz 02-01-98 KKZX-FM(4) C 492 100.0 98.9 MHz 02-01-98 KEYF-AM(4) B NA 5.0 1050 kHz 02-01-98 KEYF-FM(4) C 490 100.0 101.1 MHz 02-01-98 KUDY-AM(4) B NA 5.0 1280 kHz 02-01-98 Billings, MT.......... KDWG-AM B NA 5.0 970 kHz 04-01-05 KCTR-FM C1 152 100.0 102.9 MHz 04-01-05 KKBR-FM C2 122 28.0 97.1 MHz 04-01-05 KBBB-FM C1 146 100.0 103.7 MHz 04-01-05 KMHK-FM C 300 100.0 95.5 MHz 04-01-05 Eugene, OR............ KUGN-AM B NA 5.0/1.0 590 kHz 02-01-98 KUGN-FM C 308 100.0 97.9 MHz 02-01-98 KEHK-FM C1 301 95.0 102.3 MHz 02-01-98 Medford, OR........... KTMT-AM B NA 1.0 880 kHz 02-01-98 KTMT-FM C 994 31.0 93.7 MHz 02-01-98 KBOY-FM C1 299 60.0 95.7 MHz 02-01-98 KCMX-AM B NA 1.0 580 kHz 02-01-98 KCMX-FM C1 435 31.6 101.9 MHz 02-01-98 KAKT-FM C1 166 51.7 105.1 MHz 02-01-98
74 82
HAAT EXPIRATION FCC IN POWER IN DATE OF MARKET(1) STATION CLASS METERS KILOWATTS(2) FREQUENCY FCC LICENSE(3) - ---------------------- ------- ----- ------ ------------- ---------- -------------- Pasco (Tri-Cities), WA.................. KFLD-AM B NA 10.0/0.25 870 kHz 02-01-98 KEYW-FM A 59 3.0 98.3 MHz 02-01-98 KORD-FM C 335 100.0 102.7 MHz 02-01-98 KXRX-FM C 408 50.0 97.1 MHz 02-01-98 KTHK-FM C2 339 8.0 97.9 MHz 02-01-98 Providence, RI........ WPRO-AM B NA 5.0 630 kHz 04-01-98 WPRO-FM B 168 39.0 92.3 MHz 04-01-98 WLKW-AM B NA 5.0 790 kHz 04-01-98 WWLI-FM B 152 50.0 105.1 MHz 04-01-98 WDGE-FM A 163 2.3 99.7 MHz 04-01-98 WDGF-FM(4) A 90 4.2 100.3 MHz 04-01-98 Allentown/ Bethlehem, PA.................. WCTO-FM B 152 50.0 96.1 MHz 08-01-98 WLEV-FM(4) B 327 10.9 100.7 MHz 08-01-98 Harrisburg/York, PA... WRKZ-FM B 283 14.1 106.7 MHz 08-01-98 WQXA-AM B NA 1.0 1250 kHz 08-01-98 WQXA-FM B 215 25.1 105.7 MHz 08-01-98 Wilkes-Barre/ Scranton, PA........ WAZL-AM C NA 1.0 1490 kHz 08-01-98 WZMT-FM B 222 19.5 97.9 MHz 08-01-98 WARM-AM B NA 5.0 590 kHz 08-01-98 WMGS-FM B 422 5.3 92.9 MHz 08-01-98 WBHT-FM(4) A 336 0.50 97.1 MHz 08-01-98 WKQV-AM(4) B NA 10.0/0.5 1550 kHz 08-01-98 WKQV-FM(4) A 308 0.30 95.7 kHz 08-01-98 WSGD-FM(4) A 235 0.52 94.3 MHz 08-01-98 WDLS-FM(4) A 207 1.45 93.7 MHz 08-01-98 WCDL-AM B NA 5.0/.037 1440 kHz 08-01-98 WEMR-AM B NA 5.0/1.0 1460 kHz 08-01-98 WEMR-FM A 354 0.24 107.7 MHz 08-01-98 Quincy, IL............ WTAD-AM B NA 5.0/1.0 930 kHz 12-01-04 WQCY-FM B 229 27.0 99.5 MHz 12-01-04 WMOS-FM A 88 3.0 103.9 MHz 12-01-04 WBRJ-FM B1 100 25.0 106.7 MHz 12-01-04 Little Rock, AR....... KARN-FM(4) A 100 3.0 102.5 MHz 06-01-04 KARN-AM(4) B NA 5.0 920 kHz 06-01-04 KKRN-FM(4) A 100 6.0 101.7 MHz 06-01-04 KRNN-AM(4) B NA 5.0/2.5 1380 kHz 06-01-04 KIPR-FM(4) C1 286 100.0 92.3 MHz 06-01-04 KESR-FM(4) A 118 4.10 102.1 MHz 06-01-04 KYTN-FM C2 95 50.0 107.7 MHz 06-01-04 KAFN-FM(5) A 100 6.0 102.5 MHz 06-01-04 KEZQ-AM B NA 2.0/1.2 1250 kHz 06-01-04 KURB-FM C 392 100.0 98.5 MHz 06-01-04 KVLO-FM C2 150 50.0 102.9 MHz 06-01-04 Boise, ID............. KIZN-FM C 762 44.0 92.3 MHz 10-01-97 KZMG-FM C 802 50.0 93.1 MHz 10-01-97 KKGL-FM C 768 44.0 96.9 MHz 10-01-97 KQFC-FM C 762 47.0 97.9 MHz 10-01-97 KBOI-AM B NA 50.0 960 kHz 10-01-97
- --------------- (1) Actual city of license may be different from the metropolitan market served. (2) Pursuant to FCC rules and regulations, many AM radio stations are licensed to operate at a reduced power during nighttime broadcasting hours, which results in reducing the radio station's coverage during those hours of operation. Both power ratings are shown, where applicable. (3) License renewal applications have been filed for the listed stations serving the Albuquerque, Modesto, Reno, Salt Lake City and Boise markets, and the expiration of the licenses is stayed during the pendency of such proceedings. 75 83 (4) The Company provides certain sales and marketing services to stations KVUU-FM, KSPZ-FM, KVOR-AM and KTWK-AM in Colorado Springs, Colorado, stations KKZX-FM, KEYF-AM, KEYF-FM and KUDY-AM in Spokane, Washington and station WKQV-AM in Wilkes-Barre/Scranton, Pennsylvania, pursuant to JSAs. The Company provides certain sales, programming and marketing services to stations WBHT-FM and WKQV-FM in Wilkes Barre/Scranton, Pennsylvania, and, pending their acquisition by the Company, stations KBEE-FM and KFNZ-AM in Salt Lake City, Utah, stations KARN-FM, KARN-AM, KKRN-FM, KRNN-AM, KIPR-FM and KESR-FM in Little Rock, Arkansas, station WLEV-FM in Allentown/Bethlehem, Pennsylvania, station WDGF-FM in Providence, Rhode Island, and stations WEMR-FM and WEMR-AM in Wilkes-Barre/Scranton, Pennsylvania, pursuant to an LMA. (5) KAFN-FM is under construction and has not yet commenced operations. Ownership Matters. The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast license without the prior approval of the FCC. In determining whether to assign, transfer, grant or renew a broadcast license, the FCC considers a number of factors pertaining to the licensee, including compliance with various rules limiting common ownership of media properties, the "character" of the licensee and those persons holding "attributable" interests therein, and compliance with the Communications Act's limitation on alien ownership, as well as compliance with other FCC policies, including equal employment opportunity requirements. Once a station purchase agreement has been signed, an application for FCC consent to assignment of license or transfer of control (depending upon whether the underlying transaction is an asset purchase or stock acquisition) is filed with the FCC. Approximately 10 to 15 days after this filing, the FCC publishes a notice assigning a file number to the application and advising that the application has been "accepted for filing." This notice begins a 30-day statutory waiting period, which provides the opportunity for third parties to file formal petitions to deny the transaction; informal objections may be filed any time prior to grant of an application. The FCC staff will normally review the application in this period and seek further information and amendments to the application if it has questions. Once the 30-day public notice period ends, the staff will complete its processing, assuming that no petitions or informal objections were received and that the application is otherwise consistent with FCC rules. The staff often grants the application by delegated authority approximately 10 days after the public notice period ends. At this point, the parties are legally authorized to close the purchase, although the FCC action is not legally a "final order." If there is a backlog of applications, the 10-day period can extend to 30 days or more. Public notice of the FCC staff grant is usually issued about a week after the grant is made, stating that the grant was effective when the staff made the grant. On the date of this notice, another 30-day period begins, within which time interested parties can file petitions seeking either staff reconsideration or full FCC review of the staff action. During this time the grant can still be modified, set aside or stayed, and is not a "final order." In the absence of a stay, however, the seller and buyer are not prevented from closing despite the absence of a final order. Also, within 40 days after the public notice of the grant, the full FCC can review and reconsider the staff's grant on its own motion. Thus, during the additional 10 days beyond the 30-day period available to third parties, the grant is still not "final." In the event that review by the full FCC is requested and the FCC subsequently affirms the staff's grant of the application, interested parties may thereafter seek judicial review in the United States Court of Appeals for the District of Columbia Circuit within thirty days of public notice of the full FCC's action. In the event the Court affirms the FCC's action, further judicial review may be sought by seeking rehearing en banc from the Court of Appeals or by certiorari from the United States Supreme Court. In the absence of the submission of a timely request for reconsideration, administrative review or judicial review, the FCC staff's grant of an application becomes final by operation of law. Upon the occurrence of that event, counsel is able to deliver an opinion that the FCC's grant is no longer subject to administrative or judicial review, although such action can nevertheless be set aside in rare circumstances, such as fraud on the agency by a party to the application. The pendency of a license renewal application will alter the aforementioned timetables because the FCC will not issue an unconditional assignment grant if the station's license renewal is pending. 76 84 Under the Communications Act, a broadcast license may not be granted to or held by a corporation that has more than one-fifth of its capital stock owned or voted by aliens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations. Under the Communications Act, a broadcast license also may not be granted to or held by any corporation that is controlled, directly or indirectly, by any other corporation more than one-fourth of whose capital stock is owned or voted by aliens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations. These restrictions apply in modified form to other forms of business organizations, including partnerships. Each of Citadel Communications, which serves as a holding company for its direct and indirect radio station subsidiaries, and the Company therefore may be restricted from having more than one-fourth of its stock owned or voted by aliens, foreign governments or non-U.S. corporations. The Certificate of Incorporation of Citadel Communications and the Certificate of Incorporation of the Company contain provisions which permit Citadel Communications and the Company to prohibit alien ownership and control consistent with the prohibitions contained in the Communications Act. The Communications Act and FCC rules also generally restrict the common ownership, operation or control of radio broadcast stations serving the same local market, of a radio broadcast station and a television broadcast station serving the same local market, and of a radio broadcast station and a daily newspaper serving the same local market. Under these "cross-ownership" rules, absent waivers, neither Citadel Communications nor the Company would be permitted to acquire any daily newspaper or television broadcast station (other than low power television) in a local market where it then owned any radio broadcast station. The FCC's rules provide for the liberal grant of a waiver of the rule prohibiting common ownership of radio and television stations in the same geographic market in the top 25 television markets if certain conditions are satisfied. The Telecommunications Act extends this waiver policy to stations in the top 50 television markets, although the FCC has not yet implemented this change. In response to the Telecommunications Act, the FCC amended its multiple ownership rules to eliminate the national limits on ownership of AM and FM stations. The FCC's broadcast multiple ownership rules restrict the number of radio stations one person or entity may own, operate or control on a local level. These limits are: (i) in a market with 45 or more commercial radio stations, an entity may own up to eight commercial radio stations, not more than five of which are in the same service (FM or AM); (ii) in a market with between 30 and 44 (inclusive) commercial radio stations, an entity may own up to seven commercial radio stations, not more than four of which are in the same service; (iii) in a market with between 15 and 29 (inclusive) commercial radio stations, an entity may own up to six commercial radio stations, not more than four of which are in the same service; (iv) in a market with 14 or fewer commercial radio stations, an entity may own up to five commercial radio stations, not more than three of which are in the same service, except that an entity may not own more than 50% of the stations in such market. None of these multiple ownership rules requires any change in the Company's current ownership of radio broadcast stations or precludes consummation of the Pending Acquisitions. However, these rules will limit the number of additional stations which the Company may acquire in the future in certain of its markets. Because of these multiple and cross-ownership rules, a purchaser of voting stock of either Citadel Communications or the Company which acquires an "attributable" interest in Citadel Communications or the Company may violate the FCC's rule if it also has an attributable interest in other television or radio stations, or in daily newspapers, depending on the number and location of those radio or television stations or daily newspapers. Such a purchaser also may be restricted in the companies in which it may invest, to the extent that these investments give rise to an attributable interest. If an attributable shareholder of Citadel Communications or the Company violates any of these ownership rules, Citadel Communications or the Company may be unable to obtain from the FCC one or more authorizations needed to conduct its radio station business and may be unable to obtain FCC consents for certain future acquisitions. 77 85 The FCC generally applies its television/radio/newspaper cross-ownership rules and its broadcast multiple ownership rules by considering the "attributable," or cognizable interests held by a person or entity. A person or entity can have an interest in a radio station, television station or daily newspaper by being an officer, director, partner or shareholder of a company that owns that station or newspaper. Whether that interest is cognizable under the FCC's ownership rules is determined by the FCC's attribution rules. If an interest is attributable, the FCC treats the person or entity who holds that interest as the "owner" of the radio station, television station or daily newspaper in question, and therefore subject to the FCC's ownership rules. With respect to a corporation, officers and directors and persons or entities that directly or indirectly can vote 5% or more of the corporation's stock (10% or more of such stock in the case of insurance companies, investment companies, bank trust departments and certain other "passive investors" that hold such stock for investment purposes only) generally are attributed with ownership of whatever radio stations, television stations and daily newspapers the corporation owns. With respect to a partnership, the interest of a general partner is attributable, as is the interest of any limited partner who is "materially involved" in the media-related activities of the partnership. Debt instruments, nonvoting stock, options and warrants for voting stock that have not yet been exercised, limited partnership interests where the limited partner is not "materially involved" in the media-related activities of the partnership, and minority (under 5%) voting stock, generally do not subject their holders to attribution. However, the FCC is currently reviewing its rules on attribution of broadcast interests, and it may adopt stricter criteria. See "-- Proposed Changes" below. In addition, the FCC has a "cross-interest" policy that under certain circumstances could prohibit a person or entity with an attributable interest in a broadcast station or daily newspaper from having a "meaningful" nonattributable interest in another broadcast station or daily newspaper in the same local market. Among other things, "meaningful" interests could include significant equity interests (including non-voting stock, voting stock and limited partnership interests) and significant employment positions. This policy may limit the permissible investments a purchaser of Citadel Communications' or the Company's voting stock may make or hold. Programming and Operation. The Communications Act requires broadcasters to serve the "public interest." Since 1981, the FCC gradually has relaxed or eliminated many of the more formalized procedures it developed to promote the broadcast of certain types of programming responsive to the needs of a station's community of license. However, licensees continue to be required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from listeners concerning a station's programming will be considered by the FCC when it evaluates the licensee's renewal application, but such complaints may be filed and considered at any time. Stations also must pay regulatory and application fees and follow various FCC rules that regulate, among other things, political advertising, the broadcast of obscene or indecent programming, sponsorship identification and technical operations (including limits on radio frequency radiation). In addition, licensees must develop and implement programs designed to promote equal employment opportunities and must submit reports to the FCC on these matters annually and in connection with a renewal application. The broadcast of contests and lotteries is regulated by FCC rules. Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of "short" (less than the maximum) renewal terms or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license. In 1985, the FCC adopted rules regarding human exposures to levels of radio frequency ("RF") radiation. These rules require applicants for new broadcast stations, renewals of broadcast licenses or modifications of existing licenses to inform the FCC at the time of filing such applications whether a new or existing broadcast facility would expose people to RF radiation in excess of certain guidelines. In August 1996, the FCC adopted more restrictive radiation limits. These limits will become effective on September 1, 1997 and will govern applications filed after that date. The Company anticipates that such regulations will not have a material effect on its business. 78 86 Local Marketing Agreements. Over the past five years, a number of radio stations, including certain of the Company's stations, have entered into what commonly are referred to as "local marketing agreements" (LMAs) or "time brokerage agreements." These agreements take various forms. Separately-owned and licensed stations may agree to function cooperatively in terms of programming, advertising sales and other matters, subject to compliance with the antitrust laws and the FCC's rules and policies, including the requirement that the licensee of each station maintains independent control over the programming and other operations of its own station. For example, pursuant to the Company's LMA with radio station WBHT-FM, the Company agreed to purchase a substantial amount of the air time for a negotiated fee. The Company retains all revenue generated. The owner of these stations is entitled to preempt the programming provided by the Company. The FCC has held that such agreements do not violate the Communications Act as long as the licensee of the station that is being substantially programmed by another entity maintains complete responsibility for, and control over, operations of its broadcast stations and otherwise ensures compliance with applicable FCC rules and policies. A station that brokers substantial time on another station in its market or engages in an LMA with a station in the same market will be considered to have an attributable ownership interest in the brokered station for purposes of the FCC's ownership rules, discussed above. As a result, a broadcast station may not enter into an LMA that allows it to program more than 15% of the broadcast time, on a weekly basis, of another local station that it could not own under the FCC's local multiple ownership rules. FCC rules also prohibit the broadcast licensee from simulcasting more than 25% of its programming on another station in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations serve substantially the same geographic area, whether the licensee owns the stations or owns one and programs the other through an LMA arrangement. Another example of a cooperative agreement between differently owned radio stations in the same market is a joint sales agreement (JSA), whereby one station sells advertising time in combination, both on itself and on a station under separate ownership. In the past, the FCC has determined that issues of joint advertising sales should be left to antitrust enforcement. The Company has entered into several JSAs whereby it sells time on behalf of other local stations. Currently, JSAs are not deemed by the FCC to be attributable. However, the FCC has outstanding a notice of proposed rulemaking, which, if adopted, would require the Company to terminate any JSA it might have with a radio station with which the Company could not have an LMA. Currently, the only Company group that would be so affected would be its group in Colorado Springs. See "-- General" and "-- Station Portfolio." Proposed Changes. In December, 1994, the FCC initiated a proceeding to solicit comment on whether it should revise its radio and television ownership "attribution" rules by among other proposals (i) raising the basic benchmark for attributing ownership in a corporate licensee from 5% to 10% of the licensee's voting stock, (ii) increasing from 10% to 20% of the licensee's voting stock the attribution benchmark for "passive investors" in corporate licensees, (iii) restricting the availability of the attribution exemption when a single party controls more than 50% of the voting stock; and (iv) considering LMAs, JSAs, debt and non-voting stock interests to be attributable under certain circumstances. No decision has been made by the FCC in these matters. At this time, no determination can be made as to what effect, if any, this proposed rulemaking will have on the Company. The Congress and the FCC from time to time have under consideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and profitability of the Company's radio stations, result in the loss of audience share and advertising revenues for the Company's radio stations, and affect the ability of the Company to acquire additional radio stations or finance such acquisitions. Such matters include: proposals to impose spectrum use or other fees on FCC licensees; the FCC's equal employment opportunity rules and matters relating to political broadcasting; technical and frequency allocation matters; proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages on radio; changes in the FCC's cross-interest, multiple ownership and cross-ownership policies; changes to broadcast technical requirements; proposals to allow telephone or cable television companies to deliver audio and video programming to the home through existing phone lines; proposals to limit the tax deductibility of advertising expenses by 79 87 advertisers; and proposals to auction the right to use the radio broadcast spectrum to the highest bidder, instead of granting FCC licenses and subsequent license renewals without such bidding. The FCC, on April 2, 1997, awarded two licenses for the provision of satellite digital audio radio services ("DARS"). Under rules adopted for this service, licensees must begin construction of their space stations within one year, begin operating within four years, and be operating their entire system within six years. The Company cannot predict whether the service will be subscription or advertiser supported. 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 on March 17, 1997, adopted an allotment plan for the expanded band which identified the 88 AM radio stations selected to move into the band. At the end of a five-year transition period, those licensees will be required to return to the FCC either the license for their existing AM band station or the license for the expanded AM band station. The Company cannot predict whether any proposed changes will be adopted or what other matters might be considered in the future, nor can it judge in advance what impact, if any, the implementation of any of these proposals or changes might have on its business. The foregoing is a brief summary of certain provisions of the Communications Act and of specific FCC rules and policies. This description does not purport to be comprehensive and reference should be made to the Communications Act, the FCC's rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of radio broadcast stations. Federal Antitrust Considerations. The Company is aware that the FTC and the DOJ, which evaluate transactions to determine whether those transactions should be challenged under the federal antitrust laws, have been increasingly active recently in their review of radio station acquisitions, particularly where an operator proposes to acquire additional stations in its existing markets. For an acquisition meeting certain size thresholds, the HSR Act and the rules promulgated thereunder require the parties to file Notification and Report Forms with the FTC and the DOJ and to observe specified waiting period requirements before consummating the acquisition. During the initial 30 day period after the filing, the agencies decide which of them will investigate the transaction. If the investigating agency determines that the transaction does not raise significant antitrust issues, then it will either terminate the waiting period or allow it to expire after the initial 30 days. On the other hand, if the agency determines that the transaction requires a more detailed investigation, then at the conclusion of the initial 30 day period, it will issue a formal request for additional information ("Second Request"). The issuance of a Second Request extends the waiting period until the twentieth calendar day after the date of substantial compliance by all parties to the acquisition. Thereafter, such waiting period may only be extended by court order or with the consent of the parties. In practice, complying with a Second Request can take a significant amount of time. In addition, if the investigating agency raises substantive issues in connection with a proposed transaction, then the parties frequently engage in lengthy discussions or negotiations with the investigating agency concerning possible means of addressing those issues, including but not limited to persuading the agency that the proposed acquisition would not violate the antitrust laws, restructuring the proposed acquisition, divestiture of other assets of one or more parties, or abandonment of the transaction. Such discussions and negotiations can be timeconsuming, and the parties may agree to delay consummation of the acquisition during their pendency. At any time before or after the consummation of a proposed acquisition, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition or seeking divestiture of the business acquired or other assets of the Company. Acquisitions that are not required to be reported under the HSR Act may be investigated by the FTC or the DOJ under the antitrust laws before or after consummation. In addition, private parties may under certain circumstances bring legal action to challenge an acquisition under the antitrust laws. The Company does not believe that any of the Pending Transactions will be adversely affected in any material respect by review under the HSR Act. The Company has received notification of early termination of 80 88 the applicable waiting period under the HSR Act in regard to the pending acquisition of WLEV-FM in Allentown, Pennsylvania and is awaiting termination of the applicable waiting period in regard to the Boise Acquisition. No other Pending Acquisition is subject to the HSR Act. As part of its increased scrutiny of radio station acquisitions, the DOJ has stated publicly that it believes that LMAs, JSAs and other similar agreements customarily entered into in connection with radio station transfers prior to the expiration of the waiting period under the HSR Act could violate the HSR Act. The Company has received two civil investigative demands from the Antitrust Division of the DOJ. One CID addresses the Company's acquisition of KRST-FM in Albuquerque, New Mexico, and the second CID addresses the Company's JSA relating to stations in Spokane, Washington and Colorado Springs, Colorado. The Company has provided the requested information in response to each CID, and, at present, has been given no indication from the DOJ regarding its intended future actions. See "-- Legal Proceedings." SEASONALITY Seasonal revenue fluctuations are common in the radio broadcasting industry and are primarily the result of fluctuations in advertising expenditures by retailers. The Company's revenue is typically lowest in the first quarter and highest in the second and fourth quarters. TRADEMARKS The Company owns a number of trademarks and service marks, including the federally registered marks "Cat Country," "KHOP," "Supertalk" and the Cat Country logo. The Company also owns a number of marks registered in various states. The Company considers such trademarks and service marks to be important to its business. See "-- Operating Strategy -- Targeted Programming." EMPLOYEES At August 1, 1997, the Company employed approximately 1,300 persons. None of such employees are covered by collective bargaining agreements, and the Company considers its relations with its employees to be good. The Company employs several on-air personalities with large loyal audiences in their respective markets. The Company generally enters into employment agreements with these personalities to protect their interests in those relationships that it believes to be valuable. The loss of one of these personalities could result in a short-term loss of audience share, but the Company does not believe that any such loss would have a material adverse effect on the Company's financial condition or results of operations. PROPERTIES AND FACILITIES The types of properties required to support each of the Company's radio stations include offices, studios, transmitter sites and antenna sites. A station's studios are generally housed with its offices in business districts. The transmitter sites and antenna sites are generally located so as to provide maximum market coverage. The Company currently owns studio facilities in Spokane, Washington; Billings, Montana; Tri-Cities, Washington; East Providence, Rhode Island; and Patton Township (State College), Lower Yoder Township (Johnstown) and Williams Township (Allentown), Pennsylvania, and it owns transmitter and antenna sites in Reno, Nevada; Salt Lake City, Utah; Spokane and Tri-Cities, Washington; Tracy (Modesto), California; Billings, Montana; Santa Fe and Albuquerque, New Mexico; Medford, Oregon; East Providence and Johnston, Rhode Island; Township One (Quincy), Illinois; and Patton Township (State College), Croyle Township (Johnstown), Mt. Joy Township (Harrisburg/York), Williams Township and Salisbury Township (Allentown) and Hanover Township (Wilkes-Barre/Scranton), Pennsylvania, and expects to acquire additional facilities and dispose of certain existing facilities in connection with the Pending Transactions. The Company leases its remaining studio and office facilities, including office space in Tempe, Arizona which is not related to the operations of a particular station, and it leases its remaining transmitter and antenna sites. The Company does not anticipate any difficulties in renewing any facility leases or in leasing alternative or 81 89 additional space, if required. The Company owns substantially all of its other equipment, consisting principally of transmitting antennae, transmitters, studio equipment and general office equipment. Substantially all of the Company's properties and equipment serve as collateral for the Company's obligations under the Credit Facility. No one property is material to the Company's operations. The Company believes that its properties are generally in good condition and suitable for its operations; however, the Company continually looks for opportunities to upgrade its properties and intends to upgrade studios, office space and transmission facilities in certain markets. LEGAL PROCEEDINGS The Company currently and from time to time is involved in litigation incidental to the conduct of its business, but the Company is not a party to any lawsuit or proceeding which, in the opinion of the Company, is likely to have a material adverse effect on the Company. The Company has received two CIDs from the DOJ pursuant to which the DOJ has requested information from the Company to determine whether the Company has violated certain antitrust laws. The first CID was issued on September 27, 1996 and concerns the Company's acquisition of all of the assets of KRST-FM in Albuquerque, New Mexico on October 9, 1996 (the "KRST Acquisition"). The CID requested written answers to interrogatories and the production of certain documents concerning the radio station market in Albuquerque, in general, and the KRST Acquisition, in particular, to enable the DOJ to determine, among other things, whether the KRST Acquisition would result in excessive concentration in the market. The Company has responded to the CID. The DOJ requested supplemental information on January 27, 1997, to which the Company also responded. There have been no communications since that time and, at present, the Company has been given no indication from the DOJ regarding its intended future actions. If the DOJ were to proceed with and successfully challenge the KRST Acquisition, the Company may be required to divest one or more radio stations in Albuquerque and/or it may be subject to the payment of fines. The second CID was issued on October 9, 1996 and concerned the Company's JSA relating to a total of eight radio stations in Spokane, Washington and Colorado Springs, Colorado and which became effective in January 1996. Pursuant to such CID, the DOJ has requested information to determine whether the JSAs constituted a de facto merger, resulting in a combination or contract in restraint of trade. The Company responded to the CID, and the DOJ is proceeding with discovery in this matter. If the DOJ were to proceed with and successfully challenge the JSA, the Company may be required to terminate the JSA and/or it may be subject to the payment of fines. At this time, the Company cannot predict the impact on the Company, if any, of these proceedings or any future DOJ demands. 82 90 THE PENDING TRANSACTIONS There are several transactions currently pending which, if consummated, would result in the Company (i) acquiring ownership of 24 additional radio stations and the right to construct and operate one radio station and (ii) selling seven radio stations. THE IN-MARKET ACQUISITIONS The Company has entered into agreements to purchase (i) one FM radio station in Providence, Rhode Island, (ii) one FM radio station in Allentown/Bethlehem, Pennsylvania (which acquisition would include the sale by the Company of one AM radio station in Allentown/Bethlehem), (iii) three FM and two AM radio stations in Wilkes-Barre/Scranton, Pennsylvania and (iv) one FM radio station and one AM radio station in Salt Lake City, Utah, six of which the Company currently operates under LMAs. WDGF-FM, Providence, Rhode Island. On June 6, 1997, the Company entered into an Asset Purchase Agreement with Bear Broadcasting Company ("Bear") pursuant to which the Company has agreed to acquire from Bear substantially all of the assets used in the operation of radio station WDGF-FM in Providence. The aggregate purchase price is approximately $4.0 million in cash. Pending the acquisition, on September 15, 1997, the Company began operating WDGF-FM under an LMA. The asset purchase agreement contains customary representations and warranties of the parties, and consummation of the acquisition is subject to various conditions, including (i) the receipt of FCC consent to the assignment of the WDGF-FM license to the Company and (ii) the receipt of consents to the assignment to the Company of certain contracts relating to WDGF-FM. An application seeking FCC approval was filed with the FCC on June 16, 1997. The Company received a grant of the application on August 6, 1997, and it anticipates that the acquisition of WDGF-FM will close in November 1997. Upon consummation of the acquisition, the Company will own four FM and two AM radio stations in Providence. WLEV-FM, Allentown/Bethlehem, Pennsylvania. On July 15, 1997, the Company entered into an Asset Purchase Agreement with Maranatha Broadcasting Company, Inc. ("Maranatha") pursuant to which the Company has agreed to acquire from Maranatha certain of the assets used in the operation of radio station WLEV-FM in Allentown/Bethlehem. Concurrently, the Company and Maranatha entered into a second Asset Purchase Agreement pursuant to which Maranatha has agreed to acquire from the Company certain of the assets used in the operation of radio station WEST-AM in Allentown/Bethlehem. The purchase price for WLEV-FM is approximately $23.0 million in cash plus the assets of WEST-AM. The Company has delivered a letter of credit in the amount of $1.75 million to secure its obligations under the asset purchase agreement relating to WLEV-FM. The Company and Maranatha also entered into an LMA pursuant to which the Company markets commercial advertising time and provides programming for WLEV-FM pending the closing of its acquisition by the Company. A monthly fee of $25,000 will be paid by the Company to Maranatha under the LMA. The Company has received notification of early termination of the applicable waiting period under the HSR Act. The asset purchase agreements contain customary representations and warranties of the parties, and consummation of the transactions is subject to certain conditions including (i) the receipt of FCC consent to the assignment of the WLEV-FM license to the Company and the assignment of the WEST-AM license to Maranatha and (ii) the receipt of consents to the assignment to the Company and Maranatha of certain contracts relating to WLEV-FM and WEST-AM, respectively. Applications seeking FCC approval were filed with the FCC on July 21, 1997 and August 21, 1997. The Company received a grant of the application relating to WLEV-FM on September 8, 1997. The Company anticipates that the acquisition of WLEV-FM and the sale of WEST-AM will close in October 1997 and November 1997, respectively. Upon consummation of these transactions, the Company will own two FM radio stations in Allentown/Bethlehem. WEMR-AM and WEMR-FM, Wilkes-Barre/Scranton, Pennsylvania. On September 11, 1997, the Company entered into an Asset Purchase Agreement with Endless Mountain Broadcasting, Inc. ("Endless Mountain") pursuant to which the Company has agreed to acquire from Endless Mountain substantially all of the assets of radio stations WEMR-AM and WEMR-FM in Wilkes-Barre/Scranton for the aggregate 83 91 purchase price of approximately $815,000 in cash. Pending the acquisition, on September 25, 1997, the Company began operating WEMR-AM and WEMR-FM pursuant to an LMA. The asset purchase agreement contains customary representations and warranties of the parties, and consummation of the acquisition of WEMR-AM and WEMR-FM is subject to certain conditions including (i) the receipt of FCC consent to the assignment of the station licenses to the Company and (ii) the receipt of consents to the assignment to the Company of certain contracts relating to the stations. An application seeking FCC approval was filed with the FCC on September 17, 1997. The Company anticipates that the acquisition of WEMR-AM and WEMR-FM will close in late 1997 or early 1998. WSGD-FM, WDLS-FM and WCDL-AM, Wilkes-Barre/Scranton, Pennsylvania. On September 26, 1997, the Company entered into an Asset Purchase Agreement with S&P Broadcasting Limited Partnership I, S&P Broadcasting Limited Partnership III and Swanson Holdings, Ltd. (collectively, "S&P Broadcasting") pursuant to which the Company has agreed to acquire from S&P Broadcasting substantially all of the assets of radio stations WSGD-FM, WDLS-FM and WCDL-AM in Wilkes-Barre/Scranton for the aggregate purchase price of approximately $6.0 million in cash. The asset purchase agreement contains customary representations and warranties of the parties, and consummation of the acquisition of WSGD-FM, WDLS-FM and WCDL-AM is subject to certain conditions including (i) the receipt of FCC consent to the assignment of the station licenses to the Company and (ii) the receipt of consents to the assignment to the Company of certain contracts relating to the stations. The Company anticipates that an application seeking FCC approval will be filed with the FCC in October 1997, and that the acquisition of WSGD-FM, WDLS-FM and WCDL-AM will close in late 1997 or early 1998. KBEE-FM and KFNZ-AM, Salt Lake City, Utah. On March 31, 1992, Predecessor entered into an LMA with Price Broadcasting Company ("Price") pursuant to which the Company markets all commercial advertising of and provides programming for KBEE-FM and KFNZ-AM, licensed to Ogden, Utah and operating in Ogden and Salt Lake City, Utah. At such time, Predecessor also acquired certain assets used in the operation of the stations. In April 1996, the Company exercised its option under the LMA with Price to purchase such stations. The Company and Price subsequently entered into an Asset Purchase Agreement on April 21, 1997 relating to the acquisition by the Company of KBEE-FM and KFNZ-AM for the aggregate purchase price of approximately $2.9 million in cash. The asset purchase agreement contains customary representations and warranties of the parties, and consummation of the acquisition of KBEE-FM and KFNZ-AM is subject to certain conditions including (i) the receipt of FCC consent to the assignment of the station licenses to the Company and (ii) the receipt of consents to the assignment to the Company of certain contracts relating to the station. An application seeking FCC approval was filed on May 9, 1997. The Company received a grant of the application on July 18, 1997, and it anticipates that the acquisition of KBEE-FM and KFNZ-AM will close in October 1997. Upon consummation of the acquisition of KBEE-FM and KFNZ-AM, the Company will own four FM and two AM radio stations in Salt Lake City. THE LITTLE ROCK ACQUISITIONS KARN-FM, KKRN-FM, KARN-AM, KRNN-AM, KAFN-FM, KIPR-FM, KESR-FM and KYTN-FM, Little Rock, Arkansas. On June 2, 1997, the Company entered into various agreements relating to four transactions with various individuals and entities pursuant to which the Company has agreed to acquire (i) five FM and two AM radio stations in Little Rock, Arkansas, (ii) the right to construct an additional FM radio station in Little Rock, (iii) the Arkansas Radio Network, a state-wide news network, and (iv) certain real estate associated with station operations. The first transaction is structured as a merger of Snider Corporation with and into the Company. Snider Corporation owns KARN-FM, KKRN-FM, KARN-AM, KRNN-AM and the Arkansas Radio Network and owns the right to construct and operate KAFN-FM. The aggregate purchase price for this acquisition is approximately $9.0 million, consisting of $4.5 million in cash and the balance in shares of a newly created series of preferred stock of Citadel Communications. The cash portion of the purchase price may be reduced 84 92 by the amount of certain liabilities of Snider Corporation existing on the closing date. The second related transaction involves the purchase by the Company from the shareholders of Snider Corporation of real estate used in connection with the stations owned by Snider Corporation for the aggregate purchase price of approximately $3.0 million in cash. The third transaction is structured as a merger of Snider Broadcasting Corporation ("Snider Broadcasting") with and into the Company. Snider Broadcasting owns KIPR-FM. The purchase price is approximately $5.5 million payable in shares of a newly created series of preferred stock of Citadel Communications. In addition, the purchase price will be increased by the amount necessary to repay indebtedness for borrowed money of Snider Broadcasting, and such additional amount will be paid in cash. Such cash portion may be reduced by the amount of certain liabilities of Snider Broadcasting existing on the closing date of the acquisition. The fourth transaction involves the purchase by the Company of substantially all of the assets of CDB Broadcasting Corporation and its license subsidiary (collectively, "CDB") which owns KESR-FM. The purchase price for CDB is approximately $7.5 million, payable in cash, and will be reduced by the amount of the cash portion of the purchase price for Snider Broadcasting, as well as by the amount of certain liabilities to be assumed by the Company. CDB has entered into an agreement to purchase the stock of Natural States Communications Company ("Natural States") which owns KYTN-FM, and such agreement has been assigned to the Company. The purchase price for the stock of Natural States and certain shareholder non-compete agreements is approximately $1.5 million in cash. The Company has delivered letters of credit in an aggregate amount of $1.25 million to secure its obligations under the various acquisition agreements. Pending the acquisition, on June 2, 1997, the Company began operating six of the foregoing stations pursuant to LMAs under which an aggregate monthly fee of approximately $186,000 will be paid by the Company to Snider Corporation, Snider Broadcasting and CDB. The various acquisition documents contain customary representations and warranties of the parties. Consummation of the various transactions is subject to certain conditions including (i) the receipt of FCC consent to the transfer of control of Snider Corporation, Snider Broadcasting and Natural States to the Company, (ii) the receipt of FCC consent to the assignment of the KESR-FM license to the Company and (iii) certain other customary conditions for the types of transactions involved. An application seeking FCC approval (other than the acquisition of Natural States) was filed with the FCC on June 12, 1997, and an application seeking FCC approval of the acquisition of Natural States was filed with the FCC on July 22, 1997. The Company received a grant of the application (other than the acquisition of Natural States) on August 26, 1997, and it anticipates that the acquisition (other than Natural States) will close in October 1997. The Company received a grant of the application relating to Natural States on September 9, 1997, and it anticipates that such transaction will close in November 1997. Consummation of the acquisition of the foregoing stations is contingent upon the closing of each of the several transactions discussed above other than the consummation of the acquisition of Natural States. KURB-FM, KVLO-FM and KEZQ-AM, Little Rock, Arkansas. On August 1, 1997, the Company entered into an Asset Purchase Agreement with GHB of Little Rock, Inc. ("GHB") pursuant to which the Company has agreed to acquire from GHB substantially all of the assets of radio stations KURB-FM, KVLO-FM and KEZQ-AM in Little Rock for the aggregate purchase price of approximately $11.4 million. The Company has delivered a letter of credit in the amount of $800,000 to secure its obligations under the asset purchase agreement. The asset purchase agreement contains customary representations and warranties of the parties, and consummation of the acquisition of KURB-FM, KVLO-FM and KEZQ-AM is subject to certain conditions including (i) the receipt of FCC consent to the assignment of the station licenses to the Company and (ii) the receipt of consents to the assignment to the Company of certain contracts relating to the stations. An application seeking FCC approval was filed with the FCC on August 6, 1997. The Company received a grant 85 93 of the application on September 19, 1997, and it anticipates that the acquisition of KURB-FM, KVLO-FM and KEZQ-AM will close in late 1997. THE BOISE ACQUISITION KKGL-FM, KQFC-FM, KBOI-AM, KIZN-FM and KZMG-FM, Boise, Idaho. On September 29, 1997, the Company entered into various agreements relating to three transactions with various individuals and entities pursuant to which the Company has agreed to acquire four FM radio stations and one AM radio station and certain real estate associated with station operations. The first transaction involves the purchase of all of the issued and outstanding capital stock of Pacific Northwest Broadcasting Corporation ("Pacific Broadcasting") which owns radio stations KKGL-FM, KQFC-FM and KBOI-AM. The aggregate purchase price for this transaction is approximately $13.2 million in cash. At the time this transaction is consummated, Pacific Broadcasting will be merged with and into the Company. The Company has deposited $500,000 into escrow to secure its obligations under the acquisition agreement. The second related transaction involves the purchase by the Company from the principals of Pacific Broadcasting of real estate used in connection with the stations for the purchase price of approximately $1.2 million in cash. The third transaction involves the purchase by the Company of substantially all of the assets of radio stations KIZN-FM and KZMG-FM from Wilson Group, LLC ("Wilson Group") for the aggregate purchase price of approximately $14.1 million in cash. The Company has delivered a letter of credit in the amount of $500,000 to secure its obligations under the acquisition agreement. Wilson Group is not affiliated with Lawrence R. Wilson, a director and executive officer of the Company. The Company has also entered into an LMA with each of Pacific Broadcasting and Wilson Group pursuant to which the Company will market commercial advertising time and provide programming for the Boise Stations pending their acquisition by the Company. The Company will commence operations under these LMAs after all applicable waiting periods under the HSR Act have expired or been terminated. The Company will also enter into a five-year consulting agreement with the principal of Pacific Broadcasting and Wilson Group. The various acquisition agreements contain customary representations and warranties of the parties. Consummation of the various transactions is subject to certain conditions including (i) the receipt of FCC consent to the transfer of control of Pacific Broadcasting to the Company, (ii) the receipt of FCC consent to the assignment of the KIZN-FM and KZMG-FM licenses to the Company, (iii) the expiration or termination of the applicable waiting periods under the HSR Act and (iv) certain other customary conditions for the type of transactions involved. The Company anticipates that an application seeking FCC approval will be filed with the FCC in October 1997, that the acquisition of Pacific Broadcasting will close in January 1998, and that the acquisition of KIZN-FM and KZMG-FM will close in April 1998. Consummation of the acquisition of KIZN-FM and KZMG-FM is contingent upon the consummation of the acquisition of Pacific Broadcasting. Upon consummation of the various acquisitions, the Company will own four FM radio stations and one AM radio station in Boise. THE JOHNSTOWN/STATE COLLEGE DISPOSITION On September 29, 1997, the Company entered into an Asset Purchase Agreement with Talleyrand Broadcasting, Inc. ("Talleyrand") pursuant to which Talleyrand has agreed to purchase substantially all of the assets of radio stations WQKK-FM and WGLU-FM in Johnstown, Pennsylvania and radio stations WRSC-AM, WQWK-FM, WBLF-AM and WIKN-FM in State College, Pennsylvania for the aggregate purchase price of approximately $8.5 million in cash. In addition to the stations it owns in Johnstown and State College, the Company will also sell to Talleyrand its right of first refusal to purchase two additional radio stations in Johnstown. The asset purchase agreement contains customary representations and warranties of the parties, and consummation of the sale of WQKK-FM, WGLU-FM, WRSC-AM, WQWK-FM, WBLF-AM and 86 94 WIKN-FM is subject to certain conditions including (i) the receipt of FCC consent to the assignment of the station licenses to Talleyrand and (ii) the receipt of consents to the assignment to Talleyrand of certain contracts relating to the stations. The Company anticipates that an application seeking FCC approval will be filed with the FCC in October 1997 and that the sale of WQKK-FM, WGLU-FM, WRSC-AM, WQWK-FM, WBLF-AM and WIKN-FM will close in late 1997 or early 1998. The Company does not own any other radio stations in either Johnstown or State College. 87 95 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth the names, ages and positions of the directors and executive officers of the Company:
NAME AGE POSITION ------------------------------ --- -------------------------------------------- Lawrence R. Wilson............ 52 Chief Executive Officer, President and Chairman of the Board of Directors Donna L. Heffner.............. 38 Vice President, Chief Financial Officer, Treasurer and Secretary Stuart R. Stanek.............. 41 Vice President; President of East Region Edward T. Hardy............... 48 Vice President; President of West Region D. Robert Proffitt............ 45 Vice President; President of Central Region Michael J. Ahearn............. 40 Director J. Walter Corcoran............ 59 Director Christopher P. Hall........... 43 Director Mark A. Leavitt............... 38 Director Harlan A. Levy................ 41 Director Scott E. Smith................ 42 Director John E. von Schlegell......... 43 Director Ted L. Snider, Sr.(1)......... 68 Director
- --------------- (1) It is anticipated that Ted L. Snider will become a director of the Company following the Company's acquisition of Snider Corporation. See "The Pending Transactions -- The Little Rock Acquisitions." Lawrence R. Wilson co-founded and was a general partner of Predecessor from 1984 to July 1992 and has been the Chief Executive Officer, President and Chairman of the Board of the Company since it was incorporated in August 1991 and of Citadel Communications since it was incorporated in May 1993. From 1974 to 1979, Mr. Wilson was Executive Vice President and General Counsel of Combined Communications Corporation, a national media company, where he handled all acquisitions and mergers and oversaw the broadcast, newspaper and outdoor billboard divisions as a part of a five person management committee. From 1979 to 1986, he was engaged in the private practice of law. Donna L. Heffner joined Predecessor in 1988 as its Controller. Ms. Heffner has served as Treasurer and Secretary of the Company since it was incorporated in August 1991 and of Citadel Communications since it was incorporated in May 1993. She has served as Chief Financial Officer of the Company and Citadel Communications since July 1992 and May 1993, respectively. In January 1997, Ms. Heffner became Vice President of Citadel Communications and the Company. From 1982 to 1985 and in 1987, she was employed by Price Waterhouse, and in 1986, she was employed by Lowrimore, Warwick & Company as an accountant. Stuart R. Stanek joined Predecessor in 1986 as a General Manager of KKFM-FM in Colorado Springs. In 1988, he became General Manager of KCNR-AM/KUBL-FM in Salt Lake City, in 1991, he was appointed Vice President of the Company, in 1992 he was elected to the Board of Directors of the Company and in 1993, he was appointed Vice President and elected to the Board of Citadel Communications. He served as a Director of Citadel Communications and the Company until August 1996. Mr. Stanek became President of East Region for the Company in June 1997. Edward T. Hardy founded and was elected President and Chief Executive Officer of Deschutes in 1994. Mr. Hardy joined Citadel Communications in January 1997 as President of Deschutes following Citadel Communications' acquisition of Deschutes. Mr. Hardy became President of West Region for the Company and Vice President of Citadel Communications and the Company in June 1997. From 1984 to 1993, Mr. Hardy was Vice President -- General Manager of KUPL AM/FM in Portland. 88 96 D. Robert Proffitt joined Predecessor in 1988 as Vice President -- General Manager of KKFM-FM in Colorado Springs. In 1991, he was appointed Vice President of the Company, and in 1993, he was appointed Vice President of Citadel Communications. Mr. Proffitt took over as General Manager of the Company's Albuquerque operations in 1994. Mr. Proffitt became President of Central Region for the Company in June 1997. Michael J. Ahearn has served as a member of the Board of Directors of the Company and Citadel Communications since August 1996. He was a shareholder of Gallagher & Kennedy, P.A., a Phoenix based law firm, from 1986 until June 1996, where he practiced in the area of corporate law. In July 1996, he joined Quantum Partners, L.L.C. as a principal. Quantum Partners, L.L.C. is a Phoenix based venture capital company that invests in privately held, growth-oriented businesses. J. Walter Corcoran has served as a member of the Board of Directors of the Company and Citadel Communications since March 1997. Since June 1996 he has been the Service Advisor for Oxford Analytica, Inc., a provider of economic and political analysis of world events. From 1993 to 1996, he was the President of Bristol Media, a broker and provider of financing to media companies in the broadcast and cable television fields, and from 1971 to 1993, he was the President of Philips Credit Corporation, a full service finance company based in New York with over $1.1 billion invested in the fields of television and radio broadcasting, cable television and medical equipment. Christopher P. Hall has served as a member of the Board of Directors of the Company and Citadel Communications since March 1997. Since 1993, Mr. Hall has been a Partner at Piliero Goldstein Jenkins & Hall, LLP, a law firm in New York. From 1986 to 1993, he was an attorney with the New York office of Jones, Day, Reavis & Pogue. Mark A. Leavitt has served as a member of the Board of Directors of the Company since 1992 and of Citadel Communications since 1993. He has been a Managing Director and Group Head of the Telecommunications and Media Group within the Investment Banking Department of Prudential Securities Incorporated since August 1996. Mr. Leavitt was employed by Oppenheimer & Co., Inc. ("Oppenheimer") from 1987 to 1996, most recently as Managing Director of the Investment Banking Group responsible for the firm's activities in media and communications. Mr. Leavitt serves on the Board of Directors of T/SF Communications Corp., a publishing company. Harlan A. Levy has served as a member of the Board of Directors of the Company and Citadel Communications since March 1997. He has had a private law practice in New York since 1995. From 1987 to 1995, he was an Assistant District Attorney for New York County. Scott E. Smith has served as a member of the Board of Directors of the Company since 1992 and of Citadel Communications since 1993. He is an Executive Vice President of Baker, Fentress & Company ("Baker Fentress"). Since 1989, Mr. Smith has managed the private placement portfolio of Baker Fentress. John E. von Schlegell has served as a member of the Board of Directors of the Company and Citadel Communications since January 1997. He co-founded and, since 1991, has managed, Endeavour Capital Fund Limited Partnership ("Endeavour Capital"), a firm that invests equity capital in privately held businesses throughout the northwest. Since January 1994, Mr. von Schlegell has been the President and a shareholder of DVS Management, Inc. ("DVS"), the general partner of Endeavour Capital. From January 1991 until January 1994, Mr. von Schlegell was a general partner of DVS Associates, the then general partner of Endeavour Capital. Ted L. Snider, Sr. is anticipated to become a director of the Company following the Company's acquisition of Snider Corporation. Mr. Snider has been Chairman of Snider Corporation since its incorporation in 1971. Snider Corporation owns two FM and two AM radio stations, the right to construct an additional FM radio station and the Arkansas Radio Network. Members of the Board of Directors are not currently compensated for their services as Board members. Each nonemployee director is reimbursed for travel and related expenses for attendance at Board and Committee meetings. 89 97 BOARD COMPOSITION AND GOVERNANCE MATTERS Pursuant to the Third Amended and Restated Voting Agreement dated as of March 17, 1997, as amended (the "Voting Agreement"), by and among Citadel Communications, Christopher P. Hall, as Trustee under the Voting Trust Agreement dated March 17, 1997 (the "Voting Trust Agreement"), Baker Fentress, FINOVA Capital Corporation ("FINOVA Capital"), Oppenheimer, Endeavour Capital, Edward T. Hardy, Lawrence R. Wilson and certain other parties, certain parties to the Voting Agreement have the right to designate the directors of Citadel Communications and the Company as follows: Baker Fentress has the right to designate one director, and has initially designated Scott E. Smith; Lawrence R. Wilson has the right to designate three directors, and has initially designated himself, Michael J. Ahearn and Mark A. Leavitt; Endeavour Capital has the right to designate one director, and has initially designated John von Schlegell; the Voting Trustee has the right to designate three directors, subject to certain restrictions, and has initially designated himself, J. Walter Corcoran and Harlan A. Levy. The Voting Agreement also provides that any committees of the Board of Directors of either Citadel Communications or the Company will be created only upon the approval of at least three-quarters of the members of the Board of Directors of Citadel Communications (the "Citadel Board"). Pursuant to the Voting Trust Agreement, the Trustee votes the shares of ABRY II, and ABRY/CIP in accordance with the relevant provisions of the Voting Agreement. See "Security Ownership of Certain Beneficial Owners." In connection with the Little Rock Acquisitions, the shareholders who receive shares of preferred stock of Citadel Communications (collectively, the "Little Rock Shareholders") will become parties to the Voting Agreement and the Voting Agreement will be amended to give the Little Rock Shareholders the right to designate one additional director of Citadel Communications and the Company. It is anticipated that Ted L. Snider, Sr. will be such designee. See "The Pending Transactions" and " -- Executive Officers and Directors." The rights and obligations of a shareholder or group of shareholders under the Voting Agreement terminate in relevant part either upon consummation of a sale of Citadel Communications' common stock, par value $0.001 per share (the "Common Stock"), in an underwritten public offering which results in net cash proceeds to Citadel Communications of at least $25 million, or automatically upon the fifteenth anniversary date of the Voting Agreement, unless extended. The Voting Trust Agreement continues in effect until terminated upon written agreement of Citadel Communications and the holders of voting trust certificates which represent a majority of the shares held in the voting trust. Pursuant to the Voting Agreement, the prior vote or written consent of not less than three-quarters of the members of the Citadel Board is required for certain actions by Citadel Communications or the Company, subject to various exceptions including the Tele-Media Acquisition, as follows: transfers or other dispositions of assets; acquisitions, mergers, investments and certain LMA or similar transactions; the issuance or repurchase of equity securities; the creation or incurrence of indebtedness or amendment of applicable debt documents; transactions with affiliates; public offerings of equity securities; amendments to certificates of incorporation or bylaws; and certain actions in connection with bankruptcy. Pursuant to a Securities Purchase and Exchange Agreement, dated June 28, 1996, as amended by the First Amendment thereto dated December 31, 1996, and by the Second Amendment thereto dated March 17, 1997 (the "Securities Purchase and Exchange Agreement") among Citadel Communications, the Company, ABRY II, ABRY/CIP, Baker Fentress, Oppenheimer, Endeavour Capital, Edward T. Hardy, Bank of America Illinois and certain other parties, the prior vote or written consent of the holders of a majority of the Series D Preferred Stock is required for the taking by Citadel Communications or the Company of the actions described in the preceding paragraph (other than in respect of transactions with affiliates or certain actions in connection with bankruptcy), also subject to various exceptions. See "Security Ownership of Certain Beneficial Owners." 90 98 EXECUTIVE COMPENSATION The following table sets forth information with respect to the compensation paid to the Company's Chief Executive Officer and each of the other two persons who were executive officers of the Company during 1996 (the "Named Executives"): SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION ------------ ----------------------------------- SECURITIES NAME AND OTHER ANNUAL UNDERLYING ALL OTHER PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION - ----------------------------- ---- -------- ------- ------------ ------------ ------------ Lawrence R. Wilson........... 1996 $325,000 $81,250(1) $3,404(2) 150,000 $411,423(3) Chief Executive Officer and President Stuart R. Stanek............. 1996 $165,000 $35,000(1) $2,627(2) 24,000 $ 2,553(4) Vice President and President of East Region Donna L. Heffner............. 1996 $120,000 $20,000(1) $1,364(2) 22,000 $ 2,505(5) Vice President and Chief Financial Officer
- --------------- (1) Bonuses were earned in 1996, but paid in 1997. Does not reflect bonuses earned in 1995, but paid in 1996. (2) Represents amount for personal use of Company-provided vehicle and for goods and services received through the Company's trade agreements. (3) Represents the Company's contribution of $2,708 to the Company's 401(k) Plan, which contribution vests over five years, the Company's payment of $78 of premiums for term life insurance, and the forgiveness of $408,637 of indebtedness. See "Certain Transactions." (4) Represents the Company's contribution of $2,475 to the Company's 401(k) Plan, which contribution vests over five years, and the Company's payment of $78 of premiums for term life insurance. (5) Represents the Company's contribution of $2,427 to the Company's 401(k) Plan, which contribution vests over five years, and the Company's payment of $78 of premiums for term life insurance. Stock Options. The following table summarizes individual grants of options to purchase shares of Class A Common Stock, par value $0.001 per share, of Citadel Communications (the "Class A Common Stock") to the Named Executives during the year ended December 31, 1996: OPTIONS GRANTED IN FISCAL 1996
POTENTIAL REALIZABLE PERCENT VALUE AT ASSUMED NUMBER OF OF TOTAL ANNUAL RATES OF SECURITIES OPTIONS EXERCISE STOCK PRICE APPRECIATION UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(1) OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------ NAME GRANTED IN 1996 ($/SH) DATE 5%($) 10%($) - -------------------------------- --------- ---------- -------- ---------- ----------- ----------- Lawrence R. Wilson(2)........... 25,628 8.3% $17.17 6/28/01 $ 70,548 $ 204,257 124,372 40.1 17.17 6/28/06 1,026,945 2,900,146 Stuart R. Stanek(3)............. 2,000 0.6 12.00 1/05/06 26,854 38,250 22,000 7.1 17.17 6/28/06 181,655 513,003 Donna L. Heffner(3)............. 22,000 7.1 17.17 6/28/06 181,655 513,003
- --------------- (1) The potential realizable value is based on the term of the option at the time of grant. An assumed stock price appreciation of 5% and 10% is used pursuant to rules promulgated by the Commission. The potential realizable value is calculated by assuming (i) that the stock price on the date of grant was equal 91 99 to $12.00 for the option to purchase 2,000 shares granted to Mr. Stanek on January 5, 1996 and $15.61 for the remaining options which were granted on June 28, 1996, which represent Citadel Communications' estimate of fair market value on such dates, and (ii) that such price appreciates at the indicated rate, compounded annually, for the entire term of the option and that the option is exercised and sold on the last day of its term at this appreciated stock price. The gains shown are net of the option exercise price, but do not include deductions for taxes or other expenses associated with the exercise of the option or the sale of the underlying shares. The potential realizable value is not intended to forecast the future appreciation of the Class A Common Stock. (2) Pursuant to his employment agreement with the Company, Mr. Wilson was granted options under Citadel Communications' 1996 Equity Incentive Plan to purchase 25,628 and 124,372 shares of Citadel Communications' Class A Common Stock at an exercise price of $17.17 (110% of the fair market value on the date of grant) per share. The option to purchase 25,628 shares vests 25% on each of the first through fourth anniversaries of the date of the grant, and the option to purchase 124,372 shares vests 20% on each of the first through fifth anniversaries of the date of grant. Vesting accelerates in the event of a change in control of Citadel Communications (as provided for in the relevant option agreements), but only to the extent that such acceleration does not result in Citadel Communications incurring compensation expense under section 280G of the Internal Revenue Code of 1986, as amended. (3) Options vest 20% on each of the first through fifth anniversaries of the date of grant. Vesting accelerates in the event of a change in control of Citadel Communications (as provided for in the relevant option agreements). The following table shows the number and value of unexercised stock options to purchase shares of Class A Common Stock held by the Named Executives as of December 31, 1996. No options were exercised by the Named Executives in 1996. FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS(1) ------------------------- ------------------------- EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE ------------------------- ------------------------- Lawrence R. Wilson........... 62,942/150,000 $ 729,086/$0 Stuart R. Stanek............. 18,671/ 52,007 $207,724/$284,486 Donna L. Heffner............. 18,807/ 50,211 $209,451/$279,857
- --------------- (1) Assumes that the fair market value of each share of Class A Common Stock into which the options are exercisable is $15.61 which represents Citadel Communications' estimate of fair market value on December 31, 1996. In October 1993, Mr. Wilson was granted performance options to acquire up to an aggregate of 85,936 shares of Class A Common Stock at an exercise price per share of $2.91, which represented Citadel Communications' estimate of the fair market value of the shares on the date of grant. The options can be earned (17,187 shares per year) over a five-year period following the date of grant and expire on the earlier of ten years from the date granted or termination of employment. Vesting is dependent upon Citadel Communications achieving certain annual operating results. At December 31, 1996, the option was exercisable with respect to 34,374 shares, and, on January 1, 1997, the option vested with respect to an additional 17,187 shares. In December 1994, Mr. Wilson was granted an immediately exercisable option to acquire an aggregate of 28,568 shares of Class A Common Stock at an exercise price of $5.37 per share. EMPLOYMENT AGREEMENT In June 1996, the Company entered into an employment agreement with Lawrence R. Wilson which has an initial term ending in June 2001. Mr. Wilson's current annual base salary under the agreement is $341,250 which is to be increased by 5% in January of each year during the term of the agreement. The agreement also 92 100 provides for an annual bonus calculated as a percentage of Mr. Wilson's base salary in effect at the end of the year and based on certain annual performance criteria of the Company. Mr. Wilson's employment with the Company will terminate upon Mr. Wilson's becoming permanently disabled or upon (i) a liquidation or dissolution of Citadel Communications, (ii) a sale, transfer or other disposition of all of the assets of the Company on a consolidated basis or (iii) any transaction or series of transactions whereby any person or entity other than ABRY II or its affiliates or affiliates of the Company, becomes the direct or indirect beneficial owner of securities of Citadel Communications or the Company representing 50% or more of the combined voting power of Citadel Communications' or the Company's then outstanding securities. In such event, Mr. Wilson or his beneficiary will be entitled to receive Mr. Wilson's then base salary through the end of the month in which the termination occurs. In addition, upon the affirmative vote or written consent of not less than 66-2/3% of the members of the Citadel Board, Mr. Wilson's employment may be terminated with or without cause. If any such termination is without cause, Mr. Wilson will be entitled to receive his then current base salary through the end of the then term of the employment agreement. 1996 EQUITY INCENTIVE PLAN Citadel Communications has adopted the 1996 Equity Incentive Plan (the "Plan") pursuant to which all employees of the Company are eligible to receive awards in the form of non-qualified options and incentive options to purchase Class A Common Stock, stock appreciation rights, restricted securities and other stock-based awards as determined by the Citadel Board. The Plan is administered by the Citadel Board, which determines the price and type of awards granted and the key managerial employees eligible to receive awards and the terms thereof, including vesting, all in a manner consistent with the Plan. The Citadel Board may delegate responsibility for administration of the Plan to a committee of the Citadel Board. The total number of shares of Class A Common Stock reserved and available for awards under the Plan (or which may be used to provide a basis of measurement for an award) is 526,824 shares. Shares subject to any option which terminates or expires unexercised will be available for subsequent grants. The exercise price of incentive stock options granted under the Plan is to be at least 100% of the fair market value of the Class A Common Stock on the date of grant (110% of the fair market value of the Class A Common Stock in the case of an incentive stock option to an individual who at the time of the grant owns more than 10% of the combined voting power of Citadel Communications' capital stock). The Citadel Board may provide that an optionee may pay for shares upon exercise of an option in cash or by check or by such other medium or by any combination of media as authorized by the Citadel Board. The grant of an option may be accompanied by a reload option, which gives an optionee who pays the exercise price of an option with shares of Class A Common Stock an additional option to acquire the same number of shares that was used to pay for the original option at an exercise price of not less than the fair market value of Class A Common Stock as of the reload option grant date. An unexercised option normally expires upon termination of employment, provided that the Citadel Board may permit the holder of the option to exercise it during the 90 days following termination. Under certain circumstances, including termination of employment upon retirement, disability or death, the option may be exercised during an extended period. In the event of termination of employment under certain circumstances following certain change in control events, an option generally may be exercised in full during the 90 days following termination. The Plan also provides for the grant of performance units and shares of restricted stock. 401(K) PLAN Effective in 1993, the Company adopted a 401(k) Savings Plan ("Retirement Plan") for the purpose of providing, at the option of the employee, retirement benefits to full-time employees of the Company and its subsidiaries who have been employed for a period of one year or longer. Contributions to the Retirement Plan are made by the employee and, on a voluntary basis, by the Company. The Company currently matches 100% of that part of the employee's deferred compensation which does not exceed 2% of such employee's salary. A contribution to the Retirement Plan of $144,256 was made during the year ended December 31, 1996. 93 101 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During 1996, Mark A. Leavitt and Scott E. Smith and former directors William P. Sutter, Jr. and Royce Yudkoff were members of the Compensation Committee of the Citadel Board, which determines compensation matters for the Company. Such persons are or were also directors of the Company. Mr. Yudkoff is President of ABRY Holdings, Inc., the general partner of ABRY Capital, L.P., the general partner of ABRY II and ABRY/CIP. Investment Banking Relationships. Mark A. Leavitt, a director of the Company, is a Managing Director of Prudential Securities Incorporated, which has provided since 1996, and may in the future provide, investment banking services to the Company. Such services have been provided on terms customary in the industry. Prudential Securities Incorporated was an Initial Purchaser in the Original Offerings. In each of 1994, 1995 and 1996, Oppenheimer provided investment banking services to the Company and Citadel Communications. During such years, Mr. Leavitt was a Managing Director of Oppenheimer. Such services were provided on terms customary in the industry. Oppenheimer is also a party to the Voting Agreement, the Securities Purchase and Exchange Agreement, the Stockholders Agreement and the Registration Rights Agreement (as defined). Repayment of Certain Indebtedness. In October 1996, the Company repaid its indebtedness to Baker Fentress, which consisted of $7.0 million in principal amount and $20,534 in accrued and unpaid interest. The Company also paid Baker Fentress a $420,000 prepayment penalty. Baker Fentress beneficially owns all of the outstanding shares of Series A Preferred Stock (as defined) of Citadel Communications which is convertible into shares of Class A Common Stock. See "Security Ownership of Certain Beneficial Owners." Scott E. Smith, a director of the Company, is an Executive Vice President of Baker Fentress. Registration Rights Agreement. Citadel Communications is a party to a Registration Rights Agreement, dated June 28, 1996, as amended (the "Registration Rights Agreement"), with Lawrence R. Wilson, ABRY II, ABRY/CIP, Baker Fentress, Bank of America Illinois (and certain of its employees and its affiliates), Oppenheimer, Edward T. Hardy, Endeavour Capital and others, which requires Citadel Communications, upon a one-time demand by such shareholders on or after the earlier of (i) the consummation of an initial public offering of Citadel Communications' Common Stock which is registered pursuant to the Securities Act or (ii) August 1, 2000, to register their shares of Common Stock of Citadel Communications under the Securities Act for offer and sale to the public (including by way of an underwritten public offering), and which entitles such parties to join in any registration of equity securities of Citadel Communications. In connection with the Little Rock Acquisitions, the Little Rock Shareholders will become parties to the Registration Rights Agreement. Securities Purchase and Exchange Agreement. Pursuant to a Securities Purchase and Exchange Agreement dated June 28, 1996, as amended (the "Securities Purchase and Exchange Agreement"), among Citadel Communications, the Company, ABRY II, ABRY/CIP, Baker Fentress, Oppenheimer, Endeavor Capital, Edward T. Hardy, Bank of America Illinois and certain other parties, Citadel Communications redeemed outstanding preferred stock held by Bank of America Illinois and certain other parties, repaid the $2.0 million principal balance and the $17,500 in accrued interest on Citadel Communications' Junior Subordinated Convertible Note Due 1996 dated May 24, 1996 issued to ABRY II, financed four radio station acquisitions, and paid certain working capital requirements. The transactions were financed by Citadel Communications' issuance of approximately 1,473,857 shares of its Series C Preferred Stock (as defined), and approximately 1,346,422 shares of its Series D Preferred Stock to ABRY II, and of approximately 182,162 shares of Series C Preferred Stock, and approximately 166,411 shares of Series D Preferred Stock to ABRY/CIP, all for approximately $15.61 per share for a total consideration of approximately $49.5 million, and through borrowings under a $20.0 million revolving line of credit with ABRY II and ABRY/CIP. See "Security Ownership of Certain Beneficial Owners." Simultaneously, four then existing series of capital stock of Citadel Communications held by ABRY II, ABRY/CIP, Baker Fentress, Oppenheimer, Bank of America Illinois and certain other parties were reclassified. The consummation of these transactions was conditioned upon, among other things, the entry of various parties into, and the effectiveness as of the time of closing of, 94 102 the Registration Rights Agreement, the Stockholders Agreement, the Voting Agreement, and the Management and Consulting Services Agreement (as defined). The Securities Purchase and Exchange Agreement established a commitment (the "Facility A Commitment") by ABRY II and ABRY/CIP in favor of Citadel Communications for a revolving line of credit in the aggregate principal amount of $20.0 million and against which ABRY II and ABRY/CIP made pro rata advances (the "Facility A Advances"). At June 30, 1997, there were four Facility A Advances outstanding, the aggregate principal balance of which was approximately $12.8 million. Contemporaneously with the consummation of the Original Offerings, a portion of the proceeds was used to repay advances made to the Company by Citadel Communications with the proceeds of the Facility A Advances. Citadel Communications repaid the Facility A Advances concurrently with the closing of the Original Offerings. Thereafter, the Facility A Commitment terminated and ABRY II and ABRY/CIP have no further obligation to make Facility A Advances. The Securities Purchase and Exchange Agreement provides that Citadel Communications and, to the extent applicable, its subsidiaries, including the Company, must enter into an agreement with each of its employees who owns Citadel Communications equity securities providing (i) that any employee transfer of these equity securities (except for any made by Mr. Wilson) is subject to a Citadel Communications right of first refusal to purchase these equity securities at a price determined by a formula and (ii) that any payment or other consideration received by such employee in connection with any transaction resulting in a change of control of Citadel Communications or the Company including (a) certain employment agreements or consulting agreements, (b) noncompetition agreements, (c) licenses or (d) forbearances of any kind, unless such payment does not exceed the price per share of Common Stock paid to non-employee holders of Common Stock, shall be deemed additional payment to Citadel Communications in the case of sale of the assets of Citadel Communications, or shall be payable to all holders of equity securities of Citadel Communications in the case of a merger or sale of part or all of the equity securities of Citadel Communications. For additional information concerning the Securities Purchase and Exchange Agreement, see "--Board Composition and Governance Matters." Voting Trust Agreement. The Voting Trust Agreement provides that the Trustee, currently Christopher P. Hall, and each person who is at any time a Back-Up Trustee (as defined in the Voting Trust Agreement), currently J. Walter Corcoran and Harlan A. Levy, shall be entitled to receive compensation for services as Trustee and availability as Back-Up Trustee, either under the Voting Trust Agreement or under an agreement to provide services thereunder, in the amount of $25,000 per year. The Trustee is also expressly authorized to incur and be promptly reimbursed by ABRY II and ABRY/CIP for all reasonable charges and other expenses which he deems necessary and proper in the performance of his duties. Citadel Communications has agreed to pay ABRY II (for the account of ABRY II and ABRY/CIP) the amount of up to $75,000 per year to defray the fees and expenses associated with the Voting Trust, including any fees payable to the Voting Trustee and the Back-Up Trustees. For additional information concerning the Voting Trust Agreement, see "Management -- Board Composition and Governance Matters" and "Security Ownership of Certain Beneficial Owners." Management and Consulting Services Agreement. In June 1996, the Company entered into a Management Services and Consulting Agreement with ABRY Partners, Inc. (the "Management and Consulting Services Agreement") which was terminated in March 1997. Pursuant to the agreement, ABRY Partners, Inc. provided consultation to the Company's Board of Directors and management on business and financial matters. The Company paid $37,500 and $62,500 to ABRY Partners, Inc. under this agreement in 1996 and 1997, respectively, and reimbursed ABRY Partners, Inc. for reasonable out-of-pocket costs and expenses. ABRY Partners, Inc. is an affiliate of ABRY II and ABRY/CIP. Stockholders Agreement. Citadel Communications is a party to a Second Amended and Restated Stockholders Agreement, dated June 28, 1996, as amended (the "Stockholders Agreement"), with ABRY II, ABRY/CIP, Baker Fentress, Oppenheimer, Bank of America Illinois, FINOVA Capital, Endeavour Capital, Lawrence R. Wilson, Claire Wilson, Edward T. Hardy and certain other shareholders of Citadel Communications (collectively, the "Shareholder Parties"). Pursuant to the Stockholders Agreement, the 95 103 Shareholder Parties have the right of first refusal to purchase any equity securities issued by Citadel Communications or any of its subsidiaries, including the Company, other than Class A Common Stock or options to purchase Class A Common Stock issued to employees or directors pursuant to certain compensation plans, equity securities issued upon conversion of another class of equity securities or Common Stock issued in a registered public offering. Subject to certain exceptions, the Shareholder Parties, other than Lawrence and Claire Wilson, also have (i) the right of first refusal with respect to the shares of capital stock of Citadel Communications proposed to be transferred by the Wilsons, or (ii) the right to participate in any such transfer. Certain of the Shareholder Parties, including ABRY II, ABRY/CIP, Bank of America Illinois, Endeavour Capital and Mr. Hardy, have the right, under certain circumstances, to require Citadel Communications to purchase all or a portion of their shares of capital stock of Citadel Communications for a price determined in accordance with the Stockholders Agreement. In the event that Citadel Communications is unable to repurchase shares tendered by or on behalf of ABRY II or ABRY/CIP, such entities are entitled, among other things, to solicit offers and make presentations and proposals to prospective buyers of Citadel Communications and enter into negotiations and/or agreements regarding the potential sale of Citadel Communications. Citadel Communications also has the right, at its option, at any time commencing on August 1, 2000, to repurchase outstanding shares of Preferred Stock (as defined) and the warrants held by Bank of America Illinois to purchase shares of Class B Common Stock (as defined), and, under certain circumstances, shares of Class A Common Stock, held by certain Shareholder Parties, for a price determined in accordance with the Stockholders Agreement. The foregoing provisions of the Stockholders Agreement terminate upon the consummation of a sale of Citadel Communications' Common Stock in an underwritten public offering which results in receipt by Citadel Communications of net cash proceeds of at least $25.0 million. Donna L. Heffner, Stuart R. Stanek and D. Robert Proffitt, executive officers of the Company, and Michael J. Ahearn, a director of the Company, have joined as parties with respect to certain provisions of the Stockholders Agreement. In connection with the Little Rock Acquisitions, the Little Rock Shareholders will become Shareholder Parties under the Stockholders Agreement. Stock Repurchase. In June 1996, Citadel Communications repurchased shares of capital stock of Citadel Communications then held by Mesirow Capital Partners VI ("Mesirow VI") for an aggregate amount of approximately $10.7 million. Mesirow VI had acquired such shares in 1993. William P. Sutter, Jr., a former director of the Company, was an officer of the general partner of Mesirow VI. Mesirow VI had been a party to the Registration Rights Agreement, the Voting Agreement and the Stockholders Agreement. 96 104 CERTAIN TRANSACTIONS CERTAIN LOAN TRANSACTIONS Lawrence R. Wilson, an executive officer and director of the Company, was indebted to the Company in the amount of $394,297 (including accrued interest of $46,440) as of December 31, 1995 (the "Principal Shareholder Loan"). Approximately $70,000 of the principal amount of the Principal Shareholder Loan was advanced by Predecessor to Mr. Wilson in June 1992 for personal purposes, approximately $27,860 of the Principal Shareholder Loan was advanced by Predecessor to Mr. Wilson in April 1993 to finance Mr. Wilson's purchase of capital stock of the Company from a former shareholder and approximately $250,000 was advanced by the Company to Mr. Wilson in 1994 for personal purposes. The Principal Shareholder Loan, which bore interest at the rate of 8.5% per annum, was forgiven in June 1996, at which time an aggregate of $408,637 principal and accrued interest was outstanding. Mr. Wilson's indebtedness under the Principal Shareholder Loan was secured by certain shares of capital stock of Citadel Communications owned by Mr. Wilson. In 1995, Mr. Wilson made a short-term unsecured loan of $365,000 to the Company at an annual interest rate of 10%. The Company repaid such loan in full in 1996. SALE AND LEASEBACK OF AIRPLANE In December 1995, the Company sold to Wilson Aviation, L.L.C., a company owned by Mr. Wilson and his spouse, an airplane formerly owned by the Company, for a cash purchase price of approximately $1.3 million. Contemporaneously with the sale of the airplane, the Company entered into an agreement to lease the airplane from Wilson Aviation, L.L.C. from December 29, 1995 to December 31, 2001. Under the terms of the lease, the Company is required to pay monthly rent in the amount of $17,250 and, in addition, to bear all of the costs of the maintenance, repair and operation of the airplane during the term of the lease. The sale and leaseback were not independently established in an arm's length transaction; however, the transaction was reviewed and approved by the Company's senior lender and the Company believes, based upon such review, that the terms of the transaction are reasonable. REAL ESTATE PURCHASE IN CONNECTION WITH ACQUISITION In order to facilitate the Company's acquisition of KKLI-FM from Tippie Communications, Inc. ("Tippie") in 1996, Mr. Wilson purchased from a shareholder of Tippie certain associated real estate located in Colorado Springs, Colorado, which the Company did not desire to acquire. The purchase price for the real estate was $350,000. The purchase price and terms of the transaction were negotiated between Mr. Wilson and the seller of the real estate, and neither the Company nor Mr. Wilson obtained an independent appraisal of such real estate. The Company believes that its acquisition of KKLI-FM, in the context of the acquisition of the real estate by Mr. Wilson, was fair to the Company. DESCHUTES TRANSACTIONS In connection with the acquisition of Deschutes, Edward T. Hardy, an officer, director and shareholder of Deschutes prior to its acquisition by Citadel Communications and currently an executive officer of the Company, and Endeavour Capital, a shareholder of Deschutes prior to its acquisition by Citadel Communications and currently a shareholder of Citadel Communications, each received merger consideration consisting of shares of capital stock of Citadel Communications valued at approximately $206,500 and approximately $7.2 million, respectively. John E. von Schlegell, a director of the Company, is President and a shareholder of the general partner of Endeavour Capital. Mr. Hardy also received immediately exercisable options to purchase 22,918 shares of Class A Common Stock at an exercise price of $4.91 per share and 8,045 shares of Class A Common Stock at an exercise price of $17.17 per share in exchange for options to acquire shares of Deschutes capital stock. Following the Deschutes merger, he was granted options to purchase an aggregate of 37,000 shares of Class A Common Stock at an exercise price of $17.17 per share, which options vest 20% per year beginning with the first anniversary of the date of the grant. In contemplation of the 97 105 proposed acquisition of Deschutes, during 1996, the Company made advances to Deschutes to enable Deschutes to acquire various radio stations and pay-off existing debt. At December 31, 1996, an aggregate of approximately $18.3 million was due under these advances, which was credited against the cash portion of the purchase price for Deschutes. In connection with the acquisition of Deschutes, Citadel Communications entered into an Agreement Not to Compete with DVS, the general partner of Endeavour Capital, pursuant to which Citadel Communications is obligated to pay DVS an aggregate of $200,000 in 1997 and 1998. In February 1995, the Company sold the assets of six radio stations located in Montana to Deschutes for the aggregate purchase price of $5.4 million. At the time of the transaction, Mr. Hardy was a director, executive officer and shareholder of Deschutes and Endeavour Capital was a shareholder of Deschutes. LITTLE ROCK ACQUISITIONS Ted L. Snider, Sr., who is expected to become a director of the Company, and his spouse are the shareholders of Snider Corporation and, in connection with the Company's acquisition of Snider Corporation and certain other assets from Mr. Snider and his spouse, Mr. Snider and his spouse will receive approximately $7.5 million in cash and approximately $4.5 million in shares of a newly created series of preferred stock of Citadel Communications. Mr. Snider's son and nephew are principal shareholders of Snider Broadcasting and of CDB and, in connection with the Company's acquisition of Snider Broadcasting and certain assets from CDB, they will receive approximately $5.5 million in shares of a newly created series of preferred stock of Citadel Communications. In addition, the Company may repay certain indebtedness of Snider Broadcasting and CDB will receive up to $7.5 million. Effective June 2, 1997, the Company began operating the radio stations owned by Snider Corporation, Snider Broadcasting and CDB under LMAs under which an aggregate monthly fee of approximately $186,000 is paid by the Company to such entities. See "The Pending Transactions." CONSULTING ARRANGEMENT During the fiscal year ended December 31, 1996, Michael J. Ahearn, a director of the Company, provided financial consulting services to the Company for which he was paid $83,520. On June 28, 1996, Mr. Ahearn was also granted an option to purchase 4,000 shares of Class A Common Stock at an exercise price of $17.17 per share. Such option will vest with respect to 800 shares on each of the first through fifth anniversaries of the date of the grant. LEGAL SERVICES During each of the fiscal years ended December 31, 1994, 1995 and 1996, the Company retained the law firm of Gallagher & Kennedy, P.A. to represent the Company on various matters. Michael J. Ahearn was a shareholder of such firm in such years. PREPAYMENT AND REDEMPTION On June 28, 1996, pursuant to the Securities Purchase and Exchange Agreement, the Company prepaid certain Senior Subordinated Notes in the principal amount of $4.0 million, and funded Citadel Communications' redemption of a portion of the stock purchase warrants, issued under a Senior Subordinated Note and Warrant Purchase Agreement dated as of October 1, 1993. These Senior Subordinated Notes and warrants were held, in part, by Bank of America Illinois. Bank of America Illinois now holds, and as of June 28, 1996 held, warrants to purchase 138,101 shares of Class B Common Stock (nonvoting). Class B Common Stock is convertible into Class A Common Stock (voting) upon the occurrence of certain events, and such a conversion would result in Bank of America Illinois owning in excess of 5% of the outstanding shares of Class A Common Stock on an undiluted basis. See "Security Ownership of Certain Beneficial Owners." See also "Management -- Compensation Committee Interlocks and Insider Participation." 98 106 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS Citadel Communications owns all of the currently issued and outstanding common stock of the Company and has pledged such common stock to secure its guaranty of indebtedness under the Credit Facility. See "Description of Indebtedness -- Existing Loan Agreement" and "Description of Other Capital Stock." Citadel Communications is authorized to issue up to 53,831,234 shares of capital stock, par value $0.001 per share, consisting of 15,910,471 shares of Class A Common Stock, 156,933 shares of Class B Common Stock, 12,000,000 shares of Class C Common Stock (the "Class C Common Stock" and collectively with the Class A and Class B Common Stock, the "Common Stock") and 25,763,830 shares of preferred stock (the "Preferred Stock"), of which seven classes have been designated. There are currently issued and outstanding shares of Common Stock and the following shares of Preferred Stock: 746,412 shares of Series A Convertible Redeemable Preferred, having a liquidation value of approximately $2.49 per share (the "Series A Preferred Stock"); 17,201 shares of Series B Convertible Redeemable Preferred Stock, having a liquidation value of approximately $2.91 per share (the "Series B Preferred Stock"); 2,130,587 shares of Series C Convertible Redeemable Preferred Stock, having a liquidation value of approximately $15.61 per share (the "Series C Preferred Stock"); 1,038,267 shares of Series D Convertible Redeemable Preferred Stock, having a liquidation value of approximately $15.61 per share (the "Series D Preferred Stock"); 482,729 shares of Series E Convertible Redeemable Preferred Stock, having a liquidation value of approximately $15.61 per share (the "Series E Preferred Stock"); and 153,264 shares of Series F Convertible Redeemable Preferred Stock having a liquidation value of approximately $27.73 per share (the "Series F Preferred Stock"). The Company has reserved 360,636 shares of Series G Convertible Redeemable Preferred Stock having a liquidation value of $27.73 per share (the "Series G Preferred Stock") for issuance in connection with the Little Rock Acquisitions. See "The Pending Transactions." The Class A Common Stock, the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock and the Series G Preferred Stock are presently the only voting securities of Citadel Communications. The Securities Purchase and Exchange Agreement requires the majority vote or consent of the holders of the Series D Preferred Stock under certain circumstances. See "Management -- Board Composition and Governance Matters." 99 107 The following table sets forth certain information as to the actual ownership of Citadel Communications' Series A, B, C, D, E, F and G Preferred Stock, as to the actual ownership of its Class C Common Stock and as to the actual and beneficial ownership of its Class A Common Stock, as of September 30, 1997, after giving effect to the issuance of the Series G Preferred Stock, by (i) each person or group who is known to Citadel Communications to own beneficially more than 5% of the outstanding shares of the Class A Common Stock, (ii) each director of the Company, (iii) each Named Executive and (iv) all directors and executive officers of the Company as a group. Except as indicated below, the persons named have sole voting and investment power with respect to all shares shown as being beneficially owned by them. The numbers of shares shown are rounded to the nearest whole share, and percentages are rounded to the nearest tenth of a percent.
COMMON STOCK CLASS A COMMON STOCK PREFERRED STOCK ACTUAL OWNERSHIP BENEFICIAL OWNERSHIP ACTUAL OWNERSHIP ----------------------------- -------------------------------------- ------------------------------------ CLASS PERCENT OF SERIES OF NO. OF PERCENT OF OF NO. OF PERCENT OF NO. OF PERCENT OF CLASS FULLY NAME PREFERRED SHARES CLASS COMMON SHARES CLASS SHARES(A) CLASS(A) DILUTED(B) - ------------------- --------- --------- ---------- ------ ------- ---------- --------- ----------- ------------ Lawrence R. Wilson(c)(d)(e)... -- -- -- A 756,225 77.4% 867,635 79.7% 13.5% 1015 Eastman Drive Bigfork, MT 59911 Edward T. Hardy(d)......... E 12,029 2.5% A 364 * 43,356 4.3% * Stuart R. Stanek(e)(f)..... -- -- -- A 21,358 2.2% 48,189 4.8% * D. Robert Proffitt(e)(g)... -- -- -- A 23,441 2.4% 43,337 4.4% * Donna L. Heffner(e)(h).... -- -- -- A 12,184 1.3% 38,819 3.9% * Michael J. Ahearn(e)(i)..... -- -- -- A -- -- 4,800 * * J. Walter Corcoran......... -- -- -- -- -- -- -- -- -- Christopher P. Hall(j).......... C 2,130,587 100% -- -- -- 2,718,270 73.6% 42.4% D 1,038,306 100% Mark A. Leavitt(k)....... B 1,505 8.7% -- -- -- 1,505 * * Harlan A. Levy..... -- -- -- -- -- -- -- -- -- Scott E. Smith(l)......... A 746,412 100% -- -- -- 746,412 43.3% 11.6% John E. von Schlegell(m)..... E 482,729 100% -- -- -- 482,729 33.1% 7.5% Ted L. Snider, Sr.(d)(e)(n)..... G 121,715 33.8% -- -- -- 121,715 11.1% 1.9% FINOVA Capital Corporation(d)(e)... -- -- -- C 74,488 100% 74,488 7.1% 1.2% Dial Tower Dial Corporate Center Phoenix, AZ 85077 Baker, Fentress & Company(d)(e).... A 746,412 100% -- -- -- 746,412 43.3% 11.6% 200 West Madison Suite 3510 Chicago, IL 60602 Oppenheimer & Co., Inc.(d)(e)(o)...... B 17,201 100% -- -- -- 17,201 1.7% * Oppenheimer Tower World Financial Center New York, NY 10281 ABRY Broadcast Partners II, L.P.(d)(e)......... C 1,896,222 89% -- -- -- 2,419,260(p) 71.2% 37.7% 18 Newbury Street D 924,057 89% Boston, MA 02116 ABRY/Citadel Investment Partners, L.P.(d)(e)......... C 234,365 11% -- -- -- 299,010 (p) 23.4% 4.7% 18 Newbury Street D 114,209 11% Boston, MA 02116 The Endeavour Capital Fund Limited Partnership(d)(e)(q)... E 482,729 100% -- -- -- 482,729 33.1% 7.5% 4380 SW Macadam Suite 460 Portland, OR 97201 Philip J. Urso(d)(e)(r).... F 153,264 100% -- -- -- 153,264 13.6% 2.4% Ted L. Snider, Jr.(d)(e)(s)..... G 109,093 30.3% -- -- -- 109,093 10.0% 1.7% Calvin G. Arnold(d)(e)(s)... G 89,257 24.7% -- -- -- 89,257 8.4% 1.4% Bank of America, Illinois(e)...... -- -- -- -- -- -- 156,933 (t) 13.8% 2.5% All directors and.............. A 746,212 100% A 813,572 83.3% 5,116,767 97.2% 79.8% executive officers as a B 1,505 8.7% group, including C 2,130,587 100% persons named above D 1,038,306 100% (13 persons)(u) E 482,729 100% G 121,715 33.8%
100 108 - --------------- * Less than 1% (a) The number of shares and percentages are calculated in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on a shareholder by shareholder basis, assuming that each shareholder converted all securities owned by such shareholder that are convertible into Class A Common Stock, and that no other shareholder so converts. Accordingly, the number of shares and percentage figures assume the conversion of all Class B Common Stock and of all Series A, B and E Preferred Stock owned by such shareholder. This conversion is at the option of the holder within 60 days; provided, however, that the right of a holder to convert Class B Common Stock is subject to the occurrence of a Conversion Event (as defined). The number of shares and percentage figures also assume conversion of all Class C Common Stock and of all Series C and Series D Preferred Stock owned by such shareholder, to the full extent of such shareholder's right of conversion consistent with the limitations set forth in the Securities Purchase and Exchange Agreement. This conversion is at the option of the holder within 60 days, except for limitations on the exercise of conversion rights by certain shareholders owing to the terms of the Securities Purchase and Exchange Agreement. The effect of those limitations on the conversion rights of certain shareholders is discussed in footnotes (b) and (o). The number of shares and percentage figures also include shares covered by options that are currently exercisable or that are exercisable within 60 days of September 30, 1997. The numbers and percentages of shares owned assume that such outstanding options have been exercised by such respective shareholders as follows (rounded to the nearest whole share): Michael J. Ahearn -- 800 shares; Edward T. Hardy -- 30,963 shares; Donna L. Heffner -- 26,635 shares; D. Robert Proffitt -- 19,897 shares; Stuart R. Stanek -- 26,831 shares; Lawrence R. Wilson -- 111,410 shares; and all directors and executive officers as a group -- 216,536 shares. (b) Fully diluted percentage figures assume the conversion of all outstanding shares of Class B Common Stock and of Series A, B and E Preferred Stock by all holders. This conversion is at the option of the holder within 60 days. Fully diluted percentage figures also assume conversion of all outstanding shares of Class C Common Stock and of Series C and D Preferred Stock by all holders to the extent such conversion is consistent with the Securities Purchase and Exchange Agreement. See footnote (p). Fully diluted percentage figures also assume the exercise of all options that are currently exercisable or are exercisable within 60 days of September 30, 1997. (c) Mr. Wilson's shares are jointly owned by Mr. Wilson and his spouse. (d) Represents shares subject to the Voting Agreement. See "Management -- Board Composition and Governance Matters." An aggregate of 759,589 actual shares of Class A Common Stock, and 4,364,042 shares of Class A Common Stock as calculated in accordance with Rule 13d-3 under the Exchange Act, as more fully described in footnote (a) above, are subject to the Voting Agreement. (e) Represents shares subject to the Stockholders Agreement. See "Management -- Compensation Committee Interlocks and Insider Participation -- Stockholders Agreement." Of the aggregate of 5,185,172 shares which are subject to the Stockholders Agreement, 20,236 shares are only subject to certain provisions thereof. (f) Mr. Stanek's shares are jointly owned by Mr. Stanek and his spouse. (g) Mr. Proffitt's shares are jointly owned by Mr. Proffitt and his spouse. (h) Ms. Heffner's shares are jointly owned by Ms. Heffner and her spouse. (i) Includes 2,200 shares and 1,800 shares of Class A Common Stock held of record by Security Investment Management & Trust as custodian for Michael J. Ahearn and Mr. Ahearn's spouse, respectively. Mr. Ahearn disclaims beneficial ownership with respect to shares held by his spouse. (j) Represents shares of Series C and Series D Preferred Stock held by Mr. Hall as Initial Trustee under the Voting Trust Agreement. The Back-Up Trustees under the Voting Trust are J. Walter Corcoran and Harlan A. Levy. (k) Represents shares held of record by Oppenheimer for the benefit of Mr. Leavitt. (l) Represents shares held by Baker Fentress, as described in the table and in footnotes (d) and (e). Mr. Smith is an Executive Vice President of Baker Fentress, and since 1989, has managed its private placement portfolio. (m) Represents shares held by Endeavour Capital, as described in the table and in footnotes (d), (e) and (q). Mr. von Schlegell is the Managing Partner of Endeavour Capital. 101 109 (n) It is anticipated that Mr. Snider will become a director of the Company following the Company's acquisition of Snider Corporation. The 121,715 shares of Series G Preferred Stock are to be issued in connection with the Little Rock Acquisitions. See "The Pending Transactions." Does not include 40,571 shares of Series G Preferred Stock to be issued to Mr. Snider's spouse. (o) Includes 1,505 shares held for the benefit of Mark A. Leavitt, as described in the table and footnote (k). (p) Represents shares issuable upon conversion of shares of Series C and Series D Preferred Stock, assuming a current conversion ratio of 1-to-1. Such conversion is limited by the terms of the Securities Purchase and Exchange Agreement. The Securities Purchase and Exchange Agreement provides, subject to certain exceptions, that ABRY II and ABRY/CIP may hold in the aggregate no more than 49% of the voting securities of Citadel Communications on an undiluted basis. These shareholders currently hold an aggregate of 43% of the voting securities of Citadel Communications on an actual undiluted basis, and 89% and 11%, respectively, of the Series C and the Series D Preferred Stock. The Series C and Series D Preferred Stock of these shareholders is held pursuant to the Voting Trust Agreement. By its terms, the Voting Trust Agreement shall continue in effect until terminated upon the written agreement of Citadel Communications and the holders of voting trust certificates which represent a majority of the shares held in the voting trust as determined in accordance with the Voting Trust Agreement. During the term of the Voting Trust Agreement, the Trustee has the right to vote the shares of stock subject to that Agreement (the "Voting Trust Shares"), and to take part in any shareholders' meetings, including the right to vote the Voting Trust Shares for the election of directors of Citadel Communications; provided, however, that the Trustee shall vote the Voting Trust Shares in the manner required by the Voting Agreement with respect to the matters covered by that Voting Agreement. The Trustee may assign his rights and delegate his obligations to a successor Trustee, who shall be a Back-Up Trustee or other person appointed in the manner provided under the terms of the Voting Trust Agreement. (q) Includes 64,117 shares of Series E Preferred Stock held by various persons who, with Citadel Communications and Endeavour Capital, are parties to a Security Holder Agreement dated December 31, 1996. Pursuant to this Agreement, (i) Endeavour Capital is the sole and exclusive agent of these persons to act in any and all matters relating to the voting of such shares in any manner not inconsistent with the provisions of the Stockholders Agreement and the Voting Agreement, and (ii) Endeavour Capital has the sole and exclusive power and authority to exercise all rights and remedies on behalf of these persons under the Stockholders Agreement, the Voting Agreement, and the Registration Rights Agreement. (r) Includes 32,907 shares of Series F Preferred Stock held by various persons who, with Citadel Communications and Mr. Urso, are parties to a Security Holders Agreement dated September 29, 1997. Pursuant to this Agreement, (i) Mr. Urso is the sole and exclusive agent of these persons to act in any and all matters relating to the voting of such shares in any manner not inconsistent with the provisions of the Stockholders Agreement and the Voting Agreement, and (ii) Mr. Urso has the sole and exclusive power and authority to exercise all rights and remedies on behalf of these persons under the Stockholders Agreement, the Voting Agreement and the Registration Rights Agreement. (s) The shares of Series G Preferred Stock are to be issued in connection with the Little Rock Acquisitions. See "The Pending Transactions." (t) Represents 138,101 shares of Class B Common Stock issuable upon the exercise of certain warrants issued pursuant to the Senior Subordinated Note and Warrant Purchase Agreement dated as of October 1, 1993 among Citadel Communications, the Company, Bank of America Illinois and certain other parties. Also includes 18,832 shares of Class B Common Stock held by various individuals who, with Citadel Communications, the Company and Bank of America Illinois, are parties to a Second Amended and Restated Security Holder Agreement dated June 28, 1996. Pursuant to this Agreement, (i) Bank of America Illinois is the sole and exclusive agent of such individuals to act in any and all matters relating to the voting of such shares in any manner not inconsistent with the provisions of the Stockholders Agreement and the Voting Agreement and (ii) Bank of America Illinois has the sole and exclusive power and authority to exercise all rights and remedies on behalf of these individuals under the Stockholders Agreement, the Voting Agreement, and the Registration Rights Agreement. (u) Includes Ted L. Snider, Sr. and the shares discussed in footnotes (d), (e) and (i) through (q). 102 110 DESCRIPTION OF INDEBTEDNESS EXISTING LOAN AGREEMENT On October 9, 1996, the Company, Deschutes f/k/a Deschutes Acquisition Corporation (now merged into the Citadel Broadcasting pursuant to the Subsidiary Merger), Citadel License and Deschutes License, Inc. (now merged into Citadel License) (collectively, the "Borrowers") entered into a loan agreement (as thereafter amended, the "Credit Facility") with FINOVA Capital Corporation, as administrative agent (the "Agent"), and other lending institutions party thereto (the "Lenders"). On July 3, 1997, the Borrowers, the Agent and the Lenders entered into amendments to the Credit Facility which permitted the issuance of the Notes and the Exchangeable Preferred Stock subject to certain limitations and restrictions regarding, among other things, redemption of or payment prior to maturity of principal on the Notes or the Exchange Debentures, if issued, the redemption of or exchange of the Exchangeable Preferred Stock and the payment of cash dividends on the Exchangeable Preferred Stock. The amendments to the Credit Facility provide for a $150.0 million revolving loan (the "Revolving Loan") which includes a $5.0 million letter of credit facility (the "L/C Facility"). A portion of the proceeds of the Original Offerings was used to repay a portion of Borrowers' indebtedness under the Credit Facility. Revolving Loan As of September 1, 1997, the outstanding principal amount of the revolving loan under the Credit Facility was approximately $50.6 million, and there was no interest accrued thereon. The Revolving Loan will be due on September 30, 2003 (the "Maturity Date") and it may be drawn upon, subject to certain conditions, for certain acquisitions, working capital and other permitted uses. On the last business day of each quarter commencing with the last quarter of 1997, the Revolving Loan commitment is to be reduced by an amount increasing from $2.5 million at December 31, 1997 to approximately $8.1 million at June 30, 2003. The Credit Facility also provides for certain additional mandatory reductions in the Revolving Loan commitment. The Borrowers will be required to pay any amount by which the outstanding principal balance exceeds the Revolving Loan commitment, as adjusted. The remaining principal balance of the Revolving Loan shall be due and payable on the Maturity Date. At the Borrowers' election (a) any portion of the Revolving Loan which has been prepaid or repaid may be reborrowed and (b) the maximum amount of the Revolving Loan commitment may be permanently reduced. L/C Facility The L/C Facility provides for, subject to certain limitations, the issuance of letters of credit to be used by Borrowers as security for the obligations of Borrowers under agreements entered into in connection with certain radio station acquisitions and for such other purposes as may be approved by the Agent ("Permitted Letters of Credit"). The Borrowers will be required to pay a quarterly fee equal to 1.25% of the amount of each Permitted Letter of Credit from time to time outstanding. As of September 1, 1997, approximately $4.0 million of letters of credit had been issued but not drawn in connection with certain of the Pending Acquisitions. Prepayments Voluntary prepayments of the amended Credit Facility are permitted without premium or penalty. Mandatory prepayment of the Credit Facility will be required, commencing in 1997, if the Total Leverage Ratio (as defined in the Credit Facility) as of the end of each year is 4.5 or greater. The amount of the mandatory prepayment shall be the lesser of (a)(i) 66-2/3% of the Excess Cash Flow (as defined in the Credit Facility) if the Total Leverage Ratio as of the end of such year exceeds 5.5 and (ii) 50% of the Excess Cash Flow if the Total Leverage Ratio as of the end of each such year is 4.5 to 5.5, inclusive, or (b) an amount by which Cash Equivalents (as defined in the Credit Facility), as of the last day of March in which the Borrowers are required to deliver financial statements, exceeds $5.0 million. Notwithstanding the foregoing, upon retirement of the Credit Facility, the Company will be required to pay a fee in the maximum amount of 103 111 $820,806 as of September 1, 1997, which amount will decline quarterly based on the amount of outstanding borrowings under the amended Credit Facility. Interest Rates The Credit Facility bears interest at a rate equal to the applicable Base Rate (as defined in the Credit Facility) in effect from time to time plus the Applicable Margin (as defined in the Credit Facility) or, at the written election of the Borrowers, at a rate equal to the applicable LIBOR Rate (as defined in the amended Credit Facility) in effect from time to time as determined by the Agent for the respective Interest Period (as defined in the Credit Facility), plus the Applicable Margin. The Borrowers' right to elect a LIBOR Rate will be subject to certain limitations. The Applicable Margins for the Credit Facility are expected to range between .50% and 1.75% for the Base Rate and 1.50% and 2.75% for the LIBOR Rate, depending on the Total Leverage Ratio from time to time. Except as otherwise provided with respect to voluntary and mandatory prepayments, interest on the Credit Facility is payable quarterly in arrears on the last business day of each quarter. At September 1, 1997, the interest rate under the Credit Facility was 8.38%. Other Fees The Borrowers are required to pay to the Agent an unused commitment fee on the last business day of each quarter, which equals the product of the Maximum Revolving Loan Commitment (as defined in the Credit Facility) for the preceding quarter minus the average outstanding principal balance of the Revolving Loan during such preceding quarter, multiplied by .125%. This multiplier will be reduced to .09375% if the Total Leverage Ratio calculated as of the last day of the quarter preceding such quarter was less than 4.5. Borrowers are required to pay an annual agency fee of $50,000 in October of each year. Security and Guarantee Subject to certain permitted liens, the Credit Facility is secured by (a) a first priority pledge on all of the Borrowers' capital stock other than the Exchangeable Preferred Stock, (b) a first priority security interest in all the existing and after acquired property of the Borrowers, including, without limitation, accounts, machinery, equipment, inventory, general intangibles, investment property and insurance on the life of Lawrence R. Wilson and (c) all proceeds of the foregoing. The Credit Facility is also guaranteed by Citadel Communications pursuant to a guaranty (the "Guaranty"). Change of Control The Credit Facility provides that a change in control or ownership will be an Event of Default. A change in control or ownership shall occur if (a) Citadel Communications shall cease to own all of the capital stock of the Company, (b) the Company shall cease to own or control all of the capital stock of its subsidiaries, (c) any person (including entities) or affiliates of such person, except Mr. Wilson or ABRY II or their respective affiliates, own capital stock possessing more than 35% of the voting power of all voting stock of Citadel Communications or (d) Mr. Wilson shall die, become permanently disabled or cease, for a period in excess of 60 days, to devote his full business time to the operation of the Borrowers' broadcasting business, unless Mr. Wilson is replaced by a person reasonably acceptable to certain Lenders within 90 days after the occurrence of any such event. Covenants The Credit Facility contains customary restrictive covenants, which, among other things, and with certain exceptions, limit the ability of the Borrowers to incur additional indebtedness and liens in connection therewith, enter into certain transactions with affiliates, pay dividends, consolidate, merge or affect certain asset sales, issue additional stock, make certain capital or overhead expenditures, make certain investments, loans or prepayments and change the nature of their business. The Borrowers are also required to satisfy certain financial covenants, which will require the Borrowers to maintain specified financial ratios and to 104 112 comply with certain financial tests, such as ratios for maximum leverage, minimum interest coverage and minimum fixed charges. Events of Default The Credit Facility contains customary Events of Default, including without limitation: (a) failure of Borrowers to pay all or any portion of the principal balance of the amended Credit Facility when due or to pay any other of the Borrowers' Obligations (as defined in the amended Credit Facility) within five days after becoming due and payable; (b) failure of Borrowers to observe or perform certain affirmative covenants or agreements, specifically those pertaining to legal existence, good standing, insurance, environmental matters, the interest hedge contract and all negative covenants; (c) failure of Borrowers or Citadel Communications to observe or perform any other covenant or agreement contained in the amended Credit Facility or related documents which is not remedied within 30 days of written notice; (d) breach of warranty or representation and/or false or misleading statements by Borrowers or the Company made in connection with the amended Credit Facility or related documents; (e) certain defaults, including payment defaults, by Borrowers, under other agreements relating to indebtedness; (f) failure of Borrowers or the Company to generally pay debts as they become due or to be adjudicated insolvent; (g) Borrowers' or Citadel Communications' filing, or consent to the filing against it, of a petition for relief or reorganization or arrangement or any other petition in bankruptcy or insolvency under the law of any jurisdiction or making of an assignment for the benefit of creditors, or the appointment of a custodian, receiver or trustee for the Borrowers or Citadel Communications under certain circumstances; (h) failure of the Borrowers or the Company to discharge certain judgments and awards against any of them; (i) revocation, termination, suspension or adverse modification of any license which is material to the continuation of the Borrowers' broadcasting business; (j) seizure or failure to maintain any item of collateral provided as security under the amended Credit Facility; (k) complete interruption of on-air broadcast operations in two or more markets at any time for more than 72 hours during any consecutive ten-day period; (l) existence of certain conditions which result in actual or potential liability to Borrower or any ERISA affiliate for its pension plan which creates a material adverse effect in the opinion of certain Lenders; (m) a change of ownership or control; (n) failure of the Guaranty to remain in full force and effect; and (o) Citadel Communications' denial or disaffirmance of obligations under the Guaranty or its failure to make payment when due. Upon the occurrence of an Event of Default, with several limitations, the Borrowers' obligations under the Credit Facility which are at that time outstanding may become automatically accelerated. OTHER INDEBTEDNESS In connection with its acquisition of WBRJ-FM in Quincy, Illinois in May 1997, Tele-Media delivered to the seller a five year promissory note in the principal amount of $160,000 which bears interest at the rate of 8.0% per year. Payments of principal and interest on the unpaid principal balance are payable in 60 equal monthly installments. Following the Tele-Media Acquisition, the note became an obligation of the Company. The Company is permitted to prepay the note, but will be responsible for the payment of any unearned interest on the note. In connection with the acquisition of WDGE-FM and related assets in Providence, Rhode Island in September 1997, the Company assumed approximately $250,000 of a selling entity's existing debt. In connection with the Tele-Media Acquisition, the Company incurred a $1.0 million contingent payment obligation which accrues interest at 5% per year. The Company will be obligated to make such payment to the former holders of the Tele-Media Bonds only if a particular $2.0 million payment relating to the Company's Providence, Rhode Island operations is received from a third party. 105 113 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Series A Securities were originally sold by the Company on July 3, 1997 in transactions exempt from the registration requirements of the Securities Act. The Series A Exchangeable Preferred Stock and $100,000,000 aggregate principal amount of the Series A Notes were sold to the Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers subsequently resold such Series A Securities to qualified institutional buyers in reliance on Rule 144A under the Securities Act. The Company issued $1,000,000 aggregate principal amount of the Series A Notes to the holders of the Tele-Media Bonds in connection with the closing of the Tele-Media Acquisition. The Company, Citadel License and the Initial Purchasers entered into the Registration Rights Agreements pursuant to which the Company and Citadel License agreed, for the benefit of the holders, that it would, at its own cost, (i) use their best efforts to file, within 90 days after July 3, 1997, the original issue date of the Series A Securities (the "Issue Date"), a registration statement (the "Exchange Offer Registration Statement") with the Commission with respect to the Exchange Offer for the Series B Securities and (ii) use their best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 180 days after the Issue Date. Upon the Exchange Offer Registration Statement being declared effective, the Company will offer the Series B Securities in exchange for surrender of the Series A Securities. The Company will keep the Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to the holders of the Series A Securities. For each of the Series A Notes surrendered pursuant to the Exchange Offer, the holder who surrendered such Series A Note will receive a Series B Note having a principal amount equal to that of the surrendered Series A Note. For each share of Series A Exchangeable Preferred Stock surrendered pursuant to the Exchange Offer, the holder who surrendered such share will receive a share of Series B Exchangeable Preferred Stock. Based on no-action letters issued by the staff of the Commission to third parties, the Company believes the Series B Securities will be freely transferable by holders thereof and any person who receives the Series B Securities after the Exchange Offer without further registration under the Securities Act only if (i) the Series B Securities were acquired in the ordinary course of business of such holder or such other person, (ii) neither such holder nor such other person is engaging in or intends to engage in a distribution of the Series B Securities and (iii) neither such holder nor such other person has an arrangement or understanding with any person to participate in the distribution of the Series B Securities. However, any purchaser of Series A Securities who is an "affiliate" of the Company or who intends to participate in the Exchange Offer for the purpose of distribution the Series B Securities (i) will not be able to rely on the position of the staff of the Commission, (ii) will not be able to tender its Series A Securities in the Exchange Offer and (iii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the Series A Securities, unless such sale or transfer is made pursuant to an exemption from such requirements. Each holder of the Series A Securities that wishes to exchange the Series A Securities for Series B Securities in the Exchange Offer will be required to represent in the Letters of Transmittal that (i) the Series B Securities are to be acquired by the holder or the person receiving such Series B Securities, whether or not such person is the holder, in the ordinary course of business, (ii) the holder or any such other person (other than a broker-dealer referred to in the next sentence) is not engaging, and does not intend to engage, in the distribution of the Series B Securities, (iii) the holder or any such other person has no arrangement or understanding with any person to participate in the distribution of the Series B Securities, (iv) neither the holder nor any such other person is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act and (v) the holder or any such other person acknowledges that if such holder or other person participates in the Exchange Offer for the purpose of distributing the Series B Securities it must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Series B Securities and cannot rely on those no-action letters. As indicated above, in connection with any resales of Series B Securities, any Participating Broker-Dealer who acquired the Series A Securities for its own account as a result of market-making or other trading activities must deliver a prospectus meeting the requirements of the Securities Act. The Commission has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the Series B Securities (other than a resale of 106 114 an unsold allotment from the original sale of the Series A Securities) with this Prospectus. Under the Registration Rights Agreements, the Company is required to allow Participating Broker-Dealers to use this Prospectus in connection with the resale of such Series B Securities. See "Plan of Distribution." In the event that (i) applicable law or interpretations of the staff of the Commission do not permit the Company to effect such an Exchange Offer, (ii) the Exchange Offer is not consummated within 210 days after the Issue Date or (iii) any holder of Series A Securities (other than an Initial Purchaser) is not eligible to participate in the Exchange Offer, the Company and Citadel License will, at their cost, (a) file, as promptly as practicable and, in any event, within 90 days after such obligation arises, a shelf registration statement covering resales of the Series A Securities (the "Shelf Registration Statement"), (b) use their best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act on or prior to 45 days after the filing occurs and (c) use their best efforts to keep effective the Shelf Registration Statement until the earlier of two years after its effective date, such time as all of the applicable Series A Securities have been sold thereunder and such time as all of the applicable Series A Securities become eligible for resale pursuant to Rule 144 under the Securities Act without volume restrictions. The Company will, in the event of the filing of the Shelf Registration Statement, provide to each holder of the Series A Securities copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the applicable Series A Securities. A holder that sells its Series A Securities pursuant to the Shelf Registration Statement generally will be required to be named as a selling security-holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreements which are applicable to such a holder (including certain indemnification obligations). In addition, each holder of Series A Securities will be required to deliver certain information to be used in connection with the Shelf Registration Statement in order to have its Series A Securities included in the Shelf Registration Statement. In the event that (i) the Exchange Offer Registration Statement is not filed with the Commission on or prior to the 90th calendar day following the Issue Date, (ii) the Exchange Offer is not consummated or a Shelf Registration Statement is not declared effective on or prior to the 210th calendar day following the Issue Date or (iii) either (A) the Exchange Offer Registration Statement ceases to be effective at any time prior to the time that the Exchange Offer is consummated or (B) if applicable, the shelf Registration Statement has been declared effective and such Shelf Registration Statement ceases to be effective at any time prior to the second anniversary of its effective date, the interest rate borne by the Series A Notes and the dividend rate borne by the Series A Exchangeable Preferred Stock will be increased by one-quarter of one percent (0.25%) per annum following such 90-day period in the case of clause (i) above, following such 210-day period in the case of clause (ii) above, or immediately in the case of clause (iii) above, which rate will be increased by an additional one-quarter of one percent (0.25%) per annum for each 30-day period that any such additional interest continues to accrue or dividends continue to accumulate in the case of clause (i) above or for each 90-day period that any such additional interest continues to accrue or dividends continue to accumulate in the case of clauses (ii) and (iii) above; provided, however, that in no event will the interest rate borne by the Series A Notes or the dividend rate borne by the Series A Exchangeable Preferred Stock be increased by more than one and one-half percent (1.5%). Upon (x) the filing of the Exchange Offer Registration Statement after the 90-day period described in clause (i) above, (y) consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, after the 210-day period described in clause (ii) above, or (z) the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement following an event described in clause (iii) above, the interest rate borne by the Series A Notes and the dividend rate borne by the Series A Exchangeable Preferred Stock from the date of such filing, consummation or effectiveness, as the case may be, will be reduced to the original interest rate or dividend rate if the Company is otherwise in compliance with the above; provided, however, that, if after any such reduction in interest rate or dividend rate, a different event specified in clause (i), (ii) or (iii) above occurs, the interest rate or dividend rate may again be increased and thereafter reduced pursuant to the foregoing provisions. 107 115 If applicable, in the event that the Shelf Registration Statement ceases to be usable for a period in excess of 30 days, whether or not consecutive, in any given year, then the interest rate borne by the Series A Notes and the dividend rate borne by the Series A Exchangeable Preferred Stock will be increased by one-quarter of one percent (0.25%) per annum on the 31st day in the applicable year such Shelf Registration Statement ceases to be usable. Such interest rate and dividend rate will increase by an additional one-quarter of one percent (0.25%) per annum for each additional 90 days that such Shelf Registration Statement is not usable, subject to the same aggregate maximum increase in the interest or dividend rate of one and one-half percent (1.5%) per annum referred to above. Upon the Company declaring that the Shelf Registration Statement is usable after the interest rate or dividend rate has been so increased, the interest rate borne by the Series A Notes and the dividend rate borne by the Series A Exchangeable Preferred Stock will be reduced to the original interest rate or dividend rate if the Company is otherwise in compliance with the above; provided, however, that, if after any such reduction in interest rate or dividend rate, the Shelf Registration Statement again ceases to be usable beyond the period permitted above, the interest rate or dividend rate may again be increased and thereafter reduced pursuant to the foregoing provisions. Any amounts of additional interest or dividends due, as the case may be, as described above will be payable in cash on the same interest payments dates and dividend payment dates, respectively, as the Notes and the Exchangeable Preferred Stock, respectively; provided, however, that on any dividend payment date occurring on or prior to July 1, 2002, dividends on the Exchangeable Preferred Stock may be paid, at the Company's option, in additional shares of Exchangeable Preferred Stock. The summary herein of certain provisions of the Registration Rights Agreements does not purport to be complete and is subject to, and is qualified in its entirety by, all the provisions of the Registration Rights Agreements, copies of which are filed as exhibits to the Exchange Offer Registration Statement of which this Prospectus is a part. Following the consummation of the Exchange Offer, holders of Series A Securities who were eligible to participate in the Exchange Offer but who did not tender their Series A Securities will not have any further registration rights, and such Series A Securities will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Series A Securities could be adversely affected. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letters of Transmittal, the Company will accept any and all Series A Securities validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue an equal principal amount of Series B Notes in exchange for such principal amount of outstanding Series A Notes accepted in the Exchange Offer and one share of Series B Exchangeable Preferred Stock in exchange for each share of Series A Exchangeable Preferred Stock accepted in the Exchange Offer. Holders may tender some or all of their Series A Securities pursuant to the Exchange Offer. Series A Notes may be tendered only in integral multiples of $1,000; provided, however, that a holder holding any Series A Note in a denomination of other than an integral multiple of $1,000 may tender the principal amount of such Series A Note that is not an integral multiple of $1,000 in addition to tendering, in integral multiples of $1,000, the remaining principal amount, if any, of such Series A Note. The form and terms of the Series B Notes are the same as the form and terms of the Series A Notes and the form and terms of the Series B Exchangeable Preferred Stock are the same as the form and terms of the Series A Exchangeable Preferred Stock except that (i) the Series B Notes and the Series B Exchangeable Preferred Stock will bear a "Series B" designation and different CUSIP Numbers from the Series A Securities, (ii) the Series B Notes and the Series B Exchangeable Preferred Stock will have been registered under the Securities Act and hence will not bear legends restricting the transfer thereof and (iii) the holders of the Series B Notes and the Series B Exchangeable Preferred Stock will not be entitled to certain rights of holders of Series A Notes and Series A Exchangeable Preferred Stock under the Registration Rights Agreements, which rights will terminate as to holders of the Series B Securities when the Exchange Offer is consummated. The Series B Notes will evidence the same debt as the Series A Notes and will be entitled to the benefits of the Notes Indenture. 108 116 As of the date of this Prospectus, $101,000,000 aggregate principal amount of Series A Notes are outstanding and 1,000,000 shares of Series A Exchangeable Preferred Stock are outstanding. The Company has fixed the close of business on , 1997 as the date for purposes of determining the persons to whom this Prospectus and the Letters of Transmittal will be mailed initially. In connection with the Exchange Offer, holders of Series A Notes do not have any appraisal or dissenters' rights under the Notes Indenture or the General Corporation Law of Nevada and holders of Series A Exchangeable Preferred Stock do not have any appraisal or dissenters' rights under the Certificate of Designation or the General Corporation Law of Nevada. The Company intends to conduct the Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Series A Securities when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purpose of receiving the Series B Securities from the Company. If any tendered Series A Securities are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, the certificates for any such unaccepted Series A Securities will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date. Holders who tender Series A Securities in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letters of Transmittal, transfer taxes with respect to the exchange of Series A Securities pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the Exchange Offer. See "-- Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1997, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, the Company will notify the Exchange Agent of any extension by written notice and will mail to the registered holders an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. The Company reserves the right, in its sole discretion, (i) to delay accepting any Series A Securities, to extend the Exchange Offer or to terminate the Exchange Offer if any of the conditions set forth below under "-- Conditions" shall not have been satisfied, by giving written notice of such delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by written notice thereof to the registered holders. INTEREST ON THE SERIES B SECURITIES Interest on the Series B Notes will accrue from and including their issuance date. Additionally, interest on the Series B Notes will accrue from the last interest payment date on which interest was paid on the Series A Notes surrendered in exchange therefor or, if no interest has been paid on the Series A Notes, from the date of original issuance of the Series A Notes to but not including the issuance date of the Series B Notes. Holders whose Series A Notes are accepted for exchange will be deemed to have waived the right to receive interest accrued on such Series A Notes. Accordingly, holders who exchange their Series A Notes will receive the same interest payment on the next interest payment date (expected to be January 1, 1998) that they would have received had they not accepted the Exchange Offer. Interest on the Series B Notes is payable semi-annually on each January 1 and July 1 commencing on January 1, 1998. 109 117 Dividends on the Series B Exchangeable Preferred Stock will accumulate from and including its issuance date. Additionally, dividends on the Series B Exchangeable Preferred Stock will accumulate from the last dividend payment date on which dividends were paid on the Series A Exchangeable Preferred Stock surrendered in exchange therefor or, if no dividends have been paid on the Series A Exchangeable Preferred Stock, from the date of original issuance of the Series A Exchangeable Preferred Stock to but not including the issuance date of the Series B Exchangeable Preferred Stock. Holders whose Series A Exchangeable Preferred Stock is accepted for exchange will be deemed to have waived the right to receive dividends accumulated on such Series A Exchangeable Preferred Stock. Accordingly, holders who exchange their Series A Exchangeable Preferred Stock will receive the same dividend payment on the next dividend payment date (expected to be January 1, 1998) that they would have received had they not accepted the Exchange Offer, except that if such dividend is not paid in cash, it will be paid in shares of Series B Exchangeable Preferred Stock instead of shares of Series A Exchangeable Preferred Stock. Dividends on the Series B Exchangeable Preferred Stock are payable semiannually on each January 1 and July 1 commencing January 1, 1998. PROCEDURES FOR TENDERING Only a holder of Series A Securities may tender such Series A Securities in the Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign and date the appropriate Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Series A Securities and any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. A separate Letter of Transmittal is required for the tender of Series A Notes and for the tender of Series A Exchangeable Preferred Stock. To be tendered effectively, the Series A Securities, Letters of Transmittal and other required documents must be completed and received by the Exchange Agent at the address set forth below under "-- Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the Series A Securities may be made by book-entry transfer in accordance with the procedures described below. Confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date. By executing a Letter of Transmittal, each holder will make to the Company the representations set forth above in the second paragraph under the heading "-- Purpose and Effect of the Exchange Offer." The tender by a holder and the acceptance thereof by the Company will constitute the agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letters of Transmittal. THE METHOD OF DELIVERY OF SERIES A SECURITIES AND THE LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR SERIES A SECURITIES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner whose Series A Securities are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See "Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" included with the Letters of Transmittal. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined) unless the Series A Securities tendered pursuant thereto are tendered 110 118 (i) by a registered holder who has not completed the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a member firm of the Medallion System (an "Eligible Institution"). If a Letter of Transmittal is signed by a person other than the registered holder of any Series A Securities listed therein, such Series A Securities must be endorsed or accompanied by a properly completed bond power, in the case of the Series A Notes, or stock power, in the case of the Series A Exchangeable Preferred Stock, signed by such registered holder as such registered holder's name appears on such Series A Securities with the signature thereon guaranteed by an Eligible Institution. If a Letter of Transmittal or any Series A Securities or bond or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. The Company understands that the Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the Series A Securities at the book-entry transfer facility, The Depository Trust Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Series A Securities by causing such Book-Entry Transfer Facility to transfer such Series A Securities into the Exchange Agent's account with respect to the Series A Securities in accordance with the Book-Entry Transfer Facility's procedures for such transfer. Although delivery of the Series A Securities may be effected through book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of tendered Series A Securities and withdrawal of tendered Series A Securities will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Series A Securities not properly tendered or any Series A Securities the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right in its sole discretion to waive any defects, irregularities or conditions of tender as to particular Series A Securities. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letters of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Series A Securities must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Series A Securities, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Series A Securities will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Series A Securities received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letters of Transmittal, as soon as practicable following the Expiration Date. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Series A Securities and (i) whose Series A Securities are not immediately available, (ii) who cannot deliver their Series A Securities, the Letters of Transmittal or any other required documents to the Exchange Agent or (iii) who cannot complete the procedures for book-entry transfer, prior to the Expiration Date, may effect a tender if: (a) the tender is made through an Eligible Institution; 111 119 (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such Series A Securities and the principal amount of Series A Notes and/or number of shares of Series A Exchangeable Preferred Stock tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, the Letters of Transmittal (or facsimiles thereof) together with the certificate(s) representing the Series A Securities (or a confirmation of book-entry transfer of such Series A Securities into the Exchange Agent's account at the Book-Entry Transfer Facility), and any other documents required by the Letters of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letters of Transmittal (or facsimiles thereof), as well as the certificate(s) representing all tendered Series A Securities in proper form for transfer (or a confirmation of book-entry transfer of such Series A Securities into the Exchange Agent's account at the Book-Entry Transfer Facility), and all other documents required by the Letters of Transmittal are received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Series A Securities according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Series A Securities may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Series A Securities in the Exchange Offer, a letter or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Series A Securities to be withdrawn (the "Depositor"), (ii) identify the Series A Securities to be withdrawn (including the certificate number(s) and principal amount of Series A Notes and/ or number of shares of Series A Exchangeable Preferred Stock, or, in the case of Series A Securities transferred by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited), (iii) be signed by the holder in the same manner as the original signature on the Letters of Transmittal by which such Series A Securities were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Series A Notes or the Transfer Agent with respect to the Series A Exchangeable Preferred Stock register the transfer of such Series A Securities into the name of the person withdrawing the tender and (iv) specify the name in which any such Series A Securities are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Series A Securities so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer, and no Series B Securities will be issued with respect thereto unless the Series A Securities so withdrawn are validly retendered. Any Series A Securities which have been tendered but which are not accepted for exchange will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Series A Securities may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the Expiration Date. CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or exchange Series B Securities for, any Series A Securities, and may terminate or amend the Exchange Offer as provided herein before the acceptance of such Series A Securities, if the Exchange Offer, 112 120 or the making of any exchange by a holder of Series A Securities, violates applicable law or any applicable interpretation of the staff of the Commission. EXCHANGE AGENT The Bank of New York has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letters of Transmittal and requests for Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: For Information by Telephone: (212) 815-2742 By Registered or Certified Mail: By Hand or Overnight Delivery Service: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street (7 East) Corporate Trust Services Window New York, New York 10286 Ground Level Attention: Reorganization Section New York, New York 10286 Attention: Reorganization Section, 7 East
By Facsimile Transmission: (212) 815-6339 (Facsimile Confirmation) (212) 815-2742 Originals of all documents sent by facsimile should be sent promptly by registered or certified mail, by hand, or by overnight delivery service. Delivery to an address or transmission of instructions via facsimile other than as set forth above will not constitute a valid delivery. The Bank of New York also acts as Trustee under the Notes Indenture and as Transfer Agent for the Exchangeable Preferred Stock. FEES AND EXPENSES The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telecopy, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company. Such expenses includes fees and expenses of the Exchange Agent, Trustee and Transfer Agent, accounting and legal fees and printing costs, among others. ACCOUNTING TREATMENT The Series B Notes and the Series B Exchangeable Preferred Stock will be recorded at the same carrying value as the Series A Notes and the Series A Exchangeable Preferred Stock as reflected in the Company's accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized by the Company. The expenses of the Exchange Offer will be amortized over the term of the Notes and Exchangeable Preferred Stock. 113 121 CONSEQUENCES OF FAILURE TO EXCHANGE The Series A Securities that are not exchanged for Series B Securities pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Series A Securities may be resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so long as the Series A Securities are eligible for resale pursuant to Rule 144A under the Securities Act, to a person inside the United States whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, (iii) in accordance with Rule 144 under the Securities Act, or pursuant to another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel reasonably acceptable to the Company), (iv) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act or (v) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. RESALE OF THE SERIES B SECURITIES With respect to resales of Series B Securities, based on no-action letters issued by the staff of the Commission to third parties, the Company believes that a holder or other person who receives Series B Securities, whether or not such person is the holder (other than a person who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), who receives Series B Securities in exchange for Series A Securities in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of the Series B Securities, will be allowed to resell the Series B Notes to the public without further registration under the Securities Act and without delivering to the purchasers of the Series B Securities a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any holder acquires Series B Securities in the Exchange Offer for the purpose of distributing or participating in a distribution of Series B Securities, such holder cannot rely on the position of the staff of the Commission enunciated in such no-action letters, and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Further, each Participating Broker-Dealer that receives Series B Securities for its own account in exchange for Series A Securities where such Series A Securities were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, may be a statutory underwriter and must acknowledge that it will deliver a prospectus in connection with any resale of such Series B Securities. The Letters of Transmittal state that by so acknowledging and by delivering a prospectus, a Participating Broker- Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. As contemplated by these no-action letters and the Registration Rights Agreements, each holder accepting the Exchange Offer is required to represent to the Company in the Letter of Transmittal that (i) the Series B Securities are to be acquired by the holder or the person receiving such Series B Notes, whether or not such person is the holder, in the ordinary course of business, (ii) the holder or any such other person (other than a broker-dealer referred to in the next sentence) is not engaging, and does not intend to engage, in the distribution of the Series B Securities, (iii) the holder or any such other person has no arrangement or understanding with any person to participate in the distribution of the Series B Securities, (iv) neither the holder nor any such other person is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act and (v) the holder or any such other person acknowledges that if such holder or other person participates in the Exchange Offer for the purpose of distributing the Series B Securities it must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Series B Securities and cannot rely on those no-action letters. As indicated above, each Participating Broker-Dealer that receives Series B Securities for its own account in exchange for Series A Securities must acknowledge that it will deliver a prospectus in connection with any resale of such Series B Securities. For a description of the procedures for such resales by Participating Broker-Dealers, see "Plan of Distribution." 114 122 DESCRIPTION OF THE NOTES The Series A Notes were, and the Series B Notes will be, issued under an indenture dated as of July 1, 1997, (the "Notes Indenture") between the Company, the initial Subsidiary Notes Guarantor referred to below and The Bank of New York, trustee (the "Trustee"), a copy of which is available from the Company. Upon the effectiveness of the Exchange Offer Registration Statement, the Notes Indenture will be subject to and governed by the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). As used in this "Description of the Notes" section, the term "Company" refers to Citadel Broadcasting Company, but not any current or future subsidiary (unless the context otherwise requires). The following summary of the material provisions of the Notes Indenture does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Notes Indenture, including the definitions of certain terms contained therein and those terms made part of the Notes Indenture by reference to the Trust Indenture Act. For definitions of certain capitalized terms used in the following summary, see "-- Certain Definitions" below. GENERAL The Notes will mature on July 1, 2007, are limited to $101,000,000 aggregate principal amount and are subordinate and junior in right of payment to all existing and future Senior Debt of the Company. Each Note bears interest at the rate of 10 1/4% per annum. Interest on the Series B Notes will accrue from and including their issuance date. Additionally, interest on the Series B Notes will accrue from the last interest payment date on which interest was paid on the Series A Notes surrendered in exchange therefor, or, if no interest has been paid on the Series A Notes, from July 3, 1997, the date of original issuance of the Series A Notes, to but not including the issuance date of the Series B Notes. Holders whose Series A Notes are accepted for exchange will be deemed to have waived the right to receive interest accrued on such Series A Notes. Accordingly, holders who exchange their Series A Notes will receive the same interest payment on the next interest payment date (expected to be January 1, 1998) that they would have received had they not accepted the Exchange Offer. Interest on the Notes is payable semi-annually on January 1 and July 1 in each year, commencing January 1, 1998, until the principal thereof is paid or duly provided for, to the person in whose name the Note (or any predecessor Note) is registered at the close of business on the December 15 or June 15 next preceding such interest payment date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The principal of and premium, if any, and interest on the Notes is payable, and the Notes are exchangeable and transferable, at the office or agency of the Company in the City of New York maintained for such purposes (which initially will be the office of the Trustee located at 101 Barclay Street, New York, New York 10286); provided, however, that, at the option of the Company, interest may be paid by check mailed to the address of the person entitled thereto as such address appears in the security register for the Notes. The Notes will be issued only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof (unless the Company otherwise directs). No service charge will be made for any registration of transfer or exchange or redemption of Notes, but the Company may require payment in certain circumstances of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. As of the date hereof, the Company's only Subsidiary is a Restricted Subsidiary and a Subsidiary Notes Guarantor. However, under certain circumstances, the Company will be able to designate future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants set forth in the Notes Indenture. Any Series A Notes that remain outstanding after consummation of the Exchange Offer and any Series B Notes issued in connection with the Exchange Offer will be treated as a single class of securities under the Notes Indenture. The Notes will not be entitled to the benefit of any sinking fund. 115 123 GUARANTEES Payment of the principal of (and premium, if any, on) and interest on the Notes, when and as the same become due and payable, is unconditionally guaranteed, jointly and severally, on a senior subordinated basis by the Subsidiary Notes Guarantors. The obligations of each Subsidiary Notes Guarantor under its Subsidiary Notes Guarantee will be limited so as not to constitute a fraudulent conveyance under applicable law. See "Risk Factors -- Fraudulent Transfer Considerations." The Notes Indenture requires that each Wholly Owned Restricted Subsidiary be a Subsidiary Notes Guarantor, as well as each other Restricted Subsidiary that guarantees any other Debt of the Company. The Notes Indenture provides that no Subsidiary Notes Guarantor may consolidate with or merge with or into any other person (other than the Company or another Subsidiary Notes Guarantor) or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets in one or more related transactions to another person unless: (a) subject to the provisions of the following paragraph, the person formed by or surviving such consolidation or merger or to which all or substantially all of such assets are disposed (if other than the Company or a Subsidiary Notes Guarantor) assumes all of the obligations of such Subsidiary Notes Guarantor under the Notes Indenture and its Subsidiary Notes Guarantee, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee and (b) immediately after giving effect to such transaction, no Default or Event of Default has occurred and is continuing. The Notes Indenture provides that, in the event of (a) a sale, transfer or other disposition of all of the Capital Stock of a Subsidiary Notes Guarantor to a person that is not an Affiliate of the Company, (b) a sale, transfer or other disposition of all or substantially all of the assets of a Subsidiary Notes Guarantor to a person that is not an Affiliate of the Company or (c) the designation of such Subsidiary Notes Guarantor as an Unrestricted Subsidiary, in any such case in compliance with the terms of the Notes Indenture, then such Subsidiary Notes Guarantor will be deemed automatically and unconditionally released and discharged from all of its obligations under the Notes Indenture and its Subsidiary Notes Guarantee without any further action on the part of the Trustee or any holder of the Notes; provided that the Net Cash Proceeds of any such sale, transfer or other disposition are applied in accordance with the "Limitation on Certain Asset Sales" covenant. SUBORDINATION The Notes are, to the extent set forth in the Notes Indenture, subordinate in right of payment to the prior payment in full of all Senior Debt. Upon any payment or distribution of assets of the Company to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency or similar proceedings of the Company (except in connection with the consolidation or merger of the Company or its liquidation or dissolution following the conveyance, transfer or lease of its properties and assets substantially as an entirety, upon the terms and conditions described under "Consolidation, Merger and Sale of Assets"), the holders of Senior Debt will first be entitled to receive payment in full, in cash or cash equivalents, of all amounts due or to become due on or in respect of such Senior Debt before the holders of Notes are entitled to receive any payment of principal of (or premium, if any) or interest on the Notes or on account of the purchase or redemption or other acquisition of Notes by the Company or any Subsidiary of the Company. In the event that, notwithstanding the foregoing, the Trustee or the holder of any Note receives any payment or distribution of assets of the Company of any kind or character (excluding equity or subordinated securities of the Company provided for in a plan of reorganization or readjustment that, in the case of subordinated securities, are subordinated in right of payment to all Senior Debt to at least the same extent as the Notes are so subordinated), before all the Senior Debt is paid in full, then such payment or distribution will be held in trust for the holders of Senior Debt and will be required to be paid over or delivered forthwith to the trustee in bankruptcy or other person making payment or distribution of assets of the Company for application to the payment of all Senior Debt remaining unpaid, to the extent necessary to pay the Senior Debt in full. The Company may not make any payments on account of the Notes or on account of the purchase or redemption or other acquisition of Notes if a default in the payment when due of principal of (or premium, if any) or interest on Specified Senior Debt has occurred and is continuing or a default in the payment when due 116 124 of commitment, facility or other fees, letter of credit fees or agency fees under the Credit Facility, or a default in payments when due with respect to letter of credit reimbursement arrangements with the Credit Facility Agent has occurred and is continuing (a "Senior Payment Default"). In addition, if any default (other than a Senior Payment Default) with respect to any Specified Senior Debt permitting the holders thereof (or a trustee or agent on behalf thereof) to accelerate the maturity thereof (a "Senior Nonmonetary Default") has occurred and is continuing and the Company and the Trustee have received written notice thereof from the Credit Facility Agent or from an authorized person on behalf of any holder of Specified Senior Debt, then the Company may not make any payments on account of the Notes or on account of the purchase or redemption or other acquisition of Notes for a period (a "blockage period") commencing on the date the Company and the Trustee receive such written notice (a "Blockage Notice") and ending on the earliest of (x) 179 days after such date (the "Initial Period"), (y) the date, if any, on which the Specified Senior Debt to which such default relates is discharged or such default is waived or otherwise cured and (z) the date, if any, on which such blockage period has been terminated by written notice to the Company or the Trustee from the Credit Facility Agent or from the person who gave the Blockage Notice. Any number of additional payment blockage periods may be commenced during the Initial Period; provided, however, that no such additional payment blockage periods shall extend beyond the Initial Period. After the expiration of the Initial Period, no payment blockage period may be commenced until at least 181 consecutive days shall have elapsed from the last day of the Initial Period. No Senior Nonmonetary Default that existed or was continuing on the date of the commencement of any blockage period with respect to the Specified Senior Debt initiating such blockage period will be, or can be, made the basis for the commencement of a subsequent blockage period, unless such default has been cured or waived for a period of not less than 90 consecutive days. In the event that, notwithstanding the foregoing, the Company makes any payment to the Trustee or the holder of any Note prohibited by these blockage provisions, then such payment will be held in trust for the holders of Senior Debt and will be required to be paid over and delivered forthwith to the holders of the Senior Debt remaining unpaid, to the extent necessary to pay in full all the Senior Debt. The Subsidiary Notes Guarantees are, to the extent set forth in the Notes Indenture, subordinated in right of payment to the prior payment in full of all senior debt of the Subsidiary Notes Guarantors, upon terms substantially comparable to the subordination of the Notes to all Senior Debt. By reason of such subordination, in the event of insolvency, creditors of the Company or a Subsidiary Notes Guarantor who are not holders of Senior Debt or the Notes may recover less, ratably, than holders of Senior Debt and may recover more, ratably, than the holders of the Notes. The subordination provisions described above will cease to be applicable to the Notes and the Subsidiary Notes Guarantees upon any defeasance or covenant defeasance of the Notes as described under "-- Defeasance or Covenant Defeasance of Notes Indenture." As used herein, the term "Specified Senior Debt" means (i) all Senior Debt under the Credit Facility and (ii) any other issue of Senior Debt having a principal amount of at least $10,000,000. At June 30, 1997, on a pro forma basis, after giving effect to the Recent 1997 Acquisitions, the Pending Transactions and the Original Offerings, the aggregate principal amount of Senior Debt outstanding would have been approximately $113.6 million. The Company may from time to time hereafter incur additional Debt constituting Senior Debt under the Credit Facility or otherwise, subject to the "Limitation on Debt" covenant described below. OPTIONAL REDEMPTION The Notes are redeemable (subject to contractual and other restrictions with respect thereto and to the legal availability of funds therefor) at the election of the Company, as a whole or from time to time in part, at any time on or after July 1, 2002 on not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of the principal amount thereof) set forth below, together with accrued and unpaid interest, if any, to the redemption date, if redeemed during the 12-month period beginning on July 1 of 117 125 the years indicated below (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date):
YEAR REDEMPTION PRICE --------------------------------------------- ---------------- 2002......................................... 105.125% 2003......................................... 104.100 2004......................................... 103.075 2005......................................... 102.050 2006......................................... 101.025
In addition, at any time and from time to time prior to July 1, 2000, the Company may at its option redeem Notes with the net proceeds of one or more Public Equity Offerings at a redemption price equal to 110.25% of the principal amount thereof, together with accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date); provided that, immediately after giving effect to any such redemption, at least $75,000,000 aggregate principal amount of the Notes remains outstanding. Any such redemption must be made within 90 days of the related Public Equity Offering. If less than all the Notes are to be redeemed, the particular Notes to be redeemed will be selected not more than 60 days prior to the redemption date by the Trustee by such method as the Trustee deems fair and appropriate. CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the Notes Indenture. Reference is made to the full definition of all such terms as well as any other capitalized terms used herein for which no definition is provided. "Acquired Debt" means Debt of a person (a) existing at the time such person is merged with or into the Company or becomes a Subsidiary, (b) assumed in connection with the acquisition of assets from such person or (c) secured by a Lien encumbering assets acquired from such person. "Affiliate" means, with respect to any specified person, any other person directly or indirectly controlling or controlled by or under direct or indirect common control with 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 the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "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") by the Company or a Restricted Subsidiary, directly or indirectly, in one or a series of related transactions, to any person other than the Company or a Restricted Subsidiary of (a) any Capital Stock of any of its Restricted Subsidiaries, (b) all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries representing a division or line of business or (c) any other properties or assets of the Company or any of its Restricted Subsidiaries, other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" does not include any transfer of properties or assets (a) that is governed by the provisions of the Notes Indenture described under (i) "Consolidation, Merger and Sale of Assets" or (ii) "Limitation on Asset Swaps," (b) between or among the Company and any of its Restricted Subsidiaries pursuant to transactions that do not violate any other provision of the Notes Indenture, (c) to an Unrestricted Subsidiary, if permitted under the "Limitation on Restricted Payments" covenant, (d) representing obsolete or permanently retired equipment, (e) the gross proceeds of which (exclusive of indemnities) do not exceed $100,000 for any particular item or $500,000 in the aggregate for any fiscal year or (f) the transfer of up to $500,000 of property and assets, including cash, to a joint venture in which the Company or a Restricted Subsidiary has an equity interest, which joint venture is engaged in the internet service provider business. 118 126 "Asset Swap" means the execution of one or more definitive agreements, subject only to FCC approval, if applicable, and other customary closing conditions, which the Company in good faith believes will be satisfied, for a substantially concurrent purchase and sale, or exchange, or "deferred exchange" (for no more than 180 days) under section 1031(a)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), of assets used in the broadcast or related businesses between the Company or any of its Restricted Subsidiaries and one or more other persons or groups of affiliated persons; provided that any amendment to or waiver of any closing conditions that individually or in the aggregate are material to the Asset Swap will be deemed to be a new Asset Swap. "Banks" means the banks and other financial institutions that from time to time are lenders under the Credit Facility. "Capital Stock" of any person means any and all shares, interests, partnership interests, participations, rights in or other equivalents (however designated) of such person's equity (however designated). "Capitalized Lease Obligation" means, with respect to any person, an obligation incurred or assumed under or in connection with any capital lease of real or personal property that, in accordance with GAAP, has been recorded as a capitalized lease on the balance sheet of such person. "Change of Control" means the occurrence 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 Lawrence R. Wilson, Scott E. Smith, John E. von Schlegell, Baker, Fentress & Company, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., The Endeavour Capital Fund Limited Partnership and any trustee, in its capacity as trustee under the Voting Trust Agreement ("Permitted Holders") or Citadel Communications, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person will 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 a majority of the voting power of all classes of Voting Stock of the Company; (b) During any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election to such Board of Directors, or whose nomination for election by the stockholders of the Company, was approved by a vote of at least 66-2/3% 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 of the Company then in office; or (c) The Company is liquidated or dissolved or adopts a plan of liquidation or dissolution. "Closing Date" means July 3, 1997, the date on which the Series A Notes were originally issued under the Notes Indenture. "Consolidated Adjusted Net Income" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (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 Sales, (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 of its Restricted Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries in cash during such period, (d) the net income (or loss) of any person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, and (e) the net income (but not the net loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is at the date of determination restricted, directly or indirectly, except to the extent that such net income could be paid to the Company or a Restricted Subsidiary thereof; provided that, if any Restricted Subsidiary is not a 119 127 Wholly Owned Restricted Subsidiary, Consolidated Adjusted Net Income will be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Consolidated Adjusted Net Income otherwise attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1) the number of shares of outstanding common stock of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries divided by (2) the total number of shares of outstanding common stock of such Restricted Subsidiary on the last day of such period. "Consolidated Cash Flow" means, for any period, the sum of, without duplication, Consolidated Adjusted Net Income for such period, plus (or, in the case of clause (d) below, plus or minus) the following items to the extent included in computing Consolidated Adjusted Net Income for such period: (a) the aggregate interest expense and preferred stock dividends of the Company and its Restricted Subsidiaries for such period, plus (b) the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period, plus (c) the aggregate depreciation and amortization expense of the Company and any of its Restricted Subsidiaries for such period, plus (d) any other non-cash charges for such period, and minus non-cash credits for such period, other than non-cash charges or credits resulting from changes in prepaid assets or accrued liabilities in the ordinary course of business; provided that income tax expense, interest expense and preferred stock dividends, depreciation and amortization expense, and non-cash charges and credits of a Restricted Subsidiary will be included in Consolidated Cash Flow only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Adjusted Net Income for such period. Solely for purposes of determining whether the Company could incur Debt pursuant to the first paragraph of the "Limitation on Debt" covenant, if the Company is permitted to give pro forma effect to an In-Market Acquisition of a radio station pursuant to clause (iii) of the second paragraph of such covenant, such calculation may also give pro forma effect to projected quantifiable improvements in operating results of such radio station due to cost reductions calculated in good faith by the Company and certified by an officers' certificate filed with the Trustee. As used in the preceding sentence, the term "In-Market Acquisition" means the acquisition of a radio station or group of radio stations serving an MSA in which the Company or its Subsidiaries has owned, or has operated under a LMA, one or more radio stations for at least the preceding six months. "Consolidated Cash Flow Ratio" means, at any date, the ratio of (i) the aggregate amount of Debt of the Company and its Restricted Subsidiaries on a consolidated basis as of the end of the immediately preceding four fiscal quarters for which internal financial statements of the Company are available (the "Reference Period") to (ii) the aggregate amount of Consolidated Cash Flow for such Reference Period. "Consolidated Fixed Charges" means, for any period, without duplication, the sum of (a) the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of operations 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 contracts (including amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs, (v) the interest component of Capitalized Lease Obligations of the Company and any of its Restricted Subsidiaries, and (vi) the portion of any rental obligation of the Company and any of its Restricted Subsidiaries in respect of any sale and leaseback transaction allocable during such period to interest expense (determined as if it were treated as a Capitalized Lease Obligation) plus (b) all interest on any Debt of any other person guaranteed by the Company or any of its Restricted Subsidiaries; provided, however, that Consolidated Fixed Charges will not include any gain or loss from extinguishment of debt, including any write-off of debt issuance costs. "Credit Facility" means the loan agreement dated October 9, 1996, among the Company, the Banks and the Credit Facility Agent, as amended, and as such agreement may be amended, restated, supplemented, replaced or refinanced or otherwise modified from time to time. "Credit Facility Agent" means the then acting Agent as defined in and under the Credit Facility or any successor thereto. "Debt" means (without duplication), with respect to any person, whether recourse is to all or a portion of the assets of such person and whether or not contingent, (a) every obligation of such person for money 120 128 borrowed, (b) every obligation of such person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such person, (d) every obligation of such person issued or assumed as the deferred purchase price of property or services, (e) every Capitalized Lease Obligation of such person, (f) all Disqualified Stock of such person valued at its maximum fixed repurchase price, plus accumulated and unpaid dividends, (g) all Hedging Obligations of such person, and (h) every obligation of the types referred to in clauses (a) through (g) of another person and all dividends of another person (i) the payment of which, in either case, such person has guaranteed or (ii) which is secured by any Lien on any property or asset of such person, the amount of such Debt being deemed to be the lesser of the actual amount of the guarantee or the value of such property or asset subject to such Lien, as the case may be, and the amount of the Debt so guaranteed or secured, as the case may be. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were repurchased on any date on which Debt is required to be determined pursuant to the Notes Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value will be determined reasonably and in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable and accrued liabilities arising in the ordinary course of business, any liability for federal, state or local taxes or other taxes owed by such person and the Exchangeable Preferred Stock will not be considered Debt for purposes of this definition. The amount outstanding at any time of any Debt issued with original issue discount is the aggregate principal amount at maturity of such Debt, less the remaining unamortized portion of the original issue discount of such Debt at such time, as determined in accordance with GAAP. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors is required to deliver a resolution of the Board of Directors, to make a finding or otherwise take action under the Notes Indenture, a member of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Disqualified Stock" means any class or series of Capital Stock that, either by its terms or by the terms of any security into which it is convertible or exchangeable or by contract or otherwise, (a) is, or upon the happening of an event or passage of time would be, required to be redeemed prior to one year after the final Stated Maturity of the Notes, (b) is redeemable at the option of the holder thereof at any time prior to one year after such final Stated Maturity or (c) at the option of the holder thereof, is convertible into or exchangeable for debt securities at any time prior to one year after such final Stated Maturity; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to cause the issuer thereof to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to one year after the Stated Maturity of the Notes will not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the "Limitation on Certain Asset Sales" and "Purchase of Notes upon a Change of Control" covenants described below and such Capital Stock specifically provides that the issuer will not repurchase or redeem any such Capital Stock pursuant to such provision prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to the "Limitation on Certain Asset Sales" and "Purchase of Notes upon a Change of Control" covenants described below. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the Closing Date. "guarantee" means, as applied to any obligation, (a) 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 (b) an agreement, direct or indirect, contingent or otherwise, the 121 129 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 limitation, the payment of amounts drawn down under letters of credit. "Hedging Obligations" means the obligations of any person under (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (b) other agreements or arrangements designed to protect such person against fluctuations in interest rates or the value of foreign currencies. "Investment" (in any person) means (a) directly or indirectly, any advance, loan or other extension of credit (including, without limitation, by way of guarantee or similar arrangement) or capital contribution to any person, the purchase or other acquisition of any stock, bonds, notes, debentures or other securities issued by such person or the acquisition (by purchase or otherwise) of all or substantially all of the business or assets of such person or the making of any investment in such person, (b) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary and (c) the transfer of any assets or properties from the Company or a Restricted Subsidiary to any Unrestricted Subsidiary, other than the transfer of assets or properties made in the ordinary course of business. Investments will exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. "License Subsidiary" means Citadel License, Inc. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, preference, 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 will be deemed to own subject to a Lien any property that 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. "Net Cash Proceeds" means, 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 of for, cash or cash equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any of its Restricted Subsidiaries), net of (a) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (b) provisions for all taxes payable as a result of such Asset Sale, (c) payments made to retire Debt where payment of such Debt is secured by the assets that are the subject of such Asset Sale, (d) amounts required to be paid to any person (other than the Company or any of its Restricted Subsidiaries) owning a beneficial interest in the assets that are subject to the Asset Sale and (e) appropriate amounts to be provided by the Company or any of its Restricted Subsidiaries, 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 seller after such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Pari Passu Debt" means Debt of the Company that ranks pari passu in right of payment with the Notes. "Permitted Investments" means any of the following: (a) Investments in (i) securities with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof); (ii) certificates of deposit, time deposits, overnight bank deposits or bankers' acceptances with a maturity of 270 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus of not less than $500,000,000; and (iii) commercial paper with a maturity of 270 days or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings Services. 122 130 (b) Investments by the Company or any of its Restricted Subsidiaries in another person, if as a result of such Investment (i) such other person becomes a Restricted Subsidiary that is a Subsidiary Notes Guarantor 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 that is a Subsidiary Notes Guarantor. (c) Investments by the Company or any of its Restricted Subsidiaries in a Subsidiary Notes Guarantor and Investments by any Restricted Subsidiary in the Company. (d) Investments in assets owned or used in the ordinary course of business. (e) Investments in existence on the Closing Date. (f) Promissory notes received as a result of Asset Sales permitted under the "Limitation on Certain Asset Sales" covenant. (g) Direct or indirect loans to employees, or to a trustee for the benefit of such employees, of the Company or any of its Restricted Subsidiaries in an aggregate amount outstanding at any time not exceeding $1,000,000. (h) Investments by the Company or any of its Restricted Subsidiaries in a joint venture that is engaged in the internet service provider business in an aggregate amount outstanding at any time not exceeding $500,000. (i) Other Investments that do not exceed $2,000,000 at any one time outstanding. "Public Equity Offering" means an underwritten public offering of Qualified Equity Interests of either (a) the Company or (b) Citadel Communications the net proceeds from which (after deducting any underwriting discounts and commissions) are used by Citadel Communications to purchase Qualified Equity Interests of the Company; provided that, in either case, such net proceeds exceed $10,000,000. "Qualified Equity Interest" means any Qualified Stock and all warrants, options or other rights to acquire Qualified Stock (but excluding any debt security that is convertible into or exchangeable for Capital Stock). "Qualified Stock" of any person means any and all Capital Stock of such person, other than Disqualified Stock. "Restricted Subsidiary" means any Subsidiary other than an Unrestricted Subsidiary. "Senior Debt" means the principal of and premium, if any, and interest on (including interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law, whether or not allowed) and other amounts due on or in connection with any Debt of the Company (other than the Notes or Pari Passu Debt), whether outstanding on the Closing Date or thereafter incurred, unless, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt will be subordinate in right of payment to any Debt or other general unsecured obligations of the Company. Without limiting the generality of the foregoing, "Senior Debt" includes the principal of and premium, if any, fees and interest (including interest accruing after the occurrence of an event of default or after the filing of a petition initiating any proceeding pursuant to any bankruptcy law, whether or not allowed) on all obligations of every nature of the Company from time to time owed to the Banks under the Credit Facility. Notwithstanding the foregoing, "Senior Debt" will not include (a) Debt that is Disqualified Stock, (b) Debt consisting of trade payables, (c) Debt of the Company to a Subsidiary or any other Affiliate of the Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt that, at the time of the incurrence, is incurred by the Company in violation of the Notes Indenture other than any Debt incurred under the Credit Facility not in excess of $150,000,000 (less any amounts applied to the permanent reduction of such Debt pursuant to the "Limitation on Certain Asset Sales" covenant under the Notes Indenture) if the Company has certified to the Credit Facility Agent, at the time such Debt is incurred, that the Company is permitted to incur such Debt under the Notes Indenture. 123 131 "Significant Subsidiary" means any Restricted Subsidiary of the Company that, together with its Subsidiaries, (a) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated net sales of the Company and its Restricted Subsidiaries, (b) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the most recently available consolidated financial statements of the Company for such fiscal year, (c) was organized or acquired after the beginning of such fiscal year and would have been a Significant Subsidiary if it had been owned during the entire fiscal year or (d) holds one or more licenses material to the Company's business. "Stated Maturity" means, when used with respect to any Note or any installment of interest thereon, the date 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 Debt, means the date specified in the instrument governing such Debt as the fixed date on which the principal of such Debt or any installment of interest thereon is due and payable. "Subordinated Debt" means Debt of the Company that is subordinated in right of payment to the Notes. "Subsidiary" means any person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company and/or one or more other Subsidiaries of the Company. "Subsidiary Notes Guarantee" means a guarantee of the Notes by a Restricted Subsidiary in accordance with the provisions of the Notes Indenture. "Subsidiary Notes Guarantor" means the License Subsidiary and each other Restricted Subsidiary that issues a Subsidiary Notes Guarantee as described under the "Subsidiary Notes Guarantees" covenant. "Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary in accordance with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary of an Unrestricted Subsidiary. "Voting Stock" means any class or classes of Capital Stock 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 or trustees of any person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). "Weighted Average Life" means, as of the date of determination with respect to any Debt or Disqualified Stock, 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 or liquidation value payment of such Debt or Disqualified Stock, respectively, multiplied by (ii) the amount of each such principal or liquidation value payment by (b) the sum of all such principal or liquidation value payments. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all of the outstanding voting securities (other than directors' qualifying shares or an immaterial number of shares required to be owned by other persons pursuant to applicable law) of which are owned, directly or indirectly, by the Company. CERTAIN COVENANTS The Notes Indenture contains, among others, the following covenants: LIMITATION ON DEBT. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Debt (including Acquired Debt and the issuance of Disqualified Stock), except that the Company or a Subsidiary Notes Guarantor may incur Debt or issue Disqualified Stock if, at the time of such event, the Consolidated Cash Flow Ratio would have been less than 7.0 to 1.0. In making the foregoing calculation, pro forma effect will be given to: (i) the incurrence of such Debt and (if applicable) the application of the net proceeds therefrom, including to refinance other Debt, as if such Debt had been incurred and the application of proceeds therefrom occurred on the first day of the four-fiscal quarter period used to calculate the Consolidated Cash Flow Ratio, (ii) the incurrence, repayment or 124 132 retirement of any other Debt by the Company or any of its Restricted Subsidiaries since the first day of such four-quarter period as if such Debt was incurred, repaid or retired at the beginning of such four-quarter period and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or any of its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period. In making a computation under the foregoing clause (i) or (ii), the amount of Debt under a revolving credit facility will be computed based upon the average daily balance of such Debt during such four-quarter period. (b) Notwithstanding the foregoing, the Company may, and may, to the extent expressly permitted below, permit any of its Restricted Subsidiaries to, incur any of the following Debt ("Permitted Debt"): (i) Debt of the Company or any Subsidiary Notes Guarantor under the Credit Facility (including guarantees thereof by the Subsidiaries) in an aggregate principal amount at any one time outstanding not to exceed $110,000,000 less any amounts applied to the permanent reduction of such Debt pursuant to the "Limitation on Certain Asset Sales" covenant. (ii) Debt of the Company or any of its Restricted Subsidiaries outstanding on the Closing Date, other than Debt described under clause (i) above. (iii) Debt owed by the Company to any of its Restricted Subsidiaries or owed by any Subsidiary to the Company or a Restricted Subsidiary (provided that such Debt is Subordinated Debt and is held by the Company or such Restricted Subsidiary) or owed to the Company or a Subsidiary Notes Guarantor by a Restricted Subsidiary that is not a Subsidiary Notes Guarantor, provided the incurrence of such Debt did not violate the "Limitation on Restricted Payments" covenant. (iv) Debt represented by the Notes and the Subsidiary Notes Guarantees. (v) Hedging Obligations of the Company or any of its Restricted Subsidiaries incurred in the ordinary course of business. (vi) Capitalized Lease Obligations of the Company or any of its Restricted Subsidiaries in an aggregate amount not exceeding $3,000,000 at any one time outstanding. (vii) Debt under purchase money mortgages or secured by purchase money security interests so long as (x) such Debt is not secured by any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets so acquired and (y) such Debt is created within 60 days of the acquisition of the related property; provided that the aggregate principal amount of Debt under this clause (vii) does not exceed $2,000,000 at any one time outstanding. (viii) Debt of the Company or any Subsidiary Notes Guarantor, not permitted by any other clause of this definition, in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding. (ix) Debt of the Company or any of its Restricted Subsidiaries consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock. (x) Acquired Debt of a person, other than Debt incurred in connection with, or in contemplation of, such person becoming a Restricted Subsidiary or the acquisition of assets from such person, as the case may be, provided that the Company on a pro forma basis could incur $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of this covenant. (xi) Any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by the Company or any Restricted Subsidiary of any outstanding Debt of the Company or such Restricted Subsidiary, other than Debt incurred pursuant to clause (i), (v), (vi), (vii), (viii) or (ix) of this definition, including any successive refinancings thereof, so long as (A) any such new Debt is in a principal amount that does not exceed the principal amount so refinanced, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Debt refinanced or the amount of any premium reasonably determined by the Company as necessary to 125 133 accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing, (B) in the case of any refinancing of Subordinated Debt, such new Debt is made subordinate to the Notes at least to the same extent as the Debt being refinanced, (C) in the case of any refinancing of the Notes or any Pari Passu Debt, such Debt is Pari Passu Debt or Subordinated Debt and (D) such refinancing Debt does not have a Weighted Average Life less than the Weighted Average Life of the Debt being refinanced and does not have a final scheduled maturity earlier than the final scheduled maturity, or permit redemption at the option of the holder earlier than the earliest date of redemption at the option of the holder, of the Debt being refinanced. LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, take any of the following actions: (a) declare or pay any dividend on, or make any distribution to holders of, any shares of the Capital Stock of the Company or any of its Restricted Subsidiaries, other than (i) dividends or distributions payable solely in Qualified Equity Interests of the issuer of such shares of Capital Stock, (ii) dividends or distributions by a Restricted Subsidiary payable to the Company or another Restricted Subsidiary or (iii) pro rata dividends or distributions on common stock of a Restricted Subsidiary held by minority stockholders, provided that such dividends do not in the aggregate exceed the minority stockholders' pro rata share of such Restricted Subsidiary's net income from the first day of the Company's fiscal quarter during which the Closing Date occurs; (b) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of Capital Stock (or any options, warrants or other rights to acquire shares of Capital Stock) of (i) the Company or any of its Unrestricted Subsidiaries or (ii) any Restricted Subsidiary that are held by any Affiliate of the Company (other than, in either case, any such Capital Stock owned by the Company or any of its Restricted Subsidiaries); (c) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Subordinated Debt; and (d) make any Investment (other than a Permitted Investment) in any person (such payments or other actions described in (but not excluded from) clauses (a) through (d) being referred to as "Restricted Payments"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment: (i) no Default or Event of Default has occurred and is continuing, (ii) the Company could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of the "Limitation on Debt" covenant, and (iii) the aggregate amount of all Restricted Payments declared or made after the Closing Date does not exceed the sum of: (A) the remainder of (x) 100% of the aggregate Consolidated Cash Flow for the period beginning on the first day of the Company's fiscal quarter during which the Closing Date occurs and ending on the last day of the Company's most recent fiscal quarter for which internal financial statements are available ending prior to the date of such proposed Restricted Payment (the "Computation Period") minus (y) the product of 1.4 times the sum of (i) Consolidated Fixed Charges for the Computation Period and (ii) all dividends or other distributions paid in cash by the Company or any of its Restricted Subsidiaries on any Disqualified Stock of the Company or any of its Restricted Subsidiaries for the Computation Period; plus (B) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Company's Board of Directors, whose good faith determination will be conclusive) from the issuance or sale (other than to a Subsidiary) of Qualified Equity Interests of the Company (excluding from 126 134 this computation any net proceeds of a Public Equity Offering received by the Company that are used by it to redeem the Notes, as discussed above); plus (C) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Company's Board of Directors, whose good faith determination will be conclusive) from the issuance or sale (other than to a Subsidiary) of debt securities or Disqualified Stock that have been converted into or exchanged for Qualified Stock of the Company, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange; plus (D) without duplication, the Net Cash Proceeds received by the Company or a Wholly Owned Restricted Subsidiary upon the sale of any of its Unrestricted Subsidiaries; plus (E) $5,000,000. Notwithstanding the foregoing, the Company and any of its Restricted Subsidiaries may take any of the following actions, so long as (with respect to clauses (f) and (g) below) no Default or Event of Default has occurred and is continuing or would occur: (a) The payment of any dividend within 60 days after the date of declaration thereof, if at the declaration date such payment would not have been prohibited by the foregoing provision. (b) The repurchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company. (c) The purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Debt in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of shares of, Qualified Stock of the Company. (d) The purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Debt in exchange for, or out of the net cash proceeds of a substantially concurrent issuance or sale (other than to a Subsidiary) of, Subordinated Debt, so long as the Company or a Restricted Subsidiary would be permitted to refinance such original Subordinated Debt with such new Subordinated Debt pursuant to clause (xi) of the definition of Permitted Debt. (e) The repurchase of any Subordinated Debt at a purchase price not greater than 101% of the principal amount of such Subordinated Debt in the event of a "change of control" in accordance with provisions similar to the "Purchase of Notes upon a Change of Control" covenant; provided that, prior to such repurchase, the Company has made the Change of Control Offer as provided in such covenant with respect to the Notes and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer. (f) The payment by the Company to Citadel Communications for the purpose of the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of Citadel Communications, options on any such shares or related stock appreciation rights or similar securities held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates) or by any employee benefit plan, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate cash consideration paid for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock after the date of the Closing Date does not exceed $1,000,000 in any fiscal year. (g) Loans or advances to officers, directors and employees of Citadel Communications, the Company or any of its Restricted Subsidiaries made in the ordinary course of business after the Closing Date in an aggregate principal amount not to exceed $1,000,000 at any one time outstanding. (h) Payments to or on behalf of Citadel Communications to pay its operating and administrative expenses attributable to the Company including, without limitation, legal and audit expenses, directors' 127 135 fees, fees payable in respect of the trustee and back-up trustees under the Voting Trust Agreement, and Commission compliance expenses, in an amount not to exceed the greater of $1,000,000 per fiscal year and 1% of the net revenues of the Company for the preceding fiscal year. The payments described in clauses (b), (c), (e), (f) and (g) of this paragraph will be Restricted Payments that will be permitted to be taken in accordance with this paragraph but will reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii), and the payments described in clauses (a), (d) and (h) of this paragraph will be Restricted Payments that will be permitted to be taken in accordance with this paragraph and will not reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii). For the purpose of making any calculations under the Notes Indenture (i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will be deemed to have made an Investment in an amount equal to the fair market value of the net assets of such Restricted Subsidiary at the time of such designation as determined by the Board of Directors of the Company, whose good faith determination will be conclusive, (ii) any property transferred to or from an Unrestricted Subsidiary will be valued at fair market value at the time of such transfer, as determined by the Board of Directors of the Company, whose good faith determination will be conclusive and (iii) subject to the foregoing, the amount of any Restricted Payment, if other than cash, will be determined by the Board of Directors of the Company, whose good faith determination will be conclusive. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other person that thereafter becomes a Restricted Subsidiary, such Investment will no longer be counted as a Restricted Payment for purposes of calculating the aggregate amount of Restricted Payments. If an Investment resulted in the making of a Restricted Payment, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise), to the extent such net reduction is not included in Consolidated Adjusted Net Income; provided that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (x) the cash proceeds received by the Company and any of its Restricted Subsidiaries in connection with such net reduction and (y) the initial amount of such Investment. In computing Consolidated Adjusted Net Income for purposes of the foregoing clause (iii)(A), (i) the Company may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company will be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment that, at the time of the making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of the Notes Indenture, such Restricted Payment will be deemed to have been made in compliance with the Notes Indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. PURCHASE OF NOTES UPON A CHANGE OF CONTROL. If a Change of Control occurs at any time, then each holder of Notes will have the right to require that the Company purchase such holder's Notes, in whole or in part in integral multiples of $1,000, at a purchase price in cash equal to 101% of the principal amount of such Notes, plus accrued and unpaid interest, if any, to the date of purchase, pursuant to the offer described below (the "Change of Control Offer") and the other procedures set forth in the Notes Indenture. Within 30 days following any Change of Control, the Company will notify the Trustee thereof and give written notice of such Change of Control to each holder of Notes by first-class mail, postage prepaid, at its address appearing in the security register, stating, among other things, (i) the purchase price and the purchase date, which will be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is 128 136 mailed or such later date as is necessary to comply with requirements under the Exchange Act; (ii) that any Notes not tendered will continue to accrue interest; (iii) that, unless the Company defaults in the payment of the purchase price, any Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control purchase date; and (iv) certain other procedures that a holder of Notes must follow to accept a Change of Control Offer or to withdraw such acceptance. If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the purchase price for all of the Notes that might be tendered by holders of the Notes seeking to accept the Change of Control Offer. The Credit Facility prohibits the purchase of Notes by the Company prior to full repayment of indebtedness under the Credit Facility and, upon a Change of Control, all amounts outstanding under the Credit Facility become due and payable. There can be no assurance that in the event of a Change of Control the Company will be able to obtain the necessary consents from the lenders under the Credit Facility to consummate a Change of Control Offer. The failure of the Company to make or consummate the Change of Control Offer or pay the applicable Change of Control purchase price when due would result in an Event of Default and would give the Trustee and the holders of the Notes the rights described under "Events of Default." In addition to the obligations of the Company under the Notes Indenture with respect to the Notes in the event of a Change of Control, the Credit Facility contains a provision designating a change of control as described therein as an event of default, which would obligate the Company to repay amounts outstanding under the Credit Facility upon an acceleration of the indebtedness outstanding thereunder. The existence of a holder's right to require the Company to purchase such holder's Notes upon a Change of Control may deter a third party from acquiring the Company in a transaction that constitutes a Change of Control. The definition of "Change of Control" in the Notes Indenture is limited in scope. The provisions of the Notes Indenture may not afford holders of Notes the right to require the Company to repurchase such Notes in the event of a highly leveraged transaction or certain transactions with the Company's management or its affiliates, including a reorganization, restructuring, merger or similar transaction involving the Company (including, in certain circumstances, an acquisition of the Company by management or its affiliates) that may adversely affect holders of the Notes, if such transaction is not a transaction defined as a Change of Control. See "Certain Definitions" above for the definition of "Change of Control." A transaction involving the Company's management or its affiliates, or a transaction involving a recapitalization of the Company, would result in a Change of Control if it is the type of transaction specified in such definition. The Company will comply with the applicable tender offer rules including Rule 14e-l under the Exchange Act, and any other applicable securities laws and regulations in connection with a Change of Control Offer. The Company will not, and will not permit any of its Restricted Subsidiaries to, create any restriction (other than restrictions existing under Debt as in effect on the Closing Date or in refinancings or replacements of such Debt) that would materially impair the ability of the Company to make a Change of Control Offer to purchase the Notes or, if such Change of Control Offer is made, to pay for the Notes tendered for purchase. LIMITATION ON CERTAIN ASSET SALES. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any Asset Sale unless (i) the consideration received by the Company or such Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold (as determined by the Board of Directors of the Company, whose good faith determination will be conclusive) and (ii) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 80% (A) cash or cash equivalents and/or (B) the assumption by the transferee of Debt of the Company or a Restricted Subsidiary ranked senior to or pari passu with the Notes and release of the Company or such Restricted Subsidiary from all liability on such Debt. (b) If the Company or any of its Restricted Subsidiaries engages in an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale, (i) apply all or a portion of such Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Facility or to the repayment of other Senior Debt of the Company or a Subsidiary Notes Guarantor or (ii) invest (or enter into one or more legally binding 129 137 agreements to invest) all or a portion of such Net Cash Proceeds 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 broadcast business or businesses reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, 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." (c) When the aggregate amount of Excess Proceeds exceeds $5,000,000, the Company will, within 30 days thereafter, make an offer to purchase from all holders of Notes, on a pro rata basis, in accordance with the procedures set forth in the Notes Indenture, the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date such offer to purchase is consummated. To the extent that the aggregate principal amount of the Notes tendered pursuant to such offer to purchase is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of the Notes validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the Notes to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset to zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act to the extent applicable in connection with the repurchase of Notes pursuant to an offer to purchase Notes. LIMITATION ON ASSET SWAPS. The Notes Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any Asset Swap, unless: (i) at the time of entering into the Asset Swap and immediately after giving effect to the proposed Asset Swap, no Default or Event of Default has occurred and is continuing or would occur as a consequence thereof; (ii) the Company would, at the time of entering into the Asset Swap and after giving pro forma effect to the proposed Asset Swap, as if such Asset Swap had occurred at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of the "Limitation on Debt" covenant; (iii) the respective aggregate fair market values of the assets being purchased and sold by the Company or any of its Restricted Subsidiaries are substantially the same at the time of entering into the Asset Swap (or any difference in such aggregate fair market values is substantially compensated for by an equalizing (i) payment of cash, (ii) assumption of liabilities or (iii) taking of assets subject to liabilities); and (iv) at the time of the consummation of the first to occur of the relinquishment or the replacement of assets constituting part of the proposed Asset Swap, the percentage of any decline in the fair market value of the asset or assets being acquired by the Company and its Restricted Subsidiaries shall not be significantly greater than the percentage of any decline in the fair market value of the assets being disposed of by the Company, calculated from the time the last agreement constituting part of the Asset Swap was entered into. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or suffer to exist any transaction with, or for the benefit of, any Affiliate of the Company unless (a) such transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been obtained in an arm's length transaction with third parties who are not Affiliates and (b) either (i) with respect to any transaction or series of transactions involving aggregate payments in excess of $1,000,000, but less than $5,000,000, the Company delivers an officers' certificate to the Trustee certifying that such transaction or transactions comply with clause (a) above or (ii) with respect to a transaction or series of transactions involving aggregate payments equal to or greater than $5,000,000, such transaction or transactions have been approved by the Board of Directors (including a majority of the Disinterested Directors) of the Company or 130 138 the Company has obtained a written opinion from a nationally recognized investment banking firm to the effect that such transaction or transactions are fair to the Company or such Restricted Subsidiary from a financial point of view. The foregoing covenant does not restrict any of the following: (A) Transactions among the Company and/or any of its Restricted Subsidiaries. (B) The Company from paying reasonable and customary regular compensation, fees, indemnification and similar arrangements and payments thereunder to directors of the Company or any of its Restricted Subsidiaries who are not employees of the Company or any of its Restricted Subsidiaries. (C) Employment agreements or compensation or employee benefits arrangements with any officer, director or employee of the Company or its Restricted Subsidiaries entered into in the ordinary course of business (including customary benefits thereunder) (it being understood that benefits of the nature in place as of the Closing Date shall be deemed permissible hereunder). (D) The performance of the Company's obligations under (a) that certain lease agreement effective December 29, 1995 with Wilson Aviation, L.L.C. relating to the lease of an airplane, (b) that certain agreement not to compete dated December 31, 1996 with DVS Management, Inc. and (c) that certain Voting Trust Agreement dated March 17, 1997 among Citadel Communications, ABRY II, ABRY/CIP and others and the related letter agreement dated March 17, 1997 among Citadel Communications, ABRY II, ABRY/CIP and others (the "Affiliate Agreements"); provided that any amendments or modifications to the terms of the Affiliate Agreements (1) are no less favorable to the Company than those that could have been obtained in an arm's length transaction with third parties who are not Affiliates and (2) are approved by the Board of Directors (including a majority of the Disinterested Directors) of the Company. (E) The Company from making payments to Citadel Communications to pay its operating and administrative expenses attributable to the Company including, without limitation, legal and audit expenses, directors' fees and Commission compliance expenses, in an amount not to exceed the greater of $1,000,000 million per fiscal year and 1% of the net revenues of the Company for the preceding fiscal year. (F) The Company or a Restricted Subsidiary from transferring up to $500,000 of properties and assets, including cash, to a joint venture in which the Company or a Restricted Subsidiary has an equity interest and in which one or more directors or officers of the Company or Citadel Communications has an equity interest, which joint venture is engaged in the internet service provider business. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any of its Restricted Subsidiaries 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 of its Restricted Subsidiaries to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock, (b) pay any Debt owed to the Company or any other Restricted Subsidiary, (c) make loans or advances to the Company or any other Restricted Subsidiary or (d) transfer any of its properties or assets to the Company or any other Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of any of the following: (i) The Credit Facility and any agreement in effect on the Closing Date and listed on a schedule attached to the Notes Indenture. (ii) Customary non-assignment provisions of any lease governing a leasehold interest of the Company or any of its Restricted Subsidiaries. (iii) The refinancing or successive refinancings of Debt referred to in clause (i) or (iv), so long as such encumbrances or restrictions are no less favorable to the Company or any of its Restricted Subsidiaries than those contained in such original agreement. 131 139 (iv) Any agreement or other instrument of a person acquired by the Company or any of its Restricted Subsidiaries 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 person, other than the person, or the property or assets of the person, so acquired. (v) Any agreement providing for the incurrence of Debt by a Restricted Subsidiary pursuant to paragraph (b) of the "Limitation on Debt" covenant, provided that such Restricted Subsidiary becomes a Subsidiary Notes Guarantor. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company will not sell, and will not permit any of its Restricted Subsidiaries, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants, or other rights to purchase shares of such Capital Stock) except (i) to the Company or a Wholly Owned Restricted Subsidiary, (ii) issuances or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law, or issuances or sales to directors of directors' qualifying shares, (iii) if, immediately after giving effect to such issuance or sale, neither the Company nor any Subsidiary owns any shares of Capital Stock of such Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) or (iv) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such person remaining after giving effect to such issuance or sale would have been permitted to be made under the "Limitation on Restricted Payments" covenant if made on the date of such issuance or sale. In addition, the Company will not, and will not permit any of its Restricted Subsidiaries to, sell, transfer or otherwise dispose of any of its properties or assets to an Unrestricted Subsidiary other than in the ordinary course of business. UNRESTRICTED SUBSIDIARIES. (a) The Board of Directors of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company nor any of its Restricted Subsidiaries is directly or indirectly liable for any Debt of such Subsidiary, (ii) no default with respect to any Debt of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Debt of the Company or any of its Restricted Subsidiaries to declare a default on such other Debt 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 the "Limitation on Restricted Payments" covenant, (iv) neither the Company nor any of its Restricted Subsidiaries 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 of its Restricted Subsidiaries has any obligation to subscribe for additional shares of Capital Stock or other equity interest in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results. Notwithstanding the foregoing, the Company may not designate the License Subsidiary, or any Subsidiary to which any properties or assets (other than current assets) owned by the Company or the License Subsidiary on the Closing Date have been transferred, as an Unrestricted Subsidiary. (b) The Board of Directors of the Company may designate any of its Unrestricted Subsidiaries as a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Debt by a Restricted Subsidiary of any outstanding Debt of such Unrestricted Subsidiary and such designation will only be permitted if (i) such Debt is permitted under the "Limitation on Debt" covenant and (ii) no Default or Event of Default will have occurred and be continuing following such designation. LIMITATION ON OTHER SENIOR SUBORDINATED DEBT. The Company and each Subsidiary Notes Guarantor will not, directly or indirectly, incur or otherwise permit to exist any Debt that is subordinate in right of payment to any Debt of the Company or such Subsidiary Notes Guarantor, as the case may be, unless such Debt is also pari passu with the Notes or the Subsidiary Notes Guarantee of the Notes by such Subsidiary Notes Guarantor, as the case may be, or subordinate in right of payment to the Notes or such Subsidiary Notes Guarantee of the Notes, as the case may be, to at least the same extent as the Notes or such Subsidiary 132 140 Notes Guarantee are subordinate in right of payment to Senior Debt or all senior debt of the Subsidiary Notes Guarantors, as the case may be, as set forth in the Notes Indenture. SUBSIDIARY NOTES GUARANTEES. The Subsidiary Notes Guarantors will, jointly and severally, unconditionally guarantee the due and punctual payment of the principal of, premium, if any, and interest on the Notes on a senior subordinated basis pursuant to the Subsidiary Notes Guarantees as described under "-- Subordination." The Subsidiary Notes Guarantors may be released from their obligations under the Subsidiary Notes Guarantees as described under "-- Defeasance and Covenant Defeasance of the Notes Indenture" and a Subsidiary Notes Guarantor may be released from its obligations under its Subsidiary Notes Guarantee as described under "Guarantees." The Company will (i) cause each person that, after the Closing Date, becomes a Wholly Owned Restricted Subsidiary of the Company, as well as each other Restricted Subsidiary that guarantees any other Debt of the Company, to execute and deliver a supplemental indenture and thereby become a Subsidiary Notes Guarantor bound by the Subsidiary Notes Guarantee of the Notes in the form set forth in the Notes Indenture (without such Subsidiary Notes Guarantor being required to execute and deliver its Subsidiary Notes Guarantee endorsed on the Notes) and (ii) deliver to the Trustee an opinion of counsel, in form and substance reasonably satisfactory to the Trustee, that the Subsidiary Notes Guarantee of such Subsidiary Notes Guarantor is a valid and legally binding obligation of such Subsidiary Notes Guarantor. GUARANTEES OF DEBT BY RESTRICTED SUBSIDIARIES. The Company will not permit any of its Restricted Subsidiaries that is not a Subsidiary Notes Guarantor, directly or indirectly, to guarantee, assume or in any other manner become liable for the payment of any Debt of the Company or any Debt of any other Restricted Subsidiary, unless (a) such Restricted Subsidiary simultaneously executes and delivers a Subsidiary Notes Guarantee and (b) with respect to any guarantee of Subordinated Debt by a Restricted Subsidiary, any such guarantee is subordinated to such Restricted Subsidiary's Subsidiary Notes Guarantee at least to the same extent as such Subordinated Debt is subordinated to the Notes, provided that the foregoing provision will not be applicable to any guarantee by any such Restricted Subsidiary that existed at the time such person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such person becoming a Restricted Subsidiary. LIMITATION ON LIENS. The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, affirm or suffer to exist any Lien of any kind securing any Pari Passu Debt or Subordinated Debt (including any assumption, guarantee or other liability with respect thereto by any Restricted Subsidiary) upon any property or assets (including any intercompany notes) of the Company or any of its Restricted Subsidiaries now owned or acquired after the Closing Date, or any income or profits therefrom, unless the Notes are directly secured equally and ratably with (or prior to in the case of Subordinated Debt) the obligation or liability secured by such Lien; provided that the foregoing will not apply to Liens securing Debt of a person acquired by the Company or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation thereof), which Lien is not applicable to any person, or the properties or assets of any person, other than the person, or the property or assets of the person, so acquired. REPORTS. At all times from and after the earlier of (i) the date of the commencement of the Exchange Offer or the effectiveness of a Shelf Registration Statement relating to the Series A Notes (the "Registration") and (ii) the date 180 days after the Closing Date, in either case, whether or not the Company is then required to file reports with the Commission, the Company will file with the Commission all such reports and other information as it would be required to file with the Commission by Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company will supply the Trustee and each holder, or will supply to the Trustee for forwarding to each such holder, without cost to such holder, copies of such reports and other information. In addition, at all times prior to the earlier of the date of the Registration and the date 180 days after the Closing Date, the Company will, at its cost, deliver to each holder of the Notes quarterly and annual reports substantially equivalent to those that would be required by the Exchange Act. In addition, at all times prior to the Registration, upon the request of any holder or any prospective purchaser of the Notes designated by a holder, the Company will supply to such holder or such prospective purchaser the information required under Rule 144A under the Securities Act. 133 141 CONSOLIDATION, MERGER AND SALE OF ASSETS The Company will not consolidate with or merge with or into any other person or, directly or indirectly, convey, transfer or lease its properties and assets substantially as an entirety to any person or persons, unless: (a) Either (i) the Company is the surviving corporation or (ii) the person (if other than the Company) formed by such consolidation or into which the Company is merged or the person that acquires by sale, assignment, transfer, lease or other disposition the properties and assets of the Company substantially as an entirety (the "Surviving Entity") (A) is a corporation, partnership or trust organized and validly existing under the laws of the United States, any state thereof or the District of Columbia and (B) expressly assumes, by a supplemental indenture in form satisfactory to the Trustee, all of the Company's obligations under the Notes Indenture and the Notes. (b) Immediately after giving effect to such transaction and treating any obligation of the Company or a Restricted Subsidiary in connection with or as a result of such transaction as having been incurred at the time of such transaction, no Default or Event of Default has occurred and is continuing. (c) Immediately after giving effect to such transaction on a pro forma basis (on the assumption that the transaction occurred at the beginning of the most recently ended four full fiscal quarter period for which internal financial statements are available), the Company (or the Surviving Entity if the Company is not the continuing obligor under the Notes Indenture) could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of the "Limitation on Debt" covenant. (d) If the Company is not the continuing obligor under the Notes Indenture, each Subsidiary Notes Guarantor, unless it is the other party to the transaction described above, has by supplemental indenture confirmed that its Subsidiary Notes Guarantee applies to the Surviving Entity's obligations under the Notes Indenture and the Notes. (e) If any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of the "Limitation on Liens" covenant are complied with. (f) The Company delivers, or causes to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an officers' certificate and an opinion of counsel, each stating that such transaction complies with the requirements of the Notes Indenture. In the event of any transaction described in and complying with the conditions listed in the first paragraph of this covenant in which the Company is not the continuing obligor under the Notes Indenture, the Surviving Entity will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Notes Indenture, and thereafter the Company will, except in the case of a lease, be discharged from all its obligations and covenants under the Notes Indenture and Notes. EVENTS OF DEFAULT Each of the following are "Events of Default" under the Notes Indenture: (a) 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. (b) Default in the payment of the principal of (or premium, if any, on) any Note when due. (c) Failure to perform or comply with the Notes Indenture provisions described under "Consolidation, Merger and Sale of Assets." (d) Default in the performance, or breach, of any covenant or agreement of the Company or any Subsidiary Notes Guarantor contained in the Notes Indenture or any Subsidiary Notes Guarantee (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere herein), and continuance of such default or breach for a period of 60 days after written notice 134 142 has been given to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the Notes then outstanding. (e) (i) An event of default has occurred under any mortgage, bond, indenture, loan agreement or other document evidencing an issue of Debt of the Company or any Significant Subsidiary, which issue has an aggregate outstanding principal amount of not less than $5,000,000, and such default has resulted in such Debt becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (ii) a default in any payment when due at final maturity of any such Debt. (f) Failure by the Company or any of its Restricted Subsidiaries to pay one or more final judgments the uninsured portion of which exceeds in the aggregate $5,000,000, which judgment or judgments are not paid, discharged or stayed for a period of 60 days. (g) Any Subsidiary Notes Guarantee ceases to be in full force and effect or is declared null and void or any Subsidiary Notes Guarantor denies that it has any further liability under any Subsidiary Notes Guarantee, or gives notice to such effect (other than by reason of the termination of the Notes Indenture or the release of any Subsidiary Notes Guarantee in accordance with the Notes Indenture), and such condition has continued for a period of 30 days after written notice of such failure requiring the Subsidiary Notes Guarantor and the Company to remedy the same has been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the holders of 25% in the aggregate principal amount of the Notes then outstanding. (h) The occurrence of certain events of bankruptcy, insolvency or reorganization with respect to the Company or any Significant Subsidiary. If an Event of Default (other than as specified in clause (h) above) occurs and is continuing, the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes then outstanding may, and the Trustee at the request of such holders shall, declare the principal of all of the outstanding Notes immediately due and payable, by a notice in writing to the Company (and to the Trustee if given by the Holders) and, if the Credit Facility is in effect, to the Credit Facility Agent, and, upon any such declaration, such principal will become due and payable immediately. If an Event of Default specified in clause (h) above occurs and is continuing, then such principal will ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of Notes. At any time after a declaration of acceleration under the Notes Indenture, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the holders of a majority in aggregate principal amount of the outstanding Notes, by written notice to the Company and the Trustee, may rescind such declaration and its consequences if (i) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Notes, (B) all unpaid principal of (and premium, if any, on) any outstanding Notes that has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Notes, (C) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue principal amount at the rate borne by the Notes and (D) all sums paid or advanced by the Trustee under the Notes Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (ii) all Events of Default, other than the non-payment of principal of (or premium, if any, on) or interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived. No such rescission will affect any subsequent default or impair any right consequent thereon. The holders of not less than a majority in aggregate principal amount of the outstanding Notes may, on behalf of the holders of all of the Notes, waive any past defaults under the Notes Indenture, except a default in the payment of the principal of (and premium, if any) or interest on any Note, or in respect of a covenant or provision that under the Notes Indenture cannot be modified or amended without the consent of the holder of each Note outstanding. If a Default or an Event of Default occurs and is continuing and is known to the Trustee, the Trustee will mail to each holder of the Notes notice of the Default or Event of Default within 90 days after the occurrence 135 143 thereof. Except in the case of a Default or an Event of Default in payment of principal of (and premium, if any, on) or interest on any Notes, the Trustee may withhold the notice to the holders of the Notes if a committee of its trust officers in good faith determines that withholding such notice is in the interests of the holders of the Notes. The Company is required to furnish to the Trustee annual statements as to the performance by the Company and the Subsidiary Notes Guarantors of their respective obligations under the Notes Indenture and as to any default in such performance. The Company is also required to notify the Trustee within five days of any officer of the Company having knowledge of any Default. DEFEASANCE OR COVENANT DEFEASANCE OF NOTES INDENTURE The Company may, at its option and at any time, terminate the obligations of the Company and any Subsidiary Notes Guarantors with respect to the outstanding Notes ("defeasance"). Such defeasance means that the Company will be deemed to have paid and discharged the entire Debt represented by the outstanding Notes, except for (i) the rights of holders of outstanding Notes to receive payments in respect of the principal of (and premium, if any, on) and interest on such Notes when such payments are due, (ii) the Company's obligations to issue temporary Notes, register the transfer or exchange of any Notes, replace mutilated, destroyed, lost or stolen Notes, maintain an office or agency for payments in respect of the Notes and segregate and hold such payments in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee and (iv) the defeasance provisions of the Notes Indenture. In addition, the Company may, at its option and at any time, elect to terminate the obligations of the Company and any Subsidiary Notes Guarantor with respect to certain covenants set forth in the Notes Indenture and described under "Certain Covenants" above, and any omission to comply with such obligations would not constitute a Default or an Event of Default with respect to the Notes ("covenant defeasance"). In order to exercise either defeasance or covenant defeasance, (a) the Company must irrevocably deposit or cause to be deposited with the Trustee, as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the holders of the Notes, money in an amount, or U.S. government securities that through the scheduled payment of principal and interest thereon will provide money in an amount, or a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the principal of (and premium, if any, on) and interest on the outstanding Notes at maturity (or upon redemption, if applicable) of such principal or installment of interest; (b) no Default or Event of Default has occurred and is continuing on the date of such deposit or, insofar as an event of bankruptcy under clause (h) of "Events of Default" above is concerned, at any time during the period ending on the 91st day after the date of such deposit; (c) such defeasance or covenant defeasance must not result in a breach or violation of, or constitute a default under, the Notes Indenture or any material agreement or instrument to which the Company or any Subsidiary Notes Guarantor is a party or by which it is bound or cause the Trustee or the trust so created to be subject to the Investment Company Act of 1940, as amended; (d) in the case of defeasance, the Company must deliver to the Trustee an opinion of counsel stating that the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or since the date hereof, there has been a change in applicable federal income tax law, to the effect, and based thereon such opinion must confirm that, the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (e) in the case of covenant defeasance, the Company must have delivered to the Trustee an opinion of counsel to the effect that the holders of the Notes outstanding will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (f) the Company must have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to either the defeasance or the covenant defeasance, as the case may be, have been complied with. 136 144 SATISFACTION AND DISCHARGE The Notes Indenture will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the Notes, as expressly provided for in the Notes Indenture) and, upon the request of the Company, the Trustee, at the expense of the Company, will execute proper instruments acknowledging satisfaction and discharge of the Notes Indenture when (a) either (i) all the Notes theretofore authenticated and delivered (other than destroyed, lost or stolen Notes that have been replaced or paid and Notes that have been subject to defeasance as described under "Defeasance or Covenant Defeasance of Notes Indenture") have been delivered to the Trustee for cancellation or (ii) all Notes not theretofore delivered to the Trustee for cancellation (A) have become due and payable, (B) will become due and payable at Stated Maturity within one year or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in trust for the purpose in an amount sufficient to pay and discharge the entire Debt on such Notes not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any, on) and interest to the date of such deposit (in the case of Notes that have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (b) the Company has paid or caused to be paid all sums payable under the Notes Indenture by the Company; and (c) the Company has delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided in the Notes Indenture relating to the satisfaction and discharge of the Notes Indenture have been complied with. AMENDMENTS AND WAIVERS Modifications and amendments of the Notes Indenture and any Subsidiary Notes Guarantee may be made by the Company, any affected Subsidiary Notes Guarantor and the Trustee with the consent of the holders of a majority in aggregate outstanding principal amount of the Notes; provided, however, that no such modification or amendment may, without the consent of the holder of each outstanding Note affected thereby, (a) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the place of payment where or change the coin or currency in which, any Note or any premium or 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); (b) reduce the percentage in principal amount of outstanding Notes, the consent of whose holders is required for any such amendment or for any waiver of compliance with certain provisions of, or certain defaults and their consequences provided for under, the Notes Indenture; (c) modify any of the provisions of the Notes Indenture relating to the subordination of the Notes or the Subsidiary Notes Guarantees in a manner materially adverse to the holders; or (d) waive a default in the payment of principal of, or premium, if any, or interest on the Notes or reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose holders is necessary for waiver of compliance with certain provisions of the Notes Indenture or for waiver of certain defaults. The holders of a majority in aggregate principal amount of the Notes outstanding may waive compliance with certain restrictive covenants and provisions of the Notes Indenture. Without the consent of any holders, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental to the Notes Indenture for any of the following purposes: (1) to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company in the Notes Indenture and in the Notes; or (2) to add to the covenants of the Company for the benefit of the holders, or to surrender any right or power herein conferred upon the Company; or (3) to add additional Events of Default; or (4) to provide for uncertificated Notes in addition to or in place of the certificated Notes; or (5) to evidence and provide for the acceptance of appointment under 137 145 the Notes Indenture by a successor Trustee; or (6) to secure the Notes; or (7) to cure any ambiguity, to correct or supplement any provision in the Notes Indenture that may be defective or inconsistent with any other provision in the Notes Indenture, or to make any other provisions with respect to matters or questions arising under the Notes Indenture, provided that such actions pursuant to this clause do not adversely affect the interests of the holders in any material respect; or (8) to comply with any requirements of the Commission in order to effect and maintain the qualification of the Notes Indenture under the Trust Indenture Act. THE TRUSTEE The Bank of New York, the Trustee under the Notes Indenture, is the initial paying agent and registrar for the Notes. The Bank of New York is a lender under the Credit Facility. The Notes Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Notes Indenture. Under the Notes Indenture, the holders of a majority in outstanding principal amount of the Notes will have the right to direct the time, method and place of conducting any proceeding or exercising any remedy available to the Trustee, subject to certain exceptions. If an Event of Default has occurred and is continuing, the Trustee will exercise such rights and powers vested in it under the Notes Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. The Notes Indenture and provisions of the Trust Indenture Act incorporated by reference therein, contain limitations on the rights of the Trustee thereunder, should it become a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions; provided, however, that, if it acquires any conflicting interest (as defined), it must eliminate such conflict or else resign. GOVERNING LAW The Notes Indenture, the Notes and the Subsidiary Notes Guarantees are governed by, and construed in accordance with, the laws of the State of New York. 138 146 DESCRIPTION OF THE EXCHANGEABLE PREFERRED STOCK AND EXCHANGE DEBENTURES EXCHANGEABLE PREFERRED STOCK As used in this "Description of the Exchangeable Preferred Stock and Exchange Debentures" section, the term "Company" refers to Citadel Broadcasting Company, but not any current or future subsidiary (unless the context otherwise requires). The following summary of the material provisions of the Exchangeable Preferred Stock does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Certificate of Designation relating thereto, a copy of which is available from the Company. For definitions of certain capitalized terms used in the following summary, see "-- Certain Definitions" below. Other capitalized terms used herein and not otherwise defined have the meanings set forth in the Certificate of Designation. GENERAL As of the date hereof, the Company is authorized to issue 4,000,000 shares of preferred stock, no par value, and, as of the date hereof, there are 1,000,000 shares of preferred stock issued and outstanding and designated as 13 1/4% Series A Exchangeable Preferred Stock. Subject to certain conditions, the Exchangeable Preferred Stock will be exchangeable for the Exchange Debentures at the option of the Company on any dividend payment date. The Series B Exchangeable Preferred Stock, when issued by the Company, will be fully paid and non-assessable and the holders thereof will not have any subscription or preemptive rights in connection therewith. The Bank of New York, 101 Barclay Street, New York, New York 10286, is the transfer agent and registrar (the "Transfer Agent") for the Exchangeable Preferred Stock. The Bank of New York is a lender under the Credit Facility. RANKING The Exchangeable Preferred Stock, with respect to dividend rights and rights on liquidation, winding-up and dissolution of the Company, ranks (i) senior to all classes of common stock and to each other class of capital stock or series of preferred stock established after June 30, 1997 by the Board of Directors of the Company the terms of which expressly provide that it ranks junior to the Exchangeable Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company (collectively referred to, together with all classes of common stock of the Company, as "Junior Stock"); (ii) on a parity with each other class of capital stock or series of preferred stock established after June 30, 1997 by the Board of Directors of the Company the terms of which expressly provide that such class or series will rank on a parity with the Exchangeable Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company (collectively referred to as "Parity Stock"); and (iii) subject to certain conditions, described below, junior to each class of capital stock or series of preferred stock established after June 30, 1997 by the Board of Directors of the Company the terms of which do not expressly provide that such class or series will rank junior to, or on a parity with, the Exchangeable Preferred Stock as to dividend rights and rights upon liquidation, winding-up and dissolution of the Company (collectively referred to as "Senior Stock"). The Company may not authorize any new class of Senior Stock (other than the Exchangeable Preferred Stock) without the approval of the holders of at least a majority of the shares of Exchangeable Preferred Stock then outstanding, voting or consenting, as the case may be, as one class. DIVIDENDS Holders of the outstanding shares of Exchangeable Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors of the Company, out of funds legally available therefor, dividends on the Exchangeable Preferred Stock. In the event that, after July 1, 2002, cash dividends on the Exchangeable Preferred Stock are in arrears and unpaid for two or more semi-annual dividend periods (whether or not consecutive), holders of Exchangeable Preferred Stock will be entitled to certain voting rights. See "-- Voting Rights" below. All dividends will be cumulative, whether or not earned or declared. Dividends on the Series B 139 147 Exchangeable Preferred Stock will accumulate from and including its issuance date. Additionally, dividends on the Series B Exchangeable Preferred Stock will accumulate from the last dividend payment date on which dividends were paid on the Series A Exchangeable Preferred Stock surrendered in exchange therefor or, if no dividends have been paid on the Series A Exchangeable Preferred Stock, from July 3, 1997, the date of original issuance of the Series A Exchangeable Preferred Stock, to but not including the issuance date of the Series B Exchangeable Preferred Stock. Holders whose Series A Exchangeable Preferred Stock is accepted for exchange will be deemed to have waived the right to receive dividends accumulated on such Series A Exchangeable Preferred Stock. Accordingly, holders who exchange their Series A Exchangeable Preferred Stock will receive the same dividend payment on the next dividend payment date (expected to be January 1, 1998) that they would have received had they not accepted the Exchange Offer, except that if such dividend is not paid in cash, it will be paid in shares of Series B Exchangeable Preferred Stock instead of shares of Series A Exchangeable Preferred Stock. Dividends are payable semi-annually in arrears on January 1 and July 1 of each year, commencing on January 1, 1998, to holders of record on the December 15 or June 15 immediately preceding the relevant dividend payment date. On or before July 1, 2002, the Company may, at its option, pay dividends in cash or in additional fully paid and non-assessable shares of Exchangeable Preferred Stock having an aggregate liquidation preference equal to the amount of such dividends. After July 1, 2002, dividends may be paid only in cash. If any dividend (or portion thereof) payable on any dividend payment date on or before July 1, 2002 is not declared or paid in full in cash or in shares of Exchangeable Preferred Stock as described above on such dividend payment date, the amount of the accumulated and unpaid dividend will bear interest at the dividend rate on the Exchangeable Preferred Stock, compounding semi-annually from such dividend payment date until paid in full. If any dividend (or portion thereof) payable on any dividend payment date after July 1, 2002 is not declared or paid in full in cash on such dividend payment date, the amount of the accumulated and unpaid dividend will bear interest at the dividend rate on the Exchangeable Preferred Stock, compounding semi-annually from such dividend payment date until paid in full. The Credit Facility and the Notes Indenture limit the Company's ability under certain circumstances to pay cash dividends on its capital stock, and future agreements may contain similar or more restrictive limitations. See "Description of Indebtedness" and "Description of the Notes." No full dividends may be declared or paid or funds set apart for the payment of dividends on any Parity Stock for any period unless full cumulative dividends shall have been or contemporaneously are declared and paid (or are deemed declared and paid) in full or declared and, if payable in cash, a sum in cash sufficient for such payment set apart for such payment on the Exchangeable Preferred Stock. If full dividends are not so paid, the Exchangeable Preferred Stock will share dividends pro rata with the Parity Stock. No dividends may be paid or set apart for such payment on Junior Stock (except dividends on Junior Stock payable in additional shares of Junior Stock) and no Junior Stock or Parity Stock may be repurchased, redeemed or otherwise retired nor may funds be set apart for payment with respect thereto, if full cumulative dividends have not been paid in full (or deemed paid) on the Exchangeable Preferred Stock. Dividends on account of arrears for any past dividend period and dividends in connection with any optional redemption may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record of the Exchangeable Preferred Stock on such date, not more than 45 days prior to the payment thereof, as may be fixed by the Board of Directors of the Company. OPTIONAL REDEMPTION The Exchangeable Preferred Stock is redeemable (subject to contractual and other restrictions with respect thereto and to the legal availability of funds therefor) at the election of the Company, as a whole or from time to time in part, at any time on or after July 1, 2002 on not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of the then effective liquidation preference thereof) set forth below, plus, without duplication, all accumulated and unpaid dividends, if any, to the redemption date (including an amount in cash equal to a prorated dividend for the period from the dividend payment date 140 148 immediately prior to the redemption date to the redemption date), if redeemed during the 12-month period beginning on July 1 of the years indicated below:
YEAR REDEMPTION PRICE ------------------------------------------- ---------------- 2002....................................... 107.729% 2003....................................... 106.625 2004....................................... 105.521 2005....................................... 104.417 2006....................................... 103.313 2007....................................... 102.208 2008....................................... 101.104
In addition, at any time and from time to time prior to July 1, 2000, the Company may at its option redeem shares of Exchangeable Preferred Stock having an aggregate liquidation preference of up to 35% of the aggregate liquidation preference of all shares of Exchangeable Preferred Stock issued in this Exchangeable Preferred Stock Offering or issued as dividends on the Exchangeable Preferred Stock, with the net proceeds of one or more Public Equity Offerings at a redemption price equal to 113.25% of the liquidation preference thereof, plus without duplication, accumulated and unpaid dividends, if any, to the redemption date (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the redemption date to the redemption date), subject to the right of holders of record on the relevant record date to receive dividends due on a dividend payment date; provided that, immediately after giving effect to any such redemption, at least $75,000,000 in aggregate liquidation preference of the Exchangeable Preferred Stock remains outstanding. Any such redemption must be made within 90 days of the related Public Equity Offering. No optional redemption may be authorized or made unless on or prior to such redemption full unpaid cumulative dividends shall have been paid or a sum set apart for such payment on the Exchangeable Preferred Stock. If less than all the Exchangeable Preferred Stock is to be redeemed, the particular shares to be redeemed will be determined pro rata, except that the Company may redeem such shares held by any holder of fewer than 100 shares without regard to such pro rata redemption requirement. If any Exchangeable Preferred Stock is to be redeemed in part, the notice of redemption that relates to such Exchangeable Preferred Stock shall state the portion of the liquidation preference to be redeemed. New shares of Exchangeable Preferred Stock having an aggregate liquidation preference equal to the unredeemed portion will be issued in the name of the holder thereof upon cancellation of the original shares of Exchangeable Preferred Stock and, unless the Company fails to pay the redemption price on the redemption date, after the redemption date dividends will cease to accumulate on the Exchangeable Preferred Stock called for redemption. See "Description of Indebtedness." The Credit Facility and the Notes Indenture limit the Company's ability to redeem the Exchangeable Preferred Stock, and future agreements may contain similar or more restrictive limitations. MANDATORY REDEMPTION The Exchangeable Preferred Stock is also subject to mandatory redemption (subject to the legal availability of funds therefor) in whole on July 1, 2009 (the "Mandatory Redemption Date"), at a redemption price equal to 100% of the liquidation preference thereof, plus, without duplication, all accumulated and unpaid dividends, if any, to the date of redemption. Future agreements of the Company may restrict or prohibit the Company from redeeming the Exchangeable Preferred Stock on such mandatory redemption date. 141 149 PROCEDURE FOR REDEMPTION On and after the redemption date, unless the Company defaults in the payment of the applicable redemption price, dividends will cease to accumulate on shares of Exchangeable Preferred Stock called for redemption and all rights of holders of such shares will terminate except for the right to receive the redemption price, without interest; provided, however, that if a notice of redemption shall have been given and the funds necessary for redemption (including an amount in respect of all dividends that will accrue to the redemption date) shall have been segregated and irrevocably set apart by the Company, in trust for the benefit of the holders of the shares called for redemption, then dividends shall cease to accumulate on the redemption date on the shares to be redeemed and, at the close of business on the day on which such funds are segregated and set apart, the holders of the shares to be redeemed shall cease to be stockholders of the Company and shall be entitled only to receive the redemption price for such shares. The Company will send a written notice of redemption by first class mail to each holder of record of shares of Exchangeable Preferred Stock, no fewer than 30 days nor more than 60 days prior to the date fixed for such redemption at its registered address. Shares of Exchangeable Preferred Stock issued and reacquired will, upon compliance with the applicable requirements of Nevada law, have the status of authorized but unissued shares of preferred stock of the Company undesignated as to series and may, with any and all other authorized but unissued preferred stock of the Company, be designated or redesignated and issued or reissued, as the case may be, as part of any series of preferred stock of the Company, except that any issuance or reissuance of shares of Exchangeable Preferred Stock must be in compliance with the Certificate of Designation. EXCHANGE The Company may, at its option, subject to certain conditions, on any scheduled dividend payment date, exchange the Exchangeable Preferred Stock, in whole but not in part, for the Exchange Debentures; provided that (i) on the date of such exchange there are no accumulated and unpaid dividends on the Exchangeable Preferred Stock (including the dividend payable on such date) or other contractual impediments to such exchange; and (ii) immediately after giving effect to such exchange, no Default or Event of Default (each as defined in the Exchange Indenture) would exist under the Exchange Indenture and no material breach or default would exist under the Credit Facility, the Notes Indenture or the Securities Purchase and Exchange Agreement. The exchange of the Exchangeable Preferred Stock into Exchange Debentures would be restricted by covenants contained in the Credit Facility, the Notes Indenture and the Securities Purchase and Exchange Agreement, in each case, relating, among other things, to the incurrence of debt, and future agreements may contain similar or more restrictive limitations. Upon any exchange pursuant to the preceding paragraph, holders of outstanding shares of Exchangeable Preferred Stock will be entitled to receive, subject to the second succeeding sentence, $1.00 principal amount of Exchange Debentures for each $1.00 of the then effective liquidation preference of Exchangeable Preferred Stock held by them. The Exchange Debentures will be issued in registered form, without coupons. Exchange Debentures issued in exchange for Exchangeable Preferred Stock will be issued in principal amounts of $1,000 and integral multiples thereof, and the Company shall pay cash in lieu of issuing an Exchange Debenture in any other principal amount. The Company will send a written notice of exchange by mail to each holder of record of shares of Exchangeable Preferred Stock not fewer than 30 days nor more than 60 days before the date fixed for such exchange. On and after the date of exchange, dividends will cease to accumulate on the outstanding shares of Exchangeable Preferred Stock, and all rights of the holders of Exchangeable Preferred Stock (except the right to receive the Exchange Debentures, an amount in cash, to the extent applicable, equal to the accumulated and unpaid dividends to the exchange date and cash in lieu of any Exchange Debenture that is in a principal amount less than $1,000) will terminate. The person entitled to receive the Exchange Debentures issuable upon such exchange will be treated for all purposes as the registered holder of such Exchange Debentures. LIQUIDATION PREFERENCE Upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, holders of Exchangeable Preferred Stock will be entitled to be paid, out of the assets of the Company available for 142 150 distribution to stockholders, the then effective liquidation preference per share of Exchangeable Preferred Stock (initially $100 per share), plus, without duplication, an amount in cash equal to all accumulated and unpaid dividends thereon to the date fixed for liquidation, dissolution or winding-up (including an amount equal to a prorated dividend for the period from the last dividend payment date to the date fixed for liquidation, dissolution or winding-up), before any distribution is made on any Junior Stock, including, without limitation, common stock of the Company. If, upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the amounts payable with respect to the Exchangeable Preferred Stock and all other Parity Stock are not paid in full, the holders of the Exchangeable Preferred Stock and the Parity Stock will share equally and ratably in any distribution of assets of the Company in proportion to the full liquidation preference to which each is entitled. After payment of the full amount of the liquidation preference and accumulated and unpaid dividends to which they are entitled, the holders of shares of Exchangeable Preferred Stock will not be entitled to any further participation in any distribution of assets of the Company. However, neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company nor the consolidation or merger of the Company with one or more entities shall be deemed to be a liquidation, dissolution or winding-up of the Company. The Certificate of Designation for the Exchangeable Preferred Stock will not contain any provision requiring funds to be set aside to protect the liquidation preference of the Exchangeable Preferred Stock. VOTING RIGHTS The holders of Exchangeable Preferred Stock, except as otherwise required under Nevada law or as set forth below, are not entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Company. The Certificate of Designation provides that if (i) after July 1, 2002, cash dividends on the Exchangeable Preferred Stock are in arrears and unpaid for two or more semi-annual dividend periods (whether or not consecutive); (ii) the Company fails to redeem the Exchangeable Preferred Stock on July 1, 2009 or fails to otherwise discharge any redemption obligation with respect to the Exchangeable Preferred Stock; (iii) the Company fails to make a Change of Control Offer if such offer is required by the provisions set forth under the "Purchase of Exchangeable Preferred Stock upon a Change of Control" covenant below or fails to purchase shares of Exchangeable Preferred Stock from holders who elect to have such shares purchased pursuant to the Change of Control Offer; (iv) a breach or violation of any other provisions described under the caption "-- Certain Covenants" occurs and the breach or violation continues for a period of 30 days or more after the Company receives notice thereof specifying the default from the holders of at least 25% of the shares of Exchangeable Preferred Stock then outstanding; or (v) the Company fails to pay at the final stated maturity (giving effect to any extensions thereof) the principal amount of any Debt of the Company or any Restricted Subsidiary of the Company, or the final stated maturity of any such Debt is accelerated, if the aggregate principal amount of such Debt, together with the aggregate principal amount of any other such Debt in default for failure to pay principal at the final stated maturity (giving effect to any extensions thereof) or which has been accelerated, aggregates $5,000,000 or more at any time, then the number of directors constituting the Board of Directors will be adjusted to permit the holders of a majority of the then outstanding shares of Exchangeable Preferred Stock, voting separately and as a class (together with the holders of any Parity Stock having similar voting rights), to elect two directors to the Board of Directors of the Company. Such voting rights will continue until such time as, in the case of a dividend default, all dividends in arrears on the Exchangeable Preferred Stock are paid in full in cash and, in all other cases, any failure, breach or default giving rise to such voting rights is remedied or waived by the holders of at least a majority of the shares of Exchangeable Preferred Stock then outstanding, at which time the term of any directors elected pursuant to the provisions of this paragraph shall terminate. Each such event described in clauses (i) through (v) above is referred to herein as a "Voting Rights Triggering Event." The voting rights provided herein shall be the holder's exclusive remedy at law or in equity. 143 151 The Certificate of Designation also provides that the Company will not authorize any new class of Senior Stock without the affirmative vote or consent of holders of at least a majority of the shares of Exchangeable Preferred Stock then outstanding, voting or consenting, as the case may be, as one class. Under Nevada law, holders of preferred stock are entitled to vote as a class upon a proposed amendment to the certificate of incorporation, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would increase or decrease the par value of the shares of such class, or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely. CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the Certificate of Designation and the Exchange Indenture. Reference is made to the Certificate of Designation and the Exchange Indenture for the full definition of all such terms as well as any other capitalized terms used herein for which no definition is provided. "Acquired Debt" means Debt of a person (a) existing at the time such person is merged with or into the Company or becomes a Subsidiary, (b) assumed in connection with the acquisition of assets from such person or (c) secured by a Lien encumbering assets acquired from such person. "Acquired Preferred Stock" means preferred stock of a person (a) existing at the time such person is merged with or into the Company or becomes a Subsidiary or (b) assumed in connection with the acquisition of assets from such person. "Affiliate" means, with respect to any specified person, any other person directly or indirectly controlling or controlled by or under direct or indirect common control with 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 the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "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") by the Company or a Restricted Subsidiary, directly or indirectly, in one or a series of related transactions, to any person other than the Company or a Restricted Subsidiary of (a) any Capital Stock of any of its Restricted Subsidiaries, (b) all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries representing a division or line of business or (c) any other properties or assets of the Company or any of its Restricted Subsidiaries, other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" does not include any transfer of properties or assets (a) that is governed by the provisions of the Certificate of Designation or Exchange Indenture, as applicable, described under (i) "Consolidation, Merger and Sale of Assets" or (ii) the "Limitation on Asset Swaps" covenant, (b) between or among the Company and any of its Restricted Subsidiaries pursuant to transactions that do not violate any other provision of the Exchange Indenture, if applicable, (c) to an Unrestricted Subsidiary, if permitted under the "Limitation on Restricted Payments" covenant, (d) representing obsolete or permanently retired equipment, (e) the gross proceeds of which (exclusive of indemnities) do not exceed $100,000 for any particular item or $500,000 in the aggregate for any fiscal year or (f) the transfer of up to $500,000 of properties and assets, including cash, to a joint venture in which the Company or a Restricted Subsidiary has an equity interest, which joint venture is engaged in the internet service provider business. "Asset Swap" means the execution of one or more definitive agreements, subject only to FCC approval, if applicable, and other customary closing conditions, which the Company in good faith believes will be satisfied, for a substantially concurrent purchase and sale, or exchange, or "deferred exchange" (for no more than 180 days) under section 1031(a)(3) of the Code, of assets used in the broadcast or related businesses between the Company or any of its Restricted Subsidiaries and one or more other persons or groups of affiliated persons; provided that any amendment to or waiver of any closing conditions that individually or in the aggregate are material to the Asset Swap will be deemed to be a new Asset Swap. 144 152 "Banks" means the banks and other financial institutions that from time to time are lenders under the Credit Facility. "Capital Stock" of any person means any and all shares, interests, partnership interests, participations, rights in or other equivalents (however designated) of such person's equity (however designated). "Capitalized Lease Obligation" means, with respect to any person, an obligation incurred or assumed under or in connection with any capital lease of real or personal property that, in accordance with GAAP, has been recorded as a capitalized lease on the balance sheet of such person. "Change of Control" means the occurrence 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 Lawrence R. Wilson, Scott E. Smith, John E. von Schlegell, Baker, Fentress & Company, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., The Endeavour Capital Fund Limited Partnership and any trustee, in its capacity as trustee under the Voting Trust Agreement ("Permitted Holders") or Citadel Communications is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person will 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 a majority of the voting power of all classes of Voting Stock of the Company; (b) During any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election to such Board of Directors, or whose nomination for election by the stockholders of the Company, was approved by a vote of at least 66 2/3% 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 of the Company then in office; or (c) The Company is liquidated or dissolved or adopts a plan of liquidation or dissolution. "Closing Date" means July 3, 1997, the date on which the Series A Exchangeable Preferred Stock was originally issued under the Certificate of Designation. "Consolidated Adjusted Net Income" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (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 Sales, (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 of its Restricted Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries in cash during such period, (d) the net income (or loss) of any person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, and (e) the net income (but not the net loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is at the date of determination restricted, directly or indirectly, except to the extent that such net income could be paid to the Company or a Restricted Subsidiary thereof; provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated Adjusted Net Income will be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Consolidated Adjusted Net Income otherwise attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1) the number of shares of outstanding common stock of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries divided by (2) the total number of shares of outstanding common stock of such Restricted Subsidiary on the last day of such period. "Consolidated Cash Flow" means, for any period, the sum of, without duplication, Consolidated Adjusted Net Income for such period, plus (or, in the case of clause (d) below, plus or minus) the following items to 145 153 the extent included in computing Consolidated Adjusted Net Income for such period: (a) the aggregate interest expense and preferred stock dividends of the Company and its Restricted Subsidiaries for such period, plus (b) the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period, plus (c) the aggregate depreciation and amortization expense of the Company and any of its Restricted Subsidiaries for such period, plus (d) any other non-cash charges for such period, and minus non-cash credits for such period, other than non-cash charges or credits resulting from changes in prepaid assets or accrued liabilities in the ordinary course of business; provided that income tax expense, interest expense and preferred stock dividends, depreciation and amortization expense, and non-cash charges and credits of a Restricted Subsidiary will be included in Consolidated Cash Flow only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Adjusted Net Income for such period. Solely for purposes of determining whether the Company could incur Debt pursuant to the first paragraph of the "Limitation on Debt" covenant, if the Company is permitted to give pro forma effect to an In-Market Acquisition of a radio station pursuant to clause (iii) of the second paragraph of such covenant, such calculation may also give pro forma effect to projected quantifiable improvements in operating results of such radio station due to cost reductions calculated in good faith by the Company and certified by an officers' certificate filed with the Transfer Agent or Debentures Trustee, as the case may be. As used in the preceding sentence, the term "In-Market Acquisition" means the acquisition of a radio station or group of radio stations serving an MSA in which the Company or its Subsidiaries has owned, or has operated under a LMA, one or more radio stations for at least the preceding six months. "Consolidated Cash Flow Ratio" means, at any date, the ratio of (i) the aggregate amount of Debt of the Company and its Restricted Subsidiaries on a consolidated basis as of the end of the immediately preceding four fiscal quarters for which internal financial statements of the Company are available (the "Reference Period") to (ii) the aggregate amount of Consolidated Cash Flow for such Reference Period. "Consolidated Fixed Charges" means, for any period, without duplication, the sum of (a) the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of operations 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 contracts (including amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs, (v) the interest component of Capitalized Lease Obligations of the Company and any of its Restricted Subsidiaries, and (vi) the portion of any rental obligation of the Company and any of its Restricted Subsidiaries in respect of any sale and leaseback transaction allocable during such period to interest expense (determined as if it were treated as a Capitalized Lease Obligation) plus (b) all interest on any Debt of any other person guaranteed by the Company or any of its Restricted Subsidiaries; provided, however, that Consolidated Fixed Charges will not include any gain or loss from extinguishment of debt, including any write-off of debt issuance costs. "Credit Facility" means the loan agreement dated October 9, 1996 among the Company, the Banks and the Credit Facility Agent, as amended, and as such agreement may be amended, restated, supplemented, replaced or refinanced or otherwise modified from time to time. "Credit Facility Agent" means the then acting Agent as defined in and under the Credit Facility or any successor thereto. "Debt" means (without duplication), with respect to any person, whether recourse is to all or a portion of the assets of such person and whether or not contingent, (a) every obligation of such person for money borrowed, (b) every obligation of such person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such person, (d) every obligation of such person issued or assumed as the deferred purchase price of property or services, (e) every Capitalized Lease Obligation of such person, (f) all Disqualified Stock of such person valued at its maximum fixed repurchase price, plus accumulated and unpaid dividends, (g) all Hedging Obligations of such person, and (h) every obligation of the type referred to in clauses (a) through (g) of another person and all dividends of another person (i) the payment of which, in either case, such person has guaranteed or (ii) which is secured by any 146 154 Lien on any property or asset of such person, the amount of such Debt being deemed to be the lesser of the actual amount of the guarantee or the value of such property or asset subject to such Lien, as the case may be, and the amount of the Debt so guaranteed or secured, as the case may be. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were repurchased on any date on which Debt is required to be determined pursuant to the Certificate of Designation or Exchange Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value will be determined reasonably and in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable 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 will not be considered Debt for purposes of this definition. The amount outstanding at any time of any Debt issued with original issue discount is the aggregate principal amount at maturity of such Debt, less the remaining unamortized portion of the original issue discount of such Debt at such time, as determined in accordance with GAAP. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors is required to deliver a resolution of the Board of Directors, to make a finding or otherwise take action under the Exchange Indenture, a member of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Disqualified Stock" means any class or series of Capital Stock that, either by its terms (or by the terms of any security into which it is convertible or exchangeable by contract or otherwise), 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, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof, in whole or in part, prior to (i) one year after the Mandatory Redemption Date, in the case of the Exchangeable Preferred Stock, or (ii) one year after the Stated Maturity of the Exchange Debentures, in the case of the Exchange Debentures; provided that (i) in the case of the Exchangeable Preferred Stock, any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to cause the issuer thereof to repurchase or redeem such Capital Stock upon occurrence of a "change of control" occurring prior to the Mandatory Redemption Date will not constitute Disqualified Stock if the "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the "Purchase of Exchangeable Preferred Stock upon a Change of Control" covenant of the Certificate of Designation described below and such Capital Stock specifically provides that the issuer will not repurchase or redeem any such stock pursuant to such provision prior to the Company's repurchase of such Exchangeable Preferred Stock as are required to be repurchased pursuant to the "Purchase of Exchangeable Preferred Stock upon a Change of Control" covenant of the Certificate of Designation described below or (ii) in the case of the Exchange Debentures, any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to cause the issuer thereof to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the Stated Maturity of the Exchange Debentures will not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the "Limitation on Certain Asset Sales" and "Purchase of Exchange Debentures upon a Change of Control" covenants of the Exchange Indenture described below and such Capital Stock specifically provides that the issuer will not repurchase or redeem any such Capital Stock pursuant to such provision prior to the Company's repurchase of such Exchange Debentures as are required to be repurchased pursuant to the "Limitation on Certain Asset Sales" and "Purchase of Exchange Debentures upon a Change of Control" covenants of the Exchange Indenture described below; provided further that "Disqualified Stock" shall not include the Exchangeable Preferred Stock. "Exchange Act" means the Securities Exchange Act of 1934, as amended. 147 155 "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the Closing Date. "guarantee" means, as applied to any obligation, (a) 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 (b) 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 limitation, the payment of amounts drawn down under letters of credit. "Hedging Obligations" means the obligations of any person under (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (b) other agreements or arrangements designed to protect such person against fluctuations in interest rates or the value of foreign currencies. "Investment" (in any person) means (a) directly or indirectly, any advance, loan or other extension of credit (including, without limitation, by way of guarantee or similar arrangement) or capital contribution to any person, the purchase or other acquisition of any stock, bonds, notes, debentures or other securities issued by such person or the acquisition (by purchase or otherwise) of all or substantially all of the business or assets of such person or the making of any investment in such person, (b) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary and (c) the transfer of any assets or properties from the Company or a Restricted Subsidiary to any Unrestricted Subsidiary, other than the transfer of assets or properties made in the ordinary course of business. Investments will exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. "Junior Subordinated Debt" means Debt of the Company that is subordinated in right of payment to the Subordinated Debt. "License Subsidiary" means Citadel License, Inc. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, preference, 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 will be deemed to own subject to a Lien any property that 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. "Net Cash Proceeds" means, 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 of for, cash or cash equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any of its Restricted Subsidiaries), net of (a) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (b) provisions for all taxes payable as a result of such Asset Sale, (c) payments made to retire Debt where payment of such Debt is secured by the assets that are the subject of such Asset Sale, (d) amounts required to be paid to any person (other than the Company or any of its Restricted Subsidiaries) owning a beneficial interest in the assets that are subject to the Asset Sale and (e) appropriate amounts to be provided by the Company or any of its Restricted Subsidiaries, 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 seller after such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Pari Passu Debt" means Debt of the Company that ranks pari passu in right of payment with the Exchange Debentures. "Permitted Investments" means any of the following: (a) Investments in (i) securities with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the 148 156 full faith and credit of the United States is pledged in support thereof); (ii) certificates of deposit, time deposits, overnight bank deposits or bankers' acceptances with a maturity of 270 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus of not less than $500,000,000; and (iii) commercial paper with a maturity of 270 days or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings Services. (b) Investments by the Company or any of its Restricted Subsidiaries in another person, if as a result of such Investment (i) such other person becomes a Restricted Subsidiary that is or would be a Subsidiary Debentures Guarantor under the Exchange Indenture 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 that is or would be such a Subsidiary Debentures Guarantor. (c) Investments by the Company or any of its Restricted Subsidiaries in a Subsidiary Debentures Guarantor and Investments by any Restricted Subsidiary in the Company. (d) Investments in assets owned or used in the ordinary course of business. (e) Investments in existence on the Closing Date. (f) Promissory notes received as a result of Asset Sales permitted under the "Exchange Debentures -- Limitation on Certain Asset Sales" covenant. (g) Direct or indirect loans to employees, or to a trustee for the benefit of such employees, of the Company or any of its Restricted Subsidiaries in an aggregate amount outstanding at any time not exceeding $1,000,000. (h) Investments by the Company or any of its Restricted Subsidiaries in a joint venture that is engaged in the internet service provider business in an aggregate amount outstanding at any time not exceeding $500,000. (i) Other Investments that do not exceed $2,000,000 at any one time outstanding. "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Public Equity Offering" means an underwritten public offering of Qualified Equity Interests of either (a) the Company or (b) Citadel Communications the net proceeds from which (after deducting any underwriting discounts and commissions) are used by Citadel Communications to purchase Qualified Equity Interests of the Company; provided that, in either case, such net proceeds exceed $10,000,000. "Qualified Equity Interest" means any Qualified Stock and all warrants, options or other rights to acquire Qualified Stock (but excluding any debt security that is convertible into or exchangeable for Capital Stock). "Qualified Stock" of any person means any and all Capital Stock of such person, other than Disqualified Stock. "Restricted Subsidiary" means any Subsidiary other than an Unrestricted Subsidiary. "Senior Debt" means the principal of and premium, if any, and interest on (including interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law, whether or not allowed) and other amounts due on or in connection with any Debt of the Company, whether outstanding on the Closing Date or thereafter incurred, unless, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt will be subordinate in right of payment to any Debt or other general unsecured obligations of the Company. Without limiting the generality of the foregoing, "Senior Debt" includes the principal of and premium, if any, fees and interest (including interest accruing after the occurrence of an event of default or after the filing of a petition initiating any proceeding pursuant to any bankruptcy law, whether or not allowed) on all obligations of every nature of the Company from time to time owed to the Banks under the Credit Facility. Notwithstanding the 149 157 foregoing, "Senior Debt" will not include (a) Debt that is Disqualified Stock, (b) Debt consisting of trade payables, (c) Debt of the Company to a Subsidiary or any other Affiliate of the Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt that, at the time of the incurrence, is incurred by the Company in violation of the Exchange Indenture other than any Debt incurred under the Credit Facility not in excess of $150,000,000 (less any amounts applied to the permanent reduction of such Debt pursuant to the "Limitation on Certain Asset Sales" covenant under the Exchange Indenture) if the Company has certified to the Credit Facility Agent, at the time such Debt is incurred, that the Company is permitted to incur such Debt under the Exchange Indenture. "Senior Subordinated Debt" means the principal of and premium, if any, and interest on (including interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law, whether or not allowed) and other amounts due on or in connection with any Debt of the Company (including the Notes), whether outstanding on the Closing Date or thereafter incurred, for which, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt will be subordinate in right of payment to any Senior Debt or other general unsecured obligations of the Company, unless such instrument expressly provides that such Debt will be subordinate in right of payment to the Notes or any Debt that is pari passu in right of payment with the Notes. Notwithstanding the foregoing, "Senior Subordinated Debt" will not include (a) Debt that is represented by Disqualified Stock, (b) Debt consisting of trade payables, (c) Debt of the Company to a Subsidiary or any other Affiliate of the Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt that, at the time of the incurrence, is incurred by the Company in violation of the Exchange Indenture. "Significant Subsidiary" means any Restricted Subsidiary of the Company that, together with its Subsidiaries, (a) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated net sales of the Company and its Restricted Subsidiaries, (b) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the most recently available consolidated financial statements of the Company for such fiscal year, (c) was organized or acquired after the beginning of such fiscal year and would have been a Significant Subsidiary if it had been owned during the entire fiscal year or (d) that holds one or more licenses material to the Company's business. "Stated Maturity" means, when used with respect to any Exchange Debenture or any installment of interest thereon, the date specified in such Exchange Debenture as the fixed date on which the principal of such Exchange Debenture or such installment of interest is due and payable, and, when used with respect to any other Debt, means the date specified in the instrument governing such Debt as the fixed date on which the principal of such Debt or any installment of interest thereon is due and payable. "Subordinated Debt" means the principal of and premium, if any, and interest on (including interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law, whether or not allowed) and other amounts due on or in connection with any Debt of the Company (including the Exchange Debentures), whether outstanding on the Closing Date or thereafter incurred, for which, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt will be subordinate in right of payment to any Senior Debt or other general unsecured obligations of the Company, and to any Senior Subordinated Debt, unless such instrument expressly provides that such Debt will be subordinate in right of payment to the Exchange Debentures or any Debt that is pari passu in right of payment with the Exchange Debentures. Notwithstanding the foregoing, "Subordinated Debt" will not include (a) Debt that is represented by Disqualified Stock, (b) Debt consisting of trade payables, (c) Debt of the Company to a Subsidiary or any other Affiliate of the Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt that, at the time of the incurrence, is incurred by the Company in violation of the Exchange Indenture. "Subsidiary" means any person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company and/or one or more other Subsidiaries of the Company. "Subsidiary Debentures Guarantee" means a guarantee of the Exchange Debentures by a Restricted Subsidiary in accordance with the provisions of the Exchange Indenture. 150 158 "Subsidiary Debentures Guarantor" means the License Subsidiary and each other Restricted Subsidiary that issues a Subsidiary Debentures Guarantee as described under the "Subsidiary Debentures Guarantees" covenant of the Exchange Indenture. "Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary in accordance with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary of an Unrestricted Subsidiary. "Voting Rights Triggering Event" shall have the meaning set forth above under "-- Voting Rights." "Voting Stock" means any class or classes of Capital Stock 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 or trustees of any person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). "Weighted Average Life" means, as of the date of determination with respect to any Debt or Disqualified Stock, 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 or liquidation value payment of such Debt or Disqualified Stock, respectively, multiplied by (ii) the amount of each such principal or liquidation value payment by (b) the sum of all such principal or liquidation value payments. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all of the outstanding voting securities (other than directors' qualifying shares or an immaterial number of shares required to be owned by other persons pursuant to applicable law) of which are owned, directly or indirectly, by the Company. CERTAIN COVENANTS The Certificate of Designation contains, among others, the following covenants: LIMITATION ON DEBT. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Debt (including Acquired Debt and the issuance of Disqualified Stock), except that the Company or a Restricted Subsidiary may incur Debt or issue Disqualified Stock if, at the time of such event, the Consolidated Cash Flow Ratio would have been less than 7.0 to 1.0. In making the foregoing calculation, pro forma effect will be given to: (i) the incurrence of such Debt and (if applicable) the application of the net proceeds therefrom, including to refinance other Debt, as if such Debt had been incurred and the application of proceeds therefrom occurred on the first day of the four-fiscal quarter period used to calculate the Consolidated Cash Flow Ratio, (ii) the incurrence, repayment or retirement of any other Debt by the Company or any of its Restricted Subsidiaries since the first day of such four-quarter period as if such Debt was incurred, repaid or retired at the beginning of such four-quarter period and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or any of its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period. In making a computation under the foregoing clause (i) or (ii), the amount of Debt under a revolving credit facility will be computed based upon the average daily balance of such Debt during such four-quarter period. (b) Notwithstanding the foregoing, the Company may, and may, to the extent expressly permitted below, permit any of its Restricted Subsidiaries to, incur any of the following Debt ("Permitted Debt"): (i) Debt of the Company or any Restricted Subsidiary under the Credit Facility (including guarantees thereof by Subsidiaries) in an aggregate principal amount at any one time outstanding not to exceed $110,000,000. (ii) Debt of the Company or any of its Restricted Subsidiaries outstanding on the Closing Date, other than Debt described in clause (i) above. 151 159 (iii) Debt owed by the Company to any of its Restricted Subsidiaries or owed by any Subsidiary to the Company or a Restricted Subsidiary (provided that such Debt is Junior Subordinated Debt and is held by the Company or such Restricted Subsidiary) or owed to the Company or a Restricted Subsidiary by a Restricted Subsidiary, provided the incurrence of such Debt did not violate the "Limitation on Restricted Payments" covenant. (iv) Debt represented by the Notes and the Subsidiary Notes Guarantees. (v) Hedging Obligations of the Company or any of its Restricted Subsidiaries incurred in the ordinary course of business. (vi) Capitalized Lease Obligations of the Company or any of its Restricted Subsidiaries in an aggregate amount not exceeding $3,000,000 at any one time outstanding. (vii) Debt under purchase money mortgages or secured by purchase money security interests so long as (x) such Debt is not secured by any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets so acquired and (y) such Debt is created within 60 days of the acquisition of the related property; provided that the aggregate principal amount of Debt under this clause (vii) does not exceed $2,000,000 at any one time outstanding. (viii) Debt of the Company or any Restricted Subsidiary, not permitted by any other clause of this definition, in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding. (ix) Debt of the Company or any of its Restricted Subsidiaries consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock. (x) Acquired Debt of a person, other than Debt incurred in connection with, or in contemplation of, such person becoming a Restricted Subsidiary or the acquisition of assets from such person, as the case may be, provided that the Company on a pro forma basis could incur $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of this covenant. (xi) Any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by the Company or any Restricted Subsidiary of any outstanding Debt of the Company or such Restricted Subsidiary, other than Debt incurred pursuant to clause (i), (v), (vi), (vii), (viii) or (ix) of this definition, including any successive refinancings thereof, so long as (A) any such new Debt is in a principal amount that does not exceed the principal amount so refinanced, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Debt refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing plus the amount of expenses of the Company incurred in connection with such refinancing and (B) such refinancing Debt does not have a Weighted Average Life less than the Weighted Average Life of the Debt being refinanced and does not have a final scheduled maturity earlier than the final scheduled maturity, or permit redemption at the option of the holder earlier than the earliest date of redemption at the option of the holder, of the Debt being refinanced. LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, take any of the following actions: (a) declare or pay any dividend on, or make any distribution to holders of, any shares of the Junior Stock of the Company or any of its Restricted Subsidiaries, other than (i) dividends or distributions payable solely in Qualified Equity Interests of the issuer of such shares of Junior Stock, (ii) dividends or distributions by a Restricted Subsidiary payable to the Company or another Restricted Subsidiary or (iii) pro rata dividends or distributions on common stock of a Restricted Subsidiary held by minority stockholders, provided that such dividends do not in the aggregate exceed the minority stockholders' pro rata share of such Restricted Subsidiary's net income from the first day of the Company's fiscal quarter during which the Closing Date occurs; 152 160 (b) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of (i) Junior Stock of the Company (or any options, warrants or other rights to acquire shares of Junior Stock of the Company (other than any such Junior Stock owned by Restricted Subsidiaries)) or (ii) Capital Stock (or any options, warrants or other rights to acquire shares of Capital Stock) of (A) any Unrestricted Subsidiary or (B) any Restricted Subsidiary that are held by any Affiliate of the Company (other than, in either case, any such Capital Stock owned by the Company or any of its Restricted Subsidiaries); (c) make any Investment (other than a Permitted Investment) in any person (such payments or other actions described in (but not excluded from) clauses (a) through (c) being referred to as "Restricted Payments"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment: (i) no Voting Rights Triggering Event has occurred and is continuing, (ii) the Company could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of the "Limitation on Debt" covenant, and (iii) the aggregate amount of all Restricted Payments declared or made after the Closing Date does not exceed the sum of: (A) the remainder of (x) 100% of the aggregate Consolidated Cash Flow for the period beginning on the first day of the Company's fiscal quarter during which the Closing Date occurs and ending on the last day of the Company's most recent fiscal quarter for which internal financial statements are available ending prior to the date of such proposed Restricted Payment (the "Computation Period") minus (y) the product of 1.4 times the sum of (i) Consolidated Fixed Charges for the Computation Period and (ii) all dividends or other distributions paid in cash by the Company or any of its Restricted Subsidiaries on any Disqualified Stock of the Company or any of its Restricted Subsidiaries for the Computation Period; plus (B) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Company's Board of Directors, whose good faith determination will be conclusive) from the issuance or sale (other than to a Subsidiary) of Qualified Equity Interests of the Company (excluding from this computation any net proceeds of a Public Equity Offering received by the Company that are used by it to redeem the Exchangeable Preferred Stock, as discussed above); plus (C) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Company's Board of Directors, whose good faith determination will be conclusive) from the issuance or sale (other than to a Subsidiary) of debt securities or Disqualified Stock that have been converted into or exchanged for Qualified Stock of the Company, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange; plus (D) without duplication, the Net Cash Proceeds received by the Company or a Wholly Owned Restricted Subsidiary upon the sale of any of its Unrestricted Subsidiaries; plus (E) $5,000,000. Notwithstanding the foregoing, the Company and any of its Restricted Subsidiaries may take any of the following actions, so long as (with respect to clauses (c) and (d) below) no Voting Rights Triggering Event has occurred and is continuing or would occur: (a) The payment of any dividend within 60 days after the date of declaration thereof, if at the declaration date such payment would not have been prohibited by the foregoing provision. 153 161 (b) The repurchase, redemption or other acquisition or retirement for value of any shares of Junior Stock of the Company, in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company. (c) The payment by the Company to Citadel Communications for the purpose of the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of Citadel Communications, options on any such shares or related stock appreciation rights or similar securities held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates) or by any employee benefit plan, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate cash consideration paid for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock after the date of the Closing Date does not exceed $1,000,000 in any fiscal year. (d) Loans or advances to officers, directors and employees of Citadel Communications, the Company or any of its Restricted Subsidiaries made in the ordinary course of business after the Closing Date in an aggregate principal amount not to exceed $1,000,000 at any one time outstanding. (e) Payments to or on behalf of Citadel Communications to pay its operating and administrative expenses attributable to the Company including, without limitation, legal and audit expenses, directors' fees, fees payable in respect of the trustee and the back-up trustees under the Voting Trust Agreement, and Commission compliance expenses, in an amount not to exceed the greater of $1,000,000 per fiscal year and 1% of the net revenues of the Company for the preceding fiscal year. The payments described in clauses (b), (c) and (d) of this paragraph will be Restricted Payments that will be permitted to be taken in accordance with this paragraph but will reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii), and the payments described in clauses (a) and (e) of this paragraph will be Restricted Payments that will be permitted to be taken in accordance with this paragraph and will not reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii). For the purpose of making any calculations under the Certificate of Designation (i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will be deemed to have made an Investment in an amount equal to the fair market value of the net assets of such Restricted Subsidiary at the time of such designation as determined by the Board of Directors of the Company, whose good faith determination will be conclusive, (ii) any property transferred to or from an Unrestricted Subsidiary will be valued at fair market value at the time of such transfer, as determined by the Board of Directors of the Company, whose good faith determination will be conclusive and (iii) subject to the foregoing, the amount of any Restricted Payment, if other than cash, will be determined by the Board of Directors of the Company, whose good faith determination will be conclusive. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other person that thereafter becomes a Restricted Subsidiary, such Investment will no longer be counted as a Restricted Payment for purposes of calculating the aggregate amount of Restricted Payments. If an Investment resulted in the making of a Restricted Payment, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise), to the extent such net reduction is not included in Consolidated Adjusted Net Income; provided that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (x) the cash proceeds received by the Company and any of its Restricted Subsidiaries in connection with such net reduction and (y) the initial amount of such Investment. In computing Consolidated Adjusted Net Income for purposes of the foregoing clause (iii)(A), (i) the Company may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other 154 162 current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company will be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment that, at the time of the making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of the Certificate of Designation, such Restricted Payment will be deemed to have been made in compliance with the Certificate of Designation notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. PURCHASE OF EXCHANGEABLE PREFERRED STOCK UPON A CHANGE OF CONTROL. If a Change of Control occurs at any time, then each holder of Exchangeable Preferred Stock will have the right to require that the Company purchase such holder's Exchangeable Preferred Stock, in whole or in part, at a purchase price in cash equal to 101% of the liquidation preference of such Exchangeable Preferred Stock, plus accumulated and unpaid dividends, if any, to the date of purchase, pursuant to the offer described below (the "Change of Control Offer") and the other procedures set forth in the Certificate of Designation. Within 30 days following any Change of Control, the Company will notify the Transfer Agent thereof and give written notice of such Change of Control to each holder of Exchangeable Preferred Stock by first-class mail, postage prepaid, at its address appearing in the security register for the Exchangeable Preferred Stock, stating, among other things, (i) the purchase price and the purchase date, which will 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; (ii) that any Exchangeable Preferred Stock not tendered will continue to accumulate dividends; (iii) that, unless the Company defaults in the payment of the purchase price, any Exchangeable Preferred Stock accepted for payment pursuant to the Change of Control Offer will cease to accumulate dividends after the Change of Control purchase date; and (iv) certain other procedures that a holder of Exchangeable Preferred Stock must follow to accept a Change of Control Offer or to withdraw such acceptance. If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the purchase price for all of the Exchangeable Preferred Stock that might be tendered by holders of the Exchangeable Preferred Stock seeking to accept the Change of Control Offer. The Credit Facility prohibits the purchase of Exchangeable Preferred Stock by the Company prior to full repayment of indebtedness under the Credit Facility and, upon a Change of Control, all amounts outstanding under the Credit Facility become due and payable. There can be no assurance that in the event of a Change of Control the Company will be able to obtain the necessary consents from the lenders under the Credit Facility to consummate a Change of Control Offer. The failure of the Company to make or consummate the Change of Control Offer or pay the applicable Change of Control purchase price when due would result in an Voting Rights Triggering Event and would give the holders of the Exchangeable Preferred Stock the rights described under "Voting Rights." In addition to the obligations of the Company under the Certificate of Designation with respect to the Exchangeable Preferred Stock in the event of a Change of Control, the Credit Facility contains a provision designating a change of control as described therein as an event of default, which would obligate the Company to repay amounts outstanding under the Credit Facility upon an acceleration of the indebtedness outstanding thereunder. The existence of a holder's right to require the Company to purchase such holder's Exchangeable Preferred Stock upon a Change of Control may deter a third party from acquiring the Company in a transaction that constitutes a Change of Control. The definition of "Change of Control" in the Certificate of Designation is limited in scope. The provisions of the Certificate of Designation may not afford holders of Exchangeable Preferred Stock the right to require the Company to repurchase such Exchangeable Preferred Stock in the event of a highly leveraged transaction or certain transactions with the Company's management or its affiliates, including a reorganization, restructuring, merger or similar transaction involving the Company (including, in certain circumstances, an acquisition of the Company by management or its affiliates) that may adversely affect holders of the 155 163 Exchangeable Preferred Stock, if such transaction is not a transaction defined as a Change of Control. See "Certain Definitions" above for the definition of "Change of Control." A transaction involving the Company's management or its affiliates, or a transaction involving a recapitalization of the Company, would result in a Change of Control if it is the type of transaction specified in such definition. The Company will comply with the applicable tender offer rules including Rule 14e-l under the Exchange Act, and any other applicable securities laws and regulations in connection with a Change of Control Offer. The Company will not, and will not permit any of its Restricted Subsidiaries to, create any restriction (other than restrictions existing under Debt as in effect on the Closing Date or in refinancings or replacements of such Debt) that would materially impair the ability of the Company to make a Change of Control Offer to purchase the Exchangeable Preferred Stock or, if such Change of Control Offer is made, to pay for the Exchangeable Preferred Stock tendered for purchase. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company will not sell, and will not permit any of its Restricted Subsidiaries, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants, or other rights to purchase shares of such Capital Stock) except (i) to the Company or a Wholly Owned Restricted Subsidiary, (ii) issuances or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law, or issuances or sales to directors of directors' qualifying shares, (iii) if, immediately after giving effect to such issuance or sale, neither the Company nor any Subsidiary owns any shares of Capital Stock of such Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) or (iv) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such person remaining after giving effect to such issuance or sale would have been permitted to be made under the "Limitation on Restricted Payments" covenant if made on the date of such issuance or sale. In addition, the Company will not, and will not permit any of its Restricted Subsidiaries to, sell, transfer or otherwise dispose of any of its properties or assets to an Unrestricted Subsidiary other than in the ordinary course of business. UNRESTRICTED SUBSIDIARIES. (a) The Board of Directors of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company nor any of its Restricted Subsidiaries is directly or indirectly liable for any Debt of such Subsidiary, (ii) no default with respect to any Debt of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Debt of the Company or any of its Restricted Subsidiaries to declare a default on such other Debt 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 the "Limitation on Restricted Payments" covenant, (iv) neither the Company nor any of its Restricted Subsidiaries 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 of its Restricted Subsidiaries has any obligation to subscribe for additional shares of Capital Stock or other equity interest in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results. Notwithstanding the foregoing, the Company may not designate the License Subsidiary, or any Subsidiary to which any properties or assets (other than current assets) owned by the Company or the License Subsidiary on the Closing Date have been transferred, as an Unrestricted Subsidiary. (b) The Board of Directors of the Company may designate any of its Unrestricted Subsidiaries as a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Debt by a Restricted Subsidiary of any outstanding Debt of such Unrestricted Subsidiary and such designation will only be permitted if (i) such Debt is permitted under the "Limitation on Debt" covenant and (ii) no Voting Rights Triggering Event will have occurred and be continuing following such designation. 156 164 LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The Company will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit any person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock of a Subsidiary of the Company (other than Acquired Preferred Stock; provided that at the time the issuer of such Acquired Preferred Stock becomes a Subsidiary of the Company or merges with the Company or any of its Subsidiaries, and after giving effect to such transaction, the Company shall be able to incur $1.00 of additional Debt (other than Permitted Debt) in compliance with the "Limitation on Debt" covenant). REPORTS. At all times from and after the earlier of (i) the date of the commencement of the Exchange Offer or the effectiveness of the Stock Shelf Registration Statement relating to the Series A Exchangeable Preferred Stock (the "Preferred Stock Registration") and (ii) the date 180 days after the Closing Date, in either case, whether or not the Company is then required to file reports with the Commission, the Company will file with the Commission all such reports and other information as it would be required to file with the Commission by Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company will supply the Transfer Agent and each holder, or will supply to the Transfer Agent for forwarding to each such holder, without cost to such holder, copies of such reports and other information. In addition, at all times prior to the earlier of the date of the Preferred Stock Registration and the date 180 days after the Closing Date, the Company will, at its cost, deliver to each holder of the Exchangeable Preferred Stock quarterly and annual reports substantially equivalent to those that would be required by the Exchange Act. In addition, at all times prior to the Preferred Stock Registration, upon the request of any holder or any prospective purchaser of the Exchangeable Preferred Stock designated by a holder, the Company will supply to such holder or such prospective purchaser the information required under Rule 144A under the Securities Act. CONSOLIDATION, MERGER AND SALE OF ASSETS The Certificate of Designation provides that, without the affirmative vote of the holders of a majority of the issued and outstanding shares of Exchangeable Preferred Stock and any Parity Stock, voting or consenting, as the case may be, as a separate class, the Company may not, in a single transaction or a series of related transactions, consolidate with or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, another person or adopt a plan of liquidation unless: (a) Either (i) the Company is the surviving corporation or (ii) the person (if other than the Company) formed by such consolidation or into which the Company is merged or the person that acquires by sale, assignment, transfer, lease or other disposition the properties and assets of the Company substantially as an entirety (the "Surviving Entity") (A) is a corporation, partnership or trust organized and validly existing under the laws of the United States or any state thereof or the District of Columbia and (B) the Exchangeable Preferred Stock shall be converted into or exchanged for and shall become shares of such Surviving Entity, having in respect of such Surviving Entity the same powers, preferences and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereon, that the Exchangeable Preferred Stock had immediately prior to such transaction. (b) Immediately after giving effect to such transaction and treating any obligation of the Company or a Restricted Subsidiary in connection with or as a result of such transaction as having been incurred at the time of such transaction, no Voting Rights Triggering Event shall have occurred or be continuing. (c) Immediately after giving effect to such transaction on a pro forma basis (on the assumption that the transaction occurred at the beginning of the most recently ended four full fiscal quarter period for which internal financial statements are available), the Company (in the case of clause (i) of paragraph (a) or such person (in the case of clause (ii) of paragraph (a)) could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of the "Limitation on Debt" covenant. (d) The Company delivers, or causes to be delivered, to the Transfer Agent an officers' certificate and an opinion of counsel, each stating that such consolidation, merger or transfer complies with the 157 165 Certificate of Designation and that all conditions precedent in the Certificate of Designation relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of related transactions) of all or substantially all of the properties or assets of one or more Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties or assets of the Company, will be deemed to be the transfer of all or substantially all of the properties and assets of the Company. EXCHANGE DEBENTURES The Exchange Debentures, if issued, will be issued under the Exchange Indenture, dated as of July 1, 1997, between the Company, the initial Subsidiary Debentures Guarantor and The Bank of New York, trustee (the "Debentures Trustee"), a copy of which is available from the Company. If the Exchange Debentures are issued, the Exchange Indenture will be subject to and governed by the Trust Indenture Act. The following summary of the material provisions of the Exchange Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the provisions of the Exchange Indenture, including the definitions of certain terms therein and those terms made part of the Exchange Indenture by reference to the Trust Indenture Act. The definitions of certain terms used in the following summary are set forth above under "-- Exchangeable Preferred Stock -- Certain Definitions." The Credit Facility, the Notes Indenture and the Securities Purchase and Exchange Agreement limit the Company's ability to issue the Exchange Debentures, and future agreements may contain similar or more restrictive limitations. GENERAL The Exchange Debentures will mature on July 1, 2009, will be general unsecured obligations of the Company and will be limited in aggregate principal amount to the liquidation preference of the Exchangeable Preferred Stock, plus, without duplication, accumulated and unpaid dividends, on the Exchange Date of the Exchangeable Preferred Stock into Exchange Debentures (plus any additional Exchange Debentures issued in lieu of cash interest as described herein). Each Exchange Debenture will bear interest at the rate of 13-1/4% per annum from the Exchange Date or from the most recent interest payment date to which interest has been paid or provided for. Interest will be payable semi-annually in cash (or, on or prior to July 1, 2002, in additional Exchange Debentures having an aggregate principal amount equal to the amount of such interest, at the option of the Company) in arrears on each January 1 and July 1, commencing with the first such date after the Exchange Date. Interest on the Exchange Debentures will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Exchange Debentures will be subordinate and junior in right of payment to all existing and future Senior Debt and Senior Subordinated Debt of the Company. The principal of and premium, if any, and interest on the Exchange Debentures will be payable, and the Exchange Debentures will be exchangeable or transferrable, at the office or agency of the Company in the City of New York maintained for such purposes (which initially will be the office of the Debentures Trustee located at 101 Barclay Street, New York, New York 10286); provided, however, that, at the option of the Company, interest, to the extent paid in cash, may be paid by check mailed to the address of the person entitled thereto as such address appears in the security register for the Exchange Debentures. The Exchange Debentures will be issued only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. No service charge will be made for any registration of, transfer, exchange or redemption of Exchange Debentures, but the Company may require payment in certain circumstances of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. The Exchange Debentures will not be entitled to the benefit of any sinking fund. GUARANTEES Payment of the principal of (and premium, if any, on) and interest on the Exchange Debentures, when and as the same become due and payable, will be unconditionally guaranteed, jointly and severally, on a senior subordinated basis by the Subsidiary Debentures Guarantors. The obligations of each Subsidiary Debentures 158 166 Guarantor under its Subsidiary Debentures Guarantee will be limited so as not to constitute a fraudulent conveyance under applicable law. See "Risk Factors -- Fraudulent Transfer Considerations." The Exchange Indenture requires that each Wholly Owned Restricted Subsidiary be a Subsidiary Debentures Guarantor, as well as each other Restricted Subsidiary that guarantees any other Debt of the Company. The Exchange Indenture provides that no Subsidiary Debentures Guarantor may consolidate with or merge with or into any other person (other than the Company or another Subsidiary Debentures Guarantor) or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets in one or more related transactions to another person unless: (a) subject to the provisions of the following paragraph, the person formed by or surviving such consolidation or merger or to which all or substantially all of such assets are disposed (if other than the Company or a Subsidiary Debentures Guarantor) assumes all of the obligations of such Subsidiary Debentures Guarantor under the Exchange Indenture and its Subsidiary Debentures Guarantee, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Debentures Trustee and (b) immediately after giving effect to such transaction, no Default or Event of Default has occurred and is continuing. The Exchange Indenture provides that, in the event of (a) a sale, transfer or other disposition of all of the Capital Stock of a Subsidiary Debentures Guarantor to a person that is not an Affiliate of the Company, (b) a sale, transfer or other disposition of all or substantially all of the assets of a Subsidiary Debentures Guarantor to a person that is not an Affiliate of the Company or (c) the designation of such Subsidiary Debentures Guarantor as an Unrestricted Subsidiary, in any such case in compliance with the terms of the Exchange Indenture, then such Subsidiary Debentures Guarantor will be deemed automatically and unconditionally released and discharged from all of its obligations under the Exchange Indenture and its Subsidiary Debentures Guarantee without any further action on the part of the Debentures Trustee or any holder of the Exchange Debentures; provided that the Net Cash Proceeds of any such sale, transfer or other disposition are applied in accordance with the "Limitation on Certain Asset Sales" covenant. SUBORDINATION The Exchange Debentures will, to the extent set forth in the Exchange Indenture, be subordinate in right of payment to the prior payment in full of all Senior Debt and Senior Subordinated Debt. Upon any payment or distribution of assets of the Company to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency or similar proceedings of the Company (except in connection with the consolidation or merger of the Company or its liquidation or dissolution following the conveyance, transfer or lease of its properties and assets substantially as an entirety, upon the terms and conditions described under "Consolidation, Merger and Sale of Assets"), the holders of Senior Debt and Senior Subordinated Debt will first be entitled to receive payment in full, in cash or cash equivalents, of all amounts due or to become due on or in respect of such Senior Debt and Senior Subordinated Debt before the holders of Exchange Debentures are entitled to receive any payment of principal of (or premium, if any) or interest on the Exchange Debentures or on account of the purchase or redemption or other acquisition of Exchange Debentures by the Company or any Subsidiary of the Company. In the event that, notwithstanding the foregoing, the Debentures Trustee or the holder of any Exchange Debenture receives any payment or distribution of assets of the Company of any kind or character (excluding equity or subordinated securities of the Company provided for in a plan of reorganization or readjustment that, in the case of subordinated securities, are subordinated in right of payment to all Senior Debt and Senior Subordinated Debt to at least the same extent as the Exchange Debentures are so subordinated), before all the Senior Debt and Senior Subordinated Debt is paid in full, then such payment or distribution will be held in trust for the holders of Senior Debt and Senior Subordinated Debt and will be required to be paid over or delivered forthwith to the trustee in bankruptcy or other person making payment or distribution of assets of the Company for application to the payment of all Senior Debt and Senior Subordinated Debt remaining unpaid, to the extent necessary to pay the Senior Debt and Senior Subordinated Debt in full. 159 167 The Company may not make any payments on account of the Exchange Debentures or on account of the purchase or redemption or other acquisition of Exchange Debentures if a default in the payment when due of principal of (or premium, if any) or interest on Specified Senior Debt has occurred and is continuing or a default in the payment when due of commitment, facility or other fees, letter of credit fees or agency fees under the Credit Facility, or a default in payments when due with respect to letter of credit reimbursement arrangements with the Credit Facility Agent has occurred and is continuing (a "Senior Payment Default"). In addition, if any default (other than a Senior Payment Default) with respect to any Specified Senior Debt permitting the holders thereof (or a trustee or agent on behalf thereof) to accelerate the maturity thereof (a "Senior Nonmonetary Default") has occurred and is continuing and the Company and the Debentures Trustee have received written notice thereof from the Credit Facility Agent or from an authorized person on behalf of any holder of Specified Senior Debt, then the Company may not make any payments on account of the Exchange Debentures or on account of the purchase or redemption or other acquisition of Exchange Debentures for a period (a "blockage period") commencing on the date the Company and the Debentures Trustee receive such written note (a "Blockage Notice") and ending on the earliest of (x) 179 days after such date (the "Initial Period"), (y) the date, if any, on which the Specified Senior Debt to which such default relates is discharged or such default is waived or otherwise cured and (z) the date, if any, on which such blockage period has been terminated by written notice to the Company or the Debentures Trustee from the Credit Facility Agent or from the person who gave the Blockage Notice. Any number of additional payment blockage periods may be commenced during the Initial Period; provided, however, that no such additional payment blockage periods shall extend beyond the Initial Period. After the expiration of the Initial Period, no payment blockage period may be commenced until at least 181 consecutive days shall have elapsed from the last day of the Initial Period. No Senior Nonmonetary Default that existed or was continuing on the date of the commencement of any blockage period with respect to the Specified Senior Debt initiating such blockage period will be, or can be, made the basis for the commencement of a subsequent blockage period, unless such default has been cured or waived for a period of not less than 90 consecutive days. In the event that, notwithstanding the foregoing, the Company makes any payment to the Debentures Trustee or the holder of any Exchange Debenture prohibited by these blockage provisions, then such payment will be held in trust for the holders of Senior Debt and Senior Subordinated Debt and will be required to be paid over and delivered forthwith to the holders of the Senior Debt and Senior Subordinated Debt remaining unpaid, to the extent necessary to pay in full all the Senior Debt and Senior Subordinated Debt. The Subsidiary Debentures Guarantees will, to the extent set forth in the Exchange Indenture, be subordinated in right of payment to the prior payment in full of all senior debt and senior subordinated debt of the Subsidiary Debentures Guarantors, upon terms substantially comparable to the subordination of the Exchange Debentures to all Senior Debt and Senior Subordinated Debt. By reason of such subordination, in the event of insolvency, creditors of the Company or a Subsidiary Debentures Guarantor who are not holders of Senior Debt or Senior Subordinated Debt or the Exchange Debentures may recover less, ratably, than holders of Senior Debt or Senior Subordinated Debt and may recover more, ratably, than the holders of the Exchange Debentures. The subordination provisions described above will cease to be applicable to the Exchange Debentures and the Subsidiary Debentures Guarantees upon any defeasance or covenant defeasance of the Exchange Debentures as described under "-- Defeasance or Covenant Defeasance of Exchange Indenture." As used herein, the term "Specified Senior Debt" means (i) all Senior Debt under the Credit Facility and (ii) any other issue of Senior Debt having a principal amount of at least $10,000,000. At June 30, 1997, on a pro forma basis, after giving effect to the Recent 1997 Acquisitions, the Pending Transactions and the Original Offerings, the aggregate principal amount of Senior Debt and Senior Subordinated Debt (including the Notes) outstanding would have been approximately $214.6 million. The Company may from time to time hereafter incur additional Debt constituting Senior Debt and Senior Subordinated Debt under the Credit Facility or otherwise, subject to the "Limitation on Debt" covenant described below. 160 168 OPTIONAL REDEMPTION The Exchange Debentures will be redeemable (subject to contractual and other restrictions with respect thereto and to the legal availability of funds therefor) at the election of the Company, as a whole or from time to time in part, at any time on or after July 1, 2002, on not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of the principal amount thereof) set forth below, together with accrued and unpaid interest, if any, to the redemption date, if redeemed during the 12-month period beginning on July 1 of the years indicated below (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date):
YEAR REDEMPTION PRICE ---- ---------------- 2002......................................... 107.729% 2003......................................... 106.625 2004......................................... 105.521 2005......................................... 104.417 2006......................................... 103.313 2007......................................... 102.208 2008......................................... 101.104
In addition, at any time and from time to time prior to July 1, 2000, the Company may, at its option, redeem Exchange Debentures having an aggregate principal amount of up to 35% of the aggregate principal amount of Exchange Debentures issued upon exchange of the Exchangeable Preferred Stock or in payment of interest on the Exchange Debentures, at a redemption price equal to 113.25% of the aggregate principal amount thereof plus, without duplication, accrued and unpaid interest, with proceeds of one or more Public Equity Offerings, provided that, immediately after giving effect to any such redemption, at least $75,000,000 of the aggregate principal amount of the Exchange Debentures remains outstanding. Any such redemption must be made within 90 days of the related Public Equity Offering. If less than all the Exchange Debentures are to be redeemed, the particular Exchange Debentures to be redeemed will be selected not more than 60 days prior to the redemption date by the Debentures Trustee by such method as the Debentures Trustee deems fair and appropriate. CERTAIN COVENANTS The Exchange Indenture contains, among others, the following covenants: LIMITATION ON DEBT. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Debt (including Acquired Debt and the issuance of Disqualified Stock), except that the Company or a Subsidiary Debentures Guarantor may incur Debt or issue Disqualified Stock if, at the time of such event, the Consolidated Cash Flow Ratio would have been less than 7.0 to 1.0. In making the foregoing calculation, pro forma effect will be given to: (i) the incurrence of such Debt and (if applicable) the application of the net proceeds therefrom, including to refinance other Debt, as if such Debt had been incurred and the application of proceeds therefrom occurred on the first day of the four-fiscal quarter period used to calculate the Consolidated Cash Flow Ratio, (ii) the incurrence, repayment or retirement of any other Debt by the Company or any of its Restricted Subsidiaries since the first day of such four-quarter period as if such Debt was incurred, repaid or retired at the beginning of such four-quarter period and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or any of its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period. In making a computation under the foregoing clause (i) or (ii), the amount of Debt under a revolving credit facility will be computed based upon the average daily balance of such Debt during such four-quarter period. (b) Notwithstanding the foregoing, the Company may, and may, to the extent expressly permitted below, permit any of its Restricted Subsidiaries to, incur any of the following Debt ("Permitted Debt"): (i) Debt of the Company or any Subsidiary Debentures Guarantor under the Credit Facility (including guarantees thereof by Subsidiaries) in an aggregate principal amount at any one time 161 169 outstanding not to exceed $110,000,000 less any amounts applied to the permanent reduction of such Debt pursuant to the "Limitation on Certain Asset Sales" covenant. (ii) Debt of the Company or any of its Restricted Subsidiaries outstanding on the Closing Date, other than Debt described under clause (i) above. (iii) Debt owed by the Company to any of its Restricted Subsidiaries or owed by any Subsidiary to the Company or a Restricted Subsidiary (provided that such Debt is Junior Subordinated Debt and is held by the Company or such Restricted Subsidiary) or owed to the Company or a Subsidiary Debentures Guarantor by a Restricted Subsidiary that is not a Subsidiary Debentures Guarantor, provided the incurrence of such Debt did not violate the "Limitation on Restricted Payments" covenant. (iv) Debt represented by the Notes and the Subsidiary Notes Guarantees. (v) Debt represented by the Exchange Debentures and the Subsidiary Debentures Guarantees. (vi) Hedging Obligations of the Company or any of its Restricted Subsidiaries incurred in the ordinary course of business. (vii) Capitalized Lease Obligations of the Company or any of its Restricted Subsidiaries in an aggregate amount not exceeding $3,000,000 at any one time outstanding. (viii) Debt under purchase money mortgages or secured by purchase money security interests so long as (x) such Debt is not secured by any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets so acquired and (y) such Debt is created within 60 days of the acquisition of the related property; provided that the aggregate principal amount of Debt under this clause (viii) does not exceed $2,000,000 at any one time outstanding. (ix) Debt of the Company or any Subsidiary Debentures Guarantor, not permitted by any other clause of this definition, in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding. (x) Debt of the Company or any of its Restricted Subsidiaries consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock. (xi) Acquired Debt of a person, other than Debt incurred in connection with, or in contemplation of, such person becoming a Restricted Subsidiary or the acquisition of assets from such person, as the case may be, provided that the Company on a pro forma basis could incur $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of this covenant. (xii) Any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by the Company or any Restricted Subsidiary of any outstanding Debt of the Company or such Restricted Subsidiary, other than Debt incurred pursuant to clause (i), (vi), (vii), (viii), (ix) or (x) of this definition, including any successive refinancings thereof, so long as (A) any such new Debt is in a principal amount that does not exceed the principal amount so refinanced, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Debt refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing, (B) in the case of any refinancing of Junior Subordinated Debt, such new Debt is made subordinate to the Exchange Debentures at least to the same extent as the Debt being refinanced, (C) in the case of any refinancing of the Exchange Debentures or any Pari Passu Debt, such Debt is Pari Passu Debt or Junior Subordinated Debt and (D) such refinancing Debt does not have a Weighted Average Life less than the Weighted Average Life of the Debt being refinanced and does not have a final scheduled maturity earlier than the final scheduled maturity, or permit redemption at the option of the holder earlier than the earliest date of redemption at the option of the holder, of the Debt being refinanced. 162 170 LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, take any of the following actions: (a) declare or pay any dividend on, or make any distribution to holders of, any shares of the Capital Stock of the Company or any of its Restricted Subsidiaries, other than (i) dividends or distributions payable solely in Qualified Equity Interests of the issuer of such shares of Capital Stock, (ii) dividends or distributions by a Restricted Subsidiary payable to the Company or another Restricted Subsidiary or (iii) pro rata dividends or distributions on common stock of a Restricted Subsidiary held by minority stockholders, provided that such dividends do not in the aggregate exceed the minority stockholders' pro rata share of such Restricted Subsidiary's net income from the first day of the Company's fiscal quarter during which the Closing Date occurs; (b) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of Capital Stock (or any options, warrants or other rights to acquire shares of Capital Stock) of (i) the Company or any of its Unrestricted Subsidiaries or (ii) any Restricted Subsidiary that are held by any Affiliate of the Company (other than, in either case, any such Capital Stock owned by the Company or any of its Restricted Subsidiaries); (c) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Junior Subordinated Debt; and (d) make any Investment (other than a Permitted Investment) in any person (such payments or other actions described in (but not excluded from) clauses (a) through (d) being referred to as "Restricted Payments"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment: (i) no Default or Event of Default has occurred and is continuing, (ii) the Company could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of the "Limitation on Debt" covenant, and (iii) the aggregate amount of all Restricted Payments declared or made after the Closing Date does not exceed the sum of: (A) the remainder of (x) 100% of the aggregate Consolidated Cash Flow for the period beginning on the first day of the Company's fiscal quarter during which the Closing Date occurs and ending on the last day of the Company's most recent fiscal quarter for which internal financial statements are available ending prior to the date of such proposed Restricted Payment (the "Computation Period") minus (y) the product of 1.4 times the sum of (i) Consolidated Fixed Charges for the Computation Period and (ii) all dividends or other distributions paid in cash by the Company or any of its Restricted Subsidiaries on any Disqualified Stock of the Company or any of its Restricted Subsidiaries for the Computation Period; plus (B) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Company's Board of Directors, whose good faith determination will be conclusive) from the issuance or sale (other than to a Subsidiary) of Qualified Equity Interests of the Company (excluding from this computation any net proceeds of a Public Equity Offering received by the Company that are used by it to redeem the Exchange Debentures, as discussed above); plus (C) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Company's Board of Directors, whose good faith determination will be conclusive) from the issuance or sale (other than to a Subsidiary) of debt securities or Disqualified Stock that have been converted into or exchanged for Qualified Stock of the Company, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange; plus 163 171 (D) without duplication, the Net Cash Proceeds received by the Company or a Wholly Owned Restricted Subsidiary upon the sale of any of its Unrestricted Subsidiaries; plus (E) $5,000,000. Notwithstanding the foregoing, the Company and any of its Restricted Subsidiaries may take any of the following actions, so long as (with respect to clauses (f) and (g) below) no Default or Event of Default has occurred and is continuing or would occur: (a) The payment of any dividend within 60 days after the date of declaration thereof, if at the declaration date such payment would not have been prohibited by the foregoing provision. (b) The repurchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company. (c) The purchase, redemption, defeasance or other acquisition or retirement for value of Junior Subordinated Debt in exchange for, or out of the net cash proceeds of, a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of shares of Qualified Stock of the Company. (d) The purchase, redemption, defeasance or other acquisition or retirement for value of Junior Subordinated Debt in exchange for, or out of the net cash proceeds of, a substantially concurrent issuance or sale (other than to a Subsidiary) of, Junior Subordinated Debt, so long as the Company or a Restricted Subsidiary would be permitted to refinance such original Junior Subordinated Debt with such new Junior Subordinated Debt pursuant to clause (xii) of the definition of Permitted Debt. (e) The repurchase of any Junior Subordinated Debt at a purchase price not greater than 101% of the principal amount of such Junior Subordinated Debt in the event of a "change of control" in accordance with provisions similar to the "Purchase of Exchange Debentures upon a Change of Control" covenant; provided that, prior to such repurchase, the Company has made the Change of Control Offer as provided in such covenant with respect to the Exchange Debentures and has repurchased all Exchange Debentures validly tendered for payment in connection with such Change of Control Offer. (f) The payment by the Company to Citadel Communications for the purpose of the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of Citadel Communications, options on any such shares or related stock appreciation rights or similar securities held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates) or by any employee benefit plan, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate cash consideration paid for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock after the date of the Closing Date does not exceed $1,000,000 in any fiscal year. (g) Loans or advances to officers, directors and employees of Citadel Communications, the Company or any of its Restricted Subsidiaries made in the ordinary course of business after the Closing Date in an aggregate principal amount not to exceed $1,000,000 at any one time outstanding. (h) Payments to or on behalf of Citadel Communications to pay its operating and administrative expenses attributable to the Company including, without limitation, legal and audit expenses, directors' fees, fees payable in respect of the trustee and the back-up trustees under the Voting Trust Agreement, and Commission compliance expenses, in an amount not to exceed the greater of $1,000,000 per fiscal year and 1% of the net revenues of the Company for the preceding fiscal year. The payments described in clauses (b), (c), (e), (f) and (g) of this paragraph will be Restricted Payments that will be permitted to be taken in accordance with this paragraph but will reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii) and the payments described in clauses (a), (d) and (h) of this paragraph will be Restricted Payments that will be permitted to be taken in 164 172 accordance with this paragraph and will not reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii). For the purpose of making any calculations under the Exchange Indenture (i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will be deemed to have made an Investment in amount equal to the fair market value of the net assets of such Restricted Subsidiary at the time of such designation as determined by the Board of Directors of the Company, whose good faith determination will be conclusive, (ii) any property transferred to or from an Unrestricted Subsidiary will be valued at fair market value at the time of such transfer, as determined by the Board of Directors of the Company, whose good faith determination will be conclusive and (iii) subject to the foregoing, the amount of any Restricted Payment, if other than cash, will be determined by the Board of Directors of the Company, whose good faith determination will be conclusive. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other person that thereafter becomes a Restricted Subsidiary, such Investment will no longer be counted as a Restricted Payment for purposes of calculating the aggregate amount of Restricted Payments. If an Investment resulted in the making of a Restricted Payment, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise), to the extent such net reduction is not included in Consolidated Adjusted Net Income; provided that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (x) the cash proceeds received by the Company and any of its Restricted Subsidiaries in connection with such net reduction and (y) the initial amount of such Investment. In computing Consolidated Adjusted Net Income for purposes of the foregoing clause (iii)(A), (i) the Company may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company will be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment that, at the time of the making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of the Exchange Indenture, such Restricted Payment will be deemed to have been made in compliance with the Exchange Indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. PURCHASE OF EXCHANGE DEBENTURES UPON A CHANGE OF CONTROL. If a Change of Control occurs at any time, then each holder of Exchange Debentures will have the right to require that the Company purchase such holder's Exchange Debentures, in whole or in part in integral multiples of $1,000, at a purchase price in cash equal to 101% of the principal amount of such Exchange Debentures, plus accrued and unpaid interest, if any, to the date of purchase, pursuant to the offer described below (the "Change of Control Offer") and the other procedures set forth in the Exchange Indenture. Within 30 days following any Change of Control, the Company will notify the Debentures Trustee thereof and give written notice of such Change of Control to each holder of Exchange Debentures by first-class mail, postage prepaid, at its address appearing in the security register, stating, among other things, (i) the purchase price and the purchase date, which will 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; (ii) that any Exchange Debenture not tendered will continue to accrue interest; (iii) that, unless the Company defaults in the payment of the purchase price, any Exchange Debenture accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control purchase date; and (iv) certain other procedures that a holder of Exchange Debentures must follow to accept a Change of Control Offer or to withdraw such acceptance. 165 173 If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the purchase price for all of the Exchange Debentures that might be tendered by holders of the Exchange Debentures seeking to accept the Change of Control Offer. The Credit Facility prohibits the purchase of Exchange Debentures by the Company prior to full repayment of indebtedness under the Credit Facility and, upon a Change of Control, all amounts outstanding under the Credit Facility become due and payable. There can be no assurance that in the event of a Change of Control the Company will be able to obtain the necessary consents from the lenders under the Credit Facility to consummate a Change of Control Offer. The failure of the Company to make or consummate the Change of Control Offer or pay the applicable Change of Control purchase price when due would result in an Event of Default and would give the Debentures Trustee and the holders of the Exchange Debentures the rights described under "Events of Default." In addition to the obligations of the Company under the Exchange Indenture with respect to the Exchange Debentures in the event of a Change of Control, the Credit Facility contains a provision designating a change of control as described therein as an event of default, which would obligate the Company to repay amounts outstanding under the Credit Facility upon an acceleration of the indebtedness outstanding thereunder. The existence of a holder's right to require the Company to purchase such holder's Exchange Debentures upon a Change of Control may deter a third party from acquiring the Company in a transaction that constitutes a Change of Control. The definition of "Change of Control" in the Exchange Indenture is limited in scope. The provisions of the Exchange Indenture may not afford holders of Exchange Debentures the right to require the Company to repurchase such Exchange Debentures in the event of a highly leveraged transaction or certain transactions with the Company's management or its affiliates, including a reorganization, restructuring, merger or similar transaction involving the Company (including, in certain circumstances, an acquisition of the Company by management or its affiliates) that may adversely affect holders of the Exchange Debentures, if such transaction is not a transaction defined as a Change of Control. See "Certain Definitions" above for the definition of "Change of Control." A transaction involving the Company's management or its affiliates, or a transaction involving a recapitalization of the Company, would result in a Change of Control if it is the type of transaction specified in such definition. The Company will comply with the applicable tender offer rules including Rule 14e-l under the Exchange Act, and any other applicable securities laws and regulations in connection with a Change of Control Offer. The Company will not, and will not permit any of its Restricted Subsidiaries to, create any restriction (other than restrictions existing under Debt as in effect on the Closing Date or in refinancings or replacements of such Debt) that would materially impair the ability of the Company to make a Change of Control Offer to purchase the Exchange Debentures or, if such Change of Control Offer is made, to pay for the Exchange Debentures tendered for purchase. LIMITATION ON CERTAIN ASSET SALES. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any Asset Sale unless (i) the consideration received by the Company or such Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold (as determined by the Board of Directors of the Company, whose good faith determination will be conclusive) and (ii) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 80% (A) cash or cash equivalents and/or (B) the assumption by the transferee of Debt of the Company or a Restricted Subsidiary ranked senior to or pari passu with the Exchange Debentures and release of the Company or such Restricted Subsidiary from all liability on such Debt. (b) If the Company or any of its Restricted Subsidiaries engages in an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale, (i) apply all or a portion of such Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Facility or to the repayment of other Senior Debt or Senior Subordinated Debt of the Company or a Subsidiary Debentures Guarantor or (ii) invest (or enter into one or more legally binding agreements to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in 166 174 properties and assets that will be used in the broadcast business or businesses reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, 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." (c) When the aggregate amount of Excess Proceeds exceeds $5,000,000, the Company will, within 30 days thereafter, make an offer to purchase from all holders of Exchange Debentures, on a pro rata basis, in accordance with the procedures set forth in the Exchange Indenture, the maximum principal amount (expressed as a multiple of $1,000) of Exchange Debentures that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date such offer to purchase is consummated. To the extent that the aggregate principal amount of the Exchange Debentures tendered pursuant to such offer to purchase is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of the Exchange Debentures validly tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the Exchange Debentures to be purchased will be selected on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset to zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act to the extent applicable in connection with the repurchase of Exchange Debentures pursuant to an offer to purchase Exchange Debentures. LIMITATION ON ASSET SWAPS. The Exchange Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any Asset Swap, unless: (i) at the time of entering into the Asset Swap and immediately after giving effect to the proposed Asset Swap, no Default or Event of Default has occurred and is continuing or would occur as a consequence thereof; (ii) the Company would, at the time of entering into the Asset Swap and after giving pro forma effect to the proposed Asset Swap, as if such Asset Swap had occurred at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of the "Limitation on Debt" covenant; (iii) the respective aggregate fair market values of the assets being purchased and sold by the Company or any of its Restricted Subsidiaries are substantially the same at the time of entering into the Asset Swap (or any difference in such aggregate fair market values is substantially compensated for by an equalizing (i) payment of cash, (ii) assumption of liabilities or (iii) taking of assets subject to liabilities); and (iv) at the time of the consummation of the first to occur of the relinquishment or the replacement of assets constituting part of the proposed Asset Swap, the percentage of any decline in the fair market value of the asset or assets being acquired by the Company and its Restricted Subsidiaries shall not be significantly greater than the percentage of any decline in the fair market value of the assets being disposed of by the Company, calculated from the time the last agreement constituting part of the Asset Swap, was entered into. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or suffer to exist any transaction with, or for the benefit of, any Affiliate of the Company unless (a) such transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been obtained in an arm's length transaction with third parties who are not Affiliates and (b) either (i) with respect to any transaction or series of transactions involving aggregate payments in excess of $1,000,000, but less than $5,000,000, the Company delivers an officers' certificate to the Debentures Trustee certifying that such transaction or transactions comply with clause (a) above or (ii) with respect to a transaction or series of transactions involving aggregate payments equal to or greater than $5,000,000, such transaction or transactions 167 175 have been approved by the Board of Directors (including a majority of the Disinterested Directors) of the Company or the Company has obtained a written opinion from a nationally recognized investment banking firm to the effect that such transaction or transactions are fair to the Company or such Restricted Subsidiary from a financial point of view. The foregoing covenant does not restrict any of the following: (A) Transactions among the Company and/or any of its Restricted Subsidiaries. (B) The Company from paying reasonable and customary regular compensation, fees, indemnification and similar arrangements and payments thereunder to directors of the Company or any of its Restricted Subsidiaries who are not employees of the Company or any of its Restricted Subsidiaries. (C) Employment agreements or compensation or employee benefits arrangements with any officer, director or employee of the Company or its Restricted Subsidiaries entered into in the ordinary course of business (including customary benefits thereunder) (it being understood that benefits of the nature in place as of the Closing Date shall be deemed permissible hereunder). (D) The performance of the Company's obligations under (a) that certain lease agreement effective December 29, 1995 with Wilson Aviation, L.L.C. relating to the lease of an airplane, (b) that certain agreement not to compete dated December 31, 1996 with DVS Management, Inc. and (c) that certain Voting Trust Agreement dated March 17, 1997 among Citadel Communications, ABRY II, ABRY/CIP and others and the related letter agreement dated March 17, 1997 among Citadel Communications, ABRY II, ABRY/CIP and others (the "Affiliate Agreements"); provided that any amendments or modifications to the terms of the Affiliate Agreements (1) are no less favorable to the Company than those that could have been obtained in an arm's length transaction with third parties who are not Affiliates and (2) are approved by the Board of Directors (including a majority of the Disinterested Directors) of the Company. (E) The Company from making payments to Citadel Communications to pay its operating and administrative expenses attributable to the Company including, without limitation, legal and audit expenses, directors' fees and Commission compliance expenses, in an amount not to exceed the greater of $1,000,000 per fiscal year and 1% of the net revenues of the Company for the preceding fiscal year. (F) The Company or a Restricted Subsidiary from transferring up to $500,000 of properties and assets, including cash, to a joint venture in which the Company or a Restricted Subsidiary has an equity interest and in which one or more directors or officers of the Company or Citadel Communications has an equity interest, which joint venture is engaged in the internet service provider business. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any of its Restricted Subsidiaries 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 of its Restricted Subsidiaries to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock, (b) pay any Debt owed to the Company or any other Restricted Subsidiary, (c) make loans or advances to the Company or any other Restricted Subsidiary or (d) transfer any of its properties or assets to the Company or any other Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of any of the following: (i) The Credit Facility and any agreement in effect on the Closing Date. (ii) Customary non-assignment provisions of any lease governing a leasehold interest of the Company or any of its Restricted Subsidiaries. (iii) The refinancing or successive refinancings of Debt referred to in clause (i) or (iv), so long as such encumbrances or restrictions are no less favorable to the Company or any of its Restricted Subsidiaries than those contained in such original agreement. (iv) Any agreement or other instrument of a person acquired by the Company or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation 168 176 thereof), which encumbrance or restriction is not applicable to any person, or the properties or assets of any person, other than the person, or the property or assets of the person, so acquired. (v) Any agreement providing for the incurrence of Debt by a Restricted Subsidiary pursuant to paragraph (b) of the "Limitation on Debt" covenant, provided that such Restricted Subsidiary becomes a Subsidiary Debentures Guarantor. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company will not sell, and will not permit any of its Restricted Subsidiaries, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants, or other rights to purchase shares of such Capital Stock) except (i) to the Company or a Wholly Owned Restricted Subsidiary, (ii) issuances or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law, or issuances or sales to directors of directors' qualifying shares, (iii) if, immediately after giving effect to such issuance or sale, neither the Company nor any Subsidiary owns any shares of Capital Stock of such Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) or (iv) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such person remaining after giving effect to such issuance or sale would have been permitted to be made under the "Limitation on Restricted Payments" covenant if made on the date of such issuance or sale. In addition, the Company will not, and will not permit any of its Restricted Subsidiaries to, sell, transfer or otherwise dispose of any of its properties or assets to an Unrestricted Subsidiary other than in the ordinary course of business. UNRESTRICTED SUBSIDIARIES. (a) The Board of Directors of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company nor any of its Restricted Subsidiaries is directly or indirectly liable for any Debt of such Subsidiary, (ii) no default with respect to any Debt of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Debt of the Company or any of its Restricted Subsidiaries to declare a default on such other Debt 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 the "Limitation on Restricted Payments" covenant, (iv) neither the Company nor any of its Restricted Subsidiaries 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 of its Restricted Subsidiaries has any obligation to subscribe for additional shares of Capital Stock or other equity interest in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results. Notwithstanding the foregoing, the Company may not designate the License Subsidiary, or any Subsidiary to which any properties or assets (other than current assets) owned by the Company or the License Subsidiary on the Closing Date have been transferred, as an Unrestricted Subsidiary. (b) The Board of Directors of the Company may designate any of its Unrestricted Subsidiaries as a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Debt by a Restricted Subsidiary of any outstanding Debt of such Unrestricted Subsidiary and such designation will only be permitted if (i) such Debt is permitted under the "Limitation on Debt" covenant and (ii) no Default or Event of Default will have occurred and be continuing following such designation. LIMITATION ON OTHER SUBORDINATED DEBT. The Company and each Subsidiary Debentures Guarantor will not, directly or indirectly, incur or otherwise permit to exist any Debt that is subordinate in right of payment to any Senior Subordinated Debt of the Company or such Subsidiary Debentures Guarantor, as the case may be, unless such Debt is also pari passu with the Exchange Debentures or the Subsidiary Debentures Guarantee of the Exchange Debentures by such Subsidiary Debentures Guarantor, as the case may be, or subordinate in right of payment to the Exchange Debentures or such Subsidiary Debentures Guarantee of the Exchange Debentures, as the case may be, to at least the same extent as the Exchange Debentures or such Subsidiary Debentures Guarantee are subordinate in right of payment to Senior Subordinated Debt or all senior 169 177 subordinated debt of the Subsidiary Debentures Guarantors, as the case may be, as set forth in the Exchange Indenture. SUBSIDIARY DEBENTURES GUARANTEES. The Subsidiary Debentures Guarantors will, jointly and severally, unconditionally guarantee the due and punctual payment of the principal of, premium, if any, and interest on the Exchange Debentures on a subordinated basis pursuant to the Subsidiary Debentures Guarantees as described under "-- Subordination." The Subsidiary Debentures Guarantors may be released from their obligations under the Subsidiary Debentures Guarantees as described under "-- Defeasance and Covenant Defeasance of the Exchange Indenture" and a Subsidiary Debentures Guarantor may be released from its obligations under its Subsidiary Debentures Guarantee as described under "Guarantees." The Company will (i) cause each person that, after the Closing Date, becomes a Wholly Owned Restricted Subsidiary of the Company, as well as each other Restricted Subsidiary that guarantees any other Debt of the Company, to execute and deliver a supplemental indenture and thereby become a Subsidiary Debentures Guarantor bound by the Subsidiary Debentures Guarantee of the Exchange Debentures in the form set forth in the Exchange Indenture (without such Subsidiary Debentures Guarantor being required to execute and deliver its Subsidiary Debentures Guarantee endorsed on the Exchange Debentures) and (ii) deliver to the Debentures Trustee an opinion of counsel, in form and substance reasonably satisfactory to the Debentures Trustee, that the Subsidiary Debentures Guarantee of such Subsidiary Debentures Guarantor is a valid and legally binding obligation of such Subsidiary Debentures Guarantor. GUARANTEES OF DEBT BY RESTRICTED SUBSIDIARIES. The Company will not permit any of its Restricted Subsidiaries that is not a Subsidiary Debentures Guarantor, directly or indirectly, to guarantee, assume or in any other manner become liable for the payment of any Debt of the Company or any Debt of any other Restricted Subsidiary, unless (a) such Restricted Subsidiary simultaneously executes and delivers a Subsidiary Debentures Guarantee and (b) with respect to any guarantee of Junior Subordinated Debt by a Restricted Subsidiary, any such guarantee is subordinated to such Restricted Subsidiary's Subsidiary Debentures Guarantee at least to the same extent as such Junior Subordinated Debt is subordinated to the Exchange Debentures, provided that the foregoing provision will not be applicable to any guarantee by any such Restricted Subsidiary that existed at the time such person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such person becoming a Restricted Subsidiary. LIMITATION ON LIENS. The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, affirm or suffer to exist any Lien of any kind securing any Pari Passu Debt or Junior Subordinated Debt (including any assumption, guarantee or other liability with respect thereto by any Restricted Subsidiary) upon any property or assets (including any intercompany notes) of the Company or any of its Restricted Subsidiaries now owned or acquired after the Closing Date, or any income or profits therefrom, unless the Exchange Debentures are directly secured equally and ratably with (or prior to in the case of Junior Subordinated Debt) the obligation or liability secured by such Lien; provided that the foregoing will not apply to Liens securing Debt of a person acquired by the Company or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation thereof), which Lien is not applicable to any person, or the properties or assets of any person, other than the person, or the property or assets of the person, so acquired. REPORTS. At all times while the Exchange Debentures are issued and outstanding, whether or not the Company is then required to file reports with the Commission, the Company will file with the Commission all such reports and other information as it would be required to file with the Commission by Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company will supply the Debentures Trustee and each holder, or will supply to the Debentures Trustee for forwarding to each such holder, without cost to such holder, copies of such reports and other information. 170 178 CONSOLIDATION, MERGER AND SALE OF ASSETS The Company will not consolidate with or merge with or into any other person or, directly or indirectly, convey, transfer or lease its properties and assets substantially as an entirety to any person or persons, unless: (a) Either (i) the Company is the surviving corporation or (ii) the person (if other than the Company) formed by such consolidation or into which the Company is merged or the person that acquires by sale, assignment, transfer, lease or other disposition of the properties and assets of the Company substantially as an entirety (the "Surviving Entity") (A) is a corporation, partnership or trust organized and validly existing under the laws of the United States, any state thereof or the District of Columbia and (B) expressly assumes, by a supplemental indenture in form satisfactory to the Debentures Trustee, all of the Company's obligations under the Exchange Indenture and the Exchange Debentures. (b) Immediately after giving effect to such transaction and treating any obligation of the Company or a Restricted Subsidiary in connection with or as a result of such transaction as having been incurred at the time of such transaction, no Default or Event of Default has occurred and is continuing. (c) Immediately after giving effect to such transaction on a pro forma basis (on the assumption that the transaction occurred at the beginning of the most recently ended four full fiscal quarter period for which internal financial statements are available), the Company (or the Surviving Entity if the Company is not the continuing obligor under the Exchange Indenture) could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of the "Limitation on Debt" covenant. (d) If the Company is not the continuing obligor under the Exchange Indenture, each Subsidiary Debentures Guarantor, unless it is the other party to the transaction described above, has by supplemental indenture confirmed that its Subsidiary Debentures Guarantee applies to the Surviving Entity's obligations under the Exchange Indenture and the Exchange Debentures. (e) If any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of the "Limitation on Liens" covenant are complied with. (f) The Company delivers, or causes to be delivered, to the Debentures Trustee, in form and substance reasonably satisfactory to the Debentures Trustee, an officers' certificate and an opinion of counsel, each stating that such transaction complies with the requirements of the Exchange Indenture. In the event of any transaction described in and complying with the conditions listed in the first paragraph of this covenant in which the Company is not the continuing obligor under the Exchange Indenture, the Surviving Entity will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Exchange Indenture, and thereafter the Company will, except in the case of a lease, be discharged from all its obligations and covenants under the Exchange Indenture and Exchange Debentures. EVENTS OF DEFAULT Each of the following are "Events of Default" under the Exchange Indenture: (a) Default in the payment of any interest on any Exchange Debenture when it becomes due and payable, and continuance of such default for a period of 30 days. (b) Default in the payment of the principal of (or premium, if any, on) any Exchange Debenture when due. (c) Failure to perform or comply with the Exchange Indenture provisions described under "Consolidation, Merger and Sale of Assets." (d) Default in the performance, or breach, of any covenant or agreement of the Company or any Subsidiary Debentures Guarantor contained in the Exchange Indenture or any Subsidiary Debentures Guarantee (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere herein), and continuance of such default or breach for a period of 60 171 179 days after written notice has been given to the Company by the Debentures Trustee or to the Company and the Debentures Trustee by the holders of at least 25% in aggregate principal amount of the Exchange Debentures then outstanding. (e) (i) An event of default has occurred under any mortgage, bond, indenture, loan agreement or other document evidencing an issue of Debt of the Company or any Significant Subsidiary, which issue has an aggregate outstanding principal amount of not less than $5,000,000, and such default has resulted in such Debt becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (ii) a default in any payment when due at final maturity of any such Debt. (f) Failure by the Company or any of its Restricted Subsidiaries to pay one or more final judgments the uninsured portion of which exceeds in the aggregate $5,000,000, which judgment or judgments are not paid, discharged or stayed for a period of 60 days. (g) Any Subsidiary Debentures Guarantee ceases to be in full force and effect or is declared null and void or any Subsidiary Debentures Guarantor denies that it has any further liability under any Subsidiary Debentures Guarantee, or gives notice to such effect (other than by reason of the termination of the Exchange Indenture or the release of any Subsidiary Debentures Guarantee in accordance with the Exchange Indenture), and such condition has continued for a period of 30 days after written notice of such failure requiring the Subsidiary Debentures Guarantor and the Company to remedy the same has been given (x) to the Company by the Debentures Trustee or (y) to the Company and the Debentures Trustee by the holders of 25% in the aggregate principal amount of the Exchange Debentures then outstanding. (h) The occurrence of certain events of bankruptcy, insolvency or reorganization with respect to the Company or any Significant Subsidiary. If an Event of Default (other than as specified in clause (h) above) occurs and is continuing, the Debentures Trustee or the holders of not less than 25% in aggregate principal amount of the Exchange Debentures then outstanding may, and the Debentures Trustee at the request of such holders shall, declare the principal of all of the outstanding Exchange Debentures immediately due and payable, by a notice in writing to the Company (and to the Debentures Trustee if given by the Holders) and, if the Credit Facility is in effect, to the Credit Facility Agent, and, upon any such declaration, such principal will become due and payable immediately. If an Event of Default specified in clause (h) above occurs and is continuing, then such principal will ipso facto become and be immediately due and payable without any declaration or other act on the part of the Debentures Trustee or any holder of Exchange Debentures. At any time after a declaration of acceleration under the Exchange Indenture, but before a judgment or decree for payment of the money due has been obtained by the Debentures Trustee, the holders of a majority in aggregate principal amount of the outstanding Exchange Debentures, by written notice to the Company and the Debentures Trustee, may rescind such declaration and its consequences if (i) the Company has paid or deposited with the Debentures Trustee a sum sufficient to pay (A) all overdue interest on all Exchange Debentures, (B) all unpaid principal of (and premium, if any, on) any outstanding Exchange Debentures that has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Exchange Debentures, (C) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue principal amount at the rate borne by the Exchange Debentures and (D) all sums paid or advanced by the Debentures Trustee under the Exchange Indenture and the reasonable compensation, expenses, disbursements and advances of the Debentures Trustee, its agents and counsel; and (ii) all Events of Default, other than the non-payment of principal of (or premium, if any, on) or interest on the Exchange Debentures that have become due solely by such declaration of acceleration, have been cured or waived. No such rescission will affect any subsequent default or impair any right consequent thereon. The holders of not less than a majority in aggregate principal amount of the outstanding Exchange Debentures may, on behalf of the holders of all of the Exchange Debentures, waive any past defaults under the Exchange Indenture, except a default in the payment of the principal of (and premium, if any) or interest on 172 180 any Exchange Debenture, or in respect of a covenant or provision that under the Exchange Indenture cannot be modified or amended without the consent of the holder of each Exchange Debenture outstanding. If a Default or an Event of Default occurs and is continuing and is known to the Debentures Trustee, the Debentures Trustee will mail to each holder of the Exchange Debentures notice of the Default or Event of Default within 90 days after the occurrence thereof. Except in the case of a Default or an Event of Default in payment of principal of (and premium, if any, on) or interest on any Exchange Debentures, the Debentures Trustee may withhold the notice to the holders of the Exchange Debentures if a committee of its trust officers in good faith determines that withholding such notice is in the interests of the holders of the Exchange Debentures. The Company is required to furnish to the Debentures Trustee annual statements as to the performance by the Company and the Subsidiary Debentures Guarantors of their respective obligations under the Exchange Indenture and as to any default in such performance. The Company is also required to notify the Debentures Trustee within five days of any officer of the Company having knowledge of any Default. DEFEASANCE OR COVENANT DEFEASANCE OF EXCHANGE INDENTURE The Company may, at its option and at any time, terminate the obligations of the Company and any Subsidiary Debentures Guarantors with respect to the outstanding Exchange Debentures ("defeasance"). Such defeasance means that the Company will be deemed to have paid and discharged the entire Debt represented by the outstanding Exchange Debentures, except for (i) the rights of holders of outstanding Exchange Debentures to receive payments in respect of the principal of (and premium, if any, on) and interest on such Exchange Debentures when such payments are due, (ii) the Company's obligations to issue temporary Exchange Debentures, register the transfer or exchange of any Exchange Debentures, replace mutilated, destroyed, lost or stolen Exchange Debentures, maintain an office or agency for payments in respect of the Exchange Debentures and segregate and hold such payments in trust, (iii) the rights, powers, trusts, duties and immunities of the Debentures Trustee and (iv) the defeasance provisions of the Exchange Indenture. In addition, the Company may, at its option and at any time, elect to terminate the obligations of the Company and any Subsidiary Debentures Guarantor with respect to certain covenants set forth in the Exchange Indenture and described under "-- Certain Covenants" above, and any omission to comply with such obligations would not constitute a Default or an Event of Default with respect to the Exchange Debentures ("covenant defeasance"). In order to exercise either defeasance or covenant defeasance, (a) the Company must irrevocably deposit or cause to be deposited with the Debentures Trustee, as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the holders of the Exchange Debentures, money in an amount, or U.S. government securities that through the scheduled payment of principal and interest thereon will provide money in an amount, or a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the principal of (and premium, if any, on) and interest on the outstanding Exchange Debentures at maturity (or upon redemption, if applicable) of such principal or installment of interest; (b) no Default or Event of Default has occurred and is continuing on the date of such deposit or, insofar as an event of bankruptcy under clause (h) of "Events of Default" above is concerned, at any time during the period ending on the 91st day after the date of such deposit; (c) such defeasance or covenant defeasance must not result in a breach or violation of, or constitute a default under, the Exchange Indenture or any material agreement or instrument to which the Company or any Subsidiary Debentures Guarantor is a party or by which it is bound or cause the Debentures Trustee or the trust so created to be subject to the Investment Company Act of 1940, as amended; (d) in the case of defeasance, the Company must deliver to the Debentures Trustee an opinion of counsel stating that the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or since the date hereof, there has been a change in applicable federal income tax law, to the effect, and based thereon such opinion must confirm that, the holders of the outstanding Exchange Debentures will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (e) in the case of covenant defeasance, the Company must have delivered to the Debentures Trustee an opinion of 173 181 counsel to the effect that the holders of the Exchange Debentures outstanding will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (f) the Company must have delivered to the Debentures Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to either the defeasance or the covenant defeasance, as the case may be, have been complied with. SATISFACTION AND DISCHARGE The Exchange Indenture will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the Exchange Debentures, as expressly provided for in the Exchange Indenture) and, upon the request of the Company, the Debentures Trustee, at the expense of the Company, will execute proper instruments acknowledging satisfaction and discharge of the Exchange Indenture when (a) either (i) all the Exchange Debentures theretofore authenticated and delivered (other than destroyed, lost or stolen Exchange Debentures that have been replaced or paid and Exchange Debentures that have been subject to defeasance as described under "Defeasance or Covenant Defeasance of Exchange Indenture") have been delivered to the Debentures Trustee for cancellation or (ii) all Exchange Debentures not theretofore delivered to the Debentures Trustee for cancellation (A) have become due and payable, (B) will become due and payable at Stated Maturity within one year or (C) are to be called for redemption within one year under arrangements satisfactory to the Debentures Trustee for the giving of notice of redemption by the Debentures Trustee in the name, and at the expense, of the Company, and the Company has irrevocably deposited or caused to be deposited with the Debentures Trustee funds in trust for the purpose in an amount sufficient to pay and discharge the entire Debt on such Exchange Debentures not theretofore delivered to the Debentures Trustee for cancellation, for principal (and premium, if any, on) and interest to the date of such deposit (in the case of Exchange Debentures that have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (b) the Company has paid or caused to be paid all sums payable under the Exchange Indenture by the Company; and (c) the Company has delivered to the Debentures Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided in the Exchange Indenture relating to the satisfaction and discharge of the Exchange Indenture have been complied with. AMENDMENTS AND WAIVERS Modifications and amendments of the Exchange Indenture and any Subsidiary Debentures Guarantee may be made by the Company, any affected Subsidiary Debentures Guarantor and the Debentures Trustee with the consent of the holders of a majority in aggregate outstanding principal amount of the Exchange Debentures; provided, however, that no such modification or amendment may, without the consent of the holder of each outstanding Exchange Debenture affected thereby, (a) change the Stated Maturity of the principal of, or any installment of interest on, any Exchange Debenture, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the place of payment where or change the coin or currency in which, any Exchange Debenture or any premium or 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); (b) reduce the percentage in principal amount of outstanding Exchange Debentures, the consent of whose holders is required for any such amendment or for any waiver of compliance with certain provisions of, or certain defaults and their consequences provided for under, the Exchange Indenture; (c) modify any of the provisions of the Exchange Indenture relating to the subordination of the Exchange Debentures or the Subsidiary Debentures Guarantees in a manner materially adverse to the holders; or (d) waive a default in the payment of principal of, or premium, if any, or interest on the Exchange Debentures or reduce the percentage or aggregate principal amount of outstanding Exchange Debentures 174 182 the consent of whose holders is necessary for waiver of compliance with certain provisions of the Exchange Indenture or for waiver of certain defaults. The holders of a majority in aggregate principal amount of the Exchange Debentures outstanding may waive compliance with certain restrictive covenants and provisions of the Exchange Indenture. Without the consent of any holders, the Company and the Debentures Trustee, at any time and from time to time, may enter into one or more indentures supplemental to the Exchange Indenture for any of the following purposes: (1) to evidence the succession of another person to the Company and the assumption by any such successor of the covenants of the Company in the Exchange Indenture and in the Exchange Debentures; or (2) to add to the covenants of the Company for the benefit of the holders, or to surrender any right or power herein conferred upon the Company; or (3) to add additional Events of Default; or (4) to provide for uncertificated Exchange Debentures in addition to or in place of the certificated Exchange Debentures; or (5) to evidence and provide for the acceptance of appointment under the Exchange Indenture by a successor Debentures Trustee; or (6) to secure the Exchange Debentures; or (7) to cure any ambiguity, to correct or supplement any provision in the Exchange Indenture that may be defective or inconsistent with any other provision in the Exchange Indenture, or to make any other provisions with respect to matters or questions arising under the Exchange Indenture, provided that such actions pursuant to this clause do not adversely affect the interests of the holders in any material respect; or (8) to comply with any requirements of the Commission in order to effect and maintain the qualification of the Exchange Indenture under the Trust Indenture Act. THE DEBENTURES TRUSTEE The Bank of New York is the Debentures Trustee under the Exchange Indenture. The Bank of New York is a lender under the Credit Facility. The Exchange Indenture provides that, except during the continuance of an Event of Default, the Debentures Trustee will perform only such duties as are specifically set forth in the Exchange Indenture. Under the Exchange Indenture, the holders of a majority in outstanding principal amount of the Exchange Debentures will have the right to direct the time, method and place of conducting any proceeding or exercising any remedy available to the Debentures Trustee, subject to certain exceptions. If an Event of Default has occurred and is continuing, the Debentures Trustee will exercise such rights and powers vested in it under the Exchange Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. The Exchange Indenture and provisions of the Trust Indenture Act incorporated by reference therein, contain limitations on the rights of the Debentures Trustee thereunder, should it become a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Debentures Trustee is permitted to engage in other transactions; provided, however, that, if it acquires any conflicting interest (as defined), it must eliminate such conflict or else resign. GOVERNING LAW The Exchange Indenture is, and the Exchange Debentures and the Subsidiary Debentures Guarantees will be, governed by, and construed in accordance with, the laws of the State of New York. 175 183 DESCRIPTION OF OTHER CAPITAL STOCK The following summarizes certain provisions of the Company's Certificate of Incorporation, the Company's Bylaws and certain provisions of the Nevada General Corporation Law (the "NGCL"). Such summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the Company's Certificate of Incorporation and Bylaws and the NGCL, including the definitions therein of certain terms. GENERAL The authorized capital stock of the Company consists of 136,300 shares of common stock, par value $0.001 per share, of which all outstanding shares are owned by Citadel Communications, and, 4,000,000 shares of preferred stock, no par value, of which 2,000,000 shares have been designated as 13-1/4% Series A Exchangeable Preferred Stock and 2,000,000 shares have been designated as Series B Exchangeable Preferred Stock. The only preferred stock currently outstanding are 1,000,000 shares of Series A Exchangeable Preferred Stock. See "Description of Exchangeable Preferred Stock and Exchange Debentures." Certain of the rights and provisions summarized below are limited or modified by the Securities Purchase and Exchange Agreement, the Stockholders Agreement and the Voting Agreement. See "Management -- Board Composition and Governance Matters" and "-- Compensation Committee Interlocks and Insider Participation." Holders of the Company's common stock are entitled to one vote for each share held of record on all matters to be submitted to a vote of the shareholders. The Company's Certificate of Incorporation does not provide for cumulative voting for the election of directors. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors of the Company out of funds legally available therefor. The holders of common stock have no preemptive or other subscription rights, and there are no conversion rights or redemption or sinking fund provisions with respect to the common stock. All outstanding shares of common stock are fully paid and nonassessable. In the event of any liquidation, dissolution or winding-up of the affairs of the Company, holders of common stock will be entitled to share ratably in the assets of the Company available for distribution after payment in full of creditors and holders of the preferred stock of the Company. ANTI-TAKEOVER EFFECTS OF CERTAIN AGREEMENTS The Company and/or Citadel Communications are party to certain agreements which may be deemed to have anti-takeover effects. These agreements may have the effect of discouraging a future takeover attempt which is not approved by the Company and/or the Citadel Communications Board of Directors, but which individual shareholders may deem to be in their best interests or in which shareholders may receive a substantial premium for their shares over then-current market prices. As a result, shareholders who might desire to participate in such a transaction may not have an opportunity to do so. Such agreements will also render the removal of the current Board of Directors of the Company and/or Citadel Communications more difficult. The Voting Agreement gives certain parties the right to designate the directors of the Company and Citadel Communications, and provides that creation of committees of the Board of Directors of either the Company or Citadel Communications must be approved by at least three-quarters of the members of the Citadel Communications Board. The Voting Agreement requires the prior vote or written consent of not less than three-quarters of the members of the Citadel Board for the taking by the Company or Citadel Communications of certain actions, including transfers or other disposition of assets, mergers or acquisitions. The Securities Purchase and Exchange Agreement, among other things, requires the vote or consent of a majority of the Series D Preferred Stock of Citadel Communications for the taking by the Company or Citadel Communications of certain actions, including transfers or other dispositions of assets, mergers or acquisitions. See "Management -- Board Composition and Governance Matters." Pursuant to the Stockholders Agreement, certain stockholders of Citadel Communications have preemptive rights with respect to shares of capital stock of the Company and Citadel Communications. See "Management -- Compensation Committee Interlocks and Insider Participation." 176 184 FOREIGN OWNERSHIP The Company's Certificate of Incorporation permits restriction on the ownership, voting and transfer of the Company's capital stock in accordance with the Communications Act and the rules of the FCC, to prohibit ownership of more than 20% of the Company's outstanding capital stock (or more than 20% of the voting rights it represents) by or for the account of aliens or corporations otherwise subject to domination or control by aliens. See "Business -- Federal Regulation of Radio Broadcasting." The Certificate of Incorporation also authorizes the Company's Board to prohibit any transfer of the Company's capital stock that would cause the Company to violate this prohibition. The Company's Board of Directors may also prohibit the ownership, voting or transfer of any portion of its outstanding capital stock to the extent the ownership, voting or transfer of such portion would cause the Company to violate, or would otherwise result in violation of, any provision of the Communications Act or the rules, regulations and policies promulgated by the FCC under the Communications Act. No shareholders may exercise any voting rights the result of which would cause the Company to be in violation of the rules, regulations, or policies of the FCC. NEVADA GENERAL CORPORATION LAW Under certain circumstances, the following provisions of the NGCL may delay or make more difficult acquisitions or changes of control of the Company and may make it more difficult to accomplish transactions that shareholders may otherwise believe to be in their best interests. Such provisions may also have the effect of preventing changes in the Company's management. The Company's Certificate of Incorporation and Bylaws do not exclude it from these provisions of the NGCL. However, since it is anticipated that the Company will have fewer than 200 shareholders after giving effect to the Offerings, these provisions of the NGCL will not apply to the Company immediately after the Offerings. CONTROL SHARE ACQUISITIONS. Under Sections 78.378 to 78.3793 of the NGCL (the "Control Share Act"), an "acquiring person," who acquires a "controlling interest" in an "issuing corporation" may not exercise voting rights on any "control shares" unless such voting rights are conferred by a majority vote of the disinterested shareholders of the issuing corporation at an annual meeting or at a special meeting of such shareholders held upon the request and at the expense of the acquiring person. If the control shares are accorded full voting rights and the acquiring person acquires control shares with a majority or more of all the voting power, any shareholder, other than the acquiring person, who does not vote for authorizing voting rights for the control shares, is entitled to demand payment for the fair value of their shares, and the corporation must comply with the demand. For the above provisions, "acquiring person" means (subject to certain exceptions) any person who, individually or in association with others, acquires or offers to acquire, directly or indirectly, a controlling interest in an issuing corporation. "Controlling interest" means the ownership of outstanding voting shares of an issuing corporation sufficient to enable the acquiring person, individually or in association with others, directly or indirectly, to exercise (i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, and/or (iii) a majority or more of the voting power of the issuing corporation in the election of directors. Voting rights must be conferred by a majority of the disinterested shareholders as each threshold is reached and/or exceeded. "Control Shares" means those outstanding voting shares of an issuing corporation which an acquiring person (1) acquires or offers to acquire in an acquisition or (2) acquires within 90 days immediately preceding the date when the acquiring person became an acquiring person. "Issuing corporation" means a corporation that is organized in Nevada, has 200 or more shareholders (at least 100 of whom are shareholders of record and residents of Nevada) and does business in Nevada directly or though an affiliated corporation. The above does not apply if the articles of incorporation or bylaws of the corporation in effect on the 10th day following the acquisition of a controlling interest by an acquiring person provide that said provisions do not apply. The Company's Certificate of Incorporation and Bylaws do not exclude it from the restrictions imposed by such provisions. CERTAIN BUSINESS COMBINATIONS. Sections 78.411 to 78.444 of the NGCL (the "Business Combinations Act") restrict the ability of a "resident domestic corporation" to engage in any combination with an "interested stockholder" for three years following the interested stockholder's date of acquiring the shares that cause such stockholder to become an interested stockholder, unless the combination or the purchase of shares by the interested stockholder on the interested stockholder's date of acquiring the shares that cause such stockholder to become an interested stockholder is approved by the board of directors of the resident domestic 177 185 corporation before that date. If the combination was not previously approved, the interested stockholder may effect a combination after the three-year period only if such stockholder receives approval from a majority of the disinterested shares or the offer meets certain fair price criteria. For the above provisions, "resident domestic corporation" means a Nevada corporation that has 200 or more shareholders. The provisions of the Business Combinations Act do not apply to any combination of a resident domestic corporation which does not, as of the date of acquiring shares, have a class of voting shares registered with the Commission under Section 12 of the Exchange Act, unless the corporation's articles of incorporation provide otherwise. "Interested stockholder," when used in reference to any resident domestic corporation, means any person, or its subsidiaries, who is (i) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the resident domestic corporation or (ii) an affiliate or associate of the resident domestic corporation and, at any time within three years immediately before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding shares of the resident domestic corporation. The above does not apply to corporations that so elect in a charter amendment approved by a majority of the disinterested shares. Such a charter amendment, however, would not become effective for 18 months after its passage and would apply only to stock acquisitions occurring after its effective date. The Company's Certificate of Incorporation does not exclude it from the restrictions imposed by such provisions. DIRECTORS' DUTIES. Section 78.138 of the NGCL allows directors and officers, in exercising their respective powers to further the interests of the corporation, to consider the interests of the corporation's employees, suppliers, creditors and customers. They can also consider the economy of the state and the nation; the interests of the community and of society and the long and short-term interests of the corporation and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation. Directors may resist a change or potential change in control if the directors, by a majority vote of a quorum, determine that the change or potential change is opposed to or not in the best interest of the corporation. In so determining, the board of directors may consider the interests described above or have reasonable grounds to believe that, within a reasonable time, the debt created as a result of the change in control would cause the assets of the corporation or any successor to be less than the liabilities or would render the corporation or any successor insolvent or lead to bankruptcy proceedings. 178 186 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following summary discusses the material federal income tax consequences of the purchase, holding and disposition of the Notes and the Exchangeable Preferred Stock (the "Securities") by U.S. holders who hold such Securities as capital assets. A U.S. holder is a beneficial owner of a Security that is a citizen or resident of the United States or any state thereof, a corporation or other entity created or organized under the laws of the United States or any political subdivision thereof, an estate the income of which is subject to United States federal income tax regardless of source, or a trust with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States fiduciaries have the authority to control all its substantial decisions. The discussion is based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service ("IRS") rulings and pronouncements and judicial decisions now in effect, all of which are subject to change at any time by legislative, judicial or administrative action. Any such change may be applied retroactively in a manner that could adversely affect a holder of the Securities. Although the matter is not entirely free from doubt, the Company intends to treat the Exchange Debentures as indebtedness for federal income tax purposes, and the balance of the discussion is based on the assumption that such treatment will be respected. The discussion is not binding on the IRS or the courts. The Company has not sought and will not seek any rulings from the IRS with respect to the positions of the Company discussed herein, and there can be no assurance that the IRS will not take a different position concerning the tax consequences of the purchase, ownership or disposition of the Securities or that any such position would not be sustained. The tax treatment of a holder of the Securities may vary depending on his particular situation or status. Certain holders (including S corporations, insurance companies, tax-exempt organizations, financial institutions, broker-dealers and taxpayers subject to alternative minimum tax) may be subject to special rules not discussed below. The following discussion does not consider all aspects of United States federal income tax that may be relevant to the purchase, ownership, and disposition of the Securities by such holders in light of their particular circumstances. In addition, the discussion does not consider the effect of any applicable foreign, state, local or other tax laws or estate or gift tax considerations. ACCORDINGLY, PURCHASERS OF THE SECURITIES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF HOLDING AND DISPOSING OF THE SECURITIES. THE EXCHANGE OFFER The exchange of the Series B Securities for the Series A Securities pursuant to the Exchange Offer will not be treated as an "exchange" for federal income tax purposes because the Series B Securities will not be considered to differ materially in kind or extent from the Series A Securities. Rather, the Series B Securities received by a holder will be treated as a continuation of the Series A Securities in the hands of such holder. As a result, there will be no federal income tax consequences to holders exchanging Series A Securities for Series B Securities pursuant to the Exchange Offer. Therefore, the same tax consequences apply to the Series B Securities as are applicable to the Series A Securities, and a holder should have the same adjusted tax basis and holding period in the Series B Securities as it had in the Series A Securities immediately before the exchange. DISTRIBUTIONS ON EXCHANGEABLE PREFERRED STOCK Distributions on the Exchangeable Preferred Stock paid in cash will be taxable to the holder as ordinary income and treated as a dividend to the extent of the Company's current and accumulated earnings and profits (as determined for federal income tax purposes). A distribution on the Exchangeable Preferred Stock made in the form of additional shares of Exchangeable Preferred Stock ("PIK Shares") will be treated as being in an amount equal to the fair market value of the PIK Shares and will be a taxable distribution treated as a dividend to the extent of the Company's 179 187 current and accumulated earnings and profits (as determined for federal income tax purposes). The holding period of any such PIK Shares will commence on the date of their distribution. To the extent that the amount of any distribution paid on the Exchangeable Preferred Stock (including distributions made in the form of PIK Shares) exceeds the Company's current and accumulated earnings and profits allocable to such distributions (as determined for federal income tax purposes), such distribution will be treated as a return of capital, thus reducing the holder's adjusted tax basis in such Exchangeable Preferred Stock. Any such excess distribution that is greater than the holder's adjusted basis in the Exchangeable Preferred Stock will be taxed as capital gain and will be long-term capital gain if the holder's holding period for such Exchangeable Preferred Stock exceeds one year. For purposes of the remainder of this discussion, the term "dividend" refers to a distribution paid out of the Company's allocable earnings and profits, unless the context indicates otherwise. The Company does not now have any current or accumulated earnings and profits and is unable to predict whether or when it will have sufficient earnings and profits for distributions with respect to the Exchangeable Preferred Stock to be treated as dividends. Until such time, if any, as such distributions are treated as dividends, corporate holders of the Exchangeable Preferred Stock will not be eligible for the dividends-received deduction described below. If the fair market value of any PIK Shares at the time of distribution is less than the redemption price of such PIK Shares by more than a statutorily defined de minimis amount (a "redemption premium"), then such redemption premium will be required, pursuant to section 305(c) of the Code, to be accrued ratably by the holder as a constructive distribution of additional PIK Shares over the term of the PIK Shares in a manner similar to the accrual of original issue discount as described below in the discussion "Taxation of Stated Interest and Original Issue Discount on Exchange Debentures". To the extent that any PIK Shares distributed bear a redemption premium, such shares might not be interchangeable for trading purposes with PIK Shares distributed at other times or with Exchangeable Preferred Stock. Dividends received by corporate holders generally will be eligible for the 70% dividends-received deduction available under section 243 of the Code. The availability of such dividends-received deduction is subject to numerous exceptions and restrictions, including those relating to (i) the holding period of the stock, (ii) stock treated as "debt-financed portfolio stock" within the meaning of Section 246A of the Code, (iii) dividends treated as "extraordinary dividends" for purposes of section 1059 of the Code and (iv) holders who pay alternative minimum tax. Corporate stockholders should consult their own tax advisors regarding the extent, if any, to which such exceptions and restrictions may apply to their particular factual situations. In addition, recent legislative proposals by the Clinton Administration would (i) reduce the 70% dividends-received deduction to 50% and (ii) require a corporate holder to satisfy a separate forty-six day holding period requirement with respect to each dividend in order to be eligible for such dividends-received deduction. It is not possible to predict whether such legislative proposals will ultimately be enacted into law, and if so, the form or effective date of any such legislation. SALE, REDEMPTION AND EXCHANGE OF EXCHANGEABLE PREFERRED STOCK A redemption of shares of Exchangeable Preferred Stock for cash or in exchange for Exchange Debentures would be a taxable event. A redemption of shares of Exchangeable Preferred Stock for cash will generally be treated as a sale or exchange if the holder does not own, actually or constructively within the meaning of section 318 of the Code, any stock of the Company other than the Exchangeable Preferred Stock. If a holder does own, actually or constructively, other stock of the Company, a redemption of Exchangeable Preferred Stock may be treated as a dividend to the extent of the Company's current and accumulated earnings and profits (as determined for Federal income tax purposes). Dividend treatment would not apply, however, if the redemption is "not essentially equivalent to a dividend" with respect to the holder under section 302(b)(1) of the Code. A distribution to a holder will be "not essentially equivalent to a dividend" if it results in a "meaningful reduction" in the holder's stock interest in the Company. For this purpose, a redemption of Exchangeable Preferred Stock that results in a reduction in the proportionate interest in the Company (taking into account 180 188 any actual ownership of common stock of the Company and any stock constructively owned) of a holder whose relative stock interest in the Company is minimal should be regarded as a meaningful reduction in the holder's stock interest in the Company. If a redemption of the Exchangeable Preferred Stock for cash is not treated as a distribution taxable as a dividend, the redemption would result in capital gain or loss equal to the difference between the amount of cash received and the holder's adjusted tax basis in the Exchangeable Preferred Stock redeemed, except to the extent that the redemption price includes dividends which have been declared by the Board of Directors of the Company prior to the redemption. Similarly, upon the sale of the Exchangeable Preferred Stock (other than in a redemption or in exchange for the Exchange Debentures), the difference between the sum of the amount of cash and the fair market value of other property received and the holder's adjusted basis in the Exchangeable Preferred Stock would result in capital gain or loss. This gain or loss would be long-term capital gain or loss if the holder's holding period for the Exchangeable Preferred Stock exceeds one year. Under current law, capital gains recognized by corporations are currently taxed at a maximum rate of 35% and the maximum rate on net capital gains in the case of individuals is currently 28%. The congressional budget reconciliation resolution adopted in May 1997 contemplates potential reduction of the capital gains rate, particularly for individuals. However, there can be no assurance that legislation reducing capital gains tax rates will be enacted. A redemption of Exchangeable Preferred Stock in exchange for Exchange Debentures will be subject to the same general rules as a redemption for cash, except that any gain or loss generally will be determined based upon the issue price of the Exchange Debentures (as determined for purposes of computing the original issue discount on such Exchange Debentures). See the discussion below under "Original Issue Discount." If a redemption of the Exchangeable Preferred Stock is treated as a distribution that is taxable as a dividend, the amount of the distribution will be measured by the amount of cash or the issue price of the Exchange Debentures, as the case may be, received by the holder. It is possible, however, that the fair market value of the Exchange Debentures (if different from their issue price) may constitute the amount of the distribution. The holder's adjusted tax basis in the redeemed Exchangeable Preferred Stock will be transferred to any remaining stock holdings in the Company, subject to reduction or possible gain recognition under Section 1059 of the Code in respect of the nontaxed portion of such dividend. If the holder does not retain any actual stock ownership in the Company (i.e., such holder is treated as having received a dividend because he constructively owns stock in the Company but such holder does not actually own any Company Stock), such holder may lose the benefit of his basis in the Exchangeable Preferred Stock. ORIGINAL ISSUE DISCOUNT In the event that the Exchangeable Preferred Stock is exchanged for Exchange Debentures and the "stated redemption price at maturity" of the Exchange Debentures exceeds their "issue price" by more than a de minimis amount, the Exchange Debentures will be treated as having original issue discount ("OID") equal to the amount of such excess. If the Exchange Debentures are traded on an established securities market within the sixty-day period ending thirty days after the Exchange Date, the issue price of the Exchange Debentures will be their fair market value as of their issue date. Subject to certain limitations described in the Treasury Regulations, the Exchange Debentures will be deemed to be traded on an established securities market if, at a minimum, price quotations will be readily available from dealers, brokers or traders. If the Exchangeable Preferred Stock, but not the Exchange Debentures issued in exchange therefor, is traded on an established securities market within the sixty-day period ending thirty days after the Exchange Date, then the issue price of each Exchange Debenture should be the fair market value of the Exchangeable Preferred Stock exchanged therefor at the time of the exchange. The Exchangeable Preferred Stock generally will be deemed to be traded on an established securities market if, at a minimum, it appears on a system of general circulation that provides a reasonable basis to determine fair market value based either on recent price quotations or recent sales transactions. In the event that neither the Exchangeable Preferred Stock nor the Exchange Debentures are traded on an established securities market within the applicable period, the issue price of the Exchange 181 189 Debentures will be their stated principal amount (i.e., their face value) unless either (i) the Exchange Debentures do not bear "adequate stated interest" within the meaning of section 1274 of the Code, which is unlikely, or (ii) the Exchange Debentures are issued in a so-called "potentially abusive situation" as defined in the Treasury Regulations under section 1274 of the Code (including a situation involving a recent sales transaction), in which case the issue price of such Exchange Debentures generally will be the fair market value of the Exchangeable Preferred Stock surrendered in exchange therefor. The "stated redemption price at maturity" of the Exchange Debentures should equal the total of all payments under the Exchange Debentures, other than payments of "qualified stated interest." "Qualified stated interest" generally is stated interest that is unconditionally payable in cash or other property (excluding additional Exchange Debentures) at least annually at a single fixed rate. If the Exchange Debentures are issued prior to July 1, 2002, none of the stated interest on the Exchange Debentures will be treated as qualified stated interest because of the ability of the Company to pay interest on the Exchange Debentures in the form of additional Exchange Debentures (the "PIK Debentures"). The "stated redemption price at maturity" would include any optional redemption premium on the Exchange Debentures if assuming that such optional redemption will occur would result in a lower yield to maturity on the Exchange Debentures. TAXATION OF STATED INTEREST AND ORIGINAL ISSUE DISCOUNT ON EXCHANGE DEBENTURES Each holder of an Exchange Debenture with OID will be required to include in gross income an amount equal to the sum of the "daily portions" of the OID for all days during the taxable year in which such holder holds the Exchange Debenture. The daily portions of OID required to be included in a holder's gross income in a taxable year will be determined under a constant yield method by allocating to each day during the taxable year in which the holder holds the Exchange Debenture a pro rata portion of the OID thereon which is attributable to the "accrual period" in which such day is included. The amount of the OID attributable to each accrual period will be the product of the "adjusted issue price" of the Exchange Debenture at the beginning of such accrual period multiplied by the "yield to maturity" of the Exchange Debenture (properly adjusted for the length of the accrual period), less the amount of any qualified stated interest allocable to the accrual period. The adjusted issue price of an Exchange Debenture at the beginning of an accrual period is the original issue price of the Exchange Debenture plus the aggregate amount of OID that accrued in all prior accrual periods, and less any cash payments other than qualified stated interest payments on the Exchange Debenture. The "yield to maturity" is the discount rate that, when used in computing the present value of all principal and interest payments to be made under the Exchange Debenture, produces an amount equal to the issue price of the Exchange Debenture. An "accrual period" may be of any length and may vary in length over the term of the debt instrument, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs either on the final day or the first day of an accrual period. In the event that the Exchange Debentures are issued before July 1, 2002, the Company will have the option to pay interest thereon in PIK Debentures. The issuance of PIK Debentures in lieu of cash interest is not treated as a payment of interest. Instead, the underlying Exchange Debenture and any PIK Debenture that may be issued thereon are treated as a single debt instrument under the OID rules. Moreover, because the terms of the PIK Debentures and the underlying Exchange Debentures are identical so that the two are fungible in all respects, the issuance of a PIK Debenture should be treated simply as a division of the underlying Exchange Debenture, so that the holder's tax basis and adjusted issue price in the underlying Exchange Debenture should be allocated between the underlying Exchange Debenture and the PIK Debenture in proportion to their relative principal amounts. For purposes of determining the stated redemption price at maturity and the rate at which OID accrues on an Exchange Debenture issued before July 1, 2002, applicable regulations require that it be assumed that the Company will pay interest in the form of PIK Debentures to the maximum extent permitted under the terms of the Exchange Debentures if doing so would reduce the yield to maturity on such Exchange Debentures. In such a case, if the Company elects to pay in cash an interest payment on such Exchange Debentures payable in cash or in PIK Debentures, the cash payment will be treated as a pro rata prepayment on the exchange debentures. As a result, the holder would realize gain in an amount equal to the excess of the cash payment over the portion of the holder's tax basis that would have been allocated to such PIK 182 190 Debentures, and the holder's tax basis in the Exchange Debentures held would be reduced by such allocated portion of the holder's tax basis. For purposes of determining the stated redemption price at maturity and the rate at which OID accrues on an Exchange Debenture issued before July 1, 2002, applicable regulations require that it be assumed that the Company will pay interest in cash and not in the form of PIK Debentures if paying interest in the form of PIK Debentures would not reduce the yield to maturity on such Exchange Debentures. In such a case, if the Company elects to pay in the form of PIK Debentures an interest payment on such Exchange Debentures payable in cash or in PIK Debentures, the future accruals of OID will be calculated based on a redetermination of the stated redemption price at maturity and yield to maturity made by treating the Exchange Debenture as if it were retired and reissued on such payment date. In the event that Exchange Debentures are issued on or after July 1, 2002 when the Company does not have the option to pay interest thereon in PIK Debentures, stated interest would be included in income by a holder in accordance with such holder's usual method of accounting. In all other cases, all stated interest paid will be treated as payments on Exchange Debentures under the rules discussed above. BOND PREMIUM ON EXCHANGE DEBENTURES If the holder's basis in the Exchange Debentures exceeds the amount payable at the maturity date (or, in certain circumstances, the amount payable on an earlier call date), such excess will be deductible by the holder of the Exchange Debentures as amortizable bond premium over the term of the Exchange Debentures (or the period ending on such earlier call date) under a yield-to-maturity formula, if an election by the holder under section 171 of the Code is made or is already in effect. An election under section 171 of the Code is available only if the Exchange Debentures are held as capital assets. This election is revocable only with the consent of the IRS and applies to all obligations owned or acquired by the holder on or after the first day of the taxable year to which the election applies. To the extent the excess is deducted as amortizable bond premium, the holder's adjusted tax basis in the Exchange Debentures is reduced. Except as may otherwise be provided in future Treasury Regulations, the amortizable bond premium will be treated as an offset to interest income on the Exchange Debentures rather than as a separate deduction item. Proposed Treasury Regulations, which are not yet effective, would modify the rules described above in order to coordinate such rules with the rules relating to OID. ACQUISITION PREMIUM ON EXCHANGE DEBENTURES A holder of an Exchange Debenture issued with OID who purchases such Exchange Debenture for an amount that is greater than its then adjusted issue price but equal to or less than the sum of all amounts payable on the Exchange Debenture after the purchase date (other than payments, if any, of qualified stated interest) will be considered to have purchased such Exchange Debenture at an "acquisition premium." Under the acquisition premium rules, the amount of OID that such holder must include in income with respect to such Exchange Debenture for any taxable year will be reduced by the portion of such acquisition premium properly allocable to such year. MARKET DISCOUNT ON EXCHANGE DEBENTURES Purchasers of Exchangeable Preferred Stock should be aware that the disposition of Exchange Debentures may be affected by the market discount provisions of the Code. The market discount rules generally provide that if a holder of a debt instrument purchases it at a "market discount" and thereafter realizes gain upon a disposition or a retirement of the debt instrument, the lesser of such gain or the portion of the market discount that has accrued on a straight-line basis (or, if the holder so elects under section 1276(b) of the Code, on a constant interest rate basis) while the debt instrument was held by such holder will be taxed as ordinary income at the time of such disposition. "Market discount" with respect to the Exchange Debentures is the amount, if any, by which the "revised issue price" of an Exchange Debenture (or its stated redemption price at maturity if the Exchange Debenture does not have any OID) exceeds the holder's basis in the Exchange Debenture immediately after such holder's acquisition, subject to a de minimis exception. The 183 191 "revised issue price" of an Exchange Debenture is its issue price increased by the portion of OID previously includible in the gross income of prior holders for periods prior to the acquisition of the Exchange Debenture by the holder (without regard to any acquisition premium exclusion) and reduced by prior payments other than payments of qualified stated interest. A holder who acquires an Exchange Debenture at a market discount also may be required to defer a portion of any interest expense that otherwise may be deductible on any indebtedness incurred or maintained to purchase or carry such Exchange Debenture until the holder disposes of the Exchange Debenture in a taxable transaction. Moreover, any partial principal payment with respect to Exchange Debentures will be includible as ordinary income to the extent of any accrued market discount on such Exchange Debentures. Such accrued market discount will also generally be includible as ordinary income upon the occurrence of certain otherwise non-taxable transfers (such as gifts). A holder of Exchange Debentures acquired at a market discount may elect for federal income tax purposes to include market discount in gross income as the discount accrues, either on a straight-line basis or on a constant interest rate basis. This current inclusion election, once made, applies to all market discount obligations acquired on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the IRS. If a holder of Exchange Debentures makes such an election, the foregoing rules with respect to the recognition of ordinary income on sales and other dispositions of such debt instruments, and with respect to the deferral of interest deductions on indebtedness incurred or maintained to purchase or carry such debt instruments, would not apply. REDEMPTION OR SALE OF EXCHANGE DEBENTURES Generally, any redemption or sale of Exchange Debentures by a holder would result in taxable gain or loss equal to the difference between the sum of the amount of cash and the fair market value of other property received (except to the extent that cash received is attributable to accrued but previously untaxed interest, which portion of the consideration would be taxed as ordinary income) and the holder's adjusted tax basis in the Exchange Debentures. The adjusted tax basis of a holder who receives an Exchange Debenture in exchange for Exchangeable Preferred Stock will generally be equal to the issue price of the Exchange Debenture increased by any OID with respect to the Exchange Debenture included in the holder's income prior to sale or redemption of the Exchange Debenture, reduced by any amortizable bond premium applied against the holder's income prior to sale or redemption of the Exchange Debenture and by payments other than payments of qualified stated interest. Subject to the above discussion of market discount, such gain or loss would be long-term capital gain or loss if the holder's holding period for the Exchange Debentures exceeds one year. CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND TO CORPORATE HOLDERS It is possible that the Exchange Debentures will be treated as "applicable high yield discount obligations" ("AHYDOs") for federal income tax purposes, especially if the Exchange Debentures are issued before July 1, 2002. The Exchange Debentures will constitute AHYDOs if they (i) have a term of more than five years, (ii) have a yield to maturity equal to or greater than the sum of the applicable federal rate (the "AFR") at the time of issuance of the Exchange Debentures plus five percentages points and (iii) have "significant OID." A debt instrument is treated as having "significant OID" if the aggregate amount that would be includible in gross income with respect to such debt instrument for periods before the close of any accrual period ending after the date five years after the date of issue exceeds the sum of (i) the aggregate amount of interest to be paid in cash under the debt instrument before the close of such accrual period and (ii) the product of the initial issue price of such debt instrument and its yield to maturity. In determining whether any Exchange Debentures issued prior to July 1, 2002 are AHYDOs, it will be presumed that interest will be paid in the form of PIK Debentures to the maximum extent permitted under the terms of the Exchange Debentures. Because the amount of OID, if any, attributable to the Exchange Debentures will be determined at the time such Exchange Debentures are issued and the AFR at that point in time is not predictable, it is impossible currently to determine whether Exchange Debentures will be treated as AHYDOs. 184 192 If the Exchange Debentures are treated as AHYDOs, (i) as described in the following paragraph, a portion of the OID that accrues on the Exchange Debentures may be treated as a dividend generally eligible for the dividends-received deduction in the case of corporate holders, (ii) the Company would not be entitled to deduct the "disqualified portion" of the OID that accrues on the Exchange Debentures and (iii) the Company would be allowed to deduct the remainder of the OID only when it pays amounts attributable to such OID in cash. (In particular, in the case of a payment in cash of an interest payment payable on or before July 1, 2002 on an Exchange Debenture issued prior to July 1, 2002 and interest on which (for purposes of accruing OID under applicable regulations) is presumed to be paid in the form of PIK Debentures to the maximum extent permitted under the terms of the Exchange Debentures, the Company would be able to deduct only a small portion of such cash payment attributable to OID because the payment as a whole would be treated as a prepayment of a ratable portion of the Exchange Debentures.) If an Exchange Debenture is treated as an AHYDO, a corporate holder would be treated as receiving dividend income to the extent of the lesser of (i) an allocable portion of the Company's current and accumulated earnings and profits and (ii) the "disqualified portion" of the OID of such AHYDO. The "disqualified portion" of the OID is equal to the lesser of (x) the amount of OID or (y) the portion of the "total return" (i.e., the excess of all payments to be made with respect to the Exchange Debenture over its issue price) with respect to the Exchange Debenture in excess of the AFR at issuance plus six percentage points per annum. BACKUP WITHHOLDING AND INFORMATION REPORTING A holder of a Security may be subject to backup withholding at the rate of 31 percent with respect to distributions on the Exchangeable Preferred Stock, interest on the Exchange Debentures or sales proceeds thereof, unless such holder (a) is a corporation or comes within certain other exempt categories and, when required, demonstrates its exempt status or (b) provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A holder of a Security who does not provide the Company with the holder's correct taxpayer identification number may be subject to penalties imposed by the IRS. Any amount paid as backup withholding would be creditable against the holder's federal income tax liability. The Company will furnish annually to the IRS and to record holders of the Exchangeable Preferred Stock (other than with respect to certain exempt holders) information relating to dividends paid during the calendar year. In the case of PIK Shares subject to section 305(c) of the Code, such information may be based upon dividends accruing to the record holder of such PIK Shares at the time of issuance. The Company will furnish annually to the IRS and to record holders of the Exchange Debentures (other than with respect to certain exempt holders) information relating to the stated interest and the OID, if any, accruing during the calendar year. Such information will be based on the amount of OID that would have accrued to a holder who acquired the Exchange Debenture on original issue. Accordingly, other holders will be required to determine for themselves whether they are eligible to report a reduced amount of OID for federal income tax purposes. 185 193 PLAN OF DISTRIBUTION Each Participating Broker-Dealer that receives Series B Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Series B Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Series B Securities received in exchange for Series A Securities where such Series A Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 120 days after the date of this Prospectus, it will make this Prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale. In addition, for a period of 90 days after the date of this Prospectus, all dealers effecting transactions in the Series B Securities may be required to deliver a prospectus. The Company will not receive any proceeds from any sales of Series B Securities by Participating Broker-Dealers. Series B Securities received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Series B Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer and/or the purchasers of any such Series B Securities. Any Participating Broker-Dealer that resells the Series B Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Series B Securities may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of Series B Securities and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letters of Transmittal state that, by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 120 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Participating Broker-Dealer that requests such documents in the Letters of Transmittal. 186 194 LEGAL MATTERS Certain legal matters with respect to the Series B Notes and the Series B Exchangeable Preferred Stock offered hereby, including federal income tax consequences, will be passed upon for the Company by Eckert Seamans Cherin & Mellott, LLC. As to matters of Nevada Law, Eckert Seamans Cherin & Mellott, LLC will rely upon the opinion of Lionel Sawyer & Collins, Las Vegas, Nevada. EXPERTS The consolidated financial statements of Citadel Broadcasting Company and Subsidiary as of December 31, 1996 and 1995, and for each of the years in the three-year period ended December 31, 1996, have been included herein in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The consolidated financial statements of Deschutes River Broadcasting, Inc. and Subsidiaries as of December 31, 1996 and 1995, and for each of the years in the two-year period ended December 31, 1996, have been included herein in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The consolidated financial statements of Maranatha Broadcasting Company, Inc's., Radio Broadcasting Division, as of December 31, 1996, and for the year then ended, have been included herein in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The consolidated financial statements of Tele-Media Broadcasting Company and its partnership interests as of December 31, 1995 and 1996 and for each of the three years in the period ended December 31, 1996 included in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and have been included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The financial statements of Snider Corporation and Snider Broadcasting Corporation and Subsidiary and CDB Broadcasting Corporation as of December 31, 1995 and 1996 and for each of the years in the two-year period ended December 31, 1996 have been included in this Prospectus in reliance upon the reports of Erwin & Company, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The combined financial statements of Pacific Northwest Broadcasting Corporation and Affiliates as of December 31, 1996 and for the year ended December 31, 1996, have been included in this Prospectus in reliance upon the report of Balukoff, Lindstrom & Co., P.A., independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-4 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act with respect to the Series B Securities offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission, and to which reference is hereby made. Statements contained in this Prospectus as to the contents of any contract, agreement or any other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to such exhibit to the Registration Statement for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. 187 195 The Registration Statement can be inspected and copied at the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices at Seven World Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of the Registration Statement can be obtained from the Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20459, at prescribed rates. The Company is filing the Registration Statement with the Commission electronically. The Commission maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of that Web site is http://www.sec.gov. The Company intends, and is required by the terms of the Notes Indenture and the Certificate of Designation, to furnish the holders of the Series B Notes and Series B Exchangeable Preferred Stock, respectively, with annual reports containing consolidated financial statements audited by its independent certified public accountants and with quarterly reports containing unaudited condensed consolidated financial statements for each of the first three quarters of each fiscal year. 188 196 GLOSSARY OF CERTAIN DEFINED TERMS Following is a list of certain defined terms with their respective definitions, as used in this Prospectus: "A/C" means an adult contemporary radio programming format. "AOR" means an album oriented rock radio programming format. "Boise Acquisition" means the pending acquisition by the Company of the Boise Stations. "Boise Stations" means collectively radio stations KIZN-FM, KZMG-FM, KKGL-FM, KQFC-FM and KBOI-AM, all serving the Boise, Idaho market, and which stations the Company has entered into various agreements to acquire. "Broadcast cash flow" means operating income (loss) before depreciation, amortization and corporate expenses. Although broadcast cash flow is not a measure of performance calculated in accordance with GAAP, management believes that it is useful to an investor in evaluating the Company because it is a measure widely used in the broadcast industry to evaluate a radio company's operating performance. However, broadcast cash flow should not be considered in isolation or as a substitute for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP as a measure of liquidity or profitability. "Certificate of Designation" means the certificate of designation governing the Exchangeable Preferred Stock. "CHR" means a contemporary hit radio programming format. "Completed Transactions" means collectively the Company's June 1996 acquisitions of radio stations KTBL-FM, KHFM-FM and KNML-AM in Albuquerque, New Mexico and KHOP-FM in Modesto, California; its October 1996 acquisitions of radio station KKLI-FM in Colorado Springs, Colorado and radio station KRST-FM in Albuquerque; its January 1997 acquisition of Deschutes; its February 1997 acquisition of radio station KENZ-FM in Salt Lake City, Utah; its April 1997 acquisition of radio station KBER-FM in Salt Lake City; the Recent 1997 Acquisitions; and the Original Offerings. "DAB" means digital audio broadcasting. "DARs" means satellite digital audio radio services. "Deschutes" means Deschutes River Broadcasting, Inc., now merged with and into the Company. "EBITDA" means operating income (loss) before depreciation and amortization. Although EBITDA is not a measure of performance calculated in accordance with GAAP, management believes that it is useful to an investor in evaluating the Company because it is a measure widely used in the broadcast industry to evaluate a radio company's operating performance. However, EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP as a measure of liquidity or profitability. "Exchange Debentures" means the Company's 13-1/4% Subordinated Exchange Debentures due 2009 which are issuable upon conversion of the Exchangeable Preferred Stock. "Exchange Indenture" means the indenture governing the Exchange Debentures. "Exchangeable Preferred Stock" means the outstanding 1.0 million shares of 13-1/4% Exchangeable Preferred Stock issued by the Company. "Heritage" means a station or on-air show that is firmly established in its format and market and has been so for many years. "In-Market Acquisition Stations" means collectively radio stations WDGF-FM in Providence, Rhode Island; WLEV-FM in Allentown/Bethlehem, Pennsylvania; WEMR-FM, WSGD-FM, WDLS-FM, WEMR-AM and WCDL-AM in Wilkes-Barre/Scranton, Pennsylvania; and KFNZ-AM and KBEE-FM in Salt Lake City, Utah, which stations the Company has entered into agreements to purchase. "In-Market Acquisitions" means the pending acquisitions pursuant to various agreements the Company has entered into in order to purchase the In-Market Acquisition Stations. 189 197 "JSA" means a joint sales agreement or similar arrangement under which a radio station operator sells advertising on behalf of a radio station it does not own. "Little Rock Acquisitions" means collectively the several transactions which, if consummated, would result in the Company owning the Little Rock Stations. "Little Rock Shareholders" means the individuals who are to receive shares of capital stock of Citadel Communications in connection with the Little Rock Acquisitions. "Little Rock Stations" means collectively radio stations KARN-FM, KARN-AM, KKRN-FM, KRNN-AM, KIPR-FM, KESR-FM, KYTN-FM, KEZQ-AM, KURB-FM and KVLO-FM and the license to construct KAFN-FM, all serving the Little Rock, Arkansas market and/or surrounding communities, and which stations and construction permit the Company has entered into various agreements to acquire. "LMA" means a local marketing agreement or similar arrangement under which a radio station operator sells advertising on behalf of, and provides programming to, a radio station it does not own. "MSA" means metropolitan statistical area. "Notes" means the outstanding $101.0 million aggregate principal amount of 10-1/4% Senior Subordinated Notes due 2004, issued by the Company and guaranteed by Citadel License. "Notes Indenture" means that certain Indenture dated as of July 1, 1997 governing the Notes among the Company, Citadel License and The Bank of New York, as trustee. "Original Offerings" means the July 1997 sale by the Company of the Notes and the Exchangeable Preferred Stock. "Pending Acquisitions" means the In-Market Acquisitions, the Little Rock Acquisitions and the Boise Acquisition. "Pending Transactions" means collectively the Pending Acquisitions and the agreements entered into by the Company to sell radio stations WQKK-FM and WGLU-FM in Johnstown, Pennsylvania; WRSC-AM, WQWK-FM, WBLF-AM and WIKN-FM in State College, Pennsylvania; and WEST-AM in Allentown/ Bethlehem, Pennsylvania. "Predecessor" means collectively Citadel Associates Limited Partnership and Citadel Associates Montana Limited Partnership. "Recent 1997 Acquisitions" means the radio station acquisitions completed by the Company since June 30, 1997. "Subsidiary Merger" means the June 1997 merger of Deschutes with and into the Company. "Telecommunications Act" means the Telecommunications Act of 1996. "Tele-Media" means Tele-Media Broadcasting Company. "Tele-Media Acquisition" means the July 1997 acquisition by the Company of Tele-Media Broadcasting Corporation. "Tele-Media Bonds" means certain corporate bonds and warrants of Tele-Media whose redemption was included in the purchase price for the July 1997 acquisition of Tele-Media by the Company. 190 198 INDEX TO FINANCIAL STATEMENTS
PAGE ----- CITADEL BROADCASTING COMPANY AND SUBSIDIARY Independent Auditors' Report....................................................... F-3 Consolidated Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unaudited)...................................................................... F-4 Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997 (unaudited)............. F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997 (unaudited)............. F-6 Notes to Consolidated Financial Statements......................................... F-8 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES Independent Auditors' Report....................................................... F-25 Consolidated Balance Sheets as of December 31, 1996 and 1995....................... F-26 Consolidated Statements of Operations for the years ended December 31, 1996 and 1995............................................................................. F-27 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996 and 1995.................................................................... F-28 Consolidated Statements of Cash Flows for the years ended December 31, 1996 and 1995............................................................................. F-29 Notes to Consolidated Financial Statements......................................... F-30 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS Independent Auditors' Report....................................................... F-38 Consolidated Balance Sheets as of December 31, 1995 and 1996....................... F-39 Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and 1996......................................................................... F-40 Consolidated Statements of Deficiency in Net Assets for the years ended December 31, 1994, 1995 and 1996.................................................................... F-41 Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996......................................................................... F-42 Notes to Consolidated Financial Statements......................................... F-43 Condensed Consolidated Balance Sheet as of June 30, 1997 (unaudited)............... F-50 Condensed Consolidated Statements of Operations and Changes in Deficit for the six months ended June 30, 1996 and 1997 (unaudited).................................. F-51 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1997 (unaudited)............................................... F-52 Notes to Unaudited Condensed Consolidated Financial Statements..................... F-53 SNIDER CORPORATION Independent Auditors' Report....................................................... F-54 Balance Sheets as of December 31, 1996 and 1995.................................... F-55 Statements of Income for the years ended December 31, 1996 and 1995................ F-56 Statements of Stockholders' Equity for the years ended December 31, 1996 and 1995............................................................................. F-57 Statements of Cash Flows for the years ended December 31, 1996 and 1995............ F-58 Notes to Financial Statements...................................................... F-59 Balance Sheet as of May 31, 1997 (unaudited)....................................... F-63 Statement of Income for the five months ended May 31, 1997 (unaudited)............. F-64 Statement of Stockholders' Equity for the five months ended May 31, 1997 (unaudited)...................................................................... F-65 Statement of Cash Flows for the five months ended May 31, 1997 (unaudited)......... F-66 Note to Financial Statements (unaudited)........................................... F-67 Balance Sheet as of June 30, 1996 (unaudited)...................................... F-68 Statement of Income for the six months ended June 30, 1996 (unaudited)............. F-69 Statement of Stockholders' Equity for the six months ended June 30, 1996 (unaudited)...................................................................... F-70 Statement of Cash Flows for the six months ended June 30, 1996 (unaudited)......... F-71
F-1 199
PAGE ----- SNIDER BROADCASTING CORPORATION AND SUBSIDIARY AND CDB BROADCASTING CORPORATION Independent Auditors' Report....................................................... F-72 Combined Balance Sheets as of December 31, 1996 and 1995........................... F-73 Combined Statements of Operations for the years ended December 31, 1996 and 1995... F-74 Combined Statements of Stockholders' Deficit for the years ended December 31, 1996 and 1995....................................................... F-75 Combined Statements of Cash Flows for the years ended December 31, 1996 and 1995... F-76 Notes to Combined Financial Statements............................................. F-77 Combined Balance Sheet as of May 31, 1997 (unaudited).............................. F-82 Combined Statement of Operations for the five months ended May 31, 1997 (unaudited)...................................................................... F-83 Combined Statement of Stockholders' Deficit for the five months ended May 31, 1997 (unaudited)...................................................................... F-84 Combined Statement of Cash Flows for the five months ended May 31, 1997 (unaudited)...................................................................... F-85 Note to Combined Financial Statements (unaudited).................................. F-86 Combined Balance Sheet as of June 30, 1996 (unaudited)............................. F-87 Combined Statement of Operations for the six months ended June 30, 1996 (unaudited)...................................................................... F-88 Combined Statement of Stockholders' Deficit for the six months ended June 30, 1996 (unaudited)...................................................................... F-89 Combined Statement of Cash Flows for the six months ended June 30, 1996 (unaudited)...................................................................... F-90 MARANATHA BROADCASTING COMPANY, INC.'S RADIO BROADCASTING DIVISION Independent Auditors' Report....................................................... F-91 Balance Sheet as of December 31, 1996 and June 30, 1997 (unaudited)................ F-92 Statement of Operations and Division Equity for the year ended December 31, 1996 and the six-month period ended June 30, 1997 (unaudited)......................... F-93 Statement of Cash Flows for the year ended December 31, 1996 and the six-month period ended June 30, 1997 (unaudited)........................................... F-94 Notes to Financial Statements...................................................... F-95 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES Independent Auditors' Report....................................................... F-98 Combined Balance Sheet as of December 31, 1996..................................... F-99 Combined Statement of Operations for the year ended December 31, 1996.............. F-100 Combined Statement of Changes in Owners' Equity for the year ended December 31, 1996................................................................ F-101 Combined Statement of Cash Flows for the year ended December 31, 1996.............. F-102 Notes to Combined Financial Statements............................................. F-103 Unaudited Combined Balance Sheets as of June 30, 1997 and 1996..................... F-110 Unaudited Combined Statements of Operations for the six months ended June 30, 1997 and 1996......................................................................... F-111 Unaudited Combined Statements of Changes in Owners' Equity for the six months ended June 30, 1997 and 1996........................................................... F-112 Unaudited Combined Statements of Cash Flows for the six months ended June 30, 1997 and 1996......................................................................... F-113 Notes to Unaudited Combined Financial Statements................................... F-114
F-2 200 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholder Citadel Broadcasting Company: We have audited the accompanying consolidated balance sheets of Citadel Broadcasting Company (a wholly-owned subsidiary of Citadel Communications Corporation) and subsidiary as of December 31, 1995 and 1996 and the related consolidated statements of operations and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Citadel Broadcasting Company and subsidiary as of December 31, 1995 and 1996 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ KPMG PEAT MARWICK LLP Phoenix, Arizona February 14, 1997, except as to note 21 which is as of September 29, 1997 F-3 201 CITADEL BROADCASTING COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ----------------------------- JUNE 30, 1995 1996 1997 ------------ ------------ ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents...................... $ 1,005,275 $ 1,588,366 $ 276,683 Accounts receivable, less allowance for doubtful accounts of $514,533 in 1995, $621,054 in 1996, and $831,176 in 1997...... 7,200,656 12,199,973 16,030,369 Notes receivable from related parties.......... 523,964 118,646 177,272 Prepaid expenses............................... 420,497 595,755 967,049 ----------- ------------ ----------- Total current assets................... 9,150,392 14,502,740 17,451,373 Property and equipment, net...................... 12,667,530 15,208,569 19,058,433 Note receivable.................................. -- 18,251,402 -- Intangible assets, net........................... 15,093,134 51,801,835 84,282,815 Deposits for pending acquisitions................ 150,000 300,000 180,000 Other assets..................................... 311,290 2,179,039 2,448,027 ----------- ------------ ----------- $ 37,372,346 $102,243,585 $123,420,648 =========== ============ =========== LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Accounts payable............................... $ 1,192,002 $ 1,286,019 $ 2,884,549 Accrued liabilities............................ 2,383,517 2,301,716 3,096,843 Current maturities of notes payable............ 1,919,808 2,500,000 7,500,000 Note payable to parent company................. -- 12,174,416 12,817,000 Current maturities of other long-term obligations................................. 362,392 435,791 186,757 Due to related party........................... 365,000 -- -- ----------- ------------ ----------- Total current liabilities.............. 6,222,719 18,697,942 26,485,149 Notes payable, less current maturities........... 29,390,577 75,084,060 82,084,060 Notes payable to related parties................. 10,777,525 -- -- Other long-term obligations, less current maturities..................................... 230,718 877,600 1,053,109 Deferred tax liability........................... -- 1,585,333 2,889,778 Commitments and contingencies Shareholder's (deficit) equity: Common stock, $.001 par value; authorized 136,300 shares; issued and outstanding 40,000 shares............................... 40 40 40 Additional paid-in capital..................... 8,488,557 27,472,380 33,222,610 Accumulated deficit............................ (17,737,790) (21,473,770) (22,314,098) ----------- ------------ ----------- Total shareholder's (deficit) equity... (9,249,193) 5,998,650 10,908,552 ----------- ------------ ----------- $ 37,372,346 $102,243,585 $123,420,648 =========== ============ ===========
See accompanying notes to consolidated financial statements. F-4 202 CITADEL BROADCASTING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, --------------------------------------- ------------------------- 1994 1995 1996 1996 1997 ----------- ----------- ----------- ----------- ----------- (UNAUDITED) Gross broadcasting revenue...... $36,613,189 38,047,879 50,824,384 21,923,994 30,322,190 Less agency commissions....... 3,615,159 3,936,169 5,411,578 2,575,939 3,141,178 ----------- ----------- ----------- ----------- ----------- Net broadcasting revenue... 32,998,030 34,111,710 45,412,806 19,348,055 27,181,012 ----------- ----------- ----------- ----------- ----------- Operating expenses: Station operating expenses.... 24,331,135 26,832,123 33,232,485 14,797,233 19,321,366 Depreciation and amortization............... 7,434,666 4,890,517 5,158,206 1,974,239 3,907,149 Corporate general and administrative............. 2,504,192 2,273,744 3,247,579 1,255,621 1,271,060 ----------- ----------- ----------- ----------- ----------- Operating expenses......... 34,269,993 33,996,384 41,638,270 18,027,093 24,499,575 ----------- ----------- ----------- ----------- ----------- Operating income (loss)......... (1,271,963) 115,326 3,774,536 1,320,962 2,681,437 ----------- ----------- ----------- ----------- ----------- Nonoperating expenses (income): Interest expense.............. 4,865,893 5,241,760 6,155,472 2,779,448 3,594,025 Interest income............... (49,941) (70,503) (407,581) (36,756) (39,411) Loss (gain) on sale of property and equipment..... (620,068) (707,286) 1,749 -- -- Other (income) expense, net... 13,295 (3,221) (8,124) 398 (32,849) ----------- ----------- ----------- ----------- ----------- Nonoperating expenses, net...................... 4,209,179 4,460,750 5,741,516 2,743,090 3,521,765 ----------- ----------- ----------- ----------- ----------- Loss before income taxes and extraordinary item............ (5,481,142) (4,345,424) (1,966,980) (1,422,128) (840,328) Income tax (benefit)............ -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Loss before extraordinary item.......................... (5,481,142) (4,345,424) (1,966,980) (1,422,128) (840,328) Extraordinary loss on extinguishment of debt........ -- -- (1,769,000) -- -- ----------- ----------- ----------- ----------- ----------- Net loss........................ $(5,481,142) (4,345,424) (3,735,980) (1,422,128) (840,328) =========== =========== =========== =========== =========== Net loss per common share....... $ (137) (109) (93) (36) (21) =========== =========== =========== =========== =========== Shares used in per share calculation................... 40,000 40,000 40,000 40,000 40,000 =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. F-5 203 CITADEL BROADCASTING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, ----------------------------------------- --------------------------- 1994 1995 1996 1996 1997 ------------ ----------- ------------ ------------ ------------ (UNAUDITED) Cash flows from operating activities: Net loss.................. $ (5,481,142) $(4,345,424) $ (3,735,980) $ (1,422,128) $ (840,328) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Extraordinary loss..... -- -- 1,769,000 -- -- Depreciation and 7,434,666 4,890,517 5,158,206 1,974,239 3,907,149 amortization......... Amortization of debt issuance costs and debt discounts....... 286,715 131,752 370,652 301,988 38,031 Bad debt expense....... 383,275 484,702 421,378 325,694 267,250 Loss/(gain) on sale of property and equipment............ (620,068) (707,286) 1,749 -- -- Changes in assets and liabilities, net of acquisitions: Increase in accounts receivable and notes receivable from related parties...... (3,328,513) (1,069,681) (5,257,849) (2,835,403) (1,952,653) (Increase) decrease in prepaid expenses..... (146,972) 55,531 (175,058) (335,193) (208,583) Decrease in other assets............... 592,511 75,432 41,303 52,281 (201,099) Increase (decrease) in accounts payable..... (149,423) 651,247 94,017 920,573 1,212,794 Increase (decrease) in accrued liabilities.......... 1,352,692 (600,847) (81,801) 1,313,726 43,193 ----------- ----------- ----------- ----------- ----------- Net cash provided by (used in) operating activities........... 323,741 (434,057) (1,394,383) 295,777 2,265,754 ----------- ----------- ----------- ----------- ----------- Cash flows from investing activities: Capital expenditures...... (2,857,007) (1,690,950) (2,037,840) (1,144,006) (896,820) Capitalized acquisition costs.................. (840,212) (33,480) (1,144,699) (716,339) (1,491,427) Cash paid to acquire stations............... (11,576,474) -- (38,805,036) (14,810,000) (12,550,119) Deposits for pending acquisitions........... -- (150,000) (930,000) (2,050,000) (550,000) Increase in note receivable............. -- -- (18,251,402) -- -- Proceeds from sales of property and equipment.............. 1,236,765 6,684,479 1,115 -- -- ----------- ----------- ----------- ----------- ----------- Net cash provided by (used in) investing activities........... $(14,036,928) $ 4,810,049 $(61,167,862) $(18,720,345) $(15,488,366) ----------- ----------- ----------- ----------- -----------
F-6 204 CITADEL BROADCASTING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS -- CONTINUED
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, 1994 1995 1996 1996 1997 ----------- ----------- ----------- ----------- ----------- (UNAUDITED) Cash flows from financing activities: Principal payments on notes payable................ $ (2,298,413) $(6,866,198) $(50,970,385) $ (4,000,000) $ -- Proceeds from notes payable................ 19,743,070 2,400,000 86,244,059 2,000,000 12,000,000 Payment of debt issuance costs.................. -- (30,000) (2,283,124) -- -- Principal payments on other long-term obligations............ (244,495) (412,066) (776,107) (727,898) (364,167) Prepayment premium........ -- -- (420,000) -- -- Advances from (to) parent company................ (2,806,725) -- 12,367,070 -- 275,096 Capital contribution from parent company......... -- -- 18,983,823 23,663,787 -- ----------- ----------- ----------- ----------- ----------- Net cash provided by (used in) financing activities........... 14,393,437 (4,908,264) 63,145,336 20,935,889 11,910,929 ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents............... 680,250 (532,272) 583,091 2,511,321 (1,311,683) Cash and cash equivalents, beginning of period....... 857,297 1,537,547 1,005,275 1,005,275 1,588,366 ----------- ----------- ----------- ----------- ----------- Cash and cash equivalents, end of period............. $ 1,537,547 $ 1,005,275 $ 1,588,366 $ 3,516,596 $ 276,683 =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. F-7 205 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Citadel Broadcasting Company was formed August 21, 1991 as a Nevada Corporation and is a wholly-owned subsidiary of Citadel Communications Corporation ("Citadel Communications"). Citadel License, Inc. ("Citadel License") is a wholly-owned subsidiary of Citadel Broadcasting Company. Citadel Broadcasting Company and its subsidiary own and operate radio stations and hold Federal Communications Commission (FCC) licenses in California, Colorado, Nevada, New Mexico, and Utah. Principles of Consolidation and Presentation The accompanying consolidated financial statements include Citadel Broadcasting Company and its wholly-owned subsidiary (Company). All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Derivative Financial Instruments The Company uses an interest rate swap agreement to hedge the effects of fluctuations in interest rates. Amounts receivable or payable under the interest rate swap agreement are recognized as interest expense or income. Property and Equipment Assets acquired in business combinations accounted for using the purchase method of accounting are recorded at their estimated fair value upon acquisition as determined by management or by independent appraisal. Property and equipment additions are recorded at cost. Depreciation of property and equipment is determined using the straight-line method over the estimated useful lives of the related assets. Intangible Assets Intangible assets with determinable lives have been allocated among various categories of customer-based or market-based intangibles at their estimated fair value upon acquisition as determined by management or by independent appraisal. Goodwill represents the excess of cost over the fair value of tangible assets and intangible assets with determinable lives. Amortization is provided on the straight-line method over the estimated useful lives of the related assets (see note 5). The Company's policy is to write-off intangible assets once they have become fully amortized. The useful lives and recoverability of intangible assets and long-lived assets are evaluated at least annually. This evaluation encompasses the undiscounted historical broadcast cash F-8 206 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) flow of each station and existing broadcast cash flow multiples for sales of similar radio properties to estimate the potential selling price for the station and, therefore, recoverability of the assets. Barter Transactions Barter contracts are agreements entered into under which the Company provides commercial air time in exchange for goods and services used principally for promotional, sales and other business activities. An asset and liability are recorded at the fair market value of the goods or services received. Revenue is recorded and the liability is relieved when commercials are broadcast and expense is recorded and the asset is relieved when goods or services are used. Income Taxes The Company utilizes the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company is included in the consolidated tax returns of its parent company, Citadel Communications. Income (Loss) Per Share of Common Stock Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Revenue Recognition Revenue is recognized as commercials are broadcast. Local Marketing Agreements Fees earned or incurred pursuant to various local marketing agreements are recognized as gross broadcasting revenue or station operating expenses, respectively, in the period that the services performed or received occur. The Company's consolidated financial statements include broadcasting revenue and station operating expenses of stations marketed under local marketing agreements. Business and Credit Concentrations In the opinion of management, credit risk with respect to receivables is limited due to the large number of customers and the geographic diversification of the Company's customer base. The Company performs credit evaluations of its customers and believes that adequate allowances for any uncollectible receivables are maintained. At December 31, 1995 and 1996 and June 30, 1997, no receivable from any customer exceeded five percent of shareholder's equity nor did any customer's account exceed more than ten percent of net broadcasting revenue for any of the periods presented. F-9 207 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) Recently Issued Accounting Pronouncements In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings per Share" ("SFAS No. 128"). This statement establishes standards for computing and presenting earnings per share ("EPS"), and supersedes APB Opinion No. 15. The Statement replaces primary EPS with basic EPS and requires dual presentation of basic and diluted EPS. The Statement is effective for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted. After adoption, all prior period EPS data shall be restated to conform to SFAS No. 128. The pro forma effect of the Company adopting SFAS No. 128 is that both basic and diluted EPS would have been $(137) for the year ended December 31, 1994, $(109) for the year ended December 31, 1995 and $(93) for the year ended December 31, 1996 and $(36) for the six months ended June 30, 1996 and $(21) for the six months ended June 30, 1997. Reclassifications Certain 1994 and 1995 balances have been reclassified to conform to the 1996 presentation. (2) ACQUISITIONS AND DISPOSITIONS 1994 Acquisitions and Dispositions During 1994, the Company acquired the assets of three FM and two AM radio stations from various parties as follows:
MARKET PURCHASE ACQUISITION DATE STATION SERVED PRICE ------------------------ ----------------- -------------------- ---------- May 13, 1994............ KKOB-AM/KKOB-FM Albuquerque, NM $7,780,000 May 13, 1994............ KQEO-AM/KMGA-FM Albuquerque, NM 1,450,000 May 13, 1994............ KKMG-FM Colorado Springs, CO 912,500
The acquisitions were accounted for by the purchase method of accounting and, accordingly, the purchase price was allocated to current assets as well as noncurrent tangible and intangible assets based on their fair values at the date of acquisition. The acquisitions were funded with the proceeds from new notes payable. The purchase price, including acquisition costs of $449,292, was allocated as follows: Property and equipment.......................... $ 3,655,000 Intangible assets............................... 6,909,958 Accounts receivable............................. 26,834 ----------- $10,591,792 ===========
On March 15, 1994, the Company acquired the call letters and the format, along with certain tangible assets, of radio station KOH-AM in Reno, Nevada for approximately $1,400,000. Property and equipment was allocated $100,000 of the purchase price and the remaining $1,300,000 was allocated to intangible assets based on their fair values at the date of acquisition. The Company replaced the call letters of its existing KROW-AM station in Reno with the acquired call letters. On September 15, 1994, the Company sold the assets of KHEZ-FM in Boise, Idaho for $550,000. A gain of approximately $116,000 was recognized on the sale. F-10 208 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 1995 Dispositions On February 15, 1995, the Company sold the assets of KBOZ-AM, KBOZ-FM and KATH-FM, and KCTR-FM, KDWG-AM, and KKBR-FM in Bozeman and Billings, Montana, respectively, for $5,400,000. A gain of approximately $800,000 was recognized on the sale. 1996 Acquisitions During 1996, the Company acquired the assets of five FM and one AM radio stations from various parties as follows:
ACQUISITION MARKET PURCHASE DATE STATION SERVED PRICE - -------------------- ------------------ --------------------- ----------- June 28, 1996....... KHFM-FM/KHFN-AM Albuquerque, NM $ 5,500,000 June 28, 1996....... KASY-FM Albuquerque, NM 5,000,000 June 28, 1996....... KDJK-FM Modesto, CA 5,010,000 October 1, 1996..... KKLI-FM Colorado Springs, CO 3,450,000 October 9, 1996..... KRST-FM Albuquerque, NM 20,000,000
The acquisitions were accounted for by the purchase method of accounting and, accordingly, the purchase price was allocated to current assets as well as noncurrent tangible and intangible assets based on their fair values at the date of acquisition. The acquisitions were funded with the proceeds from new notes payable and a securities purchase and exchange agreement. The purchase price, including acquisition costs of $782,881, was allocated as follows: Property and equipment.......................... $ 2,446,594 Intangible assets............................... 37,135,955 Accounts receivable............................. 160,332 ----------- $39,742,881 ===========
Pro Forma The following summary, prepared on a pro forma basis, presents the results of operations as if all the above noted radio stations had been acquired as of January 1, 1994, after including the impact of the amortization of intangible assets, depreciation of fixed assets and increased interest expense on the acquisition debt since the date of acquisition.
UNAUDITED ---------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 1994 1995 1996 ------------ ------------ ------------ Net broadcasting revenue.................... $ 42,432,789 41,341,551 48,520,743 Operating income (loss)..................... (3,281,080) (1,407,363) 2,802,488 Net loss.................................... (9,834,603) (7,851,613) (6,017,738)
The pro forma results are not necessarily indicative of what actually would have occurred if the radio stations had been owned for the entire periods presented. In addition, they are not intended to be a projection of future results and do not reflect any synergies that might be achieved from combined operations. F-11 209 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 1997 Acquisitions On February 14, 1997, the Company acquired 100% of the stock of radio station KENZ-FM in Salt Lake City, Utah for a purchase price of $5,590,000. The acquisition was accounted for by the purchase method of accounting and, accordingly, the purchase price was allocated to current assets as well as noncurrent tangible and intangible assets based on their fair values at the date of acquisition. The acquisition was funded with the proceeds from new notes payable. The purchase price, including acquisition costs of $31,619 was allocated as follows: Property and equipment........................... $ 550,000 Intangible assets................................ 4,981,619 Accounts receivable.............................. 333,700 Prepaid expenses................................. 7,000 Accounts payable and accrued liabilities......... (250,700)
Effective as of January 1, 1997, Citadel Communications acquired Deschutes River Broadcasting, Inc. ("Deschutes"). At the time of the acquisition, Deschutes owned 18 radio stations in Montana, Oregon and Washington. The total consideration paid was approximately $26.0 million. Following the acquisition, Deschutes was operated as a sister company to the Company until June 20, 1997 when Deschutes was merged with and into the Company. (3) NOTE RECEIVABLE During 1996 the Company made advances to Deschutes, to allow Deschutes to acquire various radio stations and pay-off existing debt, in conjunction with the acquisition of Deschutes by Citadel Communications. These advances were funded through borrowings the Company made on the Senior Credit Facility and advances from its parent company. As of December 31, 1996, $18,251,402 was due under these advances; of this amount, approximately $8,600,000 is included in note payable to parent company. (4) PROPERTY AND EQUIPMENT Property and equipment at December 31, 1995 and 1996 and June 30, 1997 consists of the following:
DECEMBER 31, -------------------------- JUNE 30, ESTIMATED 1995 1996 1997 USEFUL LIFE ----------- ---------- ----------- ----------- (UNAUDITED) Land............................. $ 567,785 569,638 882,402 -- Buildings and improvements....... 1,033,896 1,217,287 1,510,526 5-30 years Transmitters, towers and equipment...................... 12,585,421 15,509,084 19,618,327 5-15 years Office furniture and equipment... 2,236,823 3,268,426 3,918,822 3-5 years Construction in progress......... 225,587 577,289 413,783 -- ----------- ---------- ---------- 16,649,512 21,141,724 26,343,860 Less accumulated depreciation and amortization................... (3,981,982) (5,933,155) (7,285,427) ----------- ---------- ---------- $12,667,530 15,208,569 19,058,433 =========== ========== ==========
F-12 210 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) (5) INTANGIBLE ASSETS Intangible assets at December 31, 1995 and 1996 and June 30, 1997 consist of the following:
DECEMBER 31, ---------------------------- JUNE 30, ESTIMATED 1995 1996 1997 USEFUL LIFE ------------ ----------- ----------- ----------- (UNAUDITED) Goodwill...................... $ 9,077,182 28,925,936 52,848,046 15 years Broadcast licenses............ 7,244,983 26,262,983 38,757,464 15 years Noncompetition agreements..... 4,977,018 5,168,854 5,600,364 3-10 years Local marketing agreements.... 1,909,998 1,909,998 -- 5 years Presold commercials........... -- 496,380 496,380 less than 1 year Premium lease space........... 49,552 161,787 161,787 1-13 years On-air talent contracts....... 1,231,634 1,383,323 351,689 1-3 years Subcarrier antenna income..... 118,284 219,162 219,162 1-4 years Programming contracts......... 500,000 503,000 503,000 3 years ----------- ---------- ---------- 25,108,651 65,031,423 98,937,892 Less accumulated amortization................ (10,015,517) (13,229,588) (14,655,077) ----------- ---------- ---------- $ 15,093,134 51,801,835 84,282,815 =========== ========== ==========
(6) ACCRUED LIABILITIES Accrued liabilities at December 31, 1995 and 1996 and June 30, 1997 consist of the following:
DECEMBER 31, ----------------------- JUNE 30, 1995 1996 1997 ---------- --------- --------- (UNAUDITED) Interest................................................... $ 891,155 -- -- Music license fees......................................... 66,471 245,715 90,028 Compensation and commissions............................... 621,748 1,237,392 1,648,080 Dividends.................................................. 246,198 -- -- Other...................................................... 557,945 818,609 1,358,735 ---------- --------- --------- $2,383,517 2,301,716 3,096,843 ========== ========= =========
F-13 211 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) (7) NOTES PAYABLE Notes payable at December 31, 1995 and 1996 and June 30, 1997 consist of the following:
DECEMBER 31, -------------------------- JUNE 30, 1995 1996 1997 ----------- ---------- ---------- (UNAUDITED) Note payable to financial institution (Senior Credit Facility), interest payable quarterly at the prime rate (8.5% at December 31, 1995) plus 2.5%, principal due quarterly in amounts ranging from $350,000 to $750,000 through April 1, 1999, at which time all outstanding amounts are due in full, subject to optional prepayments, paid in full in 1996........................................ $31,310,385 -- -- Note payable to financial institution (Senior Credit Facility), interest payable at the LIBOR rate (5.78% at December 31, 1996 and 5.69% at June 30, 1997) plus 2.75%, principal due quarterly in amounts ranging from $2,500,000 to $5,000,000 through June 30, 2003, at which time all outstanding amounts are due in full, subject to optional prepayments................................. -- 77,584,060 89,584,060 ----------- ---------- ---------- 31,310,385 77,584,060 89,584,060 Less current maturities....................... 1,919,808 2,500,000 7,500,000 ----------- ---------- ---------- Long-term portion............................. $29,390,577 75,084,060 82,084,060 =========== ========== ==========
In 1996, the Company entered into a financing agreement for a term loan up to a maximum of $85,000,000. The agreement allows for additional borrowings of $65,000,000 represented by a revolving loan, above the term loan maximum. Maximum borrowings, including term and revolving loans, is $150,000,000 under this Senior Credit Facility. The Company must pay, on a quarterly basis, an unused commitment fee equal to the maximum revolving loan commitment less the average of the outstanding principal balance for the preceding quarter, multiplied by .125% or if the total leverage ratio (as defined in the agreement) calculated as of the last day of the preceding quarter was less than 4.5, the commitment fee is .09375%. Commitment fees paid in 1996 were $74,931 and $158,246 in the six month period ended June 30, 1997. The agreement requires that the Company enter into an interest rate swap agreement for a period of at least two years. See note 20 for information on the interest rate swap agreement. The Senior Credit Facility is secured by a pledge of the common stock of the Company. Various debt covenants place restrictions on, among other things, indebtedness, acquisitions, dividends, capital expenditures and the sale or transfer of assets and provide for certain minimum operating cash flows for the Company and the individual radio markets. At December 31, 1996 and June 30, 1997, the Company was in compliance with all debt covenant provisions. F-14 212 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) The required aggregate principal payments as of December 31, 1996, excluding the consideration of any payments required based upon annual excess cash flow (as defined), are as follows: 1997............................................ $ 2,500,000 1998............................................ 10,000,000 1999............................................ 12,500,000 2000............................................ 14,000,000 2001............................................ 16,000,000 Thereafter...................................... 22,584,060 ----------- $77,584,060 ===========
On July 3, 1997, the payment terms of the Senior Credit Facility were amended in connection with the issuance of the Senior Subordinated Notes, see note 21. (8) NOTES PAYABLE TO RELATED PARTIES Notes payable to shareholders of Citadel Communications at December 31, 1995 consisted of the following:
1995 ----------- Senior subordinated notes payable, face amount $4,000,000, interest payable quarterly at the U.S. Treasury rate plus 4.15% (fixed at 10.4% until October 1, 1996), principal due in full October 1, 1999, subject to optional prepayments, net of unamortized discount of $222,475, paid in full in 1996........ $ 3,777,525 Junior subordinated note payable, interest only payments due quarterly at 12%, principal due in full June 30, 2000, subject to optional prepayments, paid in full in 1996................. 7,000,000 ----------- $10,777,525 ===========
F-15 213 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) (9) OTHER LONG-TERM OBLIGATIONS Other long-term obligations at December 31, 1995 and 1996 and June 30, 1997 consist of the following:
DECEMBER 31, JUNE 30, 1995 1996 1997 -------- --------- ----------- (UNAUDITED) Noncompetition agreement with former shareholder of Citadel Communications due June 1996, face amount $25,001, non-interest bearing with interest imputed at 8.5%, net of discount of $609, paid in full in 1996............. $ 24,392 -- -- Various noncompetition and consulting agreements with the sellers of radio stations acquired, due at various dates through July 2003, face amount of $647,218 and $486,113 and $416,668 at December 31, 1995 and 1996 and June 30, 1997, respectively, non-interest bearing with interest imputed at 8.5% to 9.0%, net of discount of $78,500, $54,540 and $43,569 in 1995, 1996 and 1997, respectively..................... 568,718 431,573 373,099 Prepayment premium on extinguishment of debt (a)............................... -- 881,818 820,806 Capital leases........................... -- -- 45,961 -------- --------- --------- 593,110 1,313,391 1,239,866 Less current maturities.................. 362,392 435,791 186,757 -------- --------- --------- Long-term portion........................ $230,718 877,600 1,053,109 ======== ========= =========
The required aggregate principal payments as of December 31, 1996, excluding the amortization of debt discount are as follows: 1997............................................. $ 186,757 1998............................................. 162,269 1999............................................. 124,716 2000............................................. 69,151 2001............................................. 46,793 Thereafter....................................... 723,705 ---------- $1,313,391 ==========
- --------------- (a) On October 9, 1996, the Company extinguished its long-term debt of $31,310,385, payable to a financial institution, and its note payable to a related party of $7,000,000. The early retirement of the long-term debt resulted in a $1,769,000 extraordinary loss due to prepayment premiums and the write-off of debt issuance costs. The prepayment premium can be reduced on a quarterly basis dependent on the outstanding balance of the Senior Credit Facility. The remaining balance of the prepayment premium is due upon the repayment of the Senior Credit Facility. F-16 214 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) (10) LEASE COMMITMENTS The Company leases certain tower sites, transmitters and equipment, automobiles, office equipment and an airplane. The following is a schedule by year of future minimum rental payments required under operating leases that have an initial or remaining noncancelable lease term in excess of one year as of December 31, 1996: 1997............................................ $ 1,425,503 1998............................................ 1,414,926 1999............................................ 1,389,561 2000............................................ 1,347,258 2001............................................ 1,340,597 Thereafter...................................... 4,173,404 ----------- $11,091,249 ===========
Total rental expense was $633,666, $744,395 and $1,101,237 for the years ended December 31, 1994, 1995 and 1996, respectively, and $447,187 and $904,711 for the six months ended June 30, 1996 and 1997. (11) INCOME TAXES The Company is included in the consolidated tax returns of Citadel Communications and calculates its tax provision or benefit as though it filed a separate tax return. For the years ended December 31, 1994, 1995 and 1996, the Company and Citadel Communications generated a net loss for both financial reporting and income tax purposes, therefore no tax provision has been recorded. At December 31, 1996, Citadel Communications has net operating loss carryforwards for federal income tax purposes of approximately $16,800,000 which begin to expire in 2007. On June 28, 1996, Citadel Communications underwent an ownership change in accordance with Section 382 of the Internal Revenue Code. Due to this change, the net operating losses of Citadel Communications are subject to limitation in future years. The approximate amount of the net operating loss which may be used in any one year is $4,400,000. The reconciliation of the expected income tax benefit calculated at the U.S. federal statutory rate to the actual income tax benefit per the financial statements for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1997 is as follows:
SIX MONTHS YEAR ENDED DECEMBER 31, ENDED ----------------------------------------- JUNE 30, 1994 1995 1996 ---------- ----------- ---------- ---------- 1997 ---------- (UNAUDITED) U.S. federal statutory rate applied to the loss before income taxes and extraordinary item..................... $(1,873,861) (1,487,717) (679,046) (289,910) Amortization of goodwill................. 17,478 16,563 186,844 81,844 Net operating losses providing no current benefit for federal income tax purposes............................... 1,847,534 1,467,025 526,304 197,433 Other.................................... 8,849 4,129 (34,102) 10,633 ----------- ---------- -------- ------- $ -- -- -- -- =========== ========== ======== =======
F-17 215 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets, liabilities and the valuation allowance are as follows:
DECEMBER 31, JUNE 30, ------------------------ 1997 1995 1996 ---------- ----------- ---------- (UNAUDITED) Deferred tax assets: Receivables, principally due to valuation allowances......................................... $ 195,360 248,422 332,470 Intangible assets..................................... 17,145 -- -- Net operating loss carryforward....................... 6,811,470 6,720,659 8,268,784 Accrued liabilities not deductible.................... 25,330 18,465 33,104 ----------- ---------- Total deferred tax assets..................... 7,049,305 6,987,546 8,634,358 Valuation allowance................................... (6,590,905) (4,270,206) (5,302,974) ----------- ---------- Net deferred tax assets....................... 458,400 2,717,340 3,331,384 ----------- ---------- Deferred tax liabilities: Property and equipment, principally due to accelerated depreciation....................................... (458,400) (1,883,269) (2,292,007) Intangible assets..................................... -- (834,071) (1,039,377) Differences between the tax basis and fair value of intangibles and fixed assets acquired.............. -- (1,585,333) (2,889,778) ----------- ---------- Total deferred tax liabilities................ (458,400) (4,302,673) (6,221,162) ----------- ---------- Net deferred tax liability.............................. $ -- (1,585,333) (2,889,778) =========== ==========
The valuation allowance has been increased by $3,053,457 in 1995 and decreased by $2,320,699 in 1996 and increased by $1,032,768 for the six months ended June 30, 1997. The Company has established a valuation allowance for the amount of the net deferred tax asset which management has determined that it is more likely than not will not be realized. (12) CITADEL COMMUNICATIONS FINANCIAL DATA The operations of Citadel Communications (the parent company) include the issuance of convertible preferred stock and obtaining a credit facility including a revolving line of credit of $20 million, the proceeds of which were advanced to the Company. Interest was charged on these advances in an amount equal to the interest costs of Citadel Communications. There are no other costs or expenses of Citadel Communications. Advances from Citadel Communications, other than those representing draws on Citadel Communications revolving line of credit, are recorded as capital contributions from the parent company and are presented as additional paid-in capital in the consolidated balance sheets. On January 1, 1997, in a non-cash transaction, the Company transferred $9,123,310 of debt under the Senior Credit Facility to Deschutes which reduced the corresponding note receivable. In addition, on June 20, 1997, Citadel Communications transferred the ownership of Deschutes to the Company resulting in a non-cash credit to additional paid-in capital of $6,057,696. Interest paid to Citadel Communications by the Company for the six months ended June 30, 1997 amounted to $307,466, resulting in a net increase to additional paid-in capital of $5,750,230 for the six months ended June 30, 1997. F-18 216 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) The following is summary consolidated financial data for Citadel Communications and its subsidiaries, including the Company:
DECEMBER 31, JUNE 30, 1996 1997 ------------ ----------- (UNAUDITED) Consolidated balance sheets: Current assets................................. $ 14,502,740 17,451,373 Property and equipment, net.................... 15,208,569 19,058,433 Note receivable................................ 18,251,402 -- Intangible assets, net......................... 51,801,835 84,282,815 Other assets................................... 2,550,778 2,645,167 ------------ ----------- Total assets........................... $102,315,324 123,437,788 ============ =========== Notes payable to related parties............... 11,817,000 12,817,000 Other current liabilities...................... 6,880,942 13,668,149 ------------ ----------- Total current liabilities.............. 18,697,942 26,485,149 Notes payable, less current portion............ 75,084,060 82,084,060 Other liabilities.............................. 2,462,933 3,942,887 Shareholders' equity........................... 6,070,389 10,925,692 ------------ ----------- Total liabilities and shareholders' equity............................... $102,315,324 123,437,788 ============ ===========
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, 1996 1997 ------------ ----------- (UNAUDITED) Consolidated statements of operations: Net broadcasting revenue........................ $ 45,412,806 32,410,510 Operating income................................ $ 3,744,323 1,531,941 Interest expense................................ 6,155,472 4,477,395 Other (income) expense, net..................... (413,955) (91,537) ----------- ----------- Loss before income taxes and extraordinary item......................................... (1,997,194) (2,853,917) Extraordinary loss on extinguishment of debt.... (1,769,000) -- ----------- ----------- Net loss................................ $ (3,766,194) (2,853,917) =========== ===========
(13) CITADEL LICENSE FINANCIAL DATA The operations of Citadel License include holding FCC licenses for all stations owned by the Company and the amortization of these licenses. There are no costs or expenses of Citadel License that are borne by the Company. F-19 217 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) The following is summary financial data for Citadel License:
DECEMBER 31, JUNE 30, 1996 1997 ------------ --------- (UNAUDITED) Balance sheets: Intangible assets, net (broadcast licenses)..... $ 24,035,920 35,675,125 Other assets.................................... 5,147 5,724 ------------ ----------- Total assets................................. $ 24,041,067 35,680,849 ============ =========== Shareholder's equity............................ $ 24,041,067 35,680,849 ------------ ----------- Total liabilities and shareholder's equity... $ 24,041,067 35,680,849 ============ ===========
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, 1996 1997 ------------ ----------- (UNAUDITED) Statements of Operations: Amortization expense............................ $ 991,901 968,649 ------------ ----------- Net loss..................................... $ (991,901) (968,649) ============ ===========
(14) DEFINED CONTRIBUTION PLAN The Company has a defined contribution 401(k) plan for all employees who are at least 21 years of age and have worked at least 1,000 hours in the year. Under the 401(k) plan, employees can contribute up to 20% of their compensation, subject to the maximum contribution allowed by the Internal Revenue Code. Participants vest immediately in their contributions. The Company may make discretionary contributions as approved by the Board of Directors. Participants' rights to amounts contributed by the Company vest on a graded schedule over a five-year period. During 1994, 1995, and 1996 the Company contributed $116,978, $133,215, and $144,256, respectively, and $63,028 and $105,465 for the six months ended June 30, 1996 and 1997, which represented a two percent matching of employee contributions to the 401(k) plan. (15) TRANSACTIONS WITH RELATED PARTIES On December 29, 1995, the Company entered into a sale-leaseback transaction with the principal shareholder of Citadel Communications. The Company sold an airplane for its fair value of $1,275,000 to the shareholder resulting in a loss of $74,327. The operating lease commenced on December 29, 1995 with monthly payments of $17,250 due through December 31, 2001. (16) LOCAL MARKETING AGREEMENTS At December 31, 1996, the Company has local marketing agreements to market stations KFNZ-AM, KBEE-FM, and KBER-FM in Salt Lake City, Utah. The agreements principally provide for the Company to supply specified programming to the brokered stations and enables the sales staff of the Company to sell advertising time on the station for a fixed fee to be paid by the Company. The agreements also provide the Company with the option to purchase the stations. The Company's financial statements include the broadcasting revenue and station operating expenses of the brokered stations. F-20 218 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) The local marketing agreements enable the Company to extend or terminate the agreements at the Company's option through December 31, 1997. The fees paid under the local marketing agreements amounted to $436,090, $350,000 and $1,414,527 for the years ended December 31, 1994, 1995 and 1996 and $554,085 and $611,030 for the six months ended June 30, 1996 and 1997, respectively. (17) JOINT SALES AGREEMENTS On January 15, 1996, the Company entered into a joint sales agreement (JSA) to sell advertising for radio stations KEYF-AM/FM, KUDY-AM and KKZX-FM in Spokane, Washington and radio stations KVOR-AM, KSPZ-FM, KTWK-AM, and KVUU-FM in Colorado Springs, Colorado. As stated in the JSA agreement, JSA revenue is calculated as 55% of the broadcast cash flows of these radio stations and all Company owned radio stations in these markets, with the exception of KKLI in Colorado Springs which is not included in the JSA calculation. On April 22, 1996, the Company entered into a joint sales agreement for radio station KENZ-FM in Salt Lake City, Utah. The Company's financial statements include all sales expenses for the station as well as revenue for the JSA fee calculated at 30% of net revenue of the station. On February 14, 1997 the Company acquired KENZ-FM. See note 2. (18) SUPPLEMENTAL FINANCIAL INFORMATION The Company paid cash of $3,440,392, $5,237,240 and $7,065,546 for interest for the years ended December 31, 1994, 1995 and 1996 and $2,732,085 and $3,709,972 for the six months ended June, 1996 and 1997, respectively. Barter revenue included in gross broadcasting revenue and barter expenses included in station operating expenses, amounted to $3,053,671, $3,087,871, $3,335,024, $1,419,530 and $1,945,262, and $2,891,310, $3,214,284, $3,029,665, $1,367,239 and $1,880,372 for the years ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996 and 1997, respectively. A summary of additions and deductions related to the allowance for accounts receivable for the years ended December 31, 1994, 1995 and 1996 and for the six months ended June 30, 1997 follows:
BALANCE AT BALANCE AT BEGINNING OF END OF PERIOD ADDITIONS DEDUCTIONS PERIOD ------------ --------- ---------- ---------- Year ended December 31, 1994................. $234,892 383,275 (237,636) 380,531 Year ended December 31, 1995................. $380,531 484,702 (350,700) 514,533 Year ended December 31, 1996................. $514,533 421,378 (314,857) 621,054 Six months ended June 30, 1997............... $621,054 318,247 (108,125) 831,176
(19) LITIGATION The Company is involved in certain legal actions and claims arising in the ordinary course of business. Management believes that such litigation and claims will be resolved without a material effect on the Company's financial position. The Company has received two civil investigative demands ("CIDs") from the Antitrust Division of the U.S. Department of Justice. One CID addresses the Company's acquisition of station KRST in Albuquerque, F-21 219 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) New Mexico and the second CID addresses the joint sales agreement for stations in Spokane, Washington and Colorado Springs, Colorado. The Company has provided the requested information in response to each CID, and at present has been given no indication from the Department of Justice regarding its intended future actions. (20) 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 instrument; they are subjective in nature and involve uncertainties, matters of judgment and, therefore, cannot be determined with precision. These estimates do not reflect any premium or discount 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, 1995 and 1996, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different. Cash equivalents The carrying amount is assumed to be the fair value because of the liquidity of these instruments. 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 non-current note receivable is assumed to be the fair value because the note receivable was converted by Citadel Communications into a portion of the purchase price of Deschutes on January 1, 1997 at the carrying value. Accounts payable and accrued liabilities The carrying amount approximates fair value because of the short-term maturity of these instruments. Notes payable, notes payable to related parties, note payable to parent company and other long-term obligations The fair value of the Company's notes payable, note payable to related parties, notes payable to parent company and other long-term obligations approximate the terms in the marketplace at which they could be replaced. Therefore, the fair value approximates the carrying value of these financial instruments. In 1996, the Company entered into an interest rate swap agreement with a financial institution in accordance with the terms of its Senior Credit Facility. At December 31, 1996, the Company had accrued $1,900 in interest expense related to the interest rate swap agreement. The fair value of the interest rate swap as of December 31, 1996 was $190,000 as determined by the financial institution and represents an unrealized gain. The fair value of the interest rate swap is the estimated amount that the financial institution would F-22 220 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) receive or pay to terminate the swap agreement at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties. (21) SUBSEQUENT EVENTS On April 10, 1997, the Company acquired radio station KBER-FM in Salt Lake City, Utah for a purchase price of $7,800,000. In conjunction with the acquisition, the Company borrowed an additional $7,000,000 on its Senior Credit Facility. On April 21, 1997, the Company entered into an agreement of purchase and sale to acquire radio stations KBEE and KFNZ in Salt Lake City, Utah for a purchase price of $2,873,000. On June 2, 1997, the Company entered into various agreements relating to several transactions pursuant to which the Company has agreed to acquire (i) radio stations KARN (AM & FM), KKRN, KRNN, KIPR, KESR and KYTN in Little Rock, Arkansas and surrounding communities, (ii) the right to construct one radio station, (iii) the Arkansas Radio Network and (iv) certain real estate associated with station operations for the aggregate purchase price of $26,500,000. On June 20, 1997, Deschutes was merged with and into the Company. The net worth of Deschutes as of the date of the merger was approximately $6,100,000. The results of operations for the six months ended June 30, 1997 do not reflect the 10 days of operations for Deschutes, as the activity was not material in relation to the consolidated financial statements taken as a whole. On July 3, 1997, the Company acquired all of the issued and outstanding capital stock of Tele-Media Broadcasting Company, whose assets include fourteen FM and nine AM radio stations in Pennsylvania, Rhode Island and Illinois, and which operates two FM radio stations and one AM radio station in Wilkes- Barre/Scranton, Pennsylvania under an LMA and a JSA, respectively (which stations the Company has the option to purchase), for approximately $114,400,000. On July 3, 1997, the Company completed the issuance of $101,000,000 in 10 1/4% Senior Subordinated Notes (Notes) due 2007, and completed the sale of $100,000,000 of Series A Exchangeable Preferred Stock (Exchangeable Preferred Stock). The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after July 1, 2002. In addition, at any time prior to July 1, 2000, the Company may, at its option, redeem a portion of the Notes with the net proceeds of one or more Public Equity Offerings, at a redemption price equal to 110.25% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption. The Exchangeable Preferred Stock has a liquidation preference of $100 per share, plus accumulated and unpaid dividends. Dividends on the Exchangeable Preferred Stock accrue at the rate of 13 1/4% per annum. All dividends will be payable semi-annually on January 1 and July 1 of each year, commencing January 1, 1998. On or prior to July 1, 2002, dividends are payable in additional shares of Exchangeable Preferred Stock. Thereafter, all dividends will be payable only in cash. The Company will be required to redeem the Exchangeable Preferred Stock on July 1, 2009 (subject to the legal availability of funds therefore) at a redemption price equal to the liquidation preference thereof, plus accumulated and unpaid dividends, if any, to the date of redemption. On July 3, 1997, the Senior Credit Facility was amended and restated such that the principal payment structure is based on the outstanding balance. The required annual aggregate principal payments, as amended, are $22,709,060, $30,500,000 and $36,375,000 for 2001, 2002 and 2003, respectively. On July 15, 1997, the Company entered into an asset purchase agreement with Maranatha Broadcasting Company, Inc. to acquire radio station WLEV in Allentown, Pennsylvania for $23,000,000. F-23 221 CITADEL BROADCASTING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (ALL DATA AS OF JUNE 30, 1997 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) On July 17, 1997, the Company acquired radio station KNHK in Reno, Nevada for $1,300,000. On August 1, 1997, the Company entered into an asset purchase agreement with GHB of Little Rock, Inc. to purchase substantially all of the assets of radio stations KEZQ, KURB and KVLO in Little Rock, Arkansas for $11,400,000. The purchase is subject to approval from the FCC. On September 11, 1997, the Company entered into an asset purchase agreement with Endless Mountain Broadcasting, Inc. to purchase substantially all of the assets of radio stations WEMR (AM/FM) in Wilkes-Barre/Scranton, Pennsylvania for $815,000. The purchase is subject to approval from the FCC. On September 25, 1997, the Company acquired radio station KTHK in Milton-Freewater, Oregon for a purchase price of $625,000. On September 26, 1997, the Company entered into an asset purchase agreement with S&P Broadcasting Limited Partnership I, S&P Broadcasting Limited Partnership III and Swanson Holdings, Ltd. to purchase substantially all of the assets of radio stations WSGD, WDLS and WCDL in Wilkes-Barre/Scranton, Pennsylvania for $6,000,000. The purchase is subject to approval from the FCC. On September 29, 1997, the Company acquired radio station WDGE and an internet access business in Providence, Rhode Island for a purchase price of $4,500,000. The Company also entered into a definitive agreement to purchase radio station WDGF in Providence, Rhode Island for a purchase price of $4,000,000. On September 29, 1997, the Company entered into various agreements relating to several transactions pursuant to which the Company has agreed to acquire (i) all of the issued and outstanding capital stock of Pacific Northwest Broadcasting Corporation, which owns radio stations KKGL, KQFC and KBOI in Boise, Idaho, (ii) radio stations KIZN and KZMG in Boise and (iii) real estate associated with station operations for the aggregate purchase price of $28,500,000. On September 29, 1997, the Company entered into an agreement with Talleyrand Broadcasting, Inc. to sell substantially all of the assets of radio stations WQKK and WGLU in Johnstown, Pennsylvania and radio stations WRSC, WQWK, WBLF and WIKN in State College, Pennsylvania for $8,500,000. F-24 222 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Deschutes River Broadcasting, Inc.: We have audited the accompanying consolidated balance sheets of Deschutes River Broadcasting, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Deschutes River Broadcasting, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ KPMG PEAT MARWICK LLP Portland, Oregon February 14, 1997 F-25 223 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995
1996 1995 ----------- ----------- ASSETS Current assets: Cash and cash equivalents....................................... $ 823,968 $ -- Accounts receivable, less allowance for doubtful accounts of $122,714 and $49,952 at December 31, 1996 and 1995, respectively................................................. 1,856,984 1,283,847 Prepaid expenses and other current assets....................... 367,621 238,868 Current portion of note receivable.............................. 156,000 -- ----------- ----------- Total current assets......................................... 3,204,573 1,522,715 Intangible assets, net (note 4)................................... 14,142,899 5,281,109 Long-term portion of note receivable.............................. 143,000 -- Property and equipment, net (notes 3 and 5)....................... 3,153,930 3,606,655 Deposits.......................................................... 3,026 6,542 ----------- ----------- $20,647,428 $10,417,021 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank overdraft.................................................. -- 23,133 Line of credit (notes 7 and 13)................................. -- 418,168 Accounts payable................................................ 467,873 185,071 Accrued compensation and commissions............................ 542,502 313,734 Other accrued expenses.......................................... 147,985 128,510 Current portion of long-term debt (notes 7 and 13).............. -- 485,983 Accrued interest payable (notes 6, 12 and 13)................... 255,001 335,501 ----------- ----------- Total current liabilities.................................... 1,413,361 1,890,100 Advance (note 13)................................................. 9,123,310 -- Note payable (notes 6 and 13)..................................... 8,867,000 -- Long-term debt, less current portion (notes 7 and 13)............. -- 2,886,033 Subordinated notes payable (notes 7, 12 and 13)................... -- 3,156,998 Other long-term liabilities....................................... 47,735 38,751 ----------- ----------- Total liabilities....................................... 19,451,406 7,971,882 ----------- ----------- Stockholders' equity (notes 9 and 13): Convertible preferred stock, authorized 5,000,000 shares; issued at stated value of $1 per share: Series A preferred, no par value, issued and outstanding 643,000 shares.............................................. 643,000 643,000 Series B preferred, no par value, issued and outstanding 1,612,000 shares............................................ 1,612,000 1,612,000 Series C preferred, no par value, issued and outstanding 592,000 shares.............................................. 592,000 592,000 Series D preferred, no par value, issued and outstanding 95,000 shares............................................... 95,000 95,000 (Aggregate liquidation preference of $3,426,798 and $3,172,962 at December 31, 1996 and 1995, respectively) Common stock, authorized 10,000,000 shares; no par value; 1,096,902 and -0- shares issued and outstanding at December 31, 1996 and 1995, respectively.............................. 136,471 -- Accumulated deficit............................................. (1,882,449) (496,861) ----------- ----------- Total stockholders' equity.............................. 1,196,022 2,445,139 ----------- ----------- Commitments and contingencies (notes 9, 10, 12 and 13)............ $20,647,428 $10,417,021 =========== ===========
See accompanying notes to consolidated financial statements. F-26 224 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ----------- ---------- Revenues: Net broadcasting revenues........................................ $ 8,843,074 $6,845,107 ----------- ---------- Operating expenses: Station operating expenses: Selling, promoting, programming and engineering............... 5,554,632 4,053,145 General and administrative.................................... 1,780,584 1,297,835 Corporate general and administrative expenses.................... 488,831 374,158 Management fees (note 12)........................................ 215,938 171,128 Depreciation and amortization.................................... 1,173,349 765,200 ----------- --------- Income (loss) from operations............................ (370,260) 183,641 ----------- --------- Nonoperating income (expenses): Interest expense (notes 12 and 13)............................... (1,143,893) (656,897) Gain on sale of assets........................................... 97,097 -- Other, net....................................................... 30,162 1,591 Net trade income (expense)....................................... 1,306 (22,934) ----------- --------- Nonoperating expenses, net............................... (1,015,328) (678,240) ----------- --------- Loss before income taxes................................. (1,385,588) (494,599) Income taxes (note 11)............................................. -- -- ----------- --------- Net loss................................................. $(1,385,588) $ (494,599) =========== ==========
See accompanying notes to consolidated financial statements. F-27 225 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1996 AND 1995
PREFERRED STOCK COMMON STOCK NOTE TOTAL ---------------------- --------------------- ACCUMULATED RECEIVABLE -- STOCKHOLDERS' SHARES AMOUNT SHARES AMOUNT DEFICIT OFFICER EQUITY --------- ---------- --------- --------- ----------- ------------ ------------- Balance, December 31, 1994..................... 643,000 $ 643,000 102,000 $ 102,000 (2,262) (42,000) 700,738 Repayment of note receivable -- officer... -- -- -- -- -- 42,000 42,000 Issuance of common stock................. -- -- 95,000 95,000 -- -- 95,000 Conversion of common stock to preferred stock................. 197,000 197,000 (197,000) (197,000) -- -- -- Issuance of preferred stock................. 2,102,000 2,102,000 -- -- -- -- 2,102,000 Net loss................. -- -- -- -- (494,599) -- (494,599) --------- ---------- --------- --------- ---------- ------- ---------- Balance, December 31, 1995..................... 2,942,000 2,942,000 -- -- (496,861) -- 2,445,139 Issuance of common stock................. -- -- 91,649 126,419 -- -- 126,419 Exercise of common stock warrants.............. -- -- 1,005,253 10,052 -- -- 10,052 Net loss................. -- -- -- -- (1,385,588) -- (1,385,588) --------- ---------- --------- --------- ---------- ------- ---------- Balance, December 31, 1996..................... 2,942,000 $2,942,000 1,096,902 $ 136,471 (1,882,449) -- 1,196,022 ========= ========== ========= ========= ========== ======= ==========
See accompanying notes to consolidated financial statements. F-28 226 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ----------- ----------- Cash flows from operating activities: Net loss................................................................. $(1,385,588) $ (494,599) ---------- ---------- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation.......................................................... 388,284 314,319 Amortization.......................................................... 785,065 450,881 Increase in allowance for doubtful accounts........................... 72,762 33,500 Gain on sale of assets................................................ (97,097) -- Changes in assets and liabilities, net of effect of acquisitions: Increase in accounts receivable..................................... (645,898) (1,150,810) Increase in prepaid expenses and other current assets............... (100,767) (86,257) Increase in accounts payable and accrued expenses................... 315,973 414,911 Increase (decrease) in accrued interest payable..................... (59,287) 314,800 ---------- ---------- Net cash used in operating activities............................ (726,553) (203,255) ---------- ---------- Cash flows from investing activities: Proceeds from sale of assets............................................. 1,150,000 -- Capital expenditures for property and equipment.......................... (237,305) (171,177) Capital expenditures for property and equipment related to acquisitions.......................................................... (744,717) (2,898,359) Purchase of intangible assets............................................ (9,532,047) (5,072,508) Purchase of note receivable.............................................. (273,416) -- Other.................................................................... 2,340 11,454 ---------- ---------- Net cash used in investing activities............................ (9,635,145) (8,130,590) ---------- ---------- Cash flows from financing activities: Proceeds from issuance of note payable................................... 8,867,000 -- Proceeds from advance.................................................... 9,123,310 -- Increase (decrease) in bank overdraft.................................... (23,133) 22,992 Proceeds from note receivable -- officer................................. -- 42,000 Proceeds from issuance of long-term debt................................. -- 3,306,000 Principal payments on long-term debt..................................... (3,372,016) (284,649) Proceeds from issuance of subordinated debt.............................. 2,600,000 2,710,998 Principal payments on subordinated debt.................................. (5,756,998) -- Net borrowings under line of credit...................................... (418,168) 315,719 Proceeds from exercise of common stock warrants.......................... 10,052 -- Proceeds from issuance of preferred stock................................ -- 2,197,000 Proceeds from issuance of common stock................................... 126,419 -- Increase in other long-term liabilities.................................. 29,200 23,785 ---------- ---------- Net cash provided by financing activities........................ 11,185,666 8,333,845 ---------- ---------- Net increase in cash and cash equivalents........................ 823,968 -- Cash and cash equivalents, beginning of year............................... -- -- ---------- ---------- Cash and cash equivalents, end of year..................................... $ 823,968 $ -- ========== ========== Supplemental disclosure of cash flow information: Cash paid during the year for interest................................... $ 1,244,393 $ 321,396 ========== ==========
See accompanying notes to consolidated financial statements. F-29 227 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 (1) NATURE OF BUSINESS AND ORGANIZATION Deschutes River Broadcasting, Inc. was formed in 1994 and is a holding company which wholly-owns eight subsidiaries located in Oregon, Washington and Montana. The subsidiaries own and operate radio stations and hold Federal Communications Commission (FCC) licenses. The subsidiary companies which own and operate radio stations are Deschutes River Broadcasting of Oregon, Inc., Deschutes River-Tri-Cities Operating Company, Inc., Deschutes River Broadcasting of Billings, Inc. and Deschutes River Broadcasting of Bozeman, Inc. The subsidiary companies which hold FCC licenses are DRB Oregon License, Inc., Deschutes River-Tri-Cities Broadcasting, Inc., DRB Billings License, Inc. and DRB Bozeman License, Inc. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany items and transactions have been eliminated in consolidation. (b) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (c) Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, note receivable, accounts payable and other accrued expenses, accrued interest, advance, note payable and the line of credit approximate fair value because of the short-term or intercompany nature of these instruments. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. (d) Cash and Cash Equivalents The Company considers all investments with a maturity of three months or less at date of purchase to be a cash equivalent. (e) Intangible Assets Intangible assets are recorded at cost and amortized using the straight-line method over the expected periods to be benefited, which range from three to fifteen years. The Company assesses the recoverability of these intangible assets by determining whether the balance can be recovered through undiscounted future operating cash flows of the acquired asset. The amount of asset impairment, if any, is measured based on F-30 228 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) projected discounted future operating cash flows using a discount rate reflecting the Company's average cost of funds. The assessment of the recoverability of the asset will be impacted if estimated future operating cash flows are not achieved. (f) Property and Equipment Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated lives of the respective assets, which range from five to twenty years. Maintenance and repairs are charged to operations as incurred. (g) Revenue Net broadcast revenue is presented net of agency commissions and is recognized when the advertisements are broadcast. (h) Trade Transactions Revenue from trade transactions (advertising provided in exchange for goods and services) is recognized as income when advertisements are broadcast and trade expense is recognized when merchandise is consumed or services are performed. An asset and liability are recorded at the fair market value of the goods or services received. (i) Stock Option Plan Prior to January 1, 1996, the Company accounted for its stock option plan in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation", which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income disclosure for employee stock option grants as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. (j) Income Taxes The Company accounts for taxes on the asset and liability method. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred income taxes are measured using the enacted tax rates and laws that are anticipated to be in effect when the differences are expected to reverse. (k) Reclassifications Certain 1995 amounts have been reclassified to conform with current year presentation. (3) ACQUISITIONS During 1995, the Company acquired two stations in Medford, Oregon for approximately $1.9 million and six stations in the Montana markets combined for approximately $5.4 million. F-31 229 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) During 1996, the Company acquired ten new radio stations in various markets and disposed of three stations in Bozeman, Montana. The acquisitions included three stations in Eugene, Oregon, four stations in Medford, Oregon, two stations in Billings, Montana and one station in Tri-Cities, Washington. The significant acquisitions in Eugene and Medford, Oregon had total purchase prices of $7 million and $2 million, respectively. The remaining acquisitions and disposal transaction included the transfer of a station valued at approximately $750,000 and did not result in significant net proceeds. These acquisitions have been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets purchased based upon the fair values at the date of acquisition. The excess of the purchase price over the fair value of the assets acquired has been recorded as goodwill and other identifiable intangibles. The consolidated financial statements include the operating results of each business from the date of acquisition. Pro forma unaudited consolidated operating results of the Company and the acquired stations for the years ended December 31, 1996 and 1995, assuming the acquisitions and dispositions had been made as of January 1, 1996 and 1995, are summarized below:
1996 1995 ----------- ----------- Net broadcasting revenues......................... $11,442,108 $11,316,910 Income (loss) from operations..................... (436,871) 423,053 Net loss.......................................... (2,215,299) (1,188,707)
These pro forma results have been prepared for comparative purposes only and include certain adjustments for operational expenses that the Company will not incur in its operation of the stations, for interest expense that would have been incurred to finance the purchases, additional depreciation expense based on the fair market value of the property and equipment acquired, and the amortization of intangibles arising from the transactions. The pro forma financial information is not necessarily indicative of the results of operations had the acquisitions and dispositions been consummated as of January 1, 1996 and 1995 or of future results of operations of the consolidated entities. (4) INTANGIBLE ASSETS, NET Intangible assets, net are as follows at December 31:
ESTIMATED USEFUL LIFE 1996 1995 ---------- ----------- ---------- Goodwill................................. 15 years $ 5,037,425 $2,811,354 FCC licenses............................. 15 years 9,474,000 2,325,000 Covenants not to compete................. 3-5 years 456,000 295,000 Organizational costs..................... 5 years 252,970 255,319 Deferred financing costs................. Loan term -- 88,455 ----------- ---------- 15,220,395 5,775,128 Less accumulated amortization............ 1,077,496 494,019 ----------- ---------- Intangible assets, net.............. $14,142,899 $5,281,109 =========== ==========
F-32 230 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (5) PROPERTY AND EQUIPMENT, NET Property and equipment, net are as follows at December 31:
ESTIMATED USEFUL LIFE 1996 1995 -------------- ---------- ---------- Land................................. -- $ 312,764 $ 312,764 Buildings............................ 20 years 297,431 497,430 Leasehold improvements............... Life of lease 13,000 130,000 Tower and transmitter equipment...... 13 years 1,521,586 1,664,710 Vehicles............................. 5 years 28,724 13,260 Studio equipment..................... 7 years 1,153,715 1,089,163 Furniture and fixtures............... 5 - 7 years 352,179 236,859 ---------- ---------- 3,679,399 3,944,186 Less accumulated depreciation and amortization....................... 525,469 337,531 ---------- ---------- Property and equipment, net...................... $3,153,930 $3,606,655 ========== ==========
(6) NOTE PAYABLE During 1996, in contemplation of the merger discussed at note 13, the Company obtained financing from Citadel Communications Corporation (CCC) in the form of an $8.9 million note payable to assist in making current year acquisitions (see note 3). The note bears interest at the higher of the Euro dollar rate plus 300 basis points or 9% and is payable quarterly. Accrued interest at December 31, 1996 was approximately $255,000. The note is secured by the assets of the acquired stations and stock of the subsidiary corporations that own the stations acquired with the note proceeds. The note payable was required to be repaid by July 1, 1997 if the merger did not occur. On the date of the merger, the note payable was reclassified as an intercompany liability, therefore it is classified as a non-current liability at December 31, 1996. (7) LINE OF CREDIT, LONG-TERM DEBT AND SUBORDINATED NOTES PAYABLE At December 31, the Company had the following debt instruments outstanding:
1996 1995 ------ ---------- Line of credit, revolving; rate of prime plus 1.5%..... $ -- $ 418,168 Bank note payable; variable and fixed rates of 8.5% to 10%....................................... -- 3,372,016 Subordinated notes payable; rate of 11%................ -- 3,156,998 ------ ---------- --- Total........................................ $ -- $6,947,182 ====== ==========
Borrowings under the line of credit and bank note payable were collateralized by substantially all assets of the Company, excluding assets discussed in note 6. In contemplation of the merger discussed at note 13, all debt instruments were paid off on December 31, 1996. As the instruments were paid off by December 31, 1996, the Company did not have to comply with any financial covenants at or for the year then ended. F-33 231 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (8) LEASES The Company and its subsidiaries are obligated under certain noncancelable operating leases for which future minimum payments are as follows: Year ending December 31: 1997........................................................... $ 309,542 1998........................................................... 243,062 1999........................................................... 207,604 2000........................................................... 189,175 2001........................................................... 176,279 Subsequent to 2001............................................. 379,705 ---------- $1,505,367 ==========
Rental expense, principally for office space, equipment and tower rentals, amounted to $278,000 and $145,000 for the years ended December 31, 1996 and 1995. (9) STOCKHOLDERS' EQUITY Conversion of Stock at Time of Merger As discussed in note 13, all equity instruments of the Company; preferred stock, common stock and stock options, were converted into CCC equity instruments on January 1, 1997, the merger date. Convertible Preferred Stock Each share of Deschutes River Broadcasting Series A, B, C and D preferred stock is convertible at any time into common stock on a one-for-one basis (subject to certain adjustments). Conversion of each series of preferred stock is automatic upon the exchange of 51% or more of each series of preferred stock into common stock. Dividends are payable when and as declared by the Board of Directors and are not cumulative. Dividends must be first paid on preferred stock before amounts are paid on common stock. No dividends were declared or paid during 1996 or 1995. Upon liquidation, dissolution, or winding up of the Company, holders of convertible preferred stock have preference and priority over common shares for payment out of the assets of the Company or proceeds thereof available for distribution to stockholders of $1 per share plus a liquidation preference, which accrues at an annual compounded rate of 8%. Common Stock At December 31, 1996 and 1995, the Company had reserved shares of common stock for issuance as follows:
1996 1995 --------- --------- Conversion of preferred stock....................... 2,942,000 2,942,000 Issuance of warrants................................ -- 1,005,253 Issuance to employees, officers, directors and consultants under stock incentive plan............ 708,843 708,843 --------- --------- 3,650,843 4,656,096 ========= =========
F-34 232 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Stock Incentive Plan During 1995, the Company adopted a Stock Incentive Plan (the Plan) for selected employees, officers, directors and consultants. Under the terms of the Plan, the option price is determined by the Board of Directors (the Board) at the time the option is granted. The options generally expire ten years from date of grant and are exercisable as determined by the Board. At December 31, 1995, no shares had been granted under the Plan. During 1996, the Company granted 246,569 options at $.60 and 332,926 options at $2.10. None of the options were exercised during the current year. The options generally are either 100% vested at the time of grant or become 100% vested at the time of a merger (see note 13). At December 31, 1996, 579,495 options were outstanding at a weighted average exercise price of $1.46, of which 238,095 options with an exercise price of $2.10 were exercisable. During 1995, the Financial Accounting Standards Board issued "Accounting for Stock-Based Compensation" (SFAS 123) which defines a fair value based method of accounting for an employee stock option and similar equity instruments. As permitted under SFAS 123, the Company has elected to continue to account for its stock-based compensation plans under APB Opinion No. 25. The Company has computed, for pro forma disclosure purposes, the value of all options granted during 1996 using the minimum value method as prescribed by SFAS 123 using the following assumptions for grants: Risk-free interest rate..................... 6.04% Expected dividend yield..................... 0% Expected lives.............................. 5 years
Using the minimum value methodology, the total value of options granted during 1996 was $223,000 which would be amortized on a pro forma basis over the vesting period of the options (one to five years). The weighted average fair value per share of options granted during 1996 was $.38. If the Company had accounted for its stock-based compensation plans in accordance with SFAS 123, the Company's net loss would approximate the pro forma disclosure below for the year ended December 31, 1996:
AS PRO REPORTED FORMA ---------- ---------- Net loss.................................. $1,385,588 $1,534,861
The effects of applying SFAS 123 in this pro forma disclosure is not indicative of future amounts. Warrants During 1995, the Company granted 1,005,253 warrants to purchase common stock to subordinated debt holders at a price of $.01. All warrants granted in 1995 were exercised in 1996 for 1,005,253 shares of common stock. Management determined that the value associated with these warrants at the date of grant was not material. During 1996, the Company granted 290,381 warrants to purchase common stock to subordinated debt holders at a price of $.01. The warrants were to become exercisable on January 1, 1997 if the warrant holders' portion of the subordinated debt was not repaid by December 31, 1996. Due to the contingent nature of these warrants, no value was assigned at the grant date. These warrants expired on December 31, 1996, when the subordinated debt was repaid (see notes 7 and 13). F-35 233 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (10) SALARY SAVINGS AND RETIREMENT PLAN The Company has a salary savings and retirement plan. The plan covers primarily all officers and employees of the Company who meet prescribed age and service requirements. Employees may contribute up to 15% of their compensation. Matching contributions are determined at the discretion of the Board of Directors. There were no Company contributions made to the plan during the years ended December 31, 1996 or 1995. (11) INCOME TAXES No income tax benefit was recorded by the Company in 1996 and 1995. Income tax benefit for the year ended December 31, 1996 differed from the amounts computed by applying the U.S. Federal income tax rate of 34% to pretax income primarily due to an increase in the valuation allowance. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1996 and 1995 are presented below:
1996 1995 -------- -------- Deferred tax assets: Federal and state net operating loss carryforwards........... $912,219 $246,553 Allowance for doubtful accounts.............................. 48,983 19,160 Payroll accrual.............................................. 2,100 21,403 -------- -------- Total gross deferred tax assets...................... 963,302 287,116 Less valuation allowance..................................... 735,645 190,338 -------- -------- Net deferred tax assets.............................. 227,657 96,778 -------- -------- Deferred tax liabilities: Book versus tax basis accumulated depreciation............... 227,657 96,778 -------- -------- Total gross deferred tax liabilities................. 227,657 96,778 -------- -------- Net deferred tax asset............................... $ -- $ -- ======== ========
As of December 31, 1996, the Company had a consolidated net operating loss carryforward of approximately $2,280,000 for consolidated federal income tax reporting purposes available to offset future taxable income through the year 2011. Based on the Company's history of operating losses, the more likely than not criteria for recognizing the tax benefit primarily associated with the net operating losses cannot be met and, therefore, the Company has recorded a valuation allowance to the extent of net deferred tax assets. (12) RELATED PARTY TRANSACTIONS The preferred stockholders are considered related parties of the Company. At December 31, 1995, the Company had approximately $3.2 million in notes payable to subordinated debt holders and $308,000 in accrued interest payable. During 1996, the Company borrowed an additional $2.6 million in subordinated debt from the preferred stockholders. Interest expense on the subordinated debt for fiscal 1996 and 1995 was $548,000 and $308,000, respectively. One of the preferred stockholders provides certain management services to the Company. Management fees accrued at December 31, 1996 and 1995 were approximately $48,000 and $21,000 and expense for the years then ended was approximately $216,000 and $171,000, respectively. F-36 234 DESCHUTES RIVER BROADCASTING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As part of the merger discussed in note 13, all subordinated debt and accrued interest was repaid and management services will no longer be provided to the Company. (13) SUBSEQUENT EVENTS The Company was merged with and into a wholly-owned subsidiary of CCC effective 12:01 a.m. on January 1, 1997. Effective with the merger, the Company (and its wholly-owned subsidiaries) ceased to exist. All of the Company's equity instruments, preferred stock, common stock and stock options, existing at December 31, 1996, were converted into CCC equity instruments at the conversion multiple defined in the merger agreement, at a per share conversion rate of .1222948. All options outstanding at December 31, 1996 became fully vested at the time of the merger. To effectuate the merger, CCC made an advance to the Company of approximately $9.1 million on December 31, 1996 to pay off subordinated debt, line of credit, long-term debt and other accrued expenses of the Company. The advance is considered a non-current liability at December 31, 1996 as the obligation was reclassified as an intercompany liability on the date of the merger. F-37 235 DELOITTE & TOUCHE LLP [LOGO] --------------------------------------------- 2500 One PPG Place Telephone: (412) 338-7200 Pittsburgh, Pennsylvania 15222-5401 Facsimile: (412) 338-7380 INDEPENDENT AUDITORS' REPORT To the Stockholders of Tele-Media Broadcasting Company: We have audited the accompanying consolidated balance sheets of Tele-Media Broadcasting Company and its partnership interests (collectively, the "Companies" -- see Note 1) as of December 31, 1995 and 1996, and the related consolidated statements of operations, deficiency in net assets and cash flows for each of the three years in the period ended December 31, 1996. These consolidated financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements present fairly, in all material respects, the financial position of the Companies as of December 31, 1995 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. As discussed in Note 4 to the consolidated financial statements, at December 31, 1996, the Companies were not in compliance with the terms of a debt agreement. /s/ DELOITTE & TOUCHE LLP March 28, 1997 DELOITTE TOUCHE TOHMATSU INTERNATIONAL F-38 236 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1996
1995 1996 ----------- ----------- ASSETS Current assets: Cash and cash equivalents....................................... $ 1,904,258 $ 2,343,395 Accounts receivable: Nonbarter -- less allowance for doubtful accounts of $531,000 and $612,000................................................ 4,599,032 5,262,484 Barter -- net................................................... 363,394 304,244 Other current assets............................................ 157,998 739,831 ----------- ----------- Total current assets......................................... 7,024,682 8,649,954 ----------- ----------- Property, plant and equipment: Land............................................................ 1,372,571 1,372,571 Buildings and improvements...................................... 2,357,447 2,369,520 Broadcasting equipment.......................................... 10,653,182 11,169,533 ----------- ----------- 14,383,200 14,911,624 Less accumulated depreciation................................... 6,916,068 8,259,285 ----------- ----------- Property, plant and equipment -- net......................... 7,467,132 6,652,339 ----------- ----------- Intangibles -- Net of accumulated amortization.................... 29,036,404 26,904,288 ----------- ----------- Other noncurrent assets........................................... 95,641 16,331 ----------- ----------- $43,623,859 $42,222,912 =========== =========== LIABILITIES AND DEFICIENCY IN NET ASSETS Current liabilities: Accounts payable and other accrued expenses..................... $ 1,466,387 $ 2,019,269 Accrued interest................................................ 999,880 1,895,889 Accrued sales commissions....................................... 330,561 358,513 Amounts due to affiliates -- net................................ 2,057,456 2,818,179 Current portion of long-term debt............................... 3,106,208 37,528,396 ----------- ----------- Total current liabilities.................................... 7,960,492 44,620,246 ----------- ----------- Long-term liabilities: Long-term debt -- less current portion.......................... 64,417,869 32,382,419 Other........................................................... 32,772 31,266 ----------- ----------- Total long-term liabilities.................................. 64,450,641 32,413,685 ----------- ----------- Redeemable stock warrants......................................... 750,950 1,644,000 ----------- ----------- Deficiency in net assets: Common stock, voting, $0.01 par value per share; 25,000 shares authorized, 15,000 shares outstanding........................ 150 150 Common stock, nonvoting, $0.01 par value per share; 10,000 shares authorized, none outstanding.......................... -- -- Additional paid-in capital...................................... 6,924,445 6,924,445 Deficit......................................................... (36,462,819) (43,379,614) ----------- ----------- Deficiency in net assets..................................... (29,538,224) (36,455,019) ----------- ----------- $43,623,859 $42,222,912 =========== ===========
See notes to consolidated financial statements. F-39 237 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS CONSOLIDATED STATEMENTS OF OPERATIONS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
1994 1995 1996 ----------- ----------- ----------- Revenues: Local advertising................................. $17,637,256 $18,539,201 $20,968,055 National advertising.............................. 4,867,471 4,957,359 4,618,104 Barter............................................ 3,561,009 3,646,290 3,451,849 Other............................................. 576,607 511,827 370,932 ----------- ----------- ----------- 26,642,343 27,654,677 29,408,940 Less agency commissions........................... 2,648,183 2,811,738 2,984,574 ----------- ----------- ----------- Net revenues.............................. 23,994,160 24,842,939 26,424,366 ----------- ----------- ----------- Selling, general and administrative, programming, barter and technical expenses: Selling........................................ 4,719,103 5,154,097 5,001,176 General and administrative..................... 3,552,604 4,088,306 4,674,883 Programming.................................... 3,882,737 4,391,676 4,858,386 Barter......................................... 3,485,969 3,520,426 3,513,231 Technical...................................... 176,459 224,975 245,524 ----------- ----------- ----------- 15,816,872 17,379,480 18,293,200 ----------- ----------- ----------- Operating income before management fees and depreciation and amortization..................... 8,177,288 7,463,459 8,131,166 ----------- ----------- ----------- Management fees and depreciation and amortization: Management fees -- affiliates..................... 844,579 741,876 804,410 Depreciation and amortization..................... 4,690,730 3,708,809 3,493,509 ----------- ----------- ----------- 5,535,309 4,450,685 4,297,919 ----------- ----------- ----------- Operating income.................................... 2,641,979 3,012,774 3,833,247 Interest expense.................................... 6,093,333 9,132,133 10,750,042 ----------- ----------- ----------- Loss before extraordinary item...................... (3,451,354) (6,119,359) (6,916,795) Extraordinary item -- Loss on extinguishment of debt.............................................. (1,341,348) -- -- ----------- ----------- ----------- Net loss.................................. $(4,792,702) $(6,119,359) $(6,916,795) =========== =========== ===========
See notes to consolidated financial statements. F-40 238 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS CONSOLIDATED STATEMENTS OF DEFICIENCY IN NET ASSETS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
COMMON STOCK ADDITIONAL ----------------- PAID-IN SHARES AMOUNT CAPITAL DEFICIT ------ ------ ---------- ------------ Balance, January 1, 1994................................ 2,000 $ 20 $7,125,383 $(25,550,758) Stock dividend........................................ 13,000 130 (130) -- Capital contributions -- cash......................... -- -- 1,000 -- Distributions......................................... -- -- (400,000) -- Contribution of management fees -- affiliates......... -- -- 198,192 -- Net loss.............................................. -- -- -- (4,792,702) ------ ---- ---------- ------------ Balance, December 31, 1994.............................. 15,000 150 6,924,445 (30,343,460) Net loss.............................................. -- -- -- (6,119,359) ------ ---- ---------- ------------ Balance, December 31, 1995.............................. 15,000 150 6,924,445 (36,462,819) Net loss.............................................. -- -- -- (6,916,795) ------ ---- ---------- ------------ Balance, December 31, 1996.............................. 15,000 $150 $6,924,445 $(43,379,614) ====== ==== ========== ============
See notes to consolidated financial statements. F-41 239 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996
1994 1995 1996 ----------- ----------- ----------- Cash flows from operating activities: Net loss................................................... $(4,792,702) $(6,119,359) $(6,916,795) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization........................... 4,690,730 3,708,809 3,493,509 Interest deferral....................................... 1,343,351 5,114,170 4,932,565 Amortization of loan origination fees................... -- 311,916 300,795 Management fees -- affiliates........................... 198,192 741,876 804,410 Provision for losses on accounts receivable............. 376,732 367,522 387,291 Loss on write-off of intangible assets.................. 159,431 -- -- Net barter transactions................................. (75,040) (125,864) 61,382 Increase in fair value of redeemable stock warrants..... -- -- 893,050 Other................................................... 90,867 (36,420) (78,760) Changes in operating assets and liabilities: Accounts receivable -- nonbarter...................... (437,520) (938,846) (1,050,743) Other current assets.................................. (249,489) 233,807 (581,833) Accounts payable and other accrued expenses........... (96,561) 281,957 552,882 Affiliates activity -- net............................ 1,148,600 (407,409) (43,687) Accrued interest...................................... 35,113 136,081 896,009 Accrued sales commissions............................. (38,885) (6,891) 27,952 ---------- ---------- ---------- Net cash provided by operating activities.......... 2,352,819 3,261,349 3,678,027 ---------- ---------- ---------- Cash flows from investing activities: Capital expenditures....................................... (428,423) (520,440) (468,631) Purchase of radio stations................................. (1,900,000) (5,100,000) (65,000) Other...................................................... (4,809) 6,124 6,000 ---------- ---------- ---------- Net cash used in investing activities.............. (2,333,232) (5,614,316) (527,631) ---------- ---------- ---------- Cash flows from financing activities: Capital contributions...................................... 1,000 -- -- Borrowings................................................. 61,334,446 5,433,347 95,144 Payments of long-term debt................................. (57,323,706) (2,932,546) (2,640,971) Loan origination fees and other intangible assets.......... (2,668,295) (271,271) (163,764) Sale of redeemable stock warrants.......................... 750,950 -- -- Distributions to stockholders.............................. (400,000) -- -- Other...................................................... (12,180) (2,178) (1,668) ---------- ---------- ---------- Net cash provided by (used in) financing activities....................................... 1,682,215 2,227,352 (2,711,259) ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents......... 1,701,802 (125,615) 439,137 Cash and cash equivalents, beginning of year................. 328,071 2,029,873 1,904,258 ---------- ---------- ---------- Cash and cash equivalents, end of year....................... $ 2,029,873 $ 1,904,258 $ 2,343,395 ========== ========== ==========
See notes to consolidated financial statements. F-42 240 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 1. BASIS OF PRESENTATION AND BUSINESS Tele-Media Broadcasting Company (the "Company" or "TMBC") was incorporated in 1988 under the name TMZ Broadcasting Company ("TMZ"). In April 1994, TMZ changed its name to Tele-Media Broadcasting Company. Robert E. Tudek and Everett I. Mundy each own 50% of the outstanding shares of TMBC. TMBC operates radio stations principally in midsize markets in the eastern United States and in Illinois. In May 1989, TMZ acquired all of the outstanding common stock of Eastern Broadcasting Company ("Eastern") and its wholly-owned subsidiaries: Lehigh Valley Broadcasting ("Lehigh"), Penn Broadcasting Corporation ("Hershey"), Providence Broadcasting Corporation ("Providence"), Quincy Communications Corporation ("Quincy") and State College Communications Corporation ("State College"). TMZ retained the assets acquired from State College and contributed the assets acquired from the remaining subsidiaries of Eastern to limited partnerships with the same names which TMZ had formed to facilitate the acquisition. TMZ owned between a 95% and 99% general partnership interest in each of the limited partnerships. With the exception of Quincy, the limited partnership interests were owned by the shareholders of TMZ and employees of the Companies (hereinafter defined). The limited partnership interest in Quincy (1%) was owned by Tele-Media Holding Corporation ("Holding"), which is owned by Messrs. Tudek and Mundy. In April 1993, Messrs. Tudek and Mundy formed Tele-Media Broadcasting Company of America ("America Corporation"), which purchased substantially all of the assets of two radio stations in Rhode Island, WPRO(AM) and WPRO-FM, for approximately $6 million, and in May 1993 formed Tele-Media Broadcasting Company of Johnstown/Altoona ("Johnstown/Altoona Corporation"), which purchased all of the common stock of Cambria County Broadcasting Company ("CCBC"). CCBC operated radio station WIYQ(FM). Simultaneous with the purchase, CCBC was merged into Johnstown/Altoona Corporation with Johnstown/Altoona Corporation being the surviving corporation. WIYQ(FM)'s call letters were subsequently changed to WQKK-FM. In April 1994, Tele-Media Broadcasting Company of Cambria County ("Cambria County Corporation") was formed by the shareholders of TMBC. Cambria County Corporation purchased substantially all of the assets of a radio station, WGLU(FM), in the Johnstown, PA market for approximately $1.9 million. In June 1994, the companies were restructured in order to facilitate a refinancing (see Note 4). In order to accomplish the restructuring, Tele-Media Broadcasting Operating Company Limited Partnership ("Tele-Media Operating") was formed by TMBC. Holding distributed its 1% limited partnership interest in Quincy to the shareholders of TMBC. TMBC contributed its general partnership interests in Lehigh, Hershey, Providence and Quincy to Tele-Media Operating. The shareholders of TMBC contributed all of their limited partnership interests in Lehigh, Hershey and Quincy to TMBC. TMBC contributed all of its limited partnership interest in Lehigh and all but 1% of its limited partnership interest in Hershey and Quincy to Tele-Media Operating. These limited partnership interests were, by virtue of an amendment to the respective partnership agreements, converted into general partnership interests. Tele-Media Broadcasting Company of America Limited Partnership ("America LP"), Tele-Media Broadcasting Company of Johnstown/Altoona Limited Partnership ("Johnstown/Altoona LP"), Tele-Media Broadcasting Company of State College Limited Partnership ("State College LP") and Tele-Media Broadcasting Company of Cambria County Limited Partnership ("Cambria County LP") were formed by Tele-Media Operating, and America Corporation, Johnstown/Altoona Corporation and Cambria County Corporation were merged with and into TMBC and the assets were then contributed to Tele-Media Operating which in turn conveyed them to the limited partnerships by the same names. TMBC then transferred all of the assets acquired in the State College acquisition to Tele-Media Operating which in turn conveyed them to State College LP. F-43 241 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) After the restructuring, TMBC owned a 99% general partnership interest in Tele-Media Operating, and Tele-Media Operating owned between a 95% and 99% general partnership interest in the following limited partnerships: Lehigh, Hershey, Providence, Quincy, State College LP, America LP, Johnstown/Altoona LP and Cambria County LP (collectively, the "Companies"). In March 1995, Quincy purchased substantially all of the assets of WZLZ-FM for approximately $367,000 and the call letters were subsequently changed to WMOS-FM. This acquisition was financed primarily with unsecured seller debt. During 1994, Tele-Media Operating formed Tele-Media Broadcasting Company of York Limited Partnership ("York LP"), of which Tele-Media Operating is 99% general partner and TMBC is 1% limited partner. On May 1, 1995, the Companies entered into Local Marketing Agreements ("LMAs") to operate WQXA-AM, WQXA-FM and WIKN-FM. In November 1995, York LP acquired substantially all the assets of WQXA-AM and WQXA-FM for approximately $5 million. This acquisition was financed with additional borrowings under the Amended Loan Agreement (see Note 4). On August 1, 1996, the Companies entered into an LMA to operate WBLF-AM. In October 1996, State College LP acquired substantially all the assets of WBLF-AM for approximately $215,000 (including forgiveness of a note receivable from the seller and cash paid of $65,000). During 1996, Tele-Media Operating formed Tele-Media Broadcasting Company of Wilkes Barre/Scranton Limited Partnership ("Wilkes Barre LP") of which Tele-Media Operating is 99% general partner and TMBC is 1% limited partner. On August 1, 1996 Wilkes Barre LP entered into an asset purchase agreement to acquire WAZL-AM and WZMT-FM and entered into an LMA to operate the stations. On December 1, 1996, TMBC entered into an asset purchase agreement to acquire WARM-AM and WMGS-FM along with the rights to purchase options for WBHT-FM, WKQV-FM and WKQV-AM, all of which are located in the Wilkes-Barre market, and which were being operated under LMAs and Joint Sales Agreements ("JSA's"). Subsequent to December 31, 1996, the Company consummated the acquisition of the assets of WAZL-AM and WZMT-FM for approximately $3.5 million, which was financed with borrowings under the Amended Loan Agreement. The Company expects to consummate the acquisition of the assets of WARM-AM and WMGS-FM in 1997 for approximately $11 million to be financed through additional borrowings under the Amended Loan Agreement. The Company has made a nonrefundable escrow deposit of $550,000 related to this acquisition. The escrow deposit is included in other current assets and will be a reduction of the purchase price or, in the event the acquisition is not consummated, paid to the seller. The accompanying consolidated financial statements include the accounts of TMBC and its partnership interests, including the acquisition of businesses from their respective dates of purchase. All of the aforementioned acquisitions were accounted for under the purchase method, and as such, the purchase price is allocated among the assets and liabilities purchased based on their relative fair market values at the date of acquisition. All material intercompany transactions and balances have been eliminated in the consolidated financial statements. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Cash and Cash Equivalents -- For purposes of the consolidated statements of cash flows, the Companies consider highly liquid investments with original maturities of three months or less to be cash equivalents. b. Property, Plant and Equipment -- Property, plant and equipment, carried at cost, is depreciated over the estimated useful lives of the related assets, principally five to ten years. Depreciation is computed on the straight-line method for financial statement purposes and on accelerated methods for federal income tax F-44 242 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) purposes. Depreciation expense totaled $1,446,000, $1,499,000 and $1,358,000 for the years ended December 31, 1994, 1995 and 1996, respectively. c. Intangibles -- Broadcast licenses are amortized over 20 years. Loan origination fees and non-compete agreements are amortized over the terms of the related agreements, and organization costs are amortized over five years. The Companies write-off these assets and related accumulated amortization when the assets become fully amortized. d. Impairment of Long-Lived Assets -- Management of the Companies reviews long-lived assets (including property, plant and equipment and intangibles) for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management considers the undiscounted cash flow expected to be generated by the use of the asset and its eventual disposition to determine when, and if, an impairment has occurred. Any write-downs due to impairment are charged to operations at the time the impairment is identified. During the year ended December 31, 1994, the Company wrote-off loan origination fees with a net carrying value of approximately $159,000 due to a refinancing of the debt. There were no such write-downs required in 1995 or 1996. e. Income Taxes -- No provision for income taxes has been made for the taxable income of the partnerships included in the consolidated financial statements as income taxes are the responsibility of the partners. TMBC has Subchapter S status for federal income tax purposes and, therefore, the shareholders, rather than the Company, have the responsibility for federal income taxes and for state income taxes in those states that recognize the equivalent of Subchapter S status. f. Revenue Recognition -- Revenue is recognized as commercials are broadcast. The Companies also enter into barter transactions in which advertising time is traded for merchandise or services used principally for promotional and other business purposes. Barter revenue is recorded as commercials are broadcast at the estimated fair value of the air time. If merchandise or services are received prior to the broadcast of commercials, recognition of the related revenue is deferred and recognized as the commercials are broadcast. g. Reclassifications -- Certain reclassifications have been made to the 1994 and 1995 consolidated financial statements in order to conform to the 1996 presentation. h. Use of Estimates in Preparation of the Consolidated Financial Statements -- The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. i. Local Marketing Agreements and Joint Sales Agreements -- The Companies use property, plant and equipment of the radio stations operated under LMAs and JSAs in exchange for a fee. Under provisions of the Company's LMAs and JSAs, the expenses of operating the stations (other than depreciation or amortization of assets) are the obligations of the Companies, and they are entitled to the revenues generated by the stations. Revenues and expenses related to these agreements are reflected in the consolidated statements of operations. The Companies have recorded fees in respect to these agreements of $63,750 for the year ended December 31, 1996 within general and administrative expenses on the consolidated statement of operations. No such costs were incurred in 1994 or 1995. F-45 243 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. INTANGIBLES Intangibles consist of the following:
1995 1996 ----------- ----------- Broadcast licenses................................ $36,389,881 $36,440,231 Non-compete agreements............................ 1,487,500 265,000 Loan origination fees............................. 2,854,888 2,937,340 Organization costs................................ 250,387 284,633 ----------- ----------- 40,982,656 39,927,204 Less accumulated amortization..................... 11,946,252 13,022,916 ----------- ----------- $29,036,404 $26,904,288 =========== ===========
4. LONG-TERM DEBT AND REDEEMABLE STOCK WARRANTS Long-term debt consists of the following:
1995 1996 ----------- ----------- Senior: Borrowings under Amended Loan Agreement....... $36,383,700 $33,935,700 Discount Notes................................ 30,698,371 35,630,986 Other........................................... 442,006 344,129 ----------- ----------- 67,524,077 69,910,815 Less current portion............................ 3,106,208 37,528,396 ----------- ----------- $64,417,869 $32,382,419 =========== ===========
The significant provisions of the Amended and Restated Loan Agreement dated February 26, 1997 (the "Amended Loan Agreement"), Senior Discount Notes (the "Notes"), and the Redeemable Stock Warrants (the "Warrants") are discussed below. The debt arrangements discussed in the preceding sentence were entered into in connection with a refinancing in June 1994 of substantially all of the debt then outstanding, resulting in an extraordinary loss on the extinguishment thereof of approximately $1,341,000 during the year ended December 31, 1994. AMENDED LOAN AGREEMENT The Amended Loan Agreement permits borrowings of up to approximately $49 million. The remaining permitted borrowings under the Amended Loan Agreement ($16 million at February 26, 1997) were provided to finance the 1997 planned acquisitions described in Note 1. The Amended Loan Agreement modified principal and interest payments, and certain financial covenants and requires the payment of additional fees to the Lender of $250,000 in 1997 and 1998 in the event of a failure to meet the leverage covenant in either year. Prior to the amendment on February 26, 1997, and at December 31, 1996, the Companies were not in compliance with the provisions of the loan agreement then in effect. Principal is payable in quarterly installments with any remaining principal due April 1999. The Lender has the option to require the Companies to make an additional principal payment of up to approximately $8.9 million in 1997 and $21.4 million in 1998. Prior to the date of the Amended Loan Agreement, interest was payable quarterly at the prime rate plus 2%, or at the Companies' option, LIBOR plus 4.75%. At December 31, 1996, the interest rate was 10.25% (prime plus 2%). The Amended Loan Agreement requires interest payments quarterly. Interest under the Amended Loan Agreement is charged at the prime rate plus F-46 244 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2%, or at the Companies' option, LIBOR plus 4.5%, on borrowings up to approximately $44 million; interest on the next $5 million borrowed will be charged at the prime rate plus 3.75%. The Amended Loan Agreement requires the Companies to enter into a two year interest hedge contract on or before September 30, 1997 in a notional amount not less than $25 million, providing protection should the prime rate exceed the prime rate at the date the interest hedge contract is entered into by 2.5%. A penalty of between 2% and 4% is assessed on any principal prepayment. Borrowings under the Amended Loan Agreement are collateralized by substantially all of the assets and partnership interests of Tele-Media Operating and its partnerships. The Amended Loan Agreement provides for, among other things, limitations on distributions, indebtedness, mergers, sale and purchase of assets, capital expenditures, payment of management fees and payment of interest on the Notes, and requires the achievement of certain minimum cash flow amounts. SENIOR DISCOUNT NOTES The Notes are due June 15, 2004 and were issued with an original issue discount based on an interest rate of 16%. TMBC did not make interest payments on the Notes due June 15, 1995, December 15, 1995 and June 15, 1996 and did not consummate the Exchange Offer by the date as set forth in the original Registration Rights Agreement (as defined below). Consequently, TMBC and the Note holders amended the existing agreements to convert the amount of cash interest payments then due ($2,509,000) plus penalties of approximately $1,260,000 to notes payable and, in consideration of the conversion, the Note holders waived TMBC's default. Under the terms of the Note Agreement, as amended to include the notes issued in 1995 and 1996, interest of approximately $920,000 is payable semi-annually through June 15, 1999, and the remainder of the interest is deferred and added to principal. After June 15, 1999, semi-annual interest payments will be made at an annual rate of 16% of the accreted value of the Notes. The accreted value of the Notes will approximate $47,811,000 at June 15, 1999. TMBC did not make the required interest payment of $920,585 on the Notes which was due on December 15, 1996, and consequently it is in default of the Note Agreement. The holders of the Notes have the right to require immediate payment of all amounts due under the Note Agreement. The total amount due under the Note Agreement at December 31, 1996, which is classified as a current obligation, was $35,630,986. The shareholders of TMBC have negotiated an agreement to sell their stock in the Company. As part of the transaction, the holders of the Notes will be paid an amount sufficient to satisfy all outstanding claims against TMBC, including settlement of claims relating to the redeemable stock warrants discussed below (see Note 6). In the event the sale is not consummated, TMBC plans to enter into discussions with the Note holders to convert the delinquent amount, plus any penalties, into a note payable. If the Note holders refuse to agree to the conversion or another acceptable alternative, TMBC intends to search for replacement financing. Payment under the Notes is restricted by the Amended Loan Agreement. Redemption of the Notes prior to their scheduled maturity is subject to prepayment premiums. If a Qualified Public Offering is consummated by June 15, 1999, the Notes may be redeemed at TMBC's option for between 110% to 120% of the Accreted Value of the Notes. After June 15, 1999, the Notes may be redeemed at TMBC's option for $47,811,000 plus a premium of up to 8%, which declines ratably through the date of maturity. In addition, if a Change of Control occurs, the Note holders have the option to require TMBC to repurchase the Notes at 101% of the Accreted Value. The Notes are unsecured and restrict, among other things, the declaration or payment of any dividends or any other distributions to shareholders, the incurrence of additional debt, transactions with affiliates, payment of management fees, formation of additional subsidiaries, mergers, sales of assets and capital expenditures. Pursuant to a Registration Rights Agreement between TMBC and the Purchasers, TMBC filed an Exchange Offer Registration Statement (the "Registration Statement") with the Securities and Exchange Commission F-47 245 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) on September 19, 1994. Under the terms of the Exchange Offer the holders of the Notes may exchange the Old Notes for New Notes with identical terms, except that the New Notes may be offered for resale, be resold or otherwise transferred, under certain conditions by the holders without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933. Pursuant to the terms of the Registration Rights Agreement, as amended, if the Registration Statement does not become effective by May 1, 1997, additional interest of 1% per annum will be charged from May 1, 1997 through December 1, 1997 and increase .5% each six months thereafter, not to exceed an aggregate of 5% based on the Accreted Value of the Notes until the Registration Statement becomes effective. REDEEMABLE STOCK WARRANTS The Warrants are exercisable at no additional cost to the Note holders for between 3,750 and 5,290 shares of non-voting common stock representing 20% to 26% of the equity of TMBC, based on the achievement of certain levels of Operating Cash Flow. The Warrant agreement provides registration rights to the holders and restricts, among other things, the incurrence of additional debt, payment of management fees, formation of additional subsidiaries, mergers, sale of assets and distributions to stockholders. In addition, the Warrant holders have put rights during the period from January 1, 2000 through March 31, 2000 or upon a Change of Control, to require TMBC to redeem the Warrants for cash at fair value. The Warrants expire June 9, 2004 and are exercisable at any time on or after January 1, 2000, or upon the occurrence of any of the following: the conversion of TMBC to a Subchapter C corporation for federal income tax purposes; an Initial Public Offering; a merger where TMBC is not the surviving entity; a sale, lease, transfer or other disposition of all or substantially all of the assets of TMBC or its subsidiaries; a liquidation or dissolution of TMBC; or if Messrs. Tudek and Mundy own less than 50% of TMBC or a successor company. Holders of the non-voting common stock will enter into a Registration Rights Agreement providing them with unlimited piggy-back registration rights and the right to participate in any Initial Public Offering. The non-voting stock is convertible into voting common stock in connection with the sale of shares in a public offering, in a brokers' transaction pursuant to Rule 144 under the Securities Act of 1933, and if, after conversion, the shareholder would own 4.9% or less of the common stock. TMBC has reserved 10,000 shares of non-voting stock and 10,000 shares of voting stock for exercise of the Warrants. TMBC estimated the redemption price of the warrants at December 31, 1995 and 1996 as $750,950 and $7,000,000, respectively. Increases in the redemption price are accounted for prospectively as an adjustment to periodic interest expense from the date of the increase to January 1, 2000, the earliest date the put can be exercised. The accreted value of the Warrants at December 31, 1995 and 1996, was $750,950 and $1,644,000, respectively, resulting in a charge to interest expense for the year ended December 31, 1996 of $893,050. There was no adjustment to interest expense for the years ended December 31, 1994 and 1995. Minimum scheduled maturities of long-term debt during the next five years considering the Amended Loan Agreement and the classification of the Notes as a current liability resulting from the default are as follows: 1997............................................................ $37,528,000 1998............................................................ 2,595,000 1999............................................................ 33,744,000 2000............................................................ 19,000 2001............................................................ 3,000
Interest paid on all debt in 1994, 1995 and 1996 was approximately $4,616,000, $3,570,000 and $3,750,000, respectively. F-48 246 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. OPERATING AGREEMENT WITH AFFILIATE Under terms of an operating agreement entered into in June 1994, Tele-Media Corporation of Delaware (an affiliate) ("Tele-Media Delaware") provides certain management and technical services to the Companies and charges a management fee of 3.5% of revenues. Payment of the management fee is restricted by the Notes and the Amended Loan Agreement. The operating agreement expires on June 9, 2004 and continues from year-to-year thereafter unless either party gives written notice to the other at least 30 days in advance of an expiration date. Prior to the June 1994 operating agreement discussed above, Tele-Media Delaware charged a management fee ranging from 3.5% to 7% of revenues. As required by the provisions of the debt arrangements then outstanding as discussed in Note 4, Messrs. Tudek and Mundy assumed responsibility for the payment of certain management fees in 1994. The liabilities assumed by Messrs. Tudek and Mundy are treated as additional paid-in capital in the consolidated financial statements. 6. CONTINGENCIES AND COMMITMENTS In 1995, TMBC and its shareholders entered into a nonbinding letter of intent to sell the stock of TMBC. TMBC terminated the letter of intent and the proposed buyer filed suit for damages and specific performance. A motion to dismiss the suit was heard in early 1996 and the court ruled to dismiss a majority of the claims, including those for specific performance, as no definitive agreement had been reached for sale of the stock. On March 28, 1997, the shareholders of TMBC executed an agreement to sell the stock of the Company to the plaintiff in this suit. As part of this transaction, the suit was dismissed with prejudice, and upon motion of the parties, the dismissal of the suit was approved by the court. As a result of the suit's dismissal, this action cannot again be filed by the plaintiff. General and administrative expenses for the year ended December 31, 1995 and 1996 include approximately $274,000 and $260,000, respectively, of legal expenses incurred relating to the defense of the lawsuit and the proposed sale. The shareholders have agreed to pay 5.5% of the net proceeds from a sale of their stock to two key members of management. * * * * * * F-49 247 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 1997 ASSETS Current assets: Cash and cash equivalents.................................................... $ 3,708,373 Accounts receivable: Nonbarter -- less allowance for doubtful accounts of $800,000............. 5,447,842 Barter -- net............................................................. 303,749 Other current assets......................................................... 303,620 ------------ Total current assets................................................. 9,763,584 ------------ Property, plant and equipment -- net........................................... 8,436,165 ------------ Intangibles -- net............................................................. 38,326,412 ------------ Other noncurrent assets........................................................ 16,331 ------------ $ 56,542,492 =========== LIABILITIES AND DEFICIENCY IN NET ASSETS Current liabilities: Accounts payable and other accrued expenses.................................. $ 1,514,622 Accrued interest............................................................. 2,969,594 Amounts due to affiliates -- net............................................. 4,159,152 Current portion of long-term debt............................................ 39,491,064 ------------ Total current liabilities............................................ 48,134,432 ------------ Long-term liabilities: Long-term debt -- less current portion....................................... 47,306,734 Other........................................................................ 31,266 ------------ Total long-term liabilities.......................................... 47,338,000 ------------ Redeemable stock warrants...................................................... 2,536,000 ------------ Deficiency in net assets: Common stock, voting, $0.01 par value per share; 25,000 shares authorized, 15,000 shares outstanding................................................. 150 Common stock, nonvoting, $0.01 par value per share; 10,000 shares authorized, none outstanding.......................................................... -- Additional paid-in capital................................................... 6,924,445 Deficit...................................................................... (48,390,535) ------------ Deficiency in net assets............................................. (41,465,940) ------------ $ 56,542,492 ===========
See notes to unaudited condensed consolidated financial statements. F-50 248 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND CHANGES IN DEFICIT FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
1996 1997 ------------ ------------ Revenues: Local advertising............................................. $ 9,323,963 $ 12,557,493 National advertising.......................................... 2,052,723 2,710,273 Barter........................................................ 1,697,415 2,357,519 Other......................................................... 222,507 339,431 ------------ ------------ 13,296,608 17,964,716 Less agency commissions....................................... 1,346,551 1,723,832 ------------ ------------ Net revenues.......................................... 11,950,057 16,240,884 ------------ ------------ Selling, general and administrative, programming, barter and technical expenses: Selling....................................................... 2,441,926 3,287,451 General and administrative.................................... 2,008,273 3,366,246 Programming................................................... 2,337,296 3,491,639 Barter........................................................ 1,697,415 2,357,519 Technical..................................................... 127,977 176,110 ------------ ------------ 8,612,887 12,678,965 ------------ ------------ Operating income before management fees and depreciation and amortization.................................................. 3,337,170 3,561,919 ------------ ------------ Management fees and depreciation and amortization: Management fees -- affiliates................................. 358,113 454,258 Depreciation and amortization................................. 2,092,858 2,207,660 ------------ ------------ 2,450,971 2,661,918 ------------ ------------ Operating income................................................ 886,199 900,001 Interest expense................................................ 4,955,734 5,910,922 ------------ ------------ Net loss........................................................ (4,069,535) (5,010,921) Deficit, beginning of period.................................... (36,462,819) (43,379,614) ------------ ------------ Deficit, end of period.......................................... $(40,532,354) $(48,390,535) ============ ============
See notes to unaudited condensed consolidated financial statements. F-51 249 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
1996 1997 ----------- ------------ Cash flows from operating activities: Net loss....................................................... $(4,069,535) $ (5,010,921) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization............................... 2,092,858 2,207,660 Interest deferral........................................... 3,012,406 1,975,012 Management fees -- affiliates............................... 358,113 454,258 Provision for losses on accounts receivable................. 158,144 305,581 Increase in fair value of redeemable stock warrants......... -- 892,000 Other....................................................... 849 335 Changes in operating assets and liabilities: Accounts receivable -- nonbarter.......................... (6,589) (490,939) Other current assets...................................... (115,852) (114,795) Accounts payable and other accrued expenses............... (587,980) (863,160) Affiliates activity -- net................................ (135,961) 886,715 Accrued interest.......................................... 478,336 1,073,705 ----------- ----------- Net cash provided by operating activities.............. 1,184,789 1,315,451 ----------- ----------- Cash flows from investing activities: Capital expenditures........................................... (255,344) (227,926) Purchase of radio stations..................................... -- (14,170,000) Other.......................................................... 2,500 1,500 ----------- ----------- Net cash used in investing activities.................. (252,844) (14,396,426) ----------- ----------- Cash flows from financing activities: Borrowings..................................................... 79,361 16,000,000 Payments of long-term debt..................................... (1,575,046) (1,408,350) Loan origination fees and other intangible assets.............. (25,000) (145,334) Other.......................................................... (1,714) (363) ----------- ----------- Net cash provided by (used in) financing activities.... (1,522,399) 14,445,953 ----------- ----------- Net increase (decrease) in cash and cash equivalents............. (590,454) 1,364,978 Cash and cash equivalents, beginning of period................... 1,904,258 2,343,395 ----------- ----------- Cash and cash equivalents, end of period......................... $ 1,313,804 $ 3,708,373 =========== ===========
See notes to consolidated financial statements. F-52 250 TELE-MEDIA BROADCASTING COMPANY AND ITS PARTNERSHIP INTERESTS NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 1. BASIS OF PRESENTATION The condensed consolidated balance sheet as of June 30, 1997 and the condensed consolidated statements of operations and changes in deficit and cash flows for the six month periods ended June 30, 1996 and 1997 are unaudited. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation for the periods presented have been included. These interim unaudited condensed consolidated financial statements for 1996 and 1997 should be read in conjunction with the audited consolidated financial statements and notes thereto. The consolidated results of operations for the six months ended June 30, 1997 are not necessarily indicative of the results to be expected for the full year. 2. BUSINESS ACQUISITIONS On February 27, 1997, the Company purchased substantially all of the assets of two radio stations in the Wilkes-Barre/Scranton, Pennsylvania market for approximately $3,400,000. The acquisition was accounted for under the purchase method, with approximately $500,000 allocated to property, plant and equipment and approximately $2,900,000 allocated to intangibles. On April 18, 1997, the Company closed the acquisition of two additional radio stations in the Wilkes-Barre/Scranton, Pennsylvania market for approximately $11,000,000. The acquisition was financed by $12,000,000 of additional borrowings under the Amended Loan Agreement. On May 5, 1997, the Company closed the acquisition of a radio station in the Quincy, Illinois market for approximately $300,000. The acquisition was financed primarily by an unsecured seller note and assumption of capital leases. 3. SUBSEQUENT EVENTS On July 3, 1997, all of the issued and outstanding stock of the Company was acquired by Citadel Broadcasting Company, a subsidiary of Citadel Communications Corporation for approximately $114,400,000. F-53 251 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Snider Corporation: We have audited the accompanying balance sheet of Snider Corporation as of December 31, 1996 and the related statements of income, stockholders' equity, and cash flows for the year then ended. We have also audited the accompanying consolidated balance sheet of Snider Corporation as of December 31, 1995 and the related consolidated statements of income, stockholders' equity, 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 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, the financial statements referred to above present fairly, in all material respects, the financial position of Snider Corporation 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. Also, in our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Snider Corporation as of December 31, 1995 and the consolidated results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. As discussed in Notes 3, 6 and 7, the Company has significant transactions with related parties. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The combining information is presented for purposes of additional analysis of the financial statements. The combining information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ ERWIN & COMPANY Little Rock, Arkansas April 1, 1997 F-54 252 SNIDER CORPORATION BALANCE SHEETS DECEMBER 31, 1996 AND 1995
1996 1995 ---------- ---------- ASSETS Current assets: Cash and cash equivalents......................................... $ 105,788 $ 44,870 Accounts receivable, net of allowance for doubtful accounts of $34,461 in 1996 and $26,652 in 1995............................ 475,065 566,180 Due from affiliates............................................... 38,146 61,352 Other............................................................. 20,867 34,495 ---------- ---------- Total current assets........................................... 639,866 706,897 Other assets: Non-compete covenant.............................................. 45,833 -- Land held for investment, at cost, which approximates market value.......................................................... 97,553 123,396 Other............................................................. 18,536 -- ---------- ---------- Total other assets............................................. 161,922 123,396 Property and equipment, at cost less accumulated depreciation....... 874,992 666,934 ---------- $1,676,780 $1,497,227 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable -- related party..................................... $ 50,000 $ 50,000 Accounts payable -- trade......................................... 152,388 128,416 -- other...................................... -- 385 Accrued expenses.................................................. 86,481 96,593 ---------- ---------- Total current liabilities...................................... 288,869 275,394 Stockholders' equity: Common stock, no par value; 1,000 shares authorized, 100 shares issued and outstanding......................................... 143,000 143,000 Paid in capital................................................... 474,300 62,298 Retained earnings................................................. 770,611 1,016,535 ---------- ---------- Total stockholders' equity..................................... 1,387,911 1,221,833 ---------- ---------- $1,676,780 $1,497,227 ========== ==========
See accompanying notes. F-55 253 SNIDER CORPORATION STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ---------- ---------- Revenue: Announcements and programs........................................ $3,583,944 $3,510,863 Barter accounts................................................... 428,129 360,616 ---------- ---------- Total revenue............................................. 4,012,073 3,871,479 ---------- ---------- Direct charges: Commissions....................................................... 450,944 440,461 Royalties and franchise fees...................................... 140,303 93,744 ---------- ---------- Total direct charges...................................... 591,247 534,205 ---------- ---------- Gross profit........................................................ 3,420,826 3,337,274 ---------- ---------- Operating expenses: Technical department.............................................. 95,416 57,985 Program department................................................ 509,877 608,416 News department................................................... 255,458 264,837 Sales department.................................................. 859,674 839,461 General and administrative........................................ 974,815 926,945 Depreciation and amortization..................................... 186,723 81,232 ---------- ---------- Total operating expenses.................................. 2,881,963 2,778,876 ---------- ---------- Operating income.................................................... 538,863 558,398 Other income (expense): Interest income................................................... 3,168 5,275 Interest expense.................................................. (6,917) (8,548) Loss on sale of property and equipment............................ (59,024) -- Minority interest................................................. -- (48,004) Operating agreement -- acquired stations.......................... (65,698) -- Other............................................................. (124,316) (30,540) ---------- ---------- Total other income (expense).............................. (252,787) (81,817) ---------- ---------- Net income.......................................................... $ 286,076 $ 476,581 ========== ==========
See accompanying notes F-56 254 SNIDER CORPORATION STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1996 AND 1995
COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS TOTAL -------- -------- ---------- ---------- Balance -- December 31, 1994................. $143,000 $ 62,298 $ 868,958 $1,074,256 Net income................................. -- -- 476,581 476,581 Distributions to stockholders.............. -- -- (329,004) (329,004) -------- -------- ---------- ---------- Balance -- December 31, 1995................. 143,000 62,298 1,016,535 1,221,833 Net income................................. -- -- 286,076 286,076 Capital contribution....................... -- 412,002 -- 412,002 Distributions to stockholders.............. -- -- (532,000) (532,000) -------- -------- ---------- ---------- Balance -- December 31, 1996................. $143,000 $474,300 $ 770,611 $1,387,911 ======== ======== ========== ==========
See accompanying notes F-57 255 SNIDER CORPORATION STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 --------- --------- Cash flows from operating activities: Net income......................................................... $ 286,076 $ 476,581 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................... 186,723 81,232 Loss on disposal of assets...................................... 59,023 -- Minority interest............................................... -- 48,004 Recognition of unearned income.................................. -- (107,813) Bad debt provision.............................................. 34,461 30,636 Net changes in operating assets and liabilities: Accounts receivable........................................... 56,654 (173,698) Other current assets.......................................... 13,628 77,524 Other non-current assets...................................... (18,536) -- Accounts payable.............................................. 23,587 (15,065) Accrued expenses.............................................. (10,112) 6,280 --------- --------- Net cash provided by operating activities.................. 631,504 423,681 --------- --------- Cash flows from investing activities: Purchase of property and equipment................................. (213,240) (192,120) Purchase of land held for investment............................... -- (22,563) Proceeds from sale of property and equipment....................... 262,800 -- Net advances to affiliate.......................................... (38,146) (49,064) Payment under non-compete covenant................................. (50,000) -- --------- --------- Net cash used in investing activities...................... (38,586) (263,747) --------- --------- Cash flows from financing activities: Proceeds from repayments of notes receivable....................... -- 107,623 Repayment of note payable -- Bank.................................. -- (45,044) Distributions to minority interest................................. -- (48,004) Distributions to stockholders...................................... (532,000) (329,004) --------- --------- Net cash used in financing activities...................... (532,000) (314,429) --------- --------- Net increase (decrease) in cash and cash equivalents................. 60,918 (154,495) Cash and cash equivalents: Beginning of year.................................................. 44,870 199,365 --------- --------- End of year........................................................ $ 105,788 $ 44,870 ========= ========= Supplemental cash flows information: Interest paid...................................................... $ 6,917 $ 8,548 Significant non-cash investing and financing activities: Non-cash purchase of property and equipment from affiliate...... 473,353 -- Non-cash contribution of capital................................ 412,002 --
See accompanying notes F-58 256 SNIDER CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996 AND 1995 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of consolidation The consolidated financial statements include the accounts of Snider Corporation (the Company) and SMN Company (SMN), a 52% owned partnership. All significant intercompany transactions and accounts have been eliminated in consolidation. SMN was liquidated effective December 31, 1995. Nature of operations The Company operates an AM radio station and two FM radio stations in the central Arkansas market area and provides news and information to other radio stations throughout Arkansas. The activities of SMN were not material to 1995 consolidated financial position or results of operations. Accounting 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. Depreciation and amortization Depreciation is calculated by the straight-line method. Estimated useful lives are as follows:
YEARS ----- Transmitter building, antenna system, office machines and 3-25 equipment......................................................... Furniture and fixtures.............................................. 5-10 Vehicles............................................................ 2- 4 Other............................................................... 3- 5
Non-compete covenant The non-compete covenant with the former owner of certain radio broadcasting assets acquired in 1996 is being amortized on a straight-line basis over a period of two years. Total amortization expense was for 1996 was $4,167. Statement of cash flows For purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Concentrations of credit risk Most of the Company's business activity is with customers located within the state of Arkansas. The Company grants credit to its customers in the normal course of business, ordinarily without collateral requirements. The Company's exposure to credit risk from accounts receivable -- trade and notes receivable is represented by the carrying value of those receivables. The Company also periodically has demand deposit balances with a local financial institution that exceed federally insured limits. Management periodically reviews the soundness of this financial institution and does not believe the Company is exposed to significant financial risk. F-59 257 SNIDER CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996 AND 1995 -- CONTINUED (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): Reclassifications Certain reclassifications have been made to the 1995 financial statements to conform to the 1996 basis of presentation. (2) PROPERTY AND EQUIPMENT: Property and equipment at December 31, 1996 and 1995 consists of the following:
1996 1995 ---------- ---------- Land............................................... $ 57,700 $ 301,252 Transmitter building............................... 87,879 87,879 Antenna system..................................... 91,736 91,736 Satellite equipment................................ 473,353 -- Equipment.......................................... 650,906 452,326 Office machines.................................... 339,616 325,787 Furniture and fixtures............................. 150,289 149,455 Vehicles........................................... 56,272 63,623 Other.............................................. 78,831 198,714 ---------- ---------- 1,986,582 1,670,772 Less accumulated depreciation...................... 1,111,590 1,003,838 ---------- ---------- $ 874,992 $ 666,934 ========== ==========
(3) NOTE PAYABLE -- RELATED PARTY: Note payable -- related party at December 31, 1996 and 1995 consists of an unsecured note payable to a stockholder. The note bears interest at 8% and is due on demand. (4) INCOME TAXES: The Company has elected to be treated as an S corporation for federal income tax purposes and is subject to similar treatment for state income tax purposes. Under this election, income and losses of the Company are reported in the income tax returns of the stockholders. As a result, no income taxes are reflected in the accompanying consolidated financial statements. (5) ACQUISITIONS: During 1996, the Company acquired the assets, including broadcast rights for a local FM radio. Prior to FCC approval of the acquisition, the station was operated by the Company under a license management agreement. Expenses incurred under this agreement totaling $65,698 are included in the accompanying 1996 statement of income under the heading "Other Income (Expenses)." F-60 258 SNIDER CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996 AND 1995 -- CONTINUED (5) ACQUISITION (CONTINUED): The acquisition cost of the broadcast assets were allocated as follows: Property and equipment.................................. $ 132,820 Non-compete covenant.................................... 50,000 --------- Total......................................... $ 182,820 =========
(6) COMMITMENTS AND CONTINGENCIES: The Company leases its office building and parking lot under an operating lease from an officer and principal stockholder of the Company for $10,000 per month. Additionally, the Company rented satellite space from an affiliate under an informal lease agreement totaling $6,300 and $107,950 during the years ended December 31, 1996 and 1995, respectively. Total rent expense was $140,400 and $245,377 for the years ended December 31, 1996 and 1995, respectively. Rent expense was offset by $48,320 in 1996 and $54,000 in 1995 by amounts received from an affiliate under a month to month sublease agreement for office space. Future minimum rentals under noncancelable operating leases, including renewal options, at December 31, 1996 are as follows: 1997.................................................... $ 120,000 1998.................................................... 120,000 --------- $ 240,000 =========
(7) RELATED PARTY TRANSACTIONS: General and administrative expense has been reduced by $21,000 and $23,282 in 1996 and 1995, respectively, for shared office and overhead expenses charged to an affiliate. The amounts shown in the accompanying balance sheets as due from affiliates represent amounts owed to the Company for these and certain other operating expenses paid by the Company on behalf of affiliates. During 1996, the Company purchased satellite communications equipment from an affiliate for $473,353. In connection with the purchase, the Company's stockholders transferred certain assets of another affiliate with a fair value of $412,002 to the Company. The transfer was recorded as a capital contribution. These contributed assets, plus accounts receivable due from the affiliate totaling $61,351 were exchanged for the satellite communications equipment. Information concerning the note payable -- related party is contained in Note 3. Information concerning lease and other rental income and expenses with related parties is described in Note 5. F-61 259 SNIDER CORPORATION SCHEDULE OF COMBINING OPERATING INCOME, EXCLUDING DEPRECIATION AND AMORTIZATION FOR BROADCASTING UNITS YEAR ENDED DECEMBER 31, 1996
KARN ARN COMBINED ---------- ---------- ---------- Revenue: Local announcements.................................. $1,604,785 $1,353,472 $2,958,257 National announcements............................... 135,805 -- 135,805 Political announcements.............................. 68,318 193,539 261,857 Network.............................................. 77,236 -- 77,236 Materials and facilities............................. 71,411 79,378 150,789 Barter accounts...................................... 289,797 138,332 428,129 ---------- ---------- ---------- Total revenue................................ 2,247,352 1,764,721 4,012,073 Less direct charges: Agency commissions................................... 156,538 187,616 344,154 National representative commissions.................. 16,676 90,114 106,790 Rights fees.......................................... 78,426 61,877 140,303 ---------- ---------- ---------- Totals....................................... 251,640 339,607 591,247 ---------- ---------- ---------- Gross profit........................................... 1,995,712 1,425,114 3,420,826 Operating expenses: Technical department................................. 73,611 21,805 95,416 Program department................................... 356,247 153,630 509,877 News department...................................... 115,269 140,189 255,458 Sales department..................................... 480,476 379,198 859,674 General and administrative........................... 633,288 341,527 974,815 ---------- ---------- ---------- Total operating expenses, excluding depreciation and amortization.............. 1,658,891 1,036,349 2,695,240 ---------- ---------- ---------- Operating income, excluding depreciation and amortization......................................... $ 336,821 $ 388,765 $ 725,586 ========== ========== ==========
F-62 260 SNIDER CORPORATION BALANCE SHEET MAY 31, 1997 (UNAUDITED) ASSETS Current assets: Cash and cash equivalents...................................................... $ 45,972 Accounts receivable -- trade, net of allowance for doubtful accounts of $38,228..................................................................... 780,901 Due from affiliates............................................................ 44,589 Other.......................................................................... 7,941 ---------- Total current assets................................................... 879,403 Property and equipment, at cost less accumulated depreciation of $1,193,204...... 813,910 Other assets: Non-compete agreement, less accumulated amortization of $14,583................ 35,417 Land held for investment, at cost, which approximates market value............. 97,553 Other.......................................................................... 25,692 ---------- Total other assets..................................................... 158,662 ---------- $1,851,975 ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable -- related party.................................................. $ 50,000 Accounts payable -- trade...................................................... 190,990 Accrued expenses............................................................... 103,427 ---------- Total current liabilities.............................................. 344,417 Stockholders' equity: Common stock, no par value; 1,000 shares authorized, 100 shares issued and outstanding................................................................. 143,000 Paid-in capital................................................................ 474,300 Retained earnings.............................................................. 890,258 ---------- Total stockholders' equity............................................. 1,507,558 ---------- $1,851,975 =========
See accompanying notes to financial statements. F-63 261 SNIDER CORPORATION STATEMENT OF INCOME FIVE MONTHS ENDED MAY 31, 1997 (UNAUDITED) Revenue: Announcements and programs................................................. $1,694,439 Barter accounts............................................................ 140,783 ---------- Total revenue......................................................... 1,835,222 Direct charges: Commissions................................................................ 261,257 Royalties and franchise fees............................................... 42,210 ---------- Total direct charges.................................................. 303,467 ---------- Gross profit.................................................................... 1,531,755 ---------- Operating expenses: Technical department....................................................... 52,958 Program department......................................................... 263,608 News department............................................................ 99,351 Sales department........................................................... 439,047 General and administrative................................................. 437,718 Depreciation and amortization.............................................. 92,030 ---------- Total operating expenses.............................................. 1,384,712 ---------- Operating income................................................................ 147,043 Other income (expense): Interest income............................................................ 733 Interest expense........................................................... (1,677) Other...................................................................... (26,452) ---------- Total other income (expense).......................................... (27,396) ---------- Net income...................................................................... $ 119,647 ==========
See accompanying notes to financial statements. F-64 262 SNIDER CORPORATION STATEMENT OF STOCKHOLDERS' EQUITY FIVE MONTHS ENDED MAY 31, 1997 (UNAUDITED)
COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS TOTAL -------- -------- -------- ---------- Balance -- December 31, 1996.................. $143,000 $474,300 $770,611 $1,387,911 Net income.................................... -- -- 119,647 119,647 -------- -------- -------- ---------- Balance -- May 31, 1997....................... $143,000 $474,300 $890,258 $1,507,558 ======== ======== ======== ==========
See accompanying notes to financial statements. F-65 263 SNIDER CORPORATION STATEMENT OF CASH FLOWS FIVE MONTHS ENDED MAY 31, 1997 (UNAUDITED) Cash flows from operating activities: Net income...................................................................... $119,647 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization................................................ 92,030 Bad debt provision........................................................... 12,155 Net changes in operating assets and liabilities: Accounts receivable -- trade............................................... (317,991) Other current assets....................................................... 12,926 Other non-current assets................................................... (7,156) Accounts payable -- trade.................................................. 38,602 Accrued expenses........................................................... 16,946 -------- Net cash used in operating activities................................... (32,841) -------- Cash flows from investing activities: Capital expenditures............................................................ (20,532) Net advances to affiliate....................................................... (6,443) -------- Net cash used in investing activities................................... (26,975) -------- Net decrease in cash and cash equivalents......................................... (59,816) Cash and cash equivalents: Beginning of period............................................................. 105,788 -------- End of period................................................................... $ 45,972 ======== Supplemental cash flows information: Interest paid................................................................... $ 1,677 ========
See accompanying notes to financial statements. F-66 264 SNIDER CORPORATION NOTE TO FINANCIAL STATEMENTS MAY 31, 1997 (UNAUDITED) (1) SUBSEQUENT EVENT On June 2, 1997, Snider Corporation (the "Company") entered into a local marketing agreement ("LMA") with Citadel Broadcasting Company ("Citadel") whereby Citadel pays a fixed fee to the Company in exchange for supplying specified programming to the brokered stations and selling advertising time on the stations. In compliance with the LMA, the broadcasting revenue and station operating expenses of the Company for the month ended June 30, 1997 are included in the financial statements of Citadel and are summarized as follows: Net broadcasting revenues......................................... $270,289 Station operating expenses........................................ 304,259
F-67 265 SNIDER CORPORATION BALANCE SHEET JUNE 30, 1996 (UNAUDITED) ASSETS Current assets: Cash and cash equivalents...................................................... $ 191,595 Accounts receivable--trade, net of allowance for doubtful accounts of $45,546..................................................................... 800,790 Due from affiliates............................................................ 25,617 Other.......................................................................... 4,106 ---------- Total current assets................................................... 1,022,108 Property and equipment, at cost less accumulated depreciation of $1,017,541...... 808,870 Other assets: Land held for investment, at cost, which approximates market value............. 97,553 Other.......................................................................... 11,240 ---------- Total other assets..................................................... 108,793 ---------- $1,939,771 ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable--related party.................................................... $ 50,000 Accounts payable--trade........................................................ 153,348 Accrued expenses............................................................... 132,907 ---------- Total current liabilities.............................................. 336,255 Stockholders' equity: Common stock, no par value; 1,000 shares authorized, 100 shares issued and outstanding................................................................. 143,000 Paid-in capital................................................................ 474,300 Retained earnings.............................................................. 986,216 ---------- Total stockholders' equity............................................. 1,603,516 ---------- $1,939,771 =========
F-68 266 SNIDER CORPORATION STATEMENT OF INCOME SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) Revenue: Announcements and programs..................................................... $1,893,131 Barter accounts................................................................ 214,064 ---------- Total revenue.......................................................... 2,107,195 Direct charges: Commissions.................................................................... 266,398 Royalties and franchise fees................................................... 65,599 ---------- Total direct charges................................................... 331,997 ---------- Gross profit..................................................................... 1,775,198 ---------- Operating expenses: Technical department........................................................... 35,290 Program department............................................................. 236,052 News department................................................................ 125,103 Sales department............................................................... 414,766 General and administrative..................................................... 511,160 Depreciation and amortization.................................................. 88,507 ---------- Total operating expenses............................................... 1,410,878 ---------- Operating income................................................................. 364,320 Other income (expense): Loss on sale of property and equipment......................................... (59,024) Interest expense............................................................... (2,541) Operating agreement--stations under contract................................... (36,839) Other.......................................................................... (39,235) ---------- Total other income (expense)........................................... (137,639) ---------- Net income....................................................................... $ 226,681 =========
F-69 267 SNIDER CORPORATION STATEMENT OF STOCKHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS TOTAL -------- -------- ---------- ---------- Balance--December 31, 1995......................... $143,000 $ 62,298 $1,016,535 $1,221,833 Net income......................................... 226,681 226,681 Capital contribution............................... 412,002 412,002 Distributions to stockholders...................... (257,000) (257,000) -------- -------- ---------- ---------- Balance--June 30, 1996............................. $143,000 $474,300 $ 986,216 $1,603,516 ======== ======== ========= =========
F-70 268 SNIDER CORPORATION STATEMENT OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) Cash flows from operating activities: Net income...................................................................... $226,681 Adjustments to reconcile net income to net cash provided by in operating activities: Depreciation and amortization................................................ 88,507 Loss on sale of property and equipment....................................... 59,024 Bad debt provision........................................................... 19,886 Net changes in operating assets and liabilities: Accounts receivable--trade................................................. (254,496) Other current assets....................................................... 19,149 Accounts payable--trade.................................................... 24,547 Accrued expenses........................................................... 36,314 -------- Net cash provided by operating activities............................... 219,612 -------- Cash flows from investing activities: Capital expenditures............................................................ (53,071) Proceeds from sale of assets.................................................... 262,800 Net advances to affiliate....................................................... (25,616) -------- Net cash provided by investing activities............................... 184,113 -------- Cash flows from financing activities: Distributions to stockholders................................................... (257,000) -------- Net cash used in financing activities................................... (257,000) -------- Net increase in cash and cash equivalents......................................... 146,725 Cash and cash equivalents: Beginning of period............................................................. 44,870 -------- End of period................................................................... $191,595 ======== Supplemental cash flows information: Interest paid................................................................... $ 2,541 Significant non-cash investing and financing activities: Non-cash purchase of property and equipment from affiliate................... 473,353 Non-cash contribution of capital............................................. 412,002
F-71 269 INDEPENDENT AUDITORS' REPORT The Boards of Directors and Stockholders Snider Broadcasting Corporation and Subsidiary CDB Broadcasting Corporation: We have audited the accompanying combined balance sheet of Snider Broadcasting Corporation and Subsidiary, and CDB Broadcasting Corporation as of December 31, 1996 and the related combined statements of operations, stockholders' deficit and cash flows for the year then ended. We have also audited the consolidated balance sheet of Snider Broadcasting Corporation and Subsidiary as of December 31, 1995 and the related consolidated statements of operations, stockholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Companies' 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. The combined financial statements include the financial statements of Snider Broadcasting Corporation and Subsidiary, and CDB Broadcasting Corporation, which are related through common ownership and management. As described in Notes 3, 5, and 10, the Company has significant transactions with related parties. In our opinion, the 1996 financial statements referred to above present fairly, in all material respects, the combined financial position of Snider Broadcasting Corporation and affiliate as of December 31, 1996 and the combined results of their operations and cash flows for the year then ended in conformity with generally accepted accounting principles. Also, in our opinion, the 1995 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Snider Broadcasting Corporation and Subsidiary as of December 31, 1995 and the consolidated results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ ERWIN & COMPANY Little Rock, Arkansas April 23, 1997 F-72 270 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED BALANCE SHEETS DECEMBER 31, 1996 AND 1995
1996 1995 ----------- ----------- ASSETS Current assets: Cash........................................................... $ 49,821 $ 30,813 Accounts receivable, net of allowance for doubtful accounts of $7,000 in 1996 and $8,108 in 1995........................... 376,579 305,154 Other....................................................... 15,366 2,302 ----------- ----------- Total current assets........................................ 441,766 338,269 Property and equipment, at cost less accumulated depreciation (Note 2)....................................................... 292,286 59,706 Other assets: Excess of cost over carrying value of net assets acquired, less accumulated amortization of $130,936 in 1996 and $117,476 in 1995........................................................ 796,691 309,710 Start-up costs, net of accumulated amortization of $8,797 in 1996........................................................ 61,588 -- Non-compete agreement, net of accumulated amortization of $2,083 in 1996.............................................. 97,917 -- Other assets................................................... 21,189 -- ----------- ----------- Total other assets.......................................... 977,385 309,710 ----------- ----------- $ 1,711,437 $ 707,685 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable -- stockholders (Note 3)......................... $ -- $ 52,698 Note payable -- bank (Note 4).................................. 2,637,408 -- Current maturities of long-term debt (Note 5).................. -- 206,781 Accounts payable -- trade...................................... 218,422 109,406 Income taxes payable........................................... 7,803 2,117 Accrued expenses............................................... 45,778 12,526 Accrued interest payable (Note 10)............................. 10,714 14,548 Deferred income taxes (Note 8)................................. 2,297 -- ----------- ----------- Total current liabilities.............................. 2,922,422 398,076 Long-term debt, less current maturities (Note 5)................. -- 1,386,490 ----------- ----------- Total liabilities...................................... 2,922,422 1,784,566 Stockholders' deficit: Common stock (Note 6).......................................... 75,313 75,213 Retained deficit............................................... (1,286,298) (1,152,094) ----------- ----------- Total stockholders' deficit............................ (1,210,985) (1,076,881) ----------- ----------- $ 1,711,437 $ 707,685 =========== ===========
See accompanying notes. F-73 271 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ---------- ---------- Revenue: Announcements and programs....................................... $2,008,315 $2,097,623 Barter accounts.................................................. 137,963 145,608 ---------- ---------- Total revenue............................................ 2,146,278 2,243,231 Less direct charges -- commissions................................. 264,907 286,944 ---------- ---------- Gross profit....................................................... 1,881,371 1,956,287 ---------- ---------- Operating expenses: Technical department............................................. 55,616 45,339 Program department............................................... 384,480 305,344 Sales department................................................. 439,883 377,007 General and administrative....................................... 679,475 465,647 Ratings enhancement.............................................. 105,498 -- Time brokerage................................................... 60,470 -- Consulting and non-compete (Note 9).............................. 64,733 64,733 Goodwill amortization............................................ 13,460 10,680 Depreciation and amortization.................................... 78,820 27,046 ---------- ---------- Total operating expenses................................. 1,882,435 1,295,796 ---------- ---------- Operating income (loss)............................................ (1,064) 660,491 ---------- ---------- Other income (expense): Interest expense (Note 10)....................................... (150,553) (189,532) Rent (Note 10)................................................... 30,000 12,000 Other............................................................ 39 -- ---------- ---------- Total other income (expense)............................. (120,514) (177,532) ---------- ---------- Income (loss) before income taxes.................................. (121,578) 482,959 Provision for income taxes (Note 8)................................ 12,626 2,117 ---------- ---------- Net income (loss).................................................. $ (134,204) $ 480,842 ========== ==========
See accompanying notes. F-74 272 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT YEARS ENDED DECEMBER 31, 1996 AND 1995
COMMON RETAINED STOCK DEFICIT TOTAL ------- ----------- ----------- Balance -- December 31, 1994.......................... $75,213 $(1,632,936) $(1,557,723) Net income.......................................... -- 480,842 480,842 ------- ----------- ----------- Balance -- December 31, 1995.......................... 75,213 (1,152,094) (1,076,881) Common stock issued................................. 100 -- 100 Net loss............................................ -- (134,204) (134,204) ------- ----------- ----------- Balance -- December 31, 1996.......................... $75,313 $(1,286,298) $(1,210,985) ======= =========== ===========
See accompanying notes. F-75 273 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ----------- --------- Cash flows from operating activities: Net income (loss)................................................ $ (134,204) $ 480,842 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation.................................................. 42,899 27,046 Amortization.................................................. 49,381 10,680 Deferred income taxes......................................... 2,297 -- Loss on sale of property and equipment........................ 458 -- Net changes in operating assets and liabilities: Accounts receivable......................................... (71,425) (56,489) Other assets................................................ (59,294) 446 Accounts payable............................................ 99,824 2,896 Accrued expenses............................................ 38,938 12,707 Accrued interest payable.................................... (3,834) (113,269) ----------- --------- Net cash provided by (used in) operating activities...... (34,960) 364,859 ----------- --------- Cash flows from investing activities: Acquisition of business assets................................... (768,011) (14,921) Non-compete agreement............................................ (100,000) -- Other............................................................ (69,560) -- ----------- --------- Net cash used in investing activities.................... (937,571) (14,921) ----------- --------- Cash flows from financing activities: Repayment of borrowings -- affiliates............................ (1,291,759) (186,825) -- other............................. (494,210) (169,347) Proceeds from borrowings......................................... 2,777,408 -- Common stock issued.............................................. 100 -- ----------- --------- Net cash provided by (used in) financing activities...... 991,539 (356,172) ----------- --------- Net increase (decrease) in cash.................................... 19,008 (6,234) Cash: Beginning of year................................................ 30,813 37,047 ----------- --------- End of year...................................................... $ 49,821 $ 30,813 =========== ========= Supplemental information: Interest paid.................................................... $ 154,387 $ 302,800 Income taxes paid................................................ 4,643 -- Non-cash investing activities: Equipment acquired through trade.............................. 9,192 2,333
See accompanying notes. F-76 274 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996 AND 1995 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Reporting Entity The accompanying 1995 financial statements include the accounts of Snider Broadcasting Corporation and its wholly-owned subsidiary, Cornerstone Broadcasting Corporation (Snider). The accompanying 1996 financial statements include these accounts combined with those of CDB Broadcasting Corporation (CDB), a company affiliated through common ownership and management. CDB was incorporated and began operations May 17, 1996 . All significant intercompany transactions and accounts have been eliminated. Nature of Operations Snider and CDB operate FM radio stations in the Central Arkansas market area. Accounting 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. Property and Equipment Depreciation of property and equipment is calculated using the accelerated and modified accelerated cost recovery systems. Depreciation calculated under these methods does not differ significantly from amounts calculated under methods and lives which conform to generally accepted accounting principles. Estimated useful lives of property and equipment are as follows:
YEARS ----- Tower......................................................... 5-10 Radio, office and computer equipment.......................... 3- 7 Vehicle....................................................... 5
Intangible Assets The excess of cost over carrying value of assets acquired for Snider Broadcasting Corporation is being amortized over 40 years using the straight-line method. The excess of cost over carrying value of assets acquired of CDB Broadcasting Corporation is being amortized over 15 years using the straight-line method. The non-compete agreement is being amortized over 24 months using the straight-line method. Start-up costs are being amortized over five years using the straight-line method. Asset Impairment In the event that facts and circumstances indicate that the carrying value of long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to fair value or a value based on discounted cash flows is required. F-77 275 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): Income Taxes Snider incurred net operating losses from the date of its incorporation on January 1, 1985 through 1991. At December 31, 1996 there are approximately $610,000 of net operating loss carryforwards available for federal income tax purposes. These loss carryforwards will expire beginning in the year 2000 if not previously used to offset future net taxable income. In addition, Snider has approximately $3,600 in general business credit carryforwards that expire in 2000 and 2001. Snider provides for deferred income taxes under the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." This statement provides for a liability approach under which deferred income taxes are based on enacted tax laws and rates applicable to the periods in which the taxes become payable. CDB has elected to be treated as an S corporation for federal income tax purposes and is subject to similar treatment for state income tax purposes. Under this election, income and losses of CDB are reported in the income tax returns of the stockholders. As a result, no provision for income taxes for CDB is reflected in the accompanying combined financial statements. Statement of Cash Flows For purposes of the statement of cash flows, the Companies consider cash on hand and deposits in financial institutions with initial maturities of three months or less as cash. Concentrations of Credit Risk Most of the Companies' business activity is with customers located within the central region of Arkansas. The Companies' grant credit to their customers in the normal course of business, ordinarily without collateral requirements. Reclassifications Certain reclassifications have been made to the 1995 financial statements to conform to the 1996 basis of presentation. (2) PROPERTY AND EQUIPMENT: Property and equipment at December 31, 1996 and 1995 consists of the following:
1996 1995 -------- -------- Tower................................................. $104,642 $ 89,909 Radio equipment....................................... 404,648 186,059 Office equipment...................................... 95,921 67,357 Computer equipment.................................... 52,604 37,727 Vehicle............................................... 9,859 20,113 -------- -------- 667,674 401,165 Less accumulated depreciation......................... 375,388 341,459 -------- -------- $292,286 $ 59,706 ======== ========
F-78 276 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) (3) NOTES PAYABLE -- STOCKHOLDERS: Notes payable -- stockholders at December 31, 1995 consist of unsecured demand notes payable to stockholders of Snider bearing interest at 10.25% at December 31, 1995. (4) NOTE PAYABLE -- BANK: Note payable-bank represents a short-term, $3,000,000 credit facility shared by Snider and CDB. The note matures June 12, 1997, and is secured by substantially all assets of the Companies and by guarantees of the Companies stockholders. The agreement requires the maintenance of certain ratios related to leverage and debt service. In addition, the agreement contains certain covenants, the most restrictive of which prohibit or restrict the Companies' ability to incur additional debt; pledge assets; merge, consolidate or sell assets; make certain "restricted" investments or loans and advances; dispose of certain assets; make distributions to its stockholders; and engage in transactions with their affiliates. At December 31, 1996, the Companies were in technical default with respect to a required leverage ratio and certain reporting requirements, however the Companies had not defaulted on any required principal or interest payments and were in compliance with all other ratios required under the agreement. These technical defaults permit the lender to accelerate the scheduled due date of the debt. Management anticipates the note to be extended during June 1997 with a new maturity date of December 1997. (5) LONG-TERM DEBT: Long-term debt at December 31, 1995 consists of the following:
1995 ---------- Variable rate (9.0% at December 31, 1995); note payable to Nationsbank of Texas, N.A...................................... $ 169,500 Variable rate (10.0% at December 31, 1995) unsecured, subordinated note payable to Snider Communications Corporation, an affiliate; payable on demand................................ 1,291,759 10.0% note payable; payable $4,067 monthly, including interest through February 1999; secured by real estate and personal property of Snider and guaranteed by stockholders of Snider and by a member of the immediate family of Snider's majority stockholder.................................................... 132,012 ---------- 1,593,271 Less current portion............................................. 206,781 ---------- Long-term debt, less current portion............................. $1,386,490 ==========
The note payable to affiliate of $1,291,759 at December 31, 1995 was classified as long-term due to such affiliate waiving its right to demand payment during the immediately following year. (6) STOCKHOLDERS EQUITY: Snider Broadcasting Corporation has 1,000 shares of no par value common stock authorized and 85 shares issued and outstanding. CDB Broadcasting Corporation has 1,000 shares of no par value common stock authorized, issued and outstanding. F-79 277 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) (7) RETIREMENT PLAN: During 1995, Snider adopted a 401(k) savings plan which covers substantially all employees who have completed one year of service and attained the age of 21. Participating employees may contribute from 1% to 15% of their compensation. Snider matches 25% of the first 4% contributed by participating employees. Matching contributions totaled $3,727 and $3,950 for the years ended December 31, 1996 and 1995, respectively. (8) INCOME TAXES: The provision for income taxes at December 31, 1996 and 1995, consists of the following:
1996 1995 -------- --------- Current: Federal............................................ $ -- $ 2,117 State.............................................. 10,329 -- -------- --------- 10,329 2,117 -------- --------- Deferred: Federal............................................ 84,429 155,754 State.............................................. 4,709 32,802 Decrease in valuation allowance.................... (86,841) (188,556) -------- --------- 2,297 -- -------- --------- Provision for income taxes........................... $ 12,626 $ 2,117 ======== =========
The income tax provision computed at the federal statutory rate on pretax income differs from the reported tax provision due to the decrease in the valuation allowance, effect of graduated rates and non-deductible expenses, and the results of operations of CDB reported to stockholders for income tax purposes. The components of the net deferred tax liability at December 31, 1996 and 1995 follows:
1996 1995 --------- --------- Deferred tax assets: Federal........................................... $ 213,291 $ 295,680 State............................................. -- 4,319 --------- --------- Valuation allowance............................... (213,158) (299,999) --------- --------- 133 -- --------- --------- Deferred tax liabilities: Federal........................................... 2,040 -- State............................................. 390 -- --------- --------- 2,430 -- --------- --------- Net deferred tax liability.......................... $ (2,297) $ -- ========= =========
F-80 278 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) (9) COMMITMENTS AND CONTINGENCIES: The Companies lease office space, office equipment, broadcasting equipment and tower facilities under operating leases expiring in 1993 through 1999. Total rent expense under these agreements was $61,159 in 1996 and $61,939 in 1995. Snider has commitments to pay the former owner of one of its radio stations consulting fees and amounts due under a non-compete agreement. These commitments extend through February 1999. Payments related to these commitments totaled $64,733 for each of the years ended December 31, 1996 and 1995. Future commitments under noncancelable operating leases, consulting and non-compete agreements at December 31, 1996 are as follows: 1997...................................................... $138,557 1998...................................................... 75,607 1999...................................................... 20,569 2000...................................................... 9,780 -------- $244,513 ========
(10) RELATED PARTY TRANSACTIONS: Interest expense in 1996 and 1995, respectively, includes $56,846 and $144,132 related to the Company's note payable to an affiliate (Note 5). Included in accrued expenses at December 31, 1995 is accrued interest payable of $708 related to the note. The Company leases a subcarrier bandwidth of Snider to an affiliate to transmit paging and weather information under an operating lease, cancelable upon six months written notice, expiring in 2000 and requiring monthly lease payments. Total rental income recognized under this lease was $30,000 in 1996 and $12,000 in 1995. F-81 279 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED BALANCE SHEET MAY 31, 1997 (UNAUDITED) ASSETS Current assets: Cash........................................................................... $ 16,874 Accounts receivable -- trade, net of allowance for doubtful accounts of $13,110..................................................................... 539,057 Other.......................................................................... 16,652 ---------- Total current assets................................................... 572,583 Property and equipment, at cost less accumulated depreciation of $421,330........ 284,067 Other assets: Excess of cost over carrying value of net assets acquired, less accumulated amortization of $149,287.................................................... 778,340 Start-up costs, net of accumulated amortization of $14,663..................... 55,723 Non-compete agreement, less accumulated amortization of $22,917................ 77,083 ---------- Total other assets..................................................... 911,146 ---------- $1,767,796 ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Note payable -- bank........................................................... $2,635,000 Accounts payable -- trade...................................................... 277,793 -- affiliate................................................ 27,782 Income taxes payable........................................................... 2,461 Accrued expenses............................................................... 13,056 Accrued interest payable....................................................... 42,216 Deferred income taxes.......................................................... 4,245 ---------- Total current liabilities.............................................. 3,002,553 Stockholders' deficit: Common stock................................................................... 75,313 Retained deficit............................................................... (1,310,070) ---------- Total stockholders' deficit............................................ (1,234,757) ---------- $1,767,796 =========
See accompanying notes to financial statements. F-82 280 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED STATEMENT OF OPERATIONS FIVE MONTHS ENDED MAY 31, 1997 (UNAUDITED) Revenue: Announcements and programs..................................................... $ 937,865 Barter accounts................................................................ 65,293 ---------- Total revenue.......................................................... 1,003,158 Less direct charges -- commissions............................................... 107,208 ---------- Gross profit..................................................................... 895,950 ---------- Operating expenses: Technical department........................................................... 28,843 Program department............................................................. 193,887 Sales department............................................................... 222,007 General and administrative..................................................... 246,680 Consulting and non-compete..................................................... 26,972 Goodwill amortization.......................................................... 18,351 Depreciation and amortization.................................................. 91,903 ---------- Total operating expenses............................................... 828,643 ---------- Operating income................................................................. 67,307 ---------- Other income (expense): Interest expense............................................................... (90,723) Rent........................................................................... 12,500 ---------- Total other income (expense)........................................... (78,223) ---------- Loss before income taxes......................................................... (10,916) Provision for income taxes....................................................... 12,856 ---------- Net loss......................................................................... $ (23,772) ==========
See accompanying notes to financial statements. F-83 281 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT FIVE MONTHS ENDED MAY 31, 1997 (UNAUDITED)
COMMON RETAINED STOCK DEFICIT TOTAL ------- ----------- ----------- Balance -- December 31, 1996........................... $75,313 $(1,286,298) $(1,210,985) Net loss............................................... -- (23,772) (23,772) ------- ----------- ----------- Balance -- May 31, 1997................................ $75,313 $(1,310,070) $(1,234,757) ======= =========== ===========
See accompanying notes to financial statements. F-84 282 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED STATEMENT OF CASH FLOWS FIVE MONTHS ENDED MAY 31, 1997 (UNAUDITED) Cash flows from operating activities: Net loss.................................................................... $ (23,772) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation........................................................... 45,942 Amortization........................................................... 64,313 Deferred income taxes.................................................. 1,948 Net changes in operating assets and liabilities: Accounts receivable -- trade........................................ (134,431) Other assets........................................................ 640 Accounts payable -- trade........................................... 56,906 Accrued expenses.................................................... (38,064) Accrued interest payable............................................ 31,502 -------- Net cash provided by operating activities......................... 4,984 -------- Cash flows from investing activities: Capital expenditures........................................................ (35,523) -------- Net cash used in investing activities............................. (35,523) -------- Cash flows from financing activities: Repayment of borrowings..................................................... (2,408) -------- Net cash used in financing activities............................. (2,408) -------- Net decrease in cash.......................................................... (32,947) Cash: Beginning of period......................................................... 49,821 -------- End of period............................................................... $ 16,874 ======== Supplemental cash flows information: Interest paid............................................................... $ 59,229 Income taxes paid........................................................... 16,250 Equipment acquired by trade................................................. 2,200
See accompanying notes to financial statements. F-85 283 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION NOTE TO COMBINED FINANCIAL STATEMENTS MAY 31, 1997 (UNAUDITED) (1) SUBSEQUENT EVENT On June 2, 1997, Snider Broadcasting Corporation and Subsidiary CDB Broadcasting Corporation (the "Company") entered into a local marketing agreement ("LMA") with Citadel Broadcasting Company ("Citadel") whereby Citadel pays a fixed fee to the Company in exchange for supplying specified programming to the brokered stations and selling advertising time on the stations. In compliance with the LMA, the broadcasting revenue and station operating expenses of the Company for the month ended June 30, 1997 are included in the financial statements of Citadel and are summarized as follows: Net broadcasting revenues......................................... $247,783 Station operating expenses........................................ 169,569
F-86 284 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED BALANCE SHEET JUNE 30, 1996 (UNAUDITED) ASSETS Current assets: Cash........................................................................... $ 74,209 Accounts receivable--trade, net of allowance for doubtful accounts of $6,000... 384,567 Other.......................................................................... 113,716 ---------- Total current assets................................................... 572,492 Property and equipment, at cost less accumulated depreciation of $346,745........ 69,855 Other assets: Excess of cost over carrying value of net assets acquired, less accumulated amortization of $122,816.................................................... 304,370 Start-up costs, less accumulated amortization of $2,023........................ 78,900 ---------- Total other assets..................................................... 383,270 ---------- $1,025,617 ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Note payable--bank............................................................. $1,737,408 Accounts payable--trade........................................................ 137,490 Income taxes payable........................................................... 3,889 Accrued expenses............................................................... 16,638 Accrued interest payable....................................................... 19,132 ---------- Total current liabilities.............................................. 1,914,557 Stockholders' deficit: Common stock................................................................... 75,313 Retained deficit............................................................... (964,253) ---------- Total stockholders' deficit............................................ (888,940) ---------- $1,025,617 =========
F-87 285 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) Revenue: Announcements and programs..................................................... $ 974,107 Barter accounts................................................................ 62,690 ---------- Total revenue.......................................................... 1,036,797 Less direct charges--commissions................................................. 136,184 ---------- Gross profit..................................................................... 900,613 ---------- Operating expenses: Technical department........................................................... 27,973 Program department............................................................. 156,515 Sales department............................................................... 181,298 General and administrative..................................................... 209,999 Ratings enhancement............................................................ 7,657 Consulting and non-compete..................................................... 32,366 Goodwill amortization.......................................................... 5,340 Depreciation and amortization.................................................. 18,925 ---------- Total operating expenses............................................... 640,073 ---------- Operating income................................................................. 260,540 Other income (expense): Interest expense............................................................... (82,076) Loss on sale of property and equipment......................................... (458) Rent........................................................................... 15,000 ---------- Total other income (expense)........................................... (67,534) ---------- Income before income taxes....................................................... 193,006 Provision for income taxes....................................................... 5,165 ---------- Net income....................................................................... $ 187,841 =========
F-88 286 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
COMMON RETAINED STOCK DEFICIT TOTAL ------- ----------- ----------- Balance--December 31, 1995................................. $75,213 $(1,152,094) $(1,076,881) Common stock issued........................................ 100 100 Net income................................................. 187,841 187,841 ------- ----------- ----------- Balance--June 30, 1996..................................... $75,313 $ (964,253) $ (888,940) ======= ========== ==========
F-89 287 SNIDER BROADCASTING CORPORATION AND SUBSIDIARY CDB BROADCASTING CORPORATION COMBINED STATEMENT OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) Cash flows from operating activities: Net income..................................................................... $ 187,841 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.............................................................. 14,256 Amortization.............................................................. 8,800 Loss on sale of property and equipment.................................... 458 Net changes in operating assets and liabilities: Accounts receivable--trade............................................. (79,413) Other assets........................................................... (62,851) Accounts payable--trade................................................ 28,084 Accrued expenses....................................................... 5,884 Accrued interest payable............................................... 4,584 ---------- Net cash provided by operating activities............................ 107,643 ---------- Cash flows from investing activities: Capital expenditures........................................................... (25,688) Proceeds from sale of assets................................................... 825 Business acquisition costs..................................................... (50,000) Start-up costs................................................................. (80,923) ---------- Net cash used in investing activities....................................... (155,786) ---------- Cash flows from financing activities: Repayment of borrowings--bank.................................................. (169,500) --affiliates........................................ (1,291,759) --others............................................ (184,710) Proceeds from borrowings....................................................... 1,737,408 Common stock issued............................................................ 100 ---------- Net cash provided by financing activities................................... 91,539 ---------- Net increase in cash............................................................. 43,396 Cash: Beginning of period............................................................ 30,813 ---------- End of period.................................................................. $ 74,209 ========= Supplemental cash flows information: Interest paid.................................................................. $ 77,492 =========
F-90 288 INDEPENDENT AUDITORS' REPORT The Board of Directors Maranatha Broadcasting Company, Inc.: We have audited the accompanying balance sheet of Maranatha Broadcasting Company, Inc.'s Radio Broadcasting Division (the "Company") as of December 31, 1996, and the related statements of operations and division equity 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 Maranatha Broadcasting Company, Inc.'s Radio Broadcasting Division 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. /s/ KPMG PEAT MARWICK LLP Phoenix, Arizona September 29, 1997 F-91 289 MARANATHA BROADCASTING COMPANY, INC. RADIO BROADCASTING DIVISION BALANCE SHEET DECEMBER 31, 1996 AND JUNE 30, 1997
DECEMBER 31, JUNE 30, 1996 1997 ------------ ---------- (UNAUDITED) ASSETS Current assets: Accounts receivable.............................................. $ 386,278 $ 312,166 Equipment........................................................ 213,800 220,562 Accumulated depreciation......................................... (140,828) (150,828) ---------- --------- 72,972 69,734 Broadcast license................................................ 10,325 9,895 ---------- --------- Total assets.................................................. $ 469,575 $ 391,795 ========== ========= LIABILITIES AND DIVISION EQUITY Current Liabilities: Accounts payable................................................. $ 11,944 $ 9,630 Trade payable.................................................... 10,000 -- Accrued compensation and commissions............................. 18,091 12,537 Customer deposits................................................ 16,447 16,964 ---------- --------- Total current liabilities..................................... 56,482 39,131 Commitments and contingencies Division equity.................................................. 413,093 352,664 ---------- --------- Total liabilities and division equity......................... $ 469,575 $ 391,795 ========== =========
See accompanying notes to financial statements. F-92 290 MARANATHA BROADCASTING COMPANY, INC. RADIO BROADCASTING DIVISION STATEMENT OF OPERATIONS AND DIVISION EQUITY YEAR ENDED DECEMBER 31, 1996 AND THE SIX-MONTH PERIOD ENDED JUNE 30, 1997
DECEMBER 31, JUNE 30, 1996 1997 ------------ ---------- (UNAUDITED) Revenue: Net broadcasting revenue......................................... $2,066,271 $ 976,555 Subcarrier rental................................................ 48,796 24,889 ---------- ---------- 2,115,067 1,001,444 Operating expenses: Technical expenses............................................... 75,265 37,677 Program expenses................................................. 191,363 87,784 Selling expenses................................................. 893,721 438,033 General and administrative expenses.............................. 279,090 148,975 Management fee and corporate overhead allocation................. 139,379 45,926 Bad debts........................................................ 62,868 50,619 Depreciation and amortization.................................... 20,148 10,430 ---------- ---------- Total operating expenses................................. 1,661,834 819,444 ---------- ---------- Net income......................................................... 453,233 182,000 Division equity, beginning of period............................... 441,384 413,093 Transfers to parent................................................ (481,524) (242,429) ---------- ---------- Division equity, end of period..................................... $ 413,093 $ 352,664 ========== ==========
See accompanying notes to financial statements. F-93 291 MARANATHA BROADCASTING COMPANY, INC. RADIO BROADCASTING DIVISION STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1996 AND THE SIX-MONTH PERIOD ENDED JUNE 30, 1997
DECEMBER 31, JUNE 30, 1996 1997 ------------ ---------- (UNAUDITED) Cash flows from operating activities: Net income........................................................ $ 453,233 $ 182,000 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................ 20,148 10,430 Changes in assets and liabilities: Decrease in accounts receivable.............................. 25,809 74,112 Decrease in accounts payable and accruals.................... (740) (17,351) ----------- --------- Net cash provided by operating activities................. 498,450 249,191 ----------- --------- Cash flows from investing activities: Purchase of radio equipment....................................... (16,926) (6,762) ----------- --------- Net cash used in investing activities..................... (16,926) (6,762) ----------- --------- Cash flows from financing activities: Cash transfers to parent.......................................... (481,524) (242,429) ----------- --------- Net cash used in financing activities..................... (481,524) (242,429) ----------- --------- Net change in cash................................................ -- -- Cash, beginning of period........................................... -- -- ----------- --------- Cash, end of period................................................. $ -- $ -- =========== =========
See accompanying notes to financial statements. F-94 292 MARANATHA BROADCASTING COMPANY, INC. RADIO BROADCASTING DIVISION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX-MONTH PERIOD THEN ENDED IS UNAUDITED) (1) NATURE OF BUSINESS AND ORGANIZATION Radio Broadcasting (the "Company") is a division of the Maranatha Broadcasting Company, Inc. ("Maranatha"). Maranatha is a television and radio broadcaster with facilities located in Allentown, Pennsylvania. The Company's operations and facilities are integrated with those of Maranatha. Maranatha provides management, accounting and certain administrative services for the Company and charges them for these services. Maranatha collects and retains all cash generated by the Radio Broadcasting Division. The Radio Broadcasting Division provides credit to customers, substantially all of whom are regional businesses engaged in a variety of industries and services. The Division broadcasts in the Allentown, Bethlehem, Easton region of Eastern Pennsylvania as WLEV (formerly WFMZ) and broadcasts, through a translator, in Reading, Pennsylvania as WLEV. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Equipment Equipment is carried at cost, less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of 5 to 7 years. Maintenance and repairs are charged to operations as incurred. 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. Revenue Net broadcasting revenue is presented net of agency commissions and is recognized when the advertisements are broadcast. Trade Transactions Revenue from trade transactions (advertising provided in exchange for goods and services) is recognized when advertisements are broadcast and trade expense is recognized when merchandise is consumed or services are performed. An asset and liability are recorded at the fair market value of the goods or services received. Accounts Receivable Bad debts are accounted for using the direct write-off method where the expense is recognized in the period in which the specific account is determined to be uncollectible. Management believes the effects of using this method approximates the allowance method of accounting for bad debts. Broadcast License The broadcast license and translator license were recorded at cost and amortized over 15 years; the license has been fully amortized. F-95 293 MARANATHA BROADCASTING COMPANY, INC. RADIO BROADCASTING DIVISION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes Maranatha has elected by consent of its shareholders to be taxed under the provisions of Subchapter S for federal and state income tax purposes. Under those provisions, Maranatha does not pay corporate income taxes on its taxable income. Instead, the shareholders are liable for individual income taxes on the Company's taxable income. Accordingly, these financial statements do not contain a provision for income taxes. Interim Financial Information The financial statements as of June 30, 1997 and for the six months ended June 30, 1997 are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim period have been included. The results for the interim period are not necessarily indicative of the results to be achieved for the full fiscal year. Division Equity Division equity at December 31, 1996 consists of accumulated earnings of $5,629,473 less distributions to Maranatha of $5,216,380. (3) CONTINGENT LIABILITIES AND COMMITMENTS Maranatha has certain debt and a revolving line of credit, which is secured by all the assets of Maranatha, including the assets of the Radio Broadcasting Division, as follows:
DECEMBER 31, JUNE 30, 1997 1996 ------------ ---------- (UNAUDITED) Total notes and debt payable........................ $506,886 $911,743 Less current portion................................ (190,286) (290,286) -------- -------- Total long-term debt................................ $316,600 621,457 ======== ======== Revolving line of credit............................ $ -- $ 65,000 ======== ========
The notes and line of credit bear interest primarily at the lender's prime rate which was 8.25% and 8.50% at December 31, 1996 and June 30, 1997, respectively. One of the notes bears interest at a fixed rate of 7.90%. Maranatha is in compliance with the debt covenants as of June 30, 1997. The Division leases its Reading translator site and Reading sales office under operating leases with future minimum monthly payments of $800 through November 1998. The Division has also entered into lease agreements to provide sub-channel broadcast frequency to two lessees. The future revenue under the lease terms is as follows: 1997...................................................... $ 48,796 1998...................................................... 50,516 1999...................................................... 39,121 2000...................................................... 39,817 2001...................................................... 23,891 --------- $ 202,141 =========
F-96 294 MARANATHA BROADCASTING COMPANY, INC. RADIO BROADCASTING DIVISION NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (4) AGREEMENT OF SALE On July 15, 1997, Maranatha entered into an asset purchase agreement with Citadel Broadcasting Company ("CBC") and a wholly-owned subsidiary of CBC to sell the assets and broadcast license of the Radio Broadcasting Division to CBC for $23,000,000 plus the broadcasting assets of a radio station owned by CBC and a wholly-owned subsidiary of CBC. F-97 295 INDEPENDENT AUDITORS' REPORT To the Board of Directors Pacific Northwest Broadcasting Corporation Boise, Idaho We have audited the accompanying combined balance sheet of Pacific Northwest Broadcasting Corporation and Affiliates as of December 31, 1996, and the related combined statements of operations, changes in owners' equity, and cash flows for the year then ended. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined 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 combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audit provides 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 Pacific Northwest Broadcasting Corporation and Affiliates as of December 31, 1996, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ BALUKOFF, LINDSTROM & CO., P.A. Boise, Idaho September 25, 1997 F-98 296 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES COMBINED BALANCE SHEET DECEMBER 31, 1996 ASSETS Current assets: Cash......................................................................... $ 220,381 Trade accounts receivable, net of allowance for doubtful accounts of $25,000................................................................... 1,079,835 Other accounts receivable.................................................... 57,692 Prepaid expenses............................................................. 189,395 Accrued interest receivable.................................................. 18,169 Current portion of notes receivable.......................................... 488,880 ---------- Total current assets...................................................... 2,054,352 Other assets: AM and FM broadcast licenses................................................. 4,497,916 Notes receivable, less current portion....................................... 3,011,778 Noncompete agreements........................................................ 354,441 Equipment deposits and other assets.......................................... 39,250 Deferred taxes............................................................... 42,443 ---------- 7,945,828 Property and equipment, at cost Land and improvements........................................................ 130,011 Leasehold improvements....................................................... 61,744 Towers and antennas.......................................................... 402,710 Transmitters and transmitter buildings....................................... 508,444 Studio and technical equipment............................................... 915,007 Automobiles.................................................................. 44,930 Furniture and office equipment............................................... 360,595 ---------- 2,423,441 Accumulated depreciation..................................................... (992,576) ---------- 1,430,865 ---------- $11,431,045 ========== LIABILITIES AND OWNERS' EQUITY Current liabilities: Accounts payable............................................................. $ 268,401 Accrued expenses............................................................. 259,479 Accrued taxes payable........................................................ 12,520 Current portion of notes payable to related parties.......................... 106,868 Current portion of long-term debt............................................ 1,195,717 ---------- Total current liabilities................................................. 1,842,985 Long-term debt: Notes payable to related parties, less current portion....................... 1,155,817 Notes payable, less current portion.......................................... 7,184,057 ---------- 8,339,874 Deferred revenue............................................................... 235,395 Owners' equity: Convertible preferred stock, nonvoting, par value $1,000 per share, 5% non cumulative, authorized 3,500 shares, issued and outstanding 1,396.8 shares.................................................................... 1,396,800 Common stock, voting, no par value, authorized 10,000 shares, issued and outstanding 3,766.6 shares................................................ 475,677 Members' equity.............................................................. 61,176 Accumulated deficit.......................................................... (920,862) ---------- 1,012,791 ---------- $11,431,045 ==========
See accompanying notes. F-99 297 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996 Revenues: Revenues...................................................................... $5,404,307 Less agency and representative commissions.................................... 772,233 ---------- 4,632,074 Expenses: Transmission.................................................................. 223,366 Programming and production.................................................... 1,476,235 Sales......................................................................... 816,459 General and administrative.................................................... 1,599,675 Advertising................................................................... 150,696 ---------- 4,266,431 ---------- Income from operations..................................................... 365,643 Nonoperating income (expense) Gain on sale of assets........................................................ 198,581 Noncompete revenue............................................................ 184,508 Interest income............................................................... 321,759 Interest expense.............................................................. (566,783) ---------- 138,065 ---------- Income before income taxes................................................. 503,708 Income tax expense.............................................................. 182,480 ---------- Net income................................................................. $ 321,228 ==========
See accompanying notes. F-100 298 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES COMBINED STATEMENT OF CHANGES IN OWNERS' EQUITY YEAR ENDED DECEMBER 31, 1996
PREFERRED COMMON ACCUMULATED MEMBERS' STOCK STOCK DEFICIT EQUITY TOTAL ---------- --------- ----------- ------- ---------- Balance at January 1, 1996........... $1,396,800 $ 591,302 $(1,180,914) $ -- $ 807,188 Common stock redemption, 125 shares.......................... -- (115,625) -- -- (115,625) Net income......................... -- -- 260,052 61,176 321,228 -------- --------- ----------- -------- ---------- Balance at December 31, 1996......... $1,396,800 $ 475,677 $ (920,862) $61,176 $1,012,791 ========== ========= =========== ======== ==========
See accompanying notes. F-101 299 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES COMBINED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1996 Cash flows from operating activities: Net income..................................................................... $ 321,228 Adjustments to reconcile net income to net cash provided by operating activities Amortization..................................................... 55,427 Depreciation................................................................ 71,926 Noncompete revenue.......................................................... (134,508) Noncompete expense.......................................................... 89,257 Provision for bad debts..................................................... 14,029 Gain on sale of assets...................................................... (198,581) Legal expense paid directly by bank......................................... 10,200 Changes in operating assets and liabilities Trade accounts receivable................................................. (604,884) Other accounts receivable................................................. (5,319) Prepaid expenses.......................................................... 21,658 Prepaid income tax........................................................ 7,739 Accrued interest receivable............................................... 9,794 Equipment deposits and other assets....................................... (14,258) Deferred taxes............................................................ 169,936 Bank overdraft............................................................ (118,289) Accounts payable.......................................................... 90,761 Accrued expenses.......................................................... 82,996 Accrued taxes payable..................................................... 12,520 Net cash used by operating activities.................................. (118,368) Cash flows from investing activities: Payments on receivable from shareholders....................................... 39 Loans made to shareholders..................................................... (527,896) Payments on notes receivable................................................... 773,885 Payments for acquisition of stations........................................... (63,360) Proceeds from sale of assets................................................... 190,244 Additions to property and equipment............................................ (115,660) Net cash provided by investing activities.............................. 257,252 Cash flows from financing activities: Payments on notes payable...................................................... (282,906) Borrowings on notes payable to related parties................................. 400,000 Payment on notes payable to related parties.................................... (35,597) Net cash provided by financing activities.............................. 81,497 Net increase in cash................................................... 220,381 Cash at beginning of year........................................................ -- Cash at end of year.................................................... $ 220,381
See accompanying notes. F-102 300 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Nature of Operations The Company operates AM and FM radio stations in southwestern Idaho. Revenues received from local advertisers and national agencies advertising in the southwestern Idaho market account for the majority of revenues. Principles of Combination The financial statements include the accounts of Pacific Northwest Broadcasting Corporation (PNWB) and its wholly owned subsidiary, (Richardson Broadcasting Company), and Wilson Group, LLC (Wilson), a limited liability company which has common ownership. Wilson operates as an Idaho limited liability company and its members have limited personal liability for the obligations or debts of the entity. Wilson will terminate no later than December 31, 2072. Intercompany accounts and transactions have been eliminated in combination. Cash For purposes of reporting cash flows, the Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. Depreciation Depreciation of property and equipment is provided using the straight line method over the estimated useful lives of the assets, which range from 3 to 50 years. Amortization Costs related to obtaining AM and FM broadcast licenses are amortized using the straight line method over fifteen years. Accumulated amortization relating to these licenses was $133,852 at December 31, 1996. Costs related to the noncompete agreements are amortized using the straight-line method over five years, the term of the agreement. Accumulated amortization relating to the noncompete agreements was $171,848 at December 31, 1996. Deferred Revenue Deferred revenue consists of a noncompete agreement and will be earned over the life of the agreement (7 years). Revenue Recognition and Trade Transactions Broadcast revenue is recognized when the advertisements are broadcast. Revenue from trade transactions (advertising provided in exchange for goods and services) is recognized as income when advertisements are broadcast and trade expense is recognized when merchandise is consumed or services are performed. Advertising The Company expenses advertising costs as they are incurred. Income Taxes Income taxes are provided for the tax effects of PNWB transactions reported in the financial statements and consist of taxes currently due or recoverable and deferred taxes related primarily to differences between the bases of assets and liabilities for financial and income tax reporting. Differences between financial and F-103 301 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 -- CONTINUED income tax reporting relate to accumulated depreciation, installment sales, basis in subsidiary's stock, allowance for doubtful accounts, deferred compensation, noncompete amortization and shareholder interest payable. No provision has been made for the tax effects of the Wilson transactions since Wilson is taxed as a partnership and taxes are the responsibility of the individual members. Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and reported revenues and expenses. Actual results could differ from these estimates. Concentrations of Credit Risk In the normal course of business, the Company extends unsecured credit to customers principally national advertising agencies and companies in the southwestern Idaho market. The Company also has demand deposits on hand in financial institutions which exceed applicable FDIC insurance. Acquisitions and Local Marketing Agreement In October, 1996, the Company acquired two radio stations in Boise, Idaho for $5,000,000. This acquisition was accounted for using the purchase method of accounting. The purchase price has been allocated to the assets purchased based upon fair values as agreed to with the seller. The Company operated the two radio stations under a Local Marketing Agreement (LMA) for six months prior to the acquisition. Under the terms of the LMA, the expenses of operating the stations (other than depreciation or amortization of assets) were the obligation of the Company and the Company received the revenues generated by the stations. NOTE B -- NOTES RECEIVABLE The Company sold radio stations in Medford, Oregon, Chico, California, and Eugene, Oregon in prior years and financed the sale of the radio stations to the buyers. In 1996, the Company sold two radio stations and a building in Pocatello, Idaho, and financed the sale. Each of the sales agreements included provisions which restrict the Company from competing in markets served by the radio stations which were sold. The noncompete agreements extend for periods up to seven years from the dates of the sales. The terms of the notes are as follows: Note receivable from broadcasting company for Pocatello stations at $4,003 per month through March 1997 and $11,592 per month thereafter including interest at 8.5%, due March 2002, secured by substantially all assets of the Pocatello stations...................................................................... $ 564,993 Note receivable from broadcasting company for Pocatello building at $2,405 per month, including interest at 8.5%, due March 2002, secured by real estate..... 108,884 Note receivable from broadcasting company for Chico and Eugene stations at monthly payments ranging from $37,033 to $53,204 including interest at 7.71%, due September 2002, secured by substantially all assets of the stations....... 2,826,781 ---------- 3,500,658 Less current portion............................................................ 488,880 ---------- $3,011,778 =========
F-104 302 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 -- CONTINUED NOTE C -- LONG-TERM DEBT Long-term debt is summarized as follows: To banks: Note payable to bank, monthly payments of interest only at prime plus 1%, secured by substantially all of the Company's assets. The interest rate at December 31, 1996 was 9.25%................................................... $8,000,000 To individuals: Note payable to former shareholder at $1,205 per month including interest at 8% through January 2003, unsecured............................................ 69,440 Note payable to former shareholder at $991 per month including interest at 10% through June 2000, unsecured.................................................. 35,002 Note payable to former shareholder at $3,033 per month including interest at 8% through January 2006, unsecured............................................ 234,457 Note payable to former shareholder at $375 per month through January 2006..... 40,875 Unsecured notes payable to related party, due on demand....................... 7,772 Unsecured notes payable to related parties at $4,446 per month including interest at 9% through August 2018............................................ 208,093 Unsecured notes payable to related party, due on demand including interest at 7.5%.......................................................................... 53,372 Notes payable to related parties, secured by certain notes receivable and guaranteed by principal shareholder, payable in monthly installments, including interest as follows:
MONTHLY INTEREST INSTALLMENTS RATES DUE DATES - ------------ -------- ----------------------------------- $5,077 8.0% January 1, 2005.................... 679,945 $ 470 8.0% January 1, 2005.................... 58,820 $ 470 8.0% January 1, 2005.................... 58,820 $ 470 8.0% January 1, 2005.................... 58,821 $ 440 8.0% January 1, 2005.................... 58,956 $ 381 8.0% January 1, 2005.................... 50,989 Accrued interest due to related parties.......................... 27,097 ---------- 9,642,459 Less current portion............................................. 1,302,585 ---------- $8,339,874 ==========
Maturities in future years are: 1997 -- $1,302,585, 1998 -- $2,589,369; 1999 -- $4,454,088; 2000 -- $106,077; 2001 -- $1,018,430 and thereafter -- $171,910. The note payable to the bank limits the amount of new debt and operating leases to not more than a total of $50,000 without lender's approval. The bank issued a commitment letter to refinance $7,000,000 of the $8,000,000 obligation in 1997, including a bridge loan of $2,000,000 and a term loan of $5,000,000. The bridge loan has terms which include interest at prime plus 1% and a maturity date of February 28, 1998. Requirements of the term loan include interest at prime plus 1%, due August 31, 1999 and monthly payments of approximately $77,000 (using an F-105 303 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 -- CONTINUED interest rate of 9.25%). The current portion and scheduled maturities have been adjusted to reflect the intended refinance. NOTE D -- RELATED PARTY TRANSACTIONS Interest expense paid to related parties amounted to $187,646 in 1996. The Company leases land, office facilities, and equipment from certain shareholders and officers of the Company. Rental expense paid to related parties amounted to $99,588 in 1996. NOTE E -- LEASE COMMITMENTS The Company leases radio transmitter sites, buildings, music and airtime under noncancellable leases with terms in excess of one year. Future minimum payments, by year and in the aggregate, under noncancellable operating leases with initial or remaining terms of one year or more consisted of the following at December 31, 1996: 1997.............................................................. $206,120 1998.............................................................. 201,980 1999.............................................................. 133,202 2000.............................................................. 31,300 2001.............................................................. 11,150 Thereafter........................................................ 105,850 -------- Total minimum lease payments...................................... $689,602 ========
Rental expense amounted to $245,589 in 1996. NOTE F -- INCOME TAXES The provision for income taxes results from continuing operations and includes the following components: Federal Current tax provision................................................... $ -- Deferred tax provision.................................................. 147,548 -------- 147,548 State Current tax provision................................................... 12,544 Deferred tax provision.................................................. 22,388 -------- 34,932 -------- Total income tax expense.......................................................... $182,480 ========
The components of the net deferred tax asset at December 31, 1996 are as follows: F-106 304 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 -- CONTINUED
FEDERAL STATE TOTAL --------- -------- --------- Deferred tax liability from: Taxable temporary differences............................. $(255,017) $(60,004) $(315,021) Deferred tax asset from: Deductible temporary differences.......................... 105,662 22,049 127,711 Operating loss carryforward............................... 205,289 -- 205,289 Tax credit carryforward................................... 83,214 2,793 86,007 Valuation allowance....................................... (61,543) -- (61,543) --------- -------- --------- 332,622 24,842 357,464 --------- -------- --------- Deferred tax asset (liability).............................. $ 77,605 $(35,162) $ 42,443 ========= ======== =========
The following reconciles the federal tax provision with the expected provision by applying statutory rates to income before income taxes: Federal tax expense at statutory rate............................. $171,261 Effect of state taxes............................................. (13,701) Nondeductible expenses............................................ 2,861 Partnership income................................................ (20,800) Other............................................................. 7,927 -------- Federal income tax expense........................................ $147,548 ========
For income tax purposes, operating losses and tax credit carryovers used and available are as follows at December 31, 1996:
USED AVAILABLE -------- --------- Net operating loss, federal............................. $379,789 $ 710,617 Alternative minimum tax credit.......................... -- 21,671 General business credit................................. -- 61,543
The federal net operating losses expire during 2004 through 2010. The general business credits expire during 1998 through 2000. The alternative minimum tax credits can be carried forward indefinitely. NOTE G -- DEFINED CONTRIBUTION PLAN The Company maintains a 401(k) plan covering all employees over the age of twenty-one who have completed one year of service. The Company matches 10% of an employee's contribution. Contributions to the plan were $7,022 in 1996. NOTE H -- CONVERTIBLE PREFERRED STOCK The preferred stockholders have the option to convert the preferred stock into common stock prior to December 31, 2002 on the basis of five shares of common stock for each share of preferred stock redeemed. The holders of preferred stock do not have voting rights. Preferred stock is redeemable at par. Subsequent to year end, the preferred stockholders converted all of their preferred stock to common stock at the ratio of five shares of common stock for each share of preferred stock. F-107 305 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 -- CONTINUED NOTE I -- CASH FLOW INFORMATION Supplemental cash flow information for the years ended December 31, 1996 is as follows: Interest paid.................................................. $ 347,933 Taxes paid (net of refunds).................................... $ (7,718) Noncash financing and investing activities: Purchase of shareholder's common stock and payment of deferred compensation: Common stock redeemed..................................... $ 115,625 New debt incurred......................................... (295,000) Deferred compensation paid................................ 179,375 ----------- $ -- ========== Sale of assets: Proceeds from sale of property and equipment.............. $ 689,000 Increase in notes receivable.............................. (689,000) ----------- $ -- ========== Payment of shareholder receivable with reduction in shareholder note payable: Notes payable reduced..................................... $ 1,000,000 Note payable created...................................... (7,772) Shareholder receivable paid............................... (992,228) ----------- $ -- ========== Refinancing company and shareholder debt and acquisition of radio stations: Proceeds from new debt.................................... $ 8,000,000 Payments on existing debt................................. (2,557,188) Broadcast licenses acquired............................... (4,100,000) Property and equipment acquired........................... (800,000) Noncompete agreement...................................... (100,000) Debt repayment on behalf of shareholder................... (415,972) Loan fees................................................. (80,000) Legal fees................................................ (10,200) ----------- Net cash paid for acquisition $ (63,360) ==========
NOTE J -- SUBSEQUENT EVENTS The Company has entered into an agreement to redirect certain of the Company's broadcast signals in exchange for a payment of $2,000,000. The agreement is subject to Federal Communications Commission (FCC) approval and is secured by a letter of credit. Approval is expected in 1997 and the payment is expected to be received subsequent to approval. Subsequent to December 31, 1996, the shareholders of PNWB and the members of Wilson have signed letters of intent to sell the capital stock of PNWB, the operating assets of Wilson and a building owned by a shareholder to Citadel Broadcasting Company (Citadel). The transactions are subject to approval of the FCC. Under the letters of intent, the Company will enter into a LMA with Citadel which will allow Citadel use of the property and equipment of the radio stations in exchange for a fee. The LMA will continue until FCC approval is received to close the sales of the stock of PNWB and the assets of Wilson. The sale of the stock of F-108 306 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996 -- CONTINUED PNWB will not close prior to January 1, 1998 and the sale of the assets of Wilson will not close prior to April 18, 1998. The sale price of $28,500,000 for the stock, assets and building is payable in cash totaling $25,650,000 and stock of $2,850,000. The agreement to purchase the stock of PNWB requires, among other things, that certain minimum levels of net asset value be met on the date of closing. The Company made payments of notes payable amounting to approximately $1,800,000 subsequent to year end in advance of the payment due dates. Additionally, the Company received approximately $2,600,000 in full payment of certain notes receivables subsequent to December 31, 1996. Subsequent to year end, the preferred stockholders converted all of their preferred stock to common stock at the ratio of five shares of common stock for each share of preferred stock. F-109 307 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES UNAUDITED COMBINED BALANCE SHEETS JUNE 30, 1997 AND 1996
1997 1996 ----------- ----------- ASSETS Current assets: Cash...................................................................... $ 223,280 $ 26,452 Trade accounts receivable, net of allowance for doubtful accounts of $25,000 in 1997 and $20,000 in 1996..................................... 1,180,963 720,587 Receivable from shareholders.............................................. 87,640 184,772 Other accounts receivable................................................. -- 132,006 Prepaid expenses.......................................................... 119,301 55,198 Prepaid income tax........................................................ 1,930 -- Accrued interest receivable............................................... 17,042 42,065 Current portion of notes receivable....................................... 551,623 433,089 ----------- Total current assets............................................... 2,181,779 1,594,169 Other Assets: AM and FM broadcast licenses.............................................. 4,428,368 433,295 Notes receivable, less current portion.................................... 2,735,799 3,692,472 Noncompete agreements..................................................... 301,477 300,736 Equipment deposits and other assets....................................... 43,510 34,991 Deferred taxes............................................................ 35,728 166,772 ----------- 7,544,882 4,628,266 Property and equipment, at cost: Land and improvements..................................................... 3,272 170,521 Leasehold improvements.................................................... 63,063 61,744 Towers and antennas....................................................... 402,710 319,489 Transmitters and transmitter buildings.................................... 508,916 251,408 Studio and technical equipment............................................ 947,674 444,892 Automobiles............................................................... 44,930 21,380 Furniture and office equipment............................................ 382,018 248,902 Construction in progress.................................................. 14,287 -- ----------- 2,366,870 1,518,336 Accumulated depreciation.................................................. (1,062,352) (952,908) ----------- 1,304,518 565,428 ----------- $11,031,179 $ 6,787,863 =========== LIABILITIES AND OWNERS' EQUITY Current liabilities: Accounts payable.......................................................... $ 165,262 $ 84,817 Accrued expenses.......................................................... 299,865 256,715 Accrued taxes payable..................................................... -- 13,492 Current portion of notes payable to related parties....................... 72,896 234,970 Current portion of long-term debt......................................... 3,438,732 648,769 ----------- Total current liabilities.......................................... 3,976,755 1,238,763 Long-term debt: Notes payable to related parties, less current portion.................... 1,132,539 1,792,369 Notes payable, less current portion....................................... 4,921,013 2,652,725 ----------- 6,053,552 4,445,094 Deferred revenue............................................................ 168,141 302,649 Owners' equity: Convertible preferred stock, nonvoting, par value $1,000 per share, 5% non cumulative, authorized 3,500 shares, issued and outstanding 1,396.8 shares.................................................................. 1,396,800 1,396,800 Common stock, voting, no par value, authorized 10,000 shares, issued and outstanding 3,766.6 in 1997 and 1996, respectively...................... 475,677 475,677 Members' deficit.......................................................... (133,293) -- Accumulated deficit....................................................... (906,453) (1,071,120) ----------- 832,731 801,357 ----------- $11,031,179 $ 6,787,863 ===========
See accompanying notes. F-110 308 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES UNAUDITED COMBINED STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996 ---------- ---------- Revenues: Revenues.......................................................... $3,251,875 $1,983,207 Less agency and representative commissions........................ 471,266 284,195 ---------- ---------- 2,780,609 1,699,012 Expenses: Transmission...................................................... 146,577 98,274 Programming and production........................................ 922,149 632,119 Sales............................................................. 514,444 296,329 General and administrative........................................ 954,199 700,322 Advertising....................................................... 96,845 79,330 ---------- ---------- 2,634,214 1,806,374 ---------- ---------- Income (loss) from operations............................. 146,395 (107,362) Nonoperating income (expense) Gain (loss) on sale of assets..................................... (65,639) 217,444 Noncompete revenue................................................ 67,254 117,254 Interest income................................................... 142,847 171,188 Interest expense.................................................. (466,914) (229,607) ---------- ---------- (322,452) 276,279 ---------- ---------- Income (loss) before income taxes......................... (176,057) 168,917 Income tax expense.................................................. 4,003 59,123 ---------- ---------- Net income (loss)......................................... $ (180,060) $ 109,794 ========== ==========
See accompanying notes. F-111 309 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES UNAUDITED COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY SIX MONTHS ENDED JUNE 30, 1997 AND 1996
PREFERRED COMMON ACCUMULATED MEMBERS' STOCK STOCK DEFICIT DEFICIT TOTAL ---------- --------- ----------- --------- ---------- Balance at January 1, 1996... $1,396,800 $ 591,302 $(1,180,914) $ -- $ 807,188 Common stock redemption, 125 shares.............. -- (115,625) -- -- (115,625) Net income................. -- -- 109,794 -- 109,794 --------- ---------- ---------- ---------- ---------- Balance at June 30, 1996..... $1,396,800 $ 475,677 $(1,071,120) $ -- $ 801,357 ========= ========== ========== ========== ========== Balance at January 1, 1997... $1,396,800 $ 475,677 $ (920,862) $ 61,176 $1,012,791 Net income (loss).......... -- -- 14,409 (194,469) (180,060) --------- ---------- ---------- ---------- ---------- Balance at June 30, 1997..... $1,396,800 $ 475,677 $ (906,453) $(133,293) $ 832,731 ========= ========== ========== ========== ==========
See accompanying notes. F-112 310 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES UNAUDITED COMBINED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996 --------- --------- Cash flows from operating activities: Net income (loss)....................................................... $(180,060) $ 109,794 Adjustments to reconcile net income (loss) to net cash provided by operating activities Amortization.......................................................... 69,548 20,048 Depreciation.......................................................... 69,776 32,258 Noncompete revenue.................................................... (67,254) (67,254) Noncompete expense.................................................... 52,964 42,962 Provision for bad debts............................................... 13,557 13,766 (Gain) loss on sale of assets......................................... 65,639 (217,597) Changes in operating assets and liabilities Trade accounts receivable.......................................... (114,685) (245,373) Other accounts receivable.......................................... 57,692 (80,039) Prepaid expenses................................................... 70,094 75,855 Prepaid income tax................................................. (1,930) 7,739 Accrued interest receivable........................................ 1,127 (14,102) Equipment deposits and other assets................................ (4,260) (9,999) Deferred taxes..................................................... 6,715 45,607 Accounts payable................................................... (103,139) (92,823) Bank overdraft..................................................... -- (118,289) Accrued expenses................................................... 40,386 80,232 Accrued taxes payable.............................................. (12,520) 13,492 --------- --------- Net cash used by operating activities............................ (36,350) (403,723) Cash flows from investing activities: Loans made to shareholders.............................................. (87,640) (99,327) Payments on notes receivable............................................ 213,236 148,982 Proceeds from sale of assets............................................ 61,100 168,750 Additions to property and equipment..................................... (70,168) (6,685) --------- --------- Net cash provided by investing activities........................ 116,528 211,720 Cash flows from financing activities: Borrowings on notes payable............................................. -- 200,500 Payments on notes payable............................................... (20,029) (118,874) Borrowings on notes payable to related parties.......................... -- 150,000 Payment on notes payable to related parties............................. (57,250) (13,171) --------- --------- Net cash provided (used) by financing activities................. (77,279) 218,455 --------- --------- Net increase in cash............................................. 2,899 26,452 Cash at beginning of period............................................... 220,381 -- --------- --------- Cash at end of period............................................ $ 223,280 $ 26,452 ========= ========= Supplemental disclosure of cash flow information: Interest paid........................................................... $ 229,413 $ 464,886 Taxes paid (net of refunds)............................................. $ 11,739 $ (7,718) Noncash financing and investing activities: Purchase of shareholder's common stock and related payment of deferred compensation: Common stock redeeemed............................................. $ -- $ 115,625 New debt incurred.................................................. $ -- $(295,000) Deferred compensation paid......................................... 179,375 --------- --------- $ -- $ -- ========= ========= Sale of assets: Proceeds from sale of property and equipment.......................... $ -- $ 689,000 Increase in notes receivable.......................................... -- (689,000) --------- --------- $ -- $ -- ========= =========
See accompanying notes. F-113 311 PACIFIC NORTHWEST BROADCASTING CORPORATION AND AFFILIATES NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS JUNE 30, 1997 AND 1996 NOTE A -- UNAUDITED INTERIM FINANCIAL STATEMENTS The combined balance sheet as of June 30, 1997 and 1996 and the combined statements of operations, changes in owners' equity, and cash flows for the six month periods ended June 30, 1997 and 1996 are unaudited. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position of Pacific Northwest Broadcasting Corporation and Affiliates, (the Company) and the results of operations, changes in owners' equity, and cash flows. These interim unaudited combined financial statements should be read in conjunction with the audited combined financial statements. The combined results of operations for the six months ended June 30, 1997 and 1996 are not necessarily indicative of results to be expected for the full year. NOTE B -- AGREEMENT TO REDIRECT SIGNAL The Company has entered into an agreement to redirect certain of the Company's broadcast signals in exchange for a payment of $2,000,000. The agreement is subject to Federal Communications Commission (FCC) approval and is secured by a letter of credit. Approval is expected in 1997 and payment is expected subsequently. NOTE C -- SUBSEQUENT EVENTS Subsequent to June 30, 1997, the shareholders of Pacific Northwest Broadcasting Corporation (PNWB) and the members of Wilson Group, LLC (Wilson) have signed letters of intent to sell the capital stock of PNWB, the operating assets of Wilson and a building owned by a shareholder to Citadel Broadcasting Company (Citadel). The transactions are subject to approval of the FCC. Under the letters of intent, the Company will enter into a Local Marketing Agreement (LMA) with Citadel which will allow Citadel use of the property and equipment of the radio stations in exchange for a fee. The LMA will continue until FCC approval is received to close the sales of the stock of PNWB and the assets of Wilson. The sale of the stock of PNWB will not close prior to January 1, 1998 and the sale of the assets of Wilson will not close prior to April 18, 1998. The sales price of $28,500,000 for the stock, assets and building is payable in cash totaling $25,650,000 and stock of $2,850,000. The agreement to purchase the stock of PNWB requires, among other things, that certain minimum levels of net asset value be met on the date of closing. The Company made payments of notes payable amounting to approximately $1,800,000 subsequent to June 30, 1997 in advance of the payment due dates. Additionally, the Company received approximately $2,600,000 in full payment of certain receivables subsequent to June 30, 1997. Subsequent to June 30, 1997, the preferred stockholders converted all of their preferred stock to common stock at the ratio of five shares of common stock for each share of preferred stock. F-114 312 ======================================================= NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS THE COMPANY SINCE THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ----- Prospectus Summary..................... 1 Risk Factors........................... 20 Use of Proceeds........................ 28 Capitalization......................... 29 Unaudited Pro Forma Condensed Consolidated Financial Statements.... 30 Selected Historical Financial Data..... 45 Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 47 Business............................... 52 The Pending Transactions............... 83 Management............................. 88 Certain Transactions................... 97 Security Ownership of Certain Beneficial Owners.................... 99 Description of Indebtedness............ 103 The Exchange Offer..................... 106 Description of the Notes............... 115 Description of the Exchangeable Preferred Stock and Exchange Debentures........................... 139 Description of Other Capital Stock..... 176 Certain Federal Income Tax Considerations....................... 179 Plan of Distribution................... 186 Legal Matters.......................... 187 Experts................................ 187 Available Information.................. 187 Glossary of Certain Defined Terms...... 189 Index to Financial Statements.......... F-1
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ======================================================= ======================================================= $201,000,000 CITADEL LOGO OFFER TO EXCHANGE 10 1/4% SENIOR SUBORDINATED NOTES DUE 2007 FOR 10 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007 AND 13 1/4% SERIES A EXCHANGEABLE PREFERRED STOCK FOR 13 1/4% SERIES B EXCHANGEABLE PREFERRED STOCK ----------------- PROSPECTUS ----------------- , 1997 ======================================================= 313 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 78.751 of the Nevada General Corporation Law (the "NGCL") empowers a corporation to indemnify any person who was or is a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the corporation, and with respect to any criminal proceeding, he had reasonable cause to believe that his conduct was unlawful. Section 78.751 of the NGCL also empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including amounts paid in settlement and attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted under similar standards, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation unless, and only to the extent that, the court in which such action or suit was brought or other court of competent jurisdiction shall determine upon application that in view of all the circumstances of the case, that despite the adjudication of liability such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. Section 78.751 of the NGCL further provides that, to the extent that a director or officer of a corporation has been successful on the merits or otherwise, in the defense of any action, suit or proceeding referred to above or in the defense of any claim, issue or matter therein, he must be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith and that indemnification provided for by Section 78.751 of the NGCL shall not be deemed exclusive of any other rights to which the indemnified party may be entitled, except that such indemnification may not be made to any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action, unless a court of competent jurisdiction orders otherwise, utilizing the standard described in the immediately preceding paragraph. The articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of the officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation; these provisions do not affect any rights to advancement of expenses to which corporate personnel other than officers and directors may be entitled under any contract or otherwise by law. Any indemnification referred to above, unless ordered by a court or paid as incurred in advance of final disposition upon receipt of a proper undertaking to repay the same, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (i) by the stockholders; (ii) by the II-1 314 board of directors by majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding; (iii) if a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; or (iv) if a quorum consisting of directors who were not parties to the act, suit, or proceeding cannot be obtained, by independent legal counsel in a written opinion. Article VI of Citadel Broadcasting Company's Amended and Restated Articles of Incorporation provides as follows: To the full extent permitted by law, the Corporation shall indemnify any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she is or was a director of the Corporation or any predecessor of the Corporation or serves or served any other enterprise as director at the request of the Corporation or any predecessor of the Corporation. Citadel Broadcasting Company's Bylaws further implement the permissive provisions of Section 78.751 of the NGCL discussed above. As permitted by Section 78.037 of the NGCL, Article V of Citadel Broadcasting Company's Amended and Restated Articles of Incorporation provides as follows: To the full extent permitted by General Corporation Law of State of Nevada in effect from time to time and to no greater extent, no officer or member of the Board of Directors shall be liable for monetary damages for breach of fiduciary duty in his or her capacity as an officer or a director in any action brought by or on behalf of the Corporation or any of its shareholders. Section 78.037 currently provides that any such provision of a corporation's articles of incorporation may not eliminate or limit the liability of a director or officer for (a) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law; or (b) the payment of dividends in violation of the NGCL. Citadel Broadcasting Company maintains insurance to protect persons entitled to indemnification pursuant to its Amended and Restated Articles of Incorporation and Bylaws and the NGCL against expenses, judgments, fines and amounts paid in settlement, to the fullest extent permitted by the NGCL. ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES. (A) EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ---------- ---------------------------------------------------------------------------------- 2.1 Stock Purchase Agreement dated September 29, 1997 among Pacific Northwest Broadcasting, Inc., Citadel Broadcasting Company and Citadel License, Inc.* 2.2 Asset Purchase Agreement dated September 29, 1997 among Wilson Group, LLC, Citadel Broadcasting Company and Citadel License, Inc.* 2.3 Asset Purchase Agreement dated as of July 15, 1997 among Maranatha Broadcasting Company, Inc., Citadel Broadcasting Company and Citadel License, Inc. (relating to WFMZ-FM) 2.4 Asset Purchase Agreement dated as of July 15, 1997 among Maranatha Broadcasting Company, Inc., Citadel Broadcasting Company and Citadel License, Inc. (relating to WEST-AM) 2.5 Merger Agreement dated as of June 2, 1997 among Snider Corporation, Ted L. Snider, Sr., Jane J. Snider, Citadel Communications Corporation and Citadel Broadcasting Company
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ---------- ---------------------------------------------------------------------------------- 2.6 Merger Agreement dated as of June 2, 1997 among Snider Broadcasting Corporation, Ted L. Snider, Jr., Calvin G. Arnold, Citadel Communications Corporation and Citadel Broadcasting Company 2.7 Asset Purchase Agreement dated as of June 2, 1997 among CDB Broadcasting Corporation, CDB License Corporation and Citadel Broadcasting Company 3(i)(a) Restated Articles of Incorporation of Citadel Broadcasting Company 3(i)(b) Amendment to Certificate of the Designations, Voting Powers Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations or Restrictions of the 13 1/4% Series A Exchangeable Preferred Stock and the 13 1/4% Series B Exchangeable Preferred Stock of Citadel Broadcasting Company 3(i)(c) Articles of Incorporation of Citadel License, Inc. 3(ii)(a) Bylaws of Citadel Broadcasting Company, as amended 3(ii)(b) Bylaws of Citadel License, Inc. 4.1 Indenture dated as of July 1, 1997 among Citadel Broadcasting Company, Citadel License, Inc. and The Bank of New York, as Trustee, with the forms of 10 1/4% Senior Subordinated Notes due 2007 and 10 1/4% Series B Senior Subordinated Notes due 2007 included therein 4.2 Indenture dated as of July 1, 1997 among Citadel Broadcasting Company, Citadel License, Inc. and The Bank of New York, as Trustee, with the forms of 13 1/4% Exchange Debentures due 2009 and 13 1/4% Series B Exchange Debentures due 2009 included therein 4.3 Amendment to Certificate of the Designations, Voting Powers Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations or Restrictions of the 13 1/4% Series A Exchangeable Preferred Stock and the 13 1/4% Series B Exchangeable Preferred Stock of Citadel Broadcasting Company (filed as Exhibit 3(i)(b)) 5.1 Opinion of Eckert Seamans Cherin & Mellott, including consent* 5.2 Opinion of Lionel Sawyer & Collins* 8 Opinion of Eckert Seamans Cherin & Mellott, LLC regarding certain Federal income tax matters, including consent* 9 Voting Trust Agreement dated as of March 17, 1997 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Christopher Hall as Initial Trustee, and J. Walter Corcoran and Harlan Levy as initial Back-up Trustees 10.1 Employment Agreement dated as of June 28, 1996 among Lawrence R. Wilson, Citadel Broadcasting Company and Citadel Communications Corporation 10.2 Citadel Communications Corporation 1996 Equity Incentive Plan, as amended 10.3 Citadel Communications Corporation Nonqualified Stock Option Agreement made and entered into as of June 28, 1996 between Citadel Communications Corporation and Lawrence R. Wilson 10.4 Form of Citadel Communications Corporation Stock Option Agreement for grants effective as of December 21, 1994 10.5 Form of Citadel Communications Corporation Stock Option Agreement for grants effective as of February 21, 1994 10.6 Joint Sales Agreement dated as of December 15, 1995 among Pourtales Radio Partnership, Pourtales Holdings, Inc., Springs Radio, Inc., KVUU/KSSS, Inc. and Citadel Broadcasting Company
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ---------- ---------------------------------------------------------------------------------- 10.7 Securities Purchase and Exchange Agreement dated as of June 28, 1996 among Citadel Communications Corporation, Citadel Broadcasting Company, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Bank of America Illinois, Oppenheimer & Co., Inc., Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, and Thomas E. Pelt, Jr. 10.8 First Amendment to the Securities Purchase Agreement dated as of December 31, 1996 among Citadel Communications Corporation, Citadel Broadcasting Company, Deschutes Acquisition Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust u/a/d 2-15-94, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy and Ralph W. McKee 10.9 Second Amendment to the Securities Purchase and Exchange Agreement dated as of March 17, 1997 among Citadel Communications Corporation, Citadel Broadcasting Company, Deschutes Acquisition Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust u/a/d/ 2-15-94, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy and Ralph W. McKee 10.10 Third Amendment to the Securities Purchase and Exchange Agreement dated as of September 29, 1997 among Citadel Communications Corporation, Citadel Broadcasting Company, Deschutes Acquisition Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust u/a/d/ 2-15-94, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Philip J. Urso, Phillip Norton, Richard Poholek, Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark Urso, M. Linda Urso and Juliet Rice* 10.11 Second Amended and Restated Stockholders Agreement dated as of June 28, 1996, among Citadel Communications Corporation, Baker, Fentress & Company, Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Thomas E. Van Pelt, Jr., ABRY Broadcast Partners II, L.P., ABRY Citadel Investment Partners, L.P., Oppenheimer & Co., Inc., Finova Capital Corporation, Lawrence R. Wilson, Claire Wilson, Donna L. Heffner and Stuart Stanek 10.12 First Amendment to the Second Amended Stockholders Agreement dated as of December 31, 1996 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital Corporation, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust u/a/d 2-15-94, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ---------- ---------------------------------------------------------------------------------- 10.13 Second Amendment to the Second Amended and Restated Stockholders Agreement dated as of March 17, 1997 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital Corporation, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson 10.14 Third Amendment to the Second Amended and Restated Stockholders Agreement dated as of September 29, 1997 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital Corporation, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Philip J. Urso, Phillip Norton, Richard Poholek, Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark Urso, M. Linda Urso, Juliet Rice, Lawrence R. Wilson and Claire Wilson* 10.15 Third Amended and Restated Voting Agreement dated as of March 17, 1997 among Citadel Communications Corporation, Christopher Hall as initial under the Voting Trust Agreement, Baker Fentress & Company, Finova Capital Corporation, Oppenheimer & Co., Inc., The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson 10.16 First Amendment to the Third Amended and Restated Voting Agreement dated as of June 30, 1997 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., Baker Fentress & Company, Finova Capital Corporation, Oppenheimer & Co., Inc., The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson 10.17 Second Amendment to the Third Amended and Restated Voting Agreement dated as of September 29, 1997 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., Baker Fentress & Company, Finova Capital Corporation, Oppenheimer & Co., Inc., The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Philip J. Urso, Phillip Norton, Richard Poholek, Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark Urso, M. Linda Urso and Juliet Rice, Lawrence R. Wilson and Claire Wilson* 10.18 Amended and Restated Loan Agreement dated as of July 3, 1997 among Citadel Broadcasting Company, Citadel License, Inc., FINOVA Capital Corporation and the Lenders party thereto 10.19 Agreement of Purchase and Sale dated March 17, 1997 by and among Tele-Media Broadcasting Company, Tele-Media Broadcasting Company of Centre Region, Tele-Media Broadcasting Holding Corporation and their respective shareholders and Citadel Broadcasting Company and Citadel Communications Corporation 10.20 Agreement Not to Compete made as of December 31, 1996 between DVS Management Inc. and Citadel Communications Corporation 10.21 Purchase Agreement dated June 30, 1997 by and among Citadel Broadcasting Company, Citadel Communications Corporation, Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities Inc.
II-5 318
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ---------- ---------------------------------------------------------------------------------- 10.22 Notes Registration Rights Agreement dated as of July 3, 1997 among Citadel Broadcasting Company, Citadel License, Inc., Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities, Inc. 10.23 Preferred Stock Registration Rights Agreement dated as of July 3, 1997 among Citadel Broadcasting Company, Citadel License, Inc., Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities, Inc. 21 Subsidiaries of Citadel Broadcasting Company 23.1 Consent of Eckert Seamans Cherin & Mellott, LLC (included in its opinions to be filed as Exhibits 5.1 and 8) 23.2 Consent of KPMG Peat Marwick LLP 23.3 Consent of KPMG Peat Marwick LLP 23.4 Consent of KPMG Peat Marwick LLP 23.5 Consent of Deloitte & Touche, LLP 23.6 Consent of Erwin & Company 23.7 Consent of Balukoff, Lindstrom & Co., P.A. 23.8 Consent of Ted L. Snider, Sr. 24 Power of Attorney (included on signature page) 25.1 Statement of Eligibility on Form T-1 of Trustee (10 1/4% Series B Senior Subordinated Notes Due 2007) 25.2 Statement of Eligibility on Form T-1 of Trustee (13 1/4% Exchange Debentures Due 2009) 27 Financial Data Schedule 99.1 Form of Letter of Transmittal to Tender for Exchange 10 1/4% Senior Subordinated Notes due 2007 99.2 Form of Letter of Transmittal to Tender for Exchange 13 1/4% Series A Exchangeable Preferred Stock 99.3 Form of Exchange Agency Agreement between Citadel Broadcasting Company and The Bank of New York, as Exchange Agent*
- ------------------ * To be Filed by Amendment (B) FINANCIAL STATEMENT SCHEDULES None ITEM 22. UNDERTAKINGS. The Registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any II-6 319 deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission (the "Commission") pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities act, each such post-effective amendment shall be deemed to be a 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. (3) To remove from registration by means of a post-effective amendment any of other securities being registered which remain unsold at the termination of the offering. (4) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. (5) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the 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 Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities registered, the Registrants 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. II-7 320 POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Lawrence R. Wilson and Donna L. Heffner and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. SIGNATURES Pursuant to the requirements of the Securities Act, Citadel Broadcasting Company has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bigfork, in the State of Montana, on September 30, 1997. CITADEL BROADCASTING COMPANY By: /s/ LAWRENCE R. WILSON ------------------------------------ Lawrence R. Wilson Chairman of the Board, Chief Executive Officer and President Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities indicated on September 30, 1997.
SIGNATURES TITLE - ----------------------------------------- -------------------------------------------------- /s/ LAWRENCE R. WILSON Chairman of the Board, Chief Executive Officer and - ----------------------------------------- President (Principal Executive Officer) Lawrence R. Wilson /s/ DONNA L. HEFFNER Vice President and Chief Financial Officer - ----------------------------------------- (Principal Financial and Accounting Officer) Donna L. Heffner /s/ MICHAEL J. AHEARN Director - ----------------------------------------- Michael J. Ahearn /s/ J. WALTER CORCORAN Director - ----------------------------------------- J. Walter Corcoran /s/ CHRISTOPHER P. HALL Director - ----------------------------------------- Christopher P. Hall /s/ MARK A. LEAVITT Director - ----------------------------------------- Mark A. Leavitt /s/ HARLAN A. LEVY Director - ----------------------------------------- Harlan A. Levy /s/ SCOTT E. SMITH Director - ----------------------------------------- Scott E. Smith /s/ JOHN E. VON SCHLEGELL Director - ----------------------------------------- John E. von Schlegell
II-8 321 POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Lawrence R. Wilson and Donna L. Heffner and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. SIGNATURES Pursuant to the requirements of the Securities Act, Citadel License, Inc. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Bigfork, in the State of Montana, on September 30, 1997. CITADEL LICENSE, INC. By: /s/ LAWRENCE R. WILSON ------------------------------------ Lawrence R. Wilson Chairman of the Board, Chief Executive Officer and President Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities indicated on September 30, 1997.
SIGNATURES TITLE - ----------------------------------------- -------------------------------------------------- /s/ LAWRENCE R. WILSON Chairman of the Board, Chief Executive Officer and - ----------------------------------------- President (Principal Executive Officer) Lawrence R. Wilson /s/ DONNA L. HEFFNER Vice President and Chief Financial Officer - ----------------------------------------- (Principal Financial and Accounting Officer) Donna L. Heffner /s/ MICHAEL J. AHEARN Director - ----------------------------------------- Michael J. Ahearn /s/ J. WALTER CORCORAN Director - ----------------------------------------- J. Walter Corcoran /s/ CHRISTOPHER P. HALL Director - ----------------------------------------- Christopher P. Hall /s/ MARK A. LEAVITT Director - ----------------------------------------- Mark A. Leavitt /s/ HARLAN A. LEVY Director - ----------------------------------------- Harlan A. Levy /s/ SCOTT E. SMITH Director - ----------------------------------------- Scott E. Smith /s/ JOHN E. VON SCHLEGELL Director - ----------------------------------------- John E. von Schlegell
II-9 322 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ---------- ---------------------------------------------------------------------------------- 2.1 Stock Purchase Agreement dated September 29, 1997 among Pacific Northwest Broadcasting, Inc., Citadel Broadcasting Company and Citadel License, Inc.* 2.2 Asset Purchase Agreement dated September 29, 1997 among Wilson Group, LLC, Citadel Broadcasting Company and Citadel License, Inc.* 2.3 Asset Purchase Agreement dated as of July 15, 1997 among Maranatha Broadcasting Company, Inc., Citadel Broadcasting Company and Citadel License, Inc. (relating to WFMZ-FM) 2.4 Asset Purchase Agreement dated as of July 15, 1997 among Maranatha Broadcasting Company, Inc., Citadel Broadcasting Company and Citadel License, Inc. (relating to WEST-AM) 2.5 Merger Agreement dated as of June 2, 1997 among Snider Corporation, Ted L. Snider, Sr., Jane J. Snider, Citadel Communications Corporation and Citadel Broadcasting Company 2.6 Merger Agreement dated as of June 2, 1997 among Snider Broadcasting Corporation, Ted L. Snider, Jr., Calvin G. Arnold, Citadel Communications Corporation and Citadel Broadcasting Company 2.7 Asset Purchase Agreement dated as of June 2, 1997 among CDB Broadcasting Corporation, CDB License Corporation and Citadel Broadcasting Company 3(i)(a) Restated Articles of Incorporation of Citadel Broadcasting Company 3(i)(b) Amendment to Certificate of the Designations, Voting Powers Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations or Restrictions of the 13 1/4% Series A Exchangeable Preferred Stock and the 13 1/4% Series B Exchangeable Preferred Stock of Citadel Broadcasting Company 3(i)(c) Articles of Incorporation of Citadel License, Inc. 3(ii)(a) Bylaws of Citadel Broadcasting Company, as amended 3(ii)(b) Bylaws of Citadel License, Inc. 4.1 Indenture dated as of July 1, 1997 among Citadel Broadcasting Company, Citadel License, Inc. and The Bank of New York, as Trustee, with the forms of 10 1/4% Senior Subordinated Notes due 2007 and 10 1/4% Series B Senior Subordinated Notes due 2007 included therein 4.2 Indenture dated as of July 1, 1997 among Citadel Broadcasting Company, Citadel License, Inc. and The Bank of New York, as Trustee, with the forms of 13 1/4% Exchange Debentures due 2009 and 13 1/4% Series B Exchange Debentures due 2009 included therein 4.3 Amendment to Certificate of the Designations, Voting Powers Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations or Restrictions of the 13 1/4% Series A Exchangeable Preferred Stock and the 13 1/4% Series B Exchangeable Preferred Stock of Citadel Broadcasting Company (filed as Exhibit 3(i)(b)) 5.1 Opinion of Eckert Seamans Cherin & Mellott, including consent* 5.2 Opinion of Lionel Sawyer & Collins* 8 Opinion of Eckert Seamans Cherin & Mellott, LLC regarding certain Federal income tax matters, including consent* 9 Voting Trust Agreement dated as of March 17, 1997 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Christopher Hall as Initial Trustee, and J. Walter Corcoran and Harlan Levy as initial Back-up Trustees 10.1 Employment Agreement dated as of June 28, 1996 among Lawrence R. Wilson, Citadel Broadcasting Company and Citadel Communications Corporation 10.2 Citadel Communications Corporation 1996 Equity Incentive Plan, as amended
323
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ---------- ---------------------------------------------------------------------------------- 10.3 Citadel Communications Corporation Nonqualified Stock Option Agreement made and entered into as of June 28, 1996 between Citadel Communications Corporation and Lawrence R. Wilson 10.4 Form of Citadel Communications Corporation Stock Option Agreement for grants effective as of December 21, 1994 10.5 Form of Citadel Communications Corporation Stock Option Agreement for grants effective as of February 21, 1994 10.6 Joint Sales Agreement dated as of December 15, 1995 among Pourtales Radio Partnership, Pourtales Holdings, Inc., Springs Radio, Inc., KVUU/KSSS, Inc. and Citadel Broadcasting Company 10.7 Securities Purchase and Exchange Agreement dated as of June 28, 1996 among Citadel Communications Corporation, Citadel Broadcasting Company, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Bank of America Illinois, Oppenheimer & Co., Inc., Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, and Thomas E. Pelt, Jr. 10.8 First Amendment to the Securities Purchase Agreement dated as of December 31, 1996 among Citadel Communications Corporation, Citadel Broadcasting Company, Deschutes Acquisition Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust u/a/d 2-15-94, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy and Ralph W. McKee 10.9 Second Amendment to the Securities Purchase and Exchange Agreement dated as of March 17, 1997 among Citadel Communications Corporation, Citadel Broadcasting Company, Deschutes Acquisition Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust u/a/d/ 2-15-94, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy and Ralph W. McKee 10.10 Third Amendment to the Securities Purchase and Exchange Agreement dated as of September 29, 1997 among Citadel Communications Corporation, Citadel Broadcasting Company, Deschutes Acquisition Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust u/a/d/ 2-15-94, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Philip J. Urso, Phillip Norton, Richard Poholek, Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark Urso, M. Linda Urso and Juliet Rice* 10.11 Second Amended and Restated Stockholders Agreement dated as of June 28, 1996, among Citadel Communications Corporation, Baker, Fentress & Company, Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Thomas E. Van Pelt, Jr., ABRY Broadcast Partners II, L.P., ABRY Citadel Investment Partners, L.P., Oppenheimer & Co., Inc., Finova Capital Corporation, Lawrence R. Wilson, Claire Wilson, Donna L. Heffner and Stuart Stanek
324
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ---------- ---------------------------------------------------------------------------------- 10.12 First Amendment to the Second Amended Stockholders Agreement dated as of December 31, 1996 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital Corporation, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust u/a/d 2-15-94, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson 10.13 Second Amendment to the Second Amended and Restated Stockholders Agreement dated as of March 17, 1997 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital Corporation, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson 10.14 Third Amendment to the Second Amended and Restated Stockholders Agreement dated as of September 29, 1997 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, Christopher J. Perry, Robert F. Perille, M. Ann O'Brien, Ford S. Bartholow, Jeffrey M. Mann, Matthew W. Clary, Sheryl E. Bartol, Andrea P. Joselit, Finova Capital Corporation, The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Philip J. Urso, Phillip Norton, Richard Poholek, Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark Urso, M. Linda Urso, Juliet Rice, Lawrence R. Wilson and Claire Wilson* 10.15 Third Amended and Restated Voting Agreement dated as of March 17, 1997 among Citadel Communications Corporation, Christopher Hall as initial under the Voting Trust Agreement, Baker Fentress & Company, Finova Capital Corporation, Oppenheimer & Co., Inc., The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson 10.16 First Amendment to the Third Amended and Restated Voting Agreement dated as of June 30, 1997 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., Baker Fentress & Company, Finova Capital Corporation, Oppenheimer & Co., Inc., The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Lawrence R. Wilson and Claire Wilson 10.17 Second Amendment to the Third Amended and Restated Voting Agreement dated as of September 29, 1997 among Citadel Communications Corporation, ABRY Broadcast Partners II, L.P., Baker Fentress & Company, Finova Capital Corporation, Oppenheimer & Co., Inc., The Endeavour Capital Fund Limited Partnership, Joseph P. Tennant, The Schafbuch Family Trust, Babson Capital Partners Limited Partnership, Tal Johnson, Edward T. Hardy, Ralph W. McKee, Philip J. Urso, Phillip Norton, Richard Poholek, Karen Kutniewski, Thomas Jenkins, Jeff Thompson, Pat Bowen, Mark Urso, M. Linda Urso and Juliet Rice, Lawrence R. Wilson and Claire Wilson*
325
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ---------- ---------------------------------------------------------------------------------- 10.18 Amended and Restated Loan Agreement dated as of July 3, 1997 among Citadel Broadcasting Company, Citadel License, Inc., FINOVA Capital Corporation and the Lenders party thereto 10.19 Agreement of Purchase and Sale dated March 17, 1997 by and among Tele-Media Broadcasting Company, Tele-Media Broadcasting Company of Centre Region, Tele-Media Broadcasting Holding Corporation and their respective shareholders and Citadel Broadcasting Company and Citadel Communications Corporation 10.20 Agreement Not to Compete made as of December 31, 1996 between DVS Management Inc. and Citadel Communications Corporation 10.21 Purchase Agreement dated June 30, 1997 by and among Citadel Broadcasting Company, Citadel Communications Corporation, Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities Inc. 10.22 Notes Registration Rights Agreement dated as of July 3, 1997 among Citadel Broadcasting Company, Citadel License, Inc., Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities, Inc. 10.23 Preferred Stock Registration Rights Agreement dated as of July 3, 1997 among Citadel Broadcasting Company, Citadel License, Inc., Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities, Inc. 21 Subsidiaries of Citadel Broadcasting Company 23.1 Consent of Eckert Seamans Cherin & Mellott, LLC (included in its opinions to be filed as Exhibits 5.1 and 8) 23.2 Consent of KPMG Peat Marwick LLP 23.3 Consent of KPMG Peat Marwick LLP 23.4 Consent of KPMG Peat Marwick LLP 23.5 Consent of Deloitte & Touche, LLP 23.6 Consent of Erwin & Company 23.7 Consent of Balukoff, Lindstrom & Co., P.A. 23.8 Consent of Ted L. Snider, Sr. 24 Power of Attorney (included on signature page) 25.1 Statement of Eligibility on Form T-1 of Trustee (10 1/4% Series B Senior Subordinated Notes Due 2007) 25.2 Statement of Eligibility on Form T-1 of Trustee (13 1/4% Exchange Debentures Due 2009) 27 Financial Data Schedule 99.1 Form of Letter of Transmittal to Tender for Exchange 10 1/4% Senior Subordinated Notes due 2007 99.2 Form of Letter of Transmittal to Tender for Exchange 13 1/4% Series A Exchangeable Preferred Stock 99.3 Form of Exchange Agency Agreement between Citadel Broadcasting Company and The Bank of New York, as Exchange Agent*
- ------------------ * To be Filed by Amendment EX-2.3 2 CITADEL BROADCASTING CO. S-4 1 Exhibit 2.3 ASSET PURCHASE AGREEMENT AMONG MARANATHA BROADCASTING COMPANY, INC., CITADEL BROADCASTING COMPANY AND CITADEL LICENSE, INC. WFMZ(FM) JULY 15, 1997 2 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT ("AGREEMENT"), made as of the 15th day of July, 1997, by and among MARANATHA BROADCASTING COMPANY, INC., a Pennsylvania corporation ("SELLER"); CITADEL BROADCASTING COMPANY, a Nevada corporation ("CITADEL"); and CITADEL LICENSE, INC., a Nevada corporation ("LICENSE SUB"). RECITALS: A. Seller is the licensee of and owns and operates radio station WFMZ(FM) licensed to Allentown, Pennsylvania (the "STATION"). B. Citadel and License Sub are the licensees of and own and operate radio station WEST(AM) licensed to Easton, Pennsylvania (the "EASTON STATION"). C. Seller desires to sell to Citadel and License Sub, and Citadel and License Sub desire to purchase from Seller, certain of the assets of the Station in exchange for cash and for certain of the assets of the Easton Station, on the terms and subject to the conditions set forth in this Agreement and in the Easton Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1 DEFINITIONS The following terms when used in this Agreement shall have the meanings assigned to them below: "ACCOUNTS RECEIVABLE" has the meaning specified in Section 8.3. "ACCOUNTS RECEIVABLE LIST" has the meaning specified in Section 8.3. "ACCRUED TAXES" has the meaning specified in Section 4.6. "ACT" means the Communications Act of 1934, as amended. "AFFILIATE" of any Person means any other Person (a) that directly or indirectly controls, is controlled by, or is under direct or indirect common control with, the first Person, or (b) any interests of which are owned, in whole or in part, directly or indirectly, by the first Person. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controls," "controlled by," and "under direct or indirect control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct 3 or cause the direction of the management policies of the Person, whether through the ownership of voting securities or by contract or otherwise. "ALLENTOWN ANTENNA LEASE" has the meaning specified in Section 9.9. "ASSET SCHEDULE" has the meaning specified in Section 2.1(a). "ASSIGNED CONTRACTS" has the meaning specified in Section 2.1(d). "ASSUMED OBLIGATIONS" has the meaning specified in Section 2.3. "BROKER" means Richard A. Foreman Associates Inc. "BUSINESS" has the meaning specified in Section 4.1. "CASH PURCHASE PRICE" has the meaning specified in Section 3.1. "CITADEL COLLECTION PERIOD" has the meaning specified in Section 8.3. "CITADEL'S DISCLOSURE SCHEDULE" has the meaning specified in Section 5.3. "CLOSING" means the consummation of the transactions contemplated in this Agreement in accordance with the provisions of Section 10. "CLOSING DATE" has the meaning specified in Section 10.1. "CODE" means the Internal Revenue Code of 1986, as amended. "CONTRACTS" has the meaning specified in Section 4.9. "CPR RULES" means the Center for Public Resources Rules for Nonadministered Arbitration of Business Disputes. "DAMAGES" has the meaning specified in Section 13.1. "DRAW CONDITION" has the meaning specified in Section 14.2(a). "EASTON AGREEMENT" means that certain Asset Purchase Agreement dated as of the date hereof among Seller, Citadel and License Sub relating to the sale by Citadel and License Sub of the Easton Station. "EASTON ASSUMED OBLIGATIONS" means the Assumed Obligations under, and as defined in, the Easton Agreement. 2 4 "EASTON PURCHASED ASSETS" means the Purchased Assets under, and as defined in, the Easton Agreement. "EASTON STATION" has the meaning specified in the recitals to this Agreement. "ENVIRONMENTAL CLAIMS" means and includes, without limitation: (a) claims, demands, suits, causes of action for personal injury or lost use of property, or consequential damages, to the extent any of the foregoing arise directly or indirectly out of Environmental Conditions; (b) actual or threatened damages to natural resources; (c) claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, response or remedial actions under CERCLA, RCRA or other Environmental Laws; (d) a requirement to implement "corrective action" pursuant to any order or permit issued pursuant to RCRA; (e) claims for restitution, contribution or equitable indemnity from third parties or any governmental agency; (f) fines, penalties or Liens against property; (g) claims for injunctive relief or other orders or notices of violation from Governmental Authorities; and (h) with regard to any present or former employees, exposure to or injury from Environmental Conditions. "ENVIRONMENTAL CONDITIONS" means conditions of the environment, including the ocean, natural resources (including flora and fauna), soil, surface water, ground water, any present or potential drinking water supply, subsurface strata or the ambient air, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping, or threatened release of Hazardous Materials by Seller. With respect to claims by employees, Environmental Conditions also includes the exposure of Persons to Hazardous Materials within work places on any real estate owned or occupied by Seller. "ENVIRONMENTAL LAWS" has the meaning specified in the definition of Hazardous Materials. "ENVIRONMENTAL NONCOMPLIANCE" means, but is not limited to: (a) the release or threatened release as a result of the activities of Seller of any Hazardous Materials into the environment, any storm drain, sewer, septic system or publicly owned treatment works, in violation of any effluent emission limitations, standards or other criteria or guidelines established by any federal, state or local law, regulation, rule, ordinance, plan or order; and (b) any facility operations, procedures, designs, etc. which do not conform to the statutory or regulatory requirements of the CAA, the CWA, the TSCA, the RCRA or any other Environmental Laws intended to protect public health, welfare and the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "EXCLUDED ASSETS" has the meaning specified in Section 2.2. "EXCLUDED EMPLOYEES" has the meaning specified in Section 4.10. "FCC" means the Federal Communications Commission. 3 5 "FCC APPLICATION" has the meaning specified in Section 9.1(a). "FCC APPROVAL" has the meaning specified in Section 9.1(a). "FCC LICENSES" means the main station license for the Station, together with each of the other consents, rights, licenses, permits and other authorizations issued by the FCC and held by Seller in connection with, or pertaining to, the conduct of the business and operation of the Station, together with any renewals and extensions thereof and any applications therefor pending on the Closing Date, and any and all applications made by Seller for such consents, rights, licenses, permits and other authorizations. "FINAL ORDER" means a written action or order issued by the FCC or its staff setting forth the FCC Approval (or a denial thereof), (a) which action or order has not been vacated, reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with respect to which action or order (i) no requests have been filed and are pending for administrative or judicial review, rehearing, reconsideration, appeal or stay, and the time period for filing any such requests and for the FCC to set aside the action on its own motion under the provisions of the Act or the rules, regulations and policies of the FCC has expired, or (ii) in the event of review, reconsideration or appeal, the time for further review, reconsideration or appeal has expired. "GAAP" means generally accepted accounting principles in effect in the United States of America from time to time applied on a consistent basis during the periods involved. "GOVERNMENTAL AUTHORITY" means any government, whether federal, state or local, or any other political subdivision thereof, or any agency, tribunal or instrumentality of any such governmental or political subdivision, or any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "HAZARDOUS MATERIALS" means hazardous wastes, hazardous substances, hazardous constituents, toxic substances or related materials, whether solids, liquids or gases including but not limited to substances defined as "PCBs," "hazardous wastes," "hazardous substances," "toxic substances," "pollutants," "contaminants," "radioactive materials," "petroleum," or other similar designations in, or otherwise subject to regulation under, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), 42 U.S.C. ss. 9601 ET SEQ.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. ss. 2601 ET SEQ.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 9601; the Clean Water Act ("CWA"), 33 U.S.C. ss. 1251 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C.ss. 300f ET SEQ.; the Clean Air Act ("CAA"), 42 U.S.C. ss. 7401 ET SEQ.; or any similar state law; and in the plans, rules, regulations or ordinances adopted, or other criteria and guidelines promulgated pursuant to the preceding laws or other similar laws, regulations, rules or ordinances now in effect (collectively, the "ENVIRONMENTAL LAWS"); and any other substances, constituents or wastes subject to environmental regulations under any applicable federal, state or local law, regulation or ordinance. 4 6 "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended from time to time. "HSR FILING" has the meaning specified in Section 9.8. "INDEBTEDNESS FOR BORROWED MONEY" means (a) all indebtedness of Seller in respect of money borrowed (including, without limitation, indebtedness which represents the unpaid amount of the purchase price of any property), (b) all indebtedness of Seller evidenced by a promissory note, bond or similar written obligation to pay money, (c) all indebtedness guaranteed by Seller or for which Seller is contingently liable, including, without limitation, guaranties in the form of an agreement to repurchase or reimburse, and any commitment by which any such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit, and (d) all monetary obligations of Seller under any lease or similar arrangement, which obligations would be classified and accounted for as capital obligations on a balance sheet of Seller under GAAP. "INDEMNITEE" has the meaning specified in Section 13.3. "INDEMNITOR" has the meaning specified in Section 13.3. "INTELLECTUAL PROPERTY" has the meaning specified in Section 2.1(e). "LEASEHOLDS" has the meaning specified in Section 4.8. "LETTER OF CREDIT" has the meaning specified in Section 3.2. "LIEN" means any mortgage, pledge, hypothecation, assignment, encumbrance, claim, easement, transfer restriction, lien (statutory or otherwise) or security interest of any kind or nature whatsoever. "LOCAL MARKETING AGREEMENT" has the meaning specified in Section 9.7. "OBLIGATIONS" means, without duplication, all (a) Indebtedness for Borrowed Money, (b) Accrued Taxes, accounts payable, accrued liabilities and all other liabilities and obligations of the type normally required by GAAP to be reflected on a balance sheet, (c) commitments by which Seller assures a creditor against loss, including the face amount of all letters of credit and, without duplication, all drafts drawn thereunder, (d) obligations guaranteed in any manner by Seller, (e) obligations under capitalized leases in respect of which obligations Seller is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss, (f) obligations under acceptance facilities, (g) obligations secured by a Lien on property of Seller, (h) obligations under interest rate or currency exchange or swap agreements, (i) unsatisfied obligations for "withdrawal liability" to a "multiemployer plan" as such terms are defined under ERISA, (j) indebtedness issued or obligation incurred in substitution or exchange for any Obligations, (k) costs or expenses incurred 5 7 by Seller of any nature, whether or not currently payable, and (l) other liabilities or obligations of Seller, in each of the foregoing instances whether absolute or contingent, known or unknown, and whether or not normally required by GAAP to be reflected on a balance sheet. "PERMITS" has the meaning specified in Section 4.17(b). "PERSON" means an individual, corporation, partnership, joint venture, joint stock seller, association, trust, business trust, unincorporated organization, Governmental Authority, or any other entity of whatever nature. "PERSONAL PROPERTY" has the meaning specified in Section 2.1(a). "PURCHASED ASSETS" has the meaning specified in Section 2.1. "PURCHASE PRICE" has the meaning specified in Section 3.1. "REAL PROPERTY LEASES" has the meaning specified in Section 2.1(c). "SELLER'S DISCLOSURE SCHEDULE" has the meaning specified in Section 4.3. "STATION" has the meaning specified in the recitals to this Agreement. "SUPPLEMENTAL FINANCIAL STATEMENTS" has the meaning specified in Section 6.10 "TAXES" means all taxes, charges, fees, levies, or other assessments, including income, gross receipts, excise, property, sales, transfer, license, payroll, and franchise taxes, any taxes required by law to be withheld, and any taxes payable as a result of the consummation of the transactions contemplated by this Agreement, which taxes are imposed by any Governmental Authority; and such term shall include any interest, penalties, or additions to tax attributable to such assessments. "TRADE AGREEMENTS" has the meaning specified in Section 6.9. "TRADE IMBALANCE" has the meaning specified in Section 6.9. "TRADE LIABILITIES" has the meaning specified in Section 6.9. "TRADE RECEIVABLES" has the meaning specified in Section 6.9. "TRADE SCHEDULE" has the meaning specified in Section 6.9. 6 8 SECTION 2 PURCHASE AND SALE OF ASSETS 2.1 PURCHASE AND SALE OF PURCHASED ASSETS. Subject to the terms and conditions of this Agreement, and on the basis of the representations, warranties, covenants and agreements contained in this Agreement, at the Closing, Seller agrees to sell, assign and convey to Citadel (and, with respect to clause (f) below, License Sub), and Citadel (and, with respect to clause (f) below, License Sub) agrees to purchase, acquire and accept from Seller, all of the Purchased Assets. The "PURCHASED ASSETS" consist of: (a) All the tangible personal property, improvements and fixtures described on SCHEDULE 2.1 to this Agreement (the "ASSET SCHEDULE"), including, without limitation, the translator assets serving Reading, Pennsylvania (the "PERSONAL PROPERTY"); (b) [intentionally omitted]; (c) The leasehold interests pursuant to the real property leases described on the ASSET SCHEDULE (the "REAL PROPERTY LEASES"); (d) All of the right, title and interest of Seller or any of its Affiliates in and to those contracts, leases, licenses, memberships, agencies, permits and agreements, other than Real Property Leases, to which Seller or any Affiliate thereof presently is a party or an assignee of a party which are described on the ASSET SCHEDULE (the "ASSIGNED CONTRACTS"), including the employment agreements listed on the ASSET SCHEDULE; (e) All of the copyrights, trademarks, trade names and other similar rights, including applications and registrations therefor, used in connection with the past or present operation of the Station in which Seller or any Affiliate thereof has any right, title or interest, including, without limitation, those items listed on the ASSET SCHEDULE but excluding the call letters of the Station (collectively, the "INTELLECTUAL PROPERTY"); (f) The FCC Licenses, a complete list of which is included on the ASSET SCHEDULE; (g) Copies of all books, records and accounts relating to the operation of the Station, subject to the right of Seller to retain originals thereof for Seller's personal use and reference and to obtain access to such books, records and accounts in accordance with the provisions of Section 2.2(a); and (h) All other assets owned by Seller as of the date of this Agreement which are needed in the broadcast chain of the Station as of the date of this Agreement (i.e., from studio to transmission). 7 9 2.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained in this Agreement, it is expressly understood and agreed that there shall be excluded from the assets transferred or assigned to Citadel and License Sub with respect to Station the following (collectively, the "EXCLUDED ASSETS"): (a) Except to the extent included in Section 2.1(g), all of Seller's corporate books and records and other documents relating to the internal corporate affairs of Seller, and all other corporate records or files of Seller not relating to the business or operation of the Station; (b) All cash, cash equivalents or similar type investments held by Seller, such as certificates of deposit, treasury bills and other marketable securities on hand as of the Closing; (c) All accounts receivable existing as of Closing; (d) Corporate assets and assets not used in connection with the Station; (e) Any and all claims of Seller with respect to transactions occurring or arising prior to the Closing Date, including, without limitation, claims for Tax refunds; and (f) Those additional assets identified on SCHEDULE 2.2 as Excluded Assets. Notwithstanding the foregoing, any asset which is described above but which is actually listed on the ASSET SCHEDULE shall be a Purchased Asset and not an Excluded Asset. 2.3 OBLIGATIONS. Neither Citadel nor License Sub shall assume, and they shall purchase the Purchased Assets free and clear of, any and all Obligations of Seller, except that Citadel shall assume those Obligations of Seller arising from and after the Closing Date (other than any liability or obligation for breach or default which occurred prior to the Closing Date) pursuant to each of (a) the Real Property Leases, (b) the Assigned Contracts, (c) those items subject to proration pursuant to Section 9.2, (d) the Trade Liabilities and (e) those additional items expressly set forth on SCHEDULE 2.3 to this Agreement (collectively, the "ASSUMED OBLIGATIONS"). 2.4 TAX DEFERRED EXCHANGE. Seller hereby acknowledge that it is the intention of Citadel to complete a tax deferred exchange under Section 1031 of the Code and that Citadel's rights and obligations under this Agreement may be assigned to a qualified intermediary or qualified escrow agent (as such terms are defined in the regulations under Section 1031 of the Code) for the purpose of completing such exchange. Seller agrees to cooperate in any manner reasonably necessary to complete such exchange and at no additional cost or liability to Seller. 8 10 SECTION 3 PURCHASE PRICE; LETTER OF CREDIT 3.1 PURCHASE PRICE. The purchase price for the Purchased Assets shall consist of (a) $23,000,000, subject to adjustment as provided in Sections 6.9 and 9.2 (the "CASH PURCHASE PRICE"), and (b) the Easton Purchased Assets, subject to the assumption by Seller of the Easton Assumed Obligations, as provided in the Easton Agreement (collectively, the "PURCHASE PRICE"). At the Closing, Citadel shall deliver to Seller immediately available funds in the amount of the Cash Purchase Price. 3.2 LETTER OF CREDIT. Simultaneously with the execution of this Agreement, Citadel shall deliver to Seller an irrevocable letter of credit in favor of Seller, issued by a national banking association or other issuer reasonably acceptable to Seller, in the amount of $1,750,000, which shall be in the form attached as EXHIBIT A hereto (the "LETTER OF CREDIT"). The Letter of Credit shall provide that the issuing bank shall make payment on the Letter of Credit upon such bank's receipt of a certificate from the President of Seller certifying that a Draw Condition has occurred. Upon the Closing, Seller shall return the original Letter of Credit to Citadel for cancellation. 3.3 ALLOCATION OF THE PURCHASE PRICE. Citadel, License Sub and Seller shall report the transactions contemplated by this Agreement for federal and state tax purposes in a manner consistent with the allocation of the Purchase Price mutually agreed upon by Citadel, License Sub and Seller. SECTION 4 REPRESENTATIONS AND WARRANTIES OF SELLER In connection with the purchase and sale of the Purchased Assets under this Agreement and in order to induce Citadel and License Sub to enter into and consummate the transactions contemplated by this Agreement, Seller makes the following representations and warranties to Citadel and License Sub, as of the date of this Agreement and as of the date of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times): 4.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, and has full corporate power and authority (a) to own its assets and properties and to conduct the business in which it is now engaged (the "BUSINESS") and (b) to enter into this Agreement and to consummate the transactions contemplated hereby. Seller has full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own its properties and to conduct the Business. 9 11 4.2 AUTHORITY. The execution and delivery of this Agreement by Seller, the performance by Seller of its covenants and agreements hereunder and the consummation by Seller of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Seller. This Agreement constitutes the valid and legally binding agreement of Seller, enforceable against Seller in accordance with its terms. 4.3 NO LEGAL BAR; CONFLICTS. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of Seller, or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which Seller is a party or by which Seller or any of the assets of Seller is bound. Except for the FCC Approval, compliance with the HSR Act and the consents disclosed in SCHEDULE 4.0 to this Agreement ("SELLER'S DISCLOSURE SCHEDULE"), no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 4.4 FINANCIAL STATEMENTS. Seller has delivered to Citadel the following financial statements of Seller (which include all of Seller's operations (including operations of the Station, as well as operations of Seller's television station), except that Seller does maintain separate income and expense statements with respect to the Station): (a) the reviewed balance sheets as of December 31, 1995 and December 31, 1996 and the related statements of income and cash flows for each of the years then ended; (b) the unaudited balance sheet as of June 30, 1997 and the related statements of income and cash flows for the six months then ended; and (c) the quarterly unaudited balance sheets and income statements for each quarter in 1996 and the monthly unaudited balance sheets and income statements for the first six months of 1997. Each of the foregoing financial statements (including in all cases the notes thereto, if any) (i) is accurate and complete in all material respects, (ii) is consistent in all material respects with the books and records of Seller (which, in turn, are accurate and complete in all material respects) and (iii) presents fairly in all material respects the financial condition and results of operations of Seller in accordance with GAAP (subject in the case of unaudited financial statements to the lack of footnote disclosure and changes resulting from normal year-end audit adjustments), consistently applied, as of the dates and for the periods set forth therein. Seller shall cooperate with Citadel in obtaining, at Citadel's expense, audited financial statements with respect to the Station for periods commencing on or after January 1, 1996. 4.5 ABSENCE OF CERTAIN CHANGES. Between December 31, 1996 and the date of this Agreement, except as disclosed in SELLER'S DISCLOSURE SCHEDULE, there has not been any (a) material adverse change in the condition of the Station, financial or otherwise, or in the results of operations, assets, liabilities or business of the Station; (b) damage or destruction, whether or not insured, affecting the business operations of the Station; (c) labor dispute or threatened labor 10 12 dispute involving any of the employees of the Station; (d) actual or threatened dispute pertaining to the Station with any material provider of software, hardware or services; (e) material change in the customary methods of operations of the Station; (f) except in the ordinary course of business or to the extent not material to the Business or financial condition of the Station, sale or transfer of any tangible or intangible asset used or useful in the operation of the Station, mortgage, pledge or imposition of any Lien on any such asset, lease of real property, machinery, equipment or buildings with respect to the Station entered into or modification, amendment or cancellation of any of its existing leases relating to the Station, or cancellation of any debt or claim; or (g) liability or obligation (contingent or otherwise) incurred under agreements or otherwise, except current liabilities entered into or incurred in the ordinary course of business consistent with past practices. 4.6 TAXES. Except as disclosed in SELLER'S DISCLOSURE SCHEDULE, Seller has filed or caused to be filed on a timely basis all federal, state, local and other tax returns, reports and declarations required to be filed by it with respect to the Station and has paid all Taxes (including, but not limited to, income, franchise, sales, use, unemployment, withholding, social security and workers' compensation taxes and estimated income and franchise tax payments, penalties and fines) reflected as due on such returns, reports or declarations (whether or not shown on such returns, reports or declarations), or pursuant to any assessment received by it in connection with such returns, reports or declarations. All returns, reports and declarations filed by or on behalf of Seller are true, complete and correct in all material respects. No deficiency in payment of any Taxes for any period has been asserted by any taxing authority which remains unsettled at the date hereof, no written inquiries have been received by Seller from any taxing authority with respect to possible claims for taxes or assessments, and there is no basis for any additional claims or assessments for Taxes. Since December 31, 1996, Seller has not incurred any liability for Taxes which materially affect the operation of the Station other than in the ordinary course of business. All Taxes attributable to the Station or its income, operations or properties accruing up to and including the Closing (the "ACCRUED TAXES") have been or will be paid when due regardless of whether such Taxes are due and payable as of the Closing. 4.7 ASSET SCHEDULE. The ASSET SCHEDULE includes complete and accurate (a) listings of all Personal Property; (b) descriptions of all Real Property Leases and Assigned Contracts, none of which requires any consent of third parties in connection with the transactions contemplated hereby, except otherwise as indicated in SELLER'S DISCLOSURE SCHEDULE; (c) descriptions of all of the Intellectual Property; and (d) listings of all of the FCC Licenses, all of the foregoing of which will, as of the Closing, be owned and held by Seller as reflected in the ASSET SCHEDULE. 4.8 TITLE TO AND CONDITION OF PROPERTY. (a) TITLE. Seller will as of the Closing have good, marketable and exclusive title to and undisputed possession of all of the personal and tangible property and improvements 11 13 included in the Purchased Assets. Except as set forth on SELLER'S DISCLOSURE SCHEDULE, the Purchased Assets are now free and clear of all Liens. The Purchased Assets will, as of the Closing, be free and clear of all Liens. (b) CONDITION. The Personal Property, prior to their removal (if any) pursuant to Section 9.11, is structurally sound, in reasonably good condition, ordinary wear and tear excepted, adequate and suitable for the operation of the Station as it is currently being operated, and in proper condition and repair so that the Station can operate according to its FCC Licenses, the rules, regulations and policies of the FCC and in all other respects in compliance with the Act and all other applicable federal and state laws. (c) INSURANCE. The Personal Property included among the Purchased Assets is and will be insured through the Closing Date in amounts adequate to replace or repair any casualty or other insurable loss to any of such property. (d) SUFFICIENCY OF ASSETS. The Purchased Assets include all of the assets, of a sufficient nature, condition and quantity, needed in the broadcast chain of the Station (i.e., from studio to transmission). Seller has not, since December 31, 1996, removed any material item of Personal Property from the Station other than removals in the ordinary course of business which were not done in contemplation of the transactions contemplated hereby. (e) REAL PROPERTY LEASES. (i) The ASSET SCHEDULE contains accurate descriptions of the Real Property Leases and the location of the real estate leased thereunder (the "LEASEHOLDS") and the type of facility located on the Leaseholds. Seller will as of the Closing have a valid leasehold interest in its respective Leaseholds. (ii) None of the Leaseholds is subject to any covenant or restriction preventing or limiting in any material respect the consummation of the transactions contemplated hereby, except for any consent listed on SELLER'S DISCLOSURE SCHEDULE required of the landlords under the Real Property Leases. Seller's right, title and interest in and to the Leaseholds will at the Closing be held by Seller free and clear of all Liens. (iii) The use for which the Leaseholds are zoned permits the use thereof for the business of the Station consistent with past practices. The use and occupancy of the Leaseholds by Seller are in compliance in all material respects with all regulations, codes, ordinances and statutes applicable to Seller and Seller has not received any notice asserting any material violation of sanitation laws and regulations, occupational safety and health regulations, or electrical codes. (iv) There are no facts relating to Seller, and to the best of the knowledge of Seller, no facts relating to any other party, that would prevent the Leaseholds from 12 14 being occupied and used by Citadel and/or any assignee of Citadel after the Closing Date in the same manner as immediately prior to the Closing. (v) There is not under any Real Property Lease any material default by Seller or any condition that with notice or the passage of time or both would constitute such a default, and Seller has not received any notice asserting the existence of any such default or condition. (vi) Each Real Property Lease is valid and binding and in full force and effect as to Seller, and to the best of the knowledge of Seller, as to each other party thereto, and except as disclosed on the ASSET SCHEDULE, has not been amended or otherwise modified. (vii) The Leaseholds constitute all of the real property in which Seller has a leasehold interest or other interest or right (whether as lessor or lessee) and which is or will prior to the Closing be used solely in the operation of the Station. 4.9 CONTRACTUAL AND OTHER OBLIGATIONS. Set forth in the ASSET SCHEDULE is a description of all (a) Real Property Leases to which Seller is a party; (b) all contracts, agreements, licenses, leases, arrangements and other documents used solely in connection with the present operation of the Station to which Seller is a party or by which Seller or any of the assets of Seller are bound (including, in the case of loan agreements, a description of the amounts of any outstanding borrowings thereunder and the collateral, if any, for such borrowings); (c) uncompleted orders for the purchase by Seller of materials, supplies, equipment and services for the requirements of the Station existing as of the date hereof and with respect to which the remaining obligation of Seller is in excess of $2,500; and (d) contingent contractual obligations and liabilities of Seller known to Seller existing as of the date hereof (all of the foregoing, collectively, the "CONTRACTS"). Each of the Contracts is designated in the ASSET SCHEDULE either as an Assigned Contract, or as a Contract that will not be assigned to Citadel. Neither Seller nor, to the best of the knowledge of Seller, any other Person is in material default in the performance of any covenant or condition under any Contract and no claim of such a default has been made and no event has occurred which with the giving of notice or the lapse of time would constitute such a default under any covenant or condition under any Contract. Seller is not a party to any Contract which would terminate or be materially adversely affected by the consummation of the transactions contemplated by this Agreement. Originals or true, correct and complete copies of all of the Assigned Contracts have been provided to Citadel as of the date of this Agreement. 4.10 COMPENSATION. Set forth in SELLER'S DISCLOSURE SCHEDULE is a list of (a) all agreements between Seller and its employees or other Persons providing services for compensation with regard to the Station, whether individually or collectively, and (b) all employees of Seller or other Persons providing services for Seller with respect to the Station entitled to receive annual compensation in excess of $5,000 and their respective positions, job categories and salaries, other than employees of Seller who will remain with Seller after the Closing (as specified in SELLER'S DISCLOSURE SCHEDULE) (the "EXCLUDED EMPLOYEES"). The transactions contemplated by this Agreement will not result in any liability for severance pay to 13 15 any such employee or other Person. Seller has not informed any such employee or other Person that such Person will receive any increase in compensation or benefits or any ownership interest in Seller or its Business. Except as disclosed in SELLER'S DISCLOSURE SCHEDULE, all of the employees of Seller (other than the Excluded Employees) are "at will" employees and may be terminated by Seller at any time, without liability or obligation except the payment of normal compensation accrued up to the time of termination of employment. 4.11 EMPLOYEE BENEFIT PLANS. (a) Seller does not maintain or sponsor, and is not required to make contributions to, any pension, profit-sharing, savings, bonus, incentive or deferred compensation, severance pay, medical, life insurance, welfare or other employee benefit plan which affects the employees working at the Station, except as set forth in SELLER'S DISCLOSURE SCHEDULE. SELLER'S DISCLOSURE SCHEDULE fully discloses all of the plans, funds, policies, programs, arrangements or understandings sponsored or maintained by Seller pursuant to which any employee of the Station (or any dependent or beneficiary of any such employee) might be or become entitled to (1) retirement benefits; (2) severance or separation from service benefits; (3) incentive, performance, stock, share appreciation or bonus awards; (4) health care benefits; (5) disability income or wage continuation benefits; (6) supplemental unemployment benefits; (7) life insurance, death or survivor's benefits; (8) accrued sick pay or vacation pay; (9) any type of benefit offered under any arrangement subject to characterization as an "employee welfare benefit plan" within the meaning of section 3(3) of ERISA; or (10) benefits of any other type offered through any arrangement that could be characterized as providing for additional compensation or fringe benefits. As to any such plan, fund, policy, program, arrangement or understanding, all of the following are true: (A) all amounts due as contributions, insurance premiums and benefits to the date hereof have been fully paid by Seller; (B) all applicable material requirements of law have been observed with respect to the operation thereof, and all applicable reporting and disclosure requirements have been timely satisfied; and (C) Seller is not aware of any claim or demand by any employee (or beneficiary or dependent of any employee) for benefits (other than routine claims for benefits), or by any taxing authority for taxes or penalties which has not been satisfied in full or which may be or become subject to litigation or arbitration. (b) Seller has no obligation to provide health or other welfare benefits to former, retired or terminated employees, except as specifically required under Section 4980B of the Code. Seller has substantially complied with any applicable notice and continuation requirements of Section 4980B of the Code and the regulations thereunder. 4.12 LABOR RELATIONS. There have been no material violations of any federal, state or local statutes, laws, ordinances, rules, regulations, orders or directives with respect to the employment of individuals by, or the employment practices or work conditions of, Seller, or the terms and conditions of employment, wages (including overtime compensation) and hours. The Station is not engaged in any unfair labor practice or other unlawful employment practice and there are no charges of unfair labor practices or other employee-related complaints pending or threatened against the Station before the National Labor Relations Board, the Equal Employment 14 16 Opportunity Commission, the Occupational Safety and Health Review Commission, the Department of Labor or any other Governmental Authority. There is no strike, picketing, slowdown or work stoppage or organizational attempt pending, threatened against or involving the Station. No issue with respect to union representation is pending or threatened with respect to the employees of the Station. 4.13 INCREASES IN COMPENSATION OR BENEFITS. Subsequent to December 31, 1996, there have been no increases in the compensation payable or to become payable to any of the employees of Seller who work solely at the Station (other than the Excluded Employees), nor has Seller paid or provided for any awards, bonuses, stock options, loans, profit-sharing, pension, retirement or welfare plans or similar or other payments or arrangements for or on behalf of such employees in each case other than (a) pursuant to currently existing plans or arrangements set forth in SELLER'S DISCLOSURE SCHEDULE or (b) as was required from time to time by governmental legislation affecting wages. The vacation policy of Seller is set forth in SELLER'S DISCLOSURE SCHEDULE. No employee of Seller who works solely at the Station (other than the Excluded Employees) is entitled to vacation time in excess of two weeks during the current calendar year and no such employee has any accrued vacation time with respect to any period prior to the current calendar year, except as set forth in SELLER'S DISCLOSURE SCHEDULE. 4.14 INSURANCE. Seller maintains insurance policies covering all of its properties and assets and the various occurrences which may arise in connection with the operation of the Station, each of which policies is summarized in SELLER'S DISCLOSURE SCHEDULE. Such policies are in full force and effect and all installments of premiums due thereon have been paid in full. Seller has complied with the provisions of such policies. There are no notices of any pending or threatened termination or premium increases with respect to any of such policies. There has been no casualty loss or occurrence which may give rise to any claim of any kind not covered by insurance and Seller is not aware of any casualty occurrence which may give rise to any claim of any kind not covered by insurance. No third party has filed any claim against Seller for personal injury or property damage of a kind for which liability insurance is generally available which is not fully insured, subject only to the standard deductible. 4.15 LITIGATION; DISPUTES. There are no claims, disputes, actions, suits, investigations or proceedings pending or threatened against or affecting the Station, and, to the best of the knowledge of Seller, there is no basis for any such claim, dispute, action, suit, investigation or proceeding. Seller has no knowledge of any default under any such action, suit or proceeding. Seller is not in default in respect of any judgment, order, writ, injunction or decree of any Governmental Authority with respect to the operation of the Station. 4.16 ENVIRONMENTAL. (a) Prior to the execution of this Agreement, Seller has provided to Citadel a true and correct copy of all environmental site assessments, studies, reports and communications relating to the Purchased Assets. 15 17 (b) Except as disclosed on SELLER'S DISCLOSURE SCHEDULE, (i) there are no conditions, facilities, procedures or any other facts or circumstances that constitute Environmental Noncompliance on any of the Leaseholds and (ii) there is not constructed, placed, deposited, stored, disposed of, nor located on any of the Leaseholds any asbestos in any form that has released or, unless disturbed, threatens to release airborne asbestos fibers in excess of applicable local, state and federal standards. (c) Except as disclosed on SELLER'S DISCLOSURE SCHEDULE, no structure, improvements, equipment, fixtures, activities or facilities located on the Leaseholds uses Hazardous Materials except those used in the ordinary course of the Business and in compliance with applicable Environmental Laws. (d) Except as specifically described on SELLER'S DISCLOSURE SCHEDULE, there have been no releases or threatened releases of Hazardous Materials into the environment, or which otherwise contribute to Environmental Conditions arising solely from the activities of Seller with respect to the Station or the Purchased Assets, or to the best of the knowledge of Seller arising from any other activities with respect to the Station or the Purchased Assets, except to the extent that such releases or threatened releases do not constitute a condition of Environmental Noncompliance relating to the Leaseholds. (e) Except as disclosed on SELLER'S DISCLOSURE SCHEDULE, there are no underground storage tanks, or underground piping associated with tanks, used for the management of Hazardous Materials at the Leaseholds and there are no abandoned underground storage tanks at the Leaseholds which have not been either abandoned in place or removed pursuant to a permit issued by a Governmental Authority. (f) Seller is not subject to any Environmental Claims against the Station or the Purchased Assets, no such Environmental Claim has been threatened, nor, to the best of the knowledge of Seller, is there any basis for any such Environmental Claims. 4.17 PERMITS, COMPLIANCE WITH APPLICABLE LAW. (a) GENERAL. Seller is not in default under any, and has complied with all, statutes, ordinances, regulations, orders, judgments and decrees of any Governmental Authority applicable to it or to the Business or the assets and properties of Seller as to which a default or failure to comply might result in any material adverse change in the condition, financial or otherwise, assets or properties of Seller or the Business. Seller has no knowledge of any basis for assertion of any violation of the foregoing or for any claim for compensation or damages or otherwise arising out of any violation of the foregoing. Seller has not received any notification of any asserted present or past failure to comply with any of the foregoing which has not been satisfactorily responded to in the time period required thereunder. (b) PERMITS. Set forth in SELLER'S DISCLOSURE SCHEDULE are complete and accurate lists of all FCC Licenses applicable to the Station, and all other permits, licenses, 16 18 approvals, franchises, notices and authorizations issued by any Governmental Authorities (collectively, the "PERMITS"), held by Seller and applicable to the Station. The Station is operating in accordance with the Act and its FCC Licenses and is in compliance with the Act and the rules, regulations and policies of the FCC. The Permits set forth in SELLER'S DISCLOSURE SCHEDULE are all of the Permits required for the conduct of the Business. All of the Permits set forth in SELLER'S DISCLOSURE SCHEDULE are in full force and effect, and Seller has not engaged in any activity which would cause or permit revocation or suspension of any such Permit, and no action or proceeding looking to or contemplating the revocation or suspension of any such Permit is pending or threatened. There are no existing defaults or events of default or events or state of facts which with notice or lapse of time or both would constitute a default by Seller under any such Permit. There is no default or claimed or purported or alleged default or state of facts which with notice or lapse of time or both would constitute a default on the part of any party in the performance of any obligation to be performed or paid by any party under any Permit set forth in SELLER'S DISCLOSURE SCHEDULE. Except for (1) the FCC Approval, (2) compliance with the HSR Act and (3) as set forth in SELLER'S DISCLOSURE SCHEDULE, the consummation of the transactions contemplated hereby will in no way affect the continuation, validity or effectiveness of the Permits set forth in SELLER'S DISCLOSURE SCHEDULE, or require the consent of any Person. Except as set forth in SELLER'S DISCLOSURE SCHEDULE, Seller is not required to be licensed by, and is not subject to the regulation of, any Governmental Authority by reason of the Business. 4.18 INTELLECTUAL PROPERTY. The use of the Intellectual Property in connection with the operation of the Station and in a manner consistent with past practices does not infringe upon the proprietary rights of any other Person. Citadel and License Sub will, upon consummation of the transactions contemplated by this Agreement, possess adequate rights, licenses and other authority to use the Intellectual Property used by the Station in the operation of the Station following the Closing in the manner now operated, without infringement or unlawful or improper use of any of the Intellectual Property, except that the Station's call letters shall not constitute part of the Intellectual Property. No director, officer or employee of Seller has any interest in any of the Intellectual Property, all of which will, as of the Closing, be free and clear of all Liens. Seller has no knowledge of any infringement by any Person upon the rights of Seller with respect to the Intellectual Property. Seller has not granted any outstanding licenses or other rights to any of the copyrights, trademarks, trade names or other similar rights with regard to any of the Intellectual Property. 4.19 BOOKS AND RECORDS. The books of account of Seller fairly and accurately reflect its income, expenses, assets and liabilities and have been maintained in accordance with good business practices. All of such books and records, to the extent included within the Purchased Assets, will be located on the date of the Closing on the business premises of the Station. 4.20 ACTS TO BE PERFORMED. Seller shall perform each of the covenants, acts and undertakings of Seller to be performed on or before the Closing Date pursuant to the terms of this Agreement. 17 19 4.21 RELATED PARTY OBLIGATIONS. Except as set forth on the ASSET SCHEDULE, no officer, director, shareholder or Affiliate of Seller, or any individual related by blood or marriage to any such Person, or any entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment, promissory note, loan, any other actual or proposed transaction with Seller, or has any material interest in any material property used by Seller, which is material to the operation of the Station. 4.22 DISCLOSURE. To the best of Seller's knowledge, no representation or warranty made under this Section 4 and none of the information furnished by Seller set forth in this Agreement or in the schedules or exhibits to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements in this Agreement or in the schedules or exhibits to this Agreement not misleading. SECTION 5 REPRESENTATIONS AND WARRANTIES OF CITADEL AND LICENSE SUB In connection with the purchase and sale of the Purchased Assets under this Agreement and in order to induce Seller to enter into and consummate the transactions contemplated by this Agreement, Citadel and License Sub make the following representations and warranties to Seller, as of the date of this Agreement and as of the date of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times): 5.1 ORGANIZATION AND QUALIFICATION. Each of Citadel and License Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and each has full corporate power and authority (a) to own its assets and properties and to conduct its business and (b) to enter into this Agreement and consummate the transactions contemplated hereby. Citadel has duly qualified to do business as a foreign corporation and is in good standing under the laws of the Commonwealth of Pennsylvania. Each of Citadel and License Sub has full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own its properties and to conduct its business. 5.2 AUTHORITY. The execution and delivery of this Agreement by Citadel and License Sub, the performance by Citadel and License Sub of their respective covenants and agreements hereunder and the consummation by Citadel and License Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and legally binding agreement of Citadel and License Sub, enforceable against each of them in accordance with its terms. 5.3 NO LEGAL BAR: CONFLICTS. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of Citadel or License Sub, or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any 18 20 Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of, any contract, commitment, agreement, understanding or arrangement of any kind to which Citadel or License Sub is a party or by which Citadel, License Sub or any of the assets of Citadel or License Sub is bound. Except for the FCC Approval, compliance with the HSR Act and the consents disclosed in SCHEDULE 5.0 ("CITADEL'S DISCLOSURE SCHEDULE"), no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of Citadel or License Sub in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 5.4 ACTS TO BE PERFORMED. Citadel and License Sub shall perform each of the covenants, acts and undertakings of Citadel and License Sub to be performed on or before the Closing Date pursuant to the terms of this Agreement. 5.5 LITIGATION. There is no litigation, proceeding or investigation pending or, to the best of Citadel's knowledge, threatened against or affecting Citadel or License Sub that is reasonably likely to prevent or hinder the consummation of the transactions contemplated by this Agreement. 5.6 DISCLOSURE. To the best of Citadel's knowledge, no representation or warranty made under this Section 5 and none of the information furnished by Citadel or License Sub set forth in this Agreement or in the schedules or exhibits to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements in this Agreement or in the schedules or exhibits to this Agreement not misleading. SECTION 6 AFFIRMATIVE COVENANTS OF SELLER Seller covenants and agrees with Citadel and License Sub to: 6.1 COMPLIANCE WITH LAW. Comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated hereby. 6.2 PAYMENT OF OBLIGATIONS. Fully discharge all Obligations of Seller, except the Assumed Obligations, on a timely basis. 6.3 ACCESS. Afford Citadel and its authorized representatives, upon reasonable notice to Seller, reasonable access during normal business hours to the Station and the Station's employees, and permit Citadel and its authorized representatives to examine all operations, equipment, properties and other assets, logs, books, relevant records, contracts and documents of Seller pertinent to the Station; provided, however, that in each instance (a) mutually satisfactory arrangements shall be made in advance in order to avoid interruption and to minimize interference 19 21 with the normal business and operations of the Station and (b) Citadel shall comply with Section 9.12. 6.4 PRESERVATION OF ORGANIZATION. Exercise all reasonable efforts to preserve the business organization of the Station intact, and assist Citadel, as and when requested by Citadel, to preserve the present relationships of the Station with employees, suppliers, advertisers and customers and others having business relationships with the Station; provided, however, that nothing contained in this Agreement shall require Seller to expend money in fulfillment of its obligations set forth in this Section 6.4 other than those expenditures that Seller would have made in the ordinary course of the business of the Station and consistent with past practices. 6.5 BOOKS AND RECORDS. Maintain the books and records of Seller in accordance with good business practices, on a basis consistent with past practices, and promptly make available to Citadel the books, records, tax returns, leases, contracts and other documents or agreements material to the Station as Citadel, its counsel, accountants or other authorized representatives may from time to time reasonably request. 6.6 EMPLOYEES. Pay as and when the same shall become due and payable any amounts owed by Seller to its employees who have performed services up to the time of Closing, whether fixed or accrued, for wages, vacation pay, sick pay, severance pay, employee benefits, damages and otherwise. 6.7 COMPLIANCE WITH FCC MATTERS. Comply with the FCC Licenses applicable to the Station and with the provisions of the Act, the rules, regulations and policies of the FCC, and with all other laws, ordinances, regulations, rules and orders of any Governmental Authority applicable to Seller or to the Station. 6.8 TAXES. File all federal, state and municipal tax returns, reports and declarations required to be filed by Seller prior to the Closing, and satisfy all Taxes related thereto, and either pay in full on or before the Closing or effect a proration pursuant to Section 9.2 for all Accrued Taxes attributable to Seller, or its income, operations or properties, accruing through the Closing, regardless of whether such Taxes otherwise would have been then due and payable. 6.9 TRADE-OUTS. Citadel shall assume as of the Closing the Trade Agreements existing as of the Closing and that have not yet been performed. To the extent that the aggregate liability of the Station as of the Closing for unperformed time under the Trade Agreements (the "TRADE LIABILITIES") exceeds the value of the goods and services to be received by the Station or Citadel after the Closing under the Trade Agreements (the "TRADE RECEIVABLES"), the Cash Purchase Price payable at the Closing shall be reduced by the amount by which the Trade Liabilities exceeds the Trade Receivables (the "TRADE IMBALANCE"). Seller shall deliver to Citadel at the Closing a schedule of Trade Liabilities and Trade Receivables existing as of the Closing (the "TRADE SCHEDULE"). Seller shall exercise reasonable efforts to minimize the amount of additional Trade Liabilities incurred after execution of this Agreement, and to prevent a Trade Imbalance. For purposes hereof, the term "TRADE AGREEMENTS" means and includes those agreements entered into 20 22 by Seller for the sale of advertising time on the Station for consideration other than cash. For purposes hereof, the value of Trade Receivables and the Trade Liabilities as of the Closing shall be the fair market value thereof, as previously agreed to by Seller and the applicable vendor. Citadel shall assume Seller's remaining obligations under such contracts. 6.10 SUPPLEMENTAL FINANCIAL STATEMENTS. Seller shall provide Citadel with copies of the monthly unaudited income statements and balance sheets applicable to the Station prepared by Seller from the date hereof until Closing in the ordinary course of business (collectively, the "SUPPLEMENTAL FINANCIAL STATEMENTS"). Seller shall provide such Supplemental Financial Statements to Citadel promptly upon such Supplemental Financial Statements becoming available to Seller. The Supplemental Financial Statements shall be subject to the representations and warranties as set forth in Section 4.4. 6.11 CONSENTS. Exercise all reasonable efforts (not involving the payment by Seller of any money to any party to any Assigned Contract) to obtain, prior to the Closing the consent and approval of any third parties whose consent or approval is necessary in connection with the consummation of the transactions contemplated hereby, with respect to the Assigned Contracts set forth on SELLER'S DISCLOSURE SCHEDULE and requiring such consent. If any such consent or approval is not obtained, Seller will use commercially reasonable efforts (not involving the payment of money to any Person) to secure an arrangement satisfactory to Citadel intended to provide for Citadel following the Closing the benefits under each Assigned Contract for which such consent or approval is not obtained; provided, however, that Citadel shall have the right to terminate this Agreement or to seek damages or other remedies from Seller as a result of any failure by Seller to obtain any such consent or approval set forth on SELLER'S DISCLOSURE SCHEDULE, if alternative arrangements are not satisfactory to Citadel. Seller shall also execute a consent in a form provided by Citadel, allowing Citadel to assign all of its rights under this Agreement and any related documents to one or more of Citadel's lenders upon default by Citadel under the relevant loan documents. Nothing in this Agreement will constitute a transfer or an attempted transfer of any Assigned Contract which by its terms or under applicable law or governmental rules or regulations requires the consent or approval of a third party (including, without limitation, a Governmental Authority) unless such consent or approval is obtained. 6.12 FURTHER INFORMATION. Furnish to Citadel prior to the Closing such financial (including tax), legal and other information with respect to Seller and the Station as Citadel or its authorized representatives may from time to time reasonably request. 6.13 NOTICE. Promptly notify Citadel in writing upon the occurrence or the nonoccurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty of Seller set forth in this Agreement. 21 23 SECTION 7 NEGATIVE COVENANTS OF SELLER From and after the date of this Agreement and until the Closing, Seller shall not take, or cause to be taken, any of the following actions without Citadel's prior approval, which may not be unreasonably withheld: 7.1 SALES, TRANSFERS AND LIENS. Make any sale, transfer, assignment, conveyance, mortgage, hypothecation, encumbrance or other placement of any Lien on any of the Purchased Assets, except in the ordinary course of business, which do not materially interfere with the operations of the Station, and which in the case of a sale, transfer or assignment, is replaced with an asset of equal or greater value, and, in the case of a conveyance, mortgage, hypothecation, encumbrance or other Lien, is released at or prior to the Closing. 7.2 ASSUMED OBLIGATIONS. Amend, terminate or renew any of the Assumed Obligations (including any renewal or termination resulting from the failure to provide, after the date of this Agreement, timely notice of nonrenewal or termination as required by the terms of any of the Assumed Obligations). 7.3 BREACHES, DEFAULTS. Do any act or omit to do any act, or permit any act or omission to occur, that will cause a breach of any contract, commitment or obligation of it or them in any respect that would have a material adverse effect on the Purchased Assets or the business operations of the Station as presently conducted. 7.4 OBLIGATIONS. Incur any Obligations except in the ordinary course of business in a manner consistent with past practices. 7.5 SALARY INCREASES. Increase any salary, other payments, disbursement or distributions in any manner or form to any employees of Seller (other than the Excluded Employees) except (A) in the ordinary course of business consistent with past practices or (B) in accordance with the existing terms of contracts entered into prior to the date of this Agreement. 7.6 NON-SOLICITATION. Directly or indirectly solicit or negotiate with any Person (other than a party hereto) or accept any proposal to acquire Seller or the Station in whole or in part. SECTION 8 COVENANTS OF CITADEL AND LICENSE SUB Citadel and License Sub hereby covenant as follows: 22 24 8.1 COMPLIANCE WITH LAW. Citadel and License Sub shall comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated by this Agreement. 8.2 NOTICE. Citadel and License Sub shall promptly notify Seller in writing upon the occurrence or the non-occurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty of Citadel or License Sub set forth in this Agreement. 8.3 ACCOUNTS RECEIVABLE. Subject to Citadel's receipt from Seller at the Closing of a list (the "ACCOUNTS RECEIVABLE LIST") of accounts receivable of the Station existing as of the Closing, exclusive of Trade Receivables, if any (the "ACCOUNTS RECEIVABLE"), for a period of 120 days commencing with the Closing Date (the "CITADEL COLLECTION PERIOD"), Citadel, as agent for Seller, shall collect the Accounts Receivable in accordance with Citadel's normal collection processes and procedures. In no event shall Citadel be required to institute litigation or to retain third parties to institute collection procedures with respect to the Accounts Receivable. All remittances will be applied first to the oldest Accounts Receivable, unless the client asserts that a dispute exists with respect to a particular account or the client specifies the particular invoice to which the payment is to be applied, in which case the remittances shall be applied to the specific account and Citadel shall promptly notify Seller of any dispute. Remittances collected by Citadel on behalf of Seller shall be remitted to Seller without offset of any kind within 10 days after the end of each calendar month during the Citadel Collection Period, and within five days after termination of the Citadel Collection Period. During the Citadel Collection Period, at Seller's option, Seller shall be permitted to collect the Accounts Receivable that remain outstanding after 60 days, or are disputed in writing by the relevant account debtor. Each remittance by Citadel to Seller shall be accompanied by a written report from Citadel setting forth the aggregate amount of the Accounts Receivable and the aggregate amount of cash collections of such Accounts Receivable during the period for which payment is made, along with a breakdown by account debtor. At the end of the Citadel Collection Period, Citadel shall account for all collected Accounts Receivable and provide Seller with all documentation related to uncollected Accounts Receivable, and Citadel shall have no further responsibilities with respect to any uncollected Accounts Receivables except to remit promptly to Seller any amounts subsequently received by Citadel. Citadel shall have no obligation with respect to any Accounts Receivable it is unable to collect. After the end of the Citadel Collection Period, Seller shall be entitled to collect any Accounts Receivable that remain uncollected. SECTION 9 ADDITIONAL COVENANTS OF THE PARTIES 9.1 APPLICATION FOR TRANSFER OF CONTROL. As promptly as practicable after the date of this Agreement, and in no event later than three business days after the date of this Agreement, Seller, Citadel and License Sub shall file an application (the "FCC APPLICATION") with the FCC 23 25 to approve the transfer of control of the Station from Seller to Citadel and License Sub (the "FCC APPROVAL"). Citadel shall have primary responsibility for filing and prosecuting the FCC Application. The parties agree that they shall prosecute the FCC Application (and shall cooperate with each other in the timely prosecution thereof), in good faith and with due diligence, and within the time allowed therefor by the rules and regulations of the FCC. Seller and Citadel shall each take all necessary actions on its part to obtain the FCC Approval. Citadel shall advance the filing fee for the FCC Application, and Seller shall reimburse Citadel for one-half of such filing fee at the Closing. All other costs and expenses incurred by each party in connection with the filing and prosecution of the FCC Application shall be paid by the party incurring the cost or expense. 9.2 ADJUSTMENTS AT CLOSING. Without duplication, the following items (in addition to similar items which are customarily prorated) shall be prorated between Citadel and Seller through and including the Closing Date, and the Cash Purchase Price appropriately increased or decreased as a result thereof: (a) Amounts payable under the Real Property Leases and the Assigned Contracts; (b) Power, utility and telephone charges incurred in connection with the Station; (c) Accrued Taxes existing as of the Closing; and (d) FCC and HSR filing fees, as provided in Sections 9.1 and 9.8, respectively. Proration of real and personal property taxes shall be based upon the most recent assessments available. Each of the parties shall duly cooperate with the other in making the foregoing prorations, adjustments and payments. If, for any reason beyond the reasonable control of the parties, information necessary to calculate the required prorations is unavailable before the Closing Date, such item shall be prorated after the Closing Date as soon as such information is available, and Seller and Citadel shall cooperate with each other in regard thereto and shall pay, each to the other, any amounts which may be owing as a result of such subsequent prorations. If, at any time after the Closing Date, errors are discovered in any prorations made pursuant to this Section 9.2, Seller and Citadel shall correct such errors and pay, each to the other, any sums owing as a result of such correction. All prorations to the extent feasible shall be made on the Closing Date. 9.3 BROKERAGE. Seller, Citadel and License Sub represent and warrant to each other that no Person (other than Broker) has provided services as a broker, agent or finder in connection with the transactions contemplated by this Agreement. Seller shall pay all fees, commissions, claims and expenses of Broker in connection with the transactions contemplated hereby. Seller, Citadel and License Sub shall each indemnify and hold harmless the other for any and all claims or expenses, including attorneys' fees, asserted by any Person purporting to act on 24 26 behalf of the respective indemnitor as a broker, agent or finder in connection with the transactions contemplated by this Agreement. 9.4 RISK OF LOSS. If any loss or damage to any of the Purchased Assets occurs prior to the Closing (i) which has a material adverse effect on the Station and (ii) such loss or damage is not susceptible of repair, replacement or restoration with sufficient, collectible insurance proceeds available for such purposes or by Seller at its sole cost and expense to substantially the same condition as existed before such loss or damage, then the parties shall adjust the Cash Purchase Price to reflect the diminution in value of the Station attributable to the impairment of such assets. 9.5 ACTIONS WITH FCC. In the event any investigation, order to show cause, notice of violation, notice of apparent liability or a forfeiture, material complaint, petition to deny or informal objection is instituted or filed against any party hereto (whether in connection with the proceedings to approve the FCC Application or otherwise), such party shall promptly notify the other party hereto in writing of such occurrence and shall thereafter immediately take all reasonable measures to contest the same in good faith and seek the removal or favorable resolution of such action, order, notice or complaint. 9.6 COOPERATION. During the seven-year period immediately following the Closing, Seller shall cooperate with Citadel in providing Citadel all information reasonably requested and permitting Citadel access to all records relating to the period of ownership of the Station by Seller prior to the Closing. The cost and expense in providing or permitting access to information hereunder shall be borne by Citadel. Citadel, as a condition to being provided with access to information hereunder, shall, at the request of Seller, execute a confidentiality agreement in form and substance acceptable to Seller in its reasonable discretion. Notwithstanding the foregoing, Seller may discard any such records during such seven-year period if (i) Seller notifies Citadel of Seller's intent to discard such records and (ii) Citadel does not, within 10 days after receipt of such notice, retrieve such records from Seller's premises. 9.7 LOCAL MARKETING AGREEMENT. Concurrently with the execution of this Agreement, Citadel and Seller shall execute and deliver a Local Marketing Agreement for the Station in the form of EXHIBIT B attached hereto (the "LOCAL MARKETING AGREEMENT"); provided, however, that the Local Marketing Agreement shall not be effective, and neither party shall have any obligations thereunder, until the later of (a) the date on which all applicable waiting periods under the HSR Act shall have expired or been terminated or (b) the date on which the FCC Approval shall have been obtained. 9.8 HSR FILING. As promptly as practicable after the date of this Agreement, and in no event later than 10 days after the date of this Agreement, the parties hereto shall complete and submit any filing that may be required pursuant to the HSR Act (the "HSR FILING"). The parties hereto shall diligently take, or fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested, in order to comply with the requirements of the HSR Act. The parties hereto shall use their best efforts to resolve objections, 25 27 if any, that may be asserted under the HSR Act or any other antitrust law in connection with the transactions contemplated hereby. Citadel shall advance the filing fee applicable to any HSR Filing, and Seller shall reimburse Citadel for one-half of such filing fee at the Closing. All other costs and expenses incurred by each party in connection with the filing and prosecution of any HSR Filing shall be paid by the party incurring the cost or expense. 9.9 ALLENTOWN ANTENNA LEASE. At the Closing, Seller, as lessor, and Citadel, as lessee, shall enter into an antenna lease at the Station's current tower site (the "ALLENTOWN ANTENNA LEASE") containing the following terms: (a) the term shall be 15 years; (b) rent shall be $1 per year during years 1 through 10 of such term, and $3,500 per month during years 11 through 15 of such term; (c) Citadel shall have three options to renew such lease for consecutive terms of five years, five years and four years and 11 months, respectively, with rent during each such option period equal to $3,500 per month (plus a cost of living adjustment made at the outset of each such option period); and (d) Seller may relocate the Station's current antenna site plus or minus 70 feet from its current location, so long as (i) the technical changes reflect the same coverage provided by the Station and (ii) the technical changes are pre-approved by Citadel in writing (which approval shall not be unreasonably withheld). Seller and Citadel shall negotiate in good faith the Allentown Antenna Lease, which shall contain the terms set forth in this Section 9.9 as well as such other customary and appropriate terms and conditions. 9.10 UNITED EDUCATIONAL BROADCASTING. In consideration of the parties entering into the Allentown Antenna Lease, Citadel shall provide antenna space for a low power educational transmitter/antenna licensed to United Educational Broadcasting, Inc. to share space on the Reading Courthouse Leasehold and on the transmission tower used by Citadel for its radio station WLEV(FM); provided, however, that this Section shall only remain in effect if (a) the Allentown Antenna Lease is in effect, (b) United Educational Broadcasting, Inc. is non-commercial and (c) the use of such transmitter/antenna does not interfere with any signal transmitted by any of Citadel's radio stations. 9.11 REMOVAL OF PERSONAL PROPERTY. To the extent necessary or appropriate, Citadel shall be responsible for removing, at its expense, the Personal Property from Seller's premises within a reasonable time after the Closing. 9.12 CONFIDENTIALITY. Citadel and License Sub shall maintain strict confidentiality with respect to all documents and information furnished to Citadel or License Sub by or on behalf of Seller. Notwithstanding the foregoing, nothing shall be deemed to be confidential information that (a) is known to Citadel or License Sub at the time of its disclosure to Citadel or License Sub; (b) becomes publicly known or available other than through disclosure by Citadel or License Sub; (c) is received by Citadel or License Sub from a third party not actually known by Citadel or License Sub to be bound by a confidentiality agreement with or obligation to Seller; or (d) is independently developed by Citadel or License Sub as clearly evidenced by its records. Notwithstanding the foregoing provisions of this Section, Citadel or License Sub may disclose such confidential information (x) to the extent required or deemed advisable to comply with applicable laws and regulations, (y) to its stockholders, officers, directors, employees, 26 28 representatives, financial advisors, attorneys, accountants and agents with respect to the transactions contemplated hereby (so long as such parties are informed of the confidentiality of such information), and (z) to any governmental authority in connection with the transactions contemplated hereby. In the event this Agreement is terminated, Citadel and License Sub will return to Seller all confidential information prepared or furnished by Seller relating to the transactions contemplated hereby, whether obtained before or after the execution of this Agreement. 9.13 PUBLIC ANNOUNCEMENTS. The parties hereto shall consult with each other before making any further public statements with respect to this Agreement or the transactions contemplated hereby and shall not issue any such press release or make any such public statement without the prior written consent of the other parties, which shall not be unreasonably withheld, conditioned or delayed; provided, however, that a party may, without the prior consultation with or written consent of the other parties, issue such press release or make such public statement as may be required by applicable law if it has used all reasonable efforts to consult with the other parties and to obtain such parties' consents but has been unable to do so in a timely manner. SECTION 10 THE CLOSING 10.1 CLOSING DATE. The Closing shall occur on a date mutually selected by Seller and Citadel which is within 10 business days following the later of (a) the date on which the FCC Approval has become a Final Order or (b) the date on which all applicable waiting periods under the HSR Act have expired or been terminated. The Closing shall begin at 10:00 a.m., local time, on the date of the Closing (the "CLOSING DATE") at the offices of Eckert Seamans Cherin & Mellott, LLC, counsel for Citadel and License Sub, or at such other time and place as the parties may agree in writing. 10.2 CLOSING DOCUMENTS. At the Closing: (a) Seller shall deliver to Citadel all certificates, consents (including any third party consents required as to the Assumed Obligations), estoppels and other documents (including bills of sale, assignments and the Letter of Credit) otherwise required to be delivered by Seller pursuant to this Agreement or as a condition precedent to Citadel's and License Sub's fulfillment of their obligations hereunder. (b) Citadel shall deliver to Seller the following: (i) immediately available funds in the aggregate amount of the Cash Purchase Price as required by the provisions of this Agreement; and (ii) all certificates and other documents (including an assumption agreement relating to the Assumed Obligations) required to be delivered by Citadel to Seller 27 29 pursuant to this Agreement or as a condition precedent to Seller's fulfillment of its obligations under this Agreement. SECTION 11 CONDITIONS TO SELLER'S OBLIGATION TO CLOSE The obligation of Seller to consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, any or all of which may be waived by Seller in its sole discretion (other than those set forth in Sections 11.7 and 11.8): 11.1 OPINION OF CITADEL'S AND LICENSE SUB'S COUNSEL. Seller shall have received an opinion of counsel for Citadel and License Sub, dated the date of the Closing, in form and substance reasonably satisfactory to Seller, to the effect that: (a) Each of Citadel and License Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. (b) Citadel is duly qualified and in good standing in the Commonwealth of Pennsylvania. (c) Each of Citadel and License Sub has full corporate power and authority to own its assets and properties and to conduct its business and has all necessary approvals, permits, licenses and authorizations to own its properties and to conduct its business in the manner and in the locations presently owned and conducted. (d) This Agreement, together with all other documents and instruments required to be executed or delivered by Citadel and License Sub in connection with the transactions contemplated hereby, each has been duly authorized, executed and delivered by Citadel and License Sub (to the extent a party thereto), and constitutes a valid and legally binding obligation of Citadel and License Sub (to the extent a party thereto), enforceable against each of them in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (e) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of Citadel or License Sub or, to the knowledge of such counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel after due investigation, violates or will violate, or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under, or results or will result in the termination of or the creation or imposition of any Lien pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which Citadel or 28 30 License Sub is a party or by which Citadel, License Sub or any of the assets of Citadel or License Sub is bound and which is known to such counsel, all as set forth on CITADEL'S DISCLOSURE SCHEDULE. Nothing contained in this Section 11.1 shall require an opinion by such counsel with respect to FCC matters. 11.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Citadel and License Sub contained herein shall be true and correct in all material respects at and as of the Closing with the same effect as though all such representations and warranties were made at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified except for such inaccuracies as do not, individually or in the aggregate, have a material effect on Citadel's or License Sub's ability to consummate the transactions contemplated by this Agreement) and Citadel and License Sub shall have delivered to Seller a certificate to that effect, dated the date of the Closing, signed by the President of Citadel and License Sub. 11.3 NO LITIGATION. No injunction relating to any action, suit or proceeding against Seller relating to the consummation of any of the transactions contemplated by this Agreement or any action by any Governmental Authority shall have been issued. 11.4 OTHER CERTIFICATES. Seller shall have received certificates as to the good standing of Citadel in the States of Nevada and Pennsylvania and of License Sub in the State of Nevada, each as of a date not more than 20 days before the Closing, and such other certificates, instruments and other documents, in form and substance satisfactory to Seller, as Seller shall have reasonably requested in connection with the transactions contemplated hereby. 11.5 CORPORATE ACTION. All corporate action necessary to authorize the execution, delivery and performance by Citadel and License Sub of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by Citadel and License Sub, and Citadel and License Sub shall have delivered to Seller certified copies of the resolutions of Citadel's and License Sub's board of directors authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of its officers and employees in carrying out the terms and provisions of this Agreement. 11.6 ACTS TO BE PERFORMED. Each of the covenants, acts and undertakings of Citadel and License Sub to be performed on or before the Closing Date pursuant to the terms hereof shall have been duly performed. 11.7 FCC APPROVAL. The FCC Approval shall have been obtained. 11.8 HSR CLEARANCE. All applicable waiting periods under the HSR Act shall have expired or been terminated. 29 31 SECTION 12 CONDITIONS TO CITADEL'S AND LICENSE SUB'S OBLIGATION TO CLOSE The obligation of Citadel and License Sub to consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, any or all of which may be waived by Citadel and License Sub in their sole discretion (other than those set forth in Sections 12.9 and 12.10): 12.1 OPINION OF SELLER'S COUNSEL. Citadel and License Sub shall have received an opinion of counsel for Seller, dated the date of the Closing, in form and substance reasonably satisfactory to Citadel and License Sub, to the effect that: (a) Seller is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. (b) Seller has full power and authority to own its assets and properties and to conduct the Business and has all necessary approvals, permits, licenses and authorizations to own its properties and to conduct the Business in the manner and in the locations presently owned and conducted. (c) This Agreement, together with all other documents and instruments required to be executed or delivered by Seller in connection with the transactions contemplated by this Agreement, each has been duly authorized, executed and delivered by Seller (to the extent it is a party thereto), and constitutes a valid and legally binding obligation of Seller (to the extent it is party thereto), enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (d) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of Seller or, to the knowledge of such counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel after due investigation, violates or will violate or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which Seller is a party or by which Seller, or any of the assets of Seller is bound and which is known to Seller's counsel, all as set forth on SELLER'S DISCLOSURE SCHEDULE. Except for (1) the FCC Approval, (2) compliance with the HSR Act and (3) the consents disclosed on SELLER'S DISCLOSURE SCHEDULE, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of Seller, in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 30 32 (e) To the knowledge of such counsel, except as disclosed on SELLER'S DISCLOSURE SCHEDULE, there are no claims, disputes, actions, suits or proceedings pending or threatened against Seller or any of the assets of Seller. Nothing contained in this Section 12.1 shall require an opinion of such counsel with respect to FCC matters. 12.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and warranties of Seller contained herein shall be true and correct in all material respects at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified except for such inaccuracies as do not, individually or in the aggregate, have a material effect on the Station, Seller's ability to consummate the transactions contemplated by this Agreement, or Seller's business as a whole) with the same effect as though all such representations and warranties were made at and as of the Closing and Seller shall have complied with all its covenants contained herein; and Seller shall have delivered to Citadel and License Sub a certificate to that effect, dated the date of the Closing, signed by the President of Seller. 12.3 NO LITIGATION. No injunction relating to any action, suit or proceeding against Seller, Citadel or License Sub relating to the consummation of any of the transactions contemplated by this Agreement shall have been issued. 12.4 OTHER CERTIFICATES. Citadel and License Sub shall have received a certificate as to the good standing of Seller as a corporation in Pennsylvania as of a date not more than 20 days before the Closing, and such other certificates, instruments and other documents customary for transactions of the nature provided for in this Agreement, in form and substance reasonably satisfactory to Citadel and License Sub, as Citadel and License Sub shall have reasonably requested in connection with the transactions contemplated by this Agreement. 12.5 CORPORATE ACTION. All corporate action necessary to authorize the execution, delivery and performance by Seller of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by Seller, and Seller shall have delivered to Citadel and License Sub certified copies of the resolutions of Seller's board of directors authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of its officers and employees in carrying out the terms and provisions of this Agreement. 12.6 ACTS TO PERFORMED. Each of the covenants, acts and undertakings of Seller to be performed on or before the Closing Date pursuant to the terms hereof shall have been duly performed. 12.7 UCC SEARCHES. Seller shall have delivered to Citadel and License Sub Uniform Commercial Code judgment and lien searches from the appropriate county and state agencies showing all Liens on the Purchased Assets, which searches shall be conducted not more than 30 31 33 days prior to the Closing. Seller may cause such lien searches to be prepared by a third party, in which case Seller shall not be responsible for any inaccuracies in such lien searches unless Seller has actual knowledge of their inaccuracy. Notwithstanding the foregoing, Seller shall remain responsible for satisfying any Lien on the Purchased Assets even if such searches are inaccurate. 12.8 FILINGS, CONSENTS, APPROVALS AND ESTOPPEL CERTIFICATES. All filings, consents, approvals and estoppel certificates required by or reasonably requested by Citadel and License Sub pursuant to this Agreement, or necessary to consummate the transactions contemplated by this Agreement, shall have been obtained. 12.9 FCC APPROVAL. The FCC Approval shall have been obtained. 12.10 HSR CLEARANCE. All applicable waiting periods under the HSR Act shall have expired or been terminated. SECTION 13 INDEMNIFICATION 13.1 INDEMNIFICATION BY SELLER. Subject to the limitations and procedures set forth in this Section 13, Seller shall indemnify and hold harmless Citadel and License Sub from and against all losses, claims, demands, damages, liabilities, obligations, costs and/or expenses, including, without limitation, reasonable fees and disbursements of counsel (hereinafter referred to collectively as "DAMAGES"), which are sustained or incurred by Citadel and License Sub, to the extent that such Damages are sustained or incurred by reason of the breach of any of the obligations, covenants or provisions of, or the breach of any of the representations or warranties made by, Seller in this Agreement. 13.2 INDEMNIFICATION BY CITADEL AND LICENSE SUB. Subject to the limitations and procedures set forth in this Section 13, Citadel and License Sub shall indemnify and hold harmless Seller from and against any and all Damages sustained or incurred by Seller, to the extent such Damages are sustained or incurred by Seller by reason of the breach of any of the obligations, covenants or provisions of, or the breach of any of the representations or warranties made by, Citadel or License Sub in this Agreement. 13.3 PROCEDURE FOR INDEMNIFICATION. In the event that any party to this Agreement shall incur any Damages in respect of which indemnity may be sought by such party pursuant to this Section 13 or any other provision of this Agreement, the party indemnified hereunder (the "INDEMNITEE") shall notify the party providing indemnification (the "INDEMNITOR") promptly. In the case of third party claims, such notice shall in any event be given within 10 days of the filing or assertion of any claim against the Indemnitee stating the nature and basis of such claim; provided, however, that any delay or failure to notify any Indemnitor of any claim shall not relieve it from any liability except to the extent that the Indemnitor demonstrates that the defense 32 34 of such action has been materially prejudiced by such delay or failure to notify. In the case of third party claims, the Indemnitor shall, within 10 days of receipt of notice of such claim, notify the Indemnitee of its intention to assume the defense of such claim. If the Indemnitor assumes the defense of the claim, the Indemnitor shall have the right and obligation (a) to conduct any proceedings or negotiations in connection therewith and necessary or appropriate to defend the Indemnitee, (b) to take all other required steps or proceedings to settle or defend any such claims, and (c) to employ counsel to contest any such claim or liability in the name of the Indemnitee or otherwise. If the Indemnitor shall not assume the defense of any such claim or litigation resulting therefrom, the Indemnitee may defend against any such claim or litigation in such manner as it may deem appropriate and the Indemnitee may settle such claim or litigation on such terms as it may deem appropriate, and assert against the Indemnitor any rights or claims to which the Indemnitee is entitled. Payment of Damages shall be made within 10 days of a final determination of a claim. A final determination of a disputed claim shall be (a) a judgment of any court determining the validity of disputed claim, if no appeal is pending from such judgment or if the time to appeal therefrom has elapsed, (b) an award of any arbitration determining the validity of such disputed claim, if there is not pending any motion to set aside such award or if the time within to move to set such award aside has elapsed, (c) a written termination of the dispute with respect to such claim signed by all of the parties thereto or their attorneys, (d) a written acknowledgment of the Indemnitor that it no longer disputes the validity of such claim, or (e) such other evidence of final determination of a disputed claim as shall be acceptable to the parties. SECTION 14 TERMINATION OF AGREEMENT: ADDITIONAL REMEDIES 14.1 MANNER. This Agreement and the transactions contemplated hereby may be terminated prior to completion of the Closing: (a) by mutual written consent of Citadel, License Sub and Seller; (b) by either Citadel and License Sub, on the one hand, or Seller, on the other, upon providing written notice to the other party at any time after June 30, 1998 if the FCC Approval has not been granted by the FCC, but only if the party providing such notice is not then in material breach of this Agreement; (c) by Citadel and License Sub, upon providing written notice to Seller, if as of the time set for Closing any of the conditions in Section 12 of this Agreement (except Sections 12.9 and 12.10) has not been satisfied or waived by Citadel and License Sub in writing, provided Citadel and License Sub are not then in material breach of this Agreement; (d) by Seller, upon providing written notice to Citadel and License Sub, if as of the time set for Closing any of the conditions in Section 11 of this Agreement (except Sections 33 35 11.7 and 11.8) has not been satisfied or waived by Seller in writing, provided Seller is not then in material breach of this Agreement; (e) by Seller, upon providing written notice to Citadel and License Sub, if Citadel or License Sub fails to consummate the transactions contemplated hereunder after all conditions in Section 12 of the Agreement have been satisfied, provided Seller is not then in material breach of this Agreement; (f) by Citadel and License Sub, upon providing written notice to Seller, if Seller fails to consummate the transactions contemplated hereunder after all conditions in Section 11 of this Agreement have been satisfied, provided Citadel and License Sub are not then in material breach of this Agreement; (g) subject to Section 9.1, by either party upon denial by the FCC of the FCC Application; and (h) by either party if any court of competent jurisdiction in the United States or any other United States governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other actions shall have become final and non-appealable. 14.2 ADDITIONAL REMEDIES. (a) In the event of the termination of this Agreement by Seller pursuant to Section 14.1(d) or 14.1(e) (any such event being a "DRAW CONDITION"), Seller shall be entitled to draw upon and receive the proceeds of the Letter of Credit, but shall not retain any rights to recover any actual damages it suffers as a result of such termination and the breach relating to such damages. In the event of any other termination of this Agreement pursuant to any other provision of Section 14.1, Citadel shall be entitled to a return of, and Seller shall return to Citadel, the original Letter of Credit and, in that event, Seller will no longer have any liability under this Agreement. (b) The parties recognize and agree that Citadel and License Sub have relied on this Agreement and expended considerable effort and resources related to the transactions contemplated hereunder, that the rights and benefits conferred upon Citadel and License Sub herein are unique, and that damages may not be adequate to compensate Citadel and License Sub in the event Seller improperly refuses to consummate the transactions contemplated hereunder. The parties therefore agree that Citadel and License Sub shall be entitled, at their option and in lieu of terminating this Agreement pursuant to Section 14.1, to have this Agreement specifically enforced by a court of competent jurisdiction; provided, however, that Citadel and License Sub may not specifically enforce this Agreement if they have previously terminated this Agreement and received the original Letter of Credit. 34 36 SECTION 15 GENERAL 15.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each representation and warranty herein contained shall survive the Closing, notwithstanding any investigation at any time made by or on behalf of any party to this Agreement. 15.2 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts, of the Commonwealth of Pennsylvania. 15.3 NOTICES. Any notices or other communications required or permitted under this Agreement shall be delivered personally or sent by registered or certified mail, postage prepaid, delivered by overnight delivery or sent by facsimile, addressed as follows: To Citadel or: Citadel Broadcasting Company License Sub 1015 Eastman Drive Bigfork, Montana 59911 Attn: Lawrence R. Wilson Fax: (406) 837-5373 With copy to: Citadel Broadcasting Company 140 South Ash Avenue Tempe, Arizona 85281 Attn: Donna L. Heffner Fax: (602) 731-5229 With a copy to: Eckert Seamans Cherin & Mellott, LLC 600 Grant Street 42nd Floor Pittsburgh, Pennsylvania 15219 Attn: Bryan D.Rosenberger, Esq. Fax: (412) 566-6099 To Seller: Maranatha Broadcasting Company, Inc. East Rock Road Allentown, PA 18103 Attn: Richard C. Dean Fax: (610) 791-3000 35 37 With a copy to: Malkames Law Offices 509 Linden Street Allentown, PA 18101-1491 Attn: William G. Malkames, Esq. Fax: (610) 821-5851 or such other addresses as shall be similarly furnished in writing by either party. Such notices or communications shall be deemed to have been given as of the date of personal delivery, or if mailed, the date the return receipt is signed or the date on which delivery is refused, or if delivered by overnight delivery or facsimile, on the date of receipt. 15.4 ENTIRE AGREEMENT. This instrument supersedes all prior communications, understandings and agreements of or between the parties with respect to the subject matter of this Agreement and, together with the Easton Agreement, contains the entire agreement among the parties with respect to the transactions contemplated in this Agreement. 15.5 HEADINGS. The headings of this Agreement are inserted for convenience only and shall not constitute a part of this Agreement. 15.6 SCHEDULES, EXHIBITS. All schedules and exhibits annexed to this Agreement are hereby incorporated in this Agreement by this reference. 15.7 EXPENSES. Each party shall bear its own costs and expenses incurred by it in connection with the transactions pursuant to this Agreement. 15.8 AMENDMENT. This Agreement may be amended, modified or superseded, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed on behalf of all of the parties or, in the case of a waiver, by the party waiving compliance. 15.9 WAIVER. The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect the right to enforce that provision or any other provision of this Agreement at any time thereafter. 15.10 ASSIGNMENT. Except as provided in Section 2.4, neither this Agreement nor any of the rights or obligations under this Agreement may be assigned by Seller without the prior written consent, in their sole discretion, of Citadel and License Sub, or by Citadel or License Sub without the prior written consent, in its sole discretion, of Seller. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligation under this Agreement. 15.11 PRIOR CONTROL. Until the Closing, Seller shall maintain control of the Station. 36 38 15.12 ATTORNEYS' FEES. In the event of any action arising out of this Agreement, the prevailing party shall be entitled to recover its costs, expenses and reasonable attorney's fees incurred in connection with the dispute from the other party. 15.13 COUNTERPARTS; FAX SIGNATURES. This Agreement may be executed in one or more counterparts, each of which together shall constitute a single instrument. Signatures on this Agreement transmitted by facsimile shall be deemed to be original signatures for all purposes of this Agreement. 15.14 DISPUTE RESOLUTION. Except as provided below, any dispute arising out of or relating to this Agreement or the breach, termination or validity hereof shall be finally settled by arbitration conducted expeditiously in accordance with the CPR Rules. The Center for Public Resources shall appoint a neutral advisor from its National CPR Panel. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof. The place of arbitration shall be Allentown, Pennsylvania. Such proceedings shall be administered by the neutral advisor in accordance with the CPR Rules as he/she deems appropriate; provided, however, such proceedings shall be guided by the following agreed upon procedures: (a) mandatory exchange of all relevant documents, to be accomplished within 45 days of the initiation of the procedure; (b) no other discovery; (c) hearings before the neutral advisor which shall consist of a summary presentation by each side of not more than three hours; such hearings to take place on one or two days at a maximum; and (d) decision to be rendered not more than 10 days following such hearing. The provisions of this Section 15.14 shall not apply with regard to any equitable remedies to which a party may be entitled under this Agreement. [SIGNATURES APPEAR ON FOLLOWING PAGE] 37 39 IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date above first written. Maranatha Broadcasting Company, Inc. By: /s/ Richard C. Dean ---------------------------- Its: President ---------------------------- Citadel Broadcasting Company By: /s/ Lawrence R. Wilson --------------------------- Its: President --------------------------- Citadel License, Inc. By: /s/ Lawrence Wilson --------------------------- Its: President --------------------------- 38 40 INDEX OF SCHEDULES AND EXHIBITS Schedule 2.1 - Asset Schedule Schedule 2.2 - Excluded Assets Schedule 2.3 - Assumed Obligations Schedule 4.0 - Seller's Disclosure Schedule Schedule 5.0 - Citadel's Disclosure Schedule Exhibit A - Letter of Credit Exhibit B - Local Marketing Agreement [Pursuant to Regulation S-K, Item 601(b)(2), Registrant agrees to furnish supplementally a copy of these schedules or exhibits to the Securities Exchange Commission upon request.] EX-2.4 3 CITADEL BROADCASTING CO. S-4 1 EXHIBIT 2.4 ASSET PURCHASE AGREEMENT AMONG MARANATHA BROADCASTING COMPANY, INC., CITADEL BROADCASTING COMPANY AND CITADEL LICENSE, INC. WEST(AM) JULY 15, 1997 2 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT ("AGREEMENT"), made as of the 15th day of July, 1997, by and among MARANATHA BROADCASTING COMPANY, INC., a Pennsylvania corporation ("PURCHASER"); CITADEL BROADCASTING COMPANY, a Nevada corporation ("CITADEL"); and CITADEL LICENSE, INC., a Nevada corporation ("LICENSE SUB"). RECITALS: A. Citadel and License Sub own and operate, and License Sub is the licensee of, radio station WEST(AM) licensed to Easton, Pennsylvania (the "STATION"). B. Purchaser is the licensee of and owns and operates radio station WFMZ(FM) licensed to Allentown, Pennsylvania (the "ALLENTOWN STATION"). C. Citadel and License Sub desire to sell to Purchaser, and Purchaser desires to purchase from Citadel and License Sub, certain of the assets of the Station, together with cash, in exchange for certain of the assets of the Allentown Station, on the terms and subject to the conditions set forth in this Agreement and in the Allentown Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1 DEFINITIONS The following terms when used in this Agreement shall have the meanings assigned to them below: "ACCOUNTS RECEIVABLE" has the meaning specified in Section 8.3. "ACCOUNTS RECEIVABLE LIST" has the meaning specified in Section 8.3. "ACCRUED TAXES" has the meaning specified in Section 4.6. "ACT" means the Communications Act of 1934, as amended. "AFFILIATE" of any Person means any other Person (a) that directly or indirectly controls, is controlled by, or is under direct or indirect common control with, the first Person, or (b) any interests of which are owned, in whole or in part, directly or indirectly, by the first Person. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controls," "controlled by," and "under direct or indirect control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the 3 direction of the management policies of the Person, whether through the ownership of voting securities or by contract or otherwise. "ALLENTOWN AGREEMENT" means that certain Asset Purchase Agreement dated as of the date hereof among Purchaser, Citadel and License Sub relating to the sale by Citadel and License Sub of the Allentown Station. "ALLENTOWN ASSUMED OBLIGATIONS" means the Assumed Obligations under, and as defined in, the Allentown Agreement. "ALLENTOWN PURCHASED ASSETS" means the Purchased Assets under, and as defined in, the Allentown Agreement. "ALLENTOWN STATION" has the meaning specified in the recitals to this Agreement. "ASSET SCHEDULE" has the meaning specified in Section 2.1(a). "ASSIGNED CONTRACTS" has the meaning specified in Section 2.1(d). "ASSUMED OBLIGATIONS" has the meaning specified in Section 2.3. "BROKER" means Richard A. Foreman Associates Inc. "BUSINESS" has the meaning specified in Section 4.1. "CASH PURCHASE PRICE" has the meaning specified in the Allentown Agreement. "CITADEL'S DISCLOSURE SCHEDULE" has the meaning specified in Section 4.3. "CLOSING" means the consummation of the transactions contemplated in this Agreement in accordance with the provisions of Section 10. "CLOSING DATE" has the meaning specified in Section 10.1. "CODE" means the Internal Revenue Code of 1986, as amended. "CONTRACTS" has the meaning specified in Section 4.9. "CPR RULES" means the Center for Public Resources Rules for Nonadministered Arbitration of Business Disputes. "DAMAGES" has the meaning specified in Section 13.1. "EASTON ANTENNA LEASE" has the meaning specified in Section 9.8. 3 4 "ENVIRONMENTAL CLAIMS" means and includes, without limitation: (a) claims, demands, suits, causes of action for personal injury or lost use of property, or consequential damages, to the extent any of the foregoing arise directly or indirectly out of Environmental Conditions; (b) actual or threatened damages to natural resources; (c) claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, response or remedial actions under CERCLA, RCRA or other Environmental Laws; (d) a requirement to implement "corrective action" pursuant to any order or permit issued pursuant to RCRA; (e) claims for restitution, contribution or equitable indemnity from third parties or any governmental agency; (f) fines, penalties or Liens against property; (g) claims for injunctive relief or other orders or notices of violation from Governmental Authorities; and (h) with regard to any present or former employees, exposure to or injury from Environmental Conditions. "ENVIRONMENTAL CONDITIONS" means conditions of the environment, including the ocean, natural resources (including flora and fauna), soil, surface water, ground water, any present or potential drinking water supply, subsurface strata or the ambient air, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping, or threatened release of Hazardous Materials by Citadel. With respect to claims by employees, Environmental Conditions also includes the exposure of Persons to Hazardous Materials within work places on any real estate owned or occupied by Citadel. "ENVIRONMENTAL LAWS" has the meaning specified in the definition of Hazardous Materials. "ENVIRONMENTAL NONCOMPLIANCE" means, but is not limited to: (a) the release or threatened release as a result of the activities of Citadel of any Hazardous Materials into the environment, any storm drain, sewer, septic system or publicly owned treatment works, in violation of any effluent emission limitations, standards or other criteria or guidelines established by any federal, state or local law, regulation, rule, ordinance, plan or order; and (b) any facility operations, procedures, designs, etc. which do not conform to the statutory or regulatory requirements of the CAA, the CWA, the TSCA, the RCRA or any other Environmental Laws intended to protect public health, welfare and the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "EXCLUDED ASSETS" has the meaning specified in Section 2.2. "FCC" means the Federal Communications Commission. "FCC APPLICATION" has the meaning specified in Section 9.1(a). "FCC APPROVAL" has the meaning specified in Section 9.1(a). "FCC LICENSES" means the main station license for the Station, together with each of the other consents, rights, licenses, permits and other authorizations issued by the FCC and held by 4 5 Citadel and/or License Sub in connection with, or pertaining to, the conduct of the business and operation of the Station, together with any renewals and extensions thereof and any applications therefor pending on the Closing Date, and any and all applications made by Citadel and/or License Sub for such consents, rights, licenses, permits and other authorizations. "FINAL ORDER" means a written action or order issued by the FCC or its staff setting forth the FCC Approval (or a denial thereof), (a) which action or order has not been vacated, reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with respect to which action or order (i) no requests have been filed and are pending for administrative or judicial review, rehearing, reconsideration, appeal or stay, and the time period for filing any such requests and for the FCC to set aside the action on its own motion under the provisions of the Act or the rules, regulations and policies of the FCC has expired, or (ii) in the event of review, reconsideration or appeal, the time for further review, reconsideration or appeal has expired. "GAAP" means generally accepted accounting principles in effect in the United States of America from time to time applied on a consistent basis during the periods involved. "GOVERNMENTAL AUTHORITY" means any government, whether federal, state or local, or any other political subdivision thereof, or any agency, tribunal or instrumentality of any such governmental or political subdivision, or any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "HAZARDOUS MATERIALS" means hazardous wastes, hazardous substances, hazardous constituents, toxic substances or related materials, whether solids, liquids or gases including but not limited to substances defined as "PCBs," "hazardous wastes," "hazardous substances," "toxic substances," "pollutants," "contaminants," "radioactive materials," "petroleum," or other similar designations in, or otherwise subject to regulation under, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), 42 U.S.C. Section 9601 ET SEQ.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. Section 2601 ET SEQ.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 9601; the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C.Section 300f ET SEQ.; the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 ET SEQ.; or any similar state law; and in the plans, rules, regulations or ordinances adopted, or other criteria and guidelines promulgated pursuant to the preceding laws or other similar laws, regulations, rules or ordinances now in effect (collectively, the "ENVIRONMENTAL LAWS"); and any other substances, constituents or wastes subject to environmental regulations under any applicable federal, state or local law, regulation or ordinance. "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended from time to time. "HSR FILING" has the meaning specified in Section 9.7. 5 6 "INDEBTEDNESS FOR BORROWED MONEY" means (a) all indebtedness of Citadel in respect of money borrowed (including, without limitation, indebtedness which represents the unpaid amount of the purchase price of any property), (b) all indebtedness of Citadel evidenced by a promissory note, bond or similar written obligation to pay money, (c) all indebtedness guaranteed by Citadel or for which Citadel is contingently liable, including, without limitation, guaranties in the form of an agreement to repurchase or reimburse, and any commitment by which any such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit, and (d) all monetary obligations of Citadel under any lease or similar arrangement, which obligations would be classified and accounted for as capital obligations on a balance sheet of Citadel under GAAP. "INDEMNITEE" has the meaning specified in Section 13.3. "INDEMNITOR" has the meaning specified in Section 13.3. "INTELLECTUAL PROPERTY" has the meaning specified in Section 2.1(e). "LEASEHOLDS" has the meaning specified in Section 4.8. "LIEN" means any mortgage, pledge, hypothecation, assignment, encumbrance, claim, easement, transfer restriction, lien (statutory or otherwise) or security interest of any kind or nature whatsoever. "OBLIGATIONS" means, without duplication, all (a) Indebtedness for Borrowed Money, (b) Accrued Taxes, accounts payable, accrued liabilities and all other liabilities and obligations of the type normally required by GAAP to be reflected on a balance sheet, (c) commitments by which Citadel assures a creditor against loss, including the face amount of all letters of credit and, without duplication, all drafts drawn thereunder, (d) obligations guaranteed in any manner by Citadel, (e) obligations under capitalized leases in respect of which obligations Citadel is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss, (f) obligations under acceptance facilities, (g) obligations secured by a Lien on property of Citadel, (h) obligations under interest rate or currency exchange or swap agreements, (i) unsatisfied obligations for "withdrawal liability" to a "multiemployer plan" as such terms are defined under ERISA, (j) indebtedness issued or obligation incurred in substitution or exchange for any Obligations, (k) costs or expenses incurred by Citadel of any nature, whether or not currently payable, and (l) other liabilities or obligations of Citadel, in each of the foregoing instances whether absolute or contingent, known or unknown, and whether or not normally required by GAAP to be reflected on a balance sheet. "PERMITS" has the meaning specified in Section 4.17(b). "PERSON" means an individual, corporation, partnership, joint venture, joint stock seller, association, trust, business trust, unincorporated organization, Governmental Authority, or any other entity of whatever nature. 6 7 "PERSONAL PROPERTY" has the meaning specified in Section 2.1(a). "PURCHASED ASSETS" has the meaning specified in Section 2.1. "PURCHASE PRICE" has the meaning specified in Section 3.1. "PURCHASER COLLECTION PERIOD" has the meaning specified in Section 8.3. "PURCHASER'S DISCLOSURE SCHEDULE" has the meaning specified in Section 5.3. "REAL PROPERTY" has the meaning specified in Section 2.1(b) "REAL PROPERTY LEASES" has the meaning specified in Section 2.1(c). "STATION" has the meaning specified in the recitals to this Agreement. "STUDIO" has the meaning specified in Section 9.13. "SUPPLEMENTAL FINANCIAL STATEMENTS" has the meaning specified in Section 6.10 "TAXES" means all taxes, charges, fees, levies, or other assessments, including income, gross receipts, excise, property, sales, transfer, license, payroll, and franchise taxes, any taxes required by law to be withheld, and any taxes payable as a result of the consummation of the transactions contemplated by this Agreement, which taxes are imposed by any Governmental Authority; and such term shall include any interest, penalties, or additions to tax attributable to such assessments. "TRADE AGREEMENTS" has the meaning specified in Section 6.9. "TRADE IMBALANCE" has the meaning specified in Section 6.9. "TRADE LIABILITIES" has the meaning specified in Section 6.9. "TRADE RECEIVABLES" has the meaning specified in Section 6.9. "TRADE SCHEDULE" has the meaning specified in Section 6.9. SECTION 2 PURCHASE AND SALE OF ASSETS 2.1 PURCHASE AND SALE OF PURCHASED ASSETS. Subject to the terms and conditions of this Agreement, and on the basis of the representations, warranties, covenants and agreements contained in this Agreement, at the Closing, Citadel (and, with respect to clause (f) below, 7 8 License Sub) agrees to sell, assign and convey to Purchaser, and Purchaser agrees to purchase, acquire and accept from Citadel (and, with respect to clause (f) below, License Sub), all of the Purchased Assets. The "PURCHASED ASSETS" consist of: (a) All the tangible personal property, improvements and fixtures described on SCHEDULE 2.1 to this Agreement (the "ASSET SCHEDULE") (the "PERSONAL PROPERTY"); (b) All of the right, title and interest of Citadel in and to the real property described on the ASSET SCHEDULE (the "REAL PROPERTY"); (c) The leasehold interests pursuant to the real property leases described on the ASSET SCHEDULE (the "REAL PROPERTY LEASES"); (d) All of the right, title and interest of Citadel in and to those contracts, leases, licenses, memberships, agencies, permits and agreements, other than Real Property Leases, to which Citadel presently is a party or an assignee of a party which are described on the ASSET SCHEDULE (the "ASSIGNED CONTRACTS"), including the employment agreements listed on the ASSET SCHEDULE; (e) The call letters of the Station and all of the copyrights, trademarks, trade names and other similar rights, including applications and registrations therefor, used in connection with the past or present operation of the Station in which Citadel has any right, title or interest, including, without limitation, those items listed on the ASSET SCHEDULE (collectively, the "INTELLECTUAL PROPERTY"); (f) The FCC Licenses, a complete list of which is included on the ASSET SCHEDULE; (g) Copies of all books, records and accounts relating to the operation of the Station, subject to the right of Citadel to retain originals thereof for Citadel's personal use and reference and to obtain access to such books, records and accounts in accordance with the provisions of Section 2.2(a); and (h) All other assets owned by Citadel as of the date of this Agreement which are needed in the broadcast chain of the Station as of the date of this Agreement (i.e., from studio to transmission). 2.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained in this Agreement, it is expressly understood and agreed that there shall be excluded from the assets transferred or assigned to Purchaser with respect to Station the following (collectively, the "EXCLUDED ASSETS"): (a) Except to the extent included in Section 2.1(g), all of Citadel's and License Sub's corporate books and records and other documents relating to the internal corporate affairs 8 9 of Citadel and License Sub, and all other corporate records or files of Citadel and License Sub not relating to the business or operation of the Station; (b) All cash, cash equivalents or similar type investments held by Citadel and License Sub, such as certificates of deposit, treasury bills and other marketable securities on hand as of the Closing; (c) All accounts receivable existing as of Closing; (d) Corporate assets and assets not used in connection with the Station; (e) Any and all claims of Citadel and License Sub with respect to transactions occurring or arising prior to the Closing Date, including, without limitation, claims for Tax refunds; and (f) Those additional assets identified on SCHEDULE 2.2 as Excluded Assets. Notwithstanding the foregoing, any asset which is described above but which is actually listed on the ASSET SCHEDULE shall be a Purchased Asset and not an Excluded Asset. 2.3 OBLIGATIONS. Purchaser shall not assume, and shall purchase the Purchased Assets free and clear of, any and all Obligations of Citadel and License Sub, except that Purchaser shall assume those Obligations of Citadel arising from and after the Closing Date (other than any liability or obligation for breach or default which occurred prior to the Closing Date) pursuant to each of (a) the Real Property Leases, (b) the Assigned Contracts, (c) those items subject to proration pursuant to Section 9.2, (d) the Trade Liabilities and (e) those additional items expressly set forth on SCHEDULE 2.3 to this Agreement (collectively, the "ASSUMED OBLIGATIONS"). SECTION 3 PURCHASE PRICE 3.1 PURCHASE PRICE. The purchase price for the Purchased Assets shall consist of the Allentown Purchased Assets, subject to the assumption by Citadel of the Allentown Assumed Obligations and the payment by Citadel of the Cash Purchase Price, as provided in the Allentown Agreement (the "PURCHASE PRICE"). 3.2 ALLOCATION OF THE PURCHASE PRICE. Citadel, License Sub and Purchaser shall report the transactions contemplated by this Agreement for federal and state tax purposes in a manner consistent with the allocation of the Purchase Price mutually agreed upon by Citadel, License Sub and Purchaser. 9 10 SECTION 4 REPRESENTATIONS AND WARRANTIES OF CITADEL AND LICENSE SUB In connection with the purchase and sale of the Purchased Assets under this Agreement and in order to induce Purchaser to enter into and consummate the transactions contemplated by this Agreement, Citadel and License Sub make the following representations and warranties to Purchaser, as of the date of this Agreement and as of the date of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times): 4.1 ORGANIZATION AND QUALIFICATION. Each of Citadel and License Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and has full corporate power and authority (a) to own its assets and properties and to conduct the business relating to the Station (the "BUSINESS") and (b) to enter into this Agreement and to consummate the transactions contemplated hereby. Citadel has duly qualified to do business as a foreign corporation and is in good standing under the laws of the Commonwealth of Pennsylvania. Each of Citadel and License Sub has full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own its properties and to conduct the Business. 4.2 AUTHORITY. The execution and delivery of this Agreement by Citadel and License Sub, the performance by Citadel and License Sub of their respective covenants and agreements hereunder and the consummation by Citadel and License Sub of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Citadel and License Sub. This Agreement constitutes the valid and legally binding agreement of Citadel and License Sub, enforceable against each of them in accordance with its terms. 4.3 NO LEGAL BAR; CONFLICTS. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of Citadel or License Sub, or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which Citadel or License Sub is a party or by which Citadel, License Sub or any of the assets of Citadel or License Sub is bound. Except for the FCC Approval, compliance with the HSR Act and the consents disclosed in SCHEDULE 4.0 to this Agreement ("CITADEL'S DISCLOSURE SCHEDULE"), no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 10 11 4.4 FINANCIAL STATEMENTS. Citadel has delivered to Purchaser, with respect to the Station, the monthly unaudited balance sheets and income statements for each month in 1996 and the first six months of 1997. Each of the foregoing financial statements (including in all cases the notes thereto, if any) (i) is accurate and complete in all material respects, (ii) is consistent in all material respects with the books and records of Citadel relating to the Station (which, in turn, are accurate and complete in all material respects) and (iii) presents fairly in all material respects the financial condition and results of operations of the Station in accordance with GAAP (subject in the case of unaudited financial statements to the lack of footnote disclosure and changes resulting from normal year-end audit adjustments), consistently applied, as of the dates and for the periods set forth therein. 4.5 ABSENCE OF CERTAIN CHANGES. Between December 31, 1996 and the date of this Agreement, except as disclosed in CITADEL'S DISCLOSURE SCHEDULE, there has not been any (a) material adverse change in the condition of the Station, financial or otherwise, or in the results of operations, assets, liabilities or business of the Station; (b) damage or destruction, whether or not insured, affecting the business operations of the Station; (c) labor dispute or threatened labor dispute involving any of the employees of the Station; (d) actual or threatened dispute pertaining to the Station with any material provider of software, hardware or services; (e) material change in the customary methods of operations of the Station; (f) except in the ordinary course of business or to the extent not material to the Business or financial condition of the Station, sale or transfer of any tangible or intangible asset used or useful in the operation of the Station, mortgage, pledge or imposition of any Lien on any such asset, lease of real property, machinery, equipment or buildings with respect to the Station entered into or modification, amendment or cancellation of any of its existing leases relating to the Station, or cancellation of any debt or claim; or (g) liability or obligation (contingent or otherwise) incurred under agreements or otherwise, except current liabilities entered into or incurred in the ordinary course of business consistent with past practices. 4.6 TAXES. Except as disclosed in CITADEL'S DISCLOSURE SCHEDULE, Citadel has filed or caused to be filed on a timely basis all federal, state, local and other tax returns, reports and declarations required to be filed by it with respect to the Station and has paid all Taxes (including, but not limited to, income, franchise, sales, use, unemployment, withholding, social security and workers' compensation taxes and estimated income and franchise tax payments, penalties and fines) reflected as due on such returns, reports or declarations (whether or not shown on such returns, reports or declarations), or pursuant to any assessment received by it in connection with such returns, reports or declarations. All returns, reports and declarations filed by or on behalf of Citadel relating to the Station are true, complete and correct in all material respects. With respect to the Station, no deficiency in payment of any Taxes for any period has been asserted by any taxing authority which remains unsettled at the date hereof, no written inquiries have been received by Citadel from any taxing authority with respect to possible claims for taxes or assessments, and there is no basis for any additional claims or assessments for Taxes. Since December 31, 1996, Citadel has not incurred any liability for Taxes which materially affect the operation of the Station other than in the ordinary course of business. All 11 12 Taxes attributable to the Station or its income, operations or properties accruing up to and including the Closing (the "ACCRUED TAXES") have been or will be paid when due regardless of whether such Taxes are due and payable as of the Closing. 4.7 ASSET SCHEDULE. The ASSET SCHEDULE includes complete and accurate (a) listings of all Real Property; (b) listings of all Personal Property; (c) descriptions of all Real Property Leases and Assigned Contracts, none of which requires any consent of third parties in connection with the transactions contemplated hereby, except otherwise as indicated in CITADEL'S DISCLOSURE SCHEDULE; (d) descriptions of all of the Intellectual Property; and (e) listings of all of the FCC Licenses, all of the foregoing of which will, as of the Closing, be owned and held by Citadel or License Sub as reflected in the ASSET SCHEDULE. 4.8 TITLE TO AND CONDITION OF PROPERTY. (a) TITLE. Citadel will as of the Closing have good, marketable and exclusive title to and undisputed possession of all of the real, personal and tangible property and improvements included in the Purchased Assets. Except as set forth on CITADEL'S DISCLOSURE SCHEDULE, the Purchased Assets are now free and clear of all Liens. The Purchased Assets will, as of the Closing, be free and clear of all Liens. (b) CONDITION. The Personal Property, prior to their removal (if any) pursuant to Section 9.9, is structurally sound, in reasonably good condition, ordinary wear and tear excepted, adequate and suitable for the operation of the Station as it is currently being operated, and in proper condition and repair so that the Station can operate according to its FCC Licenses, the rules, regulations and policies of the FCC and in all other respects in compliance with the Act and all other applicable federal and state laws. (c) INSURANCE. The Personal Property included among the Purchased Assets is and will be insured through the Closing Date in amounts adequate to replace or repair any casualty or other insurable loss to any of such property. (d) SUFFICIENCY OF ASSETS. The Purchased Assets include all of the assets, of a sufficient nature, condition and quantity, needed in the broadcast chain of the Station (i.e., from studio to transmission). Citadel has not, since December 31, 1996, removed any material item of Personal Property from the Station other than removals in the ordinary course of business which were not done in contemplation of the transactions contemplated hereby. (e) REAL PROPERTY LEASES. (i) The ASSET SCHEDULE contains accurate descriptions of the Real Property Leases and the location of the real estate leased thereunder (the "LEASEHOLDS") and the type of facility located on the Leaseholds. Citadel will as of the Closing have a valid leasehold interest in its respective Leaseholds. 12 13 (ii) None of the Leaseholds is subject to any covenant or restriction preventing or limiting in any material respect the consummation of the transactions contemplated hereby, except for any consent listed on CITADEL'S DISCLOSURE SCHEDULE required of the landlords under the Real Property Leases. Citadel's right, title and interest in and to the Leaseholds will at the Closing be held by Citadel free and clear of all Liens. (iii) The use for which the Leaseholds are zoned permits the use thereof for the business of the Station consistent with past practices. The use and occupancy of the Leaseholds by Citadel are in compliance in all material respects with all regulations, codes, ordinances and statutes applicable to Citadel and Citadel has not received any notice asserting any material violation of sanitation laws and regulations, occupational safety and health regulations, or electrical codes. (iv) There are no facts relating to Citadel, and to the best of the knowledge of Citadel, no facts relating to any other party, that would prevent the Leaseholds from being occupied and used by Purchaser and/or any assignee of Purchaser after the Closing Date in the same manner as immediately prior to the Closing. (v) There is not under any Real Property Lease any material default by Citadel or any condition that with notice or the passage of time or both would constitute such a default, and Citadel has not received any notice asserting the existence of any such default or condition. (vi) Each Real Property Lease is valid and binding and in full force and effect as to Citadel, and to the best of the knowledge of Citadel, as to each other party thereto, and except as disclosed on the ASSET SCHEDULE, has not been amended or otherwise modified. (vii) The Leaseholds constitute all of the real property in which Citadel has a leasehold interest or other interest or right (whether as lessor or lessee) and which is or will prior to the Closing be used solely in the operation of the Station. 4.9 CONTRACTUAL AND OTHER OBLIGATIONS. Set forth in the ASSET SCHEDULE is a description of all (a) Real Property Leases to which Citadel is a party; (b) all contracts, agreements, licenses, leases, arrangements and other documents used solely in connection with the present operation of the Station to which Citadel is a party or by which Citadel or any of the assets of Citadel are bound (including, in the case of loan agreements, a description of the amounts of any outstanding borrowings thereunder and the collateral, if any, for such borrowings); (c) uncompleted orders for the purchase by Citadel of materials, supplies, equipment and services for the requirements of the Station existing as of the date hereof and with respect to which the remaining obligation of Citadel is in excess of $2,500; and (d) contingent contractual obligations and liabilities of Citadel relating to the Station and known to Citadel existing as of the date hereof (all of the foregoing, collectively, the "CONTRACTS"). Each of the Contracts is designated in the ASSET SCHEDULE either as an Assigned Contract, or as a Contract that will not be assigned to Purchaser. Neither Citadel nor, to the best of the knowledge of Citadel, any other Person is in material 13 14 default in the performance of any covenant or condition under any Contract and no claim of such a default has been made and no event has occurred which with the giving of notice or the lapse of time would constitute such a default under any covenant or condition under any Contract. Citadel is not a party to any Contract which would terminate or be materially adversely affected by the consummation of the transactions contemplated by this Agreement. Originals or true, correct and complete copies of all of the Assigned Contracts have been provided to Purchaser as of the date of this Agreement. 4.10 COMPENSATION. Set forth in CITADEL'S DISCLOSURE SCHEDULE is a list of (a) all agreements between Citadel and its employees or other Persons providing services for compensation with regard to the Station, whether individually or collectively, and (b) all employees of Citadel or other Persons providing services for Citadel with respect to the Station entitled to receive annual compensation in excess of $5,000 and their respective positions, job categories and salaries. The transactions contemplated by this Agreement will not result in any liability for severance pay to any such employee or other Person. Citadel has not informed any such employee that such employee will receive any increase in compensation or benefits or any ownership interest in Citadel or the Business. Except as disclosed in CITADEL'S DISCLOSURE SCHEDULE, all of the employees of Citadel with respect to the Station are "at will" employees and may be terminated by Citadel at any time, without liability or obligation except the payment of normal compensation accrued up to the time of termination of employment. 4.11 EMPLOYEE BENEFIT PLANS. (a) Citadel does not maintain or sponsor, and is not required to make contributions to, any pension, profit-sharing, savings, bonus, incentive or deferred compensation, severance pay, medical, life insurance, welfare or other employee benefit plan which affects the employees working at the Station, except as set forth in CITADEL'S DISCLOSURE SCHEDULE. CITADEL'S DISCLOSURE SCHEDULE fully discloses all of the plans, funds, policies, programs, arrangements or understandings sponsored or maintained by Citadel pursuant to which any employee of the Station (or any dependent or beneficiary of any such employee) might be or become entitled to (1) retirement benefits; (2) severance or separation from service benefits; (3) incentive, performance, stock, share appreciation or bonus awards; (4) health care benefits; (5) disability income or wage continuation benefits; (6) supplemental unemployment benefits; (7) life insurance, death or survivor's benefits; (8) accrued sick pay or vacation pay; (9) any type of benefit offered under any arrangement subject to characterization as an "employee welfare benefit plan" within the meaning of section 3(3) of ERISA; or (10) benefits of any other type offered through any arrangement that could be characterized as providing for additional compensation or fringe benefits. As to any such plan, fund, policy, program, arrangement or understanding, all of the following are true: (A) all amounts due as contributions, insurance premiums and benefits to the date hereof have been fully paid by Citadel; (B) all applicable material requirements of law have been observed with respect to the operation thereof, and all applicable reporting and disclosure requirements have been timely satisfied; and (C) Citadel is not aware of any claim or demand by any employee (or beneficiary or dependent of any employee) for benefits (other than routine 14 15 claims for benefits), or by any taxing authority for taxes or penalties which has not been satisfied in full or which may be or become subject to litigation or arbitration. (b) Citadel has no obligation to provide health or other welfare benefits to former, retired or terminated employees with respect to the Station, except as specifically required under Section 4980B of the Code. Citadel has substantially complied with any applicable notice and continuation requirements of Section 4980B of the Code and the regulations thereunder. 4.12 LABOR RELATIONS. There have been no material violations of any federal, state or local statutes, laws, ordinances, rules, regulations, orders or directives with respect to the employment of individuals by, or the employment practices or work conditions of, Citadel with respect to the Station, or the terms and conditions of employment, wages (including overtime compensation) and hours. The Station is not engaged in any unfair labor practice or other unlawful employment practice and there are no charges of unfair labor practices or other employee-related complaints pending or threatened against the Station before the National Labor Relations Board, the Equal Employment Opportunity Commission, the Occupational Safety and Health Review Commission, the Department of Labor or any other Governmental Authority. There is no strike, picketing, slowdown or work stoppage or organizational attempt pending, threatened against or involving the Station. No issue with respect to union representation is pending or threatened with respect to the employees of the Station. 4.13 INCREASES IN COMPENSATION OR BENEFITS. Subsequent to December 31, 1996, there have been no increases in the compensation payable or to become payable to any of the employees of Citadel who work solely at the Station, nor has Citadel paid or provided for any awards, bonuses, stock options, loans, profit-sharing, pension, retirement or welfare plans or similar or other payments or arrangements for or on behalf of such employees in each case other than (a) pursuant to currently existing plans or arrangements set forth in CITADEL'S DISCLOSURE SCHEDULE or (b) as was required from time to time by governmental legislation affecting wages. The vacation policy of Citadel with respect to the Station is set forth in CITADEL'S DISCLOSURE SCHEDULE. No employee of Citadel who works solely at the Station is entitled to vacation time in excess of two weeks during the current calendar year and no such employee has any accrued vacation time with respect to any period prior to the current calendar year, except as set forth in CITADEL'S DISCLOSURE SCHEDULE. 4.14 INSURANCE. Citadel maintains insurance policies covering all of the Station's properties and assets and the various occurrences which may arise in connection with the operation of the Station, each of which policies is summarized in CITADEL'S DISCLOSURE SCHEDULE. Such policies are in full force and effect and all installments of premiums due thereon have been paid in full. Citadel has complied with the provisions of such policies. There are no notices of any pending or threatened termination or premium increases with respect to any of such policies. There has been no casualty loss or occurrence which may give rise to any claim of any kind not covered by insurance and Citadel is not aware of any casualty occurrence which may give rise to any claim of any kind not covered by insurance. No third party has filed any claim against Citadel with respect to the Station for personal injury or property damage of a kind for which 15 16 liability insurance is generally available which is not fully insured, subject only to the standard deductible. 4.15 LITIGATION; DISPUTES. There are no claims, disputes, actions, suits, investigations or proceedings pending or threatened against or affecting the Station, and, to the best of the knowledge of Citadel, there is no basis for any such claim, dispute, action, suit, investigation or proceeding. Citadel has no knowledge of any default under any such action, suit or proceeding. Citadel is not in default in respect of any judgment, order, writ, injunction or decree of any Governmental Authority with respect to the operation of the Station. 4.16 ENVIRONMENTAL. (a) Prior to the execution of this Agreement, Citadel has provided to Purchaser a true and correct copy of all environmental site assessments, studies, reports and communications relating to the Purchased Assets. (b) Except as disclosed on CITADEL'S DISCLOSURE SCHEDULE, (i) there are no conditions, facilities, procedures or any other facts or circumstances that constitute Environmental Noncompliance on any of the Leaseholds and (ii) there is not constructed, placed, deposited, stored, disposed of, nor located on any of the Leaseholds any asbestos in any form that has released or, unless disturbed, threatens to release airborne asbestos fibers in excess of applicable local, state and federal standards. (c) Except as disclosed on CITADEL'S DISCLOSURE SCHEDULE, no structure, improvements, equipment, fixtures, activities or facilities located on the Leaseholds uses Hazardous Materials except those used in the ordinary course of the Business and in compliance with applicable Environmental Laws. (d) Except as specifically described on CITADEL'S DISCLOSURE SCHEDULE, there have been no releases or threatened releases of Hazardous Materials into the environment, or which otherwise contribute to Environmental Conditions arising solely from the activities of the Station, or to the best of the knowledge of Citadel arising from any other activities, except to the extent that such releases or threatened releases do not constitute a condition of Environmental Noncompliance relating to the Leaseholds. (e) Except as disclosed on CITADEL'S DISCLOSURE SCHEDULE, there are no underground storage tanks, or underground piping associated with tanks, used for the management of Hazardous Materials at the Leaseholds and there are no abandoned underground storage tanks at the Leaseholds which have not been either abandoned in place or removed pursuant to a permit issued by a Governmental Authority. (f) Citadel is not subject to any Environmental Claims against Citadel with respect to the Station, no Environmental Claims with respect to the Station have been threatened, 16 17 nor, to the best of the knowledge of Citadel, is there any basis for any such Environmental Claims with respect to the Station. 4.17 PERMITS, COMPLIANCE WITH APPLICABLE LAW. (a) GENERAL. Neither Citadel nor License Sub is in default under any, and each has complied with all, statutes, ordinances, regulations, orders, judgments and decrees of any Governmental Authority applicable to it or to the Business or the assets and properties of the Station as to which a default or failure to comply might result in any material adverse change in the condition, financial or otherwise, assets or properties of the Station or the Business. Citadel has no knowledge of any basis for assertion of any violation of the foregoing or for any claim for compensation or damages or otherwise arising out of any violation of the foregoing. Citadel has not received any notification of any asserted present or past failure to comply with any of the foregoing which has not been satisfactorily responded to in the time period required thereunder. (b) PERMITS. Set forth in CITADEL'S DISCLOSURE SCHEDULE are complete and accurate lists of all FCC Licenses applicable to the Station, and all other permits, licenses, approvals, franchises, notices and authorizations issued by any Governmental Authorities (collectively, the "PERMITS"), held by Citadel and/or License Sub and applicable to the Station. The Station is operating in accordance with the Act and its FCC Licenses and is in compliance with the Act and the rules, regulations and policies of the FCC. The Permits set forth in CITADEL'S DISCLOSURE SCHEDULE are all of the Permits required for the conduct of the Business. All of the Permits set forth in CITADEL'S DISCLOSURE SCHEDULE are in full force and effect, and neither Citadel nor License Sub has engaged in any activity which would cause or permit revocation or suspension of any such Permit, and no action or proceeding looking to or contemplating the revocation or suspension of any such Permit is pending or threatened. There are no existing defaults or events of default or events or state of facts which with notice or lapse of time or both would constitute a default by Citadel or License Sub under any such Permit. There is no default or claimed or purported or alleged default or state of facts which with notice or lapse of time or both would constitute a default on the part of any party in the performance of any obligation to be performed or paid by any party under any Permit set forth in CITADEL'S DISCLOSURE SCHEDULE. Except for (1) the FCC Approval, (2) compliance with the HSR Act and (3) as set forth in CITADEL'S DISCLOSURE SCHEDULE, the consummation of the transactions contemplated hereby will in no way affect the continuation, validity or effectiveness of the Permits set forth in CITADEL'S DISCLOSURE SCHEDULE, or require the consent of any Person. Except as set forth in CITADEL'S DISCLOSURE SCHEDULE, neither Citadel nor License Sub is required to be licensed by, and neither is subject to the regulation of, any Governmental Authority by reason of the Business. 4.18 INTELLECTUAL PROPERTY. The use of the Intellectual Property in connection with the operation of the Station and in a manner consistent with past practices does not infringe upon the proprietary rights of any other Person. Purchaser will, upon consummation of the transactions contemplated by this Agreement, possess adequate rights, licenses and other authority to use the Intellectual Property used by the Station in the operation of the Station following the Closing in the manner now operated, without infringement or unlawful or improper use of any of the 17 18 Intellectual Property. No director, officer or employee of Citadel or License Sub has any interest in any of the Intellectual Property, all of which will, as of the Closing, be free and clear of all Liens. Citadel has no knowledge of any infringement by any Person upon the rights of Citadel or License Sub with respect to the Intellectual Property. Neither Citadel nor License Sub has granted any outstanding licenses or other rights to any of the call letters, copyrights, trademarks, trade names or other similar rights with regard to any of the Intellectual Property. 4.19 BOOKS AND RECORDS. The books of account of Citadel relating to the Station fairly and accurately reflect its income, expenses, assets and liabilities and have been maintained in accordance with good business practices. All of such books and records, to the extent included within the Purchased Assets, will be located on the date of the Closing on the business premises of the Station. 4.20 ACTS TO BE PERFORMED. Citadel and License Sub shall perform each of the covenants, acts and undertakings of Citadel and License Sub to be performed on or before the Closing Date pursuant to the terms of this Agreement. 4.21 RELATED PARTY OBLIGATIONS. Except as set forth on the ASSET SCHEDULE, no officer, director, shareholder or Affiliate of Citadel, or any individual related by blood or marriage to any such Person, or any entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment, promissory note, loan, any other actual or proposed transaction with Citadel, or has any material interest in any material property used by Citadel, which is material to the operation of the Station. 4.22 DISCLOSURE. To the best of Citadel's knowledge, no representation or warranty made under this Section 4 and none of the information furnished by Citadel or License Sub set forth in this Agreement or in the schedules or exhibits to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements in this Agreement or in the schedules or exhibits to this Agreement not misleading. SECTION 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER In connection with the purchase and sale of the Purchased Assets under this Agreement and in order to induce Citadel and License Sub to enter into and consummate the transactions contemplated by this Agreement, Purchaser makes the following representations and warranties to Citadel and License Sub, as of the date of this Agreement and as of the date of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times): 5.1 ORGANIZATION AND QUALIFICATION. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, and has full corporate power and authority (a) to own its assets and properties and to conduct its business and 18 19 (b) to enter into this Agreement and consummate the transactions contemplated hereby. Purchaser has full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own its properties and to conduct its business. 5.2 AUTHORITY. The execution and delivery of this Agreement by Purchaser, the performance by Purchaser of its covenants and agreements hereunder and the consummation by Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and legally binding agreement of Purchaser, enforceable against Purchaser in accordance with its terms. 5.3 NO LEGAL BAR: CONFLICTS. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of Purchaser, or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of, any contract, commitment, agreement, understanding or arrangement of any kind to which Purchaser is a party or by which Purchaser or any of the assets of Purchaser is bound. Except for the FCC Approval, compliance with the HSR Act and the consents disclosed in SCHEDULE 5.0 ("PURCHASER'S DISCLOSURE SCHEDULE"), no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of Purchaser in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 5.4 ACTS TO BE PERFORMED. Purchaser shall perform each of the covenants, acts and undertakings of Purchaser to be performed on or before the Closing Date pursuant to the terms of this Agreement. 5.5 LITIGATION. There is no litigation, proceeding or investigation pending or, to the best of Purchaser's knowledge, threatened against or affecting Purchaser that is reasonably likely to prevent or hinder the consummation of the transactions contemplated by this Agreement. 5.6 DISCLOSURE. To the best of Purchaser's knowledge, no representation or warranty made under this Section 5 and none of the information furnished by Purchaser set forth in this Agreement or in the schedules or exhibits to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements in this Agreement or in the schedules or exhibits to this Agreement not misleading. SECTION 6 AFFIRMATIVE COVENANTS OF CITADEL AND LICENSE SUB Citadel and License Sub covenant and agree with Purchaser to: 19 20 6.1 COMPLIANCE WITH LAW. Comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated hereby. 6.2 PAYMENT OF OBLIGATIONS. Fully discharge all Obligations of Citadel with respect to the Station, except the Assumed Obligations, on a timely basis. 6.3 ACCESS. Afford Purchaser and its authorized representatives, upon reasonable notice to Citadel, reasonable access during normal business hours to the Station and the Station's employees, and permit Purchaser and its authorized representatives to examine all operations, equipment, properties and other assets, logs, books, relevant records, contracts and documents of Citadel and License Sub pertinent to the Station; provided, however, that in each instance (a) mutually satisfactory arrangements shall be made in advance in order to avoid interruption and to minimize interference with the normal business and operations of the Station and (b) Purchaser shall comply with Section 9.10. 6.4 PRESERVATION OF ORGANIZATION. Exercise all reasonable efforts to preserve the business organization of the Station intact, and assist Purchaser, as and when requested by Purchaser, to preserve the present relationships of the Station with employees, suppliers, advertisers and customers and others having business relationships with the Station; provided, however, that nothing contained in this Agreement shall require Citadel or License Sub to expend money in fulfillment of their obligations set forth in this Section 6.4 other than those expenditures that Citadel or License Sub would have made in the ordinary course of the business of the Station and consistent with past practices. 6.5 BOOKS AND RECORDS. Maintain the books and records of Citadel relating to the Station in accordance with good business practices, on a basis consistent with past practices, and promptly make available to Purchaser the books, records, tax returns, leases, contracts and other documents or agreements material to the Station as Purchaser, its counsel, accountants or other authorized representatives may from time to time reasonably request. 6.6 EMPLOYEES. Pay as and when the same shall become due and payable any amounts owed by Citadel to Station employees who have performed services up to the time of Closing, whether fixed or accrued, for wages, vacation pay, sick pay, severance pay, employee benefits, damages and otherwise. 6.7 COMPLIANCE WITH FCC MATTERS. Comply with the FCC Licenses applicable to the Station and with the provisions of the Act, the rules, regulations and policies of the FCC, and with all other laws, ordinances, regulations, rules and orders of any Governmental Authority applicable to the Station. 6.8 TAXES. File all federal, state and municipal tax returns, reports and declarations required to be filed by Citadel with respect to the Station prior to the Closing, and satisfy all Taxes related thereto, and either pay in full on or before the Closing or effect a proration pursuant to Section 9.2 for all Accrued Taxes attributable to Citadel with respect to the Station, 20 21 or its income, operations or properties, accruing through the Closing, regardless of whether such Taxes otherwise would have been then due and payable. 6.9 TRADE-OUTS. Purchaser shall assume as of the Closing the Trade Agreements existing as of the Closing and that have not yet been performed. To the extent that the aggregate liability of the Station as of the Closing for unperformed time under the Trade Agreements (the "TRADE LIABILITIES") exceeds the value of the goods and services to be received by the Station or Purchaser after the Closing under the Trade Agreements (the "TRADE RECEIVABLES"), the Cash Purchase Price shall be increased by the amount by which the Trade Liabilities exceeds the Trade Receivables (the "TRADE IMBALANCE"). Citadel shall deliver to Purchaser at the Closing a schedule of Trade Liabilities and Trade Receivables existing as of the Closing (the "TRADE SCHEDULE"). Citadel shall exercise reasonable efforts to minimize the amount of additional Trade Liabilities incurred after execution of this Agreement, and to prevent a Trade Imbalance. For purposes hereof, the term "TRADE AGREEMENTS" means and includes those agreements entered into by Citadel for the sale of advertising time on the Station for consideration other than cash. For purposes hereof, the value of Trade Receivables and the Trade Liabilities as of the Closing shall be the fair market value thereof, as previously agreed to by Citadel and the applicable vendor. Purchaser shall assume Citadel's remaining obligations under such contracts. 6.10 SUPPLEMENTAL FINANCIAL STATEMENTS. Citadel shall provide Purchaser with copies of the monthly unaudited income statements and balance sheets applicable to the Station prepared by Citadel from the date hereof until Closing in the ordinary course of business (collectively, the "SUPPLEMENTAL FINANCIAL STATEMENTS"). Citadel shall provide such Supplemental Financial Statements to Purchaser promptly upon such Supplemental Financial Statements becoming available to Citadel. The Supplemental Financial Statements shall be subject to the representations and warranties as set forth in Section 4.4. 6.11 CONSENTS. Exercise all reasonable efforts (not involving the payment by Citadel or License Sub of any money to any party to any Assigned Contract) to obtain, prior to the Closing the consent and approval of any third parties whose consent or approval is necessary in connection with the consummation of the transactions contemplated hereby, with respect to the Assigned Contracts set forth on CITADEL'S DISCLOSURE SCHEDULE and requiring such consent. If any such consent or approval is not obtained, Citadel will use commercially reasonable efforts (not involving the payment of money to any Person) to secure an arrangement satisfactory to Purchaser intended to provide for Purchaser following the Closing the benefits under each Assigned Contract for which such consent or approval is not obtained; provided, however, that Purchaser shall have the right to terminate this Agreement or to seek damages or other remedies from Citadel as a result of any failure by Citadel to obtain any such consent or approval set forth on CITADEL'S DISCLOSURE SCHEDULE, if alternative arrangements are not satisfactory to Purchaser. Citadel shall also execute a consent in a form provided by Purchaser, allowing Purchaser to assign all of its rights under this Agreement and any related documents to one or more of Purchaser's lenders upon default by Purchaser under the relevant loan documents. 21 22 Nothing in this Agreement will constitute a transfer or an attempted transfer of any Assigned Contract which by its terms or under applicable law or governmental rules or regulations requires the consent or approval of a third party (including, without limitation, a Governmental Authority) unless such consent or approval is obtained. 6.12 FURTHER INFORMATION. Furnish to Purchaser prior to the Closing such financial (including tax), legal and other information with respect to the Station as Purchaser or its authorized representatives may from time to time reasonably request. 6.13 NOTICE. Promptly notify Purchaser in writing upon the occurrence or the nonoccurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty of Citadel or License Sub set forth in this Agreement. SECTION 7 NEGATIVE COVENANTS OF CITADEL AND LICENSE SUB From and after the date of this Agreement and until the Closing, Citadel and License Sub shall not take, or cause to be taken, any of the following actions without Purchaser's prior approval, which may not be unreasonably withheld: 7.1 SALES, TRANSFERS AND LIENS. Make any sale, transfer, assignment, conveyance, mortgage, hypothecation, encumbrance or other placement of any Lien on any of the Purchased Assets, except in the ordinary course of business, which do not materially interfere with the operations of the Station, and which in the case of a sale, transfer or assignment, is replaced with an asset of equal or greater value, and, in the case of a conveyance, mortgage, hypothecation, encumbrance or other Lien, is released at or prior to the Closing. 7.2 ASSUMED OBLIGATIONS. Amend, terminate or renew any of the Assumed Obligations (including any renewal or termination resulting from the failure to provide, after the date of this Agreement, timely notice of nonrenewal or termination as required by the terms of any of the Assumed Obligations). 7.3 BREACHES, DEFAULTS. Do any act or omit to do any act, or permit any act or omission to occur, that will cause a breach of any contract, commitment or obligation of it or them in any respect that would have a material adverse effect on the Purchased Assets or the business operations of the Station as presently conducted. 7.4 OBLIGATIONS. Incur any Obligations with respect to the Station except in the ordinary course of business in a manner consistent with past practices. 22 23 7.5 SALARY INCREASES. Increase any salary, other payments, disbursement or distributions in any manner or form to any employees of Citadel at the Station except (A) in the ordinary course of business consistent with past practices or (B) in accordance with the existing terms of contracts entered into prior to the date of this Agreement. 7.6 NON-SOLICITATION. Directly or indirectly solicit or negotiate with any Person (other than a party hereto) or accept any proposal to acquire the Station in whole or in part. SECTION 8 COVENANTS OF PURCHASER Purchaser hereby covenants as follows: 8.1 COMPLIANCE WITH LAW. Purchaser shall comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated by this Agreement. 8.2 NOTICE. Purchaser shall promptly notify Citadel in writing upon the occurrence or the non-occurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty of Purchaser set forth in this Agreement. 8.3 ACCOUNTS RECEIVABLE. Subject to Purchaser's receipt from Citadel at the Closing of a list (the "ACCOUNTS RECEIVABLE LIST") of accounts receivable of the Station existing as of the Closing, exclusive of Trade Receivables, if any (the "ACCOUNTS RECEIVABLE"), for a period of 120 days commencing with the Closing Date (the "PURCHASER COLLECTION PERIOD"), Purchaser, as agent for Citadel, shall collect the Accounts Receivable in accordance with Purchaser's normal collection processes and procedures. In no event shall Purchaser be required to institute litigation or to retain third parties to institute collection procedures with respect to the Accounts Receivable. All remittances will be applied first to the oldest Accounts Receivable, unless the client asserts that a dispute exists with respect to a particular account or the client specifies the particular invoice to which the payment is to be applied, in which case the remittances shall be applied to the specific account and Purchaser shall promptly notify Citadel of any dispute. Remittances collected by Purchaser on behalf of Citadel shall be remitted to Citadel without offset of any kind within 10 days after the end of each calendar month during the Purchaser Collection Period, and within five days after termination of the Purchaser Collection Period. During the Purchaser Collection Period, at Citadel's option, Citadel shall be permitted to collect the Accounts Receivable that remain outstanding after 60 days, or are disputed in writing by the relevant account debtor. Each remittance by Purchaser to Citadel shall be accompanied by a written report from Purchaser setting forth the aggregate amount of the Accounts Receivable and the aggregate amount of cash collections of such Accounts Receivable during the period for which payment is made, along with a breakdown by account debtor. At the end of the Purchaser 23 24 Collection Period, Purchaser shall account for all collected Accounts Receivable and provide Citadel with all documentation related to uncollected Accounts Receivable, and Purchaser shall have no further responsibilities with respect to any uncollected Accounts Receivables except to remit promptly to Citadel any amounts subsequently received by Purchaser. Purchaser shall have no obligation with respect to any Accounts Receivable it is unable to collect. After the end of the Purchaser Collection Period, Citadel shall be entitled to collect any Accounts Receivable that remain uncollected. SECTION 9 ADDITIONAL COVENANTS OF THE PARTIES 9.1 APPLICATION FOR TRANSFER OF CONTROL. As promptly as practicable after the date of this Agreement, and in no event later than three business days after the date of this Agreement, Purchaser, Citadel and License Sub shall file an application (the "FCC APPLICATION") with the FCC to approve the transfer of control of the Station from Citadel and License Sub to Purchaser (the "FCC APPROVAL"). Purchaser shall have primary responsibility for filing and prosecuting the FCC Application. The parties agree that they shall prosecute the FCC Application (and shall cooperate with each other in the timely prosecution thereof), in good faith and with due diligence, and within the time allowed therefor by the rules and regulations of the FCC. Purchaser and Citadel shall each take all necessary actions on its part to obtain the FCC Approval. Purchaser shall advance the filing fee for the FCC Application, and Citadel shall reimburse Purchaser for one-half of such filing fee at the Closing. All other costs and expenses incurred by each party in connection with the filing and prosecution of the FCC Application shall be paid by the party incurring the cost or expense. 9.2 ADJUSTMENTS AT CLOSING. Without duplication, the following items (in addition to similar items which are customarily prorated) shall be prorated between Citadel and Purchaser through and including the Closing Date, and the Cash Purchase Price appropriately increased or decreased as a result thereof: (a) Amounts payable under the Real Property Leases and the Assigned Contracts; (b) Power, utility and telephone charges incurred in connection with the Station; (c) Accrued Taxes existing as of the Closing; and (d) FCC and HSR filing fees, as provided in Sections 9.1 and 9.7, respectively. Proration of real and personal property taxes shall be based upon the most recent assessments available. Each of the parties shall duly cooperate with the other in making the foregoing prorations, adjustments and payments. If, for any reason beyond the reasonable control 24 25 of the parties, information necessary to calculate the required prorations is unavailable before the Closing Date, such item shall be prorated after the Closing Date as soon as such information is available, and Purchaser and Citadel shall cooperate with each other in regard thereto and shall pay, each to the other, any amounts which may be owing as a result of such subsequent prorations. If, at any time after the Closing Date, errors are discovered in any prorations made pursuant to this Section 9.2, Purchaser and Citadel shall correct such errors and pay, each to the other, any sums owing as a result of such correction. All prorations to the extent feasible shall be made on the Closing Date. 9.3 BROKERAGE. Purchaser, Citadel and License Sub represent and warrant to each other that no Person (other than Broker) has provided services as a broker, agent or finder in connection with the transactions contemplated by this Agreement. Purchaser shall pay all fees, commissions, claims and expenses of Broker in connection with the transactions contemplated hereby. Purchaser, Citadel and License Sub shall each indemnify and hold harmless the other for any and all claims or expenses, including attorneys' fees, asserted by any Person purporting to act on behalf of the respective indemnitor as a broker, agent or finder in connection with the transactions contemplated by this Agreement. 9.4 RISK OF LOSS. If any loss or damage to any of the Purchased Assets occurs prior to the Closing (i) which has a material adverse effect on the Station and (ii) such loss or damage is not susceptible of repair, replacement or restoration with sufficient, collectible insurance proceeds available for such purposes or by Citadel at its sole cost and expense to substantially the same condition as existed before such loss or damage, then the parties shall adjust the Cash Purchase Price to reflect the diminution in value of the Station attributable to the impairment of such assets. 9.5 ACTIONS WITH FCC. In the event any investigation, order to show cause, notice of violation, notice of apparent liability or a forfeiture, material complaint, petition to deny or informal objection is instituted or filed against any party hereto (whether in connection with the proceedings to approve the FCC Application or otherwise), such party shall promptly notify the other party hereto in writing of such occurrence and shall thereafter immediately take all reasonable measures to contest the same in good faith and seek the removal or favorable resolution of such action, order, notice or complaint. 9.6 COOPERATION. During the seven-year period immediately following the Closing, Citadel shall cooperate with Purchaser in providing Purchaser all information reasonably requested and permitting Purchaser access to all records relating to the period of ownership of the Station by Citadel prior to the Closing. The cost and expense in providing or permitting access to information hereunder shall be borne by Purchaser. Purchaser, as a condition to being provided with access to information hereunder, shall, at the request of Citadel, execute a confidentiality agreement in form and substance acceptable to Citadel in its reasonable discretion. Notwithstanding the foregoing, Citadel may discard any such records during such seven-year period if (i) Citadel notifies Purchaser of Citadel's intent to discard such records and 25 26 (ii) Purchaser does not, within 10 days after receipt of such notice, retrieve such records from Citadel's premises. 9.7 HSR FILING. As promptly as practicable after the date of this Agreement, and in no event later than 10 days after the date of this Agreement, the parties hereto shall complete and submit any filing that may be required pursuant to the HSR Act (the "HSR FILING"). The parties hereto shall diligently take, or fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested, in order to comply with the requirements of the HSR Act. The parties hereto shall use their best efforts to resolve objections, if any, that may be asserted under the HSR Act or any other antitrust law in connection with the transactions contemplated hereby. Citadel shall advance the filing fee applicable to any HSR Filing, and Purchaser shall reimburse Citadel for one-half of such filing fee at the Closing. All other costs and expenses incurred by each party in connection with the filing and prosecution of any HSR Filing shall be paid by the party incurring the cost or expense. 9.8 EASTON ANTENNA LEASE. At the Closing, Purchaser, as lessor, and Citadel, as lessee, shall enter into an antenna lease at the Station's current tower site for Citadel's current WLEV(FM) "hop" at such site (the "ALLENTOWN ANTENNA LEASE") containing the following terms: (a) the term shall be 50 years; and (b) rent shall be $1 per year during the entire term. Purchaser and Citadel shall negotiate in good faith the Easton Antenna Lease, which shall contain the terms set forth in this Section 9.8, as well as such other customary and appropriate terms and conditions. 9.9 REMOVAL OF PERSONAL PROPERTY. To the extent necessary or appropriate, Purchaser shall be responsible for removing, at its expense, the Personal Property from Citadel's premises within a reasonable time after the Closing. 9.10 CONFIDENTIALITY. Purchaser shall maintain strict confidentiality with respect to all documents and information furnished to Purchaser by or on behalf of Citadel or License Sub. Notwithstanding the foregoing, nothing shall be deemed to be confidential information that (a) is known to Purchaser at the time of its disclosure to Purchaser; (b) becomes publicly known or available other than through disclosure by Purchaser; (c) is received by Purchaser from a third party not actually known by Purchaser to be bound by a confidentiality agreement with or obligation to Citadel; or (d) is independently developed by Purchaser as clearly evidenced by its records. Notwithstanding the foregoing provisions of this Section, Purchaser may disclose such confidential information (x) to the extent required or deemed advisable to comply with applicable laws and regulations, (y) to its stockholders, officers, directors, employees, representatives, financial advisors, attorneys, accountants and agents with respect to the transactions contemplated hereby (so long as such parties are informed of the confidentiality of such information), and (z) to any governmental authority in connection with the transactions contemplated hereby. In the event this Agreement is terminated, Purchaser will return to Citadel all confidential information prepared or furnished by Citadel relating to the transactions contemplated hereby, whether obtained before or after the execution of this Agreement. 26 27 9.11 PUBLIC ANNOUNCEMENTS. The parties hereto shall consult with each other before making any further public statements with respect to this Agreement or the transactions contemplated hereby and shall not issue any such press release or make any such public statement without the prior written consent of the other parties, which shall not be unreasonably withheld, conditioned or delayed; provided, however, that a party may, without the prior consultation with or written consent of the other parties, issue such press release or make such public statement as may be required by applicable law if it has used all reasonable efforts to consult with the other parties and to obtain such parties' consents but has been unable to do so in a timely manner. 9.12 OPTION TO LEASE REAL PROPERTY. Purchaser may, at its cost and expense, make or cause to be made such environmental assessment regarding the Real Property as Purchaser deems appropriate. If such environmental assessment (if any) uncovers any material environmental problem with respect to the Real Property, Purchaser shall have the option (exercisable by providing written notice to Citadel at least 30 days prior to the Closing) to lease the Real Property from Citadel in lieu of taking title to the Real Property at the Closing. If Purchaser exercises such option, Purchaser and Citadel shall negotiate in good faith such lease, which shall be for a term of 29 years and 11 months, provide for rent of $1 per year during the entire term, and contain such other customary and appropriate terms and conditions. 9.13 OPTION TO LEASE STUDIO SPACE. The studio currently used by the Station (the "STUDIO") is owned by Citadel and not included in the Purchased Assets. Purchaser shall have the option (exercisable by providing written notice to Citadel at least 30 days prior to the Closing) to lease the Studio from Citadel at the Closing. If Purchaser exercises such option, Purchaser and Citadel shall negotiate in good faith such lease, which shall be for a term of 29 years and 11 months, provide for rent of $1 per year during the entire term, and contain such other customary and appropriate terms and conditions. SECTION 10 THE CLOSING 10.1 CLOSING DATE. The Closing shall occur on a date mutually selected by Purchaser and Citadel which is within 10 business days following the later of (a) the date on which the FCC Approval has become a Final Order or (b) the date on which all applicable waiting periods under the HSR Act have expired or been terminated. The Closing shall begin at 10:00 a.m., local time, on the date of the Closing (the "CLOSING DATE") at the offices of Eckert Seamans Cherin & Mellott, LLC, counsel for Citadel and License Sub, or at such other time and place as the parties may agree in writing. 10.2 CLOSING DOCUMENTS. At the Closing: (a) Citadel and License Sub shall deliver to Purchaser all certificates, consents (including any third party consents required as to the Assumed Obligations), estoppels and other documents (including bills of sale and assignments) otherwise required to be delivered by Citadel 27 28 and License Sub pursuant to this Agreement or as a condition precedent to Purchaser's fulfillment of its obligations hereunder. (b) Purchaser shall deliver to Citadel and License Sub all certificates and other documents (including an assumption agreement relating to the Assumed Obligations) required to be delivered by Purchaser to Citadel and License Sub pursuant to this Agreement or as a condition precedent to Citadel's and License Sub's fulfillment of their obligations under this Agreement. SECTION 11 CONDITIONS TO CITADEL'S AND LICENSE SUB'S OBLIGATION TO CLOSE The obligation of Citadel and License Sub to consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, any or all of which may be waived by Citadel and License Sub in their sole discretion (other than those set forth in Sections 11.7 and 11.8): 11.1 OPINION OF PURCHASER'S COUNSEL. Citadel and License Sub shall have received an opinion of counsel for Purchaser, dated the date of the Closing, in form and substance reasonably satisfactory to Citadel and License Sub, to the effect that: (a) Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. (b) Purchaser has full power and authority to own its assets and properties and to conduct its business and has all necessary approvals, permits, licenses and authorizations to own its properties and to conduct its business in the manner and in the locations presently owned and conducted. (c) This Agreement, together with all other documents and instruments required to be executed or delivered by Purchaser in connection with the transactions contemplated by this Agreement, each has been duly authorized, executed and delivered by Purchaser (to the extent it is a party thereto), and constitutes a valid and legally binding obligation of Purchaser (to the extent it is party thereto), enforceable against Purchaser in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (d) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of Purchaser or, to the knowledge of such counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel after due investigation, violates or will violate or conflicts with or will conflict with or will result in any breach of any 28 29 of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which Purchaser is a party or by which Purchaser, or any of the assets of Purchaser, is bound and which is known to Purchaser's counsel, all as set forth on PURCHASER'S DISCLOSURE SCHEDULE. Nothing contained in this Section 11.1 shall require an opinion of such counsel with respect to FCC matters. 11.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Purchaser contained herein shall be true and correct in all material respects at and as of the Closing with the same effect as though all such representations and warranties were made at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified except for such inaccuracies as do not, individually or in the aggregate, have a material effect on Purchaser's ability to consummate the transactions contemplated by this Agreement) and Purchaser shall have delivered to Citadel a certificate to that effect, dated the date of the Closing, signed by the President of Purchaser. 11.3 NO LITIGATION. No injunction relating to any action, suit or proceeding against Citadel or License Sub relating to the consummation of any of the transactions contemplated by this Agreement or any action by any Governmental Authority shall have been issued. 11.4 OTHER CERTIFICATES. Citadel shall have received certificate as to the good standing of Purchaser as a corporation in the Commonwealth of Pennsylvania as of a date not more than 20 days before the Closing, and such other certificates, instruments and other documents, in form and substance satisfactory to Citadel, as Citadel shall have reasonably requested in connection with the transactions contemplated hereby. 11.5 CORPORATE ACTION. All corporate action necessary to authorize the execution, delivery and performance by Purchaser of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by Purchaser, and Purchaser shall have delivered to Citadel certified copies of the resolutions of Purchaser's board of directors authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of its officers and employees in carrying out the terms and provisions of this Agreement. 11.6 ACTS TO BE PERFORMED. Each of the covenants, acts and undertakings of Purchaser to be performed on or before the Closing Date pursuant to the terms hereof shall have been duly performed. 11.7 FCC APPROVAL. The FCC Approval shall have been obtained. 11.8 HSR CLEARANCE. All applicable waiting periods under the HSR Act shall have expired or been terminated. 29 30 11.9 ALLENTOWN AGREEMENT. All of the conditions set forth in Section 11 of the Allentown Agreement shall have been satisfied or waived, and the transactions contemplated by the Allentown Agreement shall be consummated simultaneously with the Closing. SECTION 12 CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE The obligation of Purchaser to consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, any or all of which may be waived by Purchaser in its sole discretion (other than those set forth in Sections 12.9 and 12.10): 12.1 OPINION OF CITADEL'S AND LICENSE SUB'S COUNSEL. Purchaser shall have received an opinion of counsel for Citadel and License Sub, dated the date of the Closing, in form and substance reasonably satisfactory to Purchaser, to the effect that: (a) Each of Citadel and License Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. (b) Citadel is duly qualified and in good standing in the Commonwealth of Pennsylvania. (c) Each of Citadel and License Sub has full corporate power and authority to own its assets and properties and to conduct the Business and has all necessary approvals, permits, licenses and authorizations to own its properties and to conduct the Business in the manner and in the locations presently owned and conducted. (d) This Agreement, together with all other documents and instruments required to be executed or delivered by Citadel and License Sub in connection with the transactions contemplated hereby, each has been duly authorized, executed and delivered by Citadel and License Sub (to the extent a party thereto), and constitutes a valid and legally binding obligation of Citadel and License Sub (to the extent a party thereto), enforceable against each of them in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (e) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of Citadel or License Sub or, to the knowledge of such counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel after due investigation, violates or will violate, or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under, or results or will 30 31 result in the termination of or the creation or imposition of any Lien pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which Citadel or License Sub is a party or by which Citadel, License Sub or any of the assets of Citadel or License Sub is bound and which is known to such counsel, all as set forth on CITADEL'S DISCLOSURE SCHEDULE. Except for (1) the FCC Approval, (2) compliance with the HSR Act and (3) the consents disclosed on CITADEL'S DISCLOSURE SCHEDULE, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of Citadel or License Sub, in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. (f) To the knowledge of such counsel, except as disclosed on CITADEL'S DISCLOSURE SCHEDULE, there are no claims, disputes, actions, suits or proceedings pending or threatened against Citadel or License Sub with respect to the Station. Nothing contained in this Section 12.1 shall require an opinion by such counsel with respect to FCC matters. 12.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and warranties of Citadel and License Sub contained herein shall be true and correct in all material respects at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified except for such inaccuracies as do not, individually or in the aggregate, have a material effect on the Station or Citadel's or License Sub's ability to consummate the transactions contemplated by this Agreement) with the same effect as though all such representations and warranties were made at and as of the Closing, and Citadel and License Sub shall have complied with all their covenants contained herein; and Citadel and License Sub shall have delivered to Purchaser a certificate to that effect, dated the date of the Closing, signed by the President of Citadel and License Sub. 12.3 NO LITIGATION. No injunction relating to any action, suit or proceeding against Purchaser, Citadel or License Sub relating to the consummation of any of the transactions contemplated by this Agreement shall have been issued. 12.4 OTHER CERTIFICATES. Purchaser shall have received certificates as to the good standing of Citadel as a corporation in the States of Nevada and Pennsylvania and of License Sub in the State of Nevada, each as of a date not more than 20 days before the Closing, and such other certificates, instruments and other documents customary for transactions of the nature provided for in this Agreement, in form and substance reasonably satisfactory to Purchaser, as Purchaser shall have reasonably requested in connection with the transactions contemplated by this Agreement. 12.5 CORPORATE ACTION. All corporate action necessary to authorize the execution, delivery and performance by Citadel and License Sub of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by Citadel and License Sub, and Citadel and License Sub shall have delivered to Purchaser certified copies of the resolutions of 31 32 Citadel's and License Sub's board of directors authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of its officers and employees in carrying out the terms and provisions of this Agreement. 12.6 ACTS TO PERFORMED. Each of the covenants, acts and undertakings of Citadel and License Sub to be performed on or before the Closing Date pursuant to the terms hereof shall have been duly performed. 12.7 UCC SEARCHES. Citadel shall have delivered to Purchaser Uniform Commercial Code judgment and lien searches from the appropriate county and state agencies showing all Liens on the Purchased Assets, which searches shall be conducted not more than 30 days prior to the Closing. Citadel may cause such lien searches to be prepared by a third party, in which case Citadel shall not be responsible for any inaccuracies in such lien searches unless Citadel has actual knowledge of their inaccuracy. Notwithstanding the foregoing, Citadel and License Sub shall remain responsible for satisfying any Lien on the Purchased Assets even if such searches are inaccurate. 12.8 FILINGS, CONSENTS, APPROVALS AND ESTOPPEL CERTIFICATES. All filings, consents, approvals and estoppel certificates required by or reasonably requested by Purchaser pursuant to this Agreement, or necessary to consummate the transactions contemplated by this Agreement, shall have been obtained. 12.9 FCC APPROVAL. The FCC Approval shall have been obtained. 12.10 HSR CLEARANCE. All applicable waiting periods under the HSR Act shall have expired or been terminated. 12.11 ALLENTOWN AGREEMENT. All of the conditions set forth in Section 12 of the Allentown Agreement shall have been satisfied or waived, and the transactions contemplated by the Allentown Agreement shall be consummated simultaneously with the Closing. SECTION 13 INDEMNIFICATION 13.1 INDEMNIFICATION BY CITADEL AND LICENSE SUB. Subject to the limitations and procedures set forth in this Section 13, Citadel and License Sub shall indemnify and hold harmless Purchaser from and against any and all Damages sustained or incurred by Purchaser, to the extent such Damages are sustained or incurred by Purchaser by reason of the breach of any of the obligations, covenants or provisions of, or the breach of any of the representations or warranties made by, Citadel or License Sub in this Agreement. 13.2 INDEMNIFICATION BY PURCHASER. Subject to the limitations and procedures set forth in this Section 13, Purchaser shall indemnify and hold harmless Citadel and License Sub from 32 33 and against all losses, claims, demands, damages, liabilities, obligations, costs and/or expenses, including, without limitation, reasonable fees and disbursements of counsel (hereinafter referred to collectively as "DAMAGES"), which are sustained or incurred by Citadel and License Sub, to the extent that such Damages are sustained or incurred by reason of the breach of any of the obligations, covenants or provisions of, or the breach of any of the representations or warranties made by, Purchaser in this Agreement. 13.3 PROCEDURE FOR INDEMNIFICATION. In the event that any party to this Agreement shall incur any Damages in respect of which indemnity may be sought by such party pursuant to this Section 13 or any other provision of this Agreement, the party indemnified hereunder (the "INDEMNITEE") shall notify the party providing indemnification (the "INDEMNITOR") promptly. In the case of third party claims, such notice shall in any event be given within 10 days of the filing or assertion of any claim against the Indemnitee stating the nature and basis of such claim; provided, however, that any delay or failure to notify any Indemnitor of any claim shall not relieve it from any liability except to the extent that the Indemnitor demonstrates that the defense of such action has been materially prejudiced by such delay or failure to notify. In the case of third party claims, the Indemnitor shall, within 10 days of receipt of notice of such claim, notify the Indemnitee of its intention to assume the defense of such claim. If the Indemnitor assumes the defense of the claim, the Indemnitor shall have the right and obligation (a) to conduct any proceedings or negotiations in connection therewith and necessary or appropriate to defend the Indemnitee, (b) to take all other required steps or proceedings to settle or defend any such claims, and (c) to employ counsel to contest any such claim or liability in the name of the Indemnitee or otherwise. If the Indemnitor shall not assume the defense of any such claim or litigation resulting therefrom, the Indemnitee may defend against any such claim or litigation in such manner as it may deem appropriate and the Indemnitee may settle such claim or litigation on such terms as it may deem appropriate, and assert against the Indemnitor any rights or claims to which the Indemnitee is entitled. Payment of Damages shall be made within 10 days of a final determination of a claim. A final determination of a disputed claim shall be (a) a judgment of any court determining the validity of disputed claim, if no appeal is pending from such judgment or if the time to appeal therefrom has elapsed, (b) an award of any arbitration determining the validity of such disputed claim, if there is not pending any motion to set aside such award or if the time within to move to set such award aside has elapsed, (c) a written termination of the dispute with respect to such claim signed by all of the parties thereto or their attorneys, (d) a written acknowledgment of the Indemnitor that it no longer disputes the validity of such claim, or (e) such other evidence of final determination of a disputed claim as shall be acceptable to the parties. SECTION 14 TERMINATION OF AGREEMENT: ADDITIONAL REMEDIES 14.1 MANNER. This Agreement and the transactions contemplated hereby may be terminated prior to completion of the Closing: 33 34 (a) by mutual written consent of Citadel, License Sub and Purchaser; (b) by either Citadel and License Sub, on the one hand, or Purchaser, on the other, upon providing written notice to the other party at any time after June 30, 1998 if the FCC Approval has not been granted by the FCC, but only if the party providing such notice is not then in material breach of this Agreement; (c) by Purchaser, upon providing written notice to Citadel and License Sub, if as of the time set for Closing any of the conditions in Section 12 of this Agreement (except Sections 12.9 and 12.10) has not been satisfied or waived by Purchaser in writing, provided Purchaser is not then in material breach of this Agreement; (d) by Citadel and License Sub, upon providing written notice to Purchaser, if as of the time set for Closing any of the conditions in Section 11 of this Agreement (except Sections 11.7 and 11.8) has not been satisfied or waived by Citadel and License Sub in writing, provided Citadel and License Sub are not then in material breach of this Agreement; (e) by Citadel and License Sub, upon providing written notice to Purchaser, if Purchaser fails to consummate the transactions contemplated hereunder after all conditions in Section 12 of this Agreement have been satisfied, provided Citadel and License Sub are not then in material breach of this Agreement; (f) by Purchaser, upon providing written notice to Citadel and License Sub, if Citadel or License Sub fails to consummate the transactions contemplated hereunder after all conditions in Section 11 of the Agreement have been satisfied, provided Purchaser is not then in material breach of this Agreement; (g) subject to Section 9.1, by either party upon denial by the FCC of the FCC Application; and (h) by either party if any court of competent jurisdiction in the United States or any other United States governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other actions shall have become final and non-appealable. 14.2 ADDITIONAL REMEDIES. The parties recognize and agree that Purchaser has relied on this Agreement and expended considerable effort and resources related to the transactions contemplated hereunder, that the rights and benefits conferred upon Purchaser herein are unique, and that damages may not be adequate to compensate Purchaser in the event Citadel and/or License Sub improperly refuses to consummate the transactions contemplated hereunder. The parties therefore agree that Purchaser shall be entitled, at its option and in lieu of terminating this Agreement pursuant to Section 14.1, to have this Agreement specifically enforced by a court of 34 35 competent jurisdiction; provided, however, that Purchaser may not specifically enforce this Agreement if it has previously terminated this Agreement. SECTION 15 GENERAL 15.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each representation and warranty herein contained shall survive the Closing, notwithstanding any investigation at any time made by or on behalf of any party to this Agreement. 15.2 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts, of the Commonwealth of Pennsylvania. 15.3 NOTICES. Any notices or other communications required or permitted under this Agreement shall be delivered personally or sent by registered or certified mail, postage prepaid, delivered by overnight delivery or sent by facsimile, addressed as follows: To Citadel or: Citadel Broadcasting Company License Sub 1015 Eastman Drive Bigfork, Montana 59911 Attn: Lawrence R. Wilson Fax: (406) 837-5373 With copy to: Citadel Broadcasting Company 140 South Ash Avenue Tempe, Arizona 85281 Attn: Donna L. Heffner Fax: (602) 731-5229 With a copy to: Eckert Seamans Cherin & Mellott, LLC 600 Grant Street 42nd Floor Pittsburgh, Pennsylvania 15219 Attn: Bryan D. Rosenberger, Esq. Fax: (412) 566-6099 To Purchaser: Maranatha Broadcasting Company, Inc. East Rock Road Allentown, PA 18103 Attn: Richard C. Dean Fax: (610) 791-3000 35 36 With a copy to: Malkames Law Offices 509 Linden Street Allentown, PA 18101-1491 Attn: William G. Malkames, Esq. Fax: (610) 821-5851 or such other addresses as shall be similarly furnished in writing by either party. Such notices or communications shall be deemed to have been given as of the date of personal delivery, or if mailed, the date the return receipt is signed or the date on which delivery is refused, or if delivered by overnight delivery or facsimile, on the date of receipt. 15.4 ENTIRE AGREEMENT. This instrument supersedes all prior communications, understandings and agreements of or between the parties with respect to the subject matter of this Agreement and, together with the Allentown Agreement, contains the entire agreement among the parties with respect to the transactions contemplated in this Agreement. 15.5 HEADINGS. The headings of this Agreement are inserted for convenience only and shall not constitute a part of this Agreement. 15.6 SCHEDULES, EXHIBITS. All schedules and exhibits annexed to this Agreement are hereby incorporated in this Agreement by this reference. 15.7 EXPENSES. Each party shall bear its own costs and expenses incurred by it in connection with the transactions pursuant to this Agreement. 15.8 AMENDMENT. This Agreement may be amended, modified or superseded, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed on behalf of all of the parties or, in the case of a waiver, by the party waiving compliance. 15.9 WAIVER. The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect the right to enforce that provision or any other provision of this Agreement at any time thereafter. 15.10 ASSIGNMENT. Neither this Agreement nor any of the rights or obligations under this Agreement may be assigned by Purchaser without the prior written consent, in their sole discretion, of Citadel and License Sub, or by Citadel or License Sub without the prior written consent, in its sole discretion, of Purchaser. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligation under this Agreement. 15.11 PRIOR CONTROL. Until the Closing, Citadel and License Sub shall maintain control of the Station. 36 37 15.12 ATTORNEYS' FEES. In the event of any action arising out of this Agreement, the prevailing party shall be entitled to recover its costs, expenses and reasonable attorney's fees incurred in connection with the dispute from the other party. 15.13 COUNTERPARTS; FAX SIGNATURES. This Agreement may be executed in one or more counterparts, each of which together shall constitute a single instrument. Signatures on this Agreement transmitted by facsimile shall be deemed to be original signatures for all purposes of this Agreement. 15.14 DISPUTE RESOLUTION. Except as provided below, any dispute arising out of or relating to this Agreement or the breach, termination or validity hereof shall be finally settled by arbitration conducted expeditiously in accordance with the CPR Rules. The Center for Public Resources shall appoint a neutral advisor from its National CPR Panel. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof. The place of arbitration shall be Allentown, Pennsylvania. Such proceedings shall be administered by the neutral advisor in accordance with the CPR Rules as he/she deems appropriate; provided, however, such proceedings shall be guided by the following agreed upon procedures: (a) mandatory exchange of all relevant documents, to be accomplished within 45 days of the initiation of the procedure; (b) no other discovery; (c) hearings before the neutral advisor which shall consist of a summary presentation by each side of not more than three hours; such hearings to take place on one or two days at a maximum; and (d) decision to be rendered not more than 10 days following such hearing. The provisions of this Section 15.14 shall not apply with regard to any equitable remedies to which a party may be entitled under this Agreement. [SIGNATURES APPEAR ON FOLLOWING PAGE] 37 38 IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date above first written. Maranatha Broadcasting Company, Inc. By: /s/ Richard C. Dean --------------------------------- Its: President --------------------------------- Citadel Broadcasting Company By: /s/ Lawrence R. Wilson --------------------------------- Its: President --------------------------------- Citadel License, Inc. By: /s/ Lawrence R. Wilson --------------------------------- Its: President --------------------------------- 38 39 INDEX OF SCHEDULES Schedule 2.1 - Asset Schedule Schedule 2.2 - Excluded Assets Schedule 2.3 - Assumed Obligations Schedule 4.0 - Citadel's Disclosure Schedule Schedule 5.0 - Purchaser's Disclosure Schedule [Pursuant to Regulation S-K, Item 601(b)(2), Registrant agrees to furnish supplementally a copy of these schedules to the Securities Exchange Commission upon request.] EX-2.5 4 CITADEL BROADCASTING CO. S-4 1 Exhibit 2.5 MERGER AGREEMENT AMONG SNIDER CORPORATION TED L. SNIDER, SR., JANE J. SNIDER, CITADEL COMMUNICATIONS CORPORATION AND CITADEL BROADCASTING COMPANY JUNE 2, 1997 2 MERGER AGREEMENT THIS MERGER AGREEMENT ("AGREEMENT"), made as of the 2nd day of June, 1997, among SNIDER CORPORATION, an Arkansas corporation (the "COMPANY"); TED L. SNIDER, SR. and JANE J. SNIDER (collectively, the "STOCKHOLDERS"); CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation ("PARENT"); and CITADEL BROADCASTING COMPANY, a Nevada corporation ("CITADEL"). RECITALS: A. The Company is the licensee of and owns and operates the following radio stations: (i) KARN-AM, licensed to Little Rock, Arkansas, (ii) KARN-FM, licensed to Cabot, Arkansas, (iii) KKRN-FM, licensed to Humnoke, Arkansas, (iv) KRNN-AM, licensed to North Little Rock, Arkansas, and (v) KAFN-FM (CP), permit licensed to Gould, Arkansas (collectively, the "STATIONS"). B. The Company is a party to the following contracts: (i) those certain agreements between the Company and various third party stations relating to the Arkansas Radio Network; (ii) that certain time brokerage agreement under negotiation between the Company and Flinn Broadcasting which has not been signed by the Company; (iii) that certain Construction Permit for the construction of a transmission tower in Gould, Arkansas; and (iv) certain options and rights to acquire land in Gould, Arkansas and North Little Rock, Arkansas, for the construction and relocation of transmission towers. C. The Stockholders own all of the issued and outstanding shares of capital stock of the Company. D. Citadel is a wholly-owned subsidiary of Parent. E. The parties desire that the Company be merged with and into Citadel (with Citadel surviving such merger) pursuant to the applicable laws of the States of Arkansas and Nevada, on the terms and conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1 DEFINITIONS The following terms when used in this Agreement shall have the meanings assigned to them below: "ACCOUNTS RECEIVABLE" means the accounts receivable of the Company, exclusive of Trade Receivables, existing as of the Closing. 3 "ACCOUNTS PAYABLE" means the Obligations, described in clause (b) of the definition thereof, of the Company, exclusive of Trade Liabilities, existing as of the Closing. "ACCRUED TAXES" means all Taxes attributable to a Person or its income, operations or properties accruing up to and including the Closing. "ACT" means the Communications Act of 1934, as amended. "AFFILIATE" of any Person means any other Person (a) that directly or indirectly controls, is controlled by, or is under direct or indirect common control with, the first Person, or (b) any interests of which are owned, in whole or in part, directly or indirectly, by the first Person. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controls," "controlled by," and "under direct or indirect control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of the Person, whether through the ownership of voting securities or by contract or otherwise. "AGREEMENT NOT TO COMPETE" means the Agreement Not to Compete to be executed and delivered by Citadel and Ted L. Snider, Sr. at the Closing, substantially in the form attached to this Agreement as EXHIBIT A. "AMENDED AND RESTATED CERTIFICATE OF INCORPORATION" means the Seventh Amended and Restated Certificate of Incorporation of Parent, in the form attached to this Agreement as EXHIBIT B. "AMENDMENT TO REGISTRATION RIGHTS AGREEMENT" means the Amendment to the Third Amended and Restated Registration Rights Agreement dated as of June 28, 1996, as amended, among Parent, the Investors and Wilson to be executed and delivered at the Closing, substantially in the form attached to this Agreement as EXHIBIT C. "AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT" means the Amendment to Securities Purchase and Exchange Agreement to be executed and delivered at the Closing among the holders of the Series G Preferred Stock as of the Closing Date and each of the original parties to the Securities Purchase and Exchange Agreement dated as of June 28, 1996, as amended, among Parent, Citadel, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, and certain other parties (the "SECURITIES PURCHASE AND EXCHANGE AGREEMENT"), substantially in the form attached to this Agreement as EXHIBIT D. "AMENDMENT TO STOCKHOLDERS AGREEMENT" means the Amendment to Stockholders Agreement to be executed and delivered at the Closing among the holders of the Series G Preferred Stock as of the Closing Date and each of the original parties to the Second Amended and Restated Stockholders Agreement dated as of June 28, 1996, as amended, among Parent, -2- 4 the Investors, Wilson and certain other parties (the "STOCKHOLDERS AGREEMENT"), substantially in the form attached to this Agreement as EXHIBIT E. "AMENDMENT TO VOTING AGREEMENT" means the Amendment to Voting Agreement to be executed and delivered at the Closing among the holders of the Series G Preferred Stock as of the Closing Date and each of the original parties to the Third Amended and Restated Voting Agreement dated as of March 17, 1997 among Parent, the Investors and Wilson, substantially in the form attached to this Agreement as EXHIBIT F. "ARTICLES OF MERGER" means the Articles of Merger to be executed and delivered by Citadel and the Company at the Closing and filed with the appropriate authorities in the States of Nevada and Arkansas, in form and substance mutually agreed upon by Citadel and the Company. "ASSETS" means all of the property of every kind or nature used in the operation of the Stations, including but not limited to the Real Property, the Real Property Leases, the Intellectual Property, the Personal Property, the Trade Receivables, the Accounts Receivable and the Cash (other than the Excluded Assets and the Excluded Real Property), and all books, records and accounts relating to the operation of the Stations. "BROKER" means NationsBanc Capital Markets, Inc. "BUSINESS" means the business in which the Company is now engaged. "CASH" means the cash and cash equivalents of the Company existing as of the Closing. "CDB BROADCASTING AGREEMENT" means that certain Asset Purchase Agreement dated as of the date hereof among CDB Broadcasting Corporation, CDB License Corporation and Citadel. "CITADEL PERMITS" has the meaning specified in Section 4.8. "CITADEL STATIONS" has the meaning specified in Section 4.5. "CITADEL SUPPLEMENTAL FINANCIAL STATEMENTS" has the meaning specified in Section 8.7. "CITADEL'S CAP EXEMPT DAMAGES" has the meaning specified in Section 13.5(b). "CITADEL'S DISCLOSURE SCHEDULE" means SCHEDULE 1 to this Agreement. "CLOSING" means the consummation of the transactions contemplated in this Agreement in accordance with the provisions of Section 10. -3- 5 "CLOSING CERTIFICATE" means the certificate of the President of the Company and the Stockholders dated the Closing Date and delivered to Parent and Citadel, which sets forth a listing of the Excluded Assets. "CLOSING DATE" has the meaning specified in Section 10. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPANY ASSET SCHEDULE" means SCHEDULE 2 to this Agreement. "COMPANY COMMON STOCK" means the common stock, par value $1.00 per share, of the Company. "COMPANY SUPPLEMENTAL FINANCIAL STATEMENTS" has the meaning specified in Section 5.9. "COMPANY'S DISCLOSURE SCHEDULE" means SCHEDULE 3 to this Agreement. "CONTRACTS" means all (a) contracts, agreements, licenses, leases, arrangements and other documents to which the Company is a party or by which the Company or the assets of the Company are bound (including, in the case of loan agreements, a description of the amounts of any outstanding borrowings thereunder and the collateral, if any, for such borrowings); (b) uncompleted orders for the purchase by the Company of materials, supplies, equipment and services for the requirements of the Stations existing as of the date hereof and with respect to which the remaining obligation of the Company is in excess of $2,500; and (c) contingent contractual obligations and liabilities of the Company known to the Company existing as of the date hereof. "CPR RULES" means the Center for Public Resources Rules for Nonadministered Arbitration of Business Disputes. "DAMAGES" has the meaning specified in Section 13.1. "DISSENTING SHARES" has the meaning specified in Section 2.4(b). "DRAW CONDITION" has the meaning specified in Section 14.2(a). "EFFECTIVE DATE" means the date upon which articles of merger, or an equivalent document, reflecting the Merger have been filed with the appropriate authorities of the States of Arkansas and Nevada pursuant to Section 2. The parties intend that the Effective Date be on the Closing Date. "ENVIRONMENTAL CLAIMS" means and includes, without limitation: (a) claims, demands, suits, causes of action for personal injury or lost use of property, or consequential damages, to the extent any of the foregoing arise directly or indirectly out of Environmental Conditions; -4- 6 (b) actual or threatened damages to natural resources; (c) claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, response or remedial actions under CERCLA, RCRA or other Environmental Laws; (d) a requirement to implement "corrective action" pursuant to any order or permit issued pursuant to RCRA; (e) claims for restitution, contribution or equitable indemnity from third parties or any governmental agency; (f) fines, penalties or Liens against property; (g) claims for injunctive relief or other orders or notices of violation from Governmental Authorities; and (h) with regard to any present or former employees, exposure to or injury from Environmental Conditions. "ENVIRONMENTAL CONDITIONS" means conditions of the environment, including the ocean, natural resources (including flora and fauna), soil, surface water, ground water, any present or potential drinking water supply, subsurface strata or the ambient air, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping, or threatened release of Hazardous Materials by a Person. With respect to claims by employees, Environmental Conditions also includes the exposure of Persons to Hazardous Materials within work places on any real estate owned or occupied by a Person. "ENVIRONMENTAL LAWS" has the meaning specified in the definition of Hazardous Materials. "ENVIRONMENTAL NONCOMPLIANCE" means, but is not limited to: (a) the release or threatened release as a result of the activities of a Person of any Hazardous Materials into the environment, any storm drain, sewer, septic system or publicly owned treatment works, in violation of any effluent emission limitations, standards or other criteria or guidelines established by any federal, state or local law, regulation, rule, ordinance, plan or order; and (b) any facility operations, procedures, designs, etc. which do not conform to the statutory or regulatory requirements of the CAA, the CWA, the TSCA, the RCRA or any other Environmental Laws intended to protect public health, welfare and the environment. "EQUITY SECURITIES" has the meaning ascribed thereto in the Securities Purchase and Exchange Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "EXCLUDED ASSETS" means the excess, if any, of (a) the Cash and the Accounts Receivable over (b) the Accounts Payable. "EXCLUDED REAL PROPERTY" means those certain unimproved residential lots in Southwest Little Rock, Arkansas which are owned by the Company and further described in COMPANY'S DISCLOSURE SCHEDULE. "FCC" means the Federal Communications Commission. -5- 7 "FCC APPLICATION" has the meaning specified in Section 9.1. "FCC APPROVAL" has the meaning specified in Section 9.1. "FCC LICENSES" means the main station license for each Station, together with each of the other consents, rights, licenses, permits and other authorizations issued by the FCC and held by the Company in connection with, or pertaining to, the conduct of the business and operation of the Stations, together with any renewals and extensions thereof and any applications therefor pending on the Closing Date, and any and all applications made by the Company for such consents, rights, licenses, permits and other authorizations. "FINAL ORDER" means a written action or order issued by the FCC or its staff setting forth the FCC Approval (or a denial thereof), (a) which action or order has not been vacated, reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with respect to which action or order (i) no requests have been filed and are pending for administrative or judicial review, rehearing, reconsideration, appeal or stay, and the time period for filing any such requests and for the FCC to set aside the action on its own motion under the provisions of the Act or the rules, regulations and policies of the FCC has expired, or (ii) in the event of review, reconsideration or appeal, the time for further review, reconsideration or appeal has expired. "GAAP" means generally accepted accounting principles in effect in the United States of America from time to time applied on a consistent basis during the periods involved. "GOVERNMENTAL AUTHORITY" means any government, whether federal, state or local, or any other political subdivision thereof, or any agency, tribunal or instrumentality of any such governmental or political subdivision, or any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "HAZARDOUS MATERIALS" means hazardous wastes, hazardous substances, hazardous constituents, toxic substances or related materials, whether solids, liquids or gases including but not limited to substances defined as "PCBs," "hazardous wastes," "hazardous substances," "toxic substances," "pollutants," "contaminants," "radioactive materials," "petroleum," or other similar designations in, or otherwise subject to regulation under, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), 42 U.S.C. Section 9601 ET SEQ.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. Section 2601 ET SEQ.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 9601; the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Section 300f ET SEQ.; the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 ET SEQ.; or any similar state law; and in the plans, rules, regulations or ordinances adopted, or other criteria and guidelines promulgated pursuant to the preceding laws or other similar laws, regulations, rules or ordinances now in effect (collectively, the "ENVIRONMENTAL LAWS"); and any other substances, constituents or wastes subject to environmental regulations under any applicable federal, state or local law, regulation or ordinance. -6- 8 "INDEBTEDNESS FOR BORROWED MONEY" means (a) all indebtedness of a Person in respect of money borrowed (including, without limitation, indebtedness which represents the unpaid amount of the purchase price of any property), (b) all indebtedness of a Person evidenced by a promissory note, bond or similar written obligation to pay money, (c) all indebtedness guaranteed by a Person or for which a Person is contingently liable, including, without limitation, guaranties in the form of an agreement to repurchase or reimburse, and any commitment by which any such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit, and (d) all monetary obligations of a Person under any lease or similar arrangement, which obligations would be classified and accounted for as capital obligations on a balance sheet of such Person under GAAP. "INDEMNITEE" has the meaning specified in Section 13.3. "INDEMNITOR" has the meaning specified in Section 13.3. "INTELLECTUAL PROPERTY" means the call letters of each Station and all of the copyrights, trademarks, trade names and other similar rights, including applications and registrations therefor, used in connection with the past or present operation of each Station in which the Company has any right, title or interest, including, without limitation, those items listed on the COMPANY ASSET SCHEDULE. "INVESTORS" shall have the meaning ascribed thereto in the Securities Purchase and Exchange Agreement. "LETTER OF CREDIT" has the meaning specified in Section 2.6. "LIEN" means any mortgage, pledge, hypothecation, assignment, encumbrance, claim, easement, transfer restriction, lien (statutory or otherwise) or security interest of any kind or nature whatsoever. "LOCAL MARKETING AGREEMENTS" has the meaning specified in Section 9.2. "MERGER" has the meaning specified in Section 2.1. "MERGER CONSIDERATION" has the meaning specified in Section 2.4(a). "NET LIABILITIES" means the excess, if any, of (a) the Account Payable over (b) the Cash and the Accounts Receivable. "OBLIGATIONS" means, without duplication, all (a) Indebtedness for Borrowed Money, (b) Accrued Taxes, accounts payable, accrued liabilities and all other liabilities and obligations of the type normally required by GAAP to be reflected on a balance sheet, (c) commitments by which a Person assures a creditor against loss, including the face amount of all letters of credit and, without duplication, all drafts drawn thereunder, (d) obligations guaranteed in any manner -7- 9 by a Person, (e) obligations under capitalized leases in respect of which obligations a Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss, (f) obligations under acceptance facilities, (g) obligations secured by a Lien on property of a Person, (h) obligations under interest rate or currency exchange or swap agreements, (i) unsatisfied obligations for "withdrawal liability" to a "multiemployer plan" as such terms are defined under ERISA, (j) indebtedness issued or obligation incurred in substitution or exchange for any Obligations, (k) costs or expenses incurred by a Person of any nature, whether or not currently payable, and (l) other liabilities or obligations of a Person, in each of the foregoing instances whether absolute or contingent, known or unknown, and whether or not normally required by GAAP to be reflected on a balance sheet. "PERMITS" means all FCC Licenses applicable to the Stations, and all other permits, licenses, approvals, franchises, notices and authorizations applicable to the Stations issued by any Governmental Authorities. "PERSON" means an individual, corporation, partnership, joint venture, joint stock company, association, trust, business trust, unincorporated organization, Governmental Authority, or any other entity of whatever nature. "PERSONAL PROPERTY" means all of the tangible personal property, improvements and fixtures of every kind or nature used in the operation of the Stations in the ordinary course of business, including, without limitation, the personal property described on the COMPANY ASSET SCHEDULE. "PLAN OF MERGER" means the Plan of Merger to be executed and delivered by Citadel and the Company at the Closing and filed with the appropriate authorities in the States of Nevada and Arkansas, in form and substance mutually agreed upon by Citadel and the Company. "REAL ESTATE PURCHASE AGREEMENT" means that certain Agreement of Sale dated as of the date hereof among Ted L. Snider, Sr., Jane J. Snider and Citadel. "REAL PROPERTY" means all of the right, title and interest of the Company in and to any real property used in the operation of the Stations, including but not limited to the real property described on the COMPANY ASSET SCHEDULE. "REAL PROPERTY LEASES" means the leasehold interests pursuant to the real property leases described on the COMPANY ASSET SCHEDULE. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SERIES G PREFERRED STOCK" means the Series G Convertible Preferred Stock, par value $.001 per share, of Parent. -8- 10 "SNIDER BROADCASTING AGREEMENT" means that certain Merger Agreement dated as of the date hereof among Snider Broadcasting Corporation, the stockholders of Snider Broadcasting Corporation, Parent and Citadel. "STATIONS" has the meaning set forth in the recitals to this Agreement. "STOCKHOLDERS' CAP EXEMPT DAMAGES" has the meaning specified in Section 13.6(b). "SURVIVING CORPORATION" has the meaning specified in Section 2.1. "TAXES" means all taxes, charges, fees, levies, or other assessments, including income, gross receipts, excise, property, sales, transfer, license, payroll, and franchise taxes, any taxes required by law to be withheld, and any taxes payable as a result of the consummation of the transactions contemplated by this Agreement, which taxes are imposed by any Governmental Authority; and such term shall include any interest, penalties, or additions to tax attributable to such assessments. "THRESHOLD" has the meaning specified in Section 13.5(a). "TRADE AGREEMENTS" means and includes those agreements entered into by the Company for the sale of advertising time on the Stations for consideration other than cash, which agreements are in effect as of the Closing. "TRADE LIABILITIES" means the fair market value of the Company's liability as of the Closing for unperformed time under the Trade Agreements. "TRADE RECEIVABLES" means the fair market value of goods and services to be received by the Company after the Closing under the Trade Agreements. "WILSON" means Lawrence R. Wilson. SECTION 2 MERGER 2.1 THE MERGER. On the Closing Date, in accordance with this Agreement and Arkansas and Nevada law, the Company shall be merged with and into Citadel (the "MERGER"), the separate existence of the Company shall cease, and Citadel shall continue as the surviving corporation under the corporate name it possesses immediately prior to the Closing Date. Citadel hereinafter may sometimes be referred to as the "SURVIVING CORPORATION." 2.2 EFFECT OF THE MERGER. On the Closing Date, the effect of the Merger shall be that (i) the Surviving Corporation shall possess all the rights, privileges and franchises possessed -9- 11 by each of the Company and Citadel, (ii) all of the property and assets of whatsoever kind or description of each of the Company and Citadel, and all debts due on whatever account to any of them, including subscriptions for shares or other choses in action belonging to any of them, shall be taken and be deemed to be transferred to, and vested in, the Surviving Corporation without further act or deed, and (iii) the Surviving Corporation shall be responsible for all of the liabilities and obligations of each of the Company and Citadel, as provided by applicable law, in the same manner as if the Surviving Corporation had itself incurred such liabilities or obligations; but the liabilities of the Company and Citadel, or of their shareholders, directors or officers, shall not be affected by, nor shall the rights of the creditors thereof or of any persons dealing with such corporations be impaired by, the Merger, and any claim existing, or action or proceeding pending, by or against either of the Company or Citadel may be prosecuted to judgment as if the Merger had not taken place, or the Surviving Corporation may be proceeded against, or substituted, in place of the Company or Citadel, as the case may be. 2.3 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS. The Articles of Incorporation of Citadel, as in effect immediately prior to the Closing Date, shall be the Articles of Incorporation of the Surviving Corporation after the Closing Date until thereafter amended as provided therein and under Nevada law. The Bylaws of Citadel, as in effect immediately prior to the Closing Date, shall be the Bylaws of the Surviving Corporation after the Closing Date until thereafter amended as provided therein and under Nevada law. The directors and officers of Citadel immediately prior to the Closing Date shall be the initial directors and officers of the Surviving Corporation after the Closing Date until their successors are elected and qualified. 2.4 MERGER CONSIDERATION; CONVERSION OF SECURITIES. On the Closing Date, by virtue of the Merger and without any action on the part of Parent, Citadel, the Company or the holder of any of the securities of such corporations: (a) MERGER CONSIDERATION. Each share of Company Common Stock issued and outstanding immediately prior to the Closing Date shall be converted automatically into (i) the number of shares of Series G Preferred Stock determined pursuant to Section 2.4(b) and (ii) an amount of cash equal to (A) $4,500,000 minus the Net Liabilities, if any, divided by (B) the number of issued and outstanding shares of Company Common Stock on the Closing Date (collectively, the "MERGER CONSIDERATION"). (b) SERIES G PREFERRED STOCK. Each share of Company Common Stock issued and outstanding immediately prior to the Closing Date (other than shares as to which dissenters' rights have been perfected and not withdrawn or otherwise forfeited under applicable Arkansas law ("DISSENTING SHARES")) shall be cancelled and extinguished and be converted into the right to receive (in addition to the cash consideration specified in Section 2.4(a)) that number of shares of Series G Preferred Stock equal to 162,286 divided by the number of shares of Company Common Stock then issued and outstanding; provided, however, that (i) in the event that Citadel's acquisition of all of the issued and outstanding shares of capital stock of Tele-Media Broadcasting Company is not consummated on or prior to the -10- 12 Closing Date, then the aggregate number of shares of Series G Preferred Stock issuable as Merger Consideration shall be increased from 162,286 to 172,326 and (ii) in the event after the date hereof and prior to the Closing Date the shares of Series G Preferred Stock at any time outstanding shall be subdivided, by reclassification, recapitalization, stock dividend or otherwise, into a greater number of shares without the actual receipt by Parent of consideration for the additional number of shares so issued, or the number of shares of Series G Preferred Stock at any time outstanding shall be reduced, by reclassification, recapitalization, reduction of capital stock or otherwise, or the outstanding shares of Series G Preferred Stock shall be reclassified or changed other than in such manner, then the number of shares of Series G Preferred Stock that each holder of Company Common Stock shall be entitled to as Merger Consideration shall be adjusted accordingly to the nearest share of Series G Preferred Stock. (c) TRANSFER BOOKS. On and after the Closing Date, there shall be no transfers on the stock transfer books of the Company with respect to shares of Company Common Stock issued and outstanding immediately prior to the Closing Date. If, after the Closing Date, certificates formerly representing shares of Company Common Stock are presented to Citadel or its transfer agent, they shall be cancelled and exchanged for the Merger Consideration as provided in Section 2.5, subject to applicable law in the case of Dissenting Shares. 2.5 EXCHANGE OF CERTIFICATES. From and after the Closing Date, all certificates representing shares of Company Common Stock, with the exception of certificates representing Dissenting Shares or shares of Company Common Stock held by the Company, shall represent the right to receive Merger Consideration on the basis set forth above and upon the terms and conditions of this Agreement, subject to applicable abandoned property, escheat and similar laws. Upon delivery of certificates representing shares of Company Common Stock to the transfer agent of Citadel, Citadel shall cause the transfer agent to issue certificates representing the requisite number of shares of Series G Preferred Stock for each share of Company Common Stock represented by the certificates therefor properly delivered, and Citadel shall pay by certified or cashier's check the cash consideration described in Section 2.4(a). Notwithstanding the foregoing, neither Citadel's transfer agent nor any party hereto shall be liable to a holder of shares of Company Common Stock for any of the Merger Consideration delivered to a public official pursuant to applicable abandoned property, escheat and similar laws. 2.6 LETTER OF CREDIT. Simultaneously with the execution of this Agreement, Citadel shall deliver to the Company an irrevocable letter of credit in favor of the Company, issued by a national banking association or other issuer acceptable to the Company, in the amount of $450,000, which shall be in the form attached as EXHIBIT G hereto (the "LETTER OF CREDIT"). The Letter of Credit shall provide that the issuing bank shall make payment on the Letter of Credit upon such bank's receipt of a joint certificate from the President of each of the Company and Citadel certifying that a Draw Condition has occurred. Upon the Closing, the Company shall return the original Letter of Credit to Citadel for cancellation. -11- 13 2.7 TAX-FREE REORGANIZATION. The parties hereto intend that the Merger shall qualify as a tax-free reorganization and exchange of stock within the terms of Sections 368(a)(1)(A), 368(a)(2)(D), 354(a), 356(a) and 361(a) of the Code, and agree to take such actions as may be necessary to conform to the provisions of said Sections and to do any and all things they deem necessary or advisable to carry out the purposes and intent of this Agreement. SECTION 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY In connection with the Merger and in order to induce Parent and Citadel to enter into and consummate the transactions contemplated by this Agreement, the Company makes the following representations and warranties to Parent and Citadel, as of the date of this Agreement and as of the date of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times): 3.1 ORGANIZATION AND QUALIFICATION; AUTHORITY. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Arkansas and has full power and authority to own its assets and properties and to conduct the BusineSection The Company has full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own its properties and to conduct the Business. The execution and delivery of this Agreement by the Company, the performance by the Company of its covenants and agreements hereunder and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company. This Agreement constitutes the valid and legally binding agreement of the Company and the Stockholders, enforceable against each of them in accordance with its terms. 3.2 SUBSIDIARIES. The Company does not own, of record or beneficially, any capital stock or equity interest or investment in any Person. -12- 14 3.3 CAPITALIZATION. (a) AUTHORIZED AND ISSUED SHARES OF COMPANY. The authorized capital stock of the Company consists solely of 1,000 shares of Company Common Stock, of which 100 shares are issued and outstanding. COMPANY'S DISCLOSURE SCHEDULE lists the names of the beneficial holders of all the outstanding shares of Company Common Stock, and the number of shares held by each of them. The issued and outstanding shares of Company Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable. The Company does not have outstanding any stock or securities convertible or exchangeable for any stock or securities. (b) REPURCHASE AND OTHER OBLIGATIONS. The Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its stock or other securities. No Stockholder, nor the Company or any other Person, is entitled to any preemptive right, right of first refusal or similar right with respect to the Company. There are no agreements, arrangements or trusts between or for the benefit of the Company or the Stockholders with respect to the voting or transfer of stock or other securities, or with respect to any other aspect of the Company's affairs. The Company has not violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its stock or other securities. 3.4 NO LEGAL BAR; CONFLICTS. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of the Company, or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which the Company is a party or by which the Company or any of the Assets is bound. Except for the FCC Approval and the consents disclosed in COMPANY'S DISCLOSURE SCHEDULE, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 3.5 FINANCIAL STATEMENTS. The Company has delivered to Parent and Citadel the following financial statements of the Company: (a) the audited consolidated balance sheet as of December 31, 1995 and the related consolidated statements of income and cash flows for the year then ended; (b) the audited consolidated balance sheet as of December 31, 1996 and the related consolidated statements of income and cash flows for the year then ended; (c) the unaudited consolidated balance sheet as of April 30, 1997, and the related unaudited consolidated statements of income and cash flows for the four months then ended; and (d) the monthly unaudited balance sheets and income statements for each month in 1996 and the first four months of 1997. Each of the foregoing financial statements (including in all cases the -13- 15 notes thereto, if any) (i) is accurate and complete in all material respects, (ii) is consistent in all material respects with the books and records of the Company (which, in turn, are accurate and complete in all material respects), and (iii) fairly presents in all material respects the financial condition and results of operations of the Company in accordance with GAAP (subject in the case of unaudited financial statements to the lack of footnote disclosure and changes resulting from normal year-end audit adjustments), consistently applied, as of the dates and for the periods set forth therein. 3.6 ABSENCE OF CERTAIN CHANGES. Between December 31, 1996 and the date of this Agreement, there has not been any of the following with respect to the Company or any of the Stations: (a) material adverse change in condition, financial or otherwise, or in the results of operations, assets, liabilities or business; (b) damage or destruction, whether or not insured, affecting business operations; (c) labor dispute or threatened labor dispute involving any employees; (d) actual or threatened dispute with any material provider of software, hardware or services; (e) material change in the customary methods of operations; (f) except in the ordinary course of business or to the extent not material to the Business or financial condition of any Station, sale or transfer of any tangible or intangible asset used or useful in the operation of any Station, mortgage, pledge or imposition of any Lien on any such asset, lease of real property, machinery, equipment or buildings with respect to any Station entered into or modification, amendment or cancellation of any of its existing leases relating to any Station, or cancellation of any debt or claim; or (g) liability or obligation (contingent or otherwise) incurred under agreements or otherwise, except current liabilities entered into or incurred in the ordinary course of business consistent with past practices. 3.7 TAXES. The Company has filed or caused to be filed on a timely basis all federal, state, local and other tax returns, reports and declarations required to be filed by it with respect to the Stations and has paid all Taxes (including, but not limited to, income, franchise, sales, use, unemployment, withholding, social security and workers' compensation taxes and estimated income and franchise tax payments, penalties and fines) reflected as due on such returns, reports or declarations (whether or not shown on such returns, reports or declarations), or pursuant to any assessment received by it in connection with such returns, reports or declarations. All returns, reports and declarations filed by or on behalf of the Company are true, complete and correct. No deficiency in payment of any Taxes for any period has been asserted against the Company by any taxing authority which remains unsettled at the date hereof, no written inquiries have been received by the Company any taxing authority with respect to possible claims for taxes or assessments, and there is no basis for any additional claims or assessments for Taxes. Since December 31, 1996, the Company has not incurred any liability for Taxes which materially affect the operation of any Station other than in the ordinary course of business. 3.8 COMPANY ASSET SCHEDULE. The COMPANY ASSET SCHEDULE includes complete and accurate (a) listings of all Real Property; (b) listings of all Personal Property; (c) descriptions of all Contracts, none of which requires any consent of third parties in connection with the transactions contemplated hereby, except otherwise as indicated in COMPANY'S DISCLOSURE -14- 16 SCHEDULE; (d) descriptions of all of the Intellectual Property; and (e) listings of all of the FCC Licenses, all of the foregoing of which will, as of the Closing, be owned and held by the Company as reflected in the COMPANY ASSET SCHEDULE. 3.9 TITLE TO AND CONDITION OF PROPERTY. (a) TITLE. The Company will as of the Closing have good, marketable and exclusive title to and undisputed possession of all of the Assets. Except as set forth on COMPANY'S DISCLOSURE SCHEDULE, the Assets are now free and clear of all Liens. The Assets will, as of the Closing, be free and clear of all Liens. (b) CONDITION. The Personal Property is structurally sound, in reasonably good condition, ordinary wear and tear excepted, adequate and suitable for the operation of each Station as it is currently being operated, and in proper condition and repair so that such Station can operate according to the FCC Licenses, the rules, regulations and policies of the FCC and in all other respects in compliance with the Act and all other applicable federal and state laws. (c) INSURANCE. The Assets are and will be insured through the Closing Date in amounts adequate to replace or repair any casualty or other insurable loss to any of such property. (d) SUFFICIENCY OF ASSETS. The Assets include all of the assets (other than the Excluded Assets and the Excluded Real Property), which are sufficient in nature, condition and quantity, necessary to permit the Company to operate each Station immediately upon the Closing in the ordinary course of business and consistent with the past practices of the Company. The Company has not, since December 31, 1996, removed any material item of Personal Property from any Station other than (i) removals in the ordinary course of business which were not done in contemplation of the transactions contemplated by this Agreement and (ii) as contemplated by Section 10.2(c). (e) REAL PROPERTY; REAL PROPERTY LEASES. (i) The COMPANY ASSET SCHEDULE contains accurate descriptions of the Real Property, and contains accurate descriptions of the Real Property Leases and the location of the real estate leased thereunder and the type of facility located thereon. The Company will as of the Closing have a valid leasehold interest in each of the leaseholds created pursuant to the Real Property Leases. (ii) None of the Real Property or Real Property Leases is subject to any covenant or restriction preventing or limiting in any material respect the consummation of the transactions contemplated by this Agreement, except for any consent listed on COMPANY'S DISCLOSURE SCHEDULE required of the landlords under the Real Property Leases. The Company's right, title and interest in and to the Real Property will at the Closing be held by the Company, -15- 17 free and clear of all Liens, except those set forth in COMPANY'S DISCLOSURE SCHEDULE. The Company's right, title and interest in and to the leaseholds created pursuant to the Real Property Leases will at the Closing be held by the Company free and clear of all Liens, except those set forth in COMPANY'S DISCLOSURE SCHEDULE. (iii) The use for which the Real Property and the leaseholds existing under the Real Property Leases are zoned permits the use thereof for the business of the Stations consistent with past practices. The use and occupancy of the Real Property and the leaseholds created pursuant to the Real Property Leases by the Company are in compliance in all material respects with all regulations, codes, ordinances and statutes applicable to the Company, and the Company has not received any notice asserting any material violation of sanitation laws and regulations, occupational safety and health regulations or electrical codes. (iv) There are no facts relating to the Company, and to the best of the knowledge of the Company, no facts relating to any other party, that would prevent the Real Property and the leaseholds existing under the Real Property Leases from being occupied and used by Citadel and/or any assignee of Citadel after the Closing Date in the same manner as immediately prior to the Closing. (v) There is not under any Real Property Lease any material default by the Company, or to the best of the knowledge of the Company, by any other party, or any condition that with notice or the passage of time or both would constitute such a default, and the Company has not received, and to the best of the knowledge of the Company, no other party has received, any notice asserting the existence of any such default or condition. (vi) Each Real Property Lease is valid and binding and in full force and effect as to the Company, and to the best of the knowledge of the Company, as to each other party thereto, and except as disclosed on the COMPANY ASSET SCHEDULE, has not been amended or otherwise modified. (vii) The Real Property and the leaseholds existing under the Real Property Leases constitute all of the real property in which the Company has a fee simple interest, leasehold interest or other interest or right (whether as lessor or lessee) and which is or will prior to the Closing be used in the operation of the applicable Station, other than the Excluded Real Property (which is not used in connection with the Business). 3.10 CONTRACTUAL AND OTHER OBLIGATIONS. Set forth in the COMPANY ASSET SCHEDULE is a description of all (a) Real Property Leases and (b) Contracts. Neither the Company, nor, to the best of the knowledge of the Company, any other Person, is in material default in the performance of any covenant or condition under any Contract, and no claim of such a default has been made and no event has occurred which with the giving of notice or the lapse of time would constitute such a default under any covenant or condition under any Contract. The Company is not a party to any Contract which would terminate or be materially adversely affected by the consummation of the transactions contemplated by this Agreement. Originals -16- 18 or true, correct and complete copies of all Contracts have been provided to Parent and Citadel as of the date of this Agreement. 3.11 COMPENSATION. Set forth in COMPANY'S DISCLOSURE SCHEDULE is a list of (a) all agreements between the Company and its employees or other Persons providing services for compensation with regard to the Stations, whether individually or collectively, and (b) all employees of the Company or other Persons providing services for the Company with respect to the Stations entitled to receive annual compensation in excess of $5,000 and their respective positions, job categories and salaries. The transactions contemplated by this Agreement will not result in any liability for severance pay to any such employee or other Person. The Company has not informed any such employee or other Person that such Person will receive any increase in compensation or benefits or any ownership interest in the Company, Parent, Citadel, the Business or Citadel's business. Except as disclosed in COMPANY'S DISCLOSURE SCHEDULE, all current employees of the Company are "at will" employees and may be terminated by the Company at any time, without liability or obligation except the payment of normal compensation accrued up to the time of termination of employment. 3.12 EMPLOYEE BENEFIT PLANS. (a) The Company does not maintain or sponsor, nor is it required to make contributions to, any pension, profit-sharing, savings, bonus, incentive or deferred compensation, severance pay, medical, life insurance, welfare or other employee benefit plan which affects the employees working at any Station, except as set forth in COMPANY'S DISCLOSURE SCHEDULE. COMPANY'S DISCLOSURE SCHEDULE fully discloses all of the plans, funds, policies, programs, arrangements or understandings sponsored or maintained by the Company pursuant to which any employee of any Station (or any dependent or beneficiary of any such employee) might be or become entitled to (1) retirement benefits; (2) severance or separation from service benefits; (3) incentive, performance, stock, share appreciation or bonus awards; (4) health care benefits; (5) disability income or wage continuation benefits; (6) supplemental unemployment benefits; (7) life insurance, death or survivor's benefits; (8) accrued sick pay or vacation pay; (9) any type of benefit offered under any arrangement subject to characterization as an "employee welfare benefit plan" within the meaning of section 3(3) of ERISA; or (10) benefits of any other type offered through any arrangement that could be characterized as providing for additional compensation or fringe benefits. As to any such plan, fund, policy, program, arrangement or understanding, all of the following are true with respect to each Station: (A) all amounts due as contributions, insurance premiums and benefits to the date hereof have been fully paid by the Company; (B) all applicable material requirements of law have been observed with respect to the operation thereof, and all applicable reporting and disclosure requirements have been timely satisfied; and (C) no claim or demand has been made by any employee (or beneficiary or dependent of any employee) for benefits (other than routine claims for benefits), or by any taxing authority for taxes or penalties which has not been satisfied in full or which may be or become subject to litigation or arbitration. -17- 19 (b) The Company has no obligation to provide health or other welfare benefits to any of its former, retired or terminated employees, except as specifically required under Section 4980B of the Code. The Company has substantially complied with any applicable notice and continuation requirements of Section 4980B of the Code and the regulations thereunder. 3.13 LABOR RELATIONS. There have been no material violations of any federal, state or local statutes, laws, ordinances, rules, regulations, orders or directives with respect to the employment of individuals by, or the employment practices or work conditions, or the terms and conditions of employment, wages (including overtime compensation) and hours of, the Company. No Station is engaged in any unfair labor practice or other unlawful employment practice and there are no charges of unfair labor practices or other employee-related complaints pending or threatened against any Station before the National Labor Relations Board, the Equal Employment Opportunity Commission, the Occupational Safety and Health Review Commission, the Department of Labor or any other Governmental Authority. There is no strike, picketing, slowdown or work stoppage or organizational attempt pending, threatened against or involving any Station. No issue with respect to union representation is pending or threatened with respect to the employees of any Station. 3.14 INCREASES IN COMPENSATION OR BENEFITS. Subsequent to December 31, 1996, there have been no increases in the compensation payable or to become payable to any of the employees of the Company, nor has the Company paid or provided for any awards, bonuses, stock options, loans, profit-sharing, pension, retirement or welfare plans or similar or other payments or arrangements for or on behalf of such employees in each case other than (a) pursuant to currently existing plans or arrangements set forth in COMPANY'S DISCLOSURE SCHEDULE or (b) as was required from time to time by governmental legislation affecting wages. The vacation policies of the Company are set forth in COMPANY'S DISCLOSURE SCHEDULE. No employee of the Company is entitled to vacation time in excess of two weeks (three weeks in the case of employees with 10 years or more of service) during the current vacation year (fiscal May 1 through April 30) and no such employee has any accrued vacation time with respect to any period prior to the current calendar year, except as set forth in COMPANY'S DISCLOSURE SCHEDULE. 3.15 INSURANCE. The Company maintains insurance policies covering all of its properties and assets and the various occurrences which may arise in connection with the operation of the Stations, each of which policies is summarized in COMPANY'S DISCLOSURE SCHEDULE. Such policies maintained by the Company are in full force and effect and all installments of premiums due thereon have been paid in full. There are no notices of any pending or threatened termination or premium increases with respect to any of such policies maintained by the Company. There has been no casualty loss or occurrence to the Company which may give rise to any claim of any kind not covered by insurance, and the Company is not aware of any casualty occurrence to the Stations which may give rise to any claim of any kind not covered by insurance. No third party has filed any claim against the Company for personal injury or property damage of a kind for which liability insurance is generally available -18- 20 which is not fully insured, subject only to the standard deductible. None of the Company's insurance policies will terminate or be adversely affected by the consummation of the transactions contemplated by this Agreement. 3.16 LITIGATION; DISPUTES. Except as set forth in COMPANY'S DISCLOSURE SCHEDULE, there are no claims, disputes, actions, suits, investigations or proceedings pending or threatened against or affecting the Company or any Station and, to the best of the knowledge of the Company, there is no basis for any such claim, dispute, action, suit, investigation or proceeding. The Company has no knowledge of any default under any such action, suit or proceeding. The Company is not in default in respect of any judgment, order, writ, injunction or decree of any Governmental Authority with respect to the Company or the operation of any Station. 3.17 TRADE RECEIVABLES AND ACCOUNTS RECEIVABLE. All Trade Receivables and Accounts Receivable are reflected properly on the books and records of the Company, are valid receivables subject to no setoffs or counterclaims, are current and collectible, and will be collected in accordance with their terms at their recorded amounts, subject only to the reserve for bad debts provided for in the financial statements of the Company. 3.18 TRADE LIABILITIES. The Trade Liabilities do not, and as of the Closing Date will not, exceed the Trade Receivables. 3.19 ENVIRONMENTAL. (a) Prior to the execution of this Agreement, the Company has provided to Parent and Citadel a true and correct copy of all environmental site assessments, studies, reports and communications relating to the Real Property. (b) Except as disclosed on COMPANY'S DISCLOSURE SCHEDULE, to the best of the knowledge of the Company, (i) there are no conditions, facilities, procedures or any other facts or circumstances that constitute Environmental Noncompliance on the Real Property or any of the leaseholds existing under the Real Property Leases and (ii) there is not constructed, placed, deposited, stored, disposed of, nor located on any of the Real Property or any of the leaseholds existing under the Real Property Leases, any asbestos in any form that has released or, unless disturbed, threatens to release airborne asbestos fibers in excess of applicable local, state and federal standards. (c) Except as disclosed on COMPANY'S DISCLOSURE SCHEDULE, to the best of the Company's knowledge, no structure, improvements, equipment, fixtures, activities or facilities located on the Real Property or any of the leaseholds existing under the Real Property Leases uses Hazardous Materials except those used in the ordinary course of the Business and in compliance with applicable Environmental Laws. -19- 21 (d) Except as specifically described on COMPANY'S DISCLOSURE SCHEDULE, there have been no releases or threatened releases of Hazardous Materials into the environment, or which otherwise contribute to Environmental Conditions arising in whole or in part from the activities of the Company, or to the best of the knowledge of the Company arising from any other activities, except to the extent that such releases or threatened releases do not constitute a condition of Environmental Noncompliance relating to the Real Property or any of the leaseholds existing under the Real Property Leases. (e) Except as disclosed on COMPANY'S DISCLOSURE SCHEDULE, there are no underground storage tanks, or underground piping associated with tanks, used for the management of Hazardous Materials, and no abandoned underground storage tanks at the Real Property or any of the leaseholds existing under the Real Property Leases. (f) The Company is not subject to any Environmental Claims, and no Environmental Claims have been threatened against the Company nor, to the best of the knowledge of the Company, is there any basis for any such Environmental Claims. 3.20 PERMITS, COMPLIANCE WITH APPLICABLE LAW. (a) GENERAL. The Company is not in default under any statutes, ordinances, regulations, orders, judgments and decrees of any Governmental Authority applicable to it or to the Business or the Assets as to which a default or failure to comply might result in any material adverse change in the condition, financial or otherwise, of the Assets or the Business. The Company has no knowledge of any basis for assertion of any violation of the foregoing or for any claim for compensation or damages or otherwise arising out of any violation of the foregoing. The Company has not received any notification of any asserted present or past failure to comply with any of the foregoing which has not been satisfactorily responded to in the time period required thereunder. (b) PERMITS. Set forth in COMPANY'S DISCLOSURE SCHEDULE is a complete and accurate list of all of the Permits held by the Company and applicable to the Stations. Each Station is operating in accordance with the Act and its FCC Licenses and in compliance with the Act and the rules, regulations and policies of the FCC. The Permits set forth in COMPANY'S DISCLOSURE SCHEDULE are all of the Permits required for the conduct of the Business conducted by the Stations. All of the Permits held by the Company are in full force and effect, and the Company has not engaged in any activity which would cause or permit revocation or suspension of any such Permit, and to the best of the knowledge of the Company, no action or proceeding looking to or contemplating the revocation or suspension of any such Permit is pending or threatened. There are no existing defaults or events of default or events or state of facts which with notice or lapse of time or both would constitute a default by the Company or any other Person under any such Permit. Except for (1) the FCC Approval and (2) as set forth in COMPANY'S DISCLOSURE SCHEDULE, the consummation of the transactions contemplated hereby will in no way affect the continuation, validity or effectiveness of the Permits held by the Company or require the consent of any Person. Except as set forth in COMPANY'S -20- 22 DISCLOSURE SCHEDULE, the Company is not required to be licensed by, and is not subject to the regulation of, any Governmental Authority by reason of the Business. 3.21 INTELLECTUAL PROPERTY. The use of the Intellectual Property in connection with the operation of the Stations in a manner consistent with past practices by the Company does not infringe upon the proprietary rights of any other Person. Citadel will, upon consummation of the transactions contemplated by this Agreement, possess adequate rights, licenses and other authority to use the Intellectual Property used by the Stations in the operation of the Stations following the Closing in the manner now operated, without infringement or unlawful or improper use of any of the Intellectual Property. No director, officer or employee of the Company has any interest in any of the Intellectual Property, all of which will, as of the Closing, be free and clear of all Liens. The Company has no knowledge of any infringement by any Person upon the rights of the Company with respect to the Intellectual Property. The Company has not granted any outstanding licenses or other rights to any of the call letters, copyrights, trademarks, trade names or other similar rights with regard to any of the Intellectual Property. 3.22 BOOKS AND RECORDS. The books of account of the Company fairly and accurately reflect its income, expenses, assets and liabilities and have been maintained in accordance with good business practices. All of such books and records will be located on the date of the Closing on the business premises of the Stations. 3.23 ACTS TO BE PERFORMED. The Company shall perform each of the covenants, acts and undertakings of the Company to be performed on or before the Closing Date pursuant to the terms of this Agreement. 3.24 RELATED PARTY OBLIGATIONS. Except as set forth on COMPANY'S DISCLOSURE SCHEDULE, no officer, director, shareholder or Affiliate of the Company, or any individual related by blood or marriage to any such Person, or any entity in which any such Person or individual owns any beneficial interest is a party to any agreement, contract, commitment, promissory note, loan, any other actual or proposed transaction with the Company or has any material interest in any material property used by the Company which is material to the operation of the Stations. 3.25 DISCLOSURE. To the best of the Company's knowledge, no representation or warranty made under this Section 3 and none of the information furnished by the Company or the Stockholders set forth in this Agreement or in the schedules or exhibits to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements in this Agreement or in the schedules or exhibits to this Agreement not misleading. -21- 23 SECTION 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND CITADEL In connection with the Merger and in order to induce the Company and the Stockholders to enter into and consummate the transactions contemplated by this Agreement, Parent and Citadel jointly and severally make the following representations and warranties to the Company and the Stockholders, as of the date of this Agreement and as of the date of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times): 4.1 ORGANIZATION AND QUALIFICATION; AUTHORITY. Parent and Citadel are corporations duly organized, validly existing and in good standing under the laws of the State of Nevada and have full power and authority to own their assets and properties and to conduct their respective businesses. Parent and Citadel have full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own their respective properties and to conduct their respective businesses. Subject to the approval by the respective boards of directors of Parent and Citadel of the transactions contemplated hereby, (a) the execution and delivery of this Agreement by Parent and Citadel, the performance by Parent and Citadel of their covenants and agreements hereunder and the consummation by Parent and Citadel of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Parent and Citadel; and (b) this Agreement constitutes the valid and legally binding agreement of Parent and Citadel, enforceable against each of them in accordance with its terms. 4.2 CAPITALIZATION. (a) CURRENT EQUITY SECURITIES OF PARENT. The authorized and outstanding Equity Securities of Parent are as set forth in Section 8.c. of the Securities Purchase and Exchange Agreement. CITADEL'S DISCLOSURE SCHEDULE lists the names of the beneficial holders of all the outstanding shares of capital stock of Parent. Such issued and outstanding shares have been duly authorized and validly issued, and are fully paid and nonassessable. None of Parent or Citadel is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its Equity Securities, except as expressly provided in the Stockholders Agreement. (b) ISSUANCE OF SERIES G PREFERRED STOCK. The issuance of the Series G Preferred Stock has been duly authorized by all necessary action on the part of Parent. The Series G Preferred Stock, when issued to the Stockholders on the Effective Date, will be validly issued, fully paid and non-assessable, and will have the rights, preferences and privileges specified in the Amended and Restated Certificate of Incorporation. No Series G Preferred Stock shall be issued to any Person other than in connection with the consummation of the transactions contemplated hereby and the transactions contemplated by the Snider Broadcasting Agreement. The Series G Preferred Stock, when issued, will be free and clear -22- 24 of all Liens and restrictions, other than Liens that might have been created or suffered solely by the holders thereof, and restrictions on transfer imposed by the Securities Act or applicable state securities laws. 4.3 NO LEGAL BAR; CONFLICTS. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Certificate of Incorporation or Bylaws of Parent or Citadel, or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of, any contract, commitment, agreement, understanding or arrangement of any kind to which Parent or Citadel is a party or by which Parent, Citadel or any of their assets is bound. Except for the FCC Approval and the consents disclosed in CITADEL'S DISCLOSURE SCHEDULE, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of Parent or Citadel in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 4.4 FINANCIAL STATEMENTS. Parent and Citadel have delivered to the Company and the Stockholders the following financial statements of Parent: (a) the audited consolidated balance sheet as of December 31, 1995 and the related consolidated statements of income and cash flows for the year then ended; (b) the audited consolidated balance sheet as of December 31, 1996 and the related consolidated statements of income and cash flows for the year then ended; and (c) the unaudited consolidated balance sheet as of March 31, 1997, and the related unaudited consolidated statements of income and cash flows for the three months then ended. Each of the foregoing financial statements (including in all cases the notes thereto, if any) (i) is accurate and complete in all material respects, (ii) is consistent in all material respects with the books and records of Parent and Citadel (which, in turn, are accurate and complete in all material respects), and (iii) fairly presents in all material respects the financial condition and results of operations of Parent and Citadel in accordance with GAAP (subject in the case of unaudited financial statements to the lack of footnote disclosure and changes resulting from norman year-end audit adjustments), consistently applied, as of the dates and for the periods set forth therein. 4.5 ABSENCE OF CERTAIN CHANGES. Between December 31, 1996 and the date of this Agreement, there has not been any (a) material adverse change in the condition of Citadel or Parent, financial or otherwise, or in the results of operations, assets, liabilities or business of Citadel or Parent; (b) damage or destruction, whether or not insured, affecting the business operations of Citadel or Parent in any material respect; (c) labor dispute or threatened labor dispute involving any of the employees of Citadel or Parent; (d) actual or threatened dispute pertaining to Citadel or Parent with any material provider of software, hardware or services; (e) material change in the customary methods of operations of Citadel or Parent; (f) except in the ordinary course of business or to the extent not material to the business or financial -23- 25 condition of Citadel or Parent, sale or transfer of any tangible or intangible asset used or useful in the operation of radio stations owned and/or operated by Citadel (the "CITADEL STATIONS"), mortgage, pledge or imposition of any Lien on any such asset, lease of real property, machinery, equipment or buildings with respect to Citadel or Parent, or modification, amendment or cancellation of any of its existing leases relating to Citadel or Parent, or cancellation of any debt or claim; or (g) material liability or obligation (contingent or otherwise) incurred under agreements or otherwise, except current liabilities entered into or incurred in the ordinary course of business consistent with past practices and except as disclosed in CITADEL'S DISCLOSURE SCHEDULE. 4.6 TAXES. Citadel and Parent have filed or caused to be filed on a timely basis all federal, state, local and other tax returns, reports and declarations required to be filed by them with respect to each Citadel Station and has paid all Taxes (including, but not limited to, income, franchise, sales, use, unemployment, withholding, social security and workers' compensation taxes and estimated income and franchise tax payments, penalties and fines) reflected as due on such returns, reports or declarations (whether or not shown on such returns, reports or declarations), or pursuant to any assessment received by them in connection with such returns, reports or declarations. All returns, reports and declarations filed by or on behalf of Citadel or Parent are true, complete and correct in all material respects. No deficiency in payment of any Taxes for any period has been asserted by any taxing authority which remains unsettled at the date hereof, no written inquiries have been received by Citadel or Parent from any taxing authority with respect to possible claims for taxes or assessments, and there is no basis for any additional claims or assessments for Taxes. Since December 31, 1996, neither Citadel nor Parent has incurred any liability for Taxes which materially affect the operation of Citadel or Parent other than in the ordinary course of business. 4.7 CONTRACTUAL AND OTHER OBLIGATIONS WITH RESPECT TO PARENT STOCK. Set forth in CITADEL'S DISCLOSURE SCHEDULE is a description of all contracts, agreements, arrangements and other documents by and among Parent and its shareholders or any lender or other third party which includes, warrants, options, conversion rights or other obligations of Parent with respect to its authorized stock. 4.8 PERMITS. Citadel and Parent have all the permits, licenses, approvals, franchises, notices and authorizations issued by any Governmental Authorities (collectively, the "CITADEL PERMITS") necessary to conduct the operation of Citadel's business as currently conducted. Each Citadel Station is operating in accordance with the Act and its FCC licenses and is in compliance with the Act and the rules, regulations and policies of the FCC. The Citadel Permits are in full force and effect, and Citadel and Parent have not engaged in any activity which would cause or permit revocation or suspension of any such Citadel Permit, and no action or proceeding looking to or contemplating the revocation or suspension of any such Citadel Permit is pending or threatened. There are no existing defaults or events of default or events or state of facts which with notice or lapse of time or both would -24- 26 constitute a default by Citadel or Parent under any such Citadel Permit. There is no default or claimed or purported or alleged default or state of facts which with notice or lapse of time or both would constitute a default on the part of any party in the performance of any obligation to be performed or paid by any party under any such Citadel Permit. 4.9 ACTS TO BE PERFORMED. Parent and Citadel shall perform each of the covenants, acts and undertakings of Parent and Citadel to be performed on or before the Closing Date pursuant to the terms of this Agreement. 4.10 LITIGATION. There is no litigation, proceeding or investigation pending or, to the best knowledge of Parent and Citadel, threatened against or affecting Parent or Citadel that is reasonably likely to prevent or hinder the consummation of the transactions contemplated by this Agreement. 4.11 DISCLOSURE. To the best knowledge of Parent and Citadel, no representation or warranty made under this Section 4 and none of the information furnished by Parent or Citadel set forth in this Agreement or in the schedules or exhibits to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements in this Agreement or in the schedules or exhibits to this Agreement not misleading. SECTION 5 AFFIRMATIVE COVENANTS OF THE COMPANY The Company covenants and agrees with Parent and Citadel to: 5.1 COMPLIANCE WITH LAW. Comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated hereby. 5.2 PAYMENT OF OBLIGATIONS. Fully discharge all Obligations of the Company on a timely basis so that the Obligations of the Company existing as of the Closing Date shall consist solely of Accounts Payable and Trade Liabilities. 5.3 ACCESS. Afford Parent and Citadel and their authorized representatives, upon reasonable notice, reasonable access during normal business hours to the Stations and the Stations' employees, and permit Parent and Citadel and their authorized representatives to examine all operations, equipment, properties and other assets, logs, books, relevant records, contracts and documents pertinent to the Stations; provided, however, that in each instance mutually satisfactory arrangements shall be made in advance in order to avoid interruption and to minimize interference with the normal business and operations of the Stations. 5.4 PRESERVATION OF ORGANIZATION. Exercise all reasonable efforts to preserve the business organization of the Stations intact, and to preserve the present relationships of the Stations with employees, suppliers, advertisers and customers and others having business relationships with the Stations; provided, however, that nothing contained in this Agreement -25- 27 shall require the Company to expend money in fulfillment of its obligations set forth in this Section 5.4 other than those expenditures that the Company would have made in the ordinary course of the business of the Stations and consistent with past practices. 5.5 BOOKS AND RECORDS. Maintain the books and records of the Company in accordance with good business practices, on a basis consistent with past practices, and promptly make available to Parent and Citadel the books, records, tax returns, leases, contracts and other documents or agreements material to the Stations as Parent, Citadel or their respective counsel, accountants or other authorized representatives may from time to time reasonably request. 5.6 EMPLOYEES. Pay as and when the same shall become due and payable any amounts owed by the Company to its employees who have performed services up to the time of Closing, whether fixed or accrued, for wages, vacation pay, sick pay, severance pay, employee benefits, damages and otherwise. 5.7 COMPLIANCE WITH FCC MATTERS. Comply with the FCC Licenses applicable to the Stations and with the provisions of the Act, the rules, regulations and policies of the FCC, and with all other laws, ordinances, regulations, rules and orders of any Governmental Authority applicable to the Company or to any Station. 5.8 TAXES. File all federal, state and municipal tax returns, reports and declarations required to be filed by the Company prior to the Closing, and satisfy all Taxes related thereto which are due on or before the Closing Date. 5.9 COMPANY SUPPLEMENTAL FINANCIAL STATEMENTS. Provide Parent and Citadel with copies of the monthly unaudited income statements and balance sheets applicable to the Stations prepared by the Company from the date hereof until Closing in the ordinary course of business (collectively, the "COMPANY SUPPLEMENTAL FINANCIAL STATEMENTS"). The Company shall provide such Company Supplemental Financial Statements to Parent and Citadel promptly upon such Company Supplemental Financial Statements becoming available to it. The Company Supplemental Financial Statements shall be subject to the representations and warranties as set forth in Section 3.5. 5.10 FURTHER INFORMATION. Furnish to Parent and Citadel prior to the Closing such financial (including tax), legal and other information with respect to the Company and the Stations as Parent, Citadel or their representatives may from time to time reasonably request. 5.11 NOTICE. Promptly notify Parent and Citadel in writing upon the occurrence or the nonoccurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty made by the Company in this Agreement. -26- 28 5.12 CONSENTS. Exercise all reasonable efforts (not involving the payment by the Company of any money to any party to any Contract) to obtain, prior to the Closing, the consent and approval (in a form reasonably approved by Parent) of any third parties whose consent or approval is necessary in connection with the consummation of the transactions contemplated hereby, with respect to the Contracts set forth on COMPANY'S DISCLOSURE SCHEDULE and requiring such consent. If any such consent or approval is not obtained, the Company will use commercially reasonable efforts (not involving the payment of money to any Person) to secure an arrangement satisfactory to Citadel intended to provide for Citadel following the Closing the benefits under each Contract for which such consent or approval is not obtained; provided, however, that Citadel shall have the right to terminate this Agreement as a result of any failure by the Company to obtain any such consent or approval set forth on COMPANY'S DISCLOSURE SCHEDULE, if alternative arrangements are not satisfactory to Citadel. The Company shall also execute a consent, in a form provided by Citadel, allowing Parent and Citadel to assign all of their rights under this Agreement and any related documents to one or more of Parent's and Citadel's lenders upon default by Parent or Citadel under the relevant loan documents. Nothing in this Agreement will constitute a transfer or an attempted transfer of any Contract which by its terms or under applicable law or governmental rules or regulations requires the consent or approval of a third party (including, without limitation, a Governmental Authority) unless such consent or approval is obtained. 5.13 TRADE SCHEDULE. Deliver to Parent and Citadel at the Closing an accurate schedule of Trade Liabilities and Trade Receivables existing as of the Closing. The Company shall exercise reasonable efforts to minimize the amount of additional Trade Liabilities incurred after execution of this Agreement. 5.14 IMPACT OF LOCAL MARKETING AGREEMENTS. From and after the effective date of the Local Marketing Agreements, the covenants of the Company relating to the operation of the Stations and the Assets from and after such date shall be conditioned upon Citadel's performance, in all material respects, of its obligations under the Local Marketing Agreements. SECTION 6 NEGATIVE COVENANTS OF THE COMPANY From and after the date of this Agreement and until the Closing, the Company shall not take, or cause or permit to be taken, any of the following actions without the prior approval of Parent and Citadel, which may not be unreasonably withheld: 6.1 SALES, TRANSFERS AND LIENS. Make any sale, transfer, assignment, conveyance, mortgage, hypothecation, encumbrance or other placement of any Lien on any of the Assets, except in the ordinary course of business and which do not materially interfere with the -27- 29 operations of the Stations, and which, in the case of a sale, transfer or assignment, is replaced with an asset of equal or greater value, and, in the case of a conveyance, mortgage, hypothecation, encumbrance or other Lien, is released at or prior to the Closing. 6.2 CONTRACTS. Amend, terminate or renew any of the Contracts (including any renewal or termination resulting from the failure to provide, after the date of this Agreement, timely notice of nonrenewal or termination as required by the terms of any of the Contracts). 6.3 BREACHES, DEFAULTS. Do any act or omit to do any act, or permit any act or omission to occur, that will cause a breach of any contract, commitment or obligation of it in any respect that would have a material adverse effect on the Assets or the business operations of the Stations as presently conducted. 6.4 OBLIGATIONS. Incur any Obligations (including but not limited to any additional Indebtedness for Borrowed Money) except in the ordinary course of business in a manner consistent with past practices. 6.5 SALARY INCREASES. Increase any salary, other payments, disbursement or distributions in any manner or form to any employees of the Company except (a) in the ordinary course of business consistent with past practices or (b) in accordance with the existing terms of contracts entered into prior to the date of this Agreement. 6.6 NON-SOLICITATION. Directly or indirectly solicit or negotiate with any Person (other than a party hereto) or accept any proposal to acquire the Company or any of the Stations in whole or in part. SECTION 7 COVENANTS OF THE STOCKHOLDERS The Stockholders jointly and severally covenant and agree with Parent and Citadel to: 7.1 COMPLIANCE WITH LAW. Comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated hereby. 7.2 NOTICE. Promptly notify Parent and Citadel in writing upon the occurrence or the nonoccurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty made by the Stockholders in this Agreement. 7.3 NON-SOLICITATION. Directly or indirectly solicit or negotiate with any Person (other than a party hereto) or accept any proposal to acquire the Company or any of the -28- 30 Stations in whole or in part. Prior to the Closing, the Stockholders shall not sell, assign, pledge or otherwise transfer any of the Company Common Stock owned by them. 7.4 COMMERCIALLY REASONABLE EFFORTS. The Stockholders shall use commercially reasonable efforts to cause the Company to satisfy all of its obligations hereunder. SECTION 8 COVENANTS OF PARENT AND CITADEL Parent and Citadel jointly and severally covenant and agree with the Company and the Stockholders to: 8.1 COMPLIANCE WITH LAW. Comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated hereby. 8.2 NOTICE. Promptly notify the Company and the Stockholders in writing upon the occurrence or the nonoccurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty made by Parent or Citadel in this Agreement. 8.3 PERFORMANCE OF LOCAL MARKETING AGREEMENTS. From and after the effective date of the Local Marketing Agreements, Citadel shall perform and discharge, in all material respects, its obligations in connection with the operation of the Stations and the Assets from and after such date in accordance with the terms of the Local Marketing Agreements. 8.4 BOOKS AND RECORDS. Maintain the books and records of Parent and Citadel in accordance with good business practices, on a basis consistent with past practices, and promptly make available to the Company the books, records, tax returns, leases, contracts and other documents or agreements material to the Citadel Stations as the Company or its counsel, accountants or other authorized representatives may from time to time reasonably request. 8.5 COMPLIANCE WITH FCC MATTERS. Comply with the FCC licenses applicable to the Citadel Stations and with the provisions of the Act, the rules, regulations and policies of the FCC, and with all other laws, ordinances, regulations, rules and orders of any Governmental Authority applicable to Parent, Citadel or to any Citadel Station. 8.6 TAXES. File all federal, state and municipal tax returns, reports and declarations required to be filed by Parent and/or Citadel prior to the Closing, and satisfy all Taxes related thereto which are due on or before the Closing Date. -29- 31 8.7 CITADEL SUPPLEMENTAL FINANCIAL STATEMENTS. Provide the Company with copies of the monthly unaudited income statements and balance sheets applicable to the Citadel Stations prepared by Parent from the date hereof until Closing in the ordinary course of business (collectively, the "CITADEL SUPPLEMENTAL FINANCIAL STATEMENTS"). Parent and Citadel shall provide such Citadel Supplemental Financial Statements to the Company promptly upon such Citadel Supplemental Financial Statements becoming available to them. The Citadel Supplemental Financial Statements shall be subject to the representations and warranties as set forth in Section 4.4. 8.8 FURTHER INFORMATION. Furnish to the Company prior to the Closing such financial (including tax), legal and other information with respect to Parent, Citadel and the Citadel Stations as the Company or its representatives may from time to time reasonably request. SECTION 9 ADDITIONAL COVENANTS OF THE PARTIES 9.1 APPLICATION FOR TRANSFER OF CONTROL. As promptly as practicable after the date of this Agreement, and in no event later than 10 days after the execution of this Agreement, the Company and Citadel shall file an application (the "FCC APPLICATION") with the FCC to approve the transfer of control of the Stations from the Company to Citadel (the "FCC APPROVAL"). Citadel shall have primary responsibility for filing the FCC Application. The parties agree that they shall jointly prosecute the FCC Application (and shall cooperate with each other in the timely prosecution thereof), in good faith and with due diligence, and within the time allowed therefor by the rules and regulations of the FCC. The Company and Citadel shall each take all necessary actions on its part to obtain the FCC Approval. Citadel shall advance the filing fee for the FCC Application, and the Stockholders shall reimburse Citadel for one-half of such filing fee at the Closing. All other costs and expenses incurred by each party in connection with the filing and prosecution of the FCC Application shall be paid by the party incurring the cost or expense. 9.2 LOCAL MARKETING AGREEMENTS. Concurrently with the execution of this Agreement, Citadel and the Company shall execute and deliver a Local Marketing Agreement for each of the Stations in the form of EXHIBIT H attached hereto (collectively, the "LOCAL MARKETING AGREEMENTS"). 9.3 BROKERAGE. Each of the parties hereto represents and warrants to each other that, except for Broker, no Person has provided services as a broker, agent or finder in connection with the transactions contemplated by this Agreement. As between the parties hereto, the Stockholders are fully responsible for the payment of any fee, commission, claim or expense of Broker, and the Stockholders shall indemnify and hold harmless the Company, Parent and Citadel for any and all fees, commissions, claims or expenses, including attorneys' fees asserted by Broker. Each of the parties hereto shall each indemnify and hold harmless the -30- 32 other parties hereto for any and all claims or expenses, including attorneys' fees, asserted by any Person other than Broker purporting to act on behalf of the respective indemnitor as a broker, agent or finder in connection with the transactions contemplated by this Agreement. 9.4 RISK OF LOSS. If any loss or damage to any of the Assets occurs prior to the Closing (i) which has a material adverse effect on any Station and (ii) such loss or damage is not susceptible of repair, replacement or restoration with sufficient, collectible insurance proceeds available for such purposes or by the Stockholders at their sole cost and expense to substantially the same condition as existed before such loss or damage, then the parties shall adjust the Merger Consideration to reflect the diminution in value of such Station attributable to the impairment of such assets. 9.5 ACTIONS WITH FCC. In the event any investigation, order to show cause, notice of violation, notice of apparent liability or a forfeiture, material complaint, petition to deny or informal objection is instituted or filed against any party hereto (whether in connection with the proceedings to approve the FCC Application or otherwise), such party shall promptly notify the other parties hereto in writing of such occurrence and shall thereafter immediately take all reasonable measures to contest the same in good faith and seek the removal or favorable resolution of such action, order, notice or complaint. 9.6 COOPERATION. During the seven-year period immediately following the Closing, Citadel shall cooperate with the Stockholders in providing the Stockholders all information reasonably requested and permitting the Stockholders access to all records relating to the period of ownership of the Stations prior to the Closing. The cost and expense in providing or permitting access to information hereunder shall be borne by the Stockholders. The Stockholders, as a condition to being provided with access to information hereunder, shall, at the request of Citadel, execute a confidentiality agreement in form and substance acceptable to Citadel in its reasonable discretion. Notwithstanding the foregoing, Citadel may discard any such records during such seven-year period if (i) Citadel notifies the Stockholders of Citadel's intent to discard such records and (ii) the Stockholders do not, within 10 days after receipt of such notice, retrieve such records from Citadel's premises. SECTION 10 THE CLOSING 10.1 CLOSING DATE. The Closing shall occur on a date mutually selected by the Company and Citadel which is within 10 business days following the date on which the FCC Approval has become a Final Order. The Closing shall begin at 10:00 a.m., local time, on the date of the Closing (the "CLOSING DATE") at the offices of Friday, Eldredge & Clark, 2000 First Commercial Building, 400 West Capitol Avenue, Little Rock, Arkansas 72201, counsel for the Company and the Stockholders, or at such other time and place as the parties may agree in writing. -31- 33 10.2 ACTIONS TO BE TAKEN IMMEDIATELY PRIOR TO THE CLOSING. The following actions shall be taken immediately prior to the Closing, and as a condition precedent thereto: (a) AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. Parent shall cause the Amended and Restated Certificate of Incorporation to be filed with the Secretary of State of the State of Nevada. (b) DIVIDEND OF EXCLUDED ASSETS AND EXCLUDED REAL PROPERTY. The Company shall distribute to the Stockholders as a dividend the Excluded Assets, if any, and the Excluded Real Property; provided, however, that the Stockholders shall pay all costs, fees, expenses and Taxes resulting from such distributions. 10.3 ACTIONS TO BE TAKEN AT THE CLOSING. The following actions shall be taken at the Closing: (a) ARTICLES AND PLAN OF MERGER. The Articles of Merger, and if required under applicable law, the Plan of Merger, shall be filed with the appropriate authorities in the States of Nevada and Arkansas. (b) DELIVERY OF MERGER CONSIDERATION. Citadel shall deliver the Series G Preferred Stock and cash portion of the Merger Consideration to the holders of the Company Common Stock in accordance with Section 2.4. (c) DELIVERY OF DOCUMENTS. Each of the parties shall deliver to the other parties all agreements, certificates and other documents required to be delivered by it pursuant to the terms of this Agreement or as a condition precedent to the other parties' obligations under this Agreement, including but not limited to the following: (i) The parties shall deliver to each other fully executed originals of the Amendment to Securities Purchase Agreement, the Amendment to Registration Rights Agreement, the Amendment to Stockholders Agreement and the Amendment to Voting Agreement. (ii) Citadel and Ted L. Snider, Sr. shall execute and deliver the Agreement Not to Compete. SECTION 11 CONDITIONS TO THE COMPANY'S AND THE STOCKHOLDERS' OBLIGATION TO CLOSE The obligation of the Company and the Stockholders to consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, -32- 34 any or all of which may be waived by the Company and the Stockholders in their sole discretion (other than those set forth in Section 11.7): 11.1 OPINION OF PARENT'S AND CITADEL'S COUNSEL. The Company and the Stockholders shall have received an opinion of counsel for Parent and Citadel, dated the date of the Closing, in form and substance satisfactory to the Company and the Stockholders, to the effect that: (a) Parent and Citadel are corporations duly organized, validly existing and in good standing under the laws of the State of Nevada. (b) Citadel is duly qualified and in good standing in the State of Arkansas. (c) Parent and Citadel have full corporate power and authority to own their assets and properties and to conduct their business and have all necessary approvals, permits, licenses and authorizations to own their properties and to conduct their business in the manner and in the locations presently owned and conducted. (d) This Agreement, together with all other documents and instruments required to be executed or delivered by Parent or Citadel in connection with the transactions contemplated hereby, each has been duly authorized, executed and delivered by Parent and Citadel and constitutes a valid and legally binding obligation of Parent and Citadel, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (e) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Certificate of Incorporation or Bylaws of Parent or Citadel or, to the knowledge of such counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel after due investigation, violates or will violate, or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under, or results or will result in the termination of or the creation or imposition of any Lien pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which Parent or Citadel is a party or by which Parent or Citadel or any of their assets is bound and which is known to such counsel, all as set forth on CITADEL'S DISCLOSURE SCHEDULE. (f) The authorized and outstanding Equity Securities of Parent are as set forth in Section 8.c. of the Securities Purchase and Exchange Agreement. CITADEL'S DISCLOSURE SCHEDULE lists the names of the beneficial holders of all the outstanding shares of Parent. Such issued and outstanding shares have been duly authorized and validly issued, and are fully paid and nonassessable. To the knowledge of such counsel, neither Parent nor Citadel is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of Parent's Equity Securities, except as expressly provided in the Stockholders Agreement. The -33- 35 issuance of the Series G Preferred Stock has been duly authorized by all necessary action on the part of Parent. The Series G Preferred Stock, when issued to the holders of the Company Common Stock on the Effective Date, will be validly issued, fully paid and non-assessable, and will have the rights, preferences, and privileges specified in the Amended and Restated Certificate of Incorporation. The Series G Preferred Stock, when issued, will be free and clear of all Liens and restrictions, other than Liens that might have been created or suffered solely by the holders thereof, and restrictions on transfer imposed by the Securities Act or applicable state securities laws. Nothing contained in this Section 11.1 shall require an opinion by such counsel with respect to FCC matters. 11.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Parent and Citadel contained herein shall be true and correct in all material respects at and as of the Closing with the same effect as though all such representations and warranties were made at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified except for such inaccuracies as do not, individually or in the aggregate, have a material effect on the ability of Parent or Citadel to consummate the transactions contemplated by this Agreement) and Parent and Citadel shall have delivered to the Company and the Stockholders a certificate to that effect, dated the date of the Closing, signed by the President of Parent and Citadel. 11.3 NO LITIGATION. No injunction relating to any action, suit or proceeding against Parent, Citadel, the Company or the Stockholders relating to the consummation of any of the transactions contemplated by this Agreement or any action by any Governmental Authority shall have been issued. 11.4 OTHER CERTIFICATES. The Company and the Stockholders shall have received certificates as to the good standing of Parent in the State of Nevada, and of Citadel in the States of Nevada and Arkansas, each as of a date not more than 20 days before the Closing, and such other certificates, instruments and other documents, in form and substance satisfactory to the Company and the Stockholders, as the Company and the Stockholders shall have reasonably requested in connection with the transactions contemplated hereby. 11.5 CORPORATE ACTION. All corporate action necessary to authorize the execution, delivery and performance by Parent and Citadel of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by Parent and Citadel, and Parent and Citadel shall have delivered to the Company and the Stockholders certified copies of the resolutions of Parent's and Citadel's board of directors authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of their officers and employees in carrying out the terms and provisions of this Agreement. -34- 36 11.6 ACTS TO BE PERFORMED. Each of the covenants, acts and undertakings of Parent and Citadel to be performed on or before the Closing Date pursuant to the terms hereof shall have been duly performed. 11.7 FCC APPROVAL. The FCC Approval shall have been obtained. 11.8 OTHER TRANSACTIONS. The transactions contemplated by the Real Estate Purchase Agreement, the CDB Broadcasting Agreement and the Snider Broadcasting Agreement shall be consummated on the Closing Date. SECTION 12 CONDITIONS TO PARENT'S AND CITADEL'S OBLIGATION TO CLOSE The obligation of Parent and Citadel to consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, any or all of which may be waived by Parent and Citadel in their sole discretion (other than those set forth in Section 12.9): 12.1 OPINION OF THE COMPANY'S AND THE STOCKHOLDERS' COUNSEL. Parent and Citadel shall have received an opinion of counsel for the Company and the Stockholders, dated the date of the Closing, in form and substance satisfactory to Parent and Citadel, to the effect that: (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Arkansas. (b) The Company has full power and authority to own its assets and properties and to conduct the Business and has all necessary approvals, permits, licenses and authorizations to own its properties and to conduct the Business in the manner and in the locations presently owned and conducted. (c) This Agreement, together with all other documents and instruments required to be executed or delivered by the Company and the Stockholders in connection with the transactions contemplated by this Agreement, each has been duly authorized, executed and delivered by the Company and the Stockholders and constitutes a valid and legally binding obligation of the Company and the Stockholders, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (d) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of the Company or, to the knowledge of such -35- 37 counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel after due investigation, violates or will violate or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of, any contract, commitment, agreement, understanding or arrangement of any kind to which the Company or any of the Stockholders is a party or by which the Company, any of the Stockholders or any of the Assets is bound and which is known to such counsel, all as set forth on COMPANY'S DISCLOSURE SCHEDULE. Except for (1) the FCC Approval and (2) the consents disclosed on COMPANY'S DISCLOSURE SCHEDULE, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of the Company or the Stockholders, in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. (e) To the knowledge of such counsel, except as disclosed on COMPANY'S DISCLOSURE SCHEDULE, there are no claims, disputes, actions, suits or proceedings pending or threatened against the Company or any of the Assets. (f) Prior to the Merger, the authorized capital stock of the Company consists of 1,000 shares of Company Common Stock, of which 100 shares are issued and outstanding. To the knowledge of such counsel, COMPANY'S DISCLOSURE SCHEDULE lists the names of the beneficial holders of all the outstanding shares of Company Common Stock, and the number of shares held by each of them. The issued and outstanding shares of Company Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable. The Company does not have outstanding any stock or securities convertible or exchangeable for any stock or securities. Nothing contained in this Section 12.1 shall require an opinion of such counsel with respect to FCC matters. 12.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and warranties of the Company contained herein shall be true and correct in all material respects at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified except for such inaccuracies as do not, individually or in the aggregate, have a material effect on the Stations, the Company's or any Stockholder's ability to consummate the transactions contemplated by this Agreement, or the Business as a whole) with the same effect as though all such representations and warranties were made at and as of the Closing, and the Company and the Stockholders shall have complied with all of their respective covenants contained herein; and the Company and the Stockholders shall have delivered to Parent and Citadel a certificate to that effect, dated the date of the Closing, signed by the President of the Company and by the Stockholders. -36- 38 12.3 NO LITIGATION. No injunction relating to any action, suit or proceeding against the Company, the Stockholders, Parent or Citadel relating to the consummation of any of the transactions contemplated by this Agreement shall have been issued. 12.4 OTHER CERTIFICATES. Parent and Citadel shall have received a certificate as to the good standing of the Company as a corporation in Arkansas as of a date not more than 20 days before the Closing, and such other certificates, instruments and other documents customary for transactions of the nature provided for in this Agreement, in form and substance reasonably satisfactory to Parent and Citadel, as Parent and Citadel shall have reasonably requested in connection with the transactions contemplated by this Agreement. 12.5 CORPORATE ACTION. All corporate action necessary to authorize the execution, delivery and performance by the Company of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by the Company, and the Company shall have delivered to Parent and Citadel certified copies of the resolutions of the Company's board of directors and of the Stockholders authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of its officers and employees in carrying out the terms and provisions of this Agreement. 12.6 ACTS TO PERFORMED. Each of the covenants, acts and undertakings of the Company and the Stockholders to be performed on or before the Closing Date pursuant to the terms of this Agreement shall have been duly performed. 12.7 UCC SEARCHES. The Company and the Stockholders shall have delivered to Parent and Citadel Uniform Commercial Code judgment and lien searches from the appropriate county and state agencies showing all Liens on the Assets, which searches shall be conducted not more than 30 days prior to the Closing. The Company and the Stockholders may cause such lien searches to be prepared by a third party, in which case the Company and the Stockholders shall not be responsible for any inaccuracies in such lien searches unless the Company and the Stockholders have actual knowledge of their inaccuracy. Notwithstanding the foregoing, the Company and the Stockholders shall remain responsible for satisfying any Lien on the Assets even if such searches are inaccurate. 12.8 FILINGS, CONSENTS, APPROVALS AND ESTOPPEL CERTIFICATES. All filings, consents, approvals and estoppel certificates required by or reasonably requested by Parent and Citadel pursuant to this Agreement, or necessary to consummate the transactions contemplated by this Agreement, shall have been obtained. 12.9 FCC APPROVAL. The FCC Approval shall have been obtained. 12.10 OTHER TRANSACTIONS. The transactions contemplated by the Real Estate Purchase Agreement, the CDB Broadcasting Agreement and the Snider Broadcasting Agreement shall be consummated on the Closing Date. -37- 39 12.11 DISSENTING SHARES. There shall not be any Dissenting Shares. SECTION 13 INDEMNIFICATION 13.1 INDEMNIFICATION BY THE COMPANY AND THE STOCKHOLDERS. Subject to the limitations and procedures set forth in this Section 13, the Company and the Stockholders shall jointly and severally indemnify and hold harmless Parent and Citadel from and against all losses, claims, demands, damages, liabilities, obligations, costs and/or expenses, including, without limitation, reasonable fees and disbursements of counsel (hereinafter referred to collectively as "DAMAGES"), which are sustained or incurred by Parent or Citadel, to the extent that such Damages are sustained or incurred by reason of (i) the breach of any of the obligations or covenants of the Company or the Stockholders in this Agreement or (ii) the breach of any of the representations or warranties made by the Company or the Stockholders in this Agreement. The foregoing notwithstanding, from and after the Closing Date, the Stockholders shall be solely responsible for any indemnification due under this Section 13.1 and shall have no right to seek contribution or indemnification from the Company. 13.2 INDEMNIFICATION BY PARENT AND CITADEL. Subject to the limitations and procedures set forth in this Section 13, Parent and Citadel shall jointly and severally indemnify and hold harmless the Stockholders from and against any and all Damages sustained or incurred by Stockholders, to the extent such Damages are sustained or incurred by the Stockholders by reason of (i) the breach of any of the obligations or covenants of Parent or Citadel in this Agreement or (ii) the breach of any of the representations or warranties made by Parent or Citadel in this Agreement. 13.3 PROCEDURE FOR INDEMNIFICATION. In the event that any party to this Agreement shall incur any Damages in respect of which indemnity may be sought by such party pursuant to this Section 13 or any other provision of this Agreement, the party indemnified hereunder (the "INDEMNITEE") shall notify the party providing indemnification (the "INDEMNITOR") promptly. In the case of third party claims, such notice shall in any event be given within 10 days of the filing or assertion of any claim against the Indemnitee stating the nature and basis of such claim; provided, however, that any delay or failure to notify any Indemnitor of any claim shall not relieve it from any liability except to the extent that the Indemnitor demonstrates that the defense of such action has been materially prejudiced by such delay or failure to notify. In the case of third party claims, the Indemnitor shall, within 10 days of receipt of notice of such claim, notify the Indemnitee of its intention to assume the defense of such claim. If the Indemnitor assumes the defense of the claim, the Indemnitor shall have the right and obligation (a) to conduct any proceedings or negotiations in connection therewith and necessary or appropriate to defend the Indemnitee, (b) to take all other required steps or proceedings to settle or defend any such claims, and (c) to employ counsel to contest any such claim or liability in the name of the Indemnitee or otherwise. If the Indemnitor shall not assume the -38- 40 defense of any such claim or litigation resulting therefrom, the Indemnitee may defend against any such claim or litigation in such manner as it may deem appropriate and the Indemnitee may settle such claim or litigation on such terms as it may deem appropriate, and assert against the Indemnitor any rights or claims to which the Indemnitee is entitled. Payment of Damages shall be made within 10 days of a final determination of a claim. A final determination of a disputed claim shall be (a) a judgment of any court determining the validity of disputed claim, if no appeal is pending from such judgment or if the time to appeal therefrom has elapsed, (b) an award of any arbitration determining the validity of such disputed claim, if there is not pending any motion to set aside such award or if the time within to move to set such award aside has elapsed, (c) a written termination of the dispute with respect to such claim signed by all of the parties thereto or their attorneys, (d) a written acknowledgment of the Indemnitor that it no longer disputes the validity of such claim, or (e) such other evidence of final determination of a disputed claim as shall be acceptable to the parties. 13.4 SURVIVAL. (a) COMPANY AND STOCKHOLDERS. Each of the representations and warranties made by the Company and the Stockholders in this Agreement shall survive for a period of 24 months after the Closing Date, notwithstanding any investigation at any time made by or on behalf of Parent or Citadel, and upon the expiration of such 24-month period such representations and warranties shall expire except as follows: (i) the representations and warranties of the Company contained in Sections 3.7 and 3.12 shall expire at the time the period of limitations expires for the assessment by the taxing authority of additional Taxes with respect to which the representations and warranties relate; (ii) the representations and warranties of the Company contained in Sections 3.19 and 3.20 shall expire at the time the latest period of limitations expires for the enforcement by an applicable Governmental Authority of any remedy with respect to which the particular representation or warranty relates; and (iii) the representations and warranties of the Company contained in Sections 3.1, 3.3, 3.4 and 3.9(a) shall not expire but shall continue indefinitely. No claim for the recovery of Damages may be asserted by Parent or Citadel against the Company, the Stockholders or their successors in interest after such representations and warranties shall thus expire; provided, however, that claims for Damages first asserted in writing within the applicable period shall not thereafter be barred. (b) PARENT AND CITADEL. Each of the representations and warranties made by Parent and Citadel in this Agreement shall survive for a period of 24 months after the Closing Date, notwithstanding any investigation at any time made by or on behalf of the Company or the Stockholders, and upon the expiration of such 24-month period such representations and warranties shall expire except as follows: (i) the representations and warranties of Parent and Citadel contained in Section 4.6 shall expire at the time the period of limitations expires for the assessment by the taxing authority of additional Taxes with respect to which the representations and warranties relate; (ii) the representations and warranties of Parent and -39- 41 Citadel contained in Section 4.8 shall expire at the time the latest period of limitations expires for the enforcement by an applicable Governmental Authority of any remedy with respect to which the particular representation or warranty relates; and (iii) the representations and warranties of Parent and Citadel contained in Sections 4.1, 4.2 and 4.3 shall not expire but shall continue indefinitely. No claim for the recovery of Damages may be asserted by the Company or the Stockholders against Parent, Citadel or their successors in interest after such representations and warranties shall thus expire; provided, however, that claims for Damages first asserted in writing within the applicable period shall not thereafter be barred. 13.5 LIMITATION OF COMPANY'S AND STOCKHOLDERS' LIABILITY. (a) THRESHOLD. Parent and Citadel shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.1 (other than Damages arising by reason of a breach of the representations and warranties made in Sections 3.1, 3.3, 3.4, 3.7 and 3.9(a)) until the aggregate of all such Damages suffered by Parent and Citadel exceeds $25,000 (the "THRESHOLD"); provided, however, that once such aggregate exceeds the Threshold, Parent and Citadel may recover all such Damages suffered since the Closing Date. (b) CEILING. Parent and Citadel shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.1 (other than Damages arising by reason of a breach of the representations and warranties made in Sections 3.7, 3.9(a), 3.12, 3.19 and 3.20 ("CITADEL'S CAP EXEMPT DAMAGES")) in excess of the Merger Consideration. No maximum limitation shall apply, however, to the right of Parent and Citadel to recover Citadel's Cap Exempt Damages or Damages pursuant to clause (i) of Section 13.1. (c) EXCEPTIONS. Paragraphs (a) and (b) above shall not apply with respect to any claim for Damages relating to any intentional or fraudulent breach of a representation or warranty by the Company or the Stockholders, nor shall there be any survival limitation for any such claim. 13.6 LIMITATION OF PARENT'S AND CITADEL'S LIABILITY. (a) THRESHOLD. The Company and the Stockholders shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.2 (other than as a result of a breach of the representations and warranties made in Sections 4.1, 4.2, 4.3 and 4.6) until the aggregate of all such Damages suffered by the Company and the Stockholders exceeds the Threshold; provided, however, that once such aggregate exceeds the Threshold, the Company and the Stockholders may recover all such Damages suffered since the Closing Date. (b) CEILING. The Company and the Stockholders shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.2 (other than Damages arising by reason of a breach of the representations and warranties made in Sections 4.2, 4.6 and 4.8 ("STOCKHOLDERS' CAP EXEMPT DAMAGES")) in excess of the Merger Consideration. No maximum -40- 42 limitation shall apply, however, to the right of the Company and the Stockholders to recover Stockholders' Cap Exempt Damages or Damages pursuant to clause (i) of Section 13.2. (c) EXCEPTIONS. Paragraphs (a) and (b) above shall not apply with respect to any claim for Damages relating to any intentional or fraudulent breach of a representation or warranty by Parent or Citadel, nor shall there be any survival limitation for any such claim. SECTION 14 TERMINATION OF AGREEMENT; ADDITIONAL REMEDIES 14.1 MANNER. This Agreement and the transactions contemplated hereby may be terminated prior to completion of the Closing: (a) by mutual written consent of Citadel and the Company; (b) by either Citadel or the Company upon providing written notice to the other party at any time after December 31, 1997 if the FCC Approval has not been granted by the FCC, but only if the party providing such notice is not then in material breach of this Agreement; (c) by Citadel, upon providing written notice to the Company, if as of the time set for Closing any of the conditions in Section 12 of this Agreement (except Section 12.9) has not been satisfied or waived by Citadel in writing, provided Citadel is not then in material breach of this Agreement; (d) by the Company, upon providing written notice to Citadel, if as of the time set for Closing any of the conditions in Section 11 of this Agreement (except Section 11.7) has not been satisfied or waived by the Company in writing, provided the Company is not then in material breach of this Agreement; (e) by the Company, upon providing written notice to Citadel, if Citadel fails to consummate the transactions contemplated hereunder after all conditions in Section 12 of the Agreement have been satisfied, provided the Company is not then in material breach of this Agreement; (f) by Citadel, upon providing written notice to the Company, if the Company fails to consummate the transactions contemplated hereunder after all conditions in Section 11 of this Agreement have been satisfied, provided Citadel is not then in material breach of this Agreement; (g) by either party upon denial by the FCC of the FCC Application; and -41- 43 (h) by either party if any court of competent jurisdiction in the United States or any other United States governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other actions shall have become final and non-appealable. The foregoing notwithstanding, in the event any party hereto elects to terminate this Agreement in accordance with paragraphs (a) through (h) above, then any party hereto shall have the right to terminate, or cause its Affiliate to terminate, the Real Estate Purchase Agreement, the Snider Broadcasting Agreement and the CDB Broadcasting Agreement. 14.2 ADDITIONAL REMEDIES. (a) In the event of the termination of this Agreement by the Company (i) pursuant to Section 14.1(d) or 14.1(e) (any such event being a "DRAW CONDITION"), the Company shall be entitled to draw upon and receive the proceeds of the Letter of Credit, but shall not retain any rights to recover any actual damages it suffers as a result of such termination and the breach relating to such damages. In the event of any other termination of this Agreement pursuant to any other provision of Section 14.1, Citadel shall be entitled to a return of, and the Company shall return to Citadel, the original Letter of Credit and, in that event, the Company and the Stockholders will no longer have any liability under this Agreement. (b) The parties recognize and agree that Parent and Citadel have relied on this Agreement and expended considerable effort and resources related to the transactions contemplated hereunder, that the rights and benefits conferred upon Parent and Citadel herein are unique, and that damages may not be adequate to compensate Parent and Citadel in the event the Company and the Stockholders improperly refuse to consummate the transactions contemplated hereunder. The parties therefore agree that Parent and Citadel shall be entitled, at their option and in lieu of terminating this Agreement pursuant to Section 14.1, to have this Agreement specifically enforced by a court of competent jurisdiction in addition all other remedies available at law or in equity; provided, however, that Parent and Citadel may not specifically enforce this Agreement if Citadel has previously terminated this Agreement and received the original Letter of Credit. SECTION 15 GENERAL 15.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each representation and warranty herein contained shall survive the Closing for the periods described in Section 13.4, notwithstanding any investigation at any time made by or on behalf of any party to this Agreement. -42- 44 15.2 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts, of the State of Arkansas. 15.3 NOTICES. Any notices or other communications required or permitted under this Agreement shall be delivered personally or sent by registered or certified mail, postage prepaid, delivered by overnight delivery or sent by facsimile, addressed as follows: To Parent or Citadel: Citadel Broadcasting Company 1015 Eastman Drive Bigfork, Montana 59911 Attn: Lawrence R. Wilson Fax: (406) 837-5373 With copy to: Citadel Broadcasting Company 140 South Ash Avenue Tempe, Arizona 85281 Attn: Donna L. Heffner Fax: (602) 731-5229 With copy to: Eckert Seamans Cherin & Mellott, LLC 600 Grant Street 42nd Floor Pittsburgh, Pennsylvania 15219 Attn: Bryan D. Rosenberger, Esq. Fax: (412) 566-6099 To the Company or Snider Corporation the Stockholders: 4021 East Eighth Street P.O. Box 251920 Little Rock, Arkansas 72225-1920 Attn: Ted L. Snider, Sr. Fax: (501) 661-7506 With copy to: Friday, Eldredge & Clark 2000 First Commercial Building 400 West Capitol Avenue Little Rock, Arkansas 72201 Attn: Price C. Gardner, Esq. Fax: (501) 376-2147 or such other addresses as shall be similarly furnished in writing by either party. Such notices or communications shall be deemed to have been given as of the date of personal delivery, or if mailed, the date the return receipt is signed or the date on which delivery is refused, or if delivered by overnight delivery or facsimile, on the date of receipt. -43- 45 15.4 ENTIRE AGREEMENT. This instrument supersedes all prior communications, understandings and agreements of or between the parties with respect to the subject matter of this Agreement and contains the entire agreement between the parties with respect to the transactions contemplated in this Agreement. Except as otherwise set forth in this Agreement, there are no other representations, warranties or covenants of any party hereto with respect to the subject matter of this Agreement. 15.5 HEADINGS. The headings of this Agreement are inserted for convenience only and shall not constitute a part of this Agreement. 15.6 SCHEDULES, EXHIBITS. All schedules and exhibits annexed to this Agreement are hereby incorporated in this Agreement by this reference. 15.7 EXPENSES. Each party shall bear its own costs and expenses incurred by it in connection with the transactions pursuant to this Agreement. 15.8 AMENDMENT. This Agreement may be amended, modified or superseded, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed on behalf of all of the parties or, in the case of a waiver, by the party waiving compliance. 15.9 WAIVER. The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect the right to enforce that provision or any other provision of this Agreement at any time thereafter. 15.10 ASSIGNMENT. Neither this Agreement nor any of the rights or obligations under this Agreement may be assigned by any party without the prior written consent, in its sole discretion, of each other party. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligation under this Agreement. 15.11 PRIOR CONTROL. Until the Closing, the Company shall maintain control of each Station. 15.12 ATTORNEYS' FEES. In the event of any action arising out of this Agreement, the prevailing party shall be entitled to recover its costs, expenses and reasonable attorney's fees incurred in connection with the dispute from the other party. 15.13 COUNTERPARTS; FAX SIGNATURES. This Agreement may be executed in one or more counterparts, each of which together shall constitute a single instrument. Signatures on this Agreement transmitted by facsimile shall be deemed to be original signatures for all purposes of this Agreement. -44- 46 15.14 DISPUTE RESOLUTION. Except as provided below, any dispute arising out of or relating to this Agreement or the breach, termination or validity hereof shall be finally settled by arbitration conducted expeditiously in accordance with the CPR Rules. The Center for Public Resources shall appoint a neutral advisor from its National CPR Panel. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof. The place of arbitration shall be Little Rock, Arkansas. Such proceedings shall be administered by the neutral advisor in accordance with the CPR Rules as he/she deems appropriate; provided, however, such proceedings shall be guided by the following agreed upon procedures: (a) mandatory exchange of all relevant documents, to be accomplished within 45 days of the initiation of the procedure; (b) no other discovery; (c) hearings before the neutral advisor which shall consist of a summary presentation by each side of not more than three hours; such hearings to take place on one or two days at a maximum; and (d) decision to be rendered not more than 10 days following such hearing. The provisions of this Section 15.14 shall not apply with regard to any equitable remedies to which a party may be entitled under this Agreement. [SIGNATURES APPEAR ON FOLLOWING PAGE] -45- 47 IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date above first written. SNIDER CORPORATION By: /s/ Ted L. Snider, Sr. ----------------------------- Ted L. Snider, Sr., Chairman /s/ Ted L. Snider, Sr. -------------------------------- Ted L. Snider, Sr. /s/ Jane J. Snider -------------------------------- Jane J. Snider CITADEL COMMUNICATIONS CORPORATION By: /s/ Lawrence R. Wilson ----------------------------- Its: President ---------------------------- CITADEL BROADCASTING COMPANY By: /s/ Lawrence R. Wilson ----------------------------- Its: President ---------------------------- -46- 48 INDEX OF SCHEDULES AND EXHIBITS Schedule 1 - Citadel's Disclosure Schedule Schedule 2 - Company Asset Schedule Schedule 3 - Company's Disclosure Schedule Exhibit A - Agreement Not to Compete Exhibit B - Amended and Restated Certificate of Incorporation Exhibit C - Amendment to Registration Rights Agreement Exhibit D - Amendment to Securities Purchase and Exchange Agreement Exhibit E - Amendment to Stockholders Agreement Exhibit F - Amendment to Voting Agreement Exhibit G - Letter of Credit Exhibit H - Local Marketing Agreement [Pursuant to Regulation S-K, Item 601(b)(2), Registrant agrees to furnish supplementally a copy of these schedules or exhibits to the Securities Exchange Commission upon request.] EX-2.6 5 CITADEL BROADCASTING CO. S-4 1 Exhibit 2.6 MERGER AGREEMENT AMONG SNIDER BROADCASTING CORPORATION, TED L. SNIDER, JR., CALVIN G. ARNOLD, CITADEL COMMUNICATIONS CORPORATION AND CITADEL BROADCASTING COMPANY JUNE 2, 1997 2 MERGER AGREEMENT THIS MERGER AGREEMENT ("AGREEMENT"), made as of the 2nd day of June, 1997, among SNIDER BROADCASTING CORPORATION, an Arkansas corporation (the "COMPANY"); TED L. SNIDER, JR. and CALVIN G. ARNOLD (collectively, the "STOCKHOLDERS"); CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation ("PARENT"); and CITADEL BROADCASTING COMPANY, a Nevada corporation ("CITADEL"). RECITALS: A. The Company, through its wholly-owned subsidiaries, is the licensee of and owns and operates radio station KIPR-FM licensed to Pine Bluff, Arkansas (the "STATION"). B. The Stockholders own all of the issued and outstanding shares of capital stock of the Company. C. Citadel is a wholly-owned subsidiary of Parent. D. The parties desire that the Company be merged with and into Citadel (with Citadel surviving such merger) pursuant to the applicable laws of the States of Arkansas and Nevada, on the terms and conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1 DEFINITIONS The following terms when used in this Agreement shall have the meanings assigned to them below: "ACCOUNTS RECEIVABLE" means the accounts receivable of the SBC Companies, exclusive of Trade Receivables, existing as of the Closing. "ACCOUNTS PAYABLE" means the Obligations, described in clause (b) of the definition thereof, of the SBC Companies, exclusive of Trade Liabilities, existing as of the Closing. "ACCRUED TAXES" means all Taxes attributable to a Person or its income, operations or properties accruing up to and including the Closing. "ACT" means the Communications Act of 1934, as amended. "AFFILIATE" of any Person means any other Person (a) that directly or indirectly controls, is controlled by, or is under direct or indirect common control with, the first Person, or (b) any interests of which are owned, in whole or in part, directly or indirectly, by the first Person. 3 For purposes of this definition, the term "control" (including the correlative meanings of the terms "controls," "controlled by," and "under direct or indirect control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of the Person, whether through the ownership of voting securities or by contract or otherwise. "AGREEMENT NOT TO COMPETE" means the Agreement Not to Compete to be executed and delivered by Citadel and each of the Stockholders at the Closing, substantially in the form attached to this Agreement as EXHIBIT A. "AMENDED AND RESTATED CERTIFICATE OF INCORPORATION" means the Seventh Amended and Restated Certificate of Incorporation of Parent, in the form attached to this Agreement as EXHIBIT B. "AMENDMENT TO REGISTRATION RIGHTS AGREEMENT" means the Amendment to the Third Amended and Restated Registration Rights Agreement dated as of June 28, 1996, as amended, among Parent, the Investors and Wilson to be executed and delivered at the Closing, substantially in the form attached to this Agreement as EXHIBIT C. "AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT" means the Amendment to Securities Purchase and Exchange Agreement to be executed and delivered at the Closing among the holders of the Series G Preferred Stock as of the Closing Date and each of the original parties to the Securities Purchase and Exchange Agreement dated as of June 28, 1996, as amended, among Parent, Citadel, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Baker, Fentress & Company, Oppenheimer & Co., Inc., Bank of America Illinois, and certain other parties (the "SECURITIES PURCHASE AND EXCHANGE AGREEMENT"), substantially in the form attached to this Agreement as EXHIBIT D. "AMENDMENT TO STOCKHOLDERS AGREEMENT" means the Amendment to Stockholders Agreement to be executed and delivered at the Closing among the holders of the Series G Preferred Stock as of the Closing Date and each of the original parties to the Second Amended and Restated Stockholders Agreement dated as of June 28, 1996, as amended, among Parent, the Investors, Wilson and certain other parties (the "STOCKHOLDERS AGREEMENT"), substantially in the form attached to this Agreement as EXHIBIT E. "AMENDMENT TO VOTING AGREEMENT" means the Amendment to Voting Agreement to be executed and delivered at the Closing among the holders of the Series G Preferred Stock as of the Closing Date and each of the original parties to the Third Amended and Restated Voting Agreement dated as of March 17, 1997 among Parent, the Investors and Wilson, substantially in the form attached to this Agreement as EXHIBIT F. "ARTICLES OF MERGER" means the Articles of Merger to be executed and delivered by Citadel and the Company at the Closing and filed with the appropriate authorities in the States -2- 4 of Nevada and Arkansas, in form and substance mutually agreed upon by Citadel and the Company. "ASSETS" means all of the property of every kind or nature used in the operation of the Station, including but not limited to the Real Property, the Real Property Leases, the Intellectual Property, the Personal Property, the Trade Receivables, the Accounts Receivable and the Cash (other than the Excluded Assets), and all books, records and accounts relating to the operation of the Station. "BROKER" means NationsBanc Capital Markets, Inc. "BUSINESS" means the business in which the SBC Companies are now engaged. "CASH" means the cash and cash equivalents of the SBC Companies existing as of the Closing. "CDB BROADCASTING AGREEMENT" means that certain Asset Purchase Agreement dated as of the date hereof among CDB Broadcasting Corporation, CDB License Corporation and Citadel. "CITADEL PERMITS" has the meaning specified in Section 4.8. "CITADEL STATIONS" has the meaning specified in Section 4.5. "CITADEL SUPPLEMENTAL FINANCIAL STATEMENTS" has the meaning specified in Section 8.7. "CITADEL'S CAP EXEMPT DAMAGES" has the meaning specified in Section 13.5(b). "CITADEL'S DISCLOSURE SCHEDULE" means SCHEDULE 1 to this Agreement. "CLOSING" means the consummation of the transactions contemplated in this Agreement in accordance with the provisions of Section 10. "CLOSING CERTIFICATE" means the certificate of the President of the Company and the Stockholders dated the Closing Date and delivered to Parent and Citadel, which sets forth the Debt Payoff Amount and a listing of the Excluded Assets. "CLOSING DATE" has the meaning specified in Section 10. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPANY ASSET SCHEDULE" means SCHEDULE 2 to this Agreement. -3- 5 "COMPANY COMMON STOCK" means the common stock, par value $1.00 per share, of the Company. "COMPANY SHAREHOLDERS AGREEMENT" means the Shareholders Agreement dated as of October 28, 1986 among the Company and the Stockholders. "COMPANY SUPPLEMENTAL FINANCIAL STATEMENTS" has the meaning specified in Section 5.9. "COMPANY'S DISCLOSURE SCHEDULE" means SCHEDULE 3 to this Agreement. "CONTRACTS" means all (a) contracts, agreements, licenses, leases, arrangements and other documents to which any of the SBC Companies is a party or by which any of the SBC Companies or any of the assets of the SBC Companies are bound (including, in the case of loan agreements, a description of the amounts of any outstanding borrowings thereunder and the collateral, if any, for such borrowings); (b) uncompleted orders for the purchase by any of the SBC Companies of materials, supplies, equipment and services for the requirements of the Station existing as of the date hereof and with respect to which the remaining obligation of any of the SBC Companies is in excess of $2,500; and (c) contingent contractual obligations and liabilities of any of the SBC Companies known to the Company existing as of the date hereof. "CORNERSTONE" means Cornerstone Broadcasting Corporation, an Arkansas corporation and a wholly-owned subsidiary of the Company. "CORNERSTONE MERGER" has the meaning specified in Section 9.7. "CPR RULES" means the Center for Public Resources Rules for Nonadministered Arbitration of Business Disputes. "DAMAGES" has the meaning specified in Section 13.1. "DEBT PAYOFF AMOUNT" means the amount of Indebtedness for Borrowed Money of the SBC Companies as of the Closing Date, as certified by the President of the Company and the Stockholders in the Debt Certificate. "DISSENTING SHARES" has the meaning specified in Section 2.4(b). "DRAW CONDITION" has the meaning specified in Section 14.2(a). "EFFECTIVE DATE" means the date upon which articles of merger, or an equivalent document, reflecting the Merger have been filed with the appropriate authorities of the States of Arkansas and Nevada pursuant to Section 2. The parties intend that the Effective Date be on the Closing Date. -4- 6 "ENVIRONMENTAL CLAIMS" means and includes, without limitation: (a) claims, demands, suits, causes of action for personal injury or lost use of property, or consequential damages, to the extent any of the foregoing arise directly or indirectly out of Environmental Conditions; (b) actual or threatened damages to natural resources; (c) claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, response or remedial actions under CERCLA, RCRA or other Environmental Laws; (d) a requirement to implement "corrective action" pursuant to any order or permit issued pursuant to RCRA; (e) claims for restitution, contribution or equitable indemnity from third parties or any governmental agency; (f) fines, penalties or Liens against property; (g) claims for injunctive relief or other orders or notices of violation from Governmental Authorities; and (h) with regard to any present or former employees, exposure to or injury from Environmental Conditions. "ENVIRONMENTAL CONDITIONS" means conditions of the environment, including the ocean, natural resources (including flora and fauna), soil, surface water, ground water, any present or potential drinking water supply, subsurface strata or the ambient air, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping, or threatened release of Hazardous Materials by a Person. With respect to claims by employees, Environmental Conditions also includes the exposure of Persons to Hazardous Materials within work places on any real estate owned or occupied by a Person. "ENVIRONMENTAL LAWS" has the meaning specified in the definition of Hazardous Materials. "ENVIRONMENTAL NONCOMPLIANCE" means, but is not limited to: (a) the release or threatened release as a result of the activities of a Person of any Hazardous Materials into the environment, any storm drain, sewer, septic system or publicly owned treatment works, in violation of any effluent emission limitations, standards or other criteria or guidelines established by any federal, state or local law, regulation, rule, ordinance, plan or order; and (b) any facility operations, procedures, designs, etc. which do not conform to the statutory or regulatory requirements of the CAA, the CWA, the TSCA, the RCRA or any other Environmental Laws intended to protect public health, welfare and the environment. "EQUITY SECURITIES" has the meaning ascribed thereto in the Securities Purchase and Exchange Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "EXCLUDED ASSETS" means the excess, if any, of (a) the Cash and the Accounts Receivable over (b) the Accounts Payable. "FCC" means the Federal Communications Commission. -5- 7 "FCC APPLICATION" has the meaning specified in Section 9.1. "FCC APPROVAL" has the meaning specified in Section 9.1. "FCC LICENSES" means the main station license for the Station, together with each of the other consents, rights, licenses, permits and other authorizations issued by the FCC and held by any of the SBC Companies in connection with, or pertaining to, the conduct of the business and operation of the Station, together with any renewals and extensions thereof and any applications therefor pending on the Closing Date, and any and all applications made by any of the SBC Companies for such consents, rights, licenses, permits and other authorizations. "FINAL ORDER" means a written action or order issued by the FCC or its staff setting forth the FCC Approval (or a denial thereof), (a) which action or order has not been vacated, reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with respect to which action or order (i) no requests have been filed and are pending for administrative or judicial review, rehearing, reconsideration, appeal or stay, and the time period for filing any such requests and for the FCC to set aside the action on its own motion under the provisions of the Act or the rules, regulations and policies of the FCC has expired, or (ii) in the event of review, reconsideration or appeal, the time for further review, reconsideration or appeal has expired. "GAAP" means generally accepted accounting principles in effect in the United States of America from time to time applied on a consistent basis during the periods involved. "GOVERNMENTAL AUTHORITY" means any government, whether federal, state or local, or any other political subdivision thereof, or any agency, tribunal or instrumentality of any such governmental or political subdivision, or any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "HAZARDOUS MATERIALS" means hazardous wastes, hazardous substances, hazardous constituents, toxic substances or related materials, whether solids, liquids or gases including but not limited to substances defined as "PCBs," "hazardous wastes," "hazardous substances," "toxic substances," "pollutants," "contaminants," "radioactive materials," "petroleum," or other similar designations in, or otherwise subject to regulation under, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), 42 U.S.C. Section 9601 ET SEQ.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. Section 2601 ET SEQ.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 9601; the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C.Section 300f ET SEQ.; the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 ET SEQ.; or any similar state law; and in the plans, rules, regulations or ordinances adopted, or other criteria and guidelines promulgated pursuant to the preceding laws or other similar laws, regulations, rules or ordinances now in effect (collectively, the "ENVIRONMENTAL LAWS"); and any other substances, constituents or wastes subject to environmental regulations under any applicable federal, state or local law, regulation or ordinance. -6- 8 "INDEBTEDNESS FOR BORROWED MONEY" means (a) all indebtedness of a Person in respect of money borrowed (including, without limitation, indebtedness which represents the unpaid amount of the purchase price of any property), (b) all indebtedness of a Person evidenced by a promissory note, bond or similar written obligation to pay money, (c) all indebtedness guaranteed by a Person or for which a Person is contingently liable, including, without limitation, guaranties in the form of an agreement to repurchase or reimburse, and any commitment by which any such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit, and (d) all monetary obligations of a Person under any lease or similar arrangement, which obligations would be classified and accounted for as capital obligations on a balance sheet of such Person under GAAP. "INDEMNITEE" has the meaning specified in Section 13.3. "INDEMNITOR" has the meaning specified in Section 13.3. "INTELLECTUAL PROPERTY" means the call letters of the Station and all of the copyrights, trademarks, trade names and other similar rights, including applications and registrations therefor, used in connection with the past or present operation of the Station in which any of the SBC Companies has any right, title or interest, including, without limitation, those items listed on the COMPANY ASSET SCHEDULE. "INVESTORS" shall have the meaning ascribed thereto in the Securities Purchase and Exchange Agreement. "LETTER OF CREDIT" has the meaning specified in Section 2.6. "LICENSE SUB" means SBC License Corporation, an Arkansas corporation and a wholly-owned subsidiary of Cornerstone. "LIEN" means any mortgage, pledge, hypothecation, assignment, encumbrance, claim, easement, transfer restriction, lien (statutory or otherwise) or security interest of any kind or nature whatsoever. "LOCAL MARKETING AGREEMENT" has the meaning specified in Section 9.2. "MERGER" has the meaning specified in Section 2.1. "MERGER CONSIDERATION" has the meaning specified in Section 2.4(a). "NET LIABILITIES" means the excess, if any, of (a) the Account Payable over (b) the Cash and the Accounts Receivable. "OBLIGATIONS" means, without duplication, all (a) Indebtedness for Borrowed Money, (b) Accrued Taxes, accounts payable, accrued liabilities and all other liabilities and obligations of -7- 9 the type normally required by GAAP to be reflected on a balance sheet, (c) commitments by which a Person assures a creditor against loss, including the face amount of all letters of credit and, without duplication, all drafts drawn thereunder, (d) obligations guaranteed in any manner by a Person, (e) obligations under capitalized leases in respect of which obligations a Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss, (f) obligations under acceptance facilities, (g) obligations secured by a Lien on property of a Person, (h) obligations under interest rate or currency exchange or swap agreements, (i) unsatisfied obligations for "withdrawal liability" to a "multiemployer plan" as such terms are defined under ERISA, (j) indebtedness issued or obligation incurred in substitution or exchange for any Obligations, (k) costs or expenses incurred by a Person of any nature, whether or not currently payable, and (l) other liabilities or obligations of a Person, in each of the foregoing instances whether absolute or contingent, known or unknown, and whether or not normally required by GAAP to be reflected on a balance sheet. "PERMITS" means all FCC Licenses applicable to the Station, and all other permits, licenses, approvals, franchises, notices and authorizations applicable to the Station issued by any Governmental Authorities. "PERSON" means an individual, corporation, partnership, joint venture, joint stock company, association, trust, business trust, unincorporated organization, Governmental Authority, or any other entity of whatever nature. "PERSONAL PROPERTY" means all of the tangible personal property, improvements and fixtures of every kind or nature used in the operation of the Station in the ordinary course of business, including, without limitation, the personal property described on the COMPANY ASSET SCHEDULE. "PLAN OF MERGER" means the Plan of Merger to be executed and delivered by Citadel and the Company at the Closing and filed with the appropriate authorities in the States of Nevada and Arkansas, in form and substance mutually agreed upon by Citadel and the Company. "REAL ESTATE PURCHASE AGREEMENT" means that certain Agreement of Sale dated as of the date hereof among Ted L. Snider, Sr., Jane J. Snider and Citadel. "REAL PROPERTY" means all of the right, title and interest of any of the SBC Companies in and to any real property used in the operation of the Station, including but not limited to the real property described on the COMPANY ASSET SCHEDULE. "REAL PROPERTY LEASES" means the leasehold interests pursuant to the real property leases described on the COMPANY ASSET SCHEDULE. "SBC COMPANIES" means, collectively, the Company, Cornerstone and License Sub. -8- 10 "SECURITIES ACT" means the Securities Act of 1933, as amended. "SERIES G PREFERRED STOCK" means the Series G Convertible Preferred Stock, par value $.001 per share, of Parent. "SNIDER CORPORATION AGREEMENT" means that certain Merger Agreement dated as of the date hereof among Snider Corporation, the stockholders of Snider Corporation, Parent and Citadel. "STATION" has the meaning set forth in the recitals to this Agreement. "STOCKHOLDERS' CAP EXEMPT DAMAGES" has the meaning specified in Section 13.6(b). "SURVIVING CORPORATION" has the meaning specified in Section 2.1. "TAXES" means all taxes, charges, fees, levies, or other assessments, including income, gross receipts, excise, property, sales, transfer, license, payroll, and franchise taxes, any taxes required by law to be withheld, and any taxes payable as a result of the consummation of the transactions contemplated by this Agreement, which taxes are imposed by any Governmental Authority; and such term shall include any interest, penalties, or additions to tax attributable to such assessments. "THRESHOLD" has the meaning specified in Section 13.5(a). "TRADE AGREEMENTS" means and includes those agreements entered into by any SBC Company for the sale of advertising time on the Station for consideration other than cash, which agreements are in effect as of the Closing. "TRADE LIABILITIES" means the fair market value of the SBC Companies' liability as of the Closing for unperformed time under the Trade Agreements. "TRADE RECEIVABLES" means the fair market value of goods and services to be received by the SBC Companies after the Closing under the Trade Agreements. "WILSON" means Lawrence R. Wilson. SECTION 2 MERGER 2.1 THE MERGER. On the Closing Date, in accordance with this Agreement and Arkansas and Nevada law, the Company shall be merged with and into Citadel (the "MERGER"), the separate existence of the Company shall cease, and Citadel shall continue as the surviving -9- 11 corporation under the corporate name it possesses immediately prior to the Closing Date. Citadel hereinafter may sometimes be referred to as the "SURVIVING CORPORATION." 2.2 EFFECT OF THE MERGER. On the Closing Date, the effect of the Merger shall be that (i) the Surviving Corporation shall possess all the rights, privileges and franchises possessed by each of the Company and Citadel, (ii) all of the property and assets of whatsoever kind or description of each of the Company and Citadel, and all debts due on whatever account to any of them, including subscriptions for shares or other choses in action belonging to any of them, shall be taken and be deemed to be transferred to, and vested in, the Surviving Corporation without further act or deed, and (iii) the Surviving Corporation shall be responsible for all of the liabilities and obligations of each of the Company and Citadel, as provided by applicable law, in the same manner as if the Surviving Corporation had itself incurred such liabilities or obligations; but the liabilities of the Company and Citadel, or of their shareholders, directors or officers, shall not be affected by, nor shall the rights of the creditors thereof or of any persons dealing with such corporations be impaired by, the Merger, and any claim existing, or action or proceeding pending, by or against either of the Company or Citadel may be prosecuted to judgment as if the Merger had not taken place, or the Surviving Corporation may be proceeded against, or substituted, in place of the Company or Citadel, as the case may be. 2.3 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS. The Articles of Incorporation of Citadel, as in effect immediately prior to the Closing Date, shall be the Articles of Incorporation of the Surviving Corporation after the Closing Date until thereafter amended as provided therein and under Nevada law. The Bylaws of Citadel, as in effect immediately prior to the Closing Date, shall be the Bylaws of the Surviving Corporation after the Closing Date until thereafter amended as provided therein and under Nevada law. The directors and officers of Citadel immediately prior to the Closing Date shall be the initial directors and officers of the Surviving Corporation after the Closing Date until their successors are elected and qualified. 2.4 MERGER CONSIDERATION; CONVERSION OF SECURITIES. On the Closing Date, by virtue of the Merger and without any action on the part of Parent, Citadel, the Company or the holder of any of the securities of such corporations: (a) MERGER CONSIDERATION. Each share of Company Common Stock issued and outstanding immediately prior to the Closing Date shall be converted automatically into (i) the number of shares of Series G Preferred Stock determined pursuant to Section 2.4(b) and (ii) an amount of cash equal to (A) the Debt Payoff Amount minus the Net Liabilities, if any, divided by (B) the number of issued and outstanding shares of Company Common Stock on the Closing Date (collectively, the "MERGER CONSIDERATION"). (b) SERIES G PREFERRED STOCK. Each share of Company Common Stock issued and outstanding immediately prior to the Closing Date (other than shares as to which dissenters' rights have been perfected and not withdrawn or otherwise forfeited under applicable Arkansas law ("DISSENTING SHARES")) shall be cancelled and extinguished and be -10- 12 converted into the right to receive (in addition to the cash consideration specified in Section 2.4(a)) that number of shares of Series G Preferred Stock equal to 198,350 divided by the number of shares of Company Common Stock then issued and outstanding; provided, however, that (i) in the event that Citadel's acquisition of all of the issued and outstanding shares of capital stock of Tele-Media Broadcasting Company is not consummated on or prior to the Closing Date, then the aggregate number of shares of Series G Preferred Stock issuable as Merger Consideration shall be increased from 198,350 to 210,620 and (ii) in the event after the date hereof and prior to the Closing Date the shares of Series G Preferred Stock at any time outstanding shall be subdivided, by reclassification, recapitalization, stock dividend or otherwise, into a greater number of shares without the actual receipt by Parent of consideration for the additional number of shares so issued, or the number of shares of Series G Preferred Stock at any time outstanding shall be reduced, by reclassification, recapitalization, reduction of capital stock or otherwise, or the outstanding shares of Series G Preferred Stock shall be reclassified or changed other than in such manner, then the number of shares of Series G Preferred Stock that each holder of Company Common Stock shall be entitled to as Merger Consideration shall be adjusted accordingly to the nearest share of Series G Preferred Stock. (c) TRANSFER BOOKS. On and after the Closing Date, there shall be no transfers on the stock transfer books of the Company with respect to shares of Company Common Stock issued and outstanding immediately prior to the Closing Date. If, after the Closing Date, certificates formerly representing shares of Company Common Stock are presented to Citadel or its transfer agent, they shall be cancelled and exchanged for the Merger Consideration as provided in Section 2.5, subject to applicable law in the case of Dissenting Shares. 2.5 EXCHANGE OF CERTIFICATES. From and after the Closing Date, all certificates representing shares of Company Common Stock, with the exception of certificates representing Dissenting Shares or shares of Company Common Stock held by the Company, shall represent the right to receive Merger Consideration on the basis set forth above and upon the terms and conditions of this Agreement, subject to applicable abandoned property, escheat and similar laws. Upon delivery of certificates representing shares of Company Common Stock to the transfer agent of Citadel, Citadel shall cause the transfer agent to issue certificates representing the requisite number of shares of Series G Preferred Stock for each share of Company Common Stock represented by the certificates therefor properly delivered, and Citadel shall pay by certified or cashier's check the cash consideration described in Section 2.4(a). Notwithstanding the foregoing, neither Citadel's transfer agent nor any party hereto shall be liable to a holder of shares of Company Common Stock for any of the Merger Consideration delivered to a public official pursuant to applicable abandoned property, escheat and similar laws. 2.6 LETTER OF CREDIT. Simultaneously with the execution of this Agreement, Citadel shall deliver to the Company an irrevocable letter of credit in favor of the Company, issued by a national banking association or other issuer acceptable to the Company, in the amount of $325,000, which shall be in the form attached as EXHIBIT G hereto (the "LETTER OF CREDIT"). The -11- 13 Letter of Credit shall provide that the issuing bank shall make payment on the Letter of Credit upon such bank's receipt of a joint certificate from the President of each of the Company and Citadel certifying that a Draw Condition has occurred. Upon the Closing, the Company shall return the original Letter of Credit to Citadel for cancellation. 2.7 TAX-FREE REORGANIZATION. The parties hereto intend that the Merger shall qualify as a tax-free reorganization and exchange of stock within the terms of Sections 368(a)(1)(A), 368(a)(2)(D), 354(a), 356(a) and 361(a) of the Code, and agree to take such actions as may be necessary to conform to the provisions of said Sections and to do any and all things they deem necessary or advisable to carry out the purposes and intent of this Agreement. SECTION 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY In connection with the Merger and in order to induce Parent and Citadel to enter into and consummate the transactions contemplated by this Agreement, the Company makes the following representations and warranties to Parent and Citadel, as of the date of this Agreement and as of the date of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times): 3.1 ORGANIZATION AND QUALIFICATION; AUTHORITY. Each of the SBC Companies is a corporation duly organized, validly existing and in good standing under the laws of the State of Arkansas and has full power and authority to own its assets and properties and to conduct the Business. Each of the SBC Companies has full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own its properties and to conduct the Business. The execution and delivery of this Agreement by the Company, the performance by the Company of its covenants and agreements hereunder and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company. This Agreement constitutes the valid and legally binding agreement of the Company and the Stockholders, enforceable against each of them in accordance with its terms. 3.2 SUBSIDIARIES. The Company does not own, of record or beneficially, any capital stock or equity interest or investment in any Person other than Cornerstone and License Sub. -12- 14 3.3 CAPITALIZATION. (a) AUTHORIZED AND ISSUED SHARES OF COMPANY. The authorized capital stock of the Company consists solely of 20,000 shares of Company Common Stock, of which 85 shares are issued and outstanding. COMPANY'S DISCLOSURE SCHEDULE lists the names of the beneficial holders of all the outstanding shares of Company Common Stock, and the number of shares held by each of them. The issued and outstanding shares of Company Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable. The Company does not have outstanding any stock or securities convertible or exchangeable for any stock or securities. (b) AUTHORIZED AND ISSUED SHARES OF CORNERSTONE. The authorized capital stock of Cornerstone consists solely of 1,000 shares of Common Stock, no par value per share, of which 100 shares are issued and outstanding (all of which are owned, of record and beneficially, by the Company). The issued and outstanding shares of Common Stock of Cornerstone have been duly authorized and validly issued, and are fully paid and nonassessable. Cornerstone does not have outstanding any stock or securities convertible or exchangeable for any stock or securities. (c) AUTHORIZED AND ISSUED SHARES OF LICENSE SUB. The authorized capital stock of License Sub consists solely of 1,000 shares of Common Stock, no par value per share, of which 100 shares are issued and outstanding. The issued and outstanding shares of Common Stock of License Sub have been duly authorized and validly issued, and are fully paid and nonassessable. License Sub does not have outstanding any stock or securities convertible or exchangeable for any stock or securities. (d) REPURCHASE AND OTHER OBLIGATIONS. None of the SBC Companies is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its stock or other securities. No Stockholder, SBC Company or other Person is entitled to any preemptive right, right of first refusal or similar right with respect to any of the SBC Companies. Except for the Company Shareholders Agreement, there are no agreements, arrangements or trusts between or for the benefit of any of the SBC Companies or the Stockholders with respect to the voting or transfer of stock or other securities, or with respect to any other aspect of any of the SBC Companies' affairs. None of the SBC Companies has violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its stock or other securities. 3.4 NO LEGAL BAR; CONFLICTS. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of the Company, or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien -13- 15 pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which any of the SBC Companies is a party or by which any of the SBC Companies or any of the Assets is bound. Except for the FCC Approval and the consents disclosed in COMPANY'S DISCLOSURE SCHEDULE, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 3.5 FINANCIAL STATEMENTS. The Company has delivered to Parent and Citadel the following financial statements of the SBC Companies: (a) the audited consolidated balance sheet as of December 31, 1995 and the related consolidated statements of income and cash flows for the year then ended; (b) the audited consolidated balance sheet as of December 31, 1996 and the related consolidated statements of income and cash flows for the year then ended; (c) the unaudited consolidated balance sheet as of April 30, 1997, and the related unaudited consolidated statements of income and cash flows for the four months then ended; and (d) the monthly unaudited balance sheets and income statements for each month in 1996 and the first four months of 1997. Each of the foregoing financial statements (including in all cases the notes thereto, if any) (i) is accurate and complete in all material respects, (ii) is consistent in all material respects with the books and records of the SBC Companies (which, in turn, are accurate and complete in all material respects), and (iii) fairly presents in all material respects the financial condition and results of operations of the SBC Companies in accordance with GAAP (subject in the case of unaudited financial statements to the lack of footnote disclosure and changes resulting from normal year-end audit adjustments), consistently applied, as of the dates and for the periods set forth therein. 3.6 ABSENCE OF CERTAIN CHANGES. Between December 31, 1996 and the date of this Agreement, there has not been any of the following with respect to any of the SBC Companies or the Station: (a) material adverse change in condition, financial or otherwise, or in the results of operations, assets, liabilities or business; (b) damage or destruction, whether or not insured, affecting business operations; (c) labor dispute or threatened labor dispute involving any employees; (d) actual or threatened dispute with any material provider of software, hardware or services; (e) material change in the customary methods of operations; (f) except in the ordinary course of business or to the extent not material to the Business or financial condition of the Station, sale or transfer of any tangible or intangible asset used or useful in the operation of the Station, mortgage, pledge or imposition of any Lien on any such asset, lease of real property, machinery, equipment or buildings with respect to the Station entered into or modification, amendment or cancellation of any of its existing leases relating to the Station, or cancellation of any debt or claim; or (g) liability or obligation (contingent or otherwise) incurred under agreements or otherwise, except current liabilities entered into or incurred in the ordinary course of business consistent with past practices. 3.7 TAXES. Each of the SBC Companies has filed or caused to be filed on a timely basis all federal, state, local and other tax returns, reports and declarations required to be filed by it with respect to the Station and has paid all Taxes (including, but not limited to, income, -14- 16 franchise, sales, use, unemployment, withholding, social security and workers' compensation taxes and estimated income and franchise tax payments, penalties and fines) reflected as due on such returns, reports or declarations (whether or not shown on such returns, reports or declarations), or pursuant to any assessment received by it in connection with such returns, reports or declarations. All returns, reports and declarations filed by or on behalf of each of the SBC Companies are true, complete and correct. No deficiency in payment of any Taxes for any period has been asserted against any of the SBC Companies by any taxing authority which remains unsettled at the date hereof, no written inquiries have been received by any of the SBC Companies any taxing authority with respect to possible claims for taxes or assessments, and there is no basis for any additional claims or assessments for Taxes. Since December 31, 1996, none of the SBC Companies has incurred any liability for Taxes which materially affect the operation of the Station other than in the ordinary course of business. 3.8 COMPANY ASSET SCHEDULE. The COMPANY ASSET SCHEDULE includes complete and accurate (a) listings of all Real Property; (b) listings of all Personal Property; (c) descriptions of all Contracts, none of which requires any consent of third parties in connection with the transactions contemplated hereby, except otherwise as indicated in COMPANY'S DISCLOSURE SCHEDULE; (d) descriptions of all of the Intellectual Property; and (e) listings of all of the FCC Licenses, all of the foregoing of which will, as of the Closing, be owned and held by the SBC Companies as reflected in the COMPANY ASSET SCHEDULE. 3.9 TITLE TO AND CONDITION OF PROPERTY. (a) TITLE. The SBC Companies will as of the Closing have good, marketable and exclusive title to and undisputed possession of all of the Assets. Except as set forth on COMPANY'S DISCLOSURE SCHEDULE, the Assets are now free and clear of all Liens. The Assets will, as of the Closing, be free and clear of all Liens. (b) CONDITION. The Personal Property is structurally sound, in reasonably good condition, ordinary wear and tear excepted, adequate and suitable for the operation of the Station as it is currently being operated, and in proper condition and repair so that the Station can operate according to the FCC Licenses, the rules, regulations and policies of the FCC and in all other respects in compliance with the Act and all other applicable federal and state laws. (c) INSURANCE. The Assets are and will be insured through the Closing Date in amounts adequate to replace or repair any casualty or other insurable loss to any of such property. (d) SUFFICIENCY OF ASSETS. The Assets include all of the assets (other than the Excluded Assets), which are sufficient in nature, condition and quantity, necessary to permit the SBC Companies to operate the Station immediately upon the Closing in the ordinary course of business and consistent with the past practices of the SBC Companies. The SBC Companies have not, since December 31, 1996, removed any material item of Personal Property from the Station other than (i) removals in the ordinary course of business which were not done in -15- 17 contemplation of the transactions contemplated by this Agreement and (ii) as contemplated by Section 10.2(c). (e) REAL PROPERTY; REAL PROPERTY LEASES. (i) The COMPANY ASSET SCHEDULE contains accurate descriptions of the Real Property, and contains accurate descriptions of the Real Property Leases and the location of the real estate leased thereunder and the type of facility located thereon. The SBC Companies will as of the Closing have a valid leasehold interest in each of the leaseholds created pursuant to the Real Property Leases. (ii) None of the Real Property or Real Property Leases is subject to any covenant or restriction preventing or limiting in any material respect the consummation of the transactions contemplated by this Agreement, except for any consent listed on COMPANY'S DISCLOSURE SCHEDULE required of the landlords under the Real Property Leases. The SBC Companies' right, title and interest in and to the Real Property will at the Closing be held by the SBC Companies, free and clear of all Liens, except those set forth in COMPANY'S DISCLOSURE SCHEDULE. The SBC Companies' right, title and interest in and to the leaseholds created pursuant to the Real Property Leases will at the Closing be held by the SBC Companies free and clear of all Liens, except those set forth in COMPANY'S DISCLOSURE SCHEDULE. (iii) The use for which the Real Property and the leaseholds existing under the Real Property Leases are zoned permits the use thereof for the business of the Station consistent with past practices. The use and occupancy of the Real Property and the leaseholds created pursuant to the Real Property Leases by the SBC Companies are in compliance in all material respects with all regulations, codes, ordinances and statutes applicable to the SBC Companies and none of the SBC Companies has received any notice asserting any material violation of sanitation laws and regulations, occupational safety and health regulations or electrical codes. (iv) There are no facts relating to any of the SBC Companies, and to the best of the knowledge of the Company, no facts relating to any other party, that would prevent the Real Property and the leaseholds existing under the Real Property Leases from being occupied and used by Citadel and/or any assignee of Citadel after the Closing Date in the same manner as immediately prior to the Closing. (v) There is not under any Real Property Lease any material default by any of the SBC Companies, or to the best of the knowledge of the Company, by any other party, or any condition that with notice or the passage of time or both would constitute such a default, and none of the SBC Companies has received, and to the best of the knowledge of the Company, no other party has received, any notice asserting the existence of any such default or condition. -16- 18 (vi) Each Real Property Lease is valid and binding and in full force and effect as to the SBC Company party to such lease, and to the best of the knowledge of the Company, as to each other party thereto, and except as disclosed on the COMPANY ASSET SCHEDULE, has not been amended or otherwise modified. (vii) The Real Property and the leaseholds existing under the Real Property Leases constitute all of the real property in which any of the SBC Companies has a fee simple interest, leasehold interest or other interest or right (whether as lessor or lessee) and which is or will prior to the Closing be used in the operation of the Station. 3.10 CONTRACTUAL AND OTHER OBLIGATIONS. Set forth in the COMPANY ASSET SCHEDULE is a description of all (a) Real Property Leases and (b) Contracts. None of the SBC Companies, nor, to the best of the knowledge of the Company, any other Person, is in material default in the performance of any covenant or condition under any Contract, and no claim of such a default has been made and no event has occurred which with the giving of notice or the lapse of time would constitute such a default under any covenant or condition under any Contract. None of the SBC Companies is a party to any Contract which would terminate or be materially adversely affected by the consummation of the transactions contemplated by this Agreement. Originals or true, correct and complete copies of all Contracts have been provided to Parent and Citadel as of the date of this Agreement. 3.11 COMPENSATION. Set forth in COMPANY'S DISCLOSURE SCHEDULE is a list of (a) all agreements between the SBC Companies and their respective employees or other Persons providing services for compensation with regard to the Station, whether individually or collectively, and (b) all employees of the SBC Companies or other Persons providing services for the SBC Companies with respect to the Station entitled to receive annual compensation in excess of $5,000 and their respective positions, job categories and salaries. The transactions contemplated by this Agreement will not result in any liability for severance pay to any such employee or other Person. None of the SBC Companies has informed any such employee or other Person that such Person will receive any increase in compensation or benefits or any ownership interest in any of the SBC Companies, Parent, Citadel, the Business or Citadel's business. Except as disclosed in COMPANY'S DISCLOSURE SCHEDULE, all current employees of the SBC Companies are "at will" employees and may be terminated by the SBC Companies at any time, without liability or obligation except the payment of normal compensation accrued up to the time of termination of employment. 3.12 EMPLOYEE BENEFIT PLANS. (a) None of the SBC Companies maintains or sponsors, or is required to make contributions to, any pension, profit-sharing, savings, bonus, incentive or deferred compensation, severance pay, medical, life insurance, welfare or other employee benefit plan which affects the employees working at the Station, except as set forth in COMPANY'S DISCLOSURE SCHEDULE. COMPANY'S DISCLOSURE SCHEDULE fully discloses all of the plans, funds, policies, programs, arrangements or understandings sponsored or maintained by any of the SBC -17- 19 Companies pursuant to which any employee of the Station (or any dependent or beneficiary of any such employee) might be or become entitled to (1) retirement benefits; (2) severance or separation from service benefits; (3) incentive, performance, stock, share appreciation or bonus awards; (4) health care benefits; (5) disability income or wage continuation benefits; (6) supplemental unemployment benefits; (7) life insurance, death or survivor's benefits; (8) accrued sick pay or vacation pay; (9) any type of benefit offered under any arrangement subject to characterization as an "employee welfare benefit plan" within the meaning of section 3(3) of ERISA; or (10) benefits of any other type offered through any arrangement that could be characterized as providing for additional compensation or fringe benefits. As to any such plan, fund, policy, program, arrangement or understanding, all of the following are true with respect to the Station: (A) all amounts due as contributions, insurance premiums and benefits to the date hereof have been fully paid by the SBC Companies; (B) all applicable material requirements of law have been observed with respect to the operation thereof, and all applicable reporting and disclosure requirements have been timely satisfied; and (C) no claim or demand has been made by any employee (or beneficiary or dependent of any employee) for benefits (other than routine claims for benefits), or by any taxing authority for taxes or penalties which has not been satisfied in full or which may be or become subject to litigation or arbitration. (b) The SBC Companies have no obligation to provide health or other welfare benefits to any of their former, retired or terminated employees, except as specifically required under Section 4980B of the Code. The SBC Companies have substantially complied with any applicable notice and continuation requirements of Section 4980B of the Code and the regulations thereunder. 3.13 LABOR RELATIONS. There have been no material violations of any federal, state or local statutes, laws, ordinances, rules, regulations, orders or directives with respect to the employment of individuals by, or the employment practices or work conditions, or the terms and conditions of employment, wages (including overtime compensation) and hours of, any of the SBC Companies. The Station is not engaged in any unfair labor practice or other unlawful employment practice and there are no charges of unfair labor practices or other employee-related complaints pending or threatened against the Station before the National Labor Relations Board, the Equal Employment Opportunity Commission, the Occupational Safety and Health Review Commission, the Department of Labor or any other Governmental Authority. There is no strike, picketing, slowdown or work stoppage or organizational attempt pending, threatened against or involving the Station. No issue with respect to union representation is pending or threatened with respect to the employees of the Station. 3.14 INCREASES IN COMPENSATION OR BENEFITS. Subsequent to December 31, 1996, there have been no increases in the compensation payable or to become payable to any of the employees of the SBC Companies, nor has any of the SBC Companies paid or provided for any awards, bonuses, stock options, loans, profit-sharing, pension, retirement or welfare plans or similar or other payments or arrangements for or on behalf of such employees in each case other than (a) pursuant to currently existing plans or arrangements set forth in COMPANY'S -18- 20 DISCLOSURE SCHEDULE or (b) as was required from time to time by governmental legislation affecting wages. The vacation policies of the SBC Companies are set forth in COMPANY'S DISCLOSURE SCHEDULE. No employee of any of the SBC Companies is entitled to vacation time in excess of two weeks (three weeks in the case of employees with 10 or more years of service) during the current vacation year (fiscal May 1 through April 30) and no such employee has any accrued vacation time with respect to any period prior to the current calendar year, except as set forth in COMPANY'S DISCLOSURE SCHEDULE. 3.15 INSURANCE. The SBC Companies maintain insurance policies covering all of their respective properties and assets and the various occurrences which may arise in connection with the operation of the Station, each of which policies is summarized in COMPANY'S DISCLOSURE SCHEDULE. Such policies maintained by the SBC Companies are in full force and effect and all installments of premiums due thereon have been paid in full. There are no notices of any pending or threatened termination or premium increases with respect to any of such policies maintained by any of the SBC Companies. There has been no casualty loss or occurrence to any of the SBC Companies which may give rise to any claim of any kind not covered by insurance, and the Company is not aware of any casualty occurrence to the Station which may give rise to any claim of any kind not covered by insurance. No third party has filed any claim against any of the SBC Companies for personal injury or property damage of a kind for which liability insurance is generally available which is not fully insured, subject only to the standard deductible. None of the SBC Companies' insurance policies will terminate or be adversely affected by the consummation of the transactions contemplated by this Agreement. 3.16 LITIGATION; DISPUTES. Except as set forth in COMPANY'S DISCLOSURE SCHEDULE, there are no claims, disputes, actions, suits, investigations or proceedings pending or threatened against or affecting any of the SBC Companies or the Station and, to the best of the knowledge of the Company, there is no basis for any such claim, dispute, action, suit, investigation or proceeding. The Company has no knowledge of any default under any such action, suit or proceeding. None of the SBC Companies is in default in respect of any judgment, order, writ, injunction or decree of any Governmental Authority with respect to the SBC Companies or the operation of the Station. 3.17 TRADE RECEIVABLES AND ACCOUNTS RECEIVABLE. All Trade Receivables and Accounts Receivable are reflected properly on the books and records of the SBC Companies, are valid receivables subject to no setoffs or counterclaims, are current and collectible, and will be collected in accordance with their terms at their recorded amounts, subject only to the reserve for bad debts provided for in the financial statements of the SBC Companies. 3.18 TRADE LIABILITIES. The Trade Liabilities do not, and as of the Closing Date will not, exceed the Trade Receivables. -19- 21 3.19 ENVIRONMENTAL. (a) Prior to the execution of this Agreement, the Company has provided to Parent and Citadel a true and correct copy of all environmental site assessments, studies, reports and communications relating to the Real Property. (b) Except as disclosed on COMPANY'S DISCLOSURE SCHEDULE, to the best of the knowledge of the Company, (i) there are no conditions, facilities, procedures or any other facts or circumstances that constitute Environmental Noncompliance on the Real Property or any of the leaseholds existing under the Real Property Leases and (ii) there is not constructed, placed, deposited, stored, disposed of, nor located on any of the Real Property or any of the leaseholds existing under the Real Property Leases, any asbestos in any form that has released or, unless disturbed, threatens to release airborne asbestos fibers in excess of applicable local, state and federal standards. (c) Except as disclosed on COMPANY'S DISCLOSURE SCHEDULE, to the best of the Company's knowledge, no structure, improvements, equipment, fixtures, activities or facilities located on the Real Property or any of the leaseholds existing under the Real Property Leases uses Hazardous Materials except those used in the ordinary course of the Business and in compliance with applicable Environmental Laws. (d) Except as specifically described on COMPANY'S DISCLOSURE SCHEDULE, there have been no releases or threatened releases of Hazardous Materials into the environment, or which otherwise contribute to Environmental Conditions arising in whole or in part from the activities of any of the SBC Companies, or to the best of the knowledge of the Company arising from any other activities, except to the extent that such releases or threatened releases do not constitute a condition of Environmental Noncompliance relating to the Real Property or any of the leaseholds existing under the Real Property Leases. (e) Except as disclosed on COMPANY'S DISCLOSURE SCHEDULE, there are no underground storage tanks, or underground piping associated with tanks, used for the management of Hazardous Materials, and no abandoned underground storage tanks at the Real Property or any of the leaseholds existing under the Real Property Leases. (f) None of the SBC Companies is subject to any Environmental Claims, and no Environmental Claims have been threatened against any of the SBC Companies nor, to the best of the knowledge of the Company, is there any basis for any such Environmental Claims. 3.20 PERMITS, COMPLIANCE WITH APPLICABLE LAW. (a) GENERAL. None of the SBC Companies is in default under any statutes, ordinances, regulations, orders, judgments and decrees of any Governmental Authority applicable to it or to the Business or the Assets as to which a default or failure to comply might result in any material adverse change in the condition, financial or otherwise, of the -20- 22 Assets or the Business. The Company has no knowledge of any basis for assertion of any violation of the foregoing or for any claim for compensation or damages or otherwise arising out of any violation of the foregoing. None of the SBC Companies has received any notification of any asserted present or past failure to comply with any of the foregoing which has not been satisfactorily responded to in the time period required thereunder. (b) PERMITS. Set forth in COMPANY'S DISCLOSURE SCHEDULE is a complete and accurate list of all of the Permits held by any of the SBC Companies and applicable to the Station. The Station is operating in accordance with the Act and its FCC Licenses and in compliance with the Act and the rules, regulations and policies of the FCC. The Permits set forth in COMPANY'S DISCLOSURE SCHEDULE are all of the Permits required for the conduct of the Business conducted by the Station. All of the Permits held by the SBC Companies are in full force and effect, and none of the SBC Companies has engaged in any activity which would cause or permit revocation or suspension of any such Permit, and to the best of the knowledge of the Company, no action or proceeding looking to or contemplating the revocation or suspension of any such Permit is pending or threatened. There are no existing defaults or events of default or events or state of facts which with notice or lapse of time or both would constitute a default by any of the SBC Companies or any other Person under any such Permit. Except for (1) the FCC Approval and (2) as set forth in COMPANY'S DISCLOSURE SCHEDULE, the consummation of the transactions contemplated hereby will in no way affect the continuation, validity or effectiveness of the Permits held by any of the SBC Companies or require the consent of any Person. Except as set forth in COMPANY'S DISCLOSURE SCHEDULE, none of the SBC Companies is required to be licensed by, and is not subject to the regulation of, any Governmental Authority by reason of the Business. 3.21 INTELLECTUAL PROPERTY. The use of the Intellectual Property in connection with the operation of the Station in a manner consistent with past practices by the SBC Companies does not infringe upon the proprietary rights of any other Person. Citadel will, upon consummation of the transactions contemplated by this Agreement, possess adequate rights, licenses and other authority to use the Intellectual Property used by the Station in the operation of the Station following the Closing in the manner now operated, without infringement or unlawful or improper use of any of the Intellectual Property. No director, officer or employee of any of the SBC Companies has any interest in any of the Intellectual Property, all of which will, as of the Closing, be free and clear of all Liens. The Company has no knowledge of any infringement by any Person upon the rights of any of the SBC Companies with respect to the Intellectual Property. None of the SBC Companies has granted any outstanding licenses or other rights to any of the call letters, copyrights, trademarks, trade names or other similar rights with regard to any of the Intellectual Property. 3.22 BOOKS AND RECORDS. The books of account of the SBC Companies fairly and accurately reflect their respective income, expenses, assets and liabilities and have been maintained in accordance with good business practices. All of such books and records will be located on the date of the Closing on the business premises of the Station. -21- 23 3.23 ACTS TO BE PERFORMED. The Company shall perform each of the covenants, acts and undertakings of the Company to be performed on or before the Closing Date pursuant to the terms of this Agreement. 3.24 RELATED PARTY OBLIGATIONS. Except as set forth on COMPANY'S DISCLOSURE SCHEDULE, no officer, director, shareholder or Affiliate of any of the SBC Companies, or any individual related by blood or marriage to any such Person, or any entity in which any such Person or individual owns any beneficial interest is a party to any agreement, contract, commitment, promissory note, loan, any other actual or proposed transaction with any of the SBC Companies or has any material interest in any material property used by any of the SBC Companies which is material to the operation of the Station. 3.25 DISCLOSURE. To the best of the Company's knowledge, no representation or warranty made under this Section 3 and none of the information furnished by the Company or the Stockholders set forth in this Agreement or in the schedules or exhibits to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements in this Agreement or in the schedules or exhibits to this Agreement not misleading. SECTION 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND CITADEL In connection with the Merger and in order to induce the Company and the Stockholders to enter into and consummate the transactions contemplated by this Agreement, Parent and Citadel jointly and severally make the following representations and warranties to the Company and the Stockholders, as of the date of this Agreement and as of the date of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times): 4.1 ORGANIZATION AND QUALIFICATION; AUTHORITY. Parent and Citadel are corporations duly organized, validly existing and in good standing under the laws of the State of Nevada and have full power and authority to own their assets and properties and to conduct their respective businesses. Parent and Citadel have full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own their respective properties and to conduct their respective businesses. Subject to the approval by the respective boards of directors of Parent and Citadel of the transactions contemplated hereby, (a) the execution and delivery of this Agreement by Parent and Citadel, the performance by Parent and Citadel of their covenants and agreements hereunder and the consummation by Parent and Citadel of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Parent and Citadel; and (b) this Agreement constitutes the valid and legally binding agreement of Parent and Citadel, enforceable against each of them in accordance with its terms. -22- 24 4.2 CAPITALIZATION. (a) CURRENT EQUITY SECURITIES OF PARENT. The authorized and outstanding Equity Securities of Parent are as set forth in Section 8.c. of the Securities Purchase and Exchange Agreement. CITADEL'S DISCLOSURE SCHEDULE lists the names of the beneficial holders of all the outstanding shares of capital stock of Parent. Such issued and outstanding shares have been duly authorized and validly issued, and are fully paid and nonassessable. None of Parent or Citadel is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its Equity Securities, except as expressly provided in the Stockholders Agreement. (b) ISSUANCE OF SERIES G PREFERRED STOCK. The issuance of the Series G Preferred Stock has been duly authorized by all necessary action on the part of Parent. The Series G Preferred Stock, when issued to the Stockholders on the Effective Date, will be validly issued, fully paid and non-assessable, and will have the rights, preferences and privileges specified in the Amended and Restated Certificate of Incorporation. No Series G Preferred Stock shall be issued to any Person other than in connection with the consummation of the transactions contemplated hereby and the transactions contemplated by the Snider Corporation Agreement. The Series G Preferred Stock, when issued, will be free and clear of all Liens and restrictions, other than Liens that might have been created or suffered solely by the holders thereof, and restrictions on transfer imposed by the Securities Act or applicable state securities laws. 4.3 NO LEGAL BAR; CONFLICTS. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Certificate of Incorporation or Bylaws of Parent or Citadel, or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of, any contract, commitment, agreement, understanding or arrangement of any kind to which Parent or Citadel is a party or by which Parent, Citadel or any of their assets is bound. Except for the FCC Approval and the consents disclosed in CITADEL'S DISCLOSURE SCHEDULE, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of Parent or Citadel in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 4.4 FINANCIAL STATEMENTS. Parent and Citadel have delivered to the Company and the Stockholders the following financial statements of Parent: (a) the audited consolidated balance sheet as of December 31, 1995 and the related consolidated statements of income and cash flows for the year then ended; (b) the audited consolidated balance sheet as of December 31, 1996 and the related consolidated statements of income and cash flows for the year then ended; and (c) the unaudited consolidated balance sheet as of March 31, 1997, and the related -23- 25 unaudited consolidated statements of income and cash flows for the three months then ended. Each of the foregoing financial statements (including in all cases the notes thereto, if any) (i) is accurate and complete in all material respects, (ii) is consistent in all material respects with the books and records of Parent and Citadel (which, in turn, are accurate and complete in all material respects), and (iii) fairly presents in all material respects the financial condition and results of operations of Parent and Citadel in accordance with GAAP (subject in the case of unaudited financial statements to the lack of footnote disclosure and changes resulting from norman year-end audit adjustments), consistently applied, as of the dates and for the periods set forth therein. 4.5 ABSENCE OF CERTAIN CHANGES. Between December 31, 1996 and the date of this Agreement, there has not been any (a) material adverse change in the condition of Citadel or Parent, financial or otherwise, or in the results of operations, assets, liabilities or business of Citadel or Parent; (b) damage or destruction, whether or not insured, affecting the business operations of Citadel or Parent in any material respect; (c) labor dispute or threatened labor dispute involving any of the employees of Citadel or Parent; (d) actual or threatened dispute pertaining to Citadel or Parent with any material provider of software, hardware or services; (e) material change in the customary methods of operations of Citadel or Parent; (f) except in the ordinary course of business or to the extent not material to the business or financial condition of Citadel or Parent, sale or transfer of any tangible or intangible asset used or useful in the operation of radio stations owned and/or operated by Citadel (the "CITADEL STATIONS"), mortgage, pledge or imposition of any Lien on any such asset, lease of real property, machinery, equipment or buildings with respect to Citadel or Parent, or modification, amendment or cancellation of any of its existing leases relating to Citadel or Parent, or cancellation of any debt or claim; or (g) material liability or obligation (contingent or otherwise) incurred under agreements or otherwise, except current liabilities entered into or incurred in the ordinary course of business consistent with past practices and except as disclosed in CITADEL'S DISCLOSURE SCHEDULE. 4.6 TAXES. Citadel and Parent have filed or caused to be filed on a timely basis all federal, state, local and other tax returns, reports and declarations required to be filed by them with respect to each Citadel Station and has paid all Taxes (including, but not limited to, income, franchise, sales, use, unemployment, withholding, social security and workers' compensation taxes and estimated income and franchise tax payments, penalties and fines) reflected as due on such returns, reports or declarations (whether or not shown on such returns, reports or declarations), or pursuant to any assessment received by them in connection with such returns, reports or declarations. All returns, reports and declarations filed by or on behalf of Citadel or Parent are true, complete and correct in all material respects. No deficiency in payment of any Taxes for any period has been asserted by any taxing authority which remains unsettled at the date hereof, no written inquiries have been received by Citadel or Parent from any taxing authority with respect to possible claims for taxes or assessments, and there is no basis for any additional claims or assessments for Taxes. Since December 31, 1996, neither Citadel nor Parent has incurred any liability for Taxes which materially affect the operation of Citadel or Parent other than in the ordinary course of business. -24- 26 4.7 CONTRACTUAL AND OTHER OBLIGATIONS WITH RESPECT TO PARENT STOCK. Set forth in CITADEL'S DISCLOSURE SCHEDULE is a description of all contracts, agreements, arrangements and other documents by and among Parent and its shareholders or any lender or other third party which includes, warrants, options, conversion rights or other obligations of Parent with respect to its authorized stock. 4.8 PERMITS. Citadel and Parent have all the permits, licenses, approvals, franchises, notices and authorizations issued by any Governmental Authorities (collectively, the "CITADEL PERMITS") necessary to conduct the operation of Citadel's business as currently conducted. Each Citadel Station is operating in accordance with the Act and its FCC licenses and is in compliance with the Act and the rules, regulations and policies of the FCC. The Citadel Permits are in full force and effect, and Citadel and Parent have not engaged in any activity which would cause or permit revocation or suspension of any such Citadel Permit, and no action or proceeding looking to or contemplating the revocation or suspension of any such Citadel Permit is pending or threatened. There are no existing defaults or events of default or events or state of facts which with notice or lapse of time or both would constitute a default by Citadel or Parent under any such Citadel Permit. There is no default or claimed or purported or alleged default or state of facts which with notice or lapse of time or both would constitute a default on the part of any party in the performance of any obligation to be performed or paid by any party under any such Citadel Permit. 4.9 ACTS TO BE PERFORMED. Parent and Citadel shall perform each of the covenants, acts and undertakings of Parent and Citadel to be performed on or before the Closing Date pursuant to the terms of this Agreement. 4.10 LITIGATION. There is no litigation, proceeding or investigation pending or, to the best knowledge of Parent and Citadel, threatened against or affecting Parent or Citadel that is reasonably likely to prevent or hinder the consummation of the transactions contemplated by this Agreement. 4.11 DISCLOSURE. To the best knowledge of Parent and Citadel, no representation or warranty made under this Section 4 and none of the information furnished by Parent or Citadel set forth in this Agreement or in the schedules or exhibits to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements in this Agreement or in the schedules or exhibits to this Agreement not misleading. SECTION 5 AFFIRMATIVE COVENANTS OF THE COMPANY The Company covenants and agrees with Parent and Citadel to: -25- 27 5.1 COMPLIANCE WITH LAW. Comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated hereby. 5.2 PAYMENT OF OBLIGATIONS. Fully discharge all Obligations of the Company on a timely basis so that the Obligations of the Company existing as of the Closing Date shall consist solely of Accounts Payable, Trade Liabilities and the Debt Payoff Amount. 5.3 ACCESS. Afford Parent and Citadel and their authorized representatives, upon reasonable notice, reasonable access during normal business hours to the Station and the Station's employees, and permit Parent and Citadel and their authorized representatives to examine all operations, equipment, properties and other assets, logs, books, relevant records, contracts and documents pertinent to the Station; provided, however, that in each instance mutually satisfactory arrangements shall be made in advance in order to avoid interruption and to minimize interference with the normal business and operations of the Station. 5.4 PRESERVATION OF ORGANIZATION. Exercise all reasonable efforts to preserve the business organization of the Station intact, and to preserve the present relationships of the Station with employees, suppliers, advertisers and customers and others having business relationships with the Station; provided, however, that nothing contained in this Agreement shall require the Company to expend money in fulfillment of its obligations set forth in this Section 5.4 other than those expenditures that the SBC Companies would have made in the ordinary course of the business of the Station and consistent with past practices. 5.5 BOOKS AND RECORDS. Maintain the books and records of the SBC Companies in accordance with good business practices, on a basis consistent with past practices, and promptly make available to Parent and Citadel the books, records, tax returns, leases, contracts and other documents or agreements material to the Station as Parent, Citadel or their respective counsel, accountants or other authorized representatives may from time to time reasonably request. 5.6 EMPLOYEES. Pay as and when the same shall become due and payable any amounts owed by any of the SBC Companies to its employees who have performed services up to the time of Closing, whether fixed or accrued, for wages, vacation pay, sick pay, severance pay, employee benefits, damages and otherwise. 5.7 COMPLIANCE WITH FCC MATTERS. Comply with the FCC Licenses applicable to the Station and with the provisions of the Act, the rules, regulations and policies of the FCC, and with all other laws, ordinances, regulations, rules and orders of any Governmental Authority applicable to any of the SBC Companies or to the Station. 5.8 TAXES. File all federal, state and municipal tax returns, reports and declarations required to be filed by the SBC Companies prior to the Closing, and satisfy all Taxes related thereto which are due on or before the Closing Date. -26- 28 5.9 COMPANY SUPPLEMENTAL FINANCIAL STATEMENTS. Provide Parent and Citadel with copies of the monthly unaudited income statements and balance sheets applicable to the Station prepared by the Company from the date hereof until Closing in the ordinary course of business (collectively, the "COMPANY SUPPLEMENTAL FINANCIAL STATEMENTS"). The Company shall provide such Company Supplemental Financial Statements to Parent and Citadel promptly upon such Company Supplemental Financial Statements becoming available to it. The Company Supplemental Financial Statements shall be subject to the representations and warranties as set forth in Section 3.5. 5.10 FURTHER INFORMATION. Furnish to Parent and Citadel prior to the Closing such financial (including tax), legal and other information with respect to the SBC Companies and the Station as Parent, Citadel or their representatives may from time to time reasonably request. 5.11 NOTICE. Promptly notify Parent and Citadel in writing upon the occurrence or the nonoccurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty made by the Company in this Agreement. 5.12 CONSENTS. Exercise all reasonable efforts (not involving the payment by the Company of any money to any party to any Contract) to obtain, prior to the Closing, the consent and approval (in a form reasonably approved by Parent) of any third parties whose consent or approval is necessary in connection with the consummation of the transactions contemplated hereby, with respect to the Contracts set forth on COMPANY'S DISCLOSURE SCHEDULE and requiring such consent. If any such consent or approval is not obtained, the Company will use commercially reasonable efforts (not involving the payment of money to any Person) to secure an arrangement satisfactory to Citadel intended to provide for Citadel following the Closing the benefits under each Contract for which such consent or approval is not obtained; provided, however, that Citadel shall have the right to terminate this Agreement as a result of any failure by the Company to obtain any such consent or approval set forth on COMPANY'S DISCLOSURE SCHEDULE, if alternative arrangements are not satisfactory to Citadel. The Company shall also execute a consent, in a form provided by Citadel, allowing Parent and Citadel to assign all of their rights under this Agreement and any related documents to one or more of Parent's and Citadel's lenders upon default by Parent or Citadel under the relevant loan documents. Nothing in this Agreement will constitute a transfer or an attempted transfer of any Contract which by its terms or under applicable law or governmental rules or regulations requires the consent or approval of a third party (including, without limitation, a Governmental Authority) unless such consent or approval is obtained. 5.13 TRADE SCHEDULE. Deliver to Parent and Citadel at the Closing an accurate schedule of Trade Liabilities and Trade Receivables existing as of the Closing. The Company -27- 29 shall exercise reasonable efforts to minimize the amount of additional Trade Liabilities incurred after execution of this Agreement. 5.14 IMPACT OF LOCAL MARKETING AGREEMENT. From and after the effective date of the Local Marketing Agreement, the covenants of the Company relating to the operation of the Station and the Assets from and after such date shall be conditioned upon Citadel's performance, in all material respects, of its obligations under the Local Marketing Agreement. SECTION 6 NEGATIVE COVENANTS OF THE COMPANY From and after the date of this Agreement and until the Closing, the Company shall not take, or cause or permit to be taken, any of the following actions without the prior approval of Parent and Citadel, which may not be unreasonably withheld: 6.1 SALES, TRANSFERS AND LIENS. Make any sale, transfer, assignment, conveyance, mortgage, hypothecation, encumbrance or other placement of any Lien on any of the Assets, except in the ordinary course of business and which do not materially interfere with the operations of the Station, and which, in the case of a sale, transfer or assignment, is replaced with an asset of equal or greater value, and, in the case of a conveyance, mortgage, hypothecation, encumbrance or other Lien, is released at or prior to the Closing. 6.2 CONTRACTS. Amend, terminate or renew any of the Contracts (including any renewal or termination resulting from the failure to provide, after the date of this Agreement, timely notice of nonrenewal or termination as required by the terms of any of the Contracts). 6.3 BREACHES, DEFAULTS. Do any act or omit to do any act, or permit any act or omission to occur, that will cause a breach of any contract, commitment or obligation of it in any respect that would have a material adverse effect on the Assets or the business operations of the Station as presently conducted. 6.4 OBLIGATIONS. Incur any Obligations (including but not limited to any additional Indebtedness for Borrowed Money) except in the ordinary course of business in a manner consistent with past practices. 6.5 SALARY INCREASES. Increase any salary, other payments, disbursement or distributions in any manner or form to any employees of the SBC Companies except (a) in the ordinary course of business consistent with past practices or (b) in accordance with the existing terms of contracts entered into prior to the date of this Agreement. -28- 30 6.6 NON-SOLICITATION. Directly or indirectly solicit or negotiate with any Person (other than a party hereto) or accept any proposal to acquire any of the SBC Companies or the Station in whole or in part. SECTION 7 COVENANTS OF THE STOCKHOLDERS The Stockholders jointly and severally covenant and agree with Parent and Citadel to: 7.1 COMPLIANCE WITH LAW. Comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated hereby. 7.2 NOTICE. Promptly notify Parent and Citadel in writing upon the occurrence or the nonoccurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty made by the Stockholders in this Agreement. 7.3 NON-SOLICITATION. Directly or indirectly solicit or negotiate with any Person (other than a party hereto) or accept any proposal to acquire any of the SBC Companies or the Station in whole or in part. Prior to the Closing, the Stockholders shall not sell, assign, pledge or otherwise transfer any of the Company Common Stock owned by them. 7.4 COMMERCIALLY REASONABLE EFFORTS. The Stockholders shall use commercially reasonable efforts to cause the Company to satisfy all of its obligations hereunder. SECTION 8 COVENANTS OF PARENT AND CITADEL Parent and Citadel jointly and severally covenant and agree with the Company and the Stockholders to: 8.1 COMPLIANCE WITH LAW. Comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated hereby. 8.2 NOTICE. Promptly notify the Company and the Stockholders in writing upon the occurrence or the nonoccurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty made by Parent or Citadel in this Agreement. -29- 31 8.3 PERFORMANCE OF LOCAL MARKETING AGREEMENT. From and after the effective date of the Local Marketing Agreement, Citadel shall perform and discharge, in all material respects, its obligations in connection with the operation of the Station and the Assets from and after such date in accordance with the terms of the Local Marketing Agreement. 8.4 BOOKS AND RECORDS. Maintain the books and records of Parent and Citadel in accordance with good business practices, on a basis consistent with past practices, and promptly make available to the Company the books, records, tax returns, leases, contracts and other documents or agreements material to the Citadel Stations as the Company or its counsel, accountants or other authorized representatives may from time to time reasonably request. 8.5 COMPLIANCE WITH FCC MATTERS. Comply with the FCC licenses applicable to the Citadel Stations and with the provisions of the Act, the rules, regulations and policies of the FCC, and with all other laws, ordinances, regulations, rules and orders of any Governmental Authority applicable to Parent, Citadel or to any Citadel Station. 8.6 TAXES. File all federal, state and municipal tax returns, reports and declarations required to be filed by Parent and/or Citadel prior to the Closing, and satisfy all Taxes related thereto which are due on or before the Closing Date. 8.7 CITADEL SUPPLEMENTAL FINANCIAL STATEMENTS. Provide the Company with copies of the monthly unaudited income statements and balance sheets applicable to the Citadel Stations prepared by Parent from the date hereof until Closing in the ordinary course of business (collectively, the "CITADEL SUPPLEMENTAL FINANCIAL STATEMENTS"). Parent and Citadel shall provide such Citadel Supplemental Financial Statements to the Company promptly upon such Citadel Supplemental Financial Statements becoming available to them. The Citadel Supplemental Financial Statements shall be subject to the representations and warranties as set forth in Section 4.4. 8.8 FURTHER INFORMATION. Furnish to the Company prior to the Closing such financial (including tax), legal and other information with respect to Parent, Citadel and the Citadel Stations as the Company or its representatives may from time to time reasonably request. SECTION 9 ADDITIONAL COVENANTS OF THE PARTIES 9.1 APPLICATION FOR TRANSFER OF CONTROL. As promptly as practicable after the date of this Agreement, and in no event later than 10 days after the execution of this Agreement, the Company and Citadel shall file an application (the "FCC APPLICATION") with the FCC to approve the transfer of control of the Station from the Company to Citadel (the "FCC APPROVAL"). Citadel shall have primary responsibility for filing the FCC Application. The parties agree that they shall jointly prosecute the FCC Application (and shall cooperate with -30- 32 each other in the timely prosecution thereof), in good faith and with due diligence, and within the time allowed therefor by the rules and regulations of the FCC. The Company and Citadel shall each take all necessary actions on its part to obtain the FCC Approval. Citadel shall advance the filing fee for the FCC Application, and the Stockholders shall reimburse Citadel for one-half of such filing fee at the Closing. All other costs and expenses incurred by each party in connection with the filing and prosecution of the FCC Application shall be paid by the party incurring the cost or expense. 9.2 LOCAL MARKETING AGREEMENT. Concurrently with the execution of this Agreement, Citadel and the Company shall execute and deliver a Local Marketing Agreement for the Station in the form of EXHIBIT H attached hereto (the "LOCAL MARKETING AGREEMENT"). 9.3 BROKERAGE. Each of the parties hereto represents and warrants to each other that, except for Broker, no Person has provided services as a broker, agent or finder in connection with the transactions contemplated by this Agreement. As between the parties hereto, the Stockholders are fully responsible for the payment of any fee, commission, claim or expense of Broker, and the Stockholders shall indemnify and hold harmless the SBC Companies, Parent and Citadel for any and all fees, commissions, claims or expenses, including attorneys' fees asserted by Broker. Each of the parties hereto shall each indemnify and hold harmless the other parties hereto for any and all claims or expenses, including attorneys' fees, asserted by any Person other than Broker purporting to act on behalf of the respective indemnitor as a broker, agent or finder in connection with the transactions contemplated by this Agreement. 9.4 RISK OF LOSS. If any loss or damage to any of the Assets occurs prior to the Closing (i) which has a material adverse effect on the Station and (ii) such loss or damage is not susceptible of repair, replacement or restoration with sufficient, collectible insurance proceeds available for such purposes or by the Stockholders at their sole cost and expense to substantially the same condition as existed before such loss or damage, then the parties shall adjust the Merger Consideration to reflect the diminution in value of the Station attributable to the impairment of such assets. 9.5 ACTIONS WITH FCC. In the event any investigation, order to show cause, notice of violation, notice of apparent liability or a forfeiture, material complaint, petition to deny or informal objection is instituted or filed against any party hereto (whether in connection with the proceedings to approve the FCC Application or otherwise), such party shall promptly notify the other parties hereto in writing of such occurrence and shall thereafter immediately take all reasonable measures to contest the same in good faith and seek the removal or favorable resolution of such action, order, notice or complaint. 9.6 COOPERATION. During the seven-year period immediately following the Closing, Citadel shall cooperate with the Stockholders in providing the Stockholders all information reasonably requested and permitting the Stockholders access to all records relating to the period of ownership of the Station prior to the Closing. The cost and expense in providing or permitting access to information hereunder shall be borne by the Stockholders. The -31- 33 Stockholders, as a condition to being provided with access to information hereunder, shall, at the request of Citadel, execute a confidentiality agreement in form and substance acceptable to Citadel in its reasonable discretion. Notwithstanding the foregoing, Citadel may discard any such records during such seven-year period if (i) Citadel notifies the Stockholders of Citadel's intent to discard such records and (ii) the Stockholders do not, within 10 days after receipt of such notice, retrieve such records from Citadel's premises. 9.7 CORNERSTONE MERGER. If requested by Citadel, the Company shall, at or prior to Closing, merge Cornerstone with and into the Company, with the Company surviving such merger (the "CORNERSTONE MERGER"). The Cornerstone Merger shall be effected (if requested by Citadel) in accordance with all applicable laws and regulations and pursuant to documents in form and substance satisfactory to Citadel in its reasonable discretion. SECTION 10 THE CLOSING 10.1 CLOSING DATE. The Closing shall occur on a date mutually selected by the Company and Citadel which is within 10 business days following the date on which the FCC Approval has become a Final Order. The Closing shall begin at 10:00 a.m., local time, on the date of the Closing (the "CLOSING DATE") at the offices of Friday, Eldredge & Clark, 2000 First Commercial Building, 400 West Capitol Avenue, Little Rock, Arkansas 72201, counsel for the Company and the Stockholders, or at such other time and place as the parties may agree in writing. 10.2 ACTIONS TO BE TAKEN IMMEDIATELY PRIOR TO THE CLOSING. The following actions shall be taken immediately prior to the Closing, and as a condition precedent thereto: (a) AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. Parent shall cause the Amended and Restated Certificate of Incorporation to be filed with the Secretary of State of the State of Nevada. (b) TERMINATION OF THE COMPANY SHAREHOLDERS AGREEMENT. The parties to the Company Shareholders Agreement shall cause it to be terminated. (c) DIVIDEND OF EXCLUDED ASSETS. The Company shall distribute to the Stockholders as a dividend the Excluded Assets, if any. 10.3 ACTIONS TO BE TAKEN AT THE CLOSING. The following actions shall be taken at the Closing: (a) ARTICLES AND PLAN OF MERGER. The Articles of Merger, and if required under applicable law, the Plan of Merger, shall be filed with the appropriate authorities in the States of Nevada and Arkansas. -32- 34 (b) DELIVERY OF MERGER CONSIDERATION. Citadel shall deliver the Series G Preferred Stock and cash portion of the Merger Consideration to the holders of the Company Common Stock in accordance with Section 2.4. (c) DELIVERY OF DOCUMENTS. Each of the parties shall deliver to the other parties all agreements, certificates and other documents required to be delivered by it pursuant to the terms of this Agreement or as a condition precedent to the other parties' obligations under this Agreement, including but not limited to the following: (i) The parties shall deliver to each other fully executed originals of the Amendment to Securities Purchase Agreement, the Amendment to Registration Rights Agreement, the Amendment to Stockholders Agreement and the Amendment to Voting Agreement. (ii) Citadel and each of the Stockholders shall execute and deliver an Agreement Not to Compete. (d) REPAYMENT OF DEBT PAYOFF AMOUNT. Immediately after receipt of the Merger Consideration, the Stockholders shall take all action necessary to extinguish the Indebtedness for Borrowed Money represented by the Debt Payoff Amount. SECTION 11 CONDITIONS TO THE COMPANY'S AND THE STOCKHOLDERS' OBLIGATION TO CLOSE The obligation of the Company and the Stockholders to consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, any or all of which may be waived by the Company and the Stockholders in their sole discretion (other than those set forth in Section 11.7): 11.1 OPINION OF PARENT'S AND CITADEL'S COUNSEL. The Company and the Stockholders shall have received an opinion of counsel for Parent and Citadel, dated the date of the Closing, in form and substance satisfactory to the Company and the Stockholders, to the effect that: (a) Parent and Citadel are corporations duly organized, validly existing and in good standing under the laws of the State of Nevada. (b) Citadel is duly qualified and in good standing in the State of Arkansas. (c) Parent and Citadel have full corporate power and authority to own their assets and properties and to conduct their business and have all necessary approvals, permits, -33- 35 licenses and authorizations to own their properties and to conduct their business in the manner and in the locations presently owned and conducted. (d) This Agreement, together with all other documents and instruments required to be executed or delivered by Parent or Citadel in connection with the transactions contemplated hereby, each has been duly authorized, executed and delivered by Parent and Citadel and constitutes a valid and legally binding obligation of Parent and Citadel, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (e) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Certificate of Incorporation or Bylaws of Parent or Citadel or, to the knowledge of such counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel after due investigation, violates or will violate, or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under, or results or will result in the termination of or the creation or imposition of any Lien pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which Parent or Citadel is a party or by which Parent or Citadel or any of their assets is bound and which is known to such counsel, all as set forth on CITADEL'S DISCLOSURE SCHEDULE. (f) The authorized and outstanding Equity Securities of Parent are as set forth in Section 8.c. of the Securities Purchase and Exchange Agreement. CITADEL'S DISCLOSURE SCHEDULE lists the names of the beneficial holders of all the outstanding shares of Parent. Such issued and outstanding shares have been duly authorized and validly issued, and are fully paid and nonassessable. To the knowledge of such counsel, neither Parent nor Citadel is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of Parent's Equity Securities, except as expressly provided in the Stockholders Agreement. The issuance of the Series G Preferred Stock has been duly authorized by all necessary action on the part of Parent. The Series G Preferred Stock, when issued to the holders of the Company Common Stock on the Effective Date, will be validly issued, fully paid and non-assessable, and will have the rights, preferences, and privileges specified in the Amended and Restated Certificate of Incorporation. The Series G Preferred Stock, when issued, will be free and clear of all Liens and restrictions, other than Liens that might have been created or suffered solely by the holders thereof, and restrictions on transfer imposed by the Securities Act or applicable state securities laws. Nothing contained in this Section 11.1 shall require an opinion by such counsel with respect to FCC matters. 11.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Parent and Citadel contained herein shall be true and correct in all material respects at and as of the -34- 36 Closing with the same effect as though all such representations and warranties were made at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified except for such inaccuracies as do not, individually or in the aggregate, have a material effect on the ability of Parent or Citadel to consummate the transactions contemplated by this Agreement) and Parent and Citadel shall have delivered to the Company and the Stockholders a certificate to that effect, dated the date of the Closing, signed by the President of Parent and Citadel. 11.3 NO LITIGATION. No injunction relating to any action, suit or proceeding against Parent, Citadel, the Company or the Stockholders relating to the consummation of any of the transactions contemplated by this Agreement or any action by any Governmental Authority shall have been issued. 11.4 OTHER CERTIFICATES. The Company and the Stockholders shall have received certificates as to the good standing of Parent in the State of Nevada, and of Citadel in the States of Nevada and Arkansas, each as of a date not more than 20 days before the Closing, and such other certificates, instruments and other documents, in form and substance satisfactory to the Company and the Stockholders, as the Company and the Stockholders shall have reasonably requested in connection with the transactions contemplated hereby. 11.5 CORPORATE ACTION. All corporate action necessary to authorize the execution, delivery and performance by Parent and Citadel of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by Parent and Citadel, and Parent and Citadel shall have delivered to the Company and the Stockholders certified copies of the resolutions of Parent's and Citadel's board of directors authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of their officers and employees in carrying out the terms and provisions of this Agreement. 11.6 ACTS TO BE PERFORMED. Each of the covenants, acts and undertakings of Parent and Citadel to be performed on or before the Closing Date pursuant to the terms hereof shall have been duly performed. 11.7 FCC APPROVAL. The FCC Approval shall have been obtained. 11.8 OTHER TRANSACTIONS. The transactions contemplated by the Real Estate Purchase Agreement, the CDB Broadcasting Agreement and the Snider Corporation Agreement shall be consummated on the Closing Date. SECTION 12 CONDITIONS TO PARENT'S AND CITADEL'S OBLIGATION TO CLOSE -35- 37 The obligation of Parent and Citadel to consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, any or all of which may be waived by Parent and Citadel in their sole discretion (other than those set forth in Section 12.9): 12.1 OPINION OF THE COMPANY'S AND THE STOCKHOLDERS' COUNSEL. Parent and Citadel shall have received an opinion of counsel for the Company and the Stockholders, dated the date of the Closing, in form and substance satisfactory to Parent and Citadel, to the effect that: (a) Each of the SBC Companies is a corporation duly organized, validly existing and in good standing under the laws of the State of Arkansas. (b) Each of the SBC Companies has full power and authority to own its assets and properties and to conduct the Business and has all necessary approvals, permits, licenses and authorizations to own its properties and to conduct the Business in the manner and in the locations presently owned and conducted. (c) This Agreement, together with all other documents and instruments required to be executed or delivered by the Company and the Stockholders in connection with the transactions contemplated by this Agreement, each has been duly authorized, executed and delivered by the Company and the Stockholders and constitutes a valid and legally binding obligation of the Company and the Stockholders, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (d) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of the Company or, to the knowledge of such counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel after due investigation, violates or will violate or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of, any contract, commitment, agreement, understanding or arrangement of any kind to which any of the SBC Companies or any of the Stockholders is a party or by which any of the SBC Companies, any of the Stockholders or any of the Assets is bound and which is known to such counsel, all as set forth on COMPANY'S DISCLOSURE SCHEDULE. Except for (1) the FCC Approval and (2) the consents disclosed on COMPANY'S DISCLOSURE SCHEDULE, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of the SBC Companies or the Stockholders, in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. -36- 38 (e) To the knowledge of such counsel, except as disclosed on COMPANY'S DISCLOSURE SCHEDULE, there are no claims, disputes, actions, suits or proceedings pending or threatened against the SBC Companies or any of the Assets. (f) Prior to the Merger, the authorized capital stock of the Company consists of 20,000 shares of Company Common Stock, of which 85 shares are issued and outstanding. To the knowledge of such counsel, COMPANY'S DISCLOSURE SCHEDULE lists the names of the beneficial holders of all the outstanding shares of Company Common Stock, and the number of shares held by each of them. The issued and outstanding shares of Company Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable. The Company does not have outstanding any stock or securities convertible or exchangeable for any stock or securities. (g) The authorized capital stock of Cornerstone consists of 1,000 shares of Common Stock, no par value per share, of which 100 shares are issued and outstanding. To the knowledge of such counsel, the Company owns, of record and beneficially, all of the issued and outstanding shares of Common Stock of Cornerstone. The issued and outstanding shares of Common Stock of Cornerstone have been duly authorized and validly issued, and are fully paid and nonassessable. Cornerstone does not have outstanding any stock or securities convertible or exchangeable for any stock or securities. (h) The authorized capital stock of License Sub consists of 1,000 shares of Common Stock, no par value per share, of which 100 shares are issued and outstanding. To the knowledge of such counsel, Cornerstone owns, of record and beneficially, all of the issued and outstanding shares of Common Stock of License Sub. The issued and outstanding shares of Common Stock of License Sub have been duly authorized and validly issued, and are fully paid and nonassessable. License Sub does not have outstanding any stock or securities convertible or exchangeable for any stock or securities. Nothing contained in this Section 12.1 shall require an opinion of such counsel with respect to FCC matters. 12.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and warranties of the Company contained herein shall be true and correct in all material respects at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified except for such inaccuracies as do not, individually or in the aggregate, have a material effect on the Station, the Company's or any Stockholder's ability to consummate the transactions contemplated by this Agreement, or the Business as a whole) with the same effect as though all such representations and warranties were made at and as of the Closing, and the Company and the Stockholders shall have complied with all of their respective covenants contained herein; and the Company and the Stockholders shall have delivered to Parent and Citadel a certificate to that effect, dated the date of the Closing, signed by the President of the Company and by the Stockholders. -37- 39 12.3 NO LITIGATION. No injunction relating to any action, suit or proceeding against the SBC Companies, the Stockholders, Parent or Citadel relating to the consummation of any of the transactions contemplated by this Agreement shall have been issued. 12.4 OTHER CERTIFICATES. Parent and Citadel shall have received a certificate as to the good standing of each of the SBC Companies as a corporation in Arkansas as of a date not more than 20 days before the Closing, and such other certificates, instruments and other documents customary for transactions of the nature provided for in this Agreement, in form and substance reasonably satisfactory to Parent and Citadel, as Parent and Citadel shall have reasonably requested in connection with the transactions contemplated by this Agreement. 12.5 CORPORATE ACTION. All corporate action necessary to authorize the execution, delivery and performance by the Company of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by the Company, and the Company shall have delivered to Parent and Citadel certified copies of the resolutions of the Company's board of directors and of the Stockholders authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of its officers and employees in carrying out the terms and provisions of this Agreement. 12.6 ACTS TO PERFORMED. Each of the covenants, acts and undertakings of the Company and the Stockholders to be performed on or before the Closing Date pursuant to the terms of this Agreement shall have been duly performed. 12.7 UCC SEARCHES. The Company and the Stockholders shall have delivered to Parent and Citadel Uniform Commercial Code judgment and lien searches from the appropriate county and state agencies showing all Liens on the Assets, which searches shall be conducted not more than 30 days prior to the Closing. The Company and the Stockholders may cause such lien searches to be prepared by a third party, in which case the Company and the Stockholders shall not be responsible for any inaccuracies in such lien searches unless the Company and the Stockholders have actual knowledge of their inaccuracy. Notwithstanding the foregoing, the Company and the Stockholders shall remain responsible for satisfying any Lien on the Assets even if such searches are inaccurate. 12.8 FILINGS, CONSENTS, APPROVALS AND ESTOPPEL CERTIFICATES. All filings, consents, approvals and estoppel certificates required by or reasonably requested by Parent and Citadel pursuant to this Agreement, or necessary to consummate the transactions contemplated by this Agreement, shall have been obtained. 12.9 FCC APPROVAL. The FCC Approval shall have been obtained. 12.10 OTHER TRANSACTIONS. The transactions contemplated by the Real Estate Purchase Agreement, the CDB Broadcasting Agreement and the Snider Corporation Agreement shall be consummated on the Closing Date. -38- 40 12.11 DISSENTING SHARES. There shall not be any Dissenting Shares. SECTION 13 INDEMNIFICATION 13.1 INDEMNIFICATION BY THE COMPANY AND THE STOCKHOLDERS. Subject to the limitations and procedures set forth in this Section 13, the Company and the Stockholders shall jointly and severally indemnify and hold harmless Parent and Citadel from and against all losses, claims, demands, damages, liabilities, obligations, costs and/or expenses, including, without limitation, reasonable fees and disbursements of counsel (hereinafter referred to collectively as "DAMAGES"), which are sustained or incurred by Parent or Citadel, to the extent that such Damages are sustained or incurred by reason of (i) the breach of any of the obligations or covenants of the Company or the Stockholders in this Agreement or (ii) the breach of any of the representations or warranties made by the Company or the Stockholders in this Agreement. The foregoing notwithstanding, from and after the Closing Date, the Stockholders shall be solely responsible for any indemnification due under this Section 13.1 and shall have no right to seek contribution or indemnification from the Company. 13.2 INDEMNIFICATION BY PARENT AND CITADEL. Subject to the limitations and procedures set forth in this Section 13, Parent and Citadel shall jointly and severally indemnify and hold harmless the Stockholders from and against any and all Damages sustained or incurred by Stockholders, to the extent such Damages are sustained or incurred by the Stockholders by reason of (i) the breach of any of the obligations or covenants of Parent or Citadel in this Agreement or (ii) the breach of any of the representations or warranties made by Parent or Citadel in this Agreement. 13.3 PROCEDURE FOR INDEMNIFICATION. In the event that any party to this Agreement shall incur any Damages in respect of which indemnity may be sought by such party pursuant to this Section 13 or any other provision of this Agreement, the party indemnified hereunder (the "INDEMNITEE") shall notify the party providing indemnification (the "INDEMNITOR") promptly. In the case of third party claims, such notice shall in any event be given within 10 days of the filing or assertion of any claim against the Indemnitee stating the nature and basis of such claim; provided, however, that any delay or failure to notify any Indemnitor of any claim shall not relieve it from any liability except to the extent that the Indemnitor demonstrates that the defense of such action has been materially prejudiced by such delay or failure to notify. In the case of third party claims, the Indemnitor shall, within 10 days of receipt of notice of such claim, notify the Indemnitee of its intention to assume the defense of such claim. If the Indemnitor assumes the defense of the claim, the Indemnitor shall have the right and obligation (a) to conduct any proceedings or negotiations in connection therewith and necessary or appropriate to defend the Indemnitee, (b) to take all other required steps or proceedings to settle or defend any such claims, and (c) to employ counsel to contest any such claim or liability in the name of the Indemnitee or otherwise. If the Indemnitor shall not assume the -39- 41 defense of any such claim or litigation resulting therefrom, the Indemnitee may defend against any such claim or litigation in such manner as it may deem appropriate and the Indemnitee may settle such claim or litigation on such terms as it may deem appropriate, and assert against the Indemnitor any rights or claims to which the Indemnitee is entitled. Payment of Damages shall be made within 10 days of a final determination of a claim. A final determination of a disputed claim shall be (a) a judgment of any court determining the validity of disputed claim, if no appeal is pending from such judgment or if the time to appeal therefrom has elapsed, (b) an award of any arbitration determining the validity of such disputed claim, if there is not pending any motion to set aside such award or if the time within to move to set such award aside has elapsed, (c) a written termination of the dispute with respect to such claim signed by all of the parties thereto or their attorneys, (d) a written acknowledgment of the Indemnitor that it no longer disputes the validity of such claim, or (e) such other evidence of final determination of a disputed claim as shall be acceptable to the parties. 13.4 SURVIVAL. (a) COMPANY AND STOCKHOLDERS. Each of the representations and warranties made by the Company and the Stockholders in this Agreement shall survive for a period of 24 months after the Closing Date, notwithstanding any investigation at any time made by or on behalf of Parent or Citadel, and upon the expiration of such 24-month period such representations and warranties shall expire except as follows: (i) the representations and warranties of the Company contained in Sections 3.7 and 3.12 shall expire at the time the period of limitations expires for the assessment by the taxing authority of additional Taxes with respect to which the representations and warranties relate; (ii) the representations and warranties of the Company contained in Sections 3.19 and 3.20 shall expire at the time the latest period of limitations expires for the enforcement by an applicable Governmental Authority of any remedy with respect to which the particular representation or warranty relates; and (iii) the representations and warranties of the Company contained in Sections 3.1, 3.3, 3.4 and 3.9(a) shall not expire but shall continue indefinitely. No claim for the recovery of Damages may be asserted by Parent or Citadel against the Company, the Stockholders or their successors in interest after such representations and warranties shall thus expire; provided, however, that claims for Damages first asserted in writing within the applicable period shall not thereafter be barred. (b) PARENT AND CITADEL. Each of the representations and warranties made by Parent and Citadel in this Agreement shall survive for a period of 24 months after the Closing Date, notwithstanding any investigation at any time made by or on behalf of the Company or the Stockholders, and upon the expiration of such 24-month period such representations and warranties shall expire except as follows: (i) the representations and warranties of Parent and Citadel contained in Section 4.6 shall expire at the time the period of limitations expires for the assessment by the taxing authority of additional Taxes with respect to which the representations and warranties relate; (ii) the representations and warranties of Parent and -40- 42 Citadel contained in Section 4.8 shall expire at the time the latest period of limitations expires for the enforcement by an applicable Governmental Authority of any remedy with respect to which the particular representation or warranty relates; and (iii) the representations and warranties of Parent and Citadel contained in Sections 4.1, 4.2 and 4.3 shall not expire but shall continue indefinitely. No claim for the recovery of Damages may be asserted by the Company or the Stockholders against Parent, Citadel or their successors in interest after such representations and warranties shall thus expire; provided, however, that claims for Damages first asserted in writing within the applicable period shall not thereafter be barred. 13.5 LIMITATION OF COMPANY'S AND STOCKHOLDERS' LIABILITY. (a) THRESHOLD. Parent and Citadel shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.1 (other than Damages arising by reason of a breach of the representations and warranties made in Sections 3.1, 3.3, 3.4, 3.7 and 3.9(a)) until the aggregate of all such Damages suffered by Parent and Citadel exceeds $25,000 (the "THRESHOLD"); provided, however, that once such aggregate exceeds the Threshold, Parent and Citadel may recover all such Damages suffered since the Closing Date. (b) CEILING. Parent and Citadel shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.1 (other than Damages arising by reason of a breach of the representations and warranties made in Sections 3.7, 3.9(a), 3.12, 3.19 and 3.20 ("CITADEL'S CAP EXEMPT DAMAGES")) in excess of the Merger Consideration. No maximum limitation shall apply, however, to the right of Parent and Citadel to recover Citadel's Cap Exempt Damages or Damages pursuant to clause (i) of Section 13.1. (c) EXCEPTIONS. Paragraphs (a) and (b) above shall not apply with respect to any claim for Damages relating to any intentional or fraudulent breach of a representation or warranty by the Company or the Stockholders, nor shall there be any survival limitation for any such claim. 13.6 LIMITATION OF PARENT'S AND CITADEL'S LIABILITY. (a) THRESHOLD. The Company and the Stockholders shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.2 (other than as a result of a breach of the representations and warranties made in Sections 4.1, 4.2, 4.3 and 4.6) until the aggregate of all such Damages suffered by the Company and the Stockholders exceeds the Threshold; provided, however, that once such aggregate exceeds the Threshold, the Company and the Stockholders may recover all such Damages suffered since the Closing Date. (b) CEILING. The Company and the Stockholders shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.2 (other than Damages arising by reason of a breach of the representations and warranties made in Sections 4.2, 4.6 and 4.8 ("STOCKHOLDERS' CAP EXEMPT DAMAGES")) in excess of the Merger Consideration. No maximum -41- 43 limitation shall apply, however, to the right of the Company and the Stockholders to recover Stockholders' Cap Exempt Damages or Damages pursuant to clause (i) of Section 13.2. (c) EXCEPTIONS. Paragraphs (a) and (b) above shall not apply with respect to any claim for Damages relating to any intentional or fraudulent breach of a representation or warranty by Parent or Citadel, nor shall there be any survival limitation for any such claim. SECTION 14 TERMINATION OF AGREEMENT; ADDITIONAL REMEDIES 14.1 MANNER. This Agreement and the transactions contemplated hereby may be terminated prior to completion of the Closing: (a) by mutual written consent of Citadel and the Company; (b) by either Citadel or the Company upon providing written notice to the other party at any time after December 31, 1997 if the FCC Approval has not been granted by the FCC, but only if the party providing such notice is not then in material breach of this Agreement; (c) by Citadel, upon providing written notice to the Company, if as of the time set for Closing any of the conditions in Section 12 of this Agreement (except Section 12.9) has not been satisfied or waived by Citadel in writing, provided Citadel is not then in material breach of this Agreement; (d) by the Company, upon providing written notice to Citadel, if as of the time set for Closing any of the conditions in Section 11 of this Agreement (except Section 11.7) has not been satisfied or waived by the Company in writing, provided the Company is not then in material breach of this Agreement; (e) by the Company, upon providing written notice to Citadel, if Citadel fails to consummate the transactions contemplated hereunder after all conditions in Section 12 of the Agreement have been satisfied, provided the Company is not then in material breach of this Agreement; (f) by Citadel, upon providing written notice to the Company, if the Company fails to consummate the transactions contemplated hereunder after all conditions in Section 11 of this Agreement have been satisfied, provided Citadel is not then in material breach of this Agreement; (g) by either party upon denial by the FCC of the FCC Application; and -42- 44 (h) by either party if any court of competent jurisdiction in the United States or any other United States governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other actions shall have become final and non-appealable. The foregoing notwithstanding, in the event any party hereto elects to terminate this Agreement in accordance with paragraphs (a) through (h) above, then any party hereto shall have the right to terminate, or cause its Affiliate to terminate, the Real Estate Purchase Agreement, the Snider Corporation Agreement and the CDB Broadcasting Agreement. 14.2 ADDITIONAL REMEDIES. (a) In the event of the termination of this Agreement by the Company (i) pursuant to Section 14.1(d) or 14.1(e) (any such event being a "DRAW CONDITION"), the Company shall be entitled to draw upon and receive the proceeds of the Letter of Credit, but shall not retain any rights to recover any actual damages it suffers as a result of such termination and the breach relating to such damages. In the event of any other termination of this Agreement pursuant to any other provision of Section 14.1, Citadel shall be entitled to a return of, and the Company shall return to Citadel, the original Letter of Credit and, in that event, the Company and the Stockholders will no longer have any liability under this Agreement. (b) The parties recognize and agree that Parent and Citadel have relied on this Agreement and expended considerable effort and resources related to the transactions contemplated hereunder, that the rights and benefits conferred upon Parent and Citadel herein are unique, and that damages may not be adequate to compensate Parent and Citadel in the event the Company and the Stockholders improperly refuse to consummate the transactions contemplated hereunder. The parties therefore agree that Parent and Citadel shall be entitled, at their option and in lieu of terminating this Agreement pursuant to Section 14.1, to have this Agreement specifically enforced by a court of competent jurisdiction in addition all other remedies available at law or in equity; provided, however, that Parent and Citadel may not specifically enforce this Agreement if Citadel has previously terminated this Agreement and received the original Letter of Credit. SECTION 15 GENERAL 15.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each representation and warranty herein contained shall survive the Closing for the periods described in Section 13.4, notwithstanding any investigation at any time made by or on behalf of any party to this Agreement. -43- 45 15.2 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts, of the State of Arkansas. 15.3 NOTICES. Any notices or other communications required or permitted under this Agreement shall be delivered personally or sent by registered or certified mail, postage prepaid, delivered by overnight delivery or sent by facsimile, addressed as follows: To Parent or Citadel: Citadel Broadcasting Company 1015 Eastman Drive Bigfork, Montana 59911 Attn: Lawrence R. Wilson Fax: (406) 837-5373 With copy to: Citadel Broadcasting Company 140 South Ash Avenue Tempe, Arizona 85281 Attn: Donna L. Heffner Fax: (602) 731-5229 With copy to: Eckert Seamans Cherin & Mellott, LLC 600 Grant Street 42nd Floor Pittsburgh, Pennsylvania 15219 Attn: Bryan D. Rosenberger, Esq. Fax: (412) 566-6099 To the Company or Snider Broadcasting Corporation the Stockholders: 124 West Capitol Avenue, Suite 200 Little Rock, Arkansas 72201 Attn: Ted L. Snider, Jr. Fax: (501) 210-7628 With copy to: Friday, Eldredge & Clark 2000 First Commercial Building 400 West Capitol Avenue Little Rock, Arkansas 72201 Attn: Price C. Gardner, Esq. Fax: (501) 376-2147 or such other addresses as shall be similarly furnished in writing by either party. Such notices or communications shall be deemed to have been given as of the date of personal delivery, or if mailed, the date the return receipt is signed or the date on which delivery is refused, or if delivered by overnight delivery or facsimile, on the date of receipt. -44- 46 15.4 ENTIRE AGREEMENT. This instrument supersedes all prior communications, understandings and agreements of or between the parties with respect to the subject matter of this Agreement and contains the entire agreement between the parties with respect to the transactions contemplated in this Agreement. Except as otherwise set forth in this Agreement, there are no other representations, warranties or covenants of any party hereto with respect to the subject matter of this Agreement. 15.5 HEADINGS. The headings of this Agreement are inserted for convenience only and shall not constitute a part of this Agreement. 15.6 SCHEDULES, EXHIBITS. All schedules and exhibits annexed to this Agreement are hereby incorporated in this Agreement by this reference. 15.7 EXPENSES. Each party shall bear its own costs and expenses incurred by it in connection with the transactions pursuant to this Agreement. 15.8 AMENDMENT. This Agreement may be amended, modified or superseded, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed on behalf of all of the parties or, in the case of a waiver, by the party waiving compliance. 15.9 WAIVER. The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect the right to enforce that provision or any other provision of this Agreement at any time thereafter. 15.10 ASSIGNMENT. Neither this Agreement nor any of the rights or obligations under this Agreement may be assigned by any party without the prior written consent, in its sole discretion, of each other party. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligation under this Agreement. 15.11 PRIOR CONTROL. Until the Closing, the SBC Companies shall maintain control of the Station. 15.12 ATTORNEYS' FEES. In the event of any action arising out of this Agreement, the prevailing party shall be entitled to recover its costs, expenses and reasonable attorney's fees incurred in connection with the dispute from the other party. 15.13 COUNTERPARTS; FAX SIGNATURES. This Agreement may be executed in one or more counterparts, each of which together shall constitute a single instrument. Signatures on this Agreement transmitted by facsimile shall be deemed to be original signatures for all purposes of this Agreement. -45- 47 15.14 DISPUTE RESOLUTION. Except as provided below, any dispute arising out of or relating to this Agreement or the breach, termination or validity hereof shall be finally settled by arbitration conducted expeditiously in accordance with the CPR Rules. The Center for Public Resources shall appoint a neutral advisor from its National CPR Panel. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof. The place of arbitration shall be Little Rock, Arkansas. Such proceedings shall be administered by the neutral advisor in accordance with the CPR Rules as he/she deems appropriate; provided, however, such proceedings shall be guided by the following agreed upon procedures: (a) mandatory exchange of all relevant documents, to be accomplished within 45 days of the initiation of the procedure; (b) no other discovery; (c) hearings before the neutral advisor which shall consist of a summary presentation by each side of not more than three hours; such hearings to take place on one or two days at a maximum; and (d) decision to be rendered not more than 10 days following such hearing. The provisions of this Section 15.14 shall not apply with regard to any equitable remedies to which a party may be entitled under this Agreement. [SIGNATURES APPEAR ON FOLLOWING PAGE] -46- 48 IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date above first written. SNIDER BROADCASTING CORPORATION By: /s/ Ted L. Snider ------------------------------ Ted L. Snider, Jr., President Ted L. Snider --------------------------- Ted L. Snider, Jr. Calvin G. Arnold --------------------------- Calvin G. Arnold CITADEL COMMUNICATIONS CORPORATION By: /s/ Lawrence R. Wilson ------------------------ Lawrence R. Wilson Its: President ----------------------- CITADEL BROADCASTING COMPANY By: /s/ Lawrence R. Wilson ------------------------ Lawrence R. Wilson Its: President ----------------------- -47- 49 INDEX OF SCHEDULES AND EXHIBITS Schedule 1 - Citadel's Disclosure Schedule Schedule 2 - Company Asset Schedule Schedule 3 - Company's Disclosure Schedule Exhibit A - Agreement Not to Compete Exhibit B - Amended and Restated Certificate of Incorporation Exhibit C - Amendment to Registration Rights Agreement Exhibit D - Amendment to Securities Purchase and Exchange Agreement Exhibit E - Amendment to Stockholders Agreement Exhibit F - Amendment to Voting Agreement Exhibit G - Letter of Credit Exhibit H - Local Marketing Agreement [Pursuant to Regulation S-K, Item 601(b)(2), Registrant agrees to furnish supplementally a copy of these schedules or exhibits to the Securities Exchange Commission upon request.] EX-2.7 6 CITADEL BROADCASTING CO. S-4 1 Exhibit 2.7 ASSET PURCHASE AGREEMENT AMONG CDB BROADCASTING CORPORATION, CDB LICENSE CORPORATION AND CITADEL BROADCASTING COMPANY JUNE 2, 1997 2 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT ("AGREEMENT"), made as of the 2nd day of June, 1997, by and among CDB BROADCASTING CORPORATION, an Arkansas corporation ("CDB BROADCASTING"), CDB LICENSE CORPORATION, an Arkansas corporation ("CDB LICENSE" and together with CDB Broadcasting, "SELLERS"), and CITADEL BROADCASTING COMPANY, a Nevada corporation ("CITADEL"). RECITALS: A. Sellers are the licensees of and own and operate radio station KESR-FM licensed to Sherwood, Arkansas (the "STATION"). B. Pursuant to the Natural State Intent Letter (as herein defined), CDB Broadcasting has expressed its intention to acquire (the "NATURAL STATE ACQUISITION") all of the issued and outstanding shares of capital stock of Natural State (as herein defined), which owns and operates radio station KYTN-FM licensed to Wrightsville, Arkansas (the "PENDING STATION"). C. Sellers desire to sell to Citadel and Citadel desires to purchase from Sellers substantially all of the assets of Sellers and the Station (including CDB Broadcasting's rights under the Natural State Intent Letter and the Natural State Definitive Agreement, if any), on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1 DEFINITIONS The following terms when used in this Agreement shall have the meanings assigned to them below: "ACCOUNTS RECEIVABLE" has the meaning specified in Section 8.3. "ACCOUNTS RECEIVABLE LIST" has the meaning specified in Section 8.3. "ACCRUED TAXES" has the meaning specified in Section 4.6. "ACT" means the Communications Act of 1934, as amended. "AFFILIATE" of any Person means any other Person (a) that directly or indirectly controls, is controlled by, or is under direct or indirect common control with, the first Person, or (b) any interests of which are owned, in whole or in part, directly or indirectly, by the first Person. 3 For purposes of this definition, the term "control" (including the correlative meanings of the terms "controls," "controlled by," and "under direct or indirect control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of the Person, whether through the ownership of voting securities or by contract or otherwise. "ASSET SCHEDULE" has the meaning specified in Section 2.1(a). "ASSIGNED CONTRACTS" has the meaning specified in Section 2.1(d). "ASSUMED OBLIGATIONS" has the meaning specified in Section 2.3. "BROKER" means NationsBanc Capital Markets, Inc. "BUSINESS" has the meaning specified in Section 4.1. "CITADEL COLLECTION PERIOD" has the meaning specified in Section 8.3. "CITADEL'S CAP EXEMPT DAMAGES" has the meaning specified in Section 13.5(b). "CITADEL'S DISCLOSURE SCHEDULE" has the meaning specified in Section 5.3. "CLOSING" means the consummation of the transactions contemplated in this Agreement in accordance with the provisions of Section 10. "CLOSING DATE" has the meaning specified in Section 10.1. "CODE" means the Internal Revenue Code of 1986, as amended. "CONTRACTS" has the meaning specified in Section 4.9. "CPR RULES" means the Center for Public Resources Rules for Nonadministered Arbitration of Business Disputes. "DAMAGES" has the meaning specified in Section 13.1. "DRAW CONDITION" has the meaning specified in Section 14.2(a). "ENVIRONMENTAL CLAIMS" means and includes, without limitation: (a) claims, demands, suits, causes of action for personal injury or lost use of property, or consequential damages, to the extent any of the foregoing arise directly or indirectly out of Environmental Conditions; (b) actual or threatened damages to natural resources; (c) claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, response or remedial actions under CERCLA, RCRA or other Environmental Laws; (d) a requirement -2- 4 to implement "corrective action" pursuant to any order or permit issued pursuant to RCRA; (e) claims for restitution, contribution or equitable indemnity from third parties or any governmental agency; (f) fines, penalties or Liens against property; (g) claims for injunctive relief or other orders or notices of violation from Governmental Authorities; and (h) with regard to any present or former employees, exposure to or injury from Environmental Conditions. "ENVIRONMENTAL CONDITIONS" means conditions of the environment, including the ocean, natural resources (including flora and fauna), soil, surface water, ground water, any present or potential drinking water supply, subsurface strata or the ambient air, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping, or threatened release of Hazardous Materials by either Seller. With respect to claims by employees, Environmental Conditions also includes the exposure of Persons to Hazardous Materials within work places on any real estate owned or occupied by either Seller. "ENVIRONMENTAL LAWS" has the meaning specified in the definition of Hazardous Materials. "ENVIRONMENTAL NONCOMPLIANCE" means, but is not limited to: (a) the release or threatened release as a result of the activities of either Seller of any Hazardous Materials into the environment, any storm drain, sewer, septic system or publicly owned treatment works, in violation of any effluent emission limitations, standards or other criteria or guidelines established by any federal, state or local law, regulation, rule, ordinance, plan or order; and (b) any facility operations, procedures, designs, etc. which do not conform to the statutory or regulatory requirements of the CAA, the CWA, the TSCA, the RCRA or any other Environmental Laws intended to protect public health, welfare and the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "EXCLUDED ASSETS" has the meaning specified in Section 2.2. "FCC" means the Federal Communications Commission. "FCC APPLICATION" has the meaning specified in Section 9.1(a). "FCC APPROVAL" has the meaning specified in Section 9.1(a). "FCC LICENSES" means the main station license for the Station, together with each of the other consents, rights, licenses, permits and other authorizations issued by the FCC and held by Sellers in connection with, or pertaining to, the conduct of the business and operation of the Station, together with any renewals and extensions thereof and any applications therefor pending on the Closing Date, and any and all applications made by Sellers for such consents, rights, licenses, permits and other authorizations. -3- 5 "FINAL ORDER" means a written action or order issued by the FCC or its staff setting forth the FCC Approval (or a denial thereof), (a) which action or order has not been vacated, reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with respect to which action or order (i) no requests have been filed and are pending for administrative or judicial review, rehearing, reconsideration, appeal or stay, and the time period for filing any such requests and for the FCC to set aside the action on its own motion under the provisions of the Act or the rules, regulations and policies of the FCC has expired, or (ii) in the event of review, reconsideration or appeal, the time for further review, reconsideration or appeal has expired. "GAAP" means generally accepted accounting principles in effect in the United States of America from time to time applied on a consistent basis during the periods involved. "GOVERNMENTAL AUTHORITY" means any government, whether federal, state or local, or any other political subdivision thereof, or any agency, tribunal or instrumentality of any such governmental or political subdivision, or any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "HAZARDOUS MATERIALS" means hazardous wastes, hazardous substances, hazardous constituents, toxic substances or related materials, whether solids, liquids or gases including but not limited to substances defined as "PCBs," "hazardous wastes," "hazardous substances," "toxic substances," "pollutants," "contaminants," "radioactive materials," "petroleum," or other similar designations in, or otherwise subject to regulation under, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), 42 U.S.C. Section 9601 ET SEQ.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. Section 2601 ET SEQ.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 9601; the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Section 300f ET SEQ.; the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 ET SEQ.; or any similar state law; and in the plans, rules, regulations or ordinances adopted, or other criteria and guidelines promulgated pursuant to the preceding laws or other similar laws, regulations, rules or ordinances now in effect (collectively, the "ENVIRONMENTAL LAWS"); and any other substances, constituents or wastes subject to environmental regulations under any applicable federal, state or local law, regulation or ordinance. "INDEBTEDNESS FOR BORROWED MONEY" means (a) all indebtedness of either Seller in respect of money borrowed (including, without limitation, indebtedness which represents the unpaid amount of the purchase price of any property), (b) all indebtedness of either Seller evidenced by a promissory note, bond or similar written obligation to pay money, (c) all indebtedness guaranteed by either Seller or for which either Seller is contingently liable, including, without limitation, guaranties in the form of an agreement to repurchase or reimburse, and any commitment by which any such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit, and (d) all monetary obligations of either Seller under any lease or similar arrangement, which obligations -4- 6 would be classified and accounted for as capital obligations on a balance sheet of either Seller under GAAP. "INDEMNITEE" has the meaning specified in Section 13.3. "INDEMNITOR" has the meaning specified in Section 13.3. "INTELLECTUAL PROPERTY" has the meaning specified in Section 2.1(e). "LEASEHOLDS" has the meaning specified in Section 4.8. "LETTER OF CREDIT" has the meaning specified in Section 3.2. "LIEN" means any mortgage, pledge, hypothecation, assignment, encumbrance, claim, easement, transfer restriction, lien (statutory or otherwise) or security interest of any kind or nature whatsoever. "LOCAL MARKETING AGREEMENT" has the meaning specified in Section 9.2. "NATURAL STATE" means Natural State Communications Company, an Arkansas corporation. "NATURAL STATE ACQUISITION" has the meaning specified in the recitals to this Agreement. "NATURAL STATE CLOSING" has the meaning specified in Section 9.8. "NATURAL STATE DEFINITIVE AGREEMENT" means a definitive Stock Purchase Agreement, to be negotiated, executed and delivered by CDB Broadcasting relating to the Natural State Acquisition, in form and substance satisfactory to Citadel in its reasonable discretion. "NATURAL STATE INTENT LETTER" means that certain Memorandum of Intent dated April 30, 1997 among the stockholders of Natural State, Calvin G. Arnold, Ted L. Snider, Jr. and CDB Broadcasting. "OBLIGATIONS" means, without duplication, all (a) Indebtedness for Borrowed Money, (b) Accrued Taxes, accounts payable, accrued liabilities and all other liabilities and obligations of the type normally required by GAAP to be reflected on a balance sheet, (c) commitments by which either Seller assures a creditor against loss, including the face amount of all letters of credit and, without duplication, all drafts drawn thereunder, (d) obligations guaranteed in any manner by either Seller, (e) obligations under capitalized leases in respect of which obligations either Seller is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss, (f) obligations under acceptance facilities, (g) obligations secured by a Lien on property of either Seller, (h) obligations under interest rate or currency exchange or swap agreements, (i) unsatisfied -5- 7 obligations for "withdrawal liability" to a "multiemployer plan" as such terms are defined under ERISA, (j) indebtedness issued or obligation incurred in substitution or exchange for any Obligations, (k) costs or expenses incurred by either Seller of any nature, whether or not currently payable, and (l) other liabilities or obligations of either Seller, in each of the foregoing instances whether absolute or contingent, known or unknown, and whether or not normally required by GAAP to be reflected on a balance sheet. "PARENT" means Citadel Communications Corporation, a Nevada corporation. "PENDING STATION" has the meaning specified in the recitals to this Agreement. "PERMITS" has the meaning specified in Section 4.17(b). "PERSON" means an individual, corporation, partnership, joint venture, joint stock seller, association, trust, business trust, unincorporated organization, Governmental Authority, or any other entity of whatever nature. "PERSONAL PROPERTY" has the meaning specified in Section 2.1(a). "PURCHASED ASSETS" has the meaning specified in Section 2.1. "PURCHASE PRICE" has the meaning specified in Section 3.1. "REAL ESTATE PURCHASE AGREEMENT" means that certain Agreement of Sale dated as of the date hereof among Ted L. Snider, Sr., Jane J. Snider and Citadel. "REAL PROPERTY" has the meaning specified in Section 2.1(b) "REAL PROPERTY LEASES" has the meaning specified in Section 2.1(c). "SELLERS' DISCLOSURE SCHEDULE" has the meaning specified in Section 4.3. "SNIDER BROADCASTING AGREEMENT" means that certain Stock Purchase Agreement dated as of the date hereof among Snider Broadcasting Corporation, the stockholders of Snider Broadcasting Corporation, Parent and Citadel. "SNIDER CORPORATION AGREEMENT" means that certain Merger Agreement dated as of the date hereof among Snider Corporation, the stockholders of Snider Corporation, Parent and Citadel. "STATION" has the meaning specified in the recitals to this Agreement. "SUPPLEMENTAL FINANCIAL STATEMENTS" has the meaning specified in Section 6.10 -6- 8 "TAXES" means all taxes, charges, fees, levies, or other assessments, including income, gross receipts, excise, property, sales, transfer, license, payroll, and franchise taxes, any taxes required by law to be withheld, and any taxes payable as a result of the consummation of the transactions contemplated by this Agreement, which taxes are imposed by any Governmental Authority; and such term shall include any interest, penalties, or additions to tax attributable to such assessments. "THRESHOLD" has the meaning specified in Section 13.5(a). "TRADE AGREEMENTS" has the meaning specified in Section 6.9. "TRADE IMBALANCE" has the meaning specified in Section 6.9. "TRADE LIABILITIES" has the meaning specified in Section 6.9. "TRADE RECEIVABLES" has the meaning specified in Section 6.9. "TRADE SCHEDULE" has the meaning specified in Section 6.9. SECTION 2 PURCHASE AND SALE OF ASSETS 2.1 PURCHASE AND SALE OF PURCHASED ASSETS. Subject to the terms and conditions of this Agreement, and on the basis of the representations, warranties, covenants and agreements contained in this Agreement, at the Closing, Sellers agree to sell, assign and convey to Citadel, and Citadel agrees to purchase, acquire and accept from Sellers, all of the Purchased Assets. The "PURCHASED ASSETS" consist of: (a) All the tangible personal property, improvements and fixtures of every kind or nature used in the operation of the Station in the ordinary course of business and located at the Station (the "PERSONAL PROPERTY"), including, without limitation, the personal property described on SCHEDULE 2.1 to this Agreement (the "ASSET SCHEDULE") (b) All of the right, title and interest of Sellers or any of their Affiliates in and to any real property used in the operation of the Station in the ordinary course of business which are described on the ASSET SCHEDULE (the "REAL PROPERTY"); (c) The leasehold interests pursuant to the real property leases described on the ASSET SCHEDULE (the "REAL PROPERTY LEASES"); (d) All of the right, title and interest of Sellers or any of their Affiliates in and to those contracts, leases, licenses, memberships, agencies, permits and agreements, other than Real Property Leases, to which either Seller or any Affiliate thereof presently is a party -7- 9 or an assignee of a party which are described on the ASSET SCHEDULE (the "ASSIGNED CONTRACTS"), which Assigned Contracts include (i) the employment agreements listed on the ASSET SCHEDULE and (ii) the Natural State Intent Letter and the Natural State Definitive Agreement, if any; (e) The call letters of the Station and all of the copyrights, trademarks, trade names and other similar rights, including applications and registrations therefor, used in connection with the past or present operation of the Station in which either Seller or any Affiliate thereof has any right, title or interest, including, without limitation, those items listed on the ASSET SCHEDULE (collectively, the "INTELLECTUAL PROPERTY"); (f) The FCC Licenses, a complete list of which is included on the ASSET SCHEDULE; (g) All books, records and accounts relating to the operation of the Station, subject to the right of Sellers to make and retain photocopies thereof for Sellers' personal use and reference and to obtain access to such books, records and accounts in accordance with the provisions of Section 2.2(a); and (h) All other assets owned by Sellers as of the date of this Agreement which are used in connection with the operation of the Station as of the date of this Agreement, real and personal, tangible and intangible. 2.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained in this Agreement, it is expressly understood and agreed that there shall be excluded from the assets transferred or assigned to Citadel with respect to the Station the following (collectively, the "EXCLUDED ASSETS"): (a) Except to the extent included in Section 2.1(g), all of Sellers' corporate books and records and other documents relating to the internal corporate affairs of Sellers, and all other corporate records or files of Sellers not relating to the business or operation of the Station; (b) All cash, cash equivalents or similar type investments held by Sellers, such as certificates of deposit, treasury bills and other marketable securities on hand as of the Closing; (c) All accounts receivable existing as of Closing; (d) Corporate assets and assets not used in connection with the Station; (e) Any and all claims of Sellers with respect to transactions occurring or arising prior to the Closing Date, including, without limitation, claims for Tax refunds; and -8- 10 (f) Those additional assets identified on SCHEDULE 2.2 as Excluded Assets. Notwithstanding the foregoing, any asset which is described above but which is actually listed on the ASSET SCHEDULE shall be a Purchased Asset and not an Excluded Asset. 2.3 OBLIGATIONS. Citadel shall not assume, and shall purchase the Purchased Assets free and clear of, any and all Obligations of Sellers, except those Obligations of Sellers arising from and after the Closing Date (other than any liability or obligation for breach or default which occurred prior to the Closing Date) pursuant to each of (a) the Real Property Leases, (b) the Assigned Contracts, (c) those items subject to proration pursuant to Section 9.3, (d) the Trade Liabilities and (e) those additional items expressly set forth on SCHEDULE 2.3 to this Agreement (collectively, the "ASSUMED OBLIGATIONS"). 2.4 DELIVERY OF FCC LICENSES. At or prior to the Closing, Citadel may, in its sole and absolute discretion, instruct Sellers to deliver the FCC Licenses at the Closing to Citadel License, Inc., a wholly owned subsidiary of Citadel. 2.5 TAX DEFERRED EXCHANGE. Sellers hereby acknowledge that it is the intention of Citadel to complete a tax deferred exchange under Section 1031 of the Code and that Citadel's rights and obligations under this Agreement may be assigned to a qualified intermediary or qualified escrow agent (as such terms are defined in the regulations under Section 1031 of the Code) for the purpose of completing such exchange. Sellers agree to cooperate in any manner reasonably necessary to complete such exchange and at no additional cost or liability to Sellers. SECTION 3 PURCHASE PRICE; LETTER OF CREDIT 3.1 PURCHASE PRICE. Subject to adjustment as provided in Sections 6.9 and 9.3, the purchase price for the Purchased Assets (the "PURCHASE PRICE") is equal to (i) $7,500,000, MINUS (ii) the amount of cash actually paid by Citadel to the stockholders of Snider Broadcasting Corporation pursuant to Section 2.4(a) of the Snider Broadcasting Agreement, MINUS (iii) the amount of liabilities constituting Assumed Obligations pursuant to clause (e) of the definition thereof. At the Closing, Citadel shall deliver to Sellers immediately available funds in the amount of the Purchase Price. 3.2 LETTER OF CREDIT. Simultaneously with the execution of this Agreement, Citadel shall deliver to Sellers an irrevocable letter of credit in favor of Sellers, issued by a national banking association or other issuer acceptable to Sellers, in the amount of $325,000, which shall be in the form attached as EXHIBIT A hereto (the "LETTER OF CREDIT"). The Letter of Credit shall provide that the issuing bank shall make payment on the Letter of Credit upon such bank's receipt of a joint certificate from the President of each Seller and Citadel certifying that a Draw Condition has occurred. Upon the Closing, Sellers shall return the original Letter of Credit to Citadel for cancellation. -9- 11 3.3 ALLOCATION OF THE PURCHASE PRICE. Citadel and Sellers shall report the transactions contemplated by this Agreement for federal and state tax purposes in a manner consistent with the allocation of the Purchase Price made by Citadel at the Closing (which allocation shall be reasonably acceptable to Sellers). SECTION 4 REPRESENTATIONS AND WARRANTIES OF SELLERS In connection with the purchase and sale of the Purchased Assets under this Agreement and in order to induce Citadel to enter into and consummate the transactions contemplated by this Agreement, Sellers jointly and severally make the following representations and warranties to Citadel, as of the date of this Agreement and as of the date of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times): 4.1 ORGANIZATION AND QUALIFICATION. Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Arkansas and has full power and authority to own its assets and properties and to conduct the business in which it is now engaged (collectively, the "BUSINESS"). Each Seller has full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own its properties and to conduct its Business. 4.2 AUTHORITY. The execution and delivery of this Agreement by Sellers, the performance by Sellers of their covenants and agreements hereunder and the consummation by Sellers of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Sellers. This Agreement constitutes the valid and legally binding agreement of Sellers, enforceable against Sellers in accordance with its terms. 4.3 NO LEGAL BAR; CONFLICTS. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of either Seller, or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which either Seller is a party or by which either Seller or any of the assets of either Seller is bound. Except for the FCC Approval and the consents disclosed in SCHEDULE 4.0 to this Agreement ("SELLERS' DISCLOSURE SCHEDULE"), no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. -10- 12 4.4 FINANCIAL STATEMENTS. Sellers have delivered to Citadel the following financial statements for the Station: (a) the audited balance sheet as of December 31, 1996 and the related statements of income and cash flows for the year then ended; (b) the unaudited balance sheet as of April 30, 1997 and the related statements of income and cash flows for the four months then ended; and (c) the monthly unaudited balance sheets and income statements for each month in 1996 and the first four months of 1997. Each of the foregoing financial statements (including in all cases the notes thereto, if any) (i) is accurate and complete in all material respects, (ii) is consistent in all material respects with the books and records of Sellers (which, in turn, are accurate and complete in all material respects) and (iii) presents fairly in all material respects the financial condition and results of operations of Sellers in accordance with GAAP (subject in the case of unaudited financial statements to the lack of footnote disclosure and changes resulting from normal year-end audit adjustments), consistently applied, as of the dates and for the periods set forth therein. 4.5 ABSENCE OF CERTAIN CHANGES. Between December 31, 1996 and the date of this Agreement, there has not been any (a) material adverse change in the condition of the Station, financial or otherwise, or in the results of operations, assets, liabilities or business of the Station; (b) damage or destruction, whether or not insured, affecting the business operations of the Station; (c) labor dispute or threatened labor dispute involving any of the employees of the Station; (d) actual or threatened dispute pertaining to the Station with any material provider of software, hardware or services; (e) material change in the customary methods of operations of the Station; (f) except in the ordinary course of business or to the extent not material to the Business or financial condition of the Station, sale or transfer of any tangible or intangible asset used or useful in the operation of the Station, mortgage, pledge or imposition of any Lien on any such asset, lease of real property, machinery, equipment or buildings with respect to the Station, or modification, amendment or cancellation of any of its existing leases relating to the Station, or cancellation of any debt or claim; or (g) liability or obligation (contingent or otherwise) incurred under agreements or otherwise, except current liabilities entered into or incurred in the ordinary course of business consistent with past practices and obligations under the Natural State Intent Letter. 4.6 TAXES. Each Seller has filed or caused to be filed on a timely basis all federal, state, local and other tax returns, reports and declarations required to be filed by it with respect to the Station and has paid all Taxes (including, but not limited to, income, franchise, sales, use, unemployment, withholding, social security and workers' compensation taxes and estimated income and franchise tax payments, penalties and fines) reflected as due on such returns, reports or declarations (whether or not shown on such returns, reports or declarations), or pursuant to any assessment received by it in connection with such returns, reports or declarations. All returns, reports and declarations filed by or on behalf of each Seller are true, complete and correct in all material respects. Except as disclosed in SELLERS' DISCLOSURE SCHEDULE no deficiency in payment of any Taxes for any period has been asserted by any taxing authority which remains unsettled at the date hereof, no written inquiries have been received by either Seller from any taxing authority with respect to possible claims for taxes or assessments, and there is no basis for any additional claims or assessments for Taxes. -11- 13 Since December 31, 1996, neither Seller has incurred any liability for Taxes which materially affect the operation of the Station other than in the ordinary course of business. All Taxes attributable to the Station or its income, operations or properties accruing up to and including the Closing (the "ACCRUED TAXES") have been or will be paid when due regardless of whether such Taxes are due and payable as of the Closing. 4.7 ASSET SCHEDULE. The ASSET SCHEDULE includes complete and accurate (a) listings of all Real Property used in the operation of the Station; (b) listings of all Personal Property owned by Sellers and used in the operation of the Station; (c) descriptions of all Real Property Leases and Assigned Contracts, none of which requires any consent of third parties in connection with the transactions contemplated hereby, except otherwise as indicated in SELLERS' DISCLOSURE SCHEDULE; (d) descriptions of all of the Intellectual Property; and (e) listings of all of the FCC Licenses, all of the foregoing of which will, as of the Closing, be owned and held by Sellers as reflected in the ASSET SCHEDULE. 4.8 TITLE TO AND CONDITION OF PROPERTY. (a) TITLE. Sellers will as of the Closing have good, marketable and exclusive title to and undisputed possession of all of the real, personal and tangible property and improvements included in the Purchased Assets. Except as set forth on SELLERS' DISCLOSURE SCHEDULE, the Purchased Assets are now free and clear of all Liens. The Purchased Assets will, as of the Closing, be free and clear of all Liens. (b) CONDITION. The Personal Property is structurally sound, in reasonably good condition, ordinary wear and tear excepted, adequate and suitable for the operation of the Station as it is currently being operated, and in proper condition and repair so that the Station can operate according to its FCC Licenses, the rules, regulations and policies of the FCC and in all other respects in compliance with the Act and all other applicable federal and state laws. (c) INSURANCE. The Personal Property included among the Purchased Assets is and will be insured through the Closing Date in amounts adequate to replace or repair any casualty or other insurable loss to any of such property. (d) SUFFICIENCY OF ASSETS. The Purchased Assets include all of the assets, of a sufficient nature, condition and quantity, necessary to permit Citadel to operate the Station immediately upon the Closing in the ordinary course of business and consistent with the past practices of Sellers. Sellers have not, since December 31, 1996, removed any material item of Personal Property from the Station other than removals in the ordinary course of business which were not done in contemplation of the transactions contemplated hereby. (e) REAL PROPERTY LEASES. (i) The ASSET SCHEDULE contains accurate descriptions of the Real Property Leases and the location of the real estate leased thereunder (the "LEASEHOLDS") and the -12- 14 type of facility located on the Leaseholds. Each Seller will as of the Closing have a valid leasehold interest in its respective Leaseholds. (ii) None of the Leaseholds is subject to any covenant or restriction preventing or limiting in any material respect the consummation of the transactions contemplated hereby, except for any consent listed on SELLERS' DISCLOSURE SCHEDULE required of the landlords under the Real Property Leases. Sellers' right, title and interest in and to the Leaseholds will at the Closing be held by Sellers free and clear of all Liens. (iii) The use for which the Leaseholds are zoned permits the use thereof for the business of the Station consistent with past practices. The use and occupancy of the Leaseholds by Sellers are in compliance in all material respects with all regulations, codes, ordinances and statutes applicable to Sellers and Sellers have not received any notice asserting any material violation of sanitation laws and regulations, occupational safety and health regulations, or electrical codes. (iv) There are no facts relating to Sellers, and to the best of the knowledge of Sellers, no facts relating to any other party, that would prevent the Leaseholds from being occupied and used by Citadel and/or any assignee of Citadel after the Closing Date in the same manner as immediately prior to the Closing. (v) There is not under any Real Property Lease any material default by Sellers or any condition that with notice or the passage of time or both would constitute such a default, and Sellers have not received any notice asserting the existence of any such default or condition. (vi) Each Real Property Lease is valid and binding and in full force and effect as to Sellers, and to the best of the knowledge of Sellers, as to each other party thereto, and except as disclosed on the ASSET SCHEDULE, has not been amended or otherwise modified. (vii) The Leaseholds constitute all of the real property in which either Seller has a leasehold interest or other interest or right (whether as lessor or lessee) and which is or will prior to the Closing be used solely in the operation of the Station. 4.9 CONTRACTUAL AND OTHER OBLIGATIONS. Set forth in the ASSET SCHEDULE is a description of all (a) Real Property Leases to which either Seller is a party; (b) all contracts, agreements, licenses, leases, arrangements and other documents used solely in connection with the present operation of the Station to which either Seller is a party or by which either Seller or any of the assets of either Seller are bound (including, in the case of loan agreements, a description of the amounts of any outstanding borrowings thereunder and the collateral, if any, for such borrowings); (c) uncompleted orders for the purchase by either Seller of materials, supplies, equipment and services for the requirements of the Station existing as of the date hereof and with respect to which the remaining obligation of either Seller is in excess of -13- 15 $2,500; and (d) contingent contractual obligations and liabilities of either Seller known to Sellers existing as of the date hereof (all of the foregoing, collectively, the "CONTRACTS"). Each of the Contracts is designated in the ASSET SCHEDULE either as an Assigned Contract, or as a Contract that will not be assigned to Citadel. Neither Seller nor, to the best of the knowledge of Sellers, any other Person is in material default in the performance of any covenant or condition under any Contract and no claim of such a default has been made and no event has occurred which with the giving of notice or the lapse of time would constitute such a default under any covenant or condition under any Contract. Neither Seller is a party to any Contract which would terminate or be materially adversely affected by the consummation of the transactions contemplated by this Agreement. Originals or true, correct and complete copies of all of the Assigned Contracts have been provided to Citadel as of the date of this Agreement. 4.10 COMPENSATION. Set forth in SELLERS' DISCLOSURE SCHEDULE is a list of (a) all agreements between either Seller and its respective employees or other Persons providing services for compensation with regard to the Station, whether individually or collectively, and (b) all employees of either Seller or other Persons providing services for either Seller with respect to the Station entitled to receive annual compensation in excess of $5,000 and their respective positions, job categories and salaries. The transactions contemplated by this Agreement will not result in any liability for severance pay to any such employee or other Person. Sellers have not informed any such employee or other Person that such Person will receive any increase in compensation or benefits or any ownership interest in either Seller or its Business. Except as disclosed in SELLERS' DISCLOSURE SCHEDULE, all of the employees of Sellers are "at will" employees and may be terminated by Sellers at any time, without liability or obligation except the payment of normal compensation accrued up to the time of termination of employment. 4.11 EMPLOYEE BENEFIT PLANS. (a) Neither Seller maintains or sponsors, and neither Seller is required to make contributions to, any pension, profit-sharing, savings, bonus, incentive or deferred compensation, severance pay, medical, life insurance, welfare or other employee benefit plan which affects the employees working at the Station, except as set forth in SELLERS' DISCLOSURE SCHEDULE. SELLERS' DISCLOSURE SCHEDULE fully discloses all of the plans, funds, policies, programs, arrangements or understandings sponsored or maintained by either Seller pursuant to which any employee of the Station (or any dependent or beneficiary of any such employee) might be or become entitled to (1) retirement benefits; (2) severance or separation from service benefits; (3) incentive, performance, stock, share appreciation or bonus awards; (4) health care benefits; (5) disability income or wage continuation benefits; (6) supplemental unemployment benefits; (7) life insurance, death or survivor's benefits; (8) accrued sick pay or vacation pay; (9) any type of benefit offered under any arrangement subject to characterization as an "employee welfare benefit plan" within the meaning of section 3(3) of ERISA; or (10) benefits of any other type offered through any arrangement that could be characterized as providing for additional compensation or fringe benefits. As to any such plan, fund, policy, program, -14- 16 arrangement or understanding, all of the following are true: (A) all amounts due as contributions, insurance premiums and benefits to the date hereof have been fully paid by Sellers; (B) all applicable material requirements of law have been observed with respect to the operation thereof, and all applicable reporting and disclosure requirements have been timely satisfied; and (C) neither Seller is aware of any claim or demand by any employee (or beneficiary or dependent of any employee) for benefits (other than routine claims for benefits), or by any taxing authority for taxes or penalties which has not been satisfied in full or which may be or become subject to litigation or arbitration. (b) Neither Seller has any obligation to provide health or other welfare benefits to former, retired or terminated employees, except as specifically required under Section 4980B of the Code. Sellers have substantially complied with any applicable notice and continuation requirements of Section 4980B of the Code and the regulations thereunder. 4.12 LABOR RELATIONS. There have been no material violations of any federal, state or local statutes, laws, ordinances, rules, regulations, orders or directives with respect to the employment of individuals by, or the employment practices or work conditions of, Sellers, or the terms and conditions of employment, wages (including overtime compensation) and hours. The Station is not engaged in any unfair labor practice or other unlawful employment practice and there are no charges of unfair labor practices or other employee-related complaints pending or threatened against the Station before the National Labor Relations Board, the Equal Employment Opportunity Commission, the Occupational Safety and Health Review Commission, the Department of Labor or any other Governmental Authority. There is no strike, picketing, slowdown or work stoppage or organizational attempt pending, threatened against or involving the Station. No issue with respect to union representation is pending or threatened with respect to the employees of the Station. 4.13 INCREASES IN COMPENSATION OR BENEFITS. Subsequent to December 31, 1996, there have been no increases in the compensation payable or to become payable to any of the employees of either Seller who work solely at the Station, nor has either Seller paid or provided for any awards, bonuses, stock options, loans, profit-sharing, pension, retirement or welfare plans or similar or other payments or arrangements for or on behalf of such employees in each case other than (a) pursuant to currently existing plans or arrangements set forth in SELLERS' DISCLOSURE SCHEDULE or (b) as was required from time to time by governmental legislation affecting wages. The vacation policy of each Seller is set forth in SELLERS' DISCLOSURE SCHEDULE. No employee of either Seller who works solely at the Station is entitled to vacation time in excess of two weeks (three weeks in the case of employees with 10 years or more of service) during the current vacation year (fiscal May 1 through April 30) and no such employee has any accrued vacation time with respect to any period prior to the current calendar year except as set forth in SELLERS' DISCLOSURE SCHEDULE. 4.14 INSURANCE. Each Seller maintains insurance policies covering all of its properties and assets and the various occurrences which may arise in connection with the operation of the Station, each of which policies is summarized in SELLERS' DISCLOSURE SCHEDULE. Such policies -15- 17 are in full force and effect and all installments of premiums due thereon have been paid in full. Sellers have complied with the provisions of such policies. There are no notices of any pending or threatened termination or premium increases with respect to any of such policies. There has been no casualty loss or occurrence which may give rise to any claim of any kind not covered by insurance and neither Seller is aware of any casualty occurrence which may give rise to any claim of any kind not covered by insurance. No third party has filed any claim against either Seller for personal injury or property damage of a kind for which liability insurance is generally available which is not fully insured, subject only to the standard deductible. None of Sellers' insurance policies will terminate or be adversely affected by the consummation of the transactions contemplated by this Agreement. 4.15 LITIGATION; DISPUTES. Except as disclosed in SELLERS' DISCLOSURE SCHEDULE, there are no claims, disputes, actions, suits, investigations or proceedings pending or threatened against or affecting the Station, and, to the best of the knowledge of Sellers, there is no basis for any such claim, dispute, action, suit, investigation or proceeding. Neither Seller has knowledge of any default under any such action, suit or proceeding. Neither Seller is in default in respect of any judgment, order, writ, injunction or decree of any Governmental Authority with respect to the operation of the Station. 4.16 ENVIRONMENTAL. (a) Prior to the execution of this Agreement, Sellers have provided to Citadel a true and correct copy of all environmental site assessments, studies, reports and communications relating to the Real Property. (b) Except as disclosed on SELLERS' DISCLOSURE SCHEDULE, (i) there are no conditions, facilities, procedures or any other facts or circumstances that constitute Environmental Noncompliance on any of the Leaseholds and (ii) there is not constructed, placed, deposited, stored, disposed of, nor located on any of the Leaseholds any asbestos in any form that has released or, unless disturbed, threatens to release airborne asbestos fibers in excess of applicable local, state and federal standards. (c) Except as disclosed on SELLERS' DISCLOSURE SCHEDULE, no structure, improvements, equipment, fixtures, activities or facilities located on the Leaseholds uses Hazardous Materials except those used in the ordinary course of the Business and in compliance with applicable Environmental Laws. (d) Except as specifically described on SELLERS' DISCLOSURE SCHEDULE, there have been no releases or threatened releases of Hazardous Materials into the environment, or which otherwise contribute to Environmental Conditions arising solely from the activities of either Seller, or to the best of the knowledge of Sellers arising from any other activities, except to the extent that such releases or threatened releases do not constitute a condition of Environmental Noncompliance relating to the Leaseholds. -16- 18 (e) Except as disclosed on SELLERS' DISCLOSURE SCHEDULE, there are no underground storage tanks, or underground piping associated with tanks, used for the management of Hazardous Materials at the Leaseholds and there are no abandoned underground storage tanks at the Leaseholds which have not been either abandoned in place or removed pursuant to a permit issued by a Governmental Authority. (f) Neither Seller is subject to any Environmental Claims against Sellers, no Environmental Claims have been threatened, nor, to the best of the knowledge of Sellers, is there any basis for any such Environmental Claims. 4.17 PERMITS; COMPLIANCE WITH APPLICABLE LAW. (a) GENERAL. Neither Seller is in default under any, and each Seller has complied with all, statutes, ordinances, regulations, orders, judgments and decrees of any Governmental Authority applicable to it or to the Business or the assets and properties of each Seller as to which a default or failure to comply might result in any material adverse change in the condition, financial or otherwise, assets or properties of either Seller or its Business. Neither Seller has knowledge of any basis for assertion of any violation of the foregoing or for any claim for compensation or damages or otherwise arising out of any violation of the foregoing. Neither Seller has received any notification of any asserted present or past failure to comply with any of the foregoing which has not been satisfactorily responded to in the time period required thereunder. (b) PERMITS. Set forth in SELLERS' DISCLOSURE SCHEDULE are complete and accurate lists of all FCC Licenses applicable to the Station, and all other permits, licenses, approvals, franchises, notices and authorizations issued by any Governmental Authorities (collectively, the "PERMITS"), held by either Seller and applicable to the Station. The Station is operating in accordance with the Act and its FCC Licenses and is in compliance with the Act and the rules, regulations and policies of the FCC. The Permits set forth in SELLERS' DISCLOSURE SCHEDULE are all of the Permits required for the conduct of the Business. All of the Permits set forth in SELLERS' DISCLOSURE SCHEDULE are in full force and effect, and neither Seller has engaged in any activity which would cause or permit revocation or suspension of any such Permit, and no action or proceeding looking to or contemplating the revocation or suspension of any such Permit is pending or threatened. There are no existing defaults or events of default or events or state of facts which with notice or lapse of time or both would constitute a default by either Seller under any such Permit. There is no default or claimed or purported or alleged default or state of facts which with notice or lapse of time or both would constitute a default on the part of any party in the performance of any obligation to be performed or paid by any party under any Permit set forth in SELLERS' DISCLOSURE SCHEDULE. Except for (1) the FCC Approval and (2) as set forth in SELLERS' DISCLOSURE SCHEDULE, the consummation of the transactions contemplated hereby will in no way affect the continuation, validity or effectiveness of the Permits set forth in SELLERS' DISCLOSURE SCHEDULE, or require the consent of any Person. Except as set forth in SELLERS' DISCLOSURE SCHEDULE, neither Seller is required to -17- 19 be licensed by, and is not subject to the regulation of, any Governmental Authority by reason of its Business. (c) CDB LICENSE. CDB License owns no assets other than the FCC Licenses and has no liabilities. 4.18 INTELLECTUAL PROPERTY. The use of the Intellectual Property in connection with the operation of the Station and in a manner consistent with past practices does not infringe upon the proprietary rights of any other Person. Citadel will, upon consummation of the transactions contemplated by this Agreement, possess adequate rights, licenses and other authority to use the Intellectual Property used by the Station in the operation of the Station following the Closing in the manner now operated, without infringement or unlawful or improper use of any of the Intellectual Property. No director, officer or employee of either Seller has any interest in any of the Intellectual Property, all of which will, as of the Closing, be free and clear of all Liens. Neither Seller has knowledge of any infringement by any Person upon the rights of Sellers with respect to the Intellectual Property. Neither Seller has granted any outstanding licenses or other rights to any of the call letters, copyrights, trademarks, trade names or other similar rights with regard to any of the Intellectual Property. 4.19 BOOKS AND RECORDS. The books of account of Sellers fairly and accurately reflect its income, expenses, assets and liabilities and have been maintained in accordance with good business practices. All of such books and records, to the extent included within the Purchased Assets, will be located on the date of the Closing on the business premises of the Station. 4.20 ACTS TO BE PERFORMED. Sellers shall perform each of the covenants, acts and undertakings of Sellers to be performed on or before the Closing Date pursuant to the terms of this Agreement. 4.21 RELATED PARTY OBLIGATIONS. Except as set forth on the ASSET SCHEDULE, no officer, director, shareholder or Affiliate of either Seller, or any individual related by blood or marriage to any such Person, or any entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment, promissory note, loan, any other actual or proposed transaction with either Seller, or has any material interest in any material property used by either Seller which is material to the operation of the Station. 4.22 NATURAL STATE INTENT LETTER. The Natural State Intent Letter is in full force and effect and enforceable against each of the parties thereto in accordance with the provisions thereof. The Natural State Intent Letter has not been amended, modified or otherwise altered and a true and correct copy of the Natural State Intent Letter has been delivered by Sellers to Citadel. A true and correct copy of the current draft of the Natural State Definitive Agreement has been delivered by Sellers to Citadel. 4.23 DISCLOSURE. To the best of Sellers' knowledge, no representation or warranty made under this Section 4 and none of the information furnished by Sellers set forth in this -18- 20 Agreement or in the schedules or exhibits to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements in this Agreement or in the schedules or exhibits to this Agreement not misleading. SECTION 5 REPRESENTATIONS AND WARRANTIES OF CITADEL In connection with the purchase and sale of the Purchased Assets under this Agreement and in order to induce Sellers to enter into and consummate the transactions contemplated by this Agreement, Citadel makes the following representations and warranties to Sellers, as of the date of this Agreement and as of the date of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times): 5.1 ORGANIZATION AND QUALIFICATION. Citadel is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and has full corporate power and authority to own its assets and properties, conduct its business and acquire the Purchased Assets. Citadel has duly qualified to do business as a foreign corporation and is in good standing under the laws of the State of Arkansas. Citadel has full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own its properties and to conduct its business. 5.2 AUTHORITY. Subject to the approval by Citadel's board of directors of the transactions contemplated hereby, (a) the execution and delivery of this Agreement by Citadel, the performance by Citadel of its covenants and agreements hereunder and the consummation by Citadel of the transactions contemplated hereby have been duly authorized by all necessary corporate action; and (b) this Agreement constitutes a valid and legally binding agreement of Citadel, enforceable against Citadel in accordance with its terms. 5.3 NO LEGAL BAR: CONFLICTS. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Certificate of Incorporation or Bylaws of Citadel, or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of, any contract, commitment, agreement, understanding or arrangement of any kind to which Citadel is a party or by which Citadel or any of the assets of Citadel is bound. Except for the FCC Approval and the consents disclosed in SCHEDULE 5.0 ("CITADEL'S DISCLOSURE SCHEDULE"), no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of Citadel in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. -19- 21 5.4 ACTS TO BE PERFORMED. Citadel shall perform each of the covenants, acts and undertakings of Citadel to be performed on or before the Closing Date pursuant to the terms of this Agreement. 5.5 LITIGATION. There is no litigation, proceeding or investigation pending or, to the best of Citadel's knowledge, threatened against or affecting Citadel that is reasonably likely to prevent or hinder the consummation of the transactions contemplated by this Agreement. 5.6 DISCLOSURE. To the best of Citadel's knowledge, no representation or warranty made under this Section 5 and none of the information furnished by Citadel set forth in this Agreement or in the schedules or exhibits to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements in this Agreement or in the schedules or exhibits to this Agreement not misleading. SECTION 6 AFFIRMATIVE COVENANTS OF SELLERS Sellers jointly and severally covenant and agree with Citadel to: 6.1 COMPLIANCE WITH LAW. Comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated hereby. 6.2 PAYMENT OF OBLIGATIONS. Fully discharge all Obligations of Sellers, except the Assumed Obligations, on a timely basis. 6.3 ACCESS. Afford Citadel and its authorized representatives, upon reasonable notice to Sellers, reasonable access during normal business hours to the Station and the Station's employees, and permit Citadel and its authorized representatives to examine all operations, equipment, properties and other assets, logs, books, relevant records, contracts and documents of Sellers pertinent to the Station; provided, however, that in each instance mutually satisfactory arrangements shall be made in advance in order to avoid interruption and to minimize interference with the normal business and operations of the Station. 6.4 PRESERVATION OF ORGANIZATION. Exercise all reasonable efforts to preserve the business organization of the Station intact, and assist Citadel, as and when requested by Citadel, to preserve the present relationships of the Station with employees, suppliers, advertisers and customers and others having business relationships with the Station; provided, however, that nothing contained in this Agreement shall require either Seller to expend money in fulfillment of its obligations set forth in this Section 6.4 other than those expenditures that Sellers would have made in the ordinary course of the business of the Station and consistent with past practices. -20- 22 6.5 BOOKS AND RECORDS. Maintain the books and records of Sellers in accordance with good business practices, on a basis consistent with past practices, and promptly make available to Citadel the books, records, tax returns, leases, contracts and other documents or agreements material to the Station as Citadel, its counsel, accountants or other authorized representatives may from time to time reasonably request. 6.6 EMPLOYEES. Pay as and when the same shall become due and payable, any amounts owed by either Seller to its employees who have performed services up to the time of Closing, whether fixed or accrued, for wages, vacation pay, sick pay, severance pay, employee benefits, damages and otherwise. 6.7 COMPLIANCE WITH FCC MATTERS. Comply with the FCC Licenses applicable to the Station and with the provisions of the Act, the rules, regulations and policies of the FCC, and with all other laws, ordinances, regulations, rules and orders of any Governmental Authority applicable to either Seller or to the Station. 6.8 TAXES. File all federal, state and municipal tax returns, reports and declarations required to be filed by Sellers prior to the Closing, and satisfy all Taxes related thereto, and either pay in full on or before the Closing or effect a proration pursuant to Section 9.3 for all Accrued Taxes attributable to either Seller, or its income, operations or properties, accruing through the Closing, regardless of whether such Taxes otherwise would have been then due and payable. 6.9 TRADE-OUTS. Citadel shall assume as of the Closing the Trade Agreements existing as of the Closing and that have not yet been performed. To the extent that the aggregate liability of the Station as of the Closing for unperformed time under the Trade Agreements (the "TRADE LIABILITIES") exceeds the value of the goods and services to be received by the Station or Citadel after the Closing under the Trade Agreements (the "TRADE RECEIVABLES"), the Purchase Price payable at the Closing shall be reduced by the amount by which the Trade Liabilities exceeds the Trade Receivables (the "TRADE IMBALANCE"). Sellers shall deliver to Citadel at the Closing a schedule of Trade Liabilities and Trade Receivables existing as of the Closing (the "TRADE SCHEDULE"). Sellers shall exercise reasonable efforts to minimize the amount of additional Trade Liabilities incurred after execution of this Agreement, and to prevent a Trade Imbalance. For purposes hereof, the term "TRADE AGREEMENTS" means and includes those agreements entered into by either Seller for the sale of advertising time on the Station for consideration other than cash. For purposes hereof, the value of Trade Receivables and the Trade Liabilities as of the Closing shall be the fair market value thereof, as previously agreed to by Sellers and the applicable vendor. Citadel shall assume Sellers' remaining obligations under such contracts. 6.10 SUPPLEMENTAL FINANCIAL STATEMENTS. Sellers shall provide Citadel with copies of the monthly unaudited income statements and balance sheets applicable to the Station prepared by Sellers from the date hereof until Closing in the ordinary course of business (collectively, the "SUPPLEMENTAL FINANCIAL STATEMENTS"). Sellers shall provide such Supplemental Financial -21- 23 Statements to Citadel promptly upon such Supplemental Financial Statements becoming available to Sellers. The Supplemental Financial Statements shall be subject to the representations and warranties as set forth in Section 4.4. 6.11 CONSENTS. Exercise all reasonable efforts (not involving the payment by either Seller of any money to any party to any Assigned Contract) to obtain, prior to the Closing the consent and approval of any third parties whose consent or approval is necessary in connection with the consummation of the transactions contemplated hereby, with respect to the Assigned Contracts set forth on SELLERS' DISCLOSURE SCHEDULE and requiring such consent. If any such consent or approval is not obtained, Sellers will use commercially reasonable efforts (not involving the payment of money to any Person) to secure an arrangement satisfactory to Citadel intended to provide for Citadel following the Closing the benefits under each Assigned Contract for which such consent or approval is not obtained; provided, however, that Citadel shall have the right to terminate this Agreement or to seek damages or other remedies from Sellers as a result of any failure by Sellers to obtain any such consent or approval set forth on SELLERS' DISCLOSURE SCHEDULE, if alternative arrangements are not satisfactory to Citadel. Sellers shall also execute a consent in a form provided by Citadel, allowing Citadel to assign all of its rights under this Agreement and any related documents to one or more of Citadel's lenders upon default by Citadel under the relevant loan documents. Nothing in this Agreement will constitute a transfer or an attempted transfer of any Assigned Contract which by its terms or under applicable law or governmental rules or regulations requires the consent or approval of a third party (including, without limitation, a Governmental Authority) unless such consent or approval is obtained. 6.12 FURTHER INFORMATION. Furnish to Citadel prior to the Closing such financial (including tax), legal and other information with respect to Sellers and the Station as Citadel or its authorized representatives may from time to time reasonably request. 6.13 NOTICE. Promptly notify Citadel in writing upon the occurrence or the nonoccurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty of Sellers set forth in this Agreement. 6.14 IMPACT OF LOCAL MARKETING AGREEMENT. From and after the effective date of the Local Marketing Agreement, the covenants of Sellers relating to the operation of the Station and the Purchased Assets from and after such date shall be conditioned upon Citadel's performance, in all material respects, of its obligations under the Local Marketing Agreement. SECTION 7 NEGATIVE COVENANTS OF SELLERS -22- 24 From and after the date of this Agreement and until the Closing, neither Seller shall take, or cause to be taken, any of the following actions without Citadel's prior approval, which may not be unreasonably withheld: 7.1 SALES, TRANSFERS AND LIENS. Make any sale, transfer, assignment, conveyance, mortgage, hypothecation, encumbrance or other placement of any Lien on any of the Purchased Assets, except in the ordinary course of business, which do not materially interfere with the operations of the Station, and which in the case of a sale, transfer or assignment, is replaced with an asset of equal or greater value, and, in the case of a conveyance, mortgage, hypothecation, encumbrance or other Lien, is released at or prior to the Closing. 7.2 ASSUMED OBLIGATIONS. Amend, terminate or renew any of the Assumed Obligations (including any renewal or termination resulting from the failure to provide, after the date of this Agreement, timely notice of nonrenewal or termination as required by the terms of any of the Assumed Obligations). 7.3 BREACHES, DEFAULTS. Do any act or omit to do any act, or permit any act or omission to occur, that will cause a breach of any contract, commitment or obligation of it in any respect that would have a material adverse effect on the Purchased Assets or the business operations of the Station as presently conducted. 7.4 OBLIGATIONS. Incur any Obligations except in the ordinary course of business in a manner consistent with past practices. 7.5 SALARY INCREASES. Increase any salary, other payments, disbursement or distributions in any manner or form to any employees of either Seller except (A) in the ordinary course of business consistent with past practices or (B) in accordance with the existing terms of contracts entered into prior to the date of this Agreement. 7.6 NON-SOLICITATION. Directly or indirectly solicit or negotiate with any Person (other than a party hereto) or accept any proposal to acquire either Seller or the Station in whole or in part. SECTION 8 COVENANTS OF CITADEL Citadel hereby covenants as follows: 8.1 COMPLIANCE WITH LAW. Citadel shall comply with all applicable laws and regulations required for the valid and effective consummation of the transactions contemplated by this Agreement. -23- 25 8.2 NOTICE. Citadel shall promptly notify Sellers in writing upon the occurrence or the non-occurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a breach of or default under, or render misleading or untrue in any material respect, any agreement, covenant, representation or warranty of Citadel set forth in this Agreement. 8.3 ACCOUNTS RECEIVABLE. Subject to Citadel's receipt from Sellers at the Closing of a list (the "ACCOUNTS RECEIVABLE LIST") of accounts receivable of the Station existing as of the Closing, exclusive of Trade Receivables, if any (the "ACCOUNTS RECEIVABLE"), for a period of 120 days commencing with the Closing Date (the "CITADEL COLLECTION PERIOD"), Citadel, as agent for Sellers, shall collect the Accounts Receivable in accordance with Citadel's normal collection processes and procedures. In no event shall Citadel be required to institute litigation or to retain third parties to institute collection procedures with respect to the Accounts Receivable. All remittances will be applied first to the oldest Accounts Receivable, unless the client asserts that a dispute exists with respect to a particular account or the client specifies the particular invoice to which the payment is to be applied, in which case the remittances shall be applied to the specific account and Citadel shall promptly notify Sellers of any dispute. Remittances collected by Citadel on behalf of Sellers shall be remitted to Sellers without offset of any kind within 10 days after the end of each calendar month during the Citadel Collection Period, and within five days after termination of the Citadel Collection Period. During the Citadel Collection Period, at Sellers' option, Sellers shall be permitted to collect the Accounts Receivable that remain outstanding after 60 days, or are disputed in writing by the relevant account debtor. Each remittance by Citadel to Sellers shall be accompanied by a written report from Citadel setting forth the aggregate amount of the Accounts Receivable and the aggregate amount of cash collections of such Accounts Receivable during the period for which payment is made, along with a breakdown by account debtor. At the end of the Citadel Collection Period, Citadel shall account for all collected Accounts Receivable and provide Sellers with all documentation related to uncollected Accounts Receivable, and Citadel shall have no further responsibilities with respect to any uncollected Accounts Receivables except to remit promptly to Sellers any amounts subsequently received by Citadel. Citadel shall have no obligation with respect to any Accounts Receivable it is unable to collect. After the end of the Citadel Collection Period, Sellers shall be entitled to collect any Accounts Receivable that remain uncollected. -24- 26 8.4 PERFORMANCE OF LOCAL MARKETING AGREEMENT. From and after the effective date of the Local Marketing Agreement, Citadel shall perform and discharge, in all material respects, its obligations in connection with the operation of the Station and the Purchased Assets from and after such date in accordance with the terms of the Local Marketing Agreement. SECTION 9 ADDITIONAL COVENANTS OF THE PARTIES 9.1 APPLICATION FOR TRANSFER OF CONTROL. As promptly as practicable after the date of this Agreement, and in no event later than 10 days after the date of this Agreement, Sellers and Citadel shall file an application (the "FCC APPLICATION") with the FCC to approve the transfer of control of the Station from Sellers to Citadel (or its designee pursuant to Section 2.4) (the "FCC APPROVAL"). Citadel shall have primary responsibility for filing and prosecuting the FCC Application. The parties agree that they shall prosecute the FCC Application (and shall cooperate with each other in the timely prosecution thereof), in good faith and with due diligence, and within the time allowed therefor by the rules and regulations of the FCC. Sellers and Citadel shall each take all necessary actions on its part to obtain the FCC Approval. Citadel shall advance the filing fee for the FCC Application, and Sellers shall reimburse Citadel for one-half of such filing fee at the Closing. All other costs and expenses incurred by each party in connection with the filing and prosecution of the FCC Application shall be paid by the party incurring the cost or expense. 9.2 LOCAL MARKETING AGREEMENT. Concurrently with the execution of this Agreement, Citadel and Sellers shall execute and deliver a Local Marketing Agreement for the Station in the form of EXHIBIT B attached hereto (the "LOCAL MARKETING AGREEMENT"); provided, however, that the Local Marketing Agreement shall not be effective, and neither party shall have any obligations thereunder, until the conditions set forth in Sections 11.8 and 12.10 have been satisfied. 9.3 ADJUSTMENTS AT CLOSING. Without duplication, the following items (in addition to similar items which are customarily prorated) shall be prorated between Citadel and Sellers through and including the Closing Date, and the Purchase Price appropriately increased or decreased as a result thereof: (a) Amounts payable under the Real Property Leases and the Assigned Contracts; (b) Power, utility and telephone charges incurred in connection with the Station; (c) Accrued Taxes existing as of the Closing; and -25- 27 (d) FCC filing fees, as provided in Section 9.1. Proration of real and personal property taxes shall be based upon the most recent assessments available. Each of the parties shall duly cooperate with the other in making the foregoing prorations, adjustments and payments. If, for any reason beyond the reasonable control of the parties, information necessary to calculate the required prorations is unavailable before the Closing Date, such item shall be prorated after the Closing Date as soon as such information is available, and Sellers and Citadel shall cooperate with each other in regard thereto and shall pay, each to the other, any amounts which may be owing as a result of such subsequent prorations. If, at any time after the Closing Date, errors are discovered in any prorations made pursuant to this Section 9.3, Sellers and Citadel shall correct such errors and pay, each to the other, any sums owing as a result of such correction. All prorations to the extent feasible shall be made on the Closing Date. 9.4 BROKERAGE. Sellers and Citadel represent and warrant to each other that except for Broker and as disclosed in Section 9.8 with respect to the Natural State Acquisition, no Person has provided services as a broker, agent or finder in connection with the transactions contemplated by this Agreement. As between Sellers and Citadel, Sellers are fully responsible for the payment of any fee, commission, claim or expense of Broker, and Sellers shall indemnify and hold harmless Citadel for any and all fees, commissions, claims or expenses, including attorneys' fees asserted by Broker. Sellers and Citadel shall each indemnify and hold harmless the other for any and all claims or expenses, including attorneys' fees, asserted by any Person other than Broker purporting to act on behalf of the respective indemnitor as a broker, agent or finder in connection with the transactions contemplated by this Agreement. 9.5 RISK OF LOSS. If any loss or damage to any of the Purchased Assets occurs prior to the Closing (i) which has a material adverse effect on the Station and (ii) such loss or damage is not susceptible of repair, replacement or restoration with sufficient, collectible insurance proceeds available for such purposes or by Sellers at their sole cost and expense to substantially the same condition as existed before such loss or damage, then the parties shall adjust the Purchase Price to reflect the diminution in value of the Station attributable to the impairment of such assets. 9.6 ACTIONS WITH FCC. In the event any investigation, order to show cause, notice of violation, notice of apparent liability or a forfeiture, material complaint, petition to deny or informal objection is instituted or filed against any party hereto (whether in connection with the proceedings to approve the FCC Application or otherwise), such party shall promptly notify the other party hereto in writing of such occurrence and shall thereafter immediately take all reasonable measures to contest the same in good faith and seek the removal or favorable resolution of such action, order, notice or complaint. 9.7 COOPERATION. During the seven-year period immediately following the Closing, Citadel shall cooperate with Sellers in providing Sellers all information reasonably requested and permitting Sellers access to all records relating to the period of ownership of the Station -26- 28 by Sellers prior to the Closing. The cost and expense in providing or permitting access to information hereunder shall be borne by Sellers. Sellers, as a condition to being provided with access to information hereunder, shall, at the request of Citadel, execute a confidentiality agreement in form and substance acceptable to Citadel in its reasonable discretion. Notwithstanding the foregoing, Citadel may discard any such records during such seven-year period if (i) Citadel notifies Sellers of Citadel's intent to discard such records and (ii) Sellers do not, within 10 days after receipt of such notice, retrieve such records from Citadel's premises. 9.8 NATURAL STATE ACQUISITION. CDB Broadcasting shall comply with each of its covenants under the Natural State Intent Letter and shall proceed, in good faith, towards entering into the Natural State Definitive Agreement. From and after the time, if any, at which the Natural State Definitive Agreement is entered into, CDB Broadcasting shall comply with each of its covenants under the Natural State Definitive Agreement and shall proceed towards closing the Natural State Acquisition. Sellers and Citadel contemplate that (i) the Natural State Definitive Agreement will be entered into promptly after the date of this Agreement and (ii) the closing of the Natural State Acquisition (the "NATURAL STATE CLOSING") will occur promptly following the Closing. In the event that the Natural State Closing occurs prior to the Closing (and the Natural State Acquisition is consummated in accordance with the Natural State Definitive Agreement), (i) a copy of all deliveries made at the Natural State Closing shall be delivered to Citadel; (ii) the Purchased Assets shall include the capital stock of Natural State; (iii) for purposes of Sellers' representations, warranties and covenants herein, the term "Station" shall be deemed to include the Pending Station; (iv) the Purchase Price shall be increased by the cash portion of the purchase price and non-competition payments actually paid by CDB Broadcasting to the stockholders of Natural State at the Natural State Closing and by the sum of (A) any commission paid by CDB Broadcasting to W.N. Kate and Sunbelt Media and (B) reasonable closing costs paid by CDB Broadcasting in connection therewith (which sum shall not exceed $65,000 in the aggregate); and (v) the Assumed Obligations shall include (x) the promissory notes made by CDB Broadcasting in favor of the stockholders of Natural State at the Natural State Closing and (y) the non-competition agreements entered into by the stockholders of Natural State in favor of CDB Broadcasting at the Natural State Closing. Sellers shall keep Citadel apprised of the status of the Natural State Definitive Agreement and the Natural State Acquisition and shall provide Citadel with such information as it reasonably requests regarding Natural State and the Natural State Acquisition. CDB Broadcasting, at its option, shall have the right to assign its rights under the Natural State Definitive Agreement, if any, to Citadel in exchange for (a) Citadel's assumption of CDB Broadcasting's obligations thereunder and (b) Citadel granting CDB Broadcasting an option to reacquire the capital stock of Natural State (on the same terms and conditions as set forth in the Natural State Definitive Agreement) in the event this Agreement is terminated; provided, however, that CDB Broadcasting shall not make such assignment if it would delay the consummation of the Natural State Acquisition or the transactions contemplated hereby. -27- 29 SECTION 10 THE CLOSING 10.1 CLOSING DATE. The Closing shall occur on a date mutually selected by Sellers and Citadel which is within 10 business days following the date that the FCC Approval has become a Final Order. The Closing shall begin at 10:00 a.m., local time, on the date of the Closing (the "CLOSING DATE") at the offices of Friday, Eldredge & Clark, 2000 First Commercial Building, 400 West Capitol Avenue, Little Rock, Arkansas 72201, counsel for Sellers, or at such other time and place as the parties may agree in writing. 10.2 CLOSING DOCUMENTS. At the Closing: (a) Sellers shall deliver to Citadel all certificates, consents (including any third party consents required as to the Assumed Obligations), estoppels and other documents (including bills of sale and assignments) otherwise required to be delivered by Sellers pursuant to this Agreement or as a condition precedent to Citadel's fulfillment of its obligations hereunder. (b) Citadel shall deliver to Sellers the following: (i) immediately available funds in the aggregate amount of the Purchase Price as required by the provisions of this Agreement; and (ii) all certificates and other documents (including an assumption agreement relating to the Assumed Obligations) required to be delivered by Citadel to Sellers pursuant to this Agreement or as a condition precedent to Sellers' fulfillment of their obligations under this Agreement. SECTION 11 CONDITIONS TO SELLERS' OBLIGATION TO CLOSE The obligation of Sellers to consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, any or all of which may be waived by Sellers in their sole discretion (other than those set forth in Section 11.7): 11.1 OPINION OF CITADEL'S COUNSEL. Sellers shall have received an opinion of counsel for Citadel, dated the date of the Closing, in form and substance satisfactory to Sellers, to the effect that: (a) Citadel is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. -28- 30 (b) Citadel is duly qualified and in good standing in the State of Arkansas. (c) Citadel has full corporate power and authority to own its assets and properties and to conduct its business and has all necessary approvals, permits, licenses and authorizations to own its properties and to conduct its business in the manner and in the locations presently owned and conducted. (d) This Agreement, together with all other documents and instruments required to be executed or delivered by Citadel in connection with the transactions contemplated hereby, each has been duly authorized, executed and delivered by Citadel to the extent Citadel is a party thereto and constitutes a valid and legally binding obligation of Citadel to the extent Citadel is a party thereto, enforceable against Citadel in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (e) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Certificate of Incorporation or Bylaws of Citadel or, to the knowledge of such counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel after due investigation, violates or will violate, or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under, or results or will result in the termination of or the creation or imposition of any Lien pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which Citadel is a party or by which Citadel or any of the assets of Citadel is bound and which is known to Citadel's counsel, all as set forth on CITADEL'S DISCLOSURE SCHEDULE. Nothing contained in this Section 11.1 shall require an opinion by such counsel with respect to FCC matters. 11.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Citadel contained herein shall be true and correct in all material respects at and as of the Closing with the same effect as though all such representations and warranties were made at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified except for such inaccuracies as do not, individually or in the aggregate, have a material effect on Citadel's ability to consummate the transactions contemplated by this Agreement) and Citadel shall have delivered to Sellers a certificate to that effect, dated the date of the Closing, signed by the President of Citadel. 11.3 NO LITIGATION. No injunction relating to any action, suit or proceeding against either Seller relating to the consummation of any of the transactions contemplated by this Agreement or any action by any Governmental Authority shall have been issued. -29- 31 11.4 OTHER CERTIFICATES. Sellers shall have received certificates as to the good standing of Citadel in the States of Nevada and Arkansas, each as of a date not more than 20 days before the Closing, and such other certificates, instruments and other documents, in form and substance satisfactory to Sellers, as Sellers shall have reasonably requested in connection with the transactions contemplated hereby. 11.5 CORPORATE ACTION. All corporate action necessary to authorize the execution, delivery and performance by Citadel of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by Citadel, and Citadel shall have delivered to Sellers certified copies of the resolutions of Citadel's board of directors authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of its officers and employees in carrying out the terms and provisions of this Agreement. 11.6 ACTS TO BE PERFORMED. Each of the covenants, acts and undertakings of Citadel to be performed on or before the Closing Date pursuant to the terms hereof shall have been duly performed. 11.7 FCC APPROVAL. The FCC Approval shall have been obtained. 11.8 OTHER TRANSACTIONS. The transactions contemplated by the Real Estate Purchase Agreement, the Snider Corporation Agreement and the Snider Broadcasting Agreement shall be consummated on the Closing Date. SECTION 12 CONDITIONS TO CITADEL'S OBLIGATION TO CLOSE The obligation of Citadel to consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, any or all of which may be waived by Citadel in its sole discretion (other than those set forth in Sections 12.9): 12.1 OPINION OF SELLERS' COUNSEL. Citadel shall have received an opinion of counsel for Sellers, dated the date of the Closing, in form and substance satisfactory to Citadel, to the effect that: (a) Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Arkansas. (b) Each Seller have full power and authority to own its assets and properties and to conduct its Business and has all necessary approvals, permits, licenses and authorizations to own its properties and to conduct its Business in the manner and in the locations presently owned and conducted. -30- 32 (c) This Agreement, together with all other documents and instruments required to be executed or delivered by Sellers in connection with the transactions contemplated by this Agreement, has been duly authorized, executed and delivered by each Seller, to the extent it is a party thereto, and constitutes a valid and legally binding obligation of each Seller to the extent it is party thereto, enforceable against Sellers in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (d) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Articles of Incorporation or Bylaws of each Seller or, to the knowledge of such counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel after due investigation, violates or will violate or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which either Seller is a party or by which either Seller, or any of the assets of either Seller, is bound and which is known to Sellers' counsel, all as set forth on SELLERS' DISCLOSURE SCHEDULE. Except for (1) the FCC Approvals and (2) the consents disclosed on SELLERS' DISCLOSURE SCHEDULE, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of Sellers, in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. (e) To the knowledge of such counsel, except as disclosed on SELLERS' DISCLOSURE SCHEDULE, there are no claims, disputes, actions, suits or proceedings pending or threatened against Sellers or any of the assets of Sellers. Nothing contained in this Section 12.1 shall require an opinion of such counsel with respect to FCC matters. 12.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and warranties of Sellers contained herein shall be true and correct in all material respects at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified except for such inaccuracies as do not, individually or in the aggregate, have a material effect on the Station, Sellers' ability to consummate the transactions contemplated by this Agreement, or the Business as a whole) with the same effect as though all such representations and warranties were made at and as of the Closing and Sellers shall have complied with all their covenants contained herein; and Sellers shall have delivered to Citadel a certificate to that effect, dated the date of the Closing, signed by the President of each Seller. -31- 33 12.3 NO LITIGATION. No injunction relating to any action, suit or proceeding against either Seller or Citadel relating to the consummation of any of the transactions contemplated by this Agreement shall have been issued. 12.4 OTHER CERTIFICATES. Citadel shall have received a certificate as to the good standing of each Seller as a corporation in Arkansas as of a date not more than 20 days before the Closing, and such other certificates, instruments and other documents customary for transactions of the nature provided for in this Agreement, in form and substance reasonably satisfactory to Citadel, as Citadel shall have reasonably requested in connection with the transactions contemplated by this Agreement. 12.5 CORPORATE ACTION. All corporate action necessary to authorize the execution, delivery and performance by each Seller of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by each Seller, and Sellers shall have delivered to Citadel certified copies of the resolutions of Sellers' boards of directors authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of its officers and employees in carrying out the terms and provisions of this Agreement. 12.6 ACTS TO PERFORMED. Each of the covenants, acts and undertakings of Sellers to be performed on or before the Closing Date pursuant to the terms hereof shall have been duly performed. 12.7 UCC SEARCHES. Sellers shall have delivered to Citadel Uniform Commercial Code judgment and lien searches from the appropriate county and state agencies showing all Liens on the Purchased Assets, which searches shall be conducted not more than 30 days prior to the Closing. Sellers may cause such lien searches to be prepared by a third party, in which case Sellers shall not be responsible for any inaccuracies in such lien searches unless Sellers have actual knowledge of their inaccuracy. Notwithstanding the foregoing, Sellers shall remain responsible for satisfying any Lien on the Purchased Assets even if such searches are inaccurate. 12.8 FILINGS, CONSENTS, APPROVALS AND ESTOPPEL CERTIFICATES. All filings, consents, approvals and estoppel certificates required by or reasonably requested by Citadel pursuant to this Agreement, or necessary to consummate the transactions contemplated under this Agreement, shall have been obtained. 12.9 FCC APPROVAL. The FCC Approval shall have been obtained. -32- 34 12.10 OTHER TRANSACTIONS. The transactions contemplated by the Real Estate Purchase Agreement, the Snider Corporation Agreement and the Snider Broadcasting Agreement shall be consummated on the Closing Date. 12.11 AGREEMENT NOT TO COMPETE. Ted L. Snider, Jr. and Calvin G. Arnold shall each have executed and delivered an Agreement Not to Compete in favor of Citadel, substantially in the form attached as EXHIBIT C hereto. SECTION 13 INDEMNIFICATION 13.1 INDEMNIFICATION BY SELLERS. Subject to the limitations and procedures set forth in this Section 13, Sellers shall jointly and severally indemnify and hold harmless Citadel from and against all losses, claims, demands, damages, liabilities, obligations, costs and/or expenses, including, without limitation, reasonable fees and disbursements of counsel (hereinafter referred to collectively as "DAMAGES"), which are sustained or incurred by Citadel, to the extent that such Damages are sustained or incurred by reason of (i) the breach of any of the obligations or covenants of either Seller in this Agreement or (ii) the breach of any of the representations or warranties made by either Seller in this Agreement. 13.2 INDEMNIFICATION BY CITADEL. Subject to the limitations and procedures set forth in this Section 13, Citadel shall indemnify and hold harmless Sellers from and against any and all Damages sustained or incurred by Sellers, to the extent such Damages are sustained or incurred by Sellers by reason of (i) the breach of any of the obligations or covenants of Citadel in this Agreement or (ii) the breach of any of the representations or warranties made by Citadel in this Agreement. 13.3 PROCEDURE FOR INDEMNIFICATION. In the event that any party to this Agreement shall incur any Damages in respect of which indemnity may be sought by such party pursuant to this Section 13 or any other provision of this Agreement, the party indemnified hereunder (the "INDEMNITEE") shall notify the party providing indemnification (the "INDEMNITOR") promptly. In the case of third party claims, such notice shall in any event be given within 10 days of the filing or assertion of any claim against the Indemnitee stating the nature and basis of such claim; provided, however, that any delay or failure to notify any Indemnitor of any claim shall not relieve it from any liability except to the extent that the Indemnitor demonstrates that the defense of such action has been materially prejudiced by such delay or failure to notify. In the case of third party claims, the Indemnitor shall, within 10 days of receipt of notice of such claim, notify the Indemnitee of its intention to assume the defense of such claim. If the Indemnitor assumes the defense of the claim, the Indemnitor shall have the right and obligation (a) to conduct any proceedings or negotiations in connection therewith and necessary or appropriate to defend the Indemnitee, (b) to take all other required steps or proceedings to settle or defend any such claims, and (c) to employ counsel to contest any such claim or liability in the name of the Indemnitee or otherwise. If the Indemnitor shall not assume the -33- 35 defense of any such claim or litigation resulting therefrom, the Indemnitee may defend against any such claim or litigation in such manner as it may deem appropriate and the Indemnitee may settle such claim or litigation on such terms as it may deem appropriate, and assert against the Indemnitor any rights or claims to which the Indemnitee is entitled. Payment of Damages shall be made within 10 days of a final determination of a claim. A final determination of a disputed claim shall be (a) a judgment of any court determining the validity of a disputed claim, if no appeal is pending from such judgment or if the time to appeal therefrom has elapsed, (b) an award of any arbitration determining the validity of such disputed claim, if there is not pending any motion to set aside such award or if the time within to move to set such award aside has elapsed, (c) a written termination of the dispute with respect to such claim signed by all of the parties thereto or their attorneys, (d) a written acknowledgment of the Indemnitor that it no longer disputes the validity of such claim, or (e) such other evidence of final determination of a disputed claim as shall be acceptable to the parties. 13.4 SURVIVAL. (a) SELLERS. Each of the representations and warranties made by Sellers in this Agreement shall survive for a period of 24 months after the Closing Date, notwithstanding any investigation at any time made by or on behalf of Citadel, and upon the expiration of such 24-month period such representations and warranties shall expire except as follows: (i) the representations and warranties of Sellers contained in Sections 4.6 and 4.11 shall expire at the time the period of limitations expires for the assessment by the taxing authority of additional Taxes with respect to which the representations and warranties relate; (ii) the representations and warranties of Sellers contained in Sections 4.16 and 4.17 shall expire at the time the latest period of limitations expires for the enforcement by an applicable Governmental Authority of any remedy with respect to which the particular representation or warranty relates; and (iii) the representations and warranties of Sellers contained in Sections 4.1, 4.2, 4.3 and 4.8(a) shall not expire but shall continue indefinitely. No claim for the recovery of Damages may be asserted by Citadel against Sellers or their successors in interest after such representations and warranties shall thus expire; provided, however, that claims for Damages first asserted in writing within the applicable period shall not thereafter be barred. (b) CITADEL. Each of the representations and warranties made by Citadel in this Agreement shall survive for a period of 24 months after the Closing Date, notwithstanding any investigation at any time made by or on behalf of Sellers, and upon the expiration of such 24-month period such representations and warranties shall expire, except that the representations and warranties of Citadel contained in Sections 5.1, 5.2 and 5.3 shall not expire but shall continue indefinitely. No claim for the recovery of Damages may be asserted by Sellers against Citadel or its successors in interest after such representations and warranties shall thus expire; provided, however, that claims for Damages first asserted in writing within the applicable period shall not thereafter be barred. -34- 36 13.5 LIMITATION OF SELLERS' LIABILITY. (a) THRESHOLD. Citadel shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.1 (other than Damages arising by reason of a breach of the representations and warranties made in Sections 4.1, 4.2, 4.3, 4.6 and 4.8(a)) until the aggregate of all such Damages suffered by Citadel exceeds $25,000 (the "THRESHOLD"); provided, however, that once such aggregate exceeds the Threshold, Citadel may recover all such Damages suffered since the Closing Date. (b) CEILING. Citadel shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.1 (other than Damages arising by reason of a breach of the representations and warranties made in Sections 4.6, 4.8(a), 4.11, 4.16 and 4.17 ("CITADEL'S CAP EXEMPT DAMAGES")) in excess of the Purchase Price. No maximum limitation shall apply, however, to the right of Citadel to recover Citadel's Cap Exempt Damages or Damages pursuant to clause (i) of Section 13.1. (c) EXCEPTIONS. Paragraphs (a) and (b) above shall not apply with respect to any claim for Damages relating to any intentional or fraudulent breach of a representation or warranty by Sellers, nor shall there be any survival limitation for any such claim. 13.6 LIMITATION OF CITADEL'S LIABILITY. (a) THRESHOLD. Sellers shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.2 (other than as a result of a breach of the representations and warranties made in Sections 5.1, 5.2 and 5.3) until the aggregate of all such Damages suffered by Sellers exceeds the Threshold; provided, however, that once such aggregate exceeds the Threshold, Sellers may recover all such Damages suffered since the Closing Date. (b) CEILING. Sellers shall not be entitled to recover Damages pursuant to clause (ii) of Section 13.2 in excess of the Purchase Price. No maximum limitation shall apply, however, to the right of Sellers to recover Damages pursuant to clause (i) of Section 13.2. (c) EXCEPTIONS. Paragraphs (a) and (b) above shall not apply with respect to any claim for Damages relating to any intentional or fraudulent breach of a representation or warranty by Citadel, nor shall there be any survival limitation for any such claim. SECTION 14 TERMINATION OF AGREEMENT: ADDITIONAL REMEDIES 14.1 MANNER. This Agreement and the transactions contemplated hereby may be terminated prior to completion of the Closing: (a) by mutual written consent of Citadel and Sellers; -35- 37 (b) by either Citadel or Sellers upon providing written notice to the other party at any time after December 31, 1997 if the FCC Approval has not been granted by the FCC, but only if the party providing such notice is not then in material breach of this Agreement; (c) by Citadel, upon providing written notice to Sellers, if as of the time set for Closing any of the conditions in Section 12 of this Agreement (except Section 12.9) has not been satisfied or waived by Citadel in writing, provided Citadel is not then in material breach of this Agreement; (d) by Sellers, upon providing written notice to Citadel, if as of the time set for Closing any of the conditions in Section 11 of this Agreement (except Section 11.7) has not been satisfied or waived by Sellers in writing, provided Sellers are not then in material breach of this Agreement; (e) by Sellers, upon providing written notice to Citadel, if Citadel fails to consummate the transactions contemplated hereunder after all conditions in Section 12 of the Agreement have been satisfied, provided Sellers are not then in material breach of this Agreement; (f) by Citadel, upon providing written notice to Sellers, if Sellers fail to consummate the transactions contemplated hereunder after all conditions in Section 11 of this Agreement have been satisfied, provided Citadel is not then in material breach of this Agreement; (g) by either party upon denial by the FCC of the FCC Application; and (h) by either party if any court of competent jurisdiction in the United States or any other United States governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other actions shall have become final and non-appealable. The foregoing notwithstanding, in the event any party hereto elects to terminate this Agreement in accordance with paragraphs (a) through (h) above, then any party hereto shall have the right to terminate, or cause its Affiliate to terminate, the Real Estate Purchase Agreement, the Snider Corporation Agreement and the Snider Broadcasting Agreement. 14.2 ADDITIONAL REMEDIES. (a) In the event of the termination of this Agreement by Sellers (i) pursuant to Section 14.1(d) or 14.1(e) (any such event being a "DRAW CONDITION"), Sellers shall be entitled to draw upon and receive the proceeds of the Letter of Credit, but shall not retain any rights to recover any actual damages they suffer as a result of such termination and the breach -36- 38 relating to such damages. In the event of any other termination of this Agreement pursuant to any other provision of Section 14.1, Citadel shall be entitled to a return of, and Sellers shall return to Citadel, the original Letter of Credit and, in that event, Sellers will no longer have any liability under this Agreement. (b) The parties recognize and agree that Citadel has relied on this Agreement and expended considerable effort and resources related to the transactions contemplated hereunder, that the rights and benefits conferred upon Citadel herein are unique, and that damages may not be adequate to compensate Citadel in the event Sellers improperly refuse to consummate the transactions contemplated hereunder. The parties therefore agree that Citadel shall be entitled, at its option and in lieu of terminating this Agreement pursuant to Section 14.1, to have this Agreement specifically enforced by a court of competent jurisdiction; provided, however, that Citadel may not specifically enforce this Agreement if it has previously terminated this Agreement and received the original Letter of Credit. SECTION 15 GENERAL 15.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each representation and warranty herein contained shall survive the Closing for the periods described in Section 13.4, notwithstanding any investigation at any time made by or on behalf of any party to this Agreement. 15.2 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts, of the State of Arkansas. 15.3 NOTICES. Any notices or other communications required or permitted under this Agreement shall be delivered personally or sent by registered or certified mail, postage prepaid, delivered by overnight delivery or sent by facsimile, addressed as follows: To Citadel: Citadel Broadcasting Company 1015 Eastman Drive Bigfork, Montana 59911 Attn: Lawrence R. Wilson Fax: (406) 837-5373 With copy to: Citadel Broadcasting Company 140 South Ash Avenue Tempe, Arizona 85281 Attn: Donna L. Heffner Fax: (602) 731-5229 -37- 39 With copy to: Eckert Seamans Cherin & Mellott, LLC 600 Grant Street 42nd Floor Pittsburgh, Pennsylvania 15219 Attn: Bryan D. Rosenberger, Esq. Fax: (412) 566-6099 To Sellers: CDB Broadcasting Corporation 124 West Capitol Avenue, Suite 200 Little Rock, Arizona 72201 Attn: Ted L. Snider, Jr. Fax: (501) 210-7628 With copy to: Friday, Eldredge & Clark 2000 First Commercial Building 400 West Capitol Avenue Little Rock, Arkansas 72201 Attn: Price C. Gardner, Esq. Fax: (501) 376-2147 or such other addresses as shall be similarly furnished in writing by either party. Such notices or communications shall be deemed to have been given as of the date of personal delivery, or if mailed, the date the return receipt is signed or the date on which delivery is refused, or if delivered by overnight delivery or facsimile, on the date of receipt. 15.4 ENTIRE AGREEMENT. This instrument supersedes all prior communications, understandings and agreements of or between the parties with respect to the subject matter of this Agreement and contains the entire agreement between the parties with respect to the transactions contemplated in this Agreement. Except as otherwise set forth in this Agreement, there are no other representations, warranties or covenants of any party hereto with respect to the subject matter of this Agreement. 15.5 HEADINGS. The headings of this Agreement are inserted for convenience only and shall not constitute a part of this Agreement. 15.6 SCHEDULES, EXHIBITS. All schedules and exhibits annexed to this Agreement are hereby incorporated in this Agreement by this reference. 15.7 EXPENSES. Each party shall bear its own costs and expenses incurred by it in connection with the transactions pursuant to this Agreement. 15.8 AMENDMENT. This Agreement may be amended, modified or superseded, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, -38- 40 only by a written instrument executed on behalf of all of the parties or, in the case of a waiver, by the party waiving compliance. 15.9 WAIVER. The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect the right to enforce that provision or any other provision of this Agreement at any time thereafter. 15.10 ASSIGNMENT. Except as provided in Sections 2.4 and 2.5, neither this Agreement nor any of the rights or obligations under this Agreement may be assigned by Sellers without the prior written consent, in their sole discretion, of Citadel, or by Citadel without the prior written consent, in their sole discretion, of Sellers. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligation under this Agreement. 15.11 PRIOR CONTROL. Until the Closing, Sellers shall maintain control of the Station. 15.12 ATTORNEYS' FEES. In the event of any action arising out of this Agreement, the prevailing party shall be entitled to recover its costs, expenses and reasonable attorney's fees incurred in connection with the dispute from the other party. 15.13 COUNTERPARTS; FAX SIGNATURES. This Agreement may be executed in one or more counterparts, each of which together shall constitute a single instrument. Signatures on this Agreement transmitted by facsimile shall be deemed to be original signatures for all purposes of this Agreement. 15.14 DISPUTE RESOLUTION. Except as provided below, any dispute arising out of or relating to this Agreement or the breach, termination or validity hereof shall be finally settled by arbitration conducted expeditiously in accordance with the CPR Rules. The Center for Public Resources shall appoint a neutral advisor from its National CPR Panel. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof. The place of arbitration shall be Little Rock, Arkansas. Such proceedings shall be administered by the neutral advisor in accordance with the CPR Rules as he/she deems appropriate; provided, however, such proceedings shall be guided by the following agreed upon procedures: (a) mandatory exchange of all relevant documents, to be accomplished within 45 days of the initiation of the procedure; (b) no other discovery; -39- 41 (c) hearings before the neutral advisor which shall consist of a summary presentation by each side of not more than three hours; such hearings to take place on one or two days at a maximum; and (d) decision to be rendered not more than 10 days following such hearing. The provisions of this Section 15.14 shall not apply with regard to any equitable remedies to which a party may be entitled under this Agreement. [Remainder of page intentionally left blank.] -40- 42 IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date above first written. CDB BROADCASTING CORPORATION By: /s/ Ted Snider ------------------------------ Ted L. Snider, Jr., President CDB LICENSE CORPORATION By: /s/ Ted Snider ------------------------------ Ted L. Snider, Jr., President CITADEL BROADCASTING COMPANY By: /s/ Lawrence R. Wilson ------------------------------ Its: President ----------------------------- -41- 43 INDEX OF SCHEDULES AND EXHIBITS Schedule 2.1 - Asset Schedule Schedule 2.2 - Excluded Assets Schedule 2.3 - Assumed Obligations Schedule 4.0 - Sellers' Disclosure Schedule Schedule 5.0 - Citadel's Disclosure Schedule Exhibit A - Letter of Credit Exhibit B - Local Marketing Agreement Exhibit C - Agreement Not to Compete [Pursuant to Regulation S-K, Item 601(b)(2), Registrant agrees to furnish supplementally a copy of these schedules or exhibits to the Securities Exchange Commission upon request.] EX-3.I.A 7 CITADEL BROADCASTING CO. S-4 1 EXHIBIT 3(i)(a) CERTIFICATE OF RESTATED ARTICLES OF INCORPORATION OF CITADEL BROADCASTING COMPANY The undersigned, being the President and Secretary, respectively, of Citadel Broadcasting Company (the "Corporation"), a corporation organized and existing under the laws of the State of Nevada, do hereby declare and state that: FIRST: The name of the corporation is Citadel Broadcasting Company, the date of filing of its original Certificate of Incorporation with the Secretary of State of the State of Nevada was August 21, 1991; the date of filing of the Certificate of Amended and Restated Certificate of Incorporation with the Nevada Secretary of State was July 24, 1992; the date of filing of the Certificate of Second Amended and Restated Certificate of Incorporation with the Nevada Secretary of State was May 4, 1993; the date of filing of the Certificate of Amendment to Certificate of Incorporation with the Nevada Secretary of State was October 1, 1993; and the date of filing of the Certificate of Amendment to Certificate of Incorporation with the Nevada Secretary of State was April 26, 1994. SECOND: These Amended and Restated Articles of Incorporation have been duly adopted in accordance with the provisions of Sections 78.385, 78.390 and 78.403 of the Nevada Revised Statutes. The sole stockholder of the Corporation has duly adopted a resolution to amend and restate the Certificate of Incorporation, as set forth in these Restated Articles of Incorporation. THIRD: The text of the Certificate of Incorporation is hereby amended and restated to read as herein set forth in full: ARTICLE I NAME OF THE CORPORATION The name of this corporation is Citadel Broadcasting Company. ARTICLE II REGISTERED AGENT AND REGISTERED OFFICE The address of the Corporation's registered office in the State of Nevada is c/o The Corporation Trust Company of Nevada, One East First Street, City of Reno, County of Washoe, State of Nevada. The name of its resident agent at such address is The Corporation Trust Company of Nevada. 2 ARTICLE III PURPOSE OF THE CORPORATION The purpose of the Corporation is to engage in any or all lawful activity for which corporations may be organized under the General Corporation Law of the State of Nevada. ARTICLE IV CAPITAL STOCK; FCC MATTERS 4.1. Total Number of Shares of Stock. The total number of shares of stock of all classes that the Corporation shall have authority to issue is 4,136,300. The authorized capital stock is divided into 4,000,000 shares of Preferred Stock, no par value (the "Preferred Stock"), and 136,300 shares of Common Stock, $0.001 par value per share (the "Common Stock"). The shares of the Corporation, after the subscription price therefor has been paid, shall not be subject to assessment to pay the debts of the Corporation, and no shares issued as fully paid up shall ever be assessable or assessed. 4.2 Preferred Stock. (a) The shares of Preferred Stock of the Corporation may be issued from time to time in one or more classes or series thereof, the shares of each class or series thereof to have such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as are stated and expressed herein or in the resolution or resolutions providing for the issuance of such class or series, adopted by the Board of Directors as hereinafter provided. All shares of the same class and series of Preferred Stock will be identical, but shares of different classes or series of Preferred Stock need not be identical or rank equally except as provided by law or herein. (b) Authority is hereby expressly granted to the Board of Directors of the Corporation, subject to the provisions of this Article IV and to the limitations prescribed by the Nevada General Corporation Law, to authorize the issue of one or more classes, or series thereof, of Preferred Stock and with respect to each such class or series to fix by the resolution or resolutions providing for the issue of such class or series the voting powers, full or limited, if any, of the shares of such class or series and the designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof. The authority of the Board of Directors with respect to each class or series thereof shall include, but not be limited to, the determination or fixing of the following: (i) the maximum number of shares to constitute such class or series, which may subsequently be increased or decreased (but not below the number of shares of -2- 3 that class or series then outstanding) by resolution of the Board of Directors, the distinctive designation thereof and the stated value thereof if different than the par value thereof; (ii) the dividend rate of such class or series, the conditions and dates upon which such dividends shall be payable, the relation which such dividends shall bear to the dividends payable on any other class or classes of stock or any other series of any class of stock of the Corporation, and whether such dividends shall be cumulative or noncumulative; (iii) whether the shares of such class or series shall be subject to redemption by the Corporation and, if made subject to such redemption, the times, prices and other terms and conditions of such redemption; (iv) the terms and amount of any sinking fund established for the purchase or redemption of the shares of such class or series; (v) whether or not the shares of such class or series shall be convertible into or exchangeable for shares of any other class or classes of any stock or any other series of any class of stock of the Corporation, and, if provision is made for conversion or exchange, the times, prices, rates, adjustments, and other terms and conditions of such conversion or exchange; (vi) the extent, if any, to which the holders of shares of such class or series shall be entitled to vote with respect to the election of directors or otherwise; (vii) the restrictions, if any, on the issue or reissue of any additional shares of Preferred Stock; (viii) whether or not the issue of any additional shares of any such class or series or of any other class or series in addition to such class or series shall be subject to restrictions in addition to the restrictions, if any, on the issue of additional shares imposed in the resolution or resolutions fixing the terms of any outstanding class or series of Preferred Stock theretofore issued pursuant to this Section 4.2 and, if subject to additional restrictions, the extent of such additional restrictions; and (ix) the rights of the holders of the shares of such class or series upon the dissolution, liquidation or winding up of, or upon the distribution of assets of, the Corporation. For purposes of this Section 4.2, the voluntary sale, conveyance, lease, exchange or transfer of all or substantially all the property or assets of the Corporation or a consolidation or merger of the Corporation with one or more other corporations (whether or not the Corporation is the corporation surviving such consolidation or merger) shall not be deemed -3- 4 to be a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. The Board of Directors of the Corporation is further expressly vested with the authority to make the voting powers, designations, preferences, rights and qualifications, limitations or restrictions of any class or series of Preferred Stock dependent upon facts ascertainable outside this Certificate of Incorporation or of any amendment hereto, or outside the resolutions or resolutions providing for the issuance of such stock adopted by the Board of Directors, provided that the manner in which such facts shall operate upon the voting powers, designations, preferences, rights and qualifications, limitations or restrictions of such class or series of Preferred Stock is clearly and expressly set forth in the resolution or resolutions providing for the issue of such stock adopted by the Board of Directors of the Corporation. (c) Before any dividends shall be declared or paid or any distribution ordered or made upon the Common Stock (other than a dividend payable in Common Stock), the Corporation shall comply with the dividend and sinking fund provisions, if any, of any resolution or resolutions providing for the issuance of any class or series of Preferred Stock any shares of which shall at the time be outstanding. Subject to the foregoing sentence, the holders of Common Stock shall be entitled, to the exclusion of the holders of Preferred Stock of any and all classes and series, to receive such dividends as from time to time may be declared by the Board of Directors of the Corporation. 4.3 Common Stock. Except as otherwise provided in this Certificate of Incorporation, holders of Common Stock shall be entitled to one vote for each share of Common Stock held by them on each matter on which they are entitled to vote. The holders of Common Stock shall be entitled to participate share for share in any cash dividend which may be declared from time to time on the Common Stock of the Corporation by the Board of Directors and to receive pro rata the net assets of the Corporation on dissolution, liquidation or winding up of the Corporation, in both cases subject to all amounts to which the holders of Preferred Stock are entitled to receive or have set aside. 4.4 FCC Matters. In accordance with the Federal Communications Act of 1934, as amended ("Communications Act"), and the rules, regulations and policies promulgated by the FCC thereunder ("FCC Regulations"), the Board of Directors of the Corporation may: (a) prohibit the ownership or voting of more than 20% of the Corporation's outstanding capital stock by or for the account of aliens or their representatives or by a foreign government or representative thereof or by any corporation organized under the laws of a foreign country (collectively "Aliens"), or by or for corporations of which any officer is an Alien, more than one-fourth of its directors are Aliens, or of which more than one-fourth of its capital stock is owned of record or voted by Aliens, or by any other entity that is (i) subject to or deemed to be subject to management influence by Aliens or (ii) the equity of which is owned, controlled by, or held for the benefit of, Aliens in a manner that would cause the Corporation to be in violation of the Communications Act or the FCC -4- 5 Regulations; (b) prohibit any transfer of the Corporation's stock which would cause more than 20% of the Corporation's outstanding capital stock to be owned or voted by or for any person or entity designated in foregoing clause (a); and (c) prohibit the ownership, voting or transfer of any portion of its outstanding capital stock to the extent the ownership, voting or transfer of such portion would cause the Corporation to violate or otherwise result in violation of any provision of the Communications Act or the FCC Regulations. Notwithstanding any provisions contained herein to the contrary, if prior approvals must be obtained from the FCC (the "FCC Approvals"), (i) no stockholder other than the holders of Common Stock shall possess any voting rights except as permitted by law; (ii) no stockholder other than the holders of Common Stock may nominate, appoint or designate any member of the Board of Directors; and (iii) no stockholder shall be entitled to exercise any conversion rights or voting rights, until the FCC Approvals have been obtained. ARTICLE V LIABILITY To the full extent permitted by General Corporation Law of State of Nevada in effect from time to time and to no greater extent, no officer or member of the Board of Directors shall be liable for monetary damages for breach of fiduciary duty in his or her capacity as an officer or a director in any action brought by or on behalf of the Corporation or any of its shareholders. ARTICLE VI INDEMNIFICATION To the full extent permitted by law, the Corporation shall indemnify any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she is or was a director of the Corporation or any predecessor of the Corporation or serves or served any other enterprise as director at the request of the Corporation or any predecessor of the Corporation. ARTICLE VII DURATION The duration of the corporation shall be perpetual. ARTICLE VIII NO PREEMPTIVE RIGHTS The shareholders of the corporation shall have no preemptive rights. -5- 6 ARTICLE IX BOARD OF DIRECTORS The members of the governing board of the Corporation shall be styled as directors. The number of directors constituting the current Board of Directors is eight (8), and the number of directors shall be as fixed from time to time pursuant to the provisions contained in the Bylaws. The names and addresses of the current directors are: Lawrence R. Wilson John E. von Schlegell Michael J. Ahearn 1015 Eastman Drive The Endeavour Capital c/o Satloc, Inc. Bigfork, MT 59911 Fund Limited 4670 South Ash Avenue Partnership Tempe, AZ 85282 4380 SW Macadem Suite 460 Portland, OR 97201 Scott E. Smith Christopher P. Hall J. Walter Corcoran 200 West Madison Street Piliero, Goldstein, Oxford Analytical Suite 3510 Jenkins & Hall 200 Park Avenue Chicago, IL 60606 392 Madison Avenue New York, NY 10166 New York, NY 10017 Mark A. Leavitt Harlan A. Levy c/o Prudential 444 East 86th Street Securities New York, NY 10028 Incorporated 1 New York Plaza New York, NY 10273
DATED: June 30, 1997. (Signatures follow on next page) -6- 7 CITADEL BROADCASTING COMPANY, a Nevada corporation By: /s/ Lawrence R. Wilson ---------------------- Lawrence R. Wilson President By: /s/ Donna L. Heffner -------------------- Donna L. Heffner Secretary STATE OF N.Y. ) --------- ) SS: COUNTY OF N.Y. ) -------- The foregoing instrument was acknowledged before me this 30th day of June, 1997, by Lawrence R. Wilson, President of Citadel Broadcasting Company. Elaine Gerace ------------------------ Notary Public [SEAL: My Commission Expires: ELAINE GERACE Notary Public, State of New York 01GE4996717 Qualified in Queens County Commission Expires on May 18, 1998] STATE OF N.Y. ) --------- ) SS: COUNTY OF N.Y. ) -------- The foregoing instrument was acknowledged before me this 30th day of June, 1997, by Donna L. Heffner, Secretary of Citadel Broadcasting Company. Elaine Gerace ------------------------ Notary Public [SEAL: ELAINE GERACE Notary Public, State of New York 01GE4996717 My Commission Expires: Commission Expires May 18, 1998] -7- EX-3.I.B 8 CITADEL BROADCASTING CO. S-4 1 EXHIBIT 3(i)(b) AMENDMENT TO CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF THE 13-1/4% SERIES A EXCHANGEABLE PREFERRED STOCK AND THE 13-1/4% SERIES B EXCHANGEABLE PREFERRED STOCK OF CITADEL BROADCASTING COMPANY ("Amended Certificate of Designation") The undersigned hereby certify that they are the duly elected and acting President and Secretary, respectively, of CITADEL BROADCASTING COMPANY, a Nevada corporation, (the "Company"), and pursuant to Nev. Rev. Stat. Section 78.1955, DO HEREBY CERTIFY: I. That, a certificate of designation creating two series of Preferred Stock of the Company designated as 13-1/4% Series A Exchangeable Preferred Stock and 13-1/4% Series B Exchangeable Preferred Stock, was filed with the Nevada Secretary of State on July 2, 1997 (the "Original Designation"). The Original Designation is as follows: CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF THE 13-1/4% SERIES A EXCHANGEABLE PREFERRED STOCK AND THE 13-1/4% SERIES B EXCHANGEABLE PREFERRED STOCK OF CITADEL BROADCASTING COMPANY The undersigned hereby certify that they are the duly elected and acting President and Secretary of CITADEL BROADCASTING COMPANY, a Nevada corporation (the "Company"), and pursuant to Nev. Rev. Stat. Section 78.1955, DO HEREBY CERTIFY: WHEREAS, pursuant to authority conferred upon the Board of Directors by ARTICLE 4 of the Amended and Restated Articles of Incorporation of the Company (the "Articles"), the Board of Directors of the Company by unanimous written consent dated June 30, 1997 adopted the following resolution creating two series of Preferred Stock designated as 13-1/4% Series A Exchangeable Preferred Stock of Citadel Broadcasting Company and 13-1/4% Series B Exchangeable Preferred Stock of Citadel Broadcasting Company: RESOLVED, that pursuant to the authority expressly vested in the Board of Directors in accordance with the provisions of the Articles, two series of Preferred Stock of the Company, without par value, be and they hereby are, created and that the designation and amount thereof and the voting powers, preferences, and relative rights of the shares of each such series, and the limitations and restrictions thereof, are as follows: 2 I. Designation and Amount. The designations for the two series of Preferred Stock authorized by this resolution shall be the 13-1/4% Series A Exchangeable Preferred Stock without par value (the "Series A Preferred Stock") and the 13-1/4% Series B Exchangeable Preferred Stock without par value (the "Series B Preferred Stock" and together with the Series A Preferred Stock, the "Exchangeable Preferred Stock"). The initial liquidation preference of the Exchangeable Preferred Stock is $100.00 per share and the original issue price for each such share is $100.00. The issue price per share or liquidation preference of the Exchangeable Preferred Stock shall not for any purpose be considered to be a determination by the Board of Directors with respect to the capital and surplus of the Company. The maximum number of shares of Series A Preferred Stock shall be 2,000,000 and the maximum number of shares of Series B Preferred Stock shall be 2,000,000. II. Dividends. (a) Holders of the outstanding shares of Exchangeable Preferred Stock (the "Holders") will be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, dividends on the Exchangeable Preferred Stock at an annual rate of 13-1/4% (the "Dividend Rate"). All dividends will be cumulative, whether or not earned or declared, from the Closing Date and will be payable semi-annually in arrears on each Dividend Payment Date, commencing on January 1, 1998, to Holders of record on the June 15 or December 15 immediately preceding the relevant Dividend Payment Date. On or before July 1, 2002, the Company may, at its option, pay dividends in cash or in additional fully paid and non-assessable shares of Exchangeable Preferred Stock having an aggregate liquidation preference equal to the amount of such dividends, provided, however, that if the Company pays dividends in additional shares of Exchangeable Preferred Stock, Holders of Series A Preferred Stock shall be paid in additional shares of Series A Preferred Stock and Holders of Series B Preferred Stock shall be paid in additional shares of Series B Preferred Stock. After July 1, 2002, dividends shall be paid only in cash. If any dividend (or portion thereof) payable on any Dividend Payment Date on or before July 1, 2002 is not declared or paid in full in cash or in shares of Exchangeable Preferred Stock as described above on such Dividend Payment Date, the amount of the accumulated and unpaid dividend will bear interest at the Dividend Rate, compounding semi-annually from such Dividend Payment Date until paid in full. If any dividend (or portion thereof) payable on any Dividend Payment Date after July 1, 2002 is not declared or paid in full in cash on such Dividend Payment Date, the amount of the accumulated and unpaid dividend that is payable and that is not paid in cash on such date will bear interest at the Dividend Rate, compounding semi-annually from such Dividend Payment Date until paid in full. Dividends shall cease to accumulate in respect of the shares of Exchangeable Preferred Stock on the Exchange Date or on the Redemption Date unless the Company shall have failed to issue the appropriate aggregate principal amount of Exchange Debentures in respect of the Exchangeable Preferred Stock on the Exchange Date or shall have failed to pay the relevant redemption price on the Redemption Date. (b) All dividends paid with respect to shares of the Exchangeable Preferred Stock pursuant to Section II(a) of this Certificate of Designation shall be paid pro rata to the Holders entitled thereto. -2- 3 (c) Nothing contained in this Certificate of Designation shall in any way or under any circumstances be construed or deemed to require the Board of Directors to declare, or the Company to pay or set apart for payment, any dividends on shares of the Exchangeable Preferred Stock at any time. (d) Holders shall be entitled to receive the dividends provided for in Section II(a) of this Certificate of Designation (including any accumulated and unpaid cash dividends on the Exchangeable Preferred Stock) in preference to and in priority over any dividends (including accumulated and unpaid dividends) upon any of the Junior Stock. (e) No full dividends may be declared or paid or funds set apart for the payment of dividends on any Parity Stock for any period unless full cumulative dividends shall have been or contemporaneously are declared and paid (or are deemed declared and paid) in full or declared and, if payable in cash, a sum in cash sufficient for such payment set apart for such payment on the Exchangeable Preferred Stock. If full dividends are not so paid, the Exchangeable Preferred Stock will share dividends pro rata with the Parity Stock. No dividends may be paid or set apart for such payment on Junior Stock (except dividends on Junior Stock payable in additional shares of Junior Stock) and no Junior Stock or Parity Stock may be repurchased, redeemed or otherwise retired nor may funds be set apart for payment with respect thereto, if full cumulative dividends have not been paid in full (or deemed paid) on the Exchangeable Preferred Stock. (f) Dividends on account of arrears for any past dividend period and dividends in connection with any optional redemption may be declared and paid at any time, without reference to any regular Dividend Payment Date, to Holders of record of the Exchangeable Preferred Stock on such date, not more than 45 days prior to the payment thereof, as may be fixed by the Board of Directors. (g) Each fractional share of Exchangeable Preferred Stock outstanding shall be entitled to a ratably proportionate amount of all dividends accruing with respect to each outstanding share of Exchangeable Preferred Stock pursuant to Section II(a), and all such dividends with respect to such outstanding fractional shares shall accumulate at the Dividend Rate and shall be payable in the same manner and at such times as provided for in Section II(a) with respect to dividends on each outstanding share of Exchangeable Preferred Stock. (h) Dividends payable on the Exchangeable Preferred Stock for any period less than a year shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in the period for which dividends are payable. III. Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, Holders will be entitled to be paid, out of the assets of the Company available for distribution to stockholders, the then effective liquidation preference per share of Exchangeable Preferred Stock, plus, without duplication, an amount in cash equal to all accumulated and unpaid dividends thereon to the date fixed for -3- 4 liquidation, dissolution or winding-up (including an amount equal to a prorated dividend for the period from the last Dividend Payment Date to the date fixed for liquidation, dissolution or winding-up), before any distribution is made on any Junior Stock, including, without limitation, common stock of the Company. If, upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the amounts payable with respect to the Exchangeable Preferred Stock and all other Parity Stock are not paid in full, the Holders of the Exchangeable Preferred Stock and the holders of the Parity Stock will share equally and ratably in any distribution of assets of the Company in proportion to the full liquidation preference to which each is entitled. After payment of the full amount of the liquidation preference and accumulated and unpaid dividends to which they are entitled, Holders will not be entitled to any further participation in any distribution of assets of the Company. For the purposes of this Section III, neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company nor the consolidation or merger of the Company with one or more entities shall be deemed to be a liquidation, dissolution or winding-up of the Company. The liquidation preference with respect to each outstanding fractional share of Exchangeable Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payments with respect to each outstanding full share of Exchangeable Preferred Stock. IV. Exchange. (a) The Company may, at its option, subject to the conditions described below, on any scheduled Dividend Payment Date, exchange the Exchangeable Preferred Stock, in whole but not in part, for the Exchange Debentures. At least 30 and not more than 60 days prior to the date fixed for exchange, the Company shall send a written notice (the "Exchange Notice") of exchange by mail to each Holder, which notice shall state: (i) that the Company has elected to exchange the Exchangeable Preferred Stock into Exchange Debentures pursuant to this Certificate of Designation; (ii) the date of such exchange (the "Exchange Date"); (iii) that the Holder is to surrender to the Company, at the place or places and in the manner designated in the Exchange Notice, its certificate or certificates representing the shares of Exchangeable Preferred Stock; (iv) that dividends on the shares of Exchangeable Preferred Stock to be exchanged shall cease to accumulate at the close of business on the day prior to the Exchange Date, whether or not certificates for shares of Exchangeable Preferred Stock are surrendered for exchange on the Exchange Date, unless the Company shall default in the delivery of Exchange Debentures; and -4- 5 (v) that interest on the Exchange Debentures shall accrue from the Exchange Date whether or not certificates for shares of Exchangeable Preferred Stock are surrendered for exchange on the Exchange Date. On the Exchange Date, if the conditions set forth in clauses (A) through (E) below are satisfied and if the exchange is then permitted under the Exchange Indenture, the Company shall issue Exchange Debentures in exchange for the Exchangeable Preferred Stock as provided in the next paragraph, provided that on the Exchange Date: (A) there shall be legally available funds sufficient for the exchange to occur (including, without limitation, legally available funds sufficient therefor under Section 78.288 (or any successor provisions), to the extent applicable, of the General Corporation Law of the State of Nevada); (B) the Company shall have obtained a written opinion of counsel acceptable to the Company that an exemption from the registration requirements of the Securities Act is available for such exchange, and such exemption is relied upon by the Company for such exchange or, alternatively, that the Exchange Debentures have been registered thereunder; (C) the Exchange Indenture and the Debentures Trustee shall have been qualified under the Trust Indenture Act or the Company shall have obtained a written opinion of counsel that such qualification is not required; (D) immediately after giving effect to such exchange, no default or event of default would exist under the Exchange Indenture, and no material breach or default would exist under the Credit Facility, the Notes Indenture or the Securities Purchase and Exchange Agreement; and (E) on the date of such exchange (the "Exchange Date") there are no accumulated and unpaid dividends on the Exchangeable Preferred Stock (including the dividend payable on such date). In the event that any of the conditions set forth in clauses (A) through (E) of the preceding sentence are not satisfied on the Exchange Date, then no shares of Exchangeable Preferred Stock shall be exchanged, and in order to effect an exchange as provided for in this Section IV, the Company shall be required to fix another date for the exchange and issue a new Exchange Notice. (b) Upon any exchange pursuant to this Section IV, Holders shall be entitled to receive, subject to the provisions hereof, $1.00 principal amount of Exchange Debentures for each $1.00 of the then effective liquidation preference of the Exchangeable Preferred Stock, plus an amount in cash equal to all accumulated and unpaid dividends thereon for the period from the immediately preceding Dividend Payment Date to the day prior to the Exchange Date; provided that the Company shall pay cash in lieu of issuing an Exchange Debenture in a principal amount of less than $1,000 and provided further that the Exchange Debentures will be issuable only in denominations of $1,000 and integral multiples thereof. (c) On or before the Exchange Date, each Holder shall surrender the certificate or certificates representing such shares of the Exchangeable Preferred Stock, in the manner and at the place designated in the Exchange Notice. The Company shall cause the Exchange Debentures to be executed on the Exchange Date and, upon surrender in accordance with the Exchange Notice of the certificates for any shares of the Exchangeable Preferred Stock so exchanged (properly endorsed or assigned for transfer, if the Exchange -5- 6 Notice shall so state), such shares shall be exchanged by the Company into Exchange Debentures as aforesaid. The Company shall pay interest on the Exchange Debentures at the rate and on the dates specified therein from the Exchange Date. (d) If the Exchange Notice has been mailed as aforesaid, and if before the Exchange Date all Exchange Debentures necessary for such exchange shall have been duly executed by the Company and delivered to the Debentures Trustee with irrevocable instructions to authenticate the Exchange Debentures necessary for such exchange, then the rights of the Holders as stockholders of the Company shall cease (except the right to receive the Exchange Debentures, an amount in cash, to the extent applicable, equal to the accumulated and unpaid dividends to the Exchange Date and cash in lieu of any Exchange Debenture that is in a principal amount less than $1,000), and the person or persons entitled to receive the Exchange Debentures issuable upon exchange shall be treated for all purposes as a registered holder or holders of such Exchange Debentures as of the Exchange Date. V. Voting Rights. (a) Holders, except as otherwise required under Nevada law or as set forth below, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Company. (b) If (i) after July 1, 2002, cash dividends on the Exchangeable Preferred Stock are in arrears and unpaid for two or more semi-annual dividend periods (whether or not consecutive) (a "Dividend Default"); (ii) the Company fails to redeem the Exchangeable Preferred Stock on July 1, 2009 or fails to otherwise discharge any redemption obligation set forth in this Certificate of Designation with respect to the Exchangeable Preferred Stock; (iii) the Company fails to make a Change of Control Offer if such offer is required by the provisions set forth under the "Purchase of Exchangeable Preferred Stock upon a Change of Control" covenant set forth in Section VIII below or fails to purchase shares of Exchangeable Preferred Stock from Holders who elect to have such shares purchased pursuant to the Change of Control Offer; (iv) a breach or violation of any other provisions contained in Section VIII hereof occurs and the breach or violation continues for a period of 30 days or more after the Company receives notice thereof specifying the default from the Holders of at least 25% of the shares of Exchangeable Preferred Stock then outstanding; or (v) the Company fails to pay at the final stated maturity (giving effect to any extensions thereof) the principal amount of any Debt of the Company or any Restricted Subsidiary of the Company, or the final stated maturity of any such Debt is accelerated, if the aggregate principal amount of such Debt, together with the aggregate principal amount of any other such Debt in default for failure to pay principal at the final stated maturity (giving effect to any extensions thereof) or which has been accelerated, aggregates $5,000,000 or more at any time (each such event described in clauses (i) through (v) above being referred to herein as a "Voting Rights Triggering Event") then the number of directors constituting the Board of Directors will be adjusted to permit the Holders of a majority of the then outstanding shares of Exchangeable Preferred Stock, voting separately and as a class (together with the holders of any Parity Stock having similar voting rights), to elect two directors to the Board of Directors. The voting rights provided herein shall be the Holders' exclusive remedy at law -6- 7 or in equity. Such voting rights will continue until such time as, in the case of a Dividend Default, all dividends in arrears on the Exchangeable Preferred Stock are paid in full in cash and, in all other cases, any failure, breach or default giving rise to such voting rights is remedied or waived by the Holders of at least a majority of the shares of Exchangeable Preferred Stock then outstanding, at which time the term of any directors elected pursuant to the provisions of this paragraph shall terminate. (c) The Company shall not authorize any new class of Senior Stock or modify, change, affect or amend the Articles or this Certificate of Designation to affect materially and adversely the specified rights, preferences, privileges or voting rights of the Exchangeable Preferred Stock without the affirmative vote or consent of Holders of at least a majority of the shares of Exchangeable Preferred Stock then outstanding, voting or consenting, as the case may be, as one class. (d) Immediately after voting power to elect directors shall have become vested and be continuing in the Holders pursuant to Section V(b) or if vacancies shall exist in the offices of directors elected by the Holders, a proper officer of the Company shall call a special meeting of the Holders for the purpose of electing the directors which such Holders are entitled to elect. Any such meeting shall be held at the earliest practicable date, and the Company shall provide Holders with access to the lists of Holders pursuant to the provisions of this Section V(d). At any meeting held for the purpose of electing directors at which the Holders shall have the right, voting separately as a class, to elect directors, the presence in person or by proxy of the Holders of at least a majority of the outstanding shares of Exchangeable Preferred Stock shall be required to constitute a quorum of such Holders. (e) Any vacancy occurring in the office of a director elected by the Holders may be filled by the remaining director elected by the Holders unless and until such vacancy shall be filled by the Holders. (f) In any case in which the Holders shall be entitled to vote pursuant to this Section V or pursuant to the General Corporation Law of the State of Nevada, each Holder shall be entitled to one vote for each share of Exchangeable Preferred Stock held. (g) Holders of at least 66_% of the then outstanding shares of Exchangeable Preferred Stock, voting or consenting, as the case may be, separately as a class, may waive compliance with any provision of this Certificate of Designation. Further, Holders are entitled to vote as a class upon a proposed amendment to the Articles, whether or not entitled to vote thereon by the Articles, if the amendment would increase or decrease the par value of the shares of, or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely. Except as set forth above, (i) the creation, authorization or issuance of any shares of Junior Stock, Parity Stock or Senior Stock, including the designation of series thereof within the existing class of Preferred Stock, or (ii) the increase or decrease in the amount of authorized Capital Stock of any class, -7- 8 including any Preferred Stock, shall not require the consent of the Holders and shall not be deemed to affect adversely the rights, preferences, privileges or voting rights of Holders. VI. Redemption. (a) Optional Redemption. (i) The Exchangeable Preferred Stock will be redeemable (subject to contractual and other restrictions with respect thereto and to the legal availability of funds therefor) at the election of the Company, as a whole or from time to time in part, at any time on or after July 1, 2002 on not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of the then effective liquidation preference thereof) set forth below, plus, without duplication, all accumulated and unpaid dividends, if any, to the date of redemption (the "Redemption Date") (including an amount in cash equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Redemption Date to the Redemption Date), if redeemed during the 12-month period beginning on July 1 of the years indicated below:
Year Redemption Price ---- ---------------- 2002 107.729% 2003 106.625% 2004 105.521% 2005 104.417% 2006 103.313% 2007 102.208% 2008 101.104%
(ii) In addition, at any time and from time to time prior to July 1, 2000, the Company may at its option redeem shares of Exchangeable Preferred Stock having an aggregate liquidation preference of up to 35% of the aggregate liquidation preference of all shares of Exchangeable Preferred Stock issued as of the Closing Date or issued as dividends on the Exchangeable Preferred Stock, with the net proceeds of one or more Public Equity Offerings at a redemption price equal to 113.250% of the liquidation preference thereof, plus without duplication, accumulated and unpaid dividends, if any, to the Redemption Date (including an amount in cash equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Redemption Date to the Redemption Date), subject to the right of Holders of record on the relevant record date to receive dividends due on a Dividend Payment Date; provided that, immediately after giving effect to any such redemption, at least $75,000,000 in aggregate liquidation preference of the Exchangeable Preferred Stock remains outstanding. Any such redemption must be made within 90 days of the related Public Equity Offering. (iii) No optional redemption may be authorized or made unless on or prior to such redemption full unpaid cumulative dividends shall have been paid or a sum set apart for such payment on the Exchangeable Preferred Stock. If less than all the Exchangeable Preferred Stock is to be redeemed, the particular shares to be redeemed will be determined pro rata, except that the Company may redeem such shares held by any holder of fewer than 100 shares without regard to such pro rata redemption requirement. If any Exchangeable -8- 9 Preferred Stock is to be redeemed in part, the Redemption Notice that relates to such Exchangeable Preferred Stock shall state the portion of the liquidation preference to be redeemed. New shares of the same Series of Exchangeable Preferred Stock having an aggregate liquidation preference equal to the unredeemed portion will be issued in the name of the holder thereof upon cancellation of the original shares of Exchangeable Preferred Stock and, unless the Company fails to pay the redemption price on the Redemption Date, after the Redemption Date dividends will cease to accumulate on the Exchangeable Preferred Stock called for redemption. (b) Mandatory Redemption. The Exchangeable Preferred Stock will also be subject to mandatory redemption (subject to the legal availability of funds therefor) in whole on the redemption date of July 1, 2009 (the "Mandatory Redemption Date"), at a redemption price equal to 100% of the liquidation preference thereof, plus, without duplication, all accumulated and unpaid dividends, if any, to the date of redemption. (c) Procedure for Redemption. (i) Not more than 60 and not less than 30 days prior to any Redemption Date, written notice (the "Redemption Notice") shall be given by first-class mail, postage prepaid, to each Holder of record of shares to be redeemed on the record date fixed for such redemption of the Exchangeable Preferred Stock at such Holder's address as the same appears on the stock ledger of the Company, provided, however, that no failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the redemption of any shares of Exchangeable Preferred Stock to be redeemed except as to the Holder or Holders to whom the Company has failed to give such notice or except as to the Holder or Holders whose notice was defective. The Redemption Notice shall state: (A) the Redemption Price; (B) whether all or less than all the outstanding shares of the Exchangeable Preferred Stock are to be redeemed and the total number of shares of such Exchangeable Preferred Stock being redeemed; (C) the number of shares of Exchangeable Preferred Stock held by the Holder that the Company intends to redeem; (D) the Redemption Date; (E) that the Holder is to surrender to the Company, at the place or places, which shall be designated in such Redemption Notice, its certificates representing the shares of Exchangeable Preferred Stock to be redeemed; (F) that dividends on the shares of the Exchangeable Preferred Stock to be redeemed shall cease to accumulate on the day prior to such Redemption Date unless the Company defaults in the payment of the redemption price; and -9- 10 (G) the name of any bank or trust company performing the duties referred to in subsection (c)(v) below. (ii) On or before the Redemption Date, each Holder of Exchangeable Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares of Exchangeable Preferred Stock to the Company, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the full redemption price for such shares shall be payable in cash to the person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be returned to authorized but unissued shares. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (iii) Unless the Company defaults in the payment in full of the redemption price, dividends on the Exchangeable Preferred Stock called for redemption shall cease to accumulate on the day prior to the Redemption Date, and the Holders of such shares shall cease to have any further rights with respect thereto on the Redemption Date, other than the right to receive the redemption price, without interest. (iv) If a Redemption Notice shall have been duly given, and if, on or before the Redemption Date specified therein, all funds necessary for such redemption shall have been set aside by the Company, separate and apart from its other funds, in trust for the pro rata benefit of the Holders of the Exchangeable Preferred Stock called for redemption so as to be and continue to be available therefor, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, all shares so called for redemption shall no longer be deemed outstanding, and all rights with respect to such shares shall forthwith on such Redemption Date cease and terminate, except only the right of the Holders thereof to receive the amount payable on redemption thereof, without interest. (v) If a Redemption Notice shall have been duly given or if the Company shall have given to the bank or trust company hereinafter referred to irrevocable authorization promptly to give such notice, and if on or before the Redemption Date specified therein the funds necessary for such redemption shall have been deposited by the Company with such bank or trust company in trust for the pro rata benefit of the Holders of the Exchangeable Preferred Stock called for redemption, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, from and after the time of such deposit, all shares so called, or to be so called pursuant to such irrevocable authorization, for redemption shall no longer be deemed to be outstanding and all rights with respect of such shares shall forthwith cease and terminate, except only the right of the Holders thereof to receive from such bank or trust company at any time after the time of such deposit the funds so deposited, without interest. The aforesaid bank or trust company shall be organized and in good standing under the laws of the United States of America or of the State of New York, shall be doing business in the Borough of Manhattan, The City of New York, shall have capital, surplus and undivided profits aggregating at least $100,000,000 according to its last published statement of condition, and shall be identified in the Redemption Notice. -10- 11 Any interest accrued on such funds shall be paid to the Company from time to time. Any funds so set aside or deposited, as the case may be, and unclaimed at the end of three years from such Redemption Date shall, to the extent permitted by law, be released or repaid to the Company, after which repayment the Holders of the shares so called for redemption shall look only to the Company for payment thereof. VII. Ranking. The Exchangeable Preferred Stock will, with respect to dividend rights and rights on liquidation, winding-up and dissolution of the Company, rank (a) senior to all classes of common stock and to each other class of Capital Stock or series of preferred stock established after the Closing Date by the Board of Directors the terms of which expressly provide that it ranks junior to the Exchangeable Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company (collectively referred to, together with all classes of common stock of the Company, as "Junior Stock"); (b) on a parity with each other class of Capital Stock or series of preferred stock established after the Closing Date by the Board of Directors the terms of which expressly provide that such class or series will rank on a parity with the Exchangeable Preferred Stock as to dividend rights on liquidation, winding-up and dissolution of the Company (collectively referred to as "Parity Stock"); and (c) subject to the approval of the Holders in accordance with Section V(c) hereof, junior to each class of Capital Stock or series of preferred stock established after the Closing Date by the Board of Directors the terms of which do not expressly provide that such class or series will rank junior to, or on a parity with, the Exchangeable Preferred Stock as to dividend rights and rights upon liquidation, winding-up and dissolution of the Company (collectively referred to as "Senior Stock"). VIII. Certain Covenants. (1) LIMITATION ON DEBT. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Debt (including Acquired Debt and the issuance of Disqualified Stock), except that the Company or a Restricted Subsidiary may incur Debt or issue Disqualified Stock if, at the time of such event, the Consolidated Cash Flow Ratio would have been less than 7.0 to 1.0. In making the foregoing calculation, pro forma effect will be given to: (i) the incurrence of such Debt and (if applicable) the application of the net proceeds therefrom, including to refinance other Debt as if the additional Debt had been incurred and the application of proceeds therefrom occurred on the first day of the four-fiscal quarter period used to calculate the Consolidated Cash Flow Ratio, (ii) the incurrence, repayment or retirement of any other Debt by the Company or any of its Restricted Subsidiaries since the first day of such four-quarter period as if such Debt was incurred, repaid or retired at the beginning of such four-quarter period and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or any of its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period. In making a computation under the -11- 12 foregoing clause (i) or (ii), the amount of Debt under a revolving credit facility will be computed based upon the average daily balance of such Debt during such four-quarter period. (b) Notwithstanding the foregoing, the Company may, and may, to the extent expressly permitted below, permit any of its Restricted Subsidiaries to, incur any of the following Debt ("Permitted Debt"): (i) Debt of the Company or any Restricted Subsidiary under the Credit Facility (including guarantees thereof by Subsidiaries) in an aggregate principal amount at any one time outstanding not to exceed $110,000,000. (ii) Debt of the Company or any of its Restricted Subsidiaries outstanding on the Closing Date, other than Debt described in clause (i) above. (iii) Debt owed by the Company to any of its Restricted Subsidiaries or owed by any Subsidiary to the Company or a Restricted Subsidiary or owed to the Company or a Restricted Subsidiary by a Restricted Subsidiary, provided the incurrence of such Debt did not violate Section VIII(2), "Limitation on Restricted Payments," of this Certificate of Designation. (iv) Debt represented by the Notes and the Subsidiary Notes Guarantees. (v) Hedging Obligations of the Company or any of its Restricted Subsidiaries incurred in the ordinary course of business. (vi) Capitalized Lease Obligations of the Company or any of its Restricted Subsidiaries in an aggregate amount not exceeding $3,000,000 at any one time outstanding. (vii) Debt under purchase money mortgages or secured by purchase money security interests so long as (x) such Debt is not secured by any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets so acquired and (y) such Debt is created within 60 days of the acquisition of the related property; provided that the aggregate principal amount of Debt under this clause (vii) does not exceed $2,000,000 at any one time outstanding. (viii) Debt of the Company or any Restricted Subsidiary, not permitted by any other clause of this definition, in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding. (ix) Debt of the Company or any of its Restricted Subsidiaries consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock. -12- 13 (x) Acquired Debt of a person, other than Debt incurred in connection with, or in contemplation of, such person becoming a Restricted Subsidiary or the acquisition of assets from such person, as the case may be, provided that the Company on a pro forma basis could incur $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of this covenant. (xi) Any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by the Company or any Restricted Subsidiary of any outstanding Debt of the Company or such Restricted Subsidiary, other than Debt incurred pursuant to clause (i), (v), (vi), (vii), (viii) or (ix) of this definition, including any successive refinancings thereof, so long as (A) any such new Debt is in a principal amount that does not exceed the principal amount so refinanced, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Debt refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing plus the amount of expenses of the Company incurred in connection with such refinancing and (B) such refinancing Debt does not have a Weighted Average Life less than the Weighted Average Life of the Debt being refinanced and does not have a final scheduled maturity earlier than the final scheduled maturity, or permit redemption at the option of the holder earlier than the earliest date of redemption at the option of the holder, of the Debt being refinanced. (2) LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, take any of the following actions: (a) declare or pay any dividend on, or make any distribution to holders of, any shares of the Junior Stock of the Company or any of its Restricted Subsidiaries, other than (i) dividends or distributions payable solely in Qualified Equity Interests of the issuer of such shares of Junior Stock, (ii) dividends or distributions by a Restricted Subsidiary payable to the Company or another Restricted Subsidiary or (iii) pro rata dividends or distributions on common stock of a Restricted Subsidiary held by minority stockholders, provided that such dividends do not in the aggregate exceed the minority stockholders' pro rata share of such Restricted Subsidiary's net income from the first day of the Company's fiscal quarter during which the Closing Date occurs; (b) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of (i) Junior Stock of the Company (or any options, warrants or other rights to acquire shares of Junior Stock of the Company (other than any such Junior Stock owned by Restricted Subsidiaries)) or (ii) Capital Stock (or any options, warrants or other rights to acquire shares of Capital Stock) of (A) any Unrestricted Subsidiary or (B) any Restricted Subsidiary that are held by any Affiliate of the Company (other than, in either case, any such Capital Stock owned by the Company or any of its Restricted Subsidiaries); -13- 14 (c) make any Investment (other than a Permitted Investment) in any person (such payments or other actions described in (but not excluded from) clauses (a) through (c) being referred to as "Restricted Payments"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment: (i) no Voting Rights Triggering Event has occurred and is continuing, (ii) the Company could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to Section VIII(1)(a), "Limitation on Debt," of this Certificate of Designation, and (iii) the aggregate amount of all Restricted Payments declared or made after the Closing Date does not exceed the sum of: (A) the remainder of (x) 100% of the aggregate Consolidated Cash Flow for the period beginning on the first day of the Company's fiscal quarter during which the Closing Date occurs and ending on the last day of the Company's most recent fiscal quarter for which internal financial statements are available ending prior to the date of such proposed Restricted Payment (the "Computation Period") minus (y) the product of 1.4 times the sum of (i) Consolidated Fixed Charges for the Computation Period and (ii) all dividends or other distributions paid in cash by the Company or any of its Restricted Subsidiaries on any Disqualified Stock of the Company or any of its Restricted Subsidiaries for the Computation Period; plus (B) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Board of Directors, whose good faith determination will be conclusive) from the issuance or sale (other than to a Subsidiary) of Qualified Equity Interests of the Company (excluding from this computation any net proceeds of a Public Equity Offering received by the Company that are used by it to redeem the Exchangeable Preferred Stock, as discussed in Section VI(a)(ii), "Redemption" above); plus (C) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Board of Directors, whose good faith determination will be conclusive) from the issuance or sale (other than to a Subsidiary) of debt securities or Disqualified Stock that have been converted into or exchanged for Qualified Stock of the Company, -14- 15 together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange; plus (D) without duplication, the Net Cash Proceeds received by the Company or a Wholly Owned Restricted Subsidiary upon the sale of any of its Unrestricted Subsidiaries; plus (E) $5,000,000. Notwithstanding the foregoing, the Company and any of its Restricted Subsidiaries may take any of the following actions, so long as (with respect to clauses (c) and (d) below) no Voting Rights Triggering Event has occurred and is continuing or would occur: (a) The payment of any dividend within 60 days after the date of declaration thereof, if at the declaration date such payment would not have been prohibited by the foregoing provision. (b) The repurchase, redemption or other acquisition or retirement for value of any shares of Junior Stock of the Company, in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company. (c) The payment by the Company to Citadel Communications for the purpose of the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of Citadel Communications, options on any such shares or related stock appreciation rights or similar securities held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates) or by any employee benefit plan, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate cash consideration paid for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock after the Closing Date does not exceed $1,000,000 in any fiscal year. (d) Loans or advances to officers, directors and employees of Citadel Communications, the Company or any of its Restricted Subsidiaries made in the ordinary course of business after the Closing Date in an aggregate principal amount not to exceed $1,000,000 at any one time outstanding. (e) Payments to or on behalf of Citadel Communications to pay its operating and administrative expenses attributable to the Company, including, without limitation, legal and audit expenses, directors' fees, fees payable in respect of the trustee and the back-up trustees under the Voting Trust Agreement, and Commission compliance expenses, in an amount not to exceed the greater of $1,000,000 per fiscal year and 1% of the net revenues of the Company for the preceding fiscal year. -15- 16 (f) Repayment of the note payable of the Company to Citadel Communications outstanding as of the Closing Date in an amount not to exceed $12,817,000 plus accrued and unpaid interest thereon to the Closing Date. The payments described in clauses (b), (c) and (d) of this paragraph will be Restricted Payments that will be permitted to be taken in accordance with this paragraph but will reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii), and the payments described in clauses (a), (e) and (f) of this paragraph will be Restricted Payments that will be permitted to be taken in accordance with this paragraph and will not reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii). For the purpose of making calculations under this Certificate of Designation (i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will be deemed to have made an Investment in an amount equal to the fair market value of the net assets of such Restricted Subsidiary at the time of such designation as determined by the Board of Directors, whose good faith determination will be conclusive, (ii) any property transferred to or from an Unrestricted Subsidiary will be valued at fair market value at the time of such transfer, as determined by the Board of Directors, whose good faith determination will be conclusive and (iii) subject to the foregoing, the amount of any Restricted Payment, if other than cash, will be determined by the Board of Directors, whose good faith determination will be conclusive. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other person that thereafter becomes a Restricted Subsidiary, such Investment will no longer be counted as a Restricted Payment for purposes of calculating the aggregate amount of Restricted Payments. If an Investment resulted in the making of a Restricted Payment, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise), to the extent such net reduction is not included in Consolidated Adjusted Net Income; provided that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (x) the cash proceeds received by the Company and any of its Restricted Subsidiaries in connection with such net reduction and (y) the initial amount of such Investment. In computing Consolidated Adjusted Net Income for purposes of the foregoing clause (iii) (A), (i) the Company may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company will be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment that, at the time of the -16- 17 making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of this Certificate of Designation, such Restricted Payment will be deemed to have been made in compliance with this Certificate of Designation notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. (3) PURCHASE OF EXCHANGEABLE PREFERRED STOCK UPON A CHANGE OF CONTROL. If a Change of Control occurs at any time, then each Holder of Exchangeable Preferred Stock will have the right to require that the Company purchase such Holder's Exchangeable Preferred Stock, in whole or in part, at a purchase price in cash equal to 101% of the liquidation preference of such Exchangeable Preferred Stock, plus accumulated and unpaid dividends, if any, to the date of purchase, pursuant to the offer described herein (the "Change of Control Offer") and the other procedures set forth herein. Within 30 days following any Change of Control, the Company will notify the Transfer Agent thereof and give written notice of such Change of Control to each Holder of Exchangeable Preferred Stock by first-class mail, postage prepaid, at its address appearing in the security register of the Exchangeable Preferred Stock, stating, among other things, (i) the purchase price and the purchase date, which will 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; (ii) that any Exchangeable Preferred Stock not tendered will continue to accumulate dividends; (iii) that, unless the Company defaults in the payment of the purchase price, any Exchangeable Preferred Stock accepted for payment pursuant to the Change of Control Offer will cease to accumulate dividends after the Change of Control purchase date; and (iv) certain other procedures that a Holder of Exchangeable Preferred Stock must follow to accept a Change of Control Offer or to withdraw such acceptance. The Company will not, and will not permit any of its Restricted Subsidiaries to, create any restriction (other than restrictions existing under Debt as in effect on the Closing Date or in refinancings or replacements of such Debt) that would materially impair the ability of the Company to make a Change of Control Offer to purchase the Exchangeable Preferred Stock or, if such Change of Control Offer is made, to pay for the Exchangeable Preferred Stock tendered for purchase. (4) LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company will not sell, and will not permit any of its Restricted Subsidiaries, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants, or other rights to purchase shares of such Capital Stock) except (i) to the Company or a Wholly Owned Restricted Subsidiary, (ii) issuances or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law, or issuances or sales to directors of directors' qualifying shares, (iii) if, immediately after giving effect to such issuance or sale, neither the Company nor any Subsidiary owns any shares of Capital Stock of such Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) or (iv) if, -17- 18 immediately either giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such person remaining after giving effect to such issuance or sale would have been permitted to be made under Section VIII(2), "Limitation on Restricted Payments," of this Certificate of Designation if made on the date of such issuance or sale. In addition, the Company will not, and will not permit any of its Restricted Subsidiaries to, sell, transfer or otherwise dispose of any of its properties or assets to an Unrestricted Subsidiary other than in the ordinary course of business. (5) UNRESTRICTED SUBSIDIARIES. (a) The Board of Directors of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company nor any of its Restricted Subsidiaries is directly or indirectly liable for any Debt of such Subsidiary, (ii) no default with respect to any Debt of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Debt of the Company or any of its Restricted Subsidiaries to declare a default on such other Debt or cause the payment thereof to be accelerated or made 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 VIII(2), "Limitation on Restricted Payments," of this Certificate of Designation, (iv) neither the Company nor any of its Restricted Subsidiaries 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 of its Restricted Subsidiaries has any obligation to subscribe for additional shares of Capital Stock or other equity interest in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results. Notwithstanding the foregoing, the Company may not designate the License Subsidiary, or any Subsidiary to which any properties or assets (other than current assets) owned by the Company or the License Subsidiary on the Closing Date have been transferred, as an Unrestricted Subsidiary. (b) The Board of Directors of the Company may designate any of its Unrestricted Subsidiaries as a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Debt by a Restricted Subsidiary of any outstanding Debt of such Unrestricted Subsidiary and such designation will only be permitted if (i) such Debt is permitted under Section VIII(1), "Limitation on Debt," of this Certificate of Designation and (ii) no Voting Rights Triggering Event will have occurred and be continuing following such designation. (6) LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The Company will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit any person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock of a Subsidiary of the Company (other than Acquired Preferred Stock; provided that at the time the issuer of such Acquired Preferred Stock becomes a Subsidiary of the Company or -18- 19 merges with the Company or any of its Subsidiaries, and after giving effect to such transaction, the Company shall be able to incur $1.00 of additional Debt (other than Permitted Debt) in compliance with Section VIII(1), "Limitation on Debt," of this Certificate of Designation). (7) REPORTS. At all times from and after the earlier of (i) the date of the commencement of the Preferred Stock Exchange Offer or the effectiveness of the Preferred Stock Shelf Registration Statement (the "Preferred Stock Registration") and (ii) the date 180 days after the Closing Date, in either case, whether or not the Company is then required to file reports with the Commission, the Company will file with the Commission all such reports and other information as it would be required to file with the Commission by Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company will supply the Transfer Agent and each Holder, or will supply to the Transfer Agent for forwarding to each such Holder, without cost to such Holder, copies of such reports and other information. In addition, at all times prior to the earlier of the date of the Preferred Stock Shelf Registration Statement and the date 180 days after the Closing Date, the Company will, at its cost, deliver to each Holder of the Exchangeable Preferred Stock quarterly and annual reports substantially equivalent to those that would be required by the Exchange Act. In addition, at all times prior to the Preferred Stock Registration, upon the request by any Holder or any prospective purchaser of the Exchangeable Preferred Stock designated by a Holder, the Company will supply to such Holder or such prospective purchaser the information required under Rule 144A under the Securities Act. (8) CONSOLIDATION, MERGER AND SALE OF ASSETS. Without the affirmative vote of the Holders of a majority of the issued and outstanding shares of Exchangeable Preferred Stock and the holders of any Parity Stock, voting or consenting, as the case may be, as a separate class, the Company may not, in a single transaction or a series of related transactions, consolidate with or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, another person or adopt a plan of liquidation unless: (a) Either (i) the Company is the surviving corporation or (ii) the person (if other than the Company) formed by such consolidation or into which the Company is merged or the person that acquires by sale, assignment, transfer, lease or other disposition the properties and assets of the Company substantially as an entirety (the "Surviving Entity") (A) is a corporation, partnership or trust organized and validly existing under the laws of the United States or any state thereof or the District of Columbia and (B) the Exchangeable Preferred Stock shall be converted into or exchanged for and shall become shares of such Surviving Entity, having in respect of such Surviving Entity the same powers, preferences and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereon, that the Exchangeable Preferred Stock had immediately prior to such transaction. (b) Immediately after giving effect to such transaction and treating any obligation of the Company or a Restricted Subsidiary in connection with or as a result -19- 20 of such transaction as having been incurred at the time of such transaction, no Voting Rights Triggering Event shall have occurred or be continuing. (c) Immediately after giving effect to such transaction on a pro forma basis (on the assumption that the transaction occurred at the beginning of the most recently ended four full fiscal quarter period for which internal financial statements are available), the Company (in the case of clause (i) of paragraph (a) or such person (in the case of clause (ii) of paragraph (a)) could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to Section VIII(1)(a), "Limitation on Debt," of this Certificate of Designation. (d) The Company delivers, or causes to be delivered, to the Transfer Agent an officers' certificate and an opinion of counsel, each stating that such consolidation, merger or transfer complies with this Certificate of Designation and that all conditions precedent in this Certificate of Designation relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of related transactions) of all or substantially all of the properties or assets of one or more Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties or assets of the Company, will be deemed to be the transfer of all or substantially all of the properties and assets of the Company. IX. No Reissuance of Exchangeable Preferred Stock. None of the shares of Exchangeable Preferred Stock acquired by the Company by reason of redemption, purchase, or otherwise shall be reissued. X. Business Day. If any payment or redemption shall be required by the terms hereof to be made on a day that is not a Business Day, such payment or redemption shall be made on the immediately succeeding Business Day. XI. Transfer Restrictions. (a) The Series A Preferred Stock will bear a legend to the following effect (as applicable) unless otherwise agreed by the Company and the Holder thereof: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE -20- 21 HEREOF AND THE LAST DATE ON WHICH CITADEL BROADCASTING COMPANY (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR," WITHIN THE MEANING OF SUBPARAGRAPH (A) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. (b) The Transfer Agent shall refuse to register any transfer of Series A Preferred Stock in violation of the restrictions contained in the legend provided for in Section XI(a). (c) The legend provided for in Section XI(a) may be removed if the Series A Preferred Stock has been registered pursuant to a Preferred Stock Shelf Registration Statement under the Securities Act. Unlegended Series B Preferred Stock may be issued in exchange for Series A Preferred Stock pursuant to a Preferred Stock Exchange Offer. (d) At any time after one year following the Closing Date, upon receipt by the Transfer Agent and the Company of a certificate substantially in the form of Exhibit A hereto, the Transfer Agent shall authenticate and deliver one or more shares of unlegended Series A Preferred Stock in the place of shares of legended Series A Preferred Stock. (e) In connection with proposed transfers of Series A Preferred Stock described in Exhibit B or Exhibit C, the Transfer Agent or the Company may require the transferor or transferee, as the case may be, to deliver the appropriate letter attached hereto as Exhibits B or C. Each Holder of Series A Preferred Stock shall notify the Company or the -21- 22 Transfer Agent in the event of any transfer by such Holder of any shares of Series A Preferred Stock to a foreign transferee. XII. Definitions. As used in this Certificate of Designation, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: "Acquired Debt" means Debt of a person (a) existing at the time such person is merged with or into the Company or becomes a Subsidiary, (b) assumed in connection with the acquisition of assets from such person or (c) secured by a Lien encumbering assets acquired from such person. "Acquired Preferred Stock" means preferred stock of a person (a) existing at the time such person is merged with or into the Company or becomes a Subsidiary or (b) assumed in connection with the acquisition of assets from such person. "Affiliate" means, with respect to any specified person, any other person directly or indirectly controlling or controlled by or under direct or indirect common control with 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 the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "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") by the Company or a Restricted Subsidiary, directly or indirectly, in one or a series of related transactions, to any person other than the Company or a Restricted Subsidiary of (a) any Capital Stock of any of its Restricted Subsidiaries, (b) all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries representing a division or line of business or (c) any other properties or assets of the Company or any of its Restricted Subsidiaries, other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" does not include any transfer of properties or assets (a) that is governed by the provisions of Section VIII(8), "Consolidation, Merger and Sale of Assets," of this Certificate of Designation, (b) to an Unrestricted Subsidiary, if permitted under Section VIII(2), "Limitation on Restricted Payments," of this Certificate of Designation, (c) representing obsolete or permanently retired equipment, (d) the gross proceeds of which (exclusive of indemnities) do not exceed $100,000 for any particular item or $500,000 in the aggregate for any fiscal year, or (e) the transfer of up to $500,000 of properties and assets, including cash, to a joint venture in which the Company or a Restricted Subsidiary has an equity interest, which joint venture is engaged in the internet service provider business. -22- 23 "Banks" means the banks and other financial institutions that from time to time are lenders under the Credit Facility. "Board of Directors" means the Board of Directors of the Company. "Business Day" means a day other than a Saturday, Sunday, national or New York State holiday or other day on which commercial banks in New York City are authorized or required by law to close. "Capital Stock" of any person means any and all shares, interests, partnership interests, participations, rights in or other equivalents (however designated) of such person's equity (however designated). "Capitalized Lease Obligation" means, with respect to any person, an obligation incurred or assumed under or in connection with any capital lease of real or personal property that, in accordance with GAAP, has been recorded as a capitalized lease on the balance sheet of such person. "Change of Control" means the occurrence 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 Lawrence R. Wilson, Scott E. Smith, John E. von Schlegell, Baker, Fentress & Company, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., The Endeavour Capital Fund Limited Partnership and any trustee, in its capacity as trustee under the Voting Trust Agreement or Citadel Communications is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person will 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 a majority of the voting power of all classes of Voting Stock of the Company; (b) 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 stockholders of the Company, was approved by a vote of at least 66-2/3% 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; or (c) The Company is liquidated or dissolved or adopts a plan of liquidation or dissolution. "Change of Control Offer" has the meaning specified in Section VIII(3) hereof. -23- 24 "Citadel Communications" means Citadel Communications Corporation, a Nevada corporation, and any successors thereof. "Closing Date" means the date on which the Exchangeable Preferred Stock is originally issued under this Certificate of Designation. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act. "Computation Period" has the meaning specified in Section VIII(2) hereof. "Consolidated Adjusted Net Income" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (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 Sales, (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 of its Restricted Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries in cash during such period, (d) the net income (or loss) of any person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, and (e) the net income (but not the net loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is at the date of determination restricted, directly or indirectly, except to the extent that such net income could be paid to the Company or a Restricted Subsidiary thereof; provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated Adjusted Net Income will be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Consolidated Adjusted Net Income otherwise attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1) the number of shares of outstanding common stock of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries divided by (2) the total number of shares of outstanding common stock of such Restricted Subsidiary on the last day of such period. "Consolidated Cash Flow" means, for any period, the sum of, without duplication, Consolidated Adjusted Net Income for such period, plus (or, in the case of clause (d) below, plus or minus) the following items to the extent included in computing Consolidated Adjusted Net Income for such period: (a) the aggregate interest expense and preferred stock dividends of the Company and its Restricted Subsidiaries for such period, plus (b) the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period, plus (c) the aggregate depreciation and amortization expense of the Company and any of its Restricted Subsidiaries for such period, plus (d) any other non-cash charges for such period, and minus non-cash credits for such period, other than -24- 25 non-cash charges or credits resulting from changes in prepaid assets or accrued liabilities in the ordinary course of business; provided that income tax expense, interest expense and preferred stock dividends, depreciation and amortization expense, and non-cash charges and credits of a Restricted Subsidiary will be included in Consolidated Cash Flow only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Adjusted Net Income for such period. Solely for purposes of determining whether the Company could incur Debt pursuant to Section VIII(1)(a), "Limitation on Debt," of this Certificate of Designation, if the Company is permitted to give pro forma effect to an In-Market Acquisition of a radio station pursuant to clause (iii) of the second paragraph of such covenant, such calculation may also give pro forma effect to projected quantifiable improvements in operating results of such radio station due to cost reductions calculated in good faith by the Company and certified by an officers' certificate filed with the Transfer Agent. As used in the preceding sentence, the term "In-Market Acquisition" means the acquisition of a radio station or group of radio stations serving a metropolitan statistical area in which the Company or its Subsidiaries has owned, or has operated under a local marketing agreement, one or more radio stations for at least the preceding six months. "Consolidated Cash Flow Ratio" means, at any date, the ratio of (i) the aggregate amount of Debt of the Company and its Restricted Subsidiaries on a consolidated basis as of the end of the immediately preceding four fiscal quarters for which internal financial statements of the Company are available (the "Reference Period") to (ii) the aggregate amount of Consolidated Cash Flow for such Reference Period. "Consolidated Fixed Charges" means, for any period, without duplication, the sum of (a) the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of operations 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 contracts (including amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs, (v) the interest component of Capitalized Lease Obligations of the Company and any of its Restricted Subsidiaries, and (vi) the portion of any rental obligation of the Company and any of its Restricted Subsidiaries in respect of any sale and leaseback transaction allocable during such period to interest expense (determined as if it were treated as a Capitalized Lease Obligation) plus (b) all interest on any Debt of any other person guaranteed by the Company or any of its Restricted Subsidiaries: provided, however, that Consolidated Fixed Charges will not include any gain or loss from extinguishment of debt, including any write-off of debt issuance costs. "Credit Facility" means the loan agreement dated October 9, 1996 among the Company and the financial institutions and banks named therein, as amended, and as such agreement may be amended, restated, supplemented, replaced or refinanced or otherwise modified from time to time. -25- 26 "Debentures Trustee" means The Bank of New York, as Trustee under the Exchange Indenture, or any successor Debentures Trustee appointed in accordance with the terms of the Exchange Indenture. "Debt" means (without duplication), with respect to any person, whether recourse is to all or a portion of the assets of such person and whether or not contingent, (a) every obligation of such person for money borrowed, (b) every obligation of such person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such person, (d) every obligation of such person issued or assumed as the deferred purchase price of property or services, (e) every Capitalized Lease Obligation of such person, (f) all Disqualified Stock of such person valued at its maximum fixed repurchase price, plus accumulated and unpaid dividends, (g) all Hedging Obligations of such person, and (h) every obligation of the type referred to in clauses (a) through (g) of another person and all dividends of another person (i) the payment of which, in either case, such person has guaranteed or (ii) which is secured by any Lien on any property or asset of such person, the amount of such Debt being deemed to be the lesser of the actual amount of the guarantee or the value of such property or asset subject to such Lien, as the case may be, and the amount of the Debt so guaranteed or secured, as the case may be. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were repurchased on any date on which Debt is required to be determined pursuant to this Certificate of Designation, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value will be determined reasonably and in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable 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 will not be considered Debt for purposes of this definition. The amount outstanding at any time of any Debt issued with original issue discount is the aggregate principal amount at maturity of such Debt, less the remaining unamortized portion of the original issue discount of such Debt at such time, as determined in accordance with GAAP. "Disqualified Stock" means any class or series of Capital Stock that, either by its terms (or by the terms of any security into which it is convertible or exchangeable by contract or otherwise), 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, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof, in whole or in part, prior to one year after the Mandatory Redemption Date, provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to cause the issuer thereof to repurchase or redeem such Capital Stock upon occurrence of a "change of control" occurring prior to the Mandatory Redemption Date will not constitute Disqualified Stock if the "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such -26- 27 Capital Stock than the provisions contained in Section VIII(3), "Purchase of Exchangeable Preferred Stock upon a Change of Control," of this Certificate of Designation and such Capital Stock specifically provides that the issuer will not repurchase or redeem any such stock pursuant to such provision prior to the Company's repurchase of such Exchangeable Preferred Stock as are required to be repurchased pursuant to Section VIII(3), "Purchase of Exchangeable Preferred Stock upon a Change of Control," of this Certificate of Designation; provided, however, that "Disqualified Stock" shall not include the Exchangeable Preferred Stock. "Dividend Default" has the meaning specified in Section V(b) hereof. "Dividend Payment Date" means each January 1 and July 1 of each year on which dividends shall be paid or are payable, any Redemption Date and any other date on which dividends in arrears may be paid. "Dividend Rate" has the meaning specified in Section II(a) hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Date" has the meaning specified in Section IV(a) hereof. "Exchange Debentures" means the 13-1/4% Exchange Debentures due 2009 of the Company, issuable pursuant to the Exchange Indenture in exchange for the Exchangeable Preferred Stock at the option of the Company. "Exchange Indenture" means the Indenture dated as of July 1, 1997 among the Company, Citadel License, Inc. as guarantor, and The Bank of New York, as trustee, relating to the Exchange Debentures. "Exchange Notice" has the meaning specified in Section IV(a) hereof. "Exchangeable Preferred Stock" has the meaning set forth in Section I hereof. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the Closing Date. "guarantee" means, as applied to any obligation, (a) 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 (b) 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 nonperformance) of all or any part of such obligation, including without limitation, the payment of amounts drawn down under letters of credit. -27- 28 "Hedging Obligations" means the obligations of any person under (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (b) other agreements or arrangements destined to protect such person against fluctuations in interest rates or the value of foreign currencies. "Holder" has the meaning specified in Section II(a) hereof. "Investment" (in any person) means (a) directly or indirectly, any advance, loan or other extension of credit (including, without limitation, by way of guarantee or similar arrangement) or capital contribution to any person, the purchase or other acquisition of any stock, bonds, notes, debentures or other securities issued by such person or the acquisition (by purchase or otherwise) of all or substantially all of the business or assets of such person or the making of any investment in such person, (b) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary and (c) the transfer of any assets or properties from the Company or a Restricted Subsidiary to any Unrestricted Subsidiary, other than the transfer of assets or properties made in the ordinary course of business. Investments will exclude extension of trade credit on commercially reasonable terms in accordance with normal trade practices. "Junior Stock" has the meaning specified in Section VII hereof. "License Subsidiary" means Citadel License, Inc. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, preference, 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 will be deemed to own subject to a Lien any property that 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. "Mandatory Redemption Date" has the meaning specified in Section VI(b) hereof. "Net Cash Proceeds" means, 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 of for, cash or cash equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any of its Restricted Subsidiaries), net of (a) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (b) provisions for all taxes payable as a result of such Asset Sale, (c) payments made to retire Debt where payment of such Debt is secured by the assets that are the subject of such Asset Sale, (d) amounts required to be paid to any person (other than the Company or any of its Restricted Subsidiaries) owning a beneficial interest in the assets that are subject to the Asset Sale and (e) appropriate amounts to be provided by the Company or any of its Restricted Subsidiaries, as the case may be, as a -28- 29 reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the seller after such Asset Sale, including pension and other post- employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Notes" means the 10-1/4% Senior Subordinated Notes due 2007 of the Company, issuable pursuant to the Notes Indenture. "Notes Indenture" means the Indenture dated as of July 1, 1997 among the Company, Citadel License, Inc., as guarantor, and The Bank of New York, as trustee, relating to the 10-1/4% Senior Subordinated Notes due 2007 of the Company. "Original Issue Date" means the date on which the Company initially issues any shares of Exchangeable Preferred Stock. "Parity Stock" has the meaning specified in Section VII hereof. "Permitted Debt" has the meaning specified in Section VIII(1)(b) hereof. "Permitted Investments" means any of the following: (a) Investments in (i) securities with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof); (ii) certificates of deposit, time deposits, overnight bank deposits or bankers' acceptances with a maturity of 270 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus of not less than $500,000,000; and (iii) commercial paper with a maturity of 270 days or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings Services. (b) Investments by the Company or any of its Restricted Subsidiaries in another person, if as a result of such Investment (i) such other person becomes a Restricted Subsidiary that would be a Subsidiary Debentures Guarantor under the Exchange Indenture 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 that would be such a Subsidiary Debentures Guarantor. (c) Investments by the Company or any of its Restricted Subsidiaries in a Subsidiary Debentures Guarantor and Investments by any Restricted Subsidiary in the Company. (d) Investments in assets owned or used in the ordinary course of business. -29- 30 (e) Investments in existence on the Closing Date. (f) Promissory notes received as a result of Asset Sales provided that (i) the consideration received by the Company or the relevant Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold (as determined by the Board of Directors, whose good faith determination will be conclusive) and (ii) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 80% (A) cash or cash equivalents and/or (B) the assumption by the transferee of Debt of the Company or a Restricted Subsidiary which would be ranked senior to or pari passu with the Exchange Debentures and release of the Company or such Restricted Subsidiary from all liability on such Debt. (g) Direct or indirect loans to employees, or to a trustee for the benefit of such employees, of the Company or any of its Restricted Subsidiaries in an aggregate amount outstanding, at any time not exceeding $1,000,000. (h) Investments by the Company or any of its Restricted Subsidiaries in a joint venture that is engaged in the internet service provider business in an aggregate amount outstanding at any time not exceeding $500,000. (i) Other Investments that do not exceed $2,000,000 at any one time outstanding. "Preferred Stock" of any person means any Capital Stock of such person that has preferential rights to any other Capital Stock of such person with respect to dividends or redemptions or upon liquidation. "Preferred Stock Exchange Offer" means an offer by the Company to exchange the Series A Preferred Stock for the Series B Preferred Stock pursuant to an effective registration statement. "Preferred Stock Registration" has the meaning set forth in Section VIII(7) hereof. "Preferred Stock Shelf Registration Statement" means a shelf registration statement which becomes effective and covers resales of the Series A Preferred Stock. "Public Equity Offering" means an underwritten public offering of Qualified Equity Interests of either (a) the Company or (b) Citadel Communications, the net proceeds from which (after deducting any underwriting discounts and commissions) are used by Citadel Communications to purchase Qualified Equity Interests of the Company; provided that, in either case, such net proceeds exceed $10,000,000. -30- 31 "Qualified Equity Interest" means any Qualified Stock and all warrants, options or other rights to acquire Qualified Stock (but excluding any debt security that in convertible into or exchangeable for Capital Stock). "Qualified Stock" of any person means any and all Capital Stock of such person, other than Disqualified Stock. "Redemption Date" has the meaning specified in Section VI(a)(i) hereof. "Redemption Notice" has the meaning specified in Section VI(c)(i) hereof. "Redemption Price" means the price at which the Exchangeable Preferred Stock may be redeemed. "Restricted Payment" has the meaning specified in Section VIII(2) hereof. "Restricted Subsidiary" means any Subsidiary other than an Unrestricted Subsidiary. "Securities Act" means the Securities Act of 1933, as amended. "Securities Purchase and Exchange Agreement" means that certain Securities Purchase and Exchange Agreement, dated June 28, 1996, as amended by the First Amendment thereto dated December 31, 1996, and by the Second Amendment thereto dated March 17, 1997 among Citadel Communications, the Company and certain other parties. "Senior Stock" has the meaning specified in Section VII hereof. "Series A Preferred Stock" has the meaning set forth in Section I hereof. "Series B Preferred Stock" has the meaning set forth in Section I hereof. "Significant Subsidiary" means any Restricted Subsidiary of the Company that together with its Subsidiaries, (a) for the most recent fiscal year of the Company accounted for more than 10% of the consolidated net sales of the Company and its Restricted Subsidiaries, (b) as of the end of such fiscal year was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the most recently available consolidated financial statements of the Company for such fiscal year (c) was organized or acquired after the beginning of such fiscal year and would have been a Significant Subsidiary if it had been owned during the entire fiscal year or (d) that holds one or more licenses material to the Company's business. "Subsidiary" means any person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company and/or one or more other Subsidiaries of the Company. -31- 32 "Subsidiary Debentures Guarantee" means a guarantee of the Exchange Debentures by a Restricted Subsidiary under the Exchange Indenture. "Subsidiary Debentures Guarantor" means the License Subsidiary and each other Restricted Subsidiary that issues a Subsidiary Debentures Guarantee under the Exchange Indenture. "Subsidiary Notes Guarantee" means a guarantee of the Notes by a Restricted Subsidiary under the Notes Indenture. "Transfer Agent" means The Bank of New York or any successor transfer agent. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force on the date on which this Certificate of Designation was filed. "Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary in accordance with Section VIII(5), "Unrestricted Subsidiaries," of this Certificate of Designation and (b) any Subsidiary of an Unrestricted Subsidiary. "Voting Rights Triggering Event" has the meaning set forth above in Section V(b) hereof. "Voting Stock" means any class or classes of Capital Stock 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 or trustees of any person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). "Voting Trust Agreement" means that certain Voting Trust Agreement dated as of March 17, 1997 by and among Citadel Communications, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Christopher Hall, as the initial Trustee thereunder and J. Walter Corcoran and Harlan Levy, each as an initial Back-Up Trustee thereunder. "Weighted Average Life" means, as of the date of determination with respect to any Debt or Disqualified Stock, 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 or liquidation value payment of such Debt or Disqualified Stock, respectively, multiplied by (ii) the amount of each such principal or liquidation value payment by (b) the sum of all such principal or liquidation value payments. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all of the outstanding voting securities (other than directors' qualifying shares or an immaterial -32- 33 number of shares required to be owned by other persons pursuant to applicable law) of which are owned, directly or indirectly, by the Company. -33- 34 EXHIBIT A --------- Form of Certificate as to Completion of Distribution and Termination of Restricted Period -------------------------------- __________________, ____ The Bank of New York 101 Barclay Street New York, New York 10286 Attention: Re: Citadel Broadcasting Company (the "Company") 13-1/4% Series A Exchangeable Preferred Stock (the "Series A Preferred Stock") and 13-1/4% Series B Exchangeable Preferred Stock (the "Series B Preferred Stock) ----------------------------------------------------- Dear Ladies and Gentlemen: This letter relates to ___ shares of Series A Preferred Stock represented by the attached Certificate (the "Legended Certificate") which bears a legend outlining restrictions upon transfer of such Legended Certificate. Pursuant to Section XI(d) of the Certificate of Designation (the "Certificate of Designation") filed with the Secretary of State of the State of Nevada on July __, 1997 relating to the Series A Preferred Stock and the Series B Preferred Stock, we hereby certify that we are a person outside the United States to whom the Series A Preferred Stock could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933, as amended. Accordingly, you are hereby requested to exchange the shares of Series A Preferred Stock represented by the Legended Certificate for a like number of shares of Series A Preferred Stock, which shall be represented by the attached Certificate (the "Unlegended Certificate"), which does not bear a legend outlining restrictions upon the transfer of such Unlegended Certificate, all in the manner provided for in the Certificate of Designation. -34- 35 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By: ------------------------------ Authorized Signature -35- 36 EXHIBIT B --------- Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ----------------------------------------- _______________, ____ The Bank of New York 101 Barclay Street New York, New York 10286 Attention: Re: Citadel Broadcasting Company (the "Company") 13-1/4% Series A Exchangeable Preferred Stock (the "Securities) ---------------------------------------- Dear Sirs: In connection with our proposed purchase of ___ shares of the Securities, we confirm that: 1. The undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Securities, except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Securities have not been registered under the Securities Act, and that the Securities may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Securities, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if requested by the Company, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the exemption from registration provided by Rule 144 under the Securities Act, or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Securities from us a notice advising such purchaser that resales of the Securities are restricted as stated herein. 3. We understand that, on any proposed resale of any Securities or Conversion Shares, we will be required to furnish to you and the Company such certifications, -36- 37 legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Securities purchased by us will bear a legend to the effect set out in paragraph 2. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Securities purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Holder] By: ------------------------------ Authorized Signature -37- 38 EXHIBIT C --------- Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S ------------------------ The Bank of New York 101 Barclay Street New York, New York 10286 Attention: Re: Citadel Broadcasting Company (the "Company") 13-1/4% Series A Exchangeable Preferred Stock (the "Securities") ---------------------------------------- Dear Sirs: In connection with our proposed sale of ____ shares of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, we represent that: (1) the offer of the Securities was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act of 1933. In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the case may be. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative -38- 39 or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By: --------------------------- Authorized Signature -39- 40 II. That, pursuant to the authority conferred upon the Board of Directors of the Company by ARTICLE 4 of the Restated Articles of Incorporation (the "Articles"), and Section V of the Original Designation, the Board of Directors of the Company by unanimous written consent adopted the following resolution amending the Original Designation (the "New Designation"). The New Designation is as follows: RESOLVED, that pursuant to the authority expressly conferred upon the Board of Directors of the Company by Article 4 of the Articles, and conferred upon the Board of Directors of the Company pursuant to Section V of the Original Designation, the Original Designation is hereby amended and restated as follows: CERTIFICATE OF THE DESIGNATIONS, VOTING POWERS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF THE 13-1/4% SERIES A EXCHANGEABLE PREFERRED STOCK AND THE 13-1/4% SERIES B EXCHANGEABLE PREFERRED STOCK OF CITADEL BROADCASTING COMPANY WHEREAS, pursuant to authority conferred upon the Board of Directors by ARTICLE 4 of the Amended and Restated Articles of Incorporation of the Company (the "Articles"), the Board of Directors of the Company by unanimous written consent dated June 30, 1997 adopted the following resolution creating two series of Preferred Stock designated as 13-1/4% Series A Exchangeable Preferred Stock of Citadel Broadcasting Company and 13-1/4% Series B Exchangeable Preferred Stock of Citadel Broadcasting Company: RESOLVED, that pursuant to the authority expressly vested in the Board of Directors in accordance with the provisions of the Articles, two series of Preferred Stock of the Company, without par value, be and they hereby are, created and that the designation and amount thereof and the voting powers, preferences, and relative rights of the shares of each such series, and the limitations and restrictions thereof, are as follows: I. Designation and Amount. The designations for the two series of Preferred Stock authorized by this resolution shall be the 13-1/4% Series A Exchangeable Preferred Stock without par value (the "Series A Preferred Stock") and the 13-1/4% Series B Exchangeable Preferred Stock without par value (the "Series B Preferred Stock" and together with the Series A Preferred Stock, the "Exchangeable Preferred Stock"). The initial liquidation preference of the Exchangeable Preferred Stock is $100.00 per share and the -40- 41 original issue price for each such share is $100.00. The issue price per share or liquidation preference of the Exchangeable Preferred Stock shall not for any purpose be considered to be a determination by the Board of Directors with respect to the capital and surplus of the Company. The maximum number of shares of Series A Preferred Stock shall be 2,000,000 and the maximum number of shares of Series B Preferred Stock shall be 2,000,000. II. Dividends. (a) Holders of the outstanding shares of Exchangeable Preferred Stock (the "Holders") will be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefor, dividends on the Exchangeable Preferred Stock at an annual rate of 13-1/4% (the "Dividend Rate"). All dividends will be cumulative, whether or not earned or declared, from the Closing Date and will be payable semi-annually in arrears on each Dividend Payment Date, commencing on January 1, 1998, to Holders of record on the June 15 or December 15 immediately preceding the relevant Dividend Payment Date. On or before July 1, 2002, the Company may, at its option, pay dividends in cash or in additional fully paid and non-assessable shares of Exchangeable Preferred Stock having an aggregate liquidation preference equal to the amount of such dividends, provided, however, that if the Company pays dividends in additional shares of Exchangeable Preferred Stock, Holders of Series A Preferred Stock shall be paid in additional shares of Series A Preferred Stock and Holders of Series B Preferred Stock shall be paid in additional shares of Series B Preferred Stock. After July 1, 2002, dividends shall be paid only in cash. If any dividend (or portion thereof) payable on any Dividend Payment Date on or before July 1, 2002 is not declared or paid in full in cash or in shares of Exchangeable Preferred Stock as described above on such Dividend Payment Date, the amount of the accumulated and unpaid dividend will bear interest at the Dividend Rate, compounding semi-annually from such Dividend Payment Date until paid in full. If any dividend (or portion thereof) payable on any Dividend Payment Date after July 1, 2002 is not declared or paid in full in cash on such Dividend Payment Date, the amount of the accumulated and unpaid dividend that is payable and that is not paid in cash on such date will bear interest at the Dividend Rate, compounding semi-annually from such Dividend Payment Date until paid in full. Dividends shall cease to accumulate in respect of the shares of Exchangeable Preferred Stock on the Exchange Date or on the Redemption Date unless the Company shall have failed to issue the appropriate aggregate principal amount of Exchange Debentures in respect of the Exchangeable Preferred Stock on the Exchange Date or shall have failed to pay the relevant redemption price on the Redemption Date. (b) All dividends paid with respect to shares of the Exchangeable Preferred Stock pursuant to Section II(a) of this Certificate of Designation shall be paid pro rata to the Holders entitled thereto. (c) Nothing contained in this Certificate of Designation shall in any way or under any circumstances be construed or deemed to require the Board of Directors to declare, or the Company to pay or set apart for payment, any dividends on shares of the Exchangeable Preferred Stock at any time. -41- 42 (d) Holders shall be entitled to receive the dividends provided for in Section II(a) of this Certificate of Designation (including any accumulated and unpaid cash dividends on the Exchangeable Preferred Stock) in preference to and in priority over any cash dividends (including accumulated and unpaid dividends) upon any of the Junior Stock. (e) No full dividends may be declared or paid or funds set apart for the payment of dividends on any Parity Stock for any period unless full cumulative dividends shall have been or contemporaneously are declared and paid (or are deemed declared and paid) in full or declared and, if payable in cash, a sum in cash sufficient for such payment set apart for such payment on the Exchangeable Preferred Stock. If full dividends are not so paid, the Exchangeable Preferred Stock will share dividends pro rata with the Parity Stock. No dividends may be paid or set apart for such payment on Junior Stock (except dividends on Junior Stock payable in additional shares of Junior Stock) and no Junior Stock or Parity Stock may be repurchased, redeemed or otherwise retired nor may funds be set apart for payment with respect thereto, if full cumulative dividends have not been paid in full (or deemed paid) on any issued and outstanding Exchangeable Preferred Stock. (f) Dividends on account of arrears for any past dividend period and dividends in connection with any optional redemption may be declared and paid at any time, without reference to any regular Dividend Payment Date, to Holders of record of the Exchangeable Preferred Stock on such date, not more than 45 days prior to the payment thereof, as may be fixed by the Board of Directors. (g) Each fractional share of Exchangeable Preferred Stock outstanding shall be entitled to a ratably proportionate amount of all dividends accruing with respect to each outstanding share of Exchangeable Preferred Stock pursuant to Section II(a), and all such dividends with respect to such outstanding fractional shares shall accumulate at the Dividend Rate and shall be payable in the same manner and at such times as provided for in Section II(a) with respect to dividends on each outstanding share of Exchangeable Preferred Stock. (h) Dividends payable on the Exchangeable Preferred Stock for any period less than a year shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in the period for which dividends are payable. III. Liquidation Preference. Upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, Holders will be entitled to be paid, out of the assets of the Company available for distribution to stockholders, the then effective liquidation preference per share of Exchangeable Preferred Stock, plus, without duplication, an amount in cash equal to all accumulated and unpaid dividends thereon to the date fixed for liquidation, dissolution or winding-up (including an amount equal to a prorated dividend for the period from the last Dividend Payment Date to the date fixed for liquidation, dissolution or winding- up), before any distribution is made on any Junior Stock, including, without limitation, common stock of the Company. If, upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the amounts payable with respect to the Exchangeable -42- 43 Preferred Stock and all other Parity Stock are not paid in full, the Holders of the Exchangeable Preferred Stock and the holders of the Parity Stock will share equally and ratably in any distribution of assets of the Company in proportion to the liquidation preference, together with all accumulated and unpaid dividends, to which each is entitled. After payment of the full amount of the liquidation preference and accumulated and unpaid dividends to which they are entitled, Holders will not be entitled to any further participation in any distribution of assets of the Company. For the purposes of this Section III, neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company nor the consolidation or merger of the Company with one or more entities shall be deemed to be a liquidation, dissolution or winding-up of the Company. The liquidation preference with respect to each outstanding fractional share of Exchangeable Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payments with respect to each outstanding full share of Exchangeable Preferred Stock. IV. Exchange. (a) The Company may, at its option, subject to the conditions described below, on any scheduled Dividend Payment Date, exchange the Exchangeable Preferred Stock, in whole but not in part, for the Exchange Debentures. At least 30 and not more than 60 days prior to the date fixed for exchange, the Company shall send a written notice (the "Exchange Notice") of exchange by mail to each Holder, which notice shall state: (i) that the Company has elected to exchange the Exchangeable Preferred Stock into Exchange Debentures pursuant to this Certificate of Designation; (ii) the date of such exchange (the "Exchange Date"); (iii) that the Holder is to surrender to the Company, at the place or places and in the manner designated in the Exchange Notice, its certificate or certificates representing the shares of Exchangeable Preferred Stock; (iv) that dividends on the shares of Exchangeable Preferred Stock to be exchanged shall cease to accumulate at the close of business on the day prior to the Exchange Date, whether or not certificates for shares of Exchangeable Preferred Stock are surrendered for exchange on the Exchange Date, unless the Company shall default in the delivery of Exchange Debentures; and (v) that interest on the Exchange Debentures shall accrue from the Exchange Date whether or not certificates for shares of Exchangeable Preferred Stock are surrendered for exchange on the Exchange Date. On the Exchange Date, if the conditions set forth in clauses (A) through (E) below are satisfied and if the exchange is then permitted under the Exchange Indenture, the -43- 44 Company shall issue Exchange Debentures in exchange for the Exchangeable Preferred Stock as provided in the next paragraph, provided that on the Exchange Date: (A) there shall be legally available funds sufficient for the exchange to occur (including, without limitation, legally available funds sufficient therefor under Section 78.288 (or any successor provisions), to the extent applicable, of the General Corporation Law of the State of Nevada); (B) the Company shall have obtained a written opinion of counsel acceptable to the Company that an exemption from the registration requirements of the Securities Act is available for such exchange, and such exemption is relied upon by the Company for such exchange or, alternatively, that the Exchange Debentures have been registered thereunder; (C) the Exchange Indenture and the Debentures Trustee shall have been qualified under the Trust Indenture Act or the Company shall have obtained a written opinion of counsel that such qualification is not required; (D) immediately after giving effect to such exchange, no default or event of default would exist under the Exchange Indenture, and no material breach or default would exist under the Credit Facility, the Notes Indenture or the Securities Purchase and Exchange Agreement; and (E) on the date of such exchange (the "Exchange Date") there are no accumulated and unpaid dividends on the Exchangeable Preferred Stock (including the dividend payable on such date). In the event that any of the conditions set forth in clauses (A) through (E) of the preceding sentence are not satisfied on the Exchange Date, then no shares of Exchangeable Preferred Stock shall be exchanged, and in order to effect an exchange as provided for in this Section IV, the Company shall be required to fix another date for the exchange and issue a new Exchange Notice. (b) Upon any exchange pursuant to this Section IV, Holders shall be entitled to receive, subject to the provisions hereof, $1.00 principal amount of Exchange Debentures for each $1.00 of the aggregate of the liquidation preference of the Exchangeable Preferred Stock and all accumulated and unpaid dividends thereon, plus, without duplication, an amount in cash equal to all accumulated and unpaid dividends thereon for the period from the immediately preceding Dividend Payment Date to the day prior to the Exchange Date; provided that the Company shall pay cash in lieu of issuing an Exchange Debenture in a principal amount of less than $1,000 and provided further that the Exchange Debentures will be issuable only in denominations of $1,000 and integral multiples thereof. (c) On or before the Exchange Date, each Holder shall surrender the certificate or certificates representing such shares of the Exchangeable Preferred Stock, in the manner and at the place designated in the Exchange Notice. The Company shall cause the Exchange Debentures to be executed on the Exchange Date and, upon surrender in accordance with the Exchange Notice of the certificates for any shares of the Exchangeable Preferred Stock so exchanged (properly endorsed or assigned for transfer, if the Exchange Notice shall so state), such shares shall be exchanged by the Company into Exchange Debentures as aforesaid. The Company shall pay interest on the Exchange Debentures at the rate and on the dates specified therein from the Exchange Date. (d) If the Exchange Notice has been mailed as aforesaid, and if before the Exchange Date all Exchange Debentures necessary for such exchange shall have been duly -44- 45 executed by the Company and delivered to the Debentures Trustee with irrevocable instructions to authenticate the Exchange Debentures necessary for such exchange, then the rights of the Holders as stockholders of the Company shall cease (except the right to receive the Exchange Debentures, an amount in cash, to the extent applicable, equal to the accumulated and unpaid dividends to the Exchange Date and cash in lieu of any Exchange Debenture that is in a principal amount less than $1,000), and the person or persons entitled to receive the Exchange Debentures issuable upon exchange shall be treated for all purposes as a registered holder or holders of such Exchange Debentures as of the Exchange Date. V. Voting Rights. (a) Holders, except as otherwise required under Nevada law or as set forth below, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Company. (b) If (i) after July 1, 2002, cash dividends on the Exchangeable Preferred Stock are in arrears and unpaid for two or more semi-annual dividend periods (whether or not consecutive) (a "Dividend Default"); (ii) the Company fails to redeem the Exchangeable Preferred Stock on July 1, 2009 or fails to otherwise discharge any redemption obligation set forth in this Certificate of Designation with respect to the Exchangeable Preferred Stock; (iii) the Company fails to make a Change of Control Offer if such offer is required by the provisions set forth under the "Purchase of Exchangeable Preferred Stock upon a Change of Control" covenant set forth in Section VIII below or fails to purchase shares of Exchangeable Preferred Stock from Holders who elect to have such shares purchased pursuant to the Change of Control Offer; (iv) a breach or violation of any other provisions contained in Section VIII hereof occurs and the breach or violation continues for a period of 30 days or more after the Company receives notice thereof specifying the default from the Holders of at least 25% of the shares of Exchangeable Preferred Stock then outstanding; or (v) the Company fails to pay at the final stated maturity (giving effect to any extensions thereof) the principal amount of any Debt of the Company or any Restricted Subsidiary of the Company, or the final stated maturity of any such Debt is accelerated, if the aggregate principal amount of such Debt, together with the aggregate principal amount of any other such Debt in default for failure to pay principal at the final stated maturity (giving effect to any extensions thereof) or which has been accelerated, aggregates $5,000,000 or more at any time (each such event described in clauses (i) through (v) above being referred to herein as a "Voting Rights Triggering Event") then the number of directors constituting the Board of Directors will be adjusted to permit the Holders of a majority of the then outstanding shares of Exchangeable Preferred Stock, voting separately and as a class (together with the holders of any Parity Stock having similar voting rights), to elect two directors to the Board of Directors. The voting rights provided herein shall be the Holders' exclusive remedy at law or in equity. Such voting rights will continue until such time as, in the case of a Dividend Default, all dividends in arrears on the Exchangeable Preferred Stock are paid in full in cash and, in all other cases, any failure, breach or default giving rise to such voting rights is remedied or waived by the Holders of at least a majority of the shares of Exchangeable Preferred Stock then outstanding, at which time the term of any directors elected pursuant to the provisions of this paragraph shall terminate. -45- 46 (c) The Company shall not authorize any new class of Senior Stock or modify, change, affect or amend the Articles or this Certificate of Designation to affect materially and adversely the specified rights, preferences, privileges or voting rights of the Exchangeable Preferred Stock without the affirmative vote or consent of Holders of at least a majority of the shares of Exchangeable Preferred Stock then outstanding, voting or consenting, as the case may be, as one class. (d) Immediately after voting power to elect directors shall have become vested and be continuing in the Holders pursuant to Section V(b) or if vacancies shall exist in the offices of directors elected by the Holders, a proper officer of the Company shall call a special meeting of the Holders for the purpose of electing the directors which such Holders are entitled to elect. Any such meeting shall be held at the earliest practicable date, and the Company shall provide Holders with access to the lists of Holders pursuant to the provisions of this Section V(d). At any meeting held for the purpose of electing directors at which the Holders shall have the right, voting separately as a class, to elect directors, the presence in person or by proxy of the Holders of at least a majority of the outstanding shares of Exchangeable Preferred Stock shall be required to constitute a quorum of such Holders. (e) Any vacancy occurring in the office of a director elected by the Holders may be filled by the remaining director elected by the Holders unless and until such vacancy shall be filled by the Holders. (f) In any case in which the Holders shall be entitled to vote pursuant to this Section V or pursuant to the General Corporation Law of the State of Nevada, each Holder shall be entitled to one vote for each share of Exchangeable Preferred Stock held. (g) Holders of at least 66-2/3% of the then outstanding shares of Exchangeable Preferred Stock, voting or consenting, as the case may be, separately as a class, may waive compliance with any provision of this Certificate of Designation. Further, Holders are entitled to vote as a class upon a proposed amendment to the Articles if the amendment would increase or decrease the par value of the shares of, or alter or change the powers, preferences or special rights of the shares of such class so as to affect them adversely. Except as set forth above, (i) the creation, authorization or issuance of any shares of Junior Stock, Parity Stock or Senior Stock, including the designation of series thereof within the existing class of Preferred Stock of the Company, or (ii) the increase or decrease in the amount of authorized Capital Stock of any class, including any Preferred Stock of the Company, shall not require the consent of the Holders and shall not be deemed to affect adversely the rights, preferences, privileges or voting rights of Holders. VI. Redemption. (a) Optional Redemption. (i) The Exchangeable Preferred Stock will be redeemable (subject to contractual and other restrictions with respect thereto and to the legal availability of funds therefor) at the election of the Company, as a whole or from time to time in part, at any time on or after July 1, 2002 on not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of the -46- 47 then effective liquidation preference thereof) set forth below, plus, without duplication, all accumulated and unpaid dividends, if any, to the date of redemption (the "Redemption Date") (including an amount in cash equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Redemption Date to the Redemption Date), if redeemed during the 12-month period beginning on July 1 of the years indicated below:
Year Redemption Price ---- ---------------- 2002 107.729% 2003 106.625% 2004 105.521% 2005 104.417% 2006 103.313% 2007 102.208% 2008 101.104%
(ii) In addition, at any time and from time to time prior to July 1, 2000, the Company may at its option redeem shares of Exchangeable Preferred Stock having an aggregate liquidation preference of up to 35% of the aggregate liquidation preference of all shares of Exchangeable Preferred Stock issued as of the Closing Date or issued as dividends on the Exchangeable Preferred Stock, with the net proceeds of one or more Public Equity Offerings at a redemption price equal to 113.250% of the liquidation preference thereof, plus without duplication, accumulated and unpaid dividends, if any, to the Redemption Date (including an amount in cash equal to a prorated dividend for the period from the Dividend Payment Date immediately prior to the Redemption Date to the Redemption Date), subject to the right of Holders of record on the relevant record date to receive dividends due on a Dividend Payment Date; provided that, immediately after giving effect to any such redemption, at least $75,000,000 in aggregate liquidation preference of the Exchangeable Preferred Stock remains outstanding. Any such redemption must be made within 90 days of the related Public Equity Offering. (iii) No optional redemption may be authorized or made unless on or prior to such redemption full unpaid cumulative dividends shall have been paid or a sum set apart for such payment on the Exchangeable Preferred Stock. If less than all the Exchangeable Preferred Stock is to be redeemed, the particular shares to be redeemed will be determined pro rata, except that the Company may redeem such shares held by any holder of fewer than 100 shares without regard to such pro rata redemption requirement. If any Exchangeable Preferred Stock is to be redeemed in part, the Redemption Notice that relates to such Exchangeable Preferred Stock shall state the portion of the liquidation preference to be redeemed. New shares of the same Series of Exchangeable Preferred Stock having an aggregate liquidation preference equal to the unredeemed portion will be issued in the name of the holder thereof upon cancellation of the original shares of Exchangeable Preferred Stock and, unless the Company fails to pay the redemption price on the Redemption Date, after the Redemption Date dividends will cease to accumulate on the Exchangeable Preferred Stock called for redemption. -47- 48 (b) Mandatory Redemption. The Company shall redeem all outstanding Exchangeable Preferred Stock (subject to the legal availability of funds therefor) in whole on the redemption date of July 1, 2009 (the "Mandatory Redemption Date"), at a redemption price equal to 100% of the liquidation preference thereof, plus, without duplication, all accumulated and unpaid dividends, if any, to the date of redemption. (c) Procedure for Redemption. (i) Not more than 60 and not less than 30 days prior to any Redemption Date, written notice (the "Redemption Notice") shall be given by first-class mail, postage prepaid, to each Holder of record of shares to be redeemed on the record date fixed for such redemption of the Exchangeable Preferred Stock at such Holder's address as the same appears on the stock ledger of the Company, provided, however, that no failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the redemption of any shares of Exchangeable Preferred Stock to be redeemed except as to the Holder or Holders to whom the Company has failed to give such notice or except as to the Holder or Holders whose notice was defective. The Redemption Notice shall state: (A) the Redemption Price; (B) whether all or less than all the outstanding shares of the Exchangeable Preferred Stock are to be redeemed and the total number of shares of such Exchangeable Preferred Stock being redeemed; (C) the number of shares of Exchangeable Preferred Stock held by the Holder that the Company intends to redeem; (D) the Redemption Date; (E) that the Holder is to surrender to the Company, at the place or places, which shall be designated in such Redemption Notice, its certificates representing the shares of Exchangeable Preferred Stock to be redeemed; (F) that dividends on the shares of the Exchangeable Preferred Stock to be redeemed shall cease to accumulate on the day prior to such Redemption Date unless the Company defaults in the payment of the redemption price; and (G) the name of any bank or trust company performing the duties referred to in subsection (c)(v) below. (ii) On or before the Redemption Date, each Holder of Exchangeable Preferred Stock to be redeemed shall surrender the certificate or certificates representing such shares of Exchangeable Preferred Stock to the Company, in the manner and at the place designated in the Redemption Notice, and on the Redemption Date the full redemption price for such shares shall be payable in cash to the person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be returned to authorized but unissued shares. In the event that less than all of the shares represented by any -48- 49 such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (iii) Unless the Company defaults in the payment in full of the redemption price, dividends on the Exchangeable Preferred Stock called for redemption shall cease to accumulate on the day prior to the Redemption Date, and the Holders of such shares shall cease to have any further rights with respect thereto on the Redemption Date, other than the right to receive the redemption price, without interest. (iv) If a Redemption Notice shall have been duly given, and if, on or before the Redemption Date specified therein, all funds necessary for such redemption shall have been set aside by the Company, separate and apart from its other funds, in trust for the pro rata benefit of the Holders of the Exchangeable Preferred Stock called for redemption so as to be and continue to be available therefor, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, all shares so called for redemption shall no longer be deemed outstanding, and all rights with respect to such shares shall forthwith on such Redemption Date cease and terminate, except only the right of the Holders thereof to receive the amount payable on redemption thereof, without interest. (v) If a Redemption Notice shall have been duly given or if the Company shall have given to the bank or trust company hereinafter referred to irrevocable authorization promptly to give such notice, and if on or before the Redemption Date specified therein the funds necessary for such redemption shall have been deposited by the Company with such bank or trust company in trust for the pro rata benefit of the Holders of the Exchangeable Preferred Stock called for redemption, then, notwithstanding that any certificate for shares so called for redemption shall not have been surrendered for cancellation, from and after the time of such deposit, all shares so called, or to be so called pursuant to such irrevocable authorization, for redemption shall no longer be deemed to be outstanding and all rights with respect of such shares shall forthwith cease and terminate, except only the right of the Holders thereof to receive from such bank or trust company at any time after the time of such deposit the funds so deposited, without interest. The aforesaid bank or trust company shall be organized and in good standing under the laws of the United States of America or of the State of New York, shall be doing business in the Borough of Manhattan, The City of New York, shall have capital, surplus and undivided profits aggregating at least $100,000,000 according to its last published statement of condition, and shall be identified in the Redemption Notice. Any interest accrued on such funds shall be paid to the Company from time to time. Any funds so set aside or deposited, as the case may be, and unclaimed at the end of three years from such Redemption Date shall, to the extent permitted by law, be released or repaid to the Company, after which repayment the Holders of the shares so called for redemption shall look only to the Company for payment thereof. VII. Ranking. The Exchangeable Preferred Stock will, with respect to dividend rights and rights on liquidation, winding-up and dissolution of the Company, rank (a) senior to all classes of common stock and to each other class of Capital Stock or series of preferred stock established after the Closing Date by the Board of Directors the terms of -49- 50 which expressly provide that it ranks junior to the Exchangeable Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company (collectively referred to, together with all classes of common stock of the Company, as "Junior Stock"); (b) on a parity with each other class of Capital Stock or series of preferred stock established after the Closing Date by the Board of Directors the terms of which expressly provide that such class or series will rank on a parity with the Exchangeable Preferred Stock as to dividend rights on liquidation, winding-up and dissolution of the Company (collectively referred to as "Parity Stock"); and (c) subject to the approval of the Holders in accordance with Section V(c) hereof, junior to each class of Capital Stock or series of preferred stock established after the Closing Date by the Board of Directors the terms of which do not expressly provide that such class or series will rank junior to, or on a parity with, the Exchangeable Preferred Stock as to dividend rights and rights upon liquidation, winding-up and dissolution of the Company (collectively referred to as "Senior Stock"). VIII. Certain Covenants. (1) LIMITATION ON DEBT. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Debt (including Acquired Debt and the issuance of Disqualified Stock), except that the Company or a Restricted Subsidiary may incur Debt or issue Disqualified Stock if, at the time of such event, the Consolidated Cash Flow Ratio would have been less than 7.0 to 1.0. In making the foregoing calculation, pro forma effect will be given to: (i) the incurrence of such Debt and (if applicable) the application of the net proceeds therefrom, including to refinance other Debt as if the additional Debt had been incurred and the application of proceeds therefrom occurred on the first day of the four-fiscal quarter period used to calculate the Consolidated Cash Flow Ratio, (ii) the incurrence, repayment or retirement of any other Debt by the Company or any of its Restricted Subsidiaries since the first day of such four-quarter period as if such Debt was incurred, repaid or retired at the beginning of such four-quarter period and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or any of its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period. In making a computation under the foregoing clause (i) or (ii), the amount of Debt under a revolving credit facility will be computed based upon the average daily balance of such Debt during such four-quarter period. (b) Notwithstanding the foregoing, the Company may, and may, to the extent expressly permitted below, permit any of its Restricted Subsidiaries to, incur any of the following Debt ("Permitted Debt"): (i) Debt of the Company or any Restricted Subsidiary under the Credit Facility (including guarantees thereof by Subsidiaries) in an aggregate principal amount at any one time outstanding not to exceed $110,000,000. -50- 51 (ii) Debt of the Company or any of its Restricted Subsidiaries outstanding on the Closing Date, other than Debt described in clause (i) above. (iii) Debt owed by the Company to any of its Restricted Subsidiaries or owed by any Subsidiary to the Company or a Restricted Subsidiary or owed to the Company or a Restricted Subsidiary by a Restricted Subsidiary, provided the incurrence of such Debt did not violate Section VIII(2), "Limitation on Restricted Payments," of this Certificate of Designation. (iv) Debt represented by the Notes and the Subsidiary Notes Guarantees. (v) Hedging Obligations of the Company or any of its Restricted Subsidiaries incurred in the ordinary course of business. (vi) Capitalized Lease Obligations of the Company or any of its Restricted Subsidiaries in an aggregate amount not exceeding $3,000,000 at any one time outstanding. (vii) Debt under purchase money mortgages or secured by purchase money security interests so long as (x) such Debt is not secured by any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets so acquired and (y) such Debt is created within 60 days of the acquisition of the related property; provided that the aggregate principal amount of Debt under this clause (vii) does not exceed $2,000,000 at any one time outstanding. (viii) Debt of the Company or any Restricted Subsidiary, not permitted by any other clause of this definition, in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding. (ix) Debt of the Company or any of its Restricted Subsidiaries consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock. (x) Acquired Debt of a person, other than Debt incurred in connection with, or in contemplation of, such person becoming a Restricted Subsidiary or the acquisition of assets from such person, as the case may be, provided that the Company on a pro forma basis could incur $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of this covenant. (xi) Any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by the Company or any Restricted Subsidiary of any outstanding Debt of the Company or such Restricted Subsidiary, other than Debt incurred pursuant to clause (i), (v), (vi), (vii), (viii) or (ix) of this definition, including any successive refinancings thereof, so long as (A) any such new -51- 52 Debt is in a principal amount that does not exceed the principal amount so refinanced, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Debt refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing plus the amount of expenses of the Company incurred in connection with such refinancing and (B) such refinancing Debt does not have a Weighted Average Life less than the Weighted Average Life of the Debt being refinanced and does not have a final scheduled maturity earlier than the final scheduled maturity, or permit redemption at the option of the holder earlier than the earliest date of redemption at the option of the holder, of the Debt being refinanced. (2) LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, take any of the following actions: (a) declare or pay any dividend on, or make any distribution to holders of, any shares of the Junior Stock of the Company or any of its Restricted Subsidiaries, other than (i) dividends or distributions payable solely in Qualified Equity Interests of the issuer of such shares of Junior Stock, (ii) dividends or distributions by a Restricted Subsidiary payable to the Company or another Restricted Subsidiary or (iii) pro rata dividends or distributions on common stock of a Restricted Subsidiary held by minority stockholders, provided that such dividends do not in the aggregate exceed the minority stockholders' pro rata share of such Restricted Subsidiary's net income from the first day of the Company's fiscal quarter during which the Closing Date occurs; (b) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of (i) Junior Stock of the Company (or any options, warrants or other rights to acquire shares of Junior Stock of the Company (other than any such Junior Stock owned by Restricted Subsidiaries)) or (ii) Capital Stock (or any options, warrants or other rights to acquire shares of Capital Stock) of (A) any Unrestricted Subsidiary or (B) any Restricted Subsidiary that are held by any Affiliate of the Company (other than, in either case, any such Capital Stock owned by the Company or any of its Restricted Subsidiaries); (c) make any Investment (other than a Permitted Investment) in any person (such payments or other actions described in (but not excluded from) clauses (a) through (c) being referred to as "Restricted Payments"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment: (i) no Voting Rights Triggering Event has occurred and is continuing, -52- 53 (ii) the Company could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to Section VIII(1)(a), "Limitation on Debt," of this Certificate of Designation, and (iii) the aggregate amount of all Restricted Payments declared or made after the Closing Date does not exceed the sum of: (A) the remainder of (x) 100% of the aggregate Consolidated Cash Flow for the period beginning on the first day of the Company's fiscal quarter during which the Closing Date occurs and ending on the last day of the Company's most recent fiscal quarter for which internal financial statements are available ending prior to the date of such proposed Restricted Payment (the "Computation Period") minus (y) the product of 1.4 times the sum of (i) Consolidated Fixed Charges for the Computation Period and (ii) all dividends or other distributions paid in cash by the Company or any of its Restricted Subsidiaries on any Disqualified Stock of the Company or any of its Restricted Subsidiaries for the Computation Period; plus (B) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Board of Directors, whose good faith determination will be conclusive) from the issuance or sale (other than to a Subsidiary) of Qualified Equity Interests of the Company (excluding from this computation any net proceeds of a Public Equity Offering received by the Company that are used by it to redeem the Exchangeable Preferred Stock, as discussed in Section VI(a)(ii), "Redemption" above); plus (C) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Board of Directors, whose good faith determination will be conclusive) from the issuance or sale (other than to a Subsidiary) of debt securities or Disqualified Stock that have been converted into or exchanged for Qualified Stock of the Company, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange; plus (D) without duplication, the Net Cash Proceeds received by the Company or a Wholly Owned Restricted Subsidiary upon the sale of any of its Unrestricted Subsidiaries; plus (E) $5,000,000. -53- 54 Notwithstanding the foregoing, the Company and any of its Restricted Subsidiaries may take any of the following actions, so long as (with respect to clauses (c) and (d) below) no Voting Rights Triggering Event has occurred and is continuing or would occur: (a) The payment of any dividend within 60 days after the date of declaration thereof, if at the declaration date such payment would not have been prohibited by the foregoing provision. (b) The repurchase, redemption or other acquisition or retirement for value of any shares of Junior Stock of the Company, in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company. (c) The payment by the Company to Citadel Communications for the purpose of the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of Citadel Communications, options on any such shares or related stock appreciation rights or similar securities held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates) or by any employee benefit plan, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate cash consideration paid for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock after the Closing Date does not exceed $1,000,000 in any fiscal year. (d) Loans or advances to officers, directors and employees of Citadel Communications, the Company or any of its Restricted Subsidiaries made in the ordinary course of business after the Closing Date in an aggregate principal amount not to exceed $1,000,000 at any one time outstanding. (e) Payments to or on behalf of Citadel Communications to pay its operating and administrative expenses attributable to the Company, including, without limitation, legal and audit expenses, directors' fees, fees payable in respect of the trustee and the back-up trustees under the Voting Trust Agreement, and Commission compliance expenses, in an amount not to exceed the greater of $1,000,000 per fiscal year and 1% of the net revenues of the Company for the preceding fiscal year. (f) Repayment of the note payable of the Company to Citadel Communications outstanding as of the Closing Date in an amount not to exceed $12,817,000 plus accrued and unpaid interest thereon to the Closing Date. The payments described in clauses (b), (c) and (d) of this paragraph will be Restricted Payments that will be permitted to be taken in accordance with this paragraph but will reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii), and the payments described in clauses (a), (e) and (f) of this paragraph will be -54- 55 Restricted Payments that will be permitted to be taken in accordance with this paragraph and will not reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii). For the purpose of making calculations under this Certificate of Designation (i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will be deemed to have made an Investment in an amount equal to the fair market value of the net assets of such Restricted Subsidiary at the time of such designation as determined by the Board of Directors, whose good faith determination will be conclusive, (ii) any property transferred to or from an Unrestricted Subsidiary will be valued at fair market value at the time of such transfer, as determined by the Board of Directors, whose good faith determination will be conclusive and (iii) subject to the foregoing, the amount of any Restricted Payment, if other than cash, will be determined by the Board of Directors, whose good faith determination will be conclusive. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other person that thereafter becomes a Restricted Subsidiary, such Investment will no longer be counted as a Restricted Payment for purposes of calculating the aggregate amount of Restricted Payments. If an Investment resulted in the making of a Restricted Payment, the aggregate amount of all Restricted Payments calculated under the foregoing provision will be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise), to the extent such net reduction is not included in Consolidated Adjusted Net Income; provided that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (x) the cash proceeds received by the Company and any of its Restricted Subsidiaries in connection with such net reduction and (y) the initial amount of such Investment. In computing Consolidated Adjusted Net Income for purposes of the foregoing clause (iii) (A), (i) the Company may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company will be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment that, at the time of the making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of this Certificate of Designation, such Restricted Payment will be deemed to have been made in compliance with this Certificate of Designation notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. (3) PURCHASE OF EXCHANGEABLE PREFERRED STOCK UPON A CHANGE OF CONTROL. If a Change of Control occurs at any time, then each Holder of Exchangeable Preferred Stock -55- 56 will have the right to require that the Company purchase such Holder's Exchangeable Preferred Stock, in whole or in part, at a purchase price in cash equal to 101% of the liquidation preference of such Exchangeable Preferred Stock, plus accumulated and unpaid dividends, if any, to the date of purchase, pursuant to the offer described herein (the "Change of Control Offer") and the other procedures set forth herein. Within 30 days following any Change of Control, the Company will notify the Transfer Agent thereof and give written notice of such Change of Control to each Holder of Exchangeable Preferred Stock by first-class mail, postage prepaid, at its address appearing in the security register of the Exchangeable Preferred Stock, stating, among other things, (i) the purchase price and the purchase date, which will 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; (ii) that any Exchangeable Preferred Stock not tendered will continue to accumulate dividends; (iii) that, unless the Company defaults in the payment of the purchase price, any Exchangeable Preferred Stock accepted for payment pursuant to the Change of Control Offer will cease to accumulate dividends after the Change of Control purchase date; and (iv) certain other procedures that a Holder of Exchangeable Preferred Stock must follow to accept a Change of Control Offer or to withdraw such acceptance. On the date of purchase, the Company shall: (i) accept for payment the Exchangeable Preferred Stock tendered pursuant to the Change of Control Offer; (ii) deposit with the Transfer Agent money sufficient to pay the purchase price of all Exchangeable Preferred Stock so accepted; and (iii) deliver, or cause to be delivered, to the Transfer Agent, all Exchangeable Preferred Stock so accepted together with an officers' certificate specifying the Exchangeable Preferred Stock accepted for payment by the Company. The Company shall promptly mail to the Holders a new certificate representing any shares not so purchased. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the date of purchase. The Company will not, and will not permit any of its Restricted Subsidiaries to, create any restriction (other than restrictions existing under Debt as in effect on the Closing Date or in refinancings or replacements of such Debt) that would materially impair the ability of the Company to make a Change of Control Offer to purchase the Exchangeable Preferred Stock or, if such Change of Control Offer is made, to pay for the Exchangeable Preferred Stock tendered for purchase. (4) LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company will not sell, and will not permit any of its Restricted Subsidiaries, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants, or other rights to purchase shares of such Capital Stock) except (i) to the Company or a Wholly Owned Restricted Subsidiary, (ii) issuances or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law, or issuances or sales to directors of directors' qualifying shares, (iii) if, immediately after giving effect to such issuance or sale, neither the Company -56- 57 nor any Subsidiary owns any shares of Capital Stock of such Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) or (iv) if, immediately either giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such person remaining after giving effect to such issuance or sale would have been permitted to be made under Section VIII(2), "Limitation on Restricted Payments," of this Certificate of Designation if made on the date of such issuance or sale. In addition, the Company will not, and will not permit any of its Restricted Subsidiaries to, sell, transfer or otherwise dispose of any of its properties or assets to an Unrestricted Subsidiary other than in the ordinary course of business. (5) UNRESTRICTED SUBSIDIARIES. (a) The Board of Directors of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company nor any of its Restricted Subsidiaries is directly or indirectly liable for any Debt of such Subsidiary, (ii) no default with respect to any Debt of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Debt of the Company or any of its Restricted Subsidiaries to declare a default on such other Debt or cause the payment thereof to be accelerated or made 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 VIII(2), "Limitation on Restricted Payments," of this Certificate of Designation, (iv) neither the Company nor any of its Restricted Subsidiaries 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 of its Restricted Subsidiaries has any obligation to subscribe for additional shares of Capital Stock or other equity interest in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results. Notwithstanding the foregoing, the Company may not designate the License Subsidiary, or any Subsidiary to which any properties or assets (other than current assets) owned by the Company or the License Subsidiary on the Closing Date have been transferred, as an Unrestricted Subsidiary. (b) The Board of Directors of the Company may designate any of its Unrestricted Subsidiaries as a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Debt by a Restricted Subsidiary of any outstanding Debt of such Unrestricted Subsidiary and such designation will only be permitted if (i) such Debt is permitted under Section VIII(1), "Limitation on Debt," of this Certificate of Designation and (ii) no Voting Rights Triggering Event will have occurred and be continuing following such designation. (6) LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES. The Company will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit any person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company) to own any Preferred -57- 58 Stock of a Subsidiary of the Company (other than Acquired Preferred Stock; provided that at the time the issuer of such Acquired Preferred Stock becomes a Subsidiary of the Company or merges with the Company or any of its Subsidiaries, and after giving effect to such transaction, the Company shall be able to incur $1.00 of additional Debt (other than Permitted Debt) in compliance with Section VIII(1), "Limitation on Debt," of this Certificate of Designation). (7) REPORTS. At all times from and after the earlier of (i) the date of the commencement of the Preferred Stock Exchange Offer or the effectiveness of the Preferred Stock Shelf Registration Statement (the "Preferred Stock Registration") and (ii) the date 180 days after the Closing Date, in either case, whether or not the Company is then required to file reports with the Commission, the Company will file with the Commission all such reports and other information as it would be required to file with the Commission by Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company will supply the Transfer Agent and each Holder, or will supply to the Transfer Agent for forwarding to each such Holder, without cost to such Holder, copies of such reports and other information. In addition, at all times prior to the earlier of the date of the Preferred Stock Shelf Registration Statement and the date 180 days after the Closing Date, the Company will, at its cost, deliver to each Holder of the Exchangeable Preferred Stock quarterly and annual reports substantially equivalent to those that would be required by the Exchange Act. In addition, at all times prior to the Preferred Stock Registration, upon the request by any Holder or any prospective purchaser of the Exchangeable Preferred Stock designated by a Holder, the Company will supply to such Holder or such prospective purchaser the information required under Rule 144A under the Securities Act. (8) CONSOLIDATION, MERGER AND SALE OF ASSETS. Without the affirmative vote of the Holders of a majority of the issued and outstanding shares of Exchangeable Preferred Stock and the holders of any Parity Stock, voting or consenting, as the case may be, as a separate class, the Company may not, in a single transaction or a series of related transactions, consolidate with or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, another person or adopt a plan of liquidation unless: (a) Either (i) the Company is the surviving corporation or (ii) the person (if other than the Company) formed by such consolidation or into which the Company is merged or the person that acquires by sale, assignment, transfer, lease or other disposition the properties and assets of the Company substantially as an entirety (the "Surviving Entity") (A) is a corporation, partnership or trust organized and validly existing under the laws of the United States or any state thereof or the District of Columbia and (B) the Exchangeable Preferred Stock shall be converted into or exchanged for and shall become shares of such Surviving Entity, having in respect of such Surviving Entity the same powers, preferences and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereon, that the Exchangeable Preferred Stock had immediately prior to such transaction. -58- 59 (b) Immediately after giving effect to such transaction and treating any obligation of the Company or a Restricted Subsidiary in connection with or as a result of such transaction as having been incurred at the time of such transaction, no Voting Rights Triggering Event shall have occurred or be continuing. (c) Immediately after giving effect to such transaction on a pro forma basis (on the assumption that the transaction occurred at the beginning of the most recently ended four full fiscal quarter period for which internal financial statements are available), the Company (in the case of clause (i) of paragraph (a) or such person (in the case of clause (ii) of paragraph (a)) could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to Section VIII(1)(a), "Limitation on Debt," of this Certificate of Designation. (d) The Company delivers, or causes to be delivered, to the Transfer Agent an officers' certificate and an opinion of counsel, each stating that such consolidation, merger or transfer complies with this Certificate of Designation and that all conditions precedent in this Certificate of Designation relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of related transactions) of all or substantially all of the properties or assets of one or more Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties or assets of the Company, will be deemed to be the transfer of all or substantially all of the properties and assets of the Company. IX. No Reissuance of Exchangeable Preferred Stock. None of the shares of Exchangeable Preferred Stock acquired by the Company by reason of redemption, purchase, or otherwise shall be reissued. X. Business Day. If any payment or redemption shall be required by the terms hereof to be made on a day that is not a Business Day, such payment or redemption shall be made on the immediately succeeding Business Day. XI. Transfer Restrictions. (a) The Series A Preferred Stock will bear a legend to the following effect (as applicable) unless otherwise agreed by the Company and the Holder thereof: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES -59- 60 TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CITADEL BROADCASTING COMPANY (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR," WITHIN THE MEANING OF SUBPARAGRAPH (A) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. (b) The Transfer Agent shall refuse to register any transfer of Series A Preferred Stock in violation of the restrictions contained in the legend provided for in Section XI(a). (c) The legend provided for in Section XI(a) may be removed if the Series A Preferred Stock has been registered pursuant to a Preferred Stock Shelf Registration Statement under the Securities Act. Unlegended Series B Preferred Stock may be issued in exchange for Series A Preferred Stock pursuant to a Preferred Stock Exchange Offer. (d) At any time after one year following the Closing Date, upon receipt by the Transfer Agent and the Company of a certificate substantially in the form of Exhibit A hereto, the Transfer Agent shall authenticate and deliver one or more shares of unlegended Series A Preferred Stock in the place of shares of legended Series A Preferred Stock. (e) In connection with proposed transfers of Series A Preferred Stock described in Exhibit B or Exhibit C, the Transfer Agent or the Company may require the -60- 61 transferor or transferee, as the case may be, to deliver the appropriate letter attached hereto as Exhibits B or C. Each Holder of Series A Preferred Stock shall notify the Company or the Transfer Agent in the event of any transfer by such Holder of any shares of Series A Preferred Stock to a foreign transferee. XII. Definitions. As used in this Certificate of Designation, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: "Acquired Debt" means Debt of a person (a) existing at the time such person is merged with or into the Company or becomes a Subsidiary, (b) assumed in connection with the acquisition of assets from such person or (c) secured by a Lien encumbering assets acquired from such person. "Acquired Preferred Stock" means preferred stock of a person (a) existing at the time such person is merged with or into the Company or becomes a Subsidiary or (b) assumed in connection with the acquisition of assets from such person. "Affiliate" means, with respect to any specified person, any other person directly or indirectly controlling or controlled by or under direct or indirect common control with 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 the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "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") by the Company or a Restricted Subsidiary, directly or indirectly, in one or a series of related transactions, to any person other than the Company or a Restricted Subsidiary of (a) any Capital Stock of any of its Restricted Subsidiaries, (b) all or substantially all of the properties and assets of the Company and its Restricted Subsidiaries representing a division or line of business or (c) any other properties or assets of the Company or any of its Restricted Subsidiaries, other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" does not include any transfer of properties or assets (a) that is governed by the provisions of Section VIII(8), "Consolidation, Merger and Sale of Assets," of this Certificate of Designation, (b) to an Unrestricted Subsidiary, if permitted under Section VIII(2), "Limitation on Restricted Payments," of this Certificate of Designation, (c) representing obsolete or permanently retired equipment, (d) the gross proceeds of which (exclusive of indemnities) do not exceed $100,000 for any particular item or $500,000 in the aggregate for any fiscal year, or (e) the transfer of up to $500,000 of properties and assets, including cash, to a joint venture in which the Company or a Restricted Subsidiary has an equity interest, which joint venture is engaged in the internet service provider business. -61- 62 "Banks" means the banks and other financial institutions that from time to time are lenders under the Credit Facility. "Board of Directors" means the Board of Directors of the Company. "Business Day" means a day other than a Saturday, Sunday, national or New York State holiday or other day on which commercial banks in New York City are authorized or required by law to close. "Capital Stock" of any person means any and all shares, interests, partnership interests, participations, rights in or other equivalents (however designated) of such person's equity (however designated). "Capitalized Lease Obligation" means, with respect to any person, an obligation incurred or assumed under or in connection with any capital lease of real or personal property that, in accordance with GAAP, has been recorded as a capitalized lease on the balance sheet of such person. "Change of Control" means the occurrence 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 Lawrence R. Wilson, Scott E. Smith, John E. von Schlegell, Baker, Fentress & Company, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., The Endeavour Capital Fund Limited Partnership and any trustee, in its capacity as trustee under the Voting Trust Agreement or Citadel Communications is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person will 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 a majority of the voting power of all classes of Voting Stock of the Company; (b) 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 stockholders of the Company, was approved by a vote of at least 66-2/3% 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; or (c) The Company is liquidated or dissolved or adopts a plan of liquidation or dissolution. "Change of Control Offer" has the meaning specified in Section VIII(3) hereof. -62- 63 "Citadel Communications" means Citadel Communications Corporation, a Nevada corporation, and any successors thereof. "Closing Date" means July 3, 1997. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act. "Computation Period" has the meaning specified in Section VIII(2) hereof. "Consolidated Adjusted Net Income" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (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 Sales, (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 of its Restricted Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries in cash during such period, (d) the net income (or loss) of any person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, and (e) the net income (but not the net loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is at the date of determination restricted, directly or indirectly, except to the extent that such net income could be paid to the Company or a Restricted Subsidiary thereof; provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated Adjusted Net Income will be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Consolidated Adjusted Net Income otherwise attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1) the number of shares of outstanding common stock of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries divided by (2) the total number of shares of outstanding common stock of such Restricted Subsidiary on the last day of such period. "Consolidated Cash Flow" means, for any period, the sum of, without duplication, Consolidated Adjusted Net Income for such period, plus (or, in the case of clause (d) below, plus or minus) the following items to the extent included in computing Consolidated Adjusted Net Income for such period: (a) the aggregate interest expense and preferred stock dividends of the Company and its Restricted Subsidiaries for such period, plus (b) the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period, plus (c) the aggregate depreciation and amortization expense of the Company and any of its Restricted Subsidiaries for such period, plus (d) any other non-cash charges for such period, and minus non-cash credits for such period, other than non-cash charges or credits resulting from changes in prepaid assets or accrued liabilities in -63- 64 the ordinary course of business; provided that income tax expense, interest expense and preferred stock dividends, depreciation and amortization expense, and non-cash charges and credits of a Restricted Subsidiary will be included in Consolidated Cash Flow only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Adjusted Net Income for such period. Solely for purposes of determining whether the Company could incur Debt pursuant to Section VIII(1)(a), "Limitation on Debt," of this Certificate of Designation, if the Company is permitted to give pro forma effect to an In-Market Acquisition of a radio station pursuant to clause (iii) of the second paragraph of such covenant, such calculation may also give pro forma effect to projected quantifiable improvements in operating results of such radio station due to cost reductions calculated in good faith by the Company and certified by an officers' certificate filed with the Transfer Agent. As used in the preceding sentence, the term "In-Market Acquisition" means the acquisition of a radio station or group of radio stations serving a metropolitan statistical area in which the Company or its Subsidiaries has owned, or has operated under a local marketing agreement, one or more radio stations for at least the preceding six months. "Consolidated Cash Flow Ratio" means, at any date, the ratio of (i) the aggregate amount of Debt of the Company and its Restricted Subsidiaries on a consolidated basis as of the end of the immediately preceding four fiscal quarters for which internal financial statements of the Company are available (the "Reference Period") to (ii) the aggregate amount of Consolidated Cash Flow for such Reference Period. "Consolidated Fixed Charges" means, for any period, without duplication, the sum of (a) the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of operations 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 contracts (including amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs, (v) the interest component of Capitalized Lease Obligations of the Company and any of its Restricted Subsidiaries, and (vi) the portion of any rental obligation of the Company and any of its Restricted Subsidiaries in respect of any sale and leaseback transaction allocable during such period to interest expense (determined as if it were treated as a Capitalized Lease Obligation) plus (b) all interest on any Debt of any other person guaranteed by the Company or any of its Restricted Subsidiaries: provided, however, that Consolidated Fixed Charges will not include any gain or loss from extinguishment of debt, including any write-off of debt issuance costs. "Credit Facility" means the loan agreement dated October 9, 1996 among the Company and the financial institutions and banks named therein, as amended, and as such agreement may be amended, restated, supplemented, replaced or refinanced or otherwise modified from time to time. -64- 65 "Debentures Trustee" means The Bank of New York, as Trustee under the Exchange Indenture, or any successor Debentures Trustee appointed in accordance with the terms of the Exchange Indenture. "Debt" means (without duplication), with respect to any person, whether recourse is to all or a portion of the assets of such person and whether or not contingent, (a) every obligation of such person for money borrowed, (b) every obligation of such person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such person, (d) every obligation of such person issued or assumed as the deferred purchase price of property or services, (e) every Capitalized Lease Obligation of such person, (f) all Disqualified Stock of such person valued at its maximum fixed repurchase price, plus accumulated and unpaid dividends, (g) all Hedging Obligations of such person, and (h) every obligation of the type referred to in clauses (a) through (g) of another person and all dividends of another person (i) the payment of which, in either case, such person has guaranteed or (ii) which is secured by any Lien on any property or asset of such person, the amount of such Debt being deemed to be the lesser of the actual amount of the guarantee or the value of such property or asset subject to such Lien, as the case may be, and the amount of the Debt so guaranteed or secured, as the case may be. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price will be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were repurchased on any date on which Debt is required to be determined pursuant to this Certificate of Designation, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value will be determined reasonably and in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable 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 will not be considered Debt for purposes of this definition. The amount outstanding at any time of any Debt issued with original issue discount is the aggregate principal amount at maturity of such Debt, less the remaining unamortized portion of the original issue discount of such Debt at such time, as determined in accordance with GAAP. "Disqualified Stock" means any class or series of Capital Stock that, either by its terms (or by the terms of any security into which it is convertible or exchangeable by contract or otherwise), 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, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof, in whole or in part, prior to one year after the Mandatory Redemption Date, provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to cause the issuer thereof to repurchase or redeem such Capital Stock upon occurrence of a "change of control" occurring prior to the Mandatory Redemption Date will not constitute Disqualified Stock if the "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such -65- 66 Capital Stock than the provisions contained in Section VIII(3), "Purchase of Exchangeable Preferred Stock upon a Change of Control," of this Certificate of Designation and such Capital Stock specifically provides that the issuer will not repurchase or redeem any such stock pursuant to such provision prior to the Company's repurchase of such Exchangeable Preferred Stock as are required to be repurchased pursuant to Section VIII(3), "Purchase of Exchangeable Preferred Stock upon a Change of Control," of this Certificate of Designation; provided, however, that "Disqualified Stock" shall not include the Exchangeable Preferred Stock. "Dividend Default" has the meaning specified in Section V(b) hereof. "Dividend Payment Date" means each January 1 and July 1 of each year on which dividends shall be paid or are payable, any Redemption Date and any other date on which dividends in arrears may be paid. "Dividend Rate" has the meaning specified in Section II(a) hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Date" has the meaning specified in Section IV(a) hereof. "Exchange Debentures" means the 13-1/4% Exchange Debentures due 2009 of the Company, issuable pursuant to the Exchange Indenture in exchange for the Exchangeable Preferred Stock at the option of the Company. "Exchange Indenture" means the Indenture dated as of July 1, 1997 among the Company, Citadel License, Inc. as guarantor, and The Bank of New York, as trustee, relating to the Exchange Debentures. "Exchange Notice" has the meaning specified in Section IV(a) hereof. "Exchangeable Preferred Stock" has the meaning set forth in Section I hereof. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the Closing Date. "guarantee" means, as applied to any obligation, (a) 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 (b) 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 nonperformance) of all or any part of such obligation, including without limitation, the payment of amounts drawn down under letters of credit. -66- 67 "Hedging Obligations" means the obligations of any person under (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (b) other agreements or arrangements destined to protect such person against fluctuations in interest rates or the value of foreign currencies. "Holder" has the meaning specified in Section II(a) hereof. "Investment" (in any person) means (a) directly or indirectly, any advance, loan or other extension of credit (including, without limitation, by way of guarantee or similar arrangement) or capital contribution to any person, the purchase or other acquisition of any stock, bonds, notes, debentures or other securities issued by such person or the acquisition (by purchase or otherwise) of all or substantially all of the business or assets of such person or the making of any investment in such person, (b) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary and (c) the transfer of any assets or properties from the Company or a Restricted Subsidiary to any Unrestricted Subsidiary, other than the transfer of assets or properties made in the ordinary course of business. Investments will exclude extension of trade credit on commercially reasonable terms in accordance with normal trade practices. "Junior Stock" has the meaning specified in Section VII hereof. "License Subsidiary" means Citadel License, Inc. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, preference, 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 will be deemed to own subject to a Lien any property that 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. "Mandatory Redemption Date" has the meaning specified in Section VI(b) hereof. "Net Cash Proceeds" means, 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 of for, cash or cash equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any of its Restricted Subsidiaries), net of (a) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (b) provisions for all taxes payable as a result of such Asset Sale, (c) payments made to retire Debt where payment of such Debt is secured by the assets that are the subject of such Asset Sale, (d) amounts required to be paid to any person (other than the Company or any of its Restricted Subsidiaries) owning a beneficial interest in the assets that are subject to the Asset Sale and (e) appropriate amounts to be provided by the Company or any of its Restricted Subsidiaries, as the case may be, as a -67- 68 reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the seller after such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Notes" means the 10-1/4% Senior Subordinated Notes due 2007 of the Company, issuable pursuant to the Notes Indenture. "Notes Indenture" means the Indenture dated as of July 1, 1997 among the Company, Citadel License, Inc., as guarantor, and The Bank of New York, as trustee, relating to the 10-1/4% Senior Subordinated Notes due 2007 of the Company. "Original Issue Date" means July 3, 1997. "Parity Stock" has the meaning specified in Section VII hereof. "Permitted Debt" has the meaning specified in Section VIII(1)(b) hereof. "Permitted Investments" means any of the following: (a) Investments in (i) securities with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof); (ii) certificates of deposit, time deposits, overnight bank deposits or bankers' acceptances with a maturity of 270 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus of not less than $500,000,000; and (iii) commercial paper with a maturity of 270 days or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings Services. (b) Investments by the Company or any of its Restricted Subsidiaries in another person, if as a result of such Investment (i) such other person becomes a Restricted Subsidiary that would be a Subsidiary Debentures Guarantor under the Exchange Indenture 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 that would be such a Subsidiary Debentures Guarantor. (c) Investments by the Company or any of its Restricted Subsidiaries in a Subsidiary Debentures Guarantor and Investments by any Restricted Subsidiary in the Company. (d) Investments in assets owned or used in the ordinary course of business. (e) Investments in existence on the Closing Date. -68- 69 (f) Promissory notes received as a result of Asset Sales provided that (i) the consideration received by the Company or the relevant Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold (as determined by the Board of Directors, whose good faith determination will be conclusive) and (ii) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 80% (A) cash or cash equivalents and/or (B) the assumption by the transferee of Debt of the Company or a Restricted Subsidiary which would be ranked senior to or pari passu with the Exchange Debentures and release of the Company or such Restricted Subsidiary from all liability on such Debt. (g) Direct or indirect loans to employees, or to a trustee for the benefit of such employees, of the Company or any of its Restricted Subsidiaries in an aggregate amount outstanding, at any time not exceeding $1,000,000. (h) Investments by the Company or any of its Restricted Subsidiaries in a joint venture that is engaged in the internet service provider business in an aggregate amount outstanding at any time not exceeding $500,000. (i) Other Investments that do not exceed $2,000,000 at any one time outstanding. "Preferred Stock" of any person means any Capital Stock of such person that has preferential rights to any other Capital Stock of such person with respect to dividends or redemptions or upon liquidation. "Preferred Stock Exchange Offer" means an offer by the Company to exchange the Series A Preferred Stock for the Series B Preferred Stock pursuant to an effective registration statement. "Preferred Stock Registration" has the meaning set forth in Section VIII(7) hereof. "Preferred Stock Shelf Registration Statement" means a shelf registration statement which becomes effective and covers resales of the Series A Preferred Stock. "Public Equity Offering" means an underwritten public offering of Qualified Equity Interests of either (a) the Company or (b) Citadel Communications, the net proceeds from which (after deducting any underwriting discounts and commissions) are used by Citadel Communications to purchase Qualified Equity Interests of the Company; provided that, in either case, such net proceeds exceed $10,000,000. "Qualified Equity Interest" means any Qualified Stock and all warrants, options or other rights to acquire Qualified Stock (but excluding any debt security that is convertible into or exchangeable for Capital Stock). -69- 70 "Qualified Stock" of any person means any and all Capital Stock of such person, other than Disqualified Stock. "Redemption Date" has the meaning specified in Section VI(a)(i) hereof. "Redemption Notice" has the meaning specified in Section VI(c)(i) hereof. "Redemption Price" means the price at which the Exchangeable Preferred Stock may be redeemed. "Restricted Payment" has the meaning specified in Section VIII(2) hereof. "Restricted Subsidiary" means any Subsidiary other than an Unrestricted Subsidiary. "Securities Act" means the Securities Act of 1933, as amended. "Securities Purchase and Exchange Agreement" means that certain Securities Purchase and Exchange Agreement, dated June 28, 1996, as amended by the First Amendment thereto dated December 31, 1996, and by the Second Amendment thereto dated March 17, 1997 among Citadel Communications, the Company and certain other parties. "Senior Stock" has the meaning specified in Section VII hereof. "Series A Preferred Stock" has the meaning set forth in Section I hereof. "Series B Preferred Stock" has the meaning set forth in Section I hereof. "Significant Subsidiary" means any Restricted Subsidiary of the Company that together with its Subsidiaries, (a) for the most recent fiscal year of the Company accounted for more than 10% of the consolidated net sales of the Company and its Restricted Subsidiaries, (b) as of the end of such fiscal year was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the most recently available consolidated financial statements of the Company for such fiscal year, (c) was organized or acquired after the beginning of such fiscal year and would have been a Significant Subsidiary if it had been owned during the entire fiscal year or (d) that holds one or more licenses material to the Company's business. "Subsidiary" means any person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company and/or one or more other Subsidiaries of the Company. "Subsidiary Debentures Guarantee" means a guarantee of the Exchange Debentures by a Restricted Subsidiary under the Exchange Indenture. -70- 71 "Subsidiary Debentures Guarantor" means the License Subsidiary and each other Restricted Subsidiary that issues a Subsidiary Debentures Guarantee under the Exchange Indenture. "Subsidiary Notes Guarantee" means a guarantee of the Notes by a Restricted Subsidiary under the Notes Indenture. "Transfer Agent" means The Bank of New York or any successor transfer agent. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force on the date on which this Certificate of Designation was filed. "Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary in accordance with Section VIII(5), "Unrestricted Subsidiaries," of this Certificate of Designation and (b) any Subsidiary of an Unrestricted Subsidiary. "Voting Rights Triggering Event" has the meaning set forth above in Section V(b) hereof. "Voting Stock" means any class or classes of Capital Stock 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 or trustees of any person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). "Voting Trust Agreement" means that certain Voting Trust Agreement dated as of March 17, 1997 by and among Citadel Communications, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Christopher Hall, as the initial Trustee thereunder and J. Walter Corcoran and Harlan Levy, each as an initial Back-Up Trustee thereunder. "Weighted Average Life" means, as of the date of determination with respect to any Debt or Disqualified Stock, 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 or liquidation value payment of such Debt or Disqualified Stock, respectively, multiplied by (ii) the amount of each such principal or liquidation value payment by (b) the sum of all such principal or liquidation value payments. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all of the outstanding voting securities (other than directors' qualifying shares or an immaterial number of shares required to be owned by other persons pursuant to applicable law) of which are owned, directly or indirectly, by the Company. -71- 72 EXHIBIT A --------- Form of Certificate as to Completion of Distribution and Termination of Restricted Period -------------------------------- __________________, ____ The Bank of New York 101 Barclay Street New York, New York 10286 Attention: Re: Citadel Broadcasting Company (the "Company") 13-1/4% Series A Exchangeable Preferred Stock (the "Series A Preferred Stock") and 13-1/4% Series B Exchangeable Preferred Stock (the "Series B Preferred Stock") ---------------------------------------------------- Dear Ladies and Gentlemen: This letter relates to ___ shares of Series A Preferred Stock represented by the attached Certificate (the "Legended Certificate") which bears a legend outlining restrictions upon transfer of such Legended Certificate. Pursuant to Section XI(d) of the Certificate of Designation (the "Certificate of Designation") filed with the Secretary of State of the State of Nevada on July __, 1997 relating to the Series A Preferred Stock and the Series B Preferred Stock, we hereby certify that we are a person outside the United States to whom the Series A Preferred Stock could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933, as amended. Accordingly, you are hereby requested to exchange the shares of Series A Preferred Stock represented by the Legended Certificate for a like number of shares of Series A Preferred Stock, which shall be represented by the attached Certificate (the "Unlegended Certificate"), which does not bear a legend outlining restrictions upon the transfer of such Unlegended Certificate, all in the manner provided for in the Certificate of Designation. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By: ---------------------------- Authorized Signature -72- 73 EXHIBIT B --------- Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ----------------------------------------- _______________, ____ The Bank of New York 101 Barclay Street New York, New York 10286 Attention: Re: Citadel Broadcasting Company (the "Company") 13-1/4% Series A Exchangeable Preferred Stock (the "Securities) ---------------------------------------- Dear Sirs: In connection with our proposed purchase of ___ shares of the Securities, we confirm that: 1. The undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Securities, except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Securities have not been registered under the Securities Act, and that the Securities may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Securities, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if requested by the Company, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the exemption from registration provided by Rule 144 under the Securities Act, or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Securities from us a notice advising such purchaser that resales of the Securities are restricted as stated herein. -73- 74 3. We understand that, on any proposed resale of any Securities or Conversion Shares, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Securities purchased by us will bear a legend to the effect set out in paragraph 2. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Securities purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Holder] By: ----------------------------- Authorized Signature -74- 75 EXHIBIT C --------- Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S ------------------------ The Bank of New York 101 Barclay Street New York, New York 10286 Attention: Re: Citadel Broadcasting Company (the "Company") 13-1/4% Series A Exchangeable Preferred Stock (the "Securities") ---------------------------------------- Dear Sirs: In connection with our proposed sale of ____ shares of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, we represent that: (1) the offer of the Securities was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act of 1933. In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the case may be. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative -75- 76 or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By: ----------------------------- Authorized Signature -76- 77 III. That, the shareholder approval requirement contained in Nev. Rev. Stat. ss. 1955, subsection 3, does not apply to this Amended Certificate of Designation, because Section V of the Original Designation provides otherwise, and the changes to the Original Designation contained in this Amended Certificate of Designation do not materially or adversely affect the specified rights, preferences, privileges or voting rights of the Exchangeable Preferred Stock. [The remainder of this page left intentionally blank] -77- 78 IN WITNESS WHEREOF, the Company has caused this Amended Certificate of Designation to be duly executed in its corporate name on this _____ day of July, 1997. CITADEL BROADCASTING COMPANY By: /s/ Lawrence R. Wilson -------------------------------- Name: Lawrence R. Wilson Its: President By: /s/ Donna L. Heffner -------------------------------- Name: Donna L. Heffner Its: Secretary STATE OF ARKANSAS ---------- COUNTY OF PULASKI --------- This instrument was acknowledged before me on July 30, 1997 by -- Lawrence R. Wilson, as President of Citadel Broadcasting Company. [SEAL: Sheila A. Hornecker Notary Public /s/ Sheila H. Hornecker Pulaski County, AR] -------------------------------- Notary Public (Seal, if any) My Commission Expires 8-1-99 ---------- STATE OF Arizona ------------ COUNTY OF Maricopa ----------- This instrument was acknowledged before me on July 23, 1997 by Donna -- L. Heffner, as Secretary of Citadel Broadcasting Company. /s/ Susan M. Kaiser ------------------------------------ Notary Public (Seal, if any) My Commission Expires April 24, 2000 -------------- -78- EX-3.I.C 9 CITADEL BROADCASTING CO. S-4 1 Exhibit 3(i)(c) ARTICLES OF INCORPORATION OF CITADEL LICENSE, INC. KNOW ALL MEN BY THESE PRESENTS: That the undersigned, for the purpose of forming a corporation under the laws of the State of Nevada, hereby adopts the following Articles of Incorporation. ARTICLE I NAME OF THE CORPORATION The name of the Corporation shall be Citadel License, Inc. ARTICLE II REGISTERED AGENT AND REGISTERED ADDRESS The address of the Corporation's registered office in the State of Nevada is c/o The Corporation Trust Company of Nevada, One East First Street, City of Reno, County of Washoe, State of Nevada. The name of the Corporation's resident agent at such address is The Corporation Trust Company of Nevada. ARTICLE III PURPOSE OF THE CORPORATION The purpose of the Corporation is to hold licenses relating to the operation of radio stations, and to engage in any or all lawful activity for which corporations may be organized under the General Corporation Law of the State of Nevada. ARTICLE IV CAPITAL STOCK - IN GENERAL; FCC MATTERS 1. The total number of shares of capital which the Corporation shall have the authority to issue is Forty Thousand (40,000) shares, all of which shall be Common Stock. The par value of each share of Common Stock is $0.001. The shares of the Corporation, after the subscription price therefore has been paid, shall not be subject to assessment to pay 2 the debts of the Corporation, and no shares issued as fully paid up shall ever be assessable or assessed. 2. Notwithstanding any provisions contained herein to the contrary, unless or until all requisite approvals have been obtained from the FCC (as defined below) (the "FCC Approvals"), (i) no stockholders other than the holders of Common Stock shall possess any voting rights except as permitted by law; (ii) no stockholder other than the holders of Common Stock may nominate, appoint or designate any Members of the Board of Directors; and (iii) no stockholder shall be entitled to exercise any conversion rights or voting rights, the result of which would cause the Corporation to be in violation of the rules, regulations or policies of the FCC. 3. In accordance with the Federal Communications Act of 1934, as amended ("Communications Act"), and the rules, regulations and policies promulgated by the FCC thereunder ("FCC Regulations"), the Board of Directors of the Corporation may; (a) prohibit the ownership or voting of more than 20% of the Corporation's outstanding capital stock by or for the account of aliens or their representatives or by a foreign government or representative thereof or by any corporation organized under the laws of a foreign country (collectively "Aliens"), or by or for corporations of which any officer is an Alien, more than one-fourth of its directors are Aliens, or of which more than one-fourth of its capital stock is owned of record or voted by Aliens, or any other entity that is (i) subject to or deemed to be subject to management influences by Aliens, or (ii) the equity of which is owned, controlled by, or held for the benefit of, Aliens in a manner that would cause the Corporation to be in violation of the Communications Act or the FCC Regulations; (b) prohibit any transfer of the Corporation's stock which would cause more than 20% of the Corporation's outstanding capital stock to be owned or voted by or for any person or entity designated in foregoing clause (a); and (c) prohibit the ownership, voting or transfer of any portion of its outstanding capital stock to the extent the ownership, voting or transfer of such portion would cause the Corporation to violate or otherwise result in violation of any provision of the Communications Act or the FCC Regulations. ARTICLE V BOARD OF DIRECTORS The business and affairs of this Corporation shall be conducted by a Board of Directors, the size of which is initially set at seven (7) board members. The size of the Board may be increased or decreased from time to time as set forth in the Corporation's Bylaws. The following named persons shall constitute the first Board of Directors of this Corporation until the first annual meeting of the shareholders, or until their successors are elected and qualify: -2- 3 Lawrence R. Wilson Scott E. Smith Mark Leavitt 1015 Eastman Drive 200 West Madison Street Oppenheimer Tower Bigfork, MT 59911 Suite 3510 World Financial Center Chicago, IL 60606 New York, NY 10281 Jay Grossman 160 Commonwealth Ave. Royce Yudkoff Peggy Koenig Apt. 708 188 Heath Street 209 Ridgeway Road Boston, MA 02116 Chestnut Hills, MA 02167 Weston, MA 02193 Michael Ahearn c/o Satloc, Inc. 4670 South Ash Avenue Tempe, AZ 85285 The Board of Directors may establish, alter or dissolve committees from time to time in accordance with applicable law. ARTICLE VI LIABILITY To the fullest extent permitted by General Corporation Law of the State of Nevada in effect from time to time and to no greater extent, no officer or member of the Board of Directors shall be liable for monetary damages for breach of fiduciary duty in his or her capacity as an officer or director in any action brought by or on behalf of the Corporation or any of its shareholders ARTICLE VII INDEMNIFICATION To the fullest extent permitted by law, the Corporation shall indemnify any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she is or was a director of the Corporation or any predecessor of the Corporation or serves or served any other enterprise as director at the request of the Corporation or any predecessor of the Corporation -3- 4 ARTICLE VIII INCORPORATOR The name and address of the incorporator of the Corporation is John D. Forster, c/o Osborn Maledon, P.A., 2929 North Central Avenue, 21st Floor, Phoenix, AZ 85012. ARTICLE IX DURATION The duration of the Corporation shall be perpetual. ARTICLE X NO PREEMPTIVE RIGHTS The shareholders of the Corporation shall have no preemptive rights. IN WITNESS WHEREOF, the undersigned has caused these Articles to be executed as of the 5th day of September, 1996. /s/ John D. Forster ------------------------- John D. Forster Incorporator STATE OF ARIZONA ) ) SS. County of Maricopa ) On this, the 5th day of September, 1996, before me, the undersigned officer, personally appeared John D. Forster, known to me to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same for the purposes therein contained. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. /s/ Verliann H. K. Davis -------------------------- Notary Public My Commission Expires: OFFICIAL SEAL VERLIANN H. K. DAVIS NOTARY PUBLIC - ARIZONA MARICOPY COUNTY My Comm. expires Jan. 18, 2000 -4- EX-3.II.A 10 CITADEL BROADCASTING CO. S-4 1 EXHIBIT 3(ii)(a) BYLAWS OF CITADEL COMMUNICATIONS CORPORATION ARTICLE I OFFICES 1. PRINCIPAL OFFICE. The principal office shall be in the City of Reno, County of Washoe, State of Nevada. 2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Nevada as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS 1. ANNUAL MEETING. The annual meeting of the stockholders shall be held on the second Tuesday of March of each year, or if that day is a legal holiday, then on the next day thereafter which is not a legal holiday, or at such other date as the Board of Directors shall determine, for the purpose of electing Directors and for the transaction of such other business as may properly come before the meeting. If the election of Directors is not held on the day designated herein for any annual meeting of the stockholders, or any adjournment thereof, the Directors shall cause the election to be held at a special meeting of the stockholders as soon thereafter as convenient. 2. SPECIAL MEETINGS. Special meetings of the stockholders may be called for any purpose or purposes at any time by the Board of Directors or the President, and shall be called by the President at the request of the holders of not less than one-tenth (1/10) of all outstanding stock of the 2 Corporation entitled to vote at such meeting, or otherwise as provided by the Nevada General Corporation Law and Section 13 of Article II of these Bylaws. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. 3. PLACE OF MEETINGS. Annual and special meetings of the stockholders may be held at such time and place within or without the State of Nevada as shall be stated in the notice of the meeting, or in a duly executed waiver of notice thereof. 4. NOTICE OF MEETING. Written notice stating the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered to each stockholder of record entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. Notice may be delivered either personally or by first class, certified or registered mail, postage prepaid, and signed by an officer of the Corporation at the direction of the person or persons calling the meeting. If mailed, notice shall be deemed to be delivered when mailed to the stockholders at his or her address as it appears on the stock transfer books of the Corporation. Delivery of any such notice to any officer of a corporation or association, or to any member of a partnership shall constitute delivery of such notice to such corporation, association or partnership. In the event of the transfer of stock after delivery or mailing of the notice of and prior to the holding of the meeting it shall not be necessary to deliver or mail notice of the meeting to the transferee. Notice need not be given of an adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, provided that such adjournment is for less than thirty (30) days and further provided that a new record date is not fixed for the adjourned meeting, in either of which events, written notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at such meeting. At any adjourned meeting, any business may be transacted which might have been transacted at the meeting as originally noticed. A written waiver of notice, whether given before or after the meeting to which it relates, shall be equivalent to the giving of notice of such meeting to the stockholder or stockholders signing such waiver. Attendance of a stockholder at a meeting shall constitute a waiver of notice of such meeting, except when the stockholder attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. 5. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In order that the Corporation may determine the stockholders entitled to notice of and to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any other 2 3 change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix in advance a record date, which shall not be more than sixty (60) nor less than ten (10) days prior to the date of such meeting or such action, as the case may be. If the Board of Directors has not fixed a record date for determining the stockholders entitled to notice of and to vote at a meeting of stockholders, the record date shall be at close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. If the Board of Directors has not fixed a record date for determining the stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, the record date shall be the day on which the first written consent is expressed by any stockholder. If the Board of Directors has not fixed a record date for determining stockholders for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 6. RECORD OF STOCKHOLDERS. The Secretary or other officer having charge of the stock transfer books of the Corporation shall make, or cause to be made, at least ten (10) days before every meeting of stockholders, a complete record of the stockholders entitled to vote at a meeting of stockholders or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. 7. QUORUM AND MANNER OF ACTING. At any meeting of the stockholders, the presence, in person or by proxy, of the holders of a majority of the outstanding stock entitled to vote shall constitute a quorum for the transaction of business except as otherwise provided by the Nevada General Corporation Law or by the Certificate of Incorporation. All shares represented and entitled to vote on any single subject matter which may be brought before the meeting shall be counted for quorum purposes. Only those shares entitled to vote on a particular subject matter shall be counted for the purpose of voting on that subject matter. Business may be conducted once a quorum is present and may continue to be conducted until adjournment SINE DIE, notwithstanding the withdrawal or temporary absence of stockholders leaving less than a quorum. Except as otherwise provided in the Nevada General Corporation Law or the Certificate of Incorporation, the affirmative vote of the holders of a majority of the shares of 3 4 stock then represented at the meeting and entitled to vote thereat shall be the act of the stockholders; provided, however, that if the shares of stock so represented are less than the number required to constitute a quorum, the affirmative vote must be such as would constitute a majority if a quorum were present, except that the affirmative vote of the holders of a majority of the shares of stock then present is sufficient in all cases to adjourn a meeting. 8. VOTING OF SHARES OF STOCK. Each stockholder shall be entitled to one vote or corresponding fraction thereof for each share of stock or fraction thereof standing in his, her or its name on the books of the Corporation on the record date. A stockholder may vote either in person or by valid proxy, as defined in Section 12 of this Article II, executed in writing by the stockholder or by his, her or its duly authorized attorney in fact. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor counted for quorum purposes; provided, however, that the foregoing shall not limit the right of any corporation to vote stock, including but not limited to its own stock, when held by it in a fiduciary capacity. Shares of stock standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such other corporation may prescribe or, in the absence of such provision, as the Board of Directors of such other corporation may determine. Unless demanded by a stockholder present in person or by proxy at the meeting of the stockholders and entitled to vote thereat, or unless so directed by the chairman of the meeting, the vote thereat on any question need not be by ballot. If such demand or direction is made, a vote by ballot shall be taken, and each ballot shall be signed by the stockholder voting, or by his or her proxy, and shall state the number of shares voted. 9. ORGANIZATION. At each meeting of the stockholders, the President, or, if he or she is absent therefrom, another officer of the Corporation chosen as chairman of such meeting by stockholders holding a majority of the shares present in person or by proxy and entitled to vote thereat, or, if all the officers of the Corporation are absent therefrom, a stockholder of record so chosen, shall act as chairman of the meeting and preside thereat. The Secretary, or, if he or she is absent from the meeting or is required pursuant to the provisions of this Section 9 to act as chairman of such meeting, the person (who shall be an Assistant Secretary, if any and if present) whom the chairman of the meeting shall appoint shall act as secretary of the meeting and keep the minutes thereof. 10. ORDER OF BUSINESS. The order of business at each meeting of the stockholders shall be determined by the chairman of such meeting, but the order of business may be changed by the vote of 4 5 stockholders holding a majority of the shares present in person or by proxy at such meeting and entitled to vote thereat. 11. VOTING. At all meetings of stockholders, each stockholder entitled to vote thereat shall have the right to vote, in person or by proxy, and shall have, for each share of stock registered in his, her or its name, the number of votes provided by the Certificate of Incorporation in respect of stock of such class. Stockholders shall not have cumulative voting rights with respect to the election of Directors. 12. VOTING BY PROXY. At any meeting of the stockholders, any stockholder may be represented and vote by a proxy or proxies appointed by an instrument in writing, In the event that any such instrument in writing shall designate two (2) or more persons to act as proxies, a majority of such persons present at the meeting, or, if only one shall be present, then that one shall have and may exercise all of the powers conferred by such written instrument upon all of the persons so designated unless the instrument shall otherwise provide. No such proxy shall be valid after the expiration of six (6) months from the date of its execution, unless coupled with an interest, or unless the person executing it specifies therein the length of time for which it is to continue in force, which in no case shall exceed seven (7) years from the date of it execution. Subject to the above, any proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it or a duly executed proxy bearing a later date is filed with the Secretary of the Corporation. 13. ACTION BY STOCKHOLDERS WITHOUT A MEETING. Any action required or permitted to be taken at a meeting of the stockholders may be taken without a meeting, without notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the number of votes that would have been necessary to authorize such action at a meeting at which all shares entitled to vote were present and voted. Such written consent shall not be valid unless it is (a) signed by the stockholder, (b) dated, as to the date of such stockholder's signature, and (c) delivered to the Corporation personally or by certified or registered mail, return receipt requested, to the Corporation's principal place of business, principal office in the State of Nevada or officer or agent who has custody of the book in which the minutes of meetings of stockholders are recorded, within sixty (60) days after the earliest date that a stockholder signed the written consent. Prompt notice of the taking of any such action shall be given to any such stockholders entitled to vote who have not so consented in writing. 5 6 ARTICLE III BOARD OF DIRECTORS 1. GENERAL POWERS. The business and affairs of the Corporation shall be managed by the Board of Directors. 2. NUMBER, TERM OF OFFICE AND QUALIFICATIONS. Subject to the requirements of the Nevada General Corporation Law or the Certificate of Incorporation, the Board of Directors may from time to time determine the number of Directors. Until the Board of Directors shall otherwise determine, the number of Directors shall be that number comprising the initial Board of Directors as set forth in the Certificate of Incorporation. Each director shall hold office until his or her successor is duly elected or until his or her earlier death or resignation or removal in the manner hereinafter provided. Directors need not be stockholders. 3. PLACE OF MEETING. The Board of Directors may hold its meetings, either within or without the State of Nevada, at such place or places as it may from time to time by resolution determine or as shall be designated in any notices or waivers of notice thereof. Any such meeting, whether regular or special, may be held by conference telephone or similar communications equipment by means of which all persons in the meeting can hear each other, and participation in a meeting in such manner shall constitute presence in person at such meeting. Each person participating in a telephonic meeting shall sign the minutes thereof, which may be signed in counterparts. 4. ANNUAL MEETINGS. As soon as practicable after each annual election of Directors and on the same day, the Board of Directors shall meet for the purpose of organization and the transaction of other business at the place where regular meetings of the Board of Directors are held, and no notice of such meeting shall be necessary in order to legally hold the meeting, provided that a quorum is present. If such meeting is not held as provided above, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for a special meeting of the Board of Directors, or in the event of waiver of notice as specified in the written waiver of notice. 5. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such times as the Board of Directors shall from time to time by resolution determine. 6 7 6. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of Directors shall be held, either within or without the State of Nevada, whenever called by the President or a majority of the Directors at the time in office. Notice shall be given, in the manner hereinafter provided, of each such special meeting, which notice shall state: the time and place of such meeting, but need not state the purposes thereof. Except as otherwise provided in Section 9 of this Article III, notice of each such meeting shall be mailed to each Director, addressed to him or her at his or her residence or usual place of business, at least two (2) days before the day on which such meeting is to be held, or shall be sent addressed to him or her at such place by telegraph, cable, wireless or other form of recorded communication or delivered personally or by telephone not later than the day before the day on which such meeting is to be held. A written waiver of notice, whether given before or after the meeting to which it relates, shall be equivalent to the giving of notice of such meeting to the Director or Directors signing such waiver. Attendance of a Director at a special meeting of the Board of Directors shall constitute a waiver of notice of such meeting, except when he or she attends the meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. 7. QUORUM AND MANNER OF ACTING. A majority of the whole Board of Directors shall be present in person at any meeting of the Board of Directors in order to constitute a quorum for the transaction of business at such meeting, and except as otherwise specified in these Bylaws, and except also as otherwise expressly provided by the Nevada General Corporation Law, the vote of a majority of the Directors present at any such meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum from any such meeting, a majority of the Directors present thereat may adjourn such meeting from time to time to another time or place, without notice other than announcement at the meeting, until a quorum shall be present thereat. The Directors shall act only as a Board of Directors and the individual Directors shall have no power as such. 8. ORGANIZATION. At each meeting of the Board of Directors, the President, or if he or she is absent therefrom, a Director chosen by a majority of the Directors present thereat, shall act as chairman of such meeting and preside thereat. The Secretary, or if he or she is absent, the person (who shall be an Assistant Secretary, if any and if present) whom the chairman of such meeting shall appoint, shall act as Secretary of such meeting and keep the minutes thereof. 7 8 9. ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by all Directors and such consent is filed with the minutes of the proceedings of the Board of Directors. 10. RESIGNATIONS. Any Director may resign at any time by giving written notice of his or her resignation to the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time when it shall become effective is not specified therein, it shall take effect immediately upon its receipt by the President or the Secretary; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 11. REMOVAL OF DIRECTORS. Directors may be removed, with or without cause, as provided from time to time by the Nevada General Corporation Law as then in effect. 12. VACANCIES. Vacancies and newly created directorships resulting from any increase in the authorized number of Directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the Directors then in office, although less than a quorum, or by a sole remaining Director. If at any time, by reason of death or resignation or other cause, the Corporation has no Directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, may call a special meeting of stockholders for the purpose of filling vacancies in the Board of Directors. If one or more Directors shall resign from the Board of Directors, effective at a future date, a majority of the Directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office as provided in this section in the filling of other vacancies. 13. COMPENSATION. Unless otherwise expressly provided by resolution adopted by the Board of Directors, no Director shall receive any compensation for his or her services as a Director. The Board of Directors may at any time and from time to time by resolution provide that the Directors shall be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. In addition, the Board of Directors may at any time and from time to time by resolution provide that Directors shall be paid their actual expenses, if any, of 8 9 attendance at each meeting of the Board of Directors. Nothing in this section shall be construed as precluding any Director from serving the Corporation in any other capacity and receiving compensation therefor, but the Board of Directors may by resolution provide that any Director receiving compensation for his or her services to the Corporation in any other capacity shall not receive additional compensation for his or her services as a Director. ARTICLE IV OFFICERS 1. NUMBER. The Corporation shall have the following officers: a President, a Secretary and a Treasurer. At the discretion of the Board of Directors, the Corporation may also have a Chairman of the Board, one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers. Any two (2) or more offices may be held by the same person. 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation shall be elected annually by the Board of Directors. Each such officer shall hold office until his or her successor is duly elected or until his or her earlier death or resignation or removal in the manner hereinafter provided. 3. AGENTS. In addition to the officers mentioned in Section 1 of this Article IV, the Board of Directors may appoint such agents as the Board of Directors may deem necessary or advisable, each of which agents shall have such authority and perform such duties as are provided in these Bylaws or as the Board of Directors may from time to time determine. The Board of Directors may delegate to any officer or to any committee the power to appoint or remove any such agents. 4. REMOVAL. Any officer may be removed, with or without cause, at any time by resolution adopted by a majority of the whole Board of Directors. 5. RESIGNATIONS. Any officer may resign at any time by giving written notice of his or her resignation to the Board of Directors, the President or the Secretary. Any such resignation shall take effect at the times specified therein, or, if the time when it shall become effective is not specified therein, it shall take effect immediately upon its receipt by the Board of Directors, 9 10 the President or the Secretary; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 6. VACANCIES. A vacancy in any office due to death, resignation, removal, disqualification or any other cause may be filled for the unexpired portion of the term thereof by the Board of Directors. 7. CHAIRMAN OF THE BOARD. The Board of Directors may elect a Chairman to serve as a general executive officer of the Corporation, and, if specifically designated as such by the Board, as the chief executive officer of the Corporation. If elected, the Chairman will preside at all meetings of the Board of Directors and be vested with such other powers and duties as the Board may from time to time delegate to him or her. 8. PRESIDENT OR VICE PRESIDENTS. Unless otherwise specified by resolution of the Board of Directors, the President will be the chief executive officer of the Corporation. The President will supervise the business and affairs of the Corporation and the performance by all of its other officers of their respective duties, subject to the control of the Board of Directors (and of its Chairman, if the Chairman has been specifically designated as chief executive officer of the corporation). One or more Vice Presidents shall be elected by the Board of Directors to perform such duties as may be designated by the Board or be assigned or delegated to them by the chief executive officer. Any one of the Vice Presidents as authorized by the Board will be vested with all of the powers and charged with all of the duties of the President in the event of his or her absence or inability to act. Except as may otherwise be specifically provided in a resolution of the Board of Directors, the President or any Vice President will be a proper officer to sign on behalf of the Corporation any deed, bill of sale, assignment, option, mortgage, pledge, note, bond, evidence of indebtedness, application, consent, (to service of process or otherwise), agreement, indenture or other instrument of any significant importance to the Corporation. The President or any Vice President may represent the Corporation at any meeting of the shareholders, and may vote this Corporation's shares in such other corporation in person or by proxy appointed by him or her, provided that the Board of Directors may from time to time confer the foregoing authority upon any other person or persons. 9. SECRETARY. The Secretary shall: (a) record all the proceedings of the meetings of the stockholders, the Board of Directors and the Executive Committee, if any, in one or more books kept for that purpose; (b) see that all notices are duly given in accordance with the 10 11 provisions of these Bylaws or as required by law; (c) be the custodian of all contracts, deeds, documents, all other indicia of title to properties owned by the Corporation and of its other corporate records (except accounting records) and of the corporate seal, if any, and affix such seal to all documents the execution of which on behalf of the Corporation under its seal is duly authorized; (d) sign, with the President or a Vice President, certificates for stock of the Corporation; (e) have charge, directly or through the transfer clerk or transfer clerks, transfer agent or transfer agents and registrar or registrars appointed as provided in Section 3 of Article VII of these Bylaws, of the issue, transfer and registration of certificates for stock of the Corporation and of the records thereof, such records to be kept in such manner as to show at any time the amount of the stock of the Corporation issued and outstanding, the manner in which and the time when such stock was paid for, the names, alphabetically arranged, and the addresses of the holders of record thereof, the number of shares held by each, and the time when each became a holder of record; (f) upon request, exhibit or cause to be exhibited at all reasonable times to any Director such records of the issue, transfer and registration of the certificates for stock of the Corporation; (g) see that the books, reports, statements, certificates and all other documents and records required by law are properly kept and filed; and (h) see that the duties prescribed by Section 6 of Article II of these Bylaws are performed. In general, the Secretary shall perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the President or the Board of Directors. 10. TREASURER. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the Board of Directors shall determine. The Treasurer shall: (a) have charge and custody of, and be responsible for, all funds, securities, notes and valuable effects of the Corporation; (b) receive and give receipt for moneys due and payable to the Corporation from any sources whatsoever; (c) deposit all such moneys to the credit of the Corporation or otherwise as the Board of Directors or the President shall direct in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article VI of these Bylaws; (d) cause such funds to be disbursed by checks or drafts on the authorized depositories of the Corporation signed as provided in Article VI of these Bylaws; (e) be responsible for the accuracy of the amounts of, and cause to be preserved proper vouchers for, all moneys so disbursed; (f) have the right to require from time to time reports or statements giving such information as he or she may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; (g) render to the Chairman of the Board, the President or the Board of Directors, whenever they, respectively, shall request him or her so to do, an account of the financial condition of the Corporation and of all his or her transactions as Treasurer; and (h) upon request, exhibit or cause to be exhibited at all reasonable times the cash books and other records to the President or any of the Directors of the Corporation. In general, the Treasurer shall perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the President or the Board of Directors. 11 12 11. ASSISTANT OFFICERS. Any persons elected as assistant officers shall assist in the performance of the duties of the designated office and such other duties as shall be assigned to them by any Vice President, the Secretary or the Treasurer, as the case may be, or by the Board of Directors or the President. 12. COMPENSATION. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors. ARTICLE V COMMITTEES 1. EXECUTIVE COMMITTEE; HOW CONSTITUTED AND POWERS. The Board of Directors, by resolution adopted by a majority of the whole Board of Directors, may designate one or more of the Directors then in office, to constitute an Executive Committee, which shall have and may exercise between meetings of the Board of Directors all the delegable powers of the Board of Directors to the extent not expressly prohibited by the Nevada General Corporation Law or by resolution of the Board of Directors. The Board of Directors may designate one or more Directors as alternate members of the Committee who may replace any absent or disqualified member at any meeting of the Committee. Each member of the Executive Committee shall continue to be a member thereof only during the pleasure of a majority of the whole Board of Directors. 2. EXECUTIVE COMMITTEE; ORGANIZATION. The President shall act as chairman at all meetings of the Executive Committee and the Secretary shall act as secretary thereof. In case of the absence from any meeting of the President or the Secretary, the Committee may appoint a chairman or secretary, as the case may be, of the meeting. 3. EXECUTIVE COMMITTEE; MEETINGS. Regular meetings of the Executive Committee may be held without notice on such days and at such places as shall be fixed by resolution adopted by a majority of the Committee and communicated to all its members. Special meetings of the Committee shall be held whenever called by the President or a majority of the members thereof then in office. Notice of each special meeting of the Committee shall be given in the manner provided in Section 6 of Article III of these Bylaws for special meetings of the Board of Directors. Notice of any such meeting of the Executive Committee, however, need not be given to any 12 13 member of the Committee if waived by him or her in writing or by telegraph, cable, wireless or other form of recorded communication either before or after the meeting, or if he or she is present at such meeting, except when he or she attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Subject to the provisions of this Article V, the Committee, by resolution adopted by a majority of the whole Committee, shall fix its own rules of procedure and it shall keep a record of its proceedings and report them to the Board of Directors at the next regular meeting thereof after such proceedings have been taken. All such proceedings shall be subject to revision or alteration by the Board of Directors; provided, however, that third parties shall not be prejudiced by any such revision or alteration. 4. EXECUTIVE COMMITTEE; QUORUM AND MANNER OF ACTING. A majority of the Executive Committee shall constitute a quorum for the transaction of business, and, except as specified in Section 3 of this Article V, the act of a majority of those present at a meeting thereof at which a quorum is present shall be the act of the Committee. The members of the Committee shall act only as a committee, and the individual members shall have no power as such. 5. OTHER COMMITTEES. The Board of Directors, by resolution adopted by a majority of the whole Board, may constitute other committees, which shall in each case consist of one or more of the Directors and, at the discretion of the Board of Directors, such officers who are not Directors. The Board of Directors may designate one or more Directors or officers who are not Directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee. Each such committee shall have and may exercise such powers as the Board of Directors may determine and specify in the respective resolutions appointing them; provided, however, that (a) unless all of the members of any committee shall be Directors, such committee shall not have authority to exercise any of the powers of the Board of Directors in the management of the business and affairs of the Corporation, and (b) if any committee shall have the power to determine the amounts of the respective fixed salaries of the officers of the Corporation or any of them, such committee shall consist of not less than three (3) members and none of its members shall have any vote in the determination of the amount that shall be paid to him or her as a fixed salary. A majority of all the members of any such committee may fix its rules of procedure, determine its action and fix the time and place of its meetings and specify what notice thereof, if any, shall be given, unless the Board of Directors shall otherwise by resolution provide. 6. COMMITTEE MINUTES. The Executive Committee and any other committee shall keep regular minutes of their proceedings and report the same to the Board of Directors when required. 13 14 7. ACTION BY COMMITTEES WITHOUT A MEETING. Any action required or permitted to be taken at a meeting of the Executive Committee or any other committee of the Board of Directors may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by all members of the committee and such consent is filed with the minutes of the proceedings of the committee. 8. RESIGNATIONS. Any member of the Executive Committee or any other committee may resign therefrom at any time by giving written notice of his or her resignation to the President or the Secretary. Any such resignation shall take effect at the time specified therein, or if the time when it shall become effective is not specified therein, it shall take effect immediately upon its receipt by the President or the Secretary; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 9. VACANCIES. Any vacancy in the Executive Committee or any other committee shall be filled by the vote of a majority of the whole Board of Directors. 10. COMPENSATION. Unless otherwise expressly provided by resolution adopted by the Board of Directors, no member of the Executive Committee or any other committee shall receive any compensation for his or her services as a committee member. The Board of Directors may at any time and from time to time by resolution provide that committee members shall be paid a fixed sum for attendance at each committee meeting or a stated salary as a committee member. In addition, the Board of Directors may at any time and from time to time by resolution provide that such committee members shall be paid their actual expenses, if any, of attendance at each committee meeting. Nothing in this section shall be construed as precluding any committee member from serving the Corporation in any other capacity and receiving compensation therefor, but the Board of Directors may by resolution provide that any committee member receiving compensation for his or her services to the Corporation in any other capacity shall not receive additional compensation for his or her services as a committee member. 11. DISSOLUTION OF COMMITTEES; REMOVAL OF COMMITTEE MEMBERS. This Board of Directors, by resolution adopted by a majority of the whole Board, may, with or without cause, dissolve the Executive Committee or any other committee, and, with or without cause, remove any member thereof. 14 15 ARTICLE VI MISCELLANEOUS 1. EXECUTION OF CONTRACTS. Except as otherwise required by law or by these Bylaws, any contract or other instrument may be executed and delivered in the name of the Corporation and on its behalf by the President or any Vice President. In addition, the Board of Directors may authorize any other officer of officers or agent or agents to execute and deliver any contract or other instrument in the name of the Corporation and on its behalf, and such authority may be general or confined to specific instances as the Board of Directors may by resolution determine. 2. ATTESTATION. Any Vice President, the Secretary, or any Assistant Secretary may attest the execution of any instrument or document by the President, or any other duly authorized officer or agent of the Corporation and may affix the corporate seal, if any, in witness thereof, but neither such attestation nor the affixing of a corporate seal shall be requisite to the validity of any such document or instrument. 3. CHECKS, DRAFTS. All checks, drafts, orders for the payment for money, bills of lading, warehouse receipts, obligations, bills of exchange and insurance certificates shall be signed or endorsed (except endorsements for collection for the account of the Corporation or for deposit to its credit, which shall be governed by the provisions of Section 4 of this Article VI) by such officer or officers or agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. 4. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board of Directors or the President shall direct in general or special accounts at such banks, trust companies, savings and loan associations, or other depositories as the Board of Directors may select or as may be selected by any officer or officers or agent or agents of the Corporation to whom power in that respect has been delegated by the Board of Directors. For the purpose of deposit and for the purpose of collection for the account of the Corporation, checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by any officer or agent of the Corporation. The Board of Directors may make such special rules and regulations with respect to such accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient. 15 16 5. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. ARTICLE VII STOCK 1. CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the President, or a Vice President and by the Secretary or an Assistant Secretary. The signatures of such officers upon such certificate may be facsimiles if the certificate is manually signed by a transfer agent or registered by a registrar, other than the Corporation itself or one of its employees. If any officer who has signed or whose facsimile signature has been placed upon a certificate has ceased for any reason to be such officer prior to issuance of the certificate, the certificate may be issued with the same effect as if that person were such officer at the date of issue. All certificates for stock of the Corporation shall be consecutively numbered, shall state the number of shares represented thereby and shall otherwise be in such form as shall be determined by the Board of Directors, subject to such requirements as are imposed by the Nevada General Corporation Law. The names and addresses of the persons to whom the shares represented by certificates are issued shall be entered on the stock transfer books of the Corporation, together with the number of shares and the date of issue, and in the case of cancellation, the date of cancellation. Certificates surrendered to the Corporation for transfer shall be canceled, and no new certificate shall be issued in exchange for such shares until the original certificate has been canceled; except that in the case of a lost, stolen, destroyed or mutilated certificate, a new certificate may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. 2. TRANSFER OF STOCK. Transfer of shares of stock of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his or her legal representative or attorney in fact, who shall furnish proper evidence of authority to transfer to the Secretary, or a transfer clerk or a transfer agent, and upon surrender of the certificate or certificates for such shares properly endorsed and payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. 3. REGULATIONS. The Board of Directors may make such rules and regulations as it may deem 16 17 expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for stock of the Corporation. The Board of Directors may appoint, or authorize any officer or officers or any committee to appoint, one or more transfer clerks or one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them. 4. LOST CERTIFICATES. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of the fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. 5. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Nevada. ARTICLE VIII DIVIDENDS The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares of stock in the manner and upon the terms and conditions provided in the Nevada General Corporation Law. ARTICLE IX SEAL A corporate seal shall not be requisite to the validity of any instrument executed by or on behalf of the Corporation. Nevertheless, if in any instance a corporate seal is used, the same shall be in the form of a circle and shall bear the full name of the Corporation and the year and state of incorporation, or words and figures of similar import. 17 18 ARTICLE X INDEMNIFICATION OF DIRECTORS AND OFFICERS 1. GENERAL. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a matter he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. 2. DERIVATIVE ACTIONS. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including amounts paid in settlement and attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom to be liable to the Corporation or for amounts paid in settlement to the Corporation unless and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction shall determine upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. 18 19 3. INDEMNIFICATION IN CERTAIN CASES. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article X, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. 4. PROCEDURE. Any indemnification under Sections 1 and 2 of this Article X (unless ordered by a court or advanced pursuant to Section 5 of this Article X) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders. 5. ADVANCES FOR EXPENSES. Expenses incurred by a director, officer, employee, or agent of the Corporation in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation as they are incurred and in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay the amount if it shall be ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Corporation as authorized in this Article X. 6. RIGHTS NOT-EXCLUSIVE. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to the other Sections of this Article X shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding such office, except that indemnification, unless ordered by a court pursuant to Section 2 of this Article X or for advancement of expenses made pursuant to Section 5 of this Article X, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. 19 20 7. INSURANCE. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and liability and expenses incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article X. 8. DEFINITION OF CORPORATION. For the purposes of this Article X, references to "the Corporation" include, in addition to the resulting corporation, all constituent corporations (including any constituent of a constituent) absorbed in consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees and agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article X with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. 9. OTHER DEFINITIONS. For purposes of this Article X, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article X. 10. CONTINUATION OF RIGHTS. The indemnification and advancement of expenses provided by, or granted pursuant to this Article X shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. No amendment to or repeal of this Article X shall apply to or have any effect on, the rights of any director, officer, employee or agent under this Article X which rights 20 21 come into existence by virtue of acts or omissions of such director, officer, employee or agent occurring prior to such amendment or repeal. ARTICLE XI AMENDMENTS These Bylaws may be repealed, altered or amended by the affirmative vote of the holders of a majority of the stock issued and outstanding and entitled to vote at any meeting of Stockholders or by resolution duly adopted by the affirmative vote of not less than a majority of the Directors in office at any annual or regular meeting of the Board of Directors or at any special meeting of the Board of Directors if notice of the proposed repeal, alteration or amendment be contained in the notice of such special meeting, and new Bylaws may be adopted, at any time only by the Board of Directors. I, THE UNDERSIGNED, being the Secretary of Citadel Communications Corporation, DO HEREBY CERTIFY the foregoing to be the Bylaws of the Corporation, as adopted by the Board of Directors on the 21st of August, 1991. /s/ Donna L. Heffner ------------------------------ Donna L. Heffner, Secretary 21 22 AMENDMENT TO THE BYLAWS OF CITADEL COMMUNICATIONS CORPORATION I, THE UNDERSIGNED, being the Secretary of Citadel Communications Corporation, DO HEREBY CERTIFY that the Bylaws of the Corporation were amended on June 30, 1997 as follows: The following sentence was added to end of Article VIII, "Dividends": "The Board of Directors may appoint, or authorize any officer or officers or any committee to appoint, one or more dividend paying agents." /s/ Donna L. Heffner ---------------------------- Donna L. Heffner, Secretary EX-3.II.B 11 CITADEL BROADCASTING CO. S-4 1 Exhibit 3(ii)(b) BYLAWS OF CITADEL LICENSE, INC. ARTICLE I OFFICES 1. Principal Office. The principal office shall be in the City of Reno, County of Washoe, State of Nevada. 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Nevada as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS 1. Annual Meeting. The annual meeting of the stockholders shall be held on the second Tuesday of March of each year, or if that day is a legal holiday, then on the next day thereafter which is not a legal holiday, or at such other date as the Board of Directors shall determine, for the purpose of electing Directors and for the transaction of such other business as may properly come before the meeting. If the election of Directors is not held on the day designated herein for any annual meeting of the stockholders, or any adjournment thereof, the Directors shall cause the election to be held at a special meeting of the stockholders as soon thereafter as convenient. 2. Special Meetings. Special meetings of the stockholders may be called for any purpose or purposes at any time by the Board of Directors or the President, and shall be called by the President at the request of the holders of not less than one-tenth (1/10) of all outstanding stock of the Corporation entitled to vote at such meeting, or otherwise as provided by the Nevada General Corporation Law and Section 13 of Article II of these Bylaws. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. 1 2 3. Place of Meetings. Annual and special meetings of the stockholders may be held at such time and place within or without the State of Nevada as shall be stated in the notice of the meeting, or in a duly executed waiver of notice thereof. 4. Notice of Meeting. Written notice stating the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered to each stockholder of record entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. Notice may be delivered either personally or by certified or registered mail, postage prepaid, and signed by an officer of the Corporation at the direction of the person or persons calling the meeting. If mailed, notice shall be deemed to be delivered when mailed to the stockholders at his or her address as it appears on the stock transfer books of the Corporation. Delivery of any such notice to any officer of a corporation or association, or to any member of a partnership shall constitute delivery of such notice to such corporation, association or partnership. In the event of the transfer of stock after delivery or mailing of the notice of and prior to the holding of the meeting it shall not be necessary to deliver or mail notice of the meeting to the transferee. Notice need not be given of an adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, provided that such adjournment is for less than thirty (30) days and further provided that a new record date is not fixed for the adjourned meeting, in either of which events, written notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at such meeting. At any adjourned meeting, any business may be transacted which might have been transacted at the meeting as originally noticed. A written waiver of notice, whether given before or after the meeting to which it relates, shall be equivalent to the giving of notice of such meeting to the stockholder or stockholders signing such waiver. Attendance of a stockholder at a meeting shall constitute a waiver of notice of such meeting, except when the stockholder attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. 5. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of and to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix in advance a record date, which shall not be more than sixty (60) nor less than ten (10) days prior to the date of such meeting or such action, as the case may be. If the Board of Directors has not fixed a record date for determining the stockholders entitled to notice of and to vote at a meeting of stockholders, the record date shall be at close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. If the Board of Directors has not fixed a record date for determining the stockholders entitled to express consent to corporate action in writing without a meeting, when no 2 3 prior action by the Board of Directors is necessary, the record date shall be the day on which the first written consent is expressed by any stockholder. If the Board of Directors has not fixed a record date for determining stockholders for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 6. Record of Stockholders. The Secretary or other officer having charge of the stock transfer books of the Corporation shall make, or cause to be made, at least ten (10) days before every meeting of stockholders, a complete record of the stockholders entitled to vote at a meeting of stockholders or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. 7. Quorum and Manner of Acting. At any meeting of the stockholders, the presence, in person or by proxy, of the holders of a majority of the outstanding stock entitled to vote shall constitute a quorum for the transaction of business except as otherwise provided by the Nevada General Corporation Law or by the Certificate of Incorporation. All shares represented and entitled to vote on any single subject matter which may be brought before the meeting shall be counted for quorum purposes. Only those shares entitled to vote on a particular subject matter shall be counted for the purpose of voting on that subject matter. Business may be conducted once a quorum is present and may continue to be conducted until adjournment sine die, notwithstanding the withdrawal or temporary absence of stockholders leaving less than a quorum. Except as otherwise provided in the Nevada General Corporation Law or the Certificate of Incorporation, the affirmative vote of the holders of a majority of the shares of stock then represented at the meeting and entitled to vote thereat shall be the act of the stockholders; provided, however, that if the shares of stock so represented are less than the number required to constitute a quorum, the affirmative vote must be such as would constitute a majority if a quorum were present, except that the affirmative vote of the holders of a majority of the shares of stock then present is sufficient in all cases to adjourn a meeting. 8. Voting of Shares of Stock. Except as otherwise provided in the Certificate of Incorporation, each stockholder shall be entitled to one vote or corresponding fraction thereof for each share of stock or fraction thereof standing in his, her or its name on the books of the Corporation on the record date. A stockholder may vote either in person or by valid proxy, as defined in Section 12 of this Article II, executed in 3 4 writing by the stockholder or by his, her or its duly authorized attorney in fact. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor counted for quorum purposes; provided, however, that the foregoing shall not limit the right of any corporation to vote stock, including but not limited to its own stock, when held by it in a fiduciary capacity. Shares of stock standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such other corporation may prescribe or, in the absence of such provision, as the Board of Directors of such other corporation may determine. Unless demanded by a stockholder present in person or by proxy at any meeting of the stockholders and entitled to vote thereat, or unless so directed by the chairman of the meeting, the vote thereat on any question need not be by ballot. If such demand or direction is made, a vote by ballot shall be taken, and each ballot shall be signed by the stockholder voting, or by his or her proxy, and shall state the number of shares voted. 9. Organization. At each meeting of the stockholders, the President, or, if he or she is absent therefrom, another officer of the Corporation chosen as chairman of such meeting by stockholders holding a majority of the shares present in person or by proxy and entitled to vote thereat, or, if all the officers of the Corporation are absent therefrom, a stockholder of record so chosen, shall act as chairman of the meeting and preside thereat. The Secretary, or, if he or she is absent from the meeting or is required pursuant to the provisions of this Section 9 to act as chairman of such meeting, the person (who shall be an Assistant Secretary, if any and if present) whom the chairman of the meeting shall appoint shall act as secretary of the meeting and keep the minutes thereof. 10. Order of Business. The order of business at each meeting of the stockholders shall be determined by the chairman of such meeting, but the order of business may be changed by the vote of stockholders holding a majority of the shares present in person or by proxy at such meeting and entitled to vote thereat. 11. Voting. At all meetings of stockholders, each stockholder entitled to vote thereat shall have the right to vote, in person or by proxy, and shall have, for each share of stock registered in his, her or its name, the number of votes provided by the Certificate of Incorporation in respect of stock of such class. Stockholders shall not have cumulative voting rights with respect to the election of Directors. 12. Voting by Proxy. At any meeting of the stockholders, any stockholder may be represented and vote by a proxy or proxies appointed by an instrument in writing. In the event that any such instrument in writing shall designate two (2) or more persons to act as proxies, a majority of such persons present at the meeting, or, if only one shall be present, then that one shall have and may exercise all of the powers 4 5 conferred by such written instrument upon all of the persons so designated unless the instrument shall otherwise provide. No such proxy shall be valid after the expiration of six (6) months from the date of its execution, unless coupled with an interest, or unless the person executing it specifies therein the length of time for which it is to continue in force, which in no case shall exceed seven (7) years from the date of it execution. Subject to the above, any proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it or a duly executed proxy bearing a later date is filed with the Secretary of the Corporation. 13. Action By Stockholders Without a Meeting. Any action required or permitted to be taken at a meeting of the stockholders may be taken without a meeting, without notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the number of votes that would have been necessary to authorize such action at a meeting at which all shares entitled to vote were present and voted. Such written consent shall not be valid unless it is (a) signed by the stockholder, (b) dated, as to the date of such stockholder's signature, and (c) delivered to the Corporation personally or by certified or registered mail, return receipt requested, to the Corporation's principal place of business, principal office in the State of Nevada or officer or agent who has custody of the book in which the minutes of meetings of stockholders are recorded, within sixty (60) days after the earliest date that a stockholder signed the written consent. Prompt notice of the taking of any such action shall be given to any such stockholders entitled to vote who have not so consented in writing. ARTICLE III BOARD OF DIRECTORS 1. General Powers. The business and affairs of the Corporation shall be managed by the Board of Directors. 2. Number, Term of Office and Qualifications. Subject to the requirements of the Nevada General Corporation Law or the Certificate of Incorporation, the Board of Directors may from time to time determine the number of Directors. Until the Board of Directors shall otherwise determine, the number of Directors shall be that number comprising the initial Board of Directors as set forth in the Certificate of Incorporation. Each director shall hold office until his or her successor is duly elected or until his or her earlier death or resignation or removal in the manner hereinafter provided. Directors need not be stockholders. 3. Place of Meeting. The Board of Directors may hold its meetings, either within or without the State of Nevada, at such place or places as it may from time to time by resolution determine or as shall be designated 5 6 in any notices or waivers of notice thereof. Any such meeting, whether regular or special, may be held by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting in such manner shall constitute presence in person at such meeting. Each person participating in a telephonic meeting shall sign the minutes thereof, which may be signed in counterparts. 4. Annual Meetings. As soon as practicable after each annual election of Directors and on the same day, the Board of Directors shall meet for the purpose of organization and the transaction of other business at the place where regular meetings of the Board of Directors are held, and no notice of such meeting shall be necessary in order to legally hold the meeting, provided that a quorum is present. If such meeting is not held as provided above, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for a special meeting of the Board of Directors, or in the event of waiver of notice as specified in the written waiver of notice. 5. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such times as the Board of Directors shall from time to time by resolution determine. 6. Special Meetings; Notice. Special meetings of the Board of Directors shall be held, either within or without the State of Nevada, whenever called by the President or a majority of the Directors at the time in office. Notice shall be given, in the manner hereinafter provided, of each such special meeting, which notice shall state the time and place of such meeting, but need not state the purposes thereof. Except as otherwise provided in Section 9 of this Article III, notice of each such meeting shall be mailed to each Director, addressed to him or her at his or her residence or usual place of business, at least two (2) days before the day on which such meeting is to be held, or shall be sent addressed to him or her at such place by telegraph, cable, wireless or other form of recorded communication or delivered personally or by telephone not later than the day before the day on which such meeting is to be held. A written waiver of notice, whether given before or after the meeting to which it relates, shall be equivalent to the giving of notice of such meeting to the Director or Directors signing such waiver. Attendance of a Director at a special meeting of the Board of Directors shall constitute a waiver of notice of such meeting, except when he or she attends the meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. 7. Quorum and Manner of Acting. A majority of the whole Board of Directors shall be present in person at any meeting of the Board of Directors in order to constitute a quorum for the transaction of business at such meeting, and except as otherwise specified in these Bylaws, and except also as otherwise expressly provided by the Nevada General Corporation Law the vote of a majority of the Directors present at any such meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of 6 7 a quorum from any such meeting, a majority of the Directors present thereat may adjourn such meeting from time to time to another time or place, without notice other than announcement at the meeting, until a quorum shall be present thereat. The Directors shall act only as a Board of Directors and the individual Directors shall have no power as such. 8. Organization. At each meeting of the Board of Directors, the President, or if he or she is absent therefrom, a Director chosen by a majority of the Directors present thereat, shall act as chairman of such meeting and preside thereat. The Secretary, or if he or she is absent, the person (who shall be an Assistant Secretary, if any and if present) whom the chairman of such meeting shall appoint, shall act as Secretary of such meeting and keep the minutes thereof. 9. Action by Directors Without a Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by all Directors and such consent is filed with the minutes of the proceedings of the Board of Directors. 10. Resignations. Any Director may resign at any time by giving written notice of his or her resignation to the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time when it shall become effective is not specified therein, it shall take effect immediately upon its receipt by the President or the Secretary; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 11. Removal of Directors. Directors may be removed, with or without cause, as provided from time to time by the Nevada General Corporation Law as then in effect. 12. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of Directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the Directors then in office, although less than a quorum, or by a sole remaining Director. If at any time, by reason of death or resignation or other cause, the Corporation has no Directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, may call a special meeting of stockholders for the purpose of filling vacancies in the Board of Directors. If one or more Directors shall resign from the Board of Directors, effective at a future date, a majority of the Directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take 7 8 effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office as provided in this section in the filling of other vacancies. 13. Compensation. Unless otherwise expressly provided by resolution adopted by the Board of Directors, no Director shall receive any compensation for his or her services as a Director. The Board of Directors may at any time and from time to time by resolution provide that the Directors shall be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. In addition, the Board of Directors may at any time and from time to time by resolution provide that Directors shall be paid their actual expenses, if any, of attendance at each meeting of the Board of Directors. Nothing in this section shall be construed as precluding any Director from serving the Corporation in any other capacity and receiving compensation therefor, but the Board of Directors may by resolution provide that any Director receiving compensation for his or her services to the Corporation in any other capacity shall not receive additional compensation for his or her services as a Director. ARTICLE IV OFFICERS 1. Number. The Corporation shall have the following officers: a President, a Secretary and a Treasurer. At the discretion of the Board of Directors, the Corporation may also have a Chairman of the Board, one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers. Any two (2) or more offices may be held by the same person. 2. Election and Term of Office. The officers of the Corporation shall be elected annually by the Board of Directors. Each such officer shall hold office until his or her successor is duly elected or until his or her earlier death or resignation or removal in the manner hereinafter provided. 3. Agents. In addition to the officers mentioned in Section 1 of this Article IV, the Board of Directors may appoint such agents as the Board of Directors may deem necessary or advisable, each of which agents shall have such authority and perform such duties as are provided in these Bylaws or as the Board of Directors may from time to time determine. The Board of Directors may delegate to any officer or to any committee the power to appoint or remove any such agents. 8 9 4. Removal. Any officer may be removed, with or without cause, at any time by resolution adopted by a majority of the whole Board of Directors. 5. Resignations. Any officer may resign at any time by giving written notice of his or her resignation to the Board of Directors, the President or the Secretary. Any such resignation shall take effect at the times specified therein, or, if the time when it shall become effective is not specified therein, it shall take effect immediately upon its receipt by the Board of Directors, the President or the Secretary; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 6. Vacancies. A vacancy in any office due to death, resignation, removal, disqualification or any other cause may be filled for the unexpired portion of the term thereof by the Board of Directors. 7. Chairman of the Board. The Board of Directors may elect a Chairman to serve as a general executive officer of the Corporation, and, if specifically designated as such by the Board, as the chief executive officer of the Corporation. If elected, the Chairman will preside at all meetings of the Board of Directors and be vested with such other powers and duties as the Board may from time to time delegate to him or her. 8. President or Vice Presidents. Unless otherwise specified by resolution of the Board of Directors, the President will be the chief executive officer of the Corporation. The President will supervise the business and affairs of the Corporation and the performance by all of its other officers of their respective duties, subject to the control of the Board of Directors (and of its Chairman, if the Chairman has been specifically designated as chief executive officer of the corporation). One or more Vice Presidents shall be elected by the Board of Directors to perform such duties as may be designated by the Board or be assigned or delegated to them by the chief executive officer. Any one of the Vice Presidents as authorized by the Board will be vested with all of the powers and charged with all of the duties of the President in the event of his or her absence or inability to act. Except as may otherwise be specifically provided in a resolution of the Board of Directors, the President or any Vice President will be a proper officer to sign on behalf of the Corporation any deed, bill of sale, assignment, option, mortgage, pledge, note, bond, evidence of indebtedness, application, consent, (to service of process or otherwise), agreement, indenture or other instrument of any significant importance to the Corporation. The President or any Vice President may represent the Corporation at any meeting of the shareholders, and may vote this Corporation's shares in such other corporation in person or by 9 10 proxy appointed by him or her, provided that the Board of Directors may from time to time confer the foregoing authority upon any other person or persons. 9. Secretary. The Secretary shall: (a) record all the proceedings of the meetings of the stockholders, the Board of Directors and the Executive Committee, if any, in one or more books kept for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be the custodian of all contracts, deeds, documents, all other indicia of title to properties owned by the Corporation and of its other corporate records (except accounting records) and of the corporate seal, if any, and affix such seal to all documents the execution of which on behalf of the Corporation under its seal is duly authorized; (d) sign, with the President or a Vice President, certificates for stock of the Corporation; (e) have charge, directly or through the transfer clerk or transfer clerks, transfer agent or transfer agents and registrar or registrars appointed as provided in Section 3 of Article VII of these Bylaws, of the issue, transfer and registration of certificates for stock of the Corporation and of the records thereof, such records to be kept in such manner as to show at any time the amount of the stock of the Corporation issued and outstanding, the manner in which and the time when such stock was paid for, the names, alphabetically arranged, and the addresses of the holders of record thereof, the number of shares held by each, and the time when each became a holder of record; (f) upon request, exhibit or cause to be exhibited at all reasonable times to any Director such records of the issue, transfer and registration of the certificates for stock of the Corporation; (g) see that the books, reports, statements, certificates and all other documents and records required by law are properly kept and filed; and (h) see that the duties prescribed by Section 6 of Article II of these Bylaws are performed. In general, the Secretary shall perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the President or the Board of Directors. 10. Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the Board of Directors shall determine. The Treasurer shall: (a) have charge and custody of, and be responsible for, all funds, securities, notes and valuable effects of the Corporation; (b) receive and give receipt for moneys due and payable to the Corporation from any sources whatsoever; (c) deposit all such moneys to the credit of the Corporation or otherwise as the Board of Directors or the President shall direct in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Article VI of these Bylaws; (d) cause such funds to be disbursed by checks or drafts on the authorized depositories of the Corporation signed as provided in Article VI of these Bylaws; (e) be responsible for the accuracy of the amounts of, and cause to be preserved proper vouchers for, all moneys so disbursed; (f) have the right to require from time to time reports or statements giving such information as he or she may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; (g) render to the Chairman of the Board, the President or the Board of Directors, whenever they, respectively, shall request him or her so to do, an account of the financial condition of the Corporation and of all his or her transactions as Treasurer; and (h) upon request, exhibit or cause to be exhibited at all reasonable times the cash 10 11 books and other records to the President or any of the Directors of the Corporation. In general, the Treasurer shall perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the President or the Board of Directors. 11. Assistant Officers. Any persons elected as assistant officers shall assist in the performance of the duties of the designated office and such other duties as shall be assigned to them by any Vice President, the Secretary or the Treasurer, as the case may be, or by the Board of Directors or the President. 12. Compensation. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors. ARTICLE V COMMITTEES 1. Executive Committee; How Constituted and Powers. The Board of Directors, by resolution adopted by a majority of the whole Board of Directors, may designate one or more of the Directors then in office, to constitute an Executive Committee, which shall have and may exercise between meetings of the Board of Directors all the delegable powers of the Board of Directors to the extent not expressly prohibited by the Nevada General Corporation Law or by resolution of the Board of Directors. The Board of Directors may designate one or more Directors as alternate members of the Committee who may replace any absent or disqualified member at any meeting of the Committee. Each member of the Executive Committee shall continue to be a member thereof only during the pleasure of a majority of the whole Board of Directors. 2. Executive Committee; Organization. The President shall act as chairman at all meetings of the Executive Committee and the Secretary shall act as secretary thereof. In case of the absence from any meeting of the President or the Secretary, the Committee may appoint a chairman or secretary, as the case may be, of the meeting. 3. Executive Committee; Meetings. Regular meetings of the Executive Committee may be held without notice on such days and at such places as shall be fixed by resolution adopted by a majority of the Committee and communicated to all its members. Special meetings of the Committee shall be held whenever called by the President or a majority of the members thereof then in office. Notice of each special meeting 11 12 of the Committee shall be given in the manner provided in Section 6 of Article III of these Bylaws for special meetings of the Board of Directors. Notice of any such meeting of the Executive Committee, however, need not be given to any member of the Committee if waived by him or her in writing or by telegraph, cable, wireless or other form of recorded communication either before or after the meeting, or if he or she is present at such meeting, except when he or she attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Subject to the provisions of this Article V, the Committee, by resolution adopted by a majority of the whole Committee, shall fix its own rules of procedure and it shall keep a record of its proceedings and report them to the Board of Directors at the next regular meeting thereof after such proceedings have been taken. All such proceedings shall be subject to revision or alteration by the Board of Directors; provided, however, that third parties shall not be prejudiced by any such revision or alteration. 4. Executive Committee; Quorum and Manner of Acting. A majority of the Executive Committee shall constitute a quorum for the transaction of business, and, except as specified in Section 3 of this Article V, the act of a majority of those present at a meeting thereof at which a quorum is present shall be the act of the Committee. The members of the Committee shall act only as a committee, and the individual members shall have no power as such. 5. Other Committees. The Board of Directors, by resolution adopted by a majority of the whole Board, may constitute other committees, which shall in each case consist of one or more of the Directors and, at the discretion of the Board of Directors, such officers who are not Directors. The Board of Directors may designate one or more Directors or officers who are not Directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee. Each such committee shall have and may exercise such powers as the Board of Directors may determine and specify in the respective resolutions appointing them; provided, however, that (a) unless all of the members of any committee shall be Directors, such committee shall not have authority to exercise any of the powers of the Board of Directors in the management of the business and affairs of the Corporation, and (b) if any committee shall have the power to determine the amounts of the respective fixed salaries of the officers of the Corporation or any of them, such committee shall consist of not less than three (3) members and none of its members shall have any vote in the determination of the amount that shall be paid to him or her as a fixed salary. A majority of all the members of any such committee may fix its rules of procedure, determine its action and fix the time and place of its meetings and specify what notice thereof, if any, shall be given, unless the Board of Directors shall otherwise by resolution provide. 6. Committee Minutes. The Executive Committee and any other committee shall keep regular minutes of their proceedings and report the same to the Board of Directors when required. 12 13 7. Action by Committees Without a Meeting. Any action required or permitted to be taken at a meeting of the Executive Committee or any other committee of the Board of Directors may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by all members of the committee and such consent is filed with the minutes of the proceedings of the committee. 8. Resignations. Any member of the Executive Committee or any other committee may resign therefrom at any time by giving written notice of his or her resignation to the President or the Secretary. Any such resignation shall take effect at the time specified therein, or if the time when it shall become effective is not specified therein, it shall take effect immediately upon its receipt by the President or the Secretary; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 9. Vacancies. Any vacancy in the Executive Committee or any other committee shall be filled by the vote of a majority of the whole Board of Directors. 10. Compensation. Unless otherwise expressly provided by resolution adopted by the Board of Directors, no member of the Executive Committee or any other committee shall receive any compensation for his or her services as a committee member. The Board of Directors may at any time and from time to time by resolution provide that committee members shall be paid a fixed sum for attendance at each committee meeting or a stated salary as a committee member. In addition, the Board of Directors may at any time and from time to time by resolution provide that such committee members shall be paid their actual expenses, if any, of attendance at each committee meeting. Nothing in this section shall be construed as precluding any committee member from serving the Corporation in any other capacity and receiving compensation therefor, but the Board of Directors may by resolution provide that any committee member receiving compensation for his or her services to the Corporation in any other capacity shall not receive additional compensation for his or her services as a committee member. 11. Dissolution of Committees; Removal of Committee Members. The Board of Directors, by resolution adopted by a majority of the whole Board, may, with or without cause, dissolve the Executive Committee or any other committee, and, with or without cause, remove any member thereof. 13 14 ARTICLE VI MISCELLANEOUS 1. Execution of Contracts. Except as otherwise required by law or by these Bylaws, any contract or other instrument may be executed and delivered in the name of the Corporation and on its behalf by the President or any Vice President. In addition, the Board of Directors may authorize any other officer of officers or agent or agents to execute and deliver any contract or other instrument in the name of the Corporation and on its behalf, and such authority may be general or confined to specific instances as the Board of Directors may by resolution determine. 2. Attestation. Any Vice President, the Secretary, or any Assistant Secretary may attest the execution of any instrument or document by the President, or any other duly authorized officer or agent of the Corporation and may affix the corporate seal, if any, in witness thereof, but neither such attestation nor the affixing of a corporate seal shall be requisite to the validity of any such document or instrument. 3. Checks Drafts. All checks, drafts, orders for the payment of money, bills of lading, warehouse receipts, obligations, bills of exchange and insurance certificates shall be signed or endorsed (except endorsements for collection for the account of the Corporation or for deposit to its credit, which shall be governed by the provisions of Section 4 of this Article VI) by such officer or officers or agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board of Directors or the President shall direct in general or special accounts at such banks, trust companies, savings and loan associations, or other depositories as the Board of Directors may select or as may be selected by any officer or officers or agent or agents of the Corporation to whom power in that respect has been delegated by the Board of Directors. For the purpose of deposit and for the purpose of collection for the account of the Corporation, checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by any officer or agent of the Corporation. The Board of Directors may make such special rules and regulations with respect to such accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient. 14 15 5. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. ARTICLE VII STOCK 1. Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the President, or a Vice President and by the Secretary or an Assistant Secretary. The signatures of such officers upon such certificate may be facsimiles if the certificate is manually signed by a transfer agent or registered by a registrar, other than the Corporation itself or one of its employees. If any officer who has signed or whose facsimile signature has been placed upon a certificate has ceased for any reason to be such officer prior to issuance of the certificate, the certificate may be issued with the same effect as if that person were such officer at the date of issue. All certificates for stock of the Corporation shall be consecutively numbered, shall state the number of shares represented thereby and shall otherwise be in such form as shall be determined by the Board of Directors, subject to such requirements as are imposed by the Nevada General Corporation Law. The names and addresses of the persons to whom the shares represented by certificates are issued shall be entered on the stock transfer books of the Corporation, together with the number of shares and the date of issue, and in the case of cancellation, the date of cancellation. Certificates surrendered to the Corporation for transfer shall be canceled, and no new certificate shall be issued in exchange for such shares until the original certificate has been canceled; except that in the case of a lost, stolen, destroyed or mutilated certificate, a new certificate may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. 2. Transfer of Stock. Transfers of shares of stock of the Corporation shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his or her legal representative or attorney in fact, who shall furnish proper evidence of authority to transfer to the Secretary, or a transfer clerk or a transfer agent, and upon surrender of the certificate or certificates for such shares properly endorsed and payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. 3. Regulations. The Board of Directors may make such rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates--for stock of the Corporation. The Board of Directors may appoint, or authorize any officer or officers or any committee to appoint, one or more transfer clerks or one or more transfer agents and one or 15 16 more registrars, and may require all certificates for stock to bear the signature or signatures of any of them. 4. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of the fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. 5. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Nevada. ARTICLE VIII DIVIDENDS The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares of stock in the manner and upon the terms and conditions provided in the Certificate of Incorporation and Nevada General Corporation Law. ARTICLE IX SEAL A corporate seal shall not be requisite to the validity of any instrument executed by or on behalf of the Corporation. Nevertheless, if in any instance a corporate seal is used, the same shall be in the form of a circle and shall bear the full name of the Corporation and the year and state of incorporation, or words and figures of similar import. 16 17 ARTICLE X INDEMNIFICATION OF DIRECTORS AND OFFICERS 1. General. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. 2. Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including amounts paid in settlement and attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom to be liable to the Corporation or for amounts paid in settlement to the Corporation unless and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction shall determine upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. 3. Indemnification in Certain Cases. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in 17 18 Sections 1 and 2 of this Article X, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. 4. Procedure. Any indemnification under Sections 1 and 2 of this Article X (unless ordered by a court or advanced pursuant to Section 5 of this Article X) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders. 5. Advances for Expenses. Expenses incurred by a director, officer, employee, or agent of the Corporation in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation as they are incurred and in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay the amount if it shall be ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Corporation as authorized in this Article X. 6. Rights Not-Exclusive. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to the other Sections of this Article X shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding such office, except that indemnification, unless ordered by a court pursuant to Section 2 of this Article X or for advancement of expenses made pursuant to Section 5 of this Article X, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. 7. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and liability and expenses incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article X. 18 19 8. Definition of Corporation. For the purposes of this Article X, references to "the Corporation" include, in addition to the resulting corporation, all constituent corporations (including any constituent of a constituent) absorbed in consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees and agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article X with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. 9. Other Definitions. For purposes of this Article X, references to "other enterprises" shall include employee benefit plans; references to fines shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; such a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article X. 10. Continuation of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to this Article X shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. No amendment to or repeal of this Article X shall apply to or have any effect on, the rights of any director, officer, employee or agent under this Article X which rights come into existence by virtue of acts or omissions of such director, officer, employee or agent occurring prior to such amendment or repeal. ARTICLE XI AMENDMENTS These Bylaws may be repealed, altered or amended by the affirmative vote of the holders of a majority of the stock issued and outstanding and entitled to vote at any meeting of Stockholders or by resolution duly adopted by the affirmative vote of not less than a majority of the Directors in office at any annual or regular meeting of the Board of Directors or at any special meeting of the 19 20 Board of Directors if notice of the proposed repeal, alteration or amendment be contained in the notice of such special meeting, and new Bylaws may be adopted, at any time only by the Board of Directors. I, THE UNDERSIGNED, being the Secretary of Citadel License, Inc., DO HEREBY CERTIFY the foregoing to be the Bylaws of the Corporation, as adopted by the Board of Directors on the 6th day of September, 1996. /s/ Donna L. Heffner ---------------------------- Donna L. Heffner, Secretary 20 EX-4.1 12 CITADEL BROADCASTING CO. S-4 1 Exhibit 4.1 CITADEL BROADCASTING COMPANY, Issuer CITADEL LICENSE, INC., Guarantor and THE BANK OF NEW YORK, Trustee -------------------- INDENTURE Dated as of July 1, 1997 --------------------- $101,000,000 10-1/4% Senior Subordinated Notes due 2007 10-1/4% Series B Senior Subordinated Notes due 2007 - -------------------------------------------------------------------------------- 2 CITADEL BROADCASTING COMPANY RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND INDENTURE, DATED AS OF JULY 1, 1997
TRUST INDENTURE ACT SECTION INDENTURE SECTION Section 310(a)(1) .............................................................. 608 (a)(2) .............................................................. 608 (b) .............................................................. 609 Section 312(a) .............................................................. 701 (c) .............................................................. 702 Section 313(a) .............................................................. 703 (c) .............................................................. 703 Section 314(a)(4) .............................................................. 1010(a) (c)(1) .............................................................. 102 (c)(2) .............................................................. 102 (e) .............................................................. 102 Section315(a) .............................................................. 601(a) (b) .............................................................. 602 (c) .............................................................. 601(b) (d) .............................................................. 601(c), 603 316(a)(last sentence) .............................................................. 101 ("Outstanding") (a)(1)(A) .............................................................. 502, 512 (a)(1)(B) .............................................................. 513 (b) .............................................................. 508 (c) .............................................................. 104(d) Section 317(a)(1) .............................................................. 503 (a)(2) .............................................................. 504 (b) .............................................................. 1003 Section 318(a) .............................................................. 111
- -------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. 3 TABLE OF CONTENTS
PAGE PARTIES...........................................................................................................1 RECITALS OF THE COMPANY...........................................................................................1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions................................................................................... 1 Acquired Debt........................................................................ 2 Act ............................................................................ 2 Affiliate............................................................................ 2 Agent ............................................................................ 3 Asset Sale........................................................................... 3 Asset Sale Offer..................................................................... 3 Asset Swap........................................................................... 3 Authenticating Agent................................................................. 3 Bankruptcy Law....................................................................... 3 Banks ............................................................................ 4 Board of Directors................................................................... 4 Board Resolution..................................................................... 4 Business Day......................................................................... 4 Capital Stock........................................................................ 4 Capitalized Lease Obligation......................................................... 4 Change of Control.................................................................... 4 Change of Control Offer.............................................................. 5 Change of Control Payment............................................................ 5 Change of Control Purchase Date...................................................... 5 Citadel Communications............................................................... 5 Closing Date......................................................................... 5 Commission........................................................................... 5 Company ............................................................................ 5 Company Request or Company Order..................................................... 5 Consolidated Adjusted Net Income..................................................... 5 Consolidated Cash Flow............................................................... 6 Consolidated Cash Flow Ratio......................................................... 7 - --------
Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. 4 ii
PAGE Consolidated Fixed Charges........................................................... 7 Corporate Trust Office............................................................... 7 Credit Facility...................................................................... 7 Credit Facility Agent................................................................ 7 Custodian............................................................................ 8 Debt ............................................................................ 8 Default ............................................................................ 8 Defaulted Interest................................................................... 8 Depositary........................................................................... 8 Disinterested Director............................................................... 8 Disqualified Stock................................................................... 9 Event of Default..................................................................... 9 Excess Proceeds...................................................................... 9 Exchange Act......................................................................... 9 FCC ............................................................................ 9 Generally Accepted Accounting Principles or GAAP..................................... 9 guarantee............................................................................ 9 Hedging Obligations.................................................................. 10 Holder ............................................................................ 10 Indenture............................................................................ 10 Indenture Obligations................................................................ 10 Initial Notes........................................................................ 10 Initial Purchasers................................................................... 10 Interest Payment Date................................................................ 10 Investment........................................................................... 10 Legal Defeasance..................................................................... 11 License Subsidiary................................................................... 11 Lien ............................................................................ 11 Net Cash Proceeds.................................................................... 11 New Notes............................................................................ 11 Note Register and Note Registrar..................................................... 11 Notes ............................................................................ 11 Notes Exchange Offer................................................................. 12 Notes Exchange Offer Registration Statement.......................................... 12 Notes Registration Rights Agreement.................................................. 12 Notes Shelf Registration Statement................................................... 12 Offered Price........................................................................ 12 Offering Memorandum.................................................................. 12 Officers' Certificate................................................................ 12 Opinion of Counsel................................................................... 12
5 iii
PAGE Outstanding.......................................................................... 12 Pari Passu Debt...................................................................... 13 Paying Agent......................................................................... 13 Permitted Debt....................................................................... 13 Permitted Investments................................................................ 13 Person ............................................................................ 14 Predecessor Note..................................................................... 14 Public Equity Offering............................................................... 15 QIB ............................................................................ 15 Qualified Equity Interest............................................................ 15 Qualified Stock...................................................................... 15 Redemption Date...................................................................... 15 Redemption Price..................................................................... 15 Regular Record Date.................................................................. 15 Responsible Officer.................................................................. 15 Restricted Subsidiary................................................................ 15 Rule 144A............................................................................ 15 Securities Act....................................................................... 16 Senior Debt.......................................................................... 16 Significant Subsidiary............................................................... 16 Special Record Date.................................................................. 16 Specified Senior Debt................................................................ 16 Stated Maturity...................................................................... 16 Subordinated Debt.................................................................... 17 Subsidiary........................................................................... 17 Subsidiary Guarantor Senior Debt..................................................... 17 Subsidiary Notes Guarantee........................................................... 17 Subsidiary Notes Guarantor........................................................... 17 Trust Indenture Act or TIA........................................................... 17 Trustee ............................................................................ 18 Unrestricted Subsidiary.............................................................. 18 U.S. Government Obligations.......................................................... 18 Voting Stock......................................................................... 18 Voting Trust Agreement............................................................... 18 Weighted Average Life................................................................ 18 Wholly Owned Restricted Subsidiary................................................... 19 SECTION 102. Compliance Certificates and Opinions.......................................................... 19 SECTION 103. Form of Documents Delivered to Trustee........................................................ 19 SECTION 104. Acts of Holders............................................................................... 20
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PAGE SECTION 105. Notices, Etc., to Trustee, the Company and Subsidiary Notes Guarantors........................................................................... 21 SECTION 106. Notice to Holders; Waiver..................................................................... 22 SECTION 107. Effect of Headings and Table of Contents...................................................... 22 SECTION 108. Successors and Assigns........................................................................ 23 SECTION 109. Separability Clause........................................................................... 23 SECTION 110. Benefits of Indenture......................................................................... 23 SECTION 111. Governing Law................................................................................. 23 SECTION 112. Legal Holidays................................................................................ 23 SECTION 113. No Personal Liability of Directors, Officers, Employees, Stockholders or Incorporators..................................................................... 24 SECTION 114. Counterparts.................................................................................. 24 ARTICLE TWO NOTE FORMS SECTION 201. Forms Generally............................................................................... 24 SECTION 202. Restrictive Legends........................................................................... 25 SECTION 203. [INTENTIONALLY OMITTED]....................................................................... 27 SECTION 204. Form of Face of Note.......................................................................... 28 SECTION 205. Form of Reverse of Note....................................................................... 30 SECTION 206. Form of Trustee's Certificate of Authentication............................................... 38 ARTICLE THREE THE NOTES SECTION 301. Title and Terms............................................................................... 39 SECTION 302. Denominations................................................................................. 40 SECTION 303. Execution, Authentication, Delivery and Dating................................................ 40 SECTION 304. Temporary Notes............................................................................... 41 SECTION 305. Registration, Registration of Transfer and Exchange........................................... 42 SECTION 306. Book-Entry Provisions for the Global Note..................................................... 43 SECTION 307. Special Transfer Provisions................................................................... 44 SECTION 308. Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Institutional Accredited Investors........................................... 47 SECTION 309. [INTENTIONALLY OMITTED]....................................................................... 49 SECTION 310. Mutilated, Destroyed, Lost and Stolen Notes................................................... 49 SECTION 311. Payment of Interest; Interest Rights Preserved................................................ 50
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PAGE SECTION 312. Persons Deemed Owners......................................................................... 51 SECTION 313. Cancellation.................................................................................. 51 SECTION 314. Computation of Interest....................................................................... 52 SECTION 315. CUSIP Numbers................................................................................. 52 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture....................................................... 52 SECTION 402. Application of Trust Money.................................................................... 53 ARTICLE FIVE REMEDIES SECTION 501. Events of Default............................................................................. 54 SECTION 502. Acceleration of Maturity; Rescission and Annulment............................................ 55 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee............................... 56 SECTION 504. Trustee May File Proofs of Claim.............................................................. 57 SECTION 505. Trustee May Enforce Claims Without Possession of Notes........................................ 58 SECTION 506. Application of Money Collected................................................................ 58 SECTION 507. Limitation on Suits........................................................................... 59 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest............................................................................. 60 SECTION 509. Restoration of Rights and Remedies............................................................ 60 SECTION 510. Rights and Remedies Cumulative................................................................ 60 SECTION 511. Delay or Omission Not Waiver.................................................................. 60 SECTION 512. Control by Holders............................................................................ 61 SECTION 513. Waiver of Past Defaults....................................................................... 61 SECTION 514. Waiver of Stay or Extension Laws.............................................................. 61 SECTION 515. Undertaking for Costs......................................................................... 62 ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities........................................................... 62 SECTION 602. Notice of Defaults............................................................................ 63 SECTION 603. Certain Rights of Trustee..................................................................... 64
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PAGE SECTION 604. Trustee Not Responsible for Recitals or Issuance of Notes..................................... 65 SECTION 605. May Hold Notes................................................................................ 65 SECTION 606. Money Held in Trust........................................................................... 65 SECTION 607. Compensation and Reimbursement................................................................ 66 SECTION 608. Corporate Trustee Required; Eligibility....................................................... 67 SECTION 609. Resignation and Removal; Appointment of Successor............................................. 67 SECTION 610. Acceptance of Appointment by Successor........................................................ 69 SECTION 611. Merger, Conversion, Consolidation or Succession to BusineSection.............................. 69 ARTICLE SEVEN HOLDERS LISTS AND REPORTS BY TRUSTEE SECTION 701. Company to Furnish Trustee Names and Addresses................................................ 70 SECTION 702. Disclosure of Names and Addresses of Holders.................................................. 70 SECTION 703. Reports by Trustee............................................................................ 70 ARTICLE EIGHT MERGER, CONSOLIDATION, OR SALE OF ASSETS SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.......................................... 71 SECTION 802. Successor Substituted......................................................................... 72 ARTICLE NINE SUPPLEMENTS AND AMENDMENTS TO INDENTURE SECTION 901. Supplemental Indentures Without Consent of Holders............................................ 72 SECTION 902. Supplemental Indentures with Consent of Holders............................................... 73 SECTION 903. Execution of Supplemental Indentures.......................................................... 74 SECTION 904. Effect of Supplemental Indentures............................................................. 74 SECTION 905. Conformity with Trust Indenture Act........................................................... 74 SECTION 906. Reference in Notes to Supplemental Indentures................................................. 74 SECTION 907. Notice of Supplemental Indentures............................................................. 75 SECTION 908. Effect on Senior Debt......................................................................... 75
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PAGE ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, if Any, and Interest.......................................... 75 SECTION 1002. Maintenance of Office or Agency.............................................................. 75 SECTION 1003. Money for Note Payments to Be Held in Trust.................................................. 76 SECTION 1004. Corporate Existence.......................................................................... 77 SECTION 1005. Payment of Taxes and Other Claims............................................................ 77 SECTION 1006. Maintenance of Properties.................................................................... 78 SECTION 1007. Insurance.................................................................................... 78 SECTION 1008. Compliance with Laws......................................................................... 78 SECTION 1009. Limitation on Debt........................................................................... 79 SECTION 1010. Limitation on Restricted Payments............................................................ 81 SECTION 1011. Purchase of Notes upon a Change of Control................................................... 85 SECTION 1012. Limitation on Certain Asset Sales............................................................ 87 SECTION 1013. Limitation on Asset Swaps.................................................................... 89 SECTION 1014. Limitation on Transactions with Affiliates................................................... 90 SECTION 1015. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries.............................................................. 91 SECTION 1016. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries......................................................................... 92 SECTION 1017. Limitation on Unrestricted Subsidiaries...................................................... 93 SECTION 1018. Limitation on Other Senior Subordinated Debt................................................. 93 SECTION 1019. Subsidiary Notes Guarantees.................................................................. 94 SECTION 1020. Limitation on Guarantees of Debt by Restricted Subsidiaries.................................. 94 SECTION 1021. Limitation on Liens.......................................................................... 94 SECTION 1022. Commission Reports and Reports to Holders.................................................... 95 SECTION 1023. Statement as to Compliance................................................................... 95 ARTICLE ELEVEN REDEMPTION OF NOTES SECTION 1101. Redemption................................................................................... 96 SECTION 1102. Applicability of Article..................................................................... 97 SECTION 1103. Election to Redeem; Notice to Trustee........................................................ 97 SECTION 1104. Selection by Trustee of Notes to Be Redeemed................................................. 97 SECTION 1105. Notice of Redemption......................................................................... 97 SECTION 1106. Deposit of Redemption Price.................................................................. 99
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PAGE SECTION 1107. Notes Payable on Redemption Date............................................................. 99 SECTION 1108. Notes Redeemed in Part....................................................................... 99 ARTICLE TWELVE LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 1201. Company's Option to Effect Legal Defeasance or Covenant Defeasance...........................................................................100 SECTION 1202. Legal Defeasance and Discharge...............................................................100 SECTION 1203. Covenant Defeasance..........................................................................100 SECTION 1204. Conditions to Legal Defeasance or Covenant Defeasance........................................101 SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions................................................102 SECTION 1206. Reinstatement................................................................................103 ARTICLE THIRTEEN SUBSIDIARY NOTES GUARANTEES SECTION 1301. Subsidiary Guarantees........................................................................103 SECTION 1302. Guaranty Absolute............................................................................104 SECTION 1303. Waivers .....................................................................................106 SECTION 1304. Subrogation..................................................................................107 SECTION 1305. No Waiver; Remedies..........................................................................107 SECTION 1306. Continuing Guaranty; No Right of Set-Off; Independent Obligation.............................107 SECTION 1307. Subsidiary Notes Guarantors May Consolidate, Etc., on Certain Terms................................................................................108 SECTION 1308. Additional Subsidiary Notes Guarantors.......................................................108 SECTION 1309. Releases.....................................................................................109 ARTICLE FOURTEEN SUBORDINATION OF SECURITIES SECTION 1401. Notes and Subsidiary Notes Guarantees Subordinate to Senior Debt.............................110 SECTION 1402. Payment Over of Proceeds Upon Dissolution, Etc...............................................110 SECTION 1403. No Payment When Certain Senior Debt in Default...............................................111 SECTION 1404. Payment Permitted If No Default..............................................................113 SECTION 1405. Subrogation to Rights of Holders of Senior Debt..............................................113
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PAGE SECTION 1406. Provisions Solely to Define Relative Rights..................................................113 SECTION 1407. Trustee to Effectuate Subordination..........................................................114 SECTION 1408. No Waiver of Subordination Provisions........................................................114 SECTION 1409. Notice to Trustee............................................................................115 SECTION 1410. Reliance on Judicial Order or Certificate of Liquidation Agent...............................116 SECTION 1411. Trustee Not Fiduciary for Holders of Senior Debt.............................................116 SECTION 1412. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights...............................................................................116 SECTION 1413. Applicability to Paying Agents...............................................................117 SECTION 1414. Defeasance of this Article Fourteen..........................................................117 SECTION 1415. Subordination Provisions Controlling.........................................................117 SIGNATURES......................................................................................................118
12 INDENTURE, dated as of July 1, 1997, among CITADEL BROADCASTING COMPANY, a corporation duly organized and existing under the laws of the State of Nevada (the "Company"), having its principal office at 140 South Ash Avenue, Tempe, Arizona 85281, CITADEL LICENSE, INC., a wholly owned subsidiary of the Company, as guarantor (the "Subsidiary Notes Guarantor"), having its principal office at 140 South Ash Avenue, Tempe, Arizona 85281, and THE BANK OF NEW YORK, a New York banking corporation, as trustee (the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of and issuance of its 10-1/4% Senior Subordinated Notes due 2007 (the "Initial Notes"), and 10-1/4% Series B Senior Subordinated Notes due 2007 (the "New Notes," and together with the Initial Notes, the "Notes"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. Upon the effectiveness of the Notes Exchange Offer Registration Statement (as defined herein) or the Notes Shelf Registration Statement (as defined herein), this Indenture shall be subject to, and shall be governed by, the provisions of the Trust Indenture Act of 1939, as amended, that are required or deemed to be part of and to govern indentures qualified thereunder. All things necessary have been done to make the Notes, when executed and duly issued by the Company and authenticated and delivered hereunder by the Trustee or the Authenticating Agent, the valid obligations of the Company and to make this Indenture a valid agreement of the Company in accordance with their and its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Notes, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: 13 2 (a) the terms defined in this Article have the meanings assigned to them in this Article, and words in the singular include the plural as well as the singular, and words in the plural include the singular as well as the plural; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein, and the terms "cash transaction" and "self-liquidating paper," as used in TIA Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with Generally Accepted Accounting Principles; (d) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (e) the word "or" is not exclusive; and (f) provisions of this Indenture apply to successive events and transactions. Certain terms, used principally in Articles Two, Ten, Twelve, Thirteen and Fourteen, are defined in those Articles. "Acquired Debt" means Debt of a Person (a) existing at the time such Person is merged with or into the Company or becomes a Subsidiary, (b) assumed in connection with the acquisition of assets from such Person or (c) secured by a Lien encumbering assets acquired from such Person. "Act," when used with respect to any Holder, has the meaning set forth in Section 104. "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with 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 the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. 14 3 "Agent" means any Paying Agent, Authenticating Agent and Note Registrar under this Indenture. "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") by the Company or a Restricted Subsidiary, directly or indirectly, in one or a series of related transactions, to any Person other than the Company or a Restricted Subsidiary of (a) any Capital Stock of any of its Restricted Subsidiaries, (b) all or substantially all of the properties and assets of the Company and any of its Restricted Subsidiaries representing a division or line of business or (c) any other properties or assets of the Company or any of its Restricted Subsidiaries, other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" does not include any transfer of properties or assets (a) that is governed by the provisions of this Indenture described under (i) Article Eight or (ii) Section 1013, (b) between or among the Company and any of its Restricted Subsidiaries pursuant to transactions that do not violate any other provision of this Indenture, (c) to an Unrestricted Subsidiary, if permitted under Section 1010, (d) representing obsolete or permanently retired equipment, (e) the gross proceeds of which (exclusive of indemnities) do not exceed $100,000 for any particular item or $500,000 in the aggregate for any fiscal year or (f) the transfer of up to $500,000 of property and assets, including cash, to a joint venture in which the Company or a Restricted Subsidiary has an equity interest, which joint venture is engaged in the internet service provider business. "Asset Sale Offer" has the meaning set forth in Section 1012 herein. "Asset Swap" means the execution of one or more definitive agreements, subject only to FCC approval, if applicable, and other customary closing conditions, which the Company in good faith believes shall be satisfied, for a substantially concurrent purchase and sale, or exchange, or "deferred exchange" (for no more than 180 days) under Section 1031(a)(3) of the Internal Revenue Code of 1986, as amended, of assets used in the broadcast or related businesses between the Company or any of its Restricted Subsidiaries and one or more other Persons or groups of affiliated Persons; provided that any amendment to or waiver of any closing conditions that individually or in the aggregate are material to the Asset Swap shall be deemed to be a new Asset Swap. "Authenticating Agent" means the Person appointed, if any, by the Trustee as an authenticating agent pursuant to the last paragraph of Section 303. "Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as amended, or any similar United States federal or state or foreign 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. 15 4 "Banks" means the banks and other financial institutions that from time to time are lenders under the Credit Facility. "Board of Directors" means, with respect to any Person, either the board of directors of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the secretary or an assistant secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close. "Capital Stock" of any Person means any and all shares, interests, partnership interests, participations, rights in or other equivalents (however designated) of such Person's equity (however designated). "Capitalized Lease Obligation" means, with respect to any Person, an obligation incurred or assumed under or in connection with any capital lease of real or personal property that, in accordance with GAAP, has been recorded as a capitalized lease on the balance sheet of such Person. "Change of Control" means the occurrence 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 Lawrence R. Wilson, Scott E. Smith, Jon E. von Schlegell, Baker, Fentress & Company, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., The Endeavour Capital Fund Limited Partnership and any trustee, in its capacity as trustee under the Voting Trust Agreement or Citadel Communications, 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 a majority of the voting power of all classes of Voting Stock of the Company; (b) During any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election to such Board of Directors, or whose nomination for election by the stockholders of the Company, was approved by a vote of at least 66-2/3% of the 16 5 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 of the Company then in office; or (c) The Company is liquidated or dissolved or adopts a plan of liquidation or dissolution. "Change of Control Offer" has the meaning set forth in Section 1011 herein. "Change of Control Payment" has the meaning set forth in Section 1011 herein. "Change of Control Purchase Date" has the meaning set forth in Section 1011 herein. "Citadel Communications" means Citadel Communications Corporation, a Nevada corporation, and any successors thereof. "Closing Date" means the date on which the Notes are originally issued under this Indenture. "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 Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this Indenture, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company (i) by its chairman, a vice-chairman, its president or any vice president and (ii) by its treasurer, an assistant treasurer, its secretary or an assistant secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Consolidated Adjusted Net Income" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (a) any net after-tax extraordinary gains or losses (less all fees 17 6 and expenses relating thereto), (b) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to Asset Sales, (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 of its Restricted Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries in cash during such period, (d) the net income (or loss) of any Person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, and (e) the net income (but not the net loss) of any of its Restricted Subsidiaries to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is at the date of determination restricted, directly or indirectly, except to the extent that such net income could be paid to the Company or a Restricted Subsidiary thereof; provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated Adjusted Net Income shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Consolidated Adjusted Net Income otherwise attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1) the number of shares of outstanding common stock of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries divided by (2) the total number of shares of outstanding common stock of such Restricted Subsidiary on the last day of such period. "Consolidated Cash Flow" means, for any period, the sum of, without duplication, Consolidated Adjusted Net Income for such period, plus (or, in the case of clause (d) below, plus or minus) the following items to the extent included in computing Consolidated Adjusted Net Income for such period: (a) the aggregate interest expense and preferred stock dividends of the Company and its Restricted Subsidiaries for such period, plus (b) the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period, plus (c) the aggregate depreciation and amortization expense of the Company and any of its Restricted Subsidiaries for such period, plus (d) any other non-cash charges for such period, and minus non-cash credits for such period, other than non-cash charges or credits resulting from changes in prepaid assets or accrued liabilities in the ordinary course of business; provided that income tax expense, interest expense and preferred stock dividends, depreciation and amortization expense, and non-cash charges and credits of a Restricted Subsidiary shall be included in Consolidated Cash Flow only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Adjusted Net Income for such period. Solely for purposes of determining whether the Company could incur Debt pursuant to the first paragraph of Section 1009, if the Company is permitted to give pro forma effect to an In-Market Acquisition of a radio station pursuant to clause (iii) of the second paragraph of such Section, such calculation may also give pro forma effect to projected quantifiable improvements in operating results of such radio station due to cost reductions calculated in good faith by the Company and certified by an Officers' Certificate filed with the Trustee. As used in the preceding sentence, the term "In-Market Acquisition" means the acquisition of a radio station or group of radio stations serving a metropolitan statistical area in 18 7 which the Company or its Subsidiaries has owned, or has operated under a local marketing agreement, one or more radio stations for at least the preceding six months. "Consolidated Cash Flow Ratio" means, at any date, the ratio of (i) the aggregate amount of Debt of the Company and its Restricted Subsidiaries on a consolidated basis as of the end of the immediately preceding four fiscal quarters for which internal financial statements of the Company are available (the "Reference Period") to (ii) the aggregate amount of Consolidated Cash Flow for such Reference Period. "Consolidated Fixed Charges" means, for any period, without duplication, the sum of (a) the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of operations 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 contracts (including amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs, (v) the interest component of Capitalized Lease Obligations of the Company and any of its Restricted Subsidiaries, and (vi) the portion of any rental obligation of the Company and any of its Restricted Subsidiaries in respect of any sale and leaseback transaction allocable during such period to interest expense (determined as if it were treated as a Capitalized Lease Obligation), plus (b) all interest on any Debt of any other Person guaranteed by the Company or any of its Restricted Subsidiaries; provided, however, that Consolidated Fixed Charges shall not include any gain or loss from extinguishment of debt, including any write-off of debt issuance costs. "Corporate Trust Office" means the principal corporate trust office of the Trustee, at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at 101 Barclay Street--21W, New York, NY 10286, except that with respect to presentation of Notes for payment or for registration of transfer or exchange, such term shall mean any office or agency of the Trustee at which, at any particular time, its corporate agency business shall be conducted. "Covenant Defeasance" has the meaning set forth in Section 1203 herein. "Credit Facility" means the loan agreement dated October 9, 1996 among the Company, the Banks and the Credit Facility Agent, as amended, and as such agreement may be amended, restated, supplemented, replaced or refinanced or otherwise modified from time to time. "Credit Facility Agent" means the then acting Agent as defined in and under the Credit Facility or any successor thereto. 19 8 "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Debt" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services, (e) every Capitalized Lease Obligation of such Person, (f) all Disqualified Stock of such Person valued at its maximum fixed repurchase price, plus accumulated and unpaid dividends, (g) all Hedging Obligations of such Person, and (h) every obligation of the types referred to in clauses (a) through (g) of another Person and all dividends of another Person (i) the payment of which, in either case, such Person has guaranteed or (ii) which is secured by any Lien on any property or asset of such Person, the amount of such Debt being deemed to be the lesser of the actual amount of the guarantee or the value of such property or asset subject to such Lien, as the case may be, and the amount of the Debt so guaranteed or secured, as the case may be. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were repurchased on any date on which Debt is required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value shall be determined reasonably and in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable and accrued liabilities arising in the ordinary course of business, any liability for federal, state or local taxes or other taxes owed by such Person and the Exchangeable Preferred Stock shall not be considered Debt for purposes of this definition. The amount outstanding at any time of any Debt issued with original issue discount is the aggregate principal amount at maturity of such Debt, less the remaining unamortized portion of the original issue discount of such Debt at such time, as determined in accordance with GAAP. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Defaulted Interest" has the meaning set forth in Section 311 herein. "Depositary" means The Depository Trust Company, its nominees and successors. "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors is required to deliver a resolution of the Board of Directors, to make a finding or otherwise take action under this Indenture, a member 20 9 of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Disqualified Stock" means any class or series of Capital Stock that, either by its terms or by the terms of any security into which it is convertible or exchangeable or by contract or otherwise, (a) is, or upon the happening of an event or passage of time would be, required to be redeemed prior to one year after the final Stated Maturity of the Notes, (b) is redeemable at the option of the holder thereof at any time prior to one year after such final Stated Maturity or (c) at the option of the holder thereof, is convertible into or exchangeable for debt securities at any time prior to one year after such final Stated Maturity; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to cause the issuer thereof to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to one year after the Stated Maturity of the Notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Sections 1011 and 1012 of this Indenture and such Capital Stock specifically provides that the issuer shall not repurchase or redeem any such Capital Stock pursuant to such provision prior to the Company's repurchase of such Notes as are required to be repurchased pursuant to Sections 1011 and 1012 herein. "Event of Default" has the meaning set forth in Section 501 herein. "Excess Proceeds" has the meaning set forth in Section 1012 herein. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchangeable Preferred Stock" means the 13-1/4% Series A Exchangeable Preferred Stock, no par value, of the Company. "FCC" means the Federal Communications Commission, which has jurisdiction over the ownership, operation and sale of the Company's broadcast stations. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the Closing Date. "guarantee" means, as applied to any obligation, (a) 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 (b) 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 21 10 part of such obligation, including, without limitation, the payment of amounts drawn down under letters of credit. "Hedging Obligations" means the obligations of any Person under (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (b) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or the value of foreign currencies. "Holder" means the Person in whose name a Note is registered in the Note Register. "Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Indenture Obligations" means the obligations of the Company and any other obligor hereunder or under the Notes, including the Subsidiary Notes Guarantors, to pay principal of (and premium, if any) and interest on the Notes when due and payable at maturity, and all other amounts due or to become due under or in connection with this Indenture, the Notes and the performance of all other obligations to the Trustee (including all amounts due to the Trustee under Section 607 hereof) and the Holders under this Indenture and the Notes, according to the terms hereof and thereof. "Initial Notes" has the meaning set forth in the recitals to this Indenture. "Initial Purchasers" means Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities Inc., as purchasers of the Initial Notes. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Notes. "Investment" (in any Person) means (a) directly or indirectly, any advance, loan or other extension of credit (including, without limitation, by way of guarantee or similar arrangement) or capital contribution to any Person, the purchase or other acquisition of any stock, bonds, notes, debentures or other securities issued by such Person or the acquisition (by purchase or otherwise) of all or substantially all of the business or assets of such Person or the making of any investment in such Person, (b) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary and (c) the transfer of any assets or properties from the Company or a Restricted Subsidiary to any Unrestricted Subsidiary, other than the transfer of assets or properties made in the ordinary course of business. Investments shall exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. 22 11 "Legal Defeasance" has the meaning set forth in Section 1202 herein. "License Subsidiary" means Citadel License, Inc. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, preference, 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 that 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. "Net Cash Proceeds" means, 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 of for, cash or cash equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any of its Restricted Subsidiaries), net of (a) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (b) provisions for all taxes payable as a result of such Asset Sale, (c) payments made to retire Debt where payment of such Debt is secured by the assets that are the subject of such Asset Sale, (d) amounts required to be paid to any Person (other than the Company or any of its Restricted Subsidiaries) owning a beneficial interest in the assets that are subject to the Asset Sale and (e) appropriate amounts to be provided by the Company or any of its Restricted Subsidiaries, 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 seller after such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "New Notes" has the meaning stated in the first recital of this Indenture and refers to any New Notes containing terms substantially identical to the Initial Notes (except that (i) such New Notes shall not contain terms with respect to transfer restrictions and shall be registered under the Securities Act, and (ii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated) that are issued and exchanged for the Initial Notes in accordance with the Notes Exchange Offer, as provided for in the Notes Registration Rights Agreement and this Indenture. "Note Register" and "Note Registrar" have the respective meanings set forth in Section 305 herein. "Notes" has the meaning stated in the first recital of this Indenture and more particularly means any Notes authenticated and delivered under this Indenture. 23 12 "Notes Exchange Offer" means the offer by the Company to the Holders of the Initial Notes to exchange all of the Initial Notes for New Notes, as provided for in the Notes Registration Rights Agreement. "Notes Exchange Offer Registration Statement" means the Notes Exchange Offer Registration Statement as defined in the Notes Registration Rights Agreement. "Notes Registration Rights Agreement" means the Notes Registration Rights Agreement, dated as of July 3, 1997, among the Company, the Subsidiary Notes Guarantors and the Initial Purchasers. "Notes Shelf Registration Statement" means the Notes Shelf Registration Statement as defined in the Notes Registration Rights Agreement. "Offered Price" has the meaning set forth in Section 1012 herein. "Offering Memorandum" means the Offering Memorandum dated June 30, 1997 with respect to the offering of, inter alia, the Notes. "Officers' Certificate" means a certificate signed on behalf of the Company by two officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company that meets the requirements set forth in Section 102. "Opinion of Counsel" means a written opinion of counsel, which and who are reasonably acceptable to, and addressed to, the Trustee complying with the requirements of Section 102. Unless otherwise required by the TIA, such legal counsel may be an employee of or counsel to the Company or the Trustee. "Outstanding," when used with respect to Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except: (i) Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Notes; provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; 24 13 (iii) Notes, except to the extent provided in Sections 1202 and 1203, with respect to which the Company has effected Legal Defeasance and/or Covenant Defeasance as provided in Article Twelve; and (iv) Notes in exchange for or in lieu of which other Notes (including pursuant to Section 310) have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands the Notes are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Notes have given any request, demand, authorization, direction, consent, notice or waiver hereunder, and for the purpose of making the calculations required by TIA Section 313, Notes owned by the Company, any Subsidiary Notes Guarantor or any other obligor upon the Notes or any Affiliate of the Company, any Subsidiary Notes Guarantor or such other obligor shall be disregarded and deemed not to be Outstanding (provided that, in connection with any offer by the Company or any obligor to purchase the Notes, Notes tendered for purchase shall be deemed to be Outstanding and held by the tendering Holder until the date of purchase), except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which the Trustee actually knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company, any Subsidiary Notes Guarantor or any other obligor upon the Notes or any Affiliate of the Company, any Subsidiary Notes Guarantor or such other obligor. "Pari Passu Debt" means Debt of the Company that ranks pari passu in right of payment with the Notes. "Paying Agent" means any Person (including the Company acting as Paying Agent) authorized by the Company to pay the principal of (and premium, if any) or interest on any Notes on behalf of the Company. "Permitted Debt" has the meaning set forth in Section 1009. "Permitted Investments" means any of the following: (a) Investments in (i) securities with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof); (ii) certificates of deposit, time deposits, overnight bank 25 14 deposits or bankers' acceptances with a maturity of 270 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus of not less than $500,000,000; and (iii) commercial paper with a maturity of 270 days or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings Services. (b) Investments by the Company or any of its Restricted Subsidiaries in another Person, if as a result of such Investment (i) such other Person becomes a Restricted Subsidiary that is a Subsidiary Notes Guarantor 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 that is a Subsidiary Notes Guarantor. (c) Investments by the Company or any of its Restricted Subsidiaries in a Subsidiary Notes Guarantor and Investments by any Restricted Subsidiary in the Company. (d) Investments in assets owned or used in the ordinary course of business. (e) Investments in existence on the Closing Date. (f) Promissory notes received as a result of Asset Sales permitted under Section 1012. (g) Direct or indirect loans to employees, or to a trustee for the benefit of such employees, of the Company or any of its Restricted Subsidiaries in an aggregate amount outstanding at any time not exceeding $1,000,000. (h) Investments by the Company or any of its Restricted Subsidiaries in a joint venture that is engaged in the internet service provider business in an aggregate amount outstanding at any time not exceeding $500,000. (i) Other Investments that do not exceed $2,000,000 at any one time outstanding. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "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; and, for the purposes 26 15 of this definition, any Note authenticated and delivered under Section 310 in exchange for a mutilated, lost, destroyed or stolen Note. "Public Equity Offering" means an underwritten public offering of Qualified Equity Interests of either (a) the Company or (b) Citadel Communications the net proceeds from which (after deducting any underwriting discounts and commissions) are used by Citadel Communications to purchase Qualified Equity Interests of the Company; provided that, in either case, such net proceeds exceed $10,000,000. "QIB" means a "Qualified Institutional Buyer" under Rule 144A. "Qualified Equity Interest" means any Qualified Stock and all warrants, options or other rights to acquire Qualified Stock (but excluding any debt security that is convertible into or exchangeable for Capital Stock). "Qualified Stock" of any Person means any and all Capital Stock of such Person, other than Disqualified Stock. "Redemption Date," when used with respect to any Note to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture. "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 Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the June 15 or December 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Responsible Officer," when used with respect to the Trustee, means the chairman or any vice chairman of the board of directors, the chairman or any vice chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above-designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means any Subsidiary other than an Unrestricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act. 27 16 "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Senior Debt" means the principal of and premium, if any, and interest on (including interest accruing after the filing of a petition initiating any proceeding pursuant to any Bankruptcy Law, whether or not allowed) and other amounts due on or in connection with any Debt of the Company (other than the Notes or Pari Passu Debt), whether outstanding on the Closing Date or thereafter incurred, unless, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt shall be subordinate in right of payment to any Debt or other general unsecured obligations of the Company. Without limiting the generality of the foregoing, "Senior Debt" includes the principal of and premium, if any, fees and interest (including interest accruing after the occurrence of an event of default or after the filing of a petition initiating any proceeding pursuant to any Bankruptcy Law, whether or not allowed) on all obligations of every nature of the Company from time to time owed to the Banks under the Credit Facility. Notwithstanding the foregoing, "Senior Debt" shall not include (a) Debt that is Disqualified Stock, (b) Debt consisting of trade payables, (c) Debt of the Company to a Subsidiary or any other Affiliate of the Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt that, at the time of the incurrence, is incurred by the Company in violation of this Indenture, other than any Debt incurred under the Credit Facility not in excess of $150,000,000 (less any amounts applied to the permanent reduction of such Debt pursuant to Section 1012) if the Company has certified to the Credit Facility Agent, at the time such Debt is incurred, that the Company is permitted to incur such Debt under this Indenture. "Significant Subsidiary" means any Restricted Subsidiary of the Company that, together with its Subsidiaries, (a) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated net sales of the Company and its Restricted Subsidiaries, (b) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the most recently available consolidated financial statements of the Company for such fiscal year, (c) was organized or acquired after the beginning of such fiscal year and would have been a Significant Subsidiary if it had been owned during the entire fiscal year or (d) holds one or more licenses material to the Company's business. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 311. "Specified Senior Debt" means (i) all Senior Debt under the Credit Facility and (ii) any other issue of Senior Debt having a principal amount of at least $10,000,000. "Stated Maturity" means, when used with respect to any Note or any installment of interest thereon, the date specified in such Note as the fixed date on which the principal of 28 17 such Note or such installment of interest is due and payable, and, when used with respect to any other Debt, means the date specified in the instrument governing such Debt as the fixed date on which the principal of such Debt or any installment of interest thereon is due and payable. "Subordinated Debt" means Debt of the Company that is subordinated in right of payment to the Notes. "Subsidiary" means any Person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company and/or one or more other Subsidiaries of the Company. "Subsidiary Guarantor Senior Debt" means, as to any Subsidiary Notes Guarantor, the principal of and premium, if any, and interest on (including interest accruing after the filing of a petition initiating any proceeding pursuant to any Bankruptcy Law, whether or not allowed) and other amounts due on or in connection with any Debt of such Subsidiary Notes Guarantor (other than the Subsidiary Notes Guarantee made by such Subsidiary Notes Guarantor), whether outstanding on the Closing Date or thereafter incurred, unless, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt shall be subordinate in right of payment to any Debt or other general unsecured obligations of such Subsidiary Notes Guarantor. Notwithstanding the foregoing, "Subsidiary Guarantor Senior Debt" shall not include (a) Debt that is Disqualified Stock, (b) Debt consisting of trade payables, (c) Debt of such Subsidiary Notes Guarantor to the Company or any Subsidiary or any other Affiliate of the Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt that, at the time of the incurrence, is incurred by such Subsidiary Notes Guarantor in violation of this Indenture, other than any Debt incurred under the Credit Facility not in excess of $150,000,000 (less any amounts applied to the permanent reduction of such Debt pursuant to Section 1012) if the Company has certified to the Credit Facility Agent, at the time such Debt is incurred, that the Subsidiary Notes Guarantor is permitted to incur such Debt under this Indenture. "Subsidiary Notes Guarantee" means a guarantee of the Notes by a Restricted Subsidiary in accordance with the provisions of this Indenture. "Subsidiary Notes Guarantor" means the License Subsidiary and each other Restricted Subsidiary that issues a Subsidiary Notes Guarantee as described in Article Thirteen herein. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in force on the date as of which this Indenture was executed, except as provided in Section 905. 29 18 "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary in accordance with Section 1017 and (b) any Subsidiary of an Unrestricted Subsidiary. "U.S. Government Obligations" means obligations that are (a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Obligations or a specific payment of principal of or interest on any such U.S. Government Obligations held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligations or the specific payment of principal of or interest on the U.S. Government Obligations evidenced by such depository receipt. "Voting Stock" means any class or classes of Capital Stock 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 or trustees of a corporation (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). "Voting Trust Agreement" means that certain Voting Trust Agreement dated as of March 17, 1997 by and among Citadel Communications, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Christopher Hall, as the initial Trustee thereunder and J. Walter Corcoran and Harlan Levy, each as an initial Back-Up Trustee thereunder, as amended from time to time. "Weighted Average Life" means, as of the date of determination with respect to any Debt or Disqualified Stock, 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 or liquidation value payment of such Debt or Disqualified Stock, respectively, multiplied by (ii) the amount of each such principal or liquidation value payment by (b) the sum of all such principal or liquidation value payments. 30 19 "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all of the outstanding voting securities (other than directors' qualifying shares or an immaterial number of shares required to be owned by other Persons pursuant to applicable law) of which are owned, directly or indirectly, by the Company. SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company and any Subsidiary Notes Guarantor and any other obligor on the Notes (if applicable) shall furnish to the Trustee an Officers' Certificate in form and substance reasonably acceptable to the Trustee stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual or such firm, he or it has made such examination or investigation as is necessary to enable him or it to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters 31 20 and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company, any Subsidiary Notes Guarantor or other obligor on the Notes may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company, any Subsidiary Notes Guarantor or other obligor on the Notes stating that the information with respect to such factual matters is in the possession of the Company, any Subsidiary Notes Guarantor or other obligor on the Notes unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in Person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section 104. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient. 32 21 (c) The principal amount and serial numbers of Notes held by any Person, and the date of holding the same, shall be proved by the Note Register. (d) If the Company or any Subsidiary Notes Guarantor shall solicit from the Holders of Notes any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company or any such Subsidiary Notes Guarantor (as the case may be) may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company or any such Subsidiary Notes Guarantor (as the case may be) shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Notes shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof (including in accordance with Section 310) in respect of anything done, omitted or suffered to be done by the Trustee, any Paying Agent or the Company or any Subsidiary Notes Guarantor in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 105. NOTICES, ETC., TO TRUSTEE, THE COMPANY AND SUBSIDIARY NOTES GUARANTORS. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (1) the Trustee by any Holder or by the Company or any Subsidiary Notes Guarantor or any other obligor on the Notes shall be sufficient for every purpose hereunder if made, given, furnished or delivered in writing and mailed, first-class 33 22 postage prepaid, or delivered by recognized overnight courier, to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration; or (2) the Company or any Subsidiary Notes Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered, in writing, or mailed, first-class postage prepaid, or delivered by recognized overnight courier, to the Company or such Subsidiary Notes Guarantor addressed to it at the address of its principal office specified in the first paragraph of this Indenture, or at any other address previously furnished in writing to the Trustee by the Company or such Subsidiary Notes Guarantor. SECTION 106. NOTICE TO HOLDERS; WAIVER. Where this Indenture provides for notice of any event to Holders by the Company or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event to Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice for every purpose hereunder. SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 34 23 SECTION 108. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the Company and any Subsidiary Notes Guarantor and their Subsidiaries shall bind their successors and assigns, whether so expressed or not. SECTION 109. SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 110. BENEFITS OF INDENTURE. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person (other than the parties hereto and their successors hereunder, any Paying Agent, the Holders and the holders of Senior Debt) any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 111. GOVERNING LAW. THIS INDENTURE, THE NOTES AND THE SUBSIDIARY NOTES GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. UPON THE EFFECTIVENESS OF THE NOTES EXCHANGE OFFER REGISTRATION STATEMENT OR THE NOTES SHELF REGISTRATION STATEMENT, THIS INDENTURE SHALL BE SUBJECT TO, AND GOVERNED BY, THE PROVISIONS OF THE TRUST INDENTURE ACT OF 1939, AS AMENDED, THAT ARE REQUIRED OR DEEMED TO BE PART OF AND TO GOVERN INDENTURES QUALIFIED THEREUNDER. SECTION 112. LEGAL HOLIDAYS. In any case where any Interest Payment Date, any date established for payment of Defaulted Interest pursuant to Section 311 or Redemption Date or Stated Maturity or other maturity of any Note shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Notes) payment of principal (or premium, if any) or interest need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or date established for payment of Defaulted Interest pursuant to Section 311, Redemption Date, or at the Stated Maturity or other maturity; provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or date established for payment of Defaulted Interest pursuant 35 24 to Section 311, Stated Maturity or other maturity, as the case may be, to the next succeeding Business Day. SECTION 113. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, STOCKHOLDERS OR INCORPORATORS. No director, officer, employee, incorporator or stockholders, as such, of the Company or any Subsidiary Notes Guarantor shall have any liability for any obligations of the Company or such Subsidiary Notes Guarantor under the Notes, this Indenture or any Subsidiary Notes Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creations. Each Holder by accepting a Note waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Notes. SECTION 114. COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be original; but such counterparts shall together constitute but one and the same instrument. ARTICLE TWO NOTE FORMS SECTION 201. FORMS GENERALLY. The Notes and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. Each Note shall be dated the date of its authentication. The definitive Notes shall be printed, lithographed or engraved on steel-engraved borders or may be produced in any other manner, all as determined by the officers of the Company executing such Notes, as evidenced by their execution of such Notes. Initial Notes offered and sold to "Qualified Institutional Buyers" (as defined in Rule 144A in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A) shall initially be issued in the form of one permanent global Note 36 25 substantially in the form set forth in Sections 204 and 205 (the "Global Note") deposited with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. Initial Notes offered and sold to "accredited investors" (as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act) who are not Qualified Institutional Buyers shall initially be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in Sections 204 and 205 (the "Certificated Notes"). SECTION 202. RESTRICTIVE LEGENDS. Unless and until (i) an Initial Note is sold under a Notes Shelf Registration Statement or (ii) an Initial Note is exchanged for a New Note in connection with an effective Notes Exchange Offer Registration Statement, in each case pursuant to the Notes Registration Rights Agreement, each such Global Note and Certificated Note shall bear the following legend (the "Private Placement Legend") on the face thereof: For each Global Note: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CITADEL BROADCASTING COMPANY (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN 37 26 RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT SUBJECT TO THE COMPANY'S, AND THE TRUSTEE'S/TRANSFER AGENT'S, RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND SHALL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. For each Certificated Note: THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THE SECURITIES EVIDENCED BY THIS CERTIFICATE, NOR ANY INTEREST THEREIN, MAY BE OFFERED, SOLD, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS EITHER (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND LAWS RELATING THERETO OR (II) THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE ISSUER, STATING THAT SUCH REGISTRATION IS NOT REQUIRED. Each Global Note, whether or not an Initial Note, shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS 38 27 REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE. SECTION 203. [INTENTIONALLY OMITTED]. 39 28 SECTION 204. FORM OF FACE OF NOTE. CITADEL BROADCASTING COMPANY 10 1/4% [Series B]* Senior Subordinated Note due 2007 CUSIP No. _____ No. __________ $________ CITADEL BROADCASTING COMPANY, a Nevada corporation (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to ____________________ or registered assigns, the principal sum of ____________________ Dollars on July 1, 2007, at the office or agency of the Company referred to below, and to pay interest thereon on January 1, 1998 and semi-annually thereafter, on July 1 and January 1 in each year, from January 1, 1998, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 10-1/4% per annum, until the principal hereof is paid or duly provided for, and (to the extent lawful) to pay on demand interest on any overdue interest at the rate borne by the Notes from the date on which such overdue interest becomes payable to the date payment of such interest has been made or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be June 15 or December 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and such defaulted interest, and (to the extent lawful) interest on such defaulted interest at the rate borne by the Notes, may be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Notes not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. [The Holder of this Note is entitled to the benefits of the Notes Registration Rights Agreement, dated as of July 3, 1997 (the "Notes Registration Rights Agreement"), between the Company, the Subsidiary Notes Guarantors and the Initial Purchasers named therein. In the event that either (a) the Notes Exchange Offer Registration Statement is not filed with the Commission on or prior to the 90th calendar day following the Closing Date or (b) the Notes Exchange Offer is not consummated or a Notes Shelf Registration Statement is not declared - -------- * Include only for New Notes. 40 29 effective on or prior to the 210th calendar day following the Closing Date, the interest rate borne by the Notes shall be increased by 0.25% per annum for the first 30 days following the 90-day period referred to in clause (a) above or the first 90 days following the 210-day period referred to in clause (b) above. Such interest shall increase by an additional 0.25% per annum at the beginning of each subsequent 30-day period in the case of clause (a) above or 90-day period in the case of clause (b) above; provided, however, that in no event shall the interest rate borne by the Notes be increased by more than 1.5%. Upon the filing of the Notes Exchange Offer Registration Statement, the consummation of the Notes Exchange Offer or the effectiveness of a Notes Shelf Registration Statement, as the case may be, the interest rate borne by the Notes from the date of such filing, consummation or effectiveness, as the case may be, shall be reduced to the original interest rate set forth in the first paragraph of this Note; provided, however, that if, after any such reduction in interest rate, a different event specified in clause (a) or (b) above occurs, the interest rate may again be increased pursuant to the foregoing provisions.]* [If the Company issues a notice that the Notes Shelf Registration Statement is unusable pending the announcement of a material corporate transaction or otherwise pursuant to Section 3(k) of the Notes Registration Rights Agreement, or such a notice is required under applicable securities laws to be issued by the Company, and the aggregate number of days in any consecutive twelve-month period for which all such notices are issued or required to be issued exceeds 30 days in the aggregate, then the interest rate borne by the Notes shall be increased by one-quarter of one percent per annum following the date that such Notes Shelf Registration Statement ceases to be usable beyond the 30-day period permitted above, which rate shall be increased by an additional one-quarter of one percent per annum for each 90-day period that such additional interest continues to accrue; provided that the aggregate increase in such annual interest rate may in no event exceed 1.5%. Upon the Company declaring that the Notes Shelf Registration Statement is usable after the interest rate has been increased pursuant to the preceding sentence, the interest rate borne by the Notes shall be reduced to the original interest rate if the Company is otherwise in compliance with this paragraph; provided, however, that if after any such reduction in interest rate the Notes Shelf Registration Statement again ceases to be usable beyond the period permitted above, the interest rate shall again be increased and thereafter reduced pursuant to the foregoing provisions.]* The principal of and premium, if any, and interest on the Notes shall be payable, and the Notes shall be exchangeable and transferable, at the office or agency of the Company in The City of New York maintained for such purposes (which initially shall be the office of the Trustee located at 101 Barclay Street--21W, New York, NY 10286); provided, however, that, at the option of the Company, interest may be paid by check mailed to the address of the Person entitled thereto as such address appears in the Note Register. - -------- * Include only for Initial Notes. 41 30 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. Unless the certificate of authentication hereon has been duly executed by the Trustee or the Authenticating Agent referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: CITADEL BROADCASTING COMPANY By --------------------------------------- Name: Title: Attest: [SEAL] - --------------------------- Authorized Officer SECTION 205. FORM OF REVERSE OF NOTE. This Note is one of a duly authorized issue of securities of the Company designated as its 10-1/4% [Series B]* Senior Subordinated Notes due 2007 (the "Notes"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $101,000,000, which may be issued under an indenture (the "Indenture") dated as of July 1, 1997 between the Company, Citadel License, Inc., as guarantor (the "Subsidiary Notes Guarantor"), and The Bank of New York, as trustee (the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Subsidiary Notes Guarantor, the Trustee and the Holders of the Notes, and of the terms upon which the Notes are, and are to be, authenticated and delivered. This Note is subordinated to the prior payment in full of all Senior Debt in the manner and to the extent set forth in Article Fourteen of the Indenture. - -------- * Include only for the New Notes. 42 31 On or before each payment date, the Company shall deliver or cause to be delivered to the Trustee or the Paying Agent an amount in dollars sufficient to pay the amount due on such payment date. The Notes shall be redeemable (subject to contractual and other restrictions with respect thereto and to the legal availability of funds therefor) at the election of the Company, as a whole or from time to time in part, at any time on or after July 1, 2002 on not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of the principal amount thereof) set forth below, together with accrued and unpaid interest, if any, to the redemption date, if redeemed during the 12-month period beginning on July 1 of the years indicated below (subject to the right of Holders of record on the relevant record date to receive interest due on an Interest Payment Date):
REDEMPTION YEAR PRICE - ---- ----------------- 2002................................................... 105.125% 2003................................................... 104.100% 2004................................................... 103.075% 2005................................................... 102.050% 2006................................................... 101.025%
In addition, at any time and from time to time prior to July 1, 2000, the Company may at its option redeem Notes with the net proceeds of one or more Public Equity Offerings at a redemption price equal to 110.25% of the principal amount thereof, together with accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on an Interest Payment Date); provided that, immediately after giving effect to any such redemption, at least $75,000,000 aggregate principal amount of the Notes remains outstanding. Any such redemption must be made within 90 days of the related Public Equity Offering. If less than all the Notes are to be redeemed, the particular Notes to be redeemed shall be selected not more than 60 days prior to the redemption date by the Trustee by such method as the Trustee deems fair and appropriate. In the event of redemption or repurchase of this Note in part only, a new Note or Notes for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. Upon the occurrence of a Change of Control, the Company shall be required to make an offer to purchase on the Change of Control Purchase Date all outstanding Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of purchase, in accordance with the Indenture. 43 32 Holders of Notes that are subject to an offer to purchase shall receive a Change of Control Offer from the Company prior to any related Change of Control Purchase Date. Under certain circumstances, in the event the Net Cash Proceeds received by the Company from an Asset Sale, which proceeds are not used (i) towards the permanent reduction of amounts outstanding under the Credit Facility or to the repayment of other Senior Debt of the Company or a Subsidiary Notes Guarantor or (ii) to invest (or enter into one or more legally binding agreements 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 shall be used in the broadcast business or businesses reasonably related thereto, equal or exceed a specified amount, the Company shall be required to make an offer to all Holders to purchase the maximum principal amount of Notes, in an integral multiple of $1,000, that may be purchased out of such amount at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase, in accordance with the Indenture. Holders of Notes that are subject to any offer to purchase shall receive an Asset Sale Offer from the Company prior to any related Asset Sale Purchase Date. In the case of any redemption or repurchase of Notes, interest installments whose Stated Maturity is on or prior to the Redemption Date or Asset Sale Purchase Date, as the case may be, shall be payable to the Holders of such Notes, or one or more Predecessor Notes, of record at the close of business on the relevant Regular Record Date or Special Record Date, as the case may be, referred to on the face hereof. Notes (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date or Asset Sale Purchase Date, as the case may be. If an Event of Default shall occur and be continuing, the principal of all the Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Note and (b) certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Note. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the Subsidiary Notes Guarantors and the rights of the Holders under the Indenture and the Notes and the Subsidiary Notes Guarantees, if any, at any time by the Company, the Subsidiary Notes Guarantors and the Trustee with the consent of the Holders of a specified percentage in aggregate principal amount of the Notes at the time Outstanding. Additionally, the Indenture permits that with certain exceptions as therein provided, without notice to or consent of any Holder, the Company, any Subsidiary Notes Guarantor and the Trustee together may amend or supplement the Indenture, any Subsidiary Notes Guarantee or this Note (i) to evidence the 44 33 succession of another Person to the Company and the assumption by any such successor of the covenants of the Company in the Indenture and in the Notes; or (ii) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power conferred upon the Company in the Indenture; or (iii) to add additional Events of Default; or (iv) to provide for uncertificated Notes in addition to or in place of the certificated Notes; or (v) to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee; or (vi) to secure the Notes; or (vii) to cure any ambiguity, to correct or supplement any provision in the Indenture that may be defective or inconsistent with any other provision in the Indenture, or to make any other provisions with respect to matters or questions arising under the Indenture, provided that such actions pursuant to this clause do not adversely affect the interests of the Holders in any material respect; or (viii) to comply with any requirements of the Commission in order to effect and maintain the qualification of the Indenture under the Trust Indenture Act. The Indenture also contains provisions permitting the Holders of not less than a majority in aggregate principal amount of the Notes at the time Outstanding, on behalf of the Holders of all the Notes, to waive any past defaults by the Company with certain provisions of the Indenture, the Notes and the Subsidiary Notes Guarantees, if any, and certain past Defaults under the Indenture and the Notes and the Subsidiary Notes Guarantees, if any, and their consequences. Any such consent or waiver by or on behalf of the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company or the Subsidiary Notes Guarantors or any other obligor on the Notes (in the event any Subsidiary Notes Guarantor or other obligor is obligated to make payments in respect of the Notes), which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Note at the times, place, and rate, and in the coin or currency, herein prescribed, subject to the subordination provisions of the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registerable on the Note Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained for such purpose in The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees. The Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof (unless the Company otherwise directs). As 45 34 provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any registration of transfer or exchange or redemption of Notes, but the Company may require payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charge payable in connection therewith. The Notes are entitled to the benefit of a Subsidiary Notes Guarantee by each Subsidiary Notes Guarantor to the extent provided in each such Subsidiary Notes Guarantee. Prior to the time of due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Interest on this Note shall be computed on the basis of a 360-day year of twelve 30-day months. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. 46 35 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 said Note on the books of the Company with full power of substitution in the premises. Your Signature:_______________________________________________________________ (sign exactly as your name appears on the other side of this Note) Signature Guarantee:__________________________________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, 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 Exchange Act. 47 36 [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATED NOTES] In connection with any transfer of this Note occurring prior to the date that is the earlier of the date of an effective Registration Statement or July 3, 1999, 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 that comply with the conditions of transfer set forth in this Note and the Indenture. If none of the foregoing boxes is checked, the Trustee or other Note Registrar 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 307 of the Indenture shall have been satisfied. Date: ____________________ ________________________________ NOTICE: The signature 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:_________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, 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 Exchange Act. TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. 48 37 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 Company 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. 49 38 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by the Company pursuant to Section 1011 of the Indenture, check the Box: [ ]. If you wish to have a portion of this Note purchased by the Company pursuant to Section 1012 of the Indenture, state the amount (in original principal amount) below: $_____________________. Date: ____________________ Your Signature: ______________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: _________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, 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 Exchange Act. SECTION 206. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The Trustee's certificate of authentication shall be in substantially the following form: TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: ____________________ This is one of the Notes referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By______________________________ Authorized Signatory 50 39 ARTICLE THREE THE NOTES SECTION 301. TITLE AND TERMS. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is limited to $101,000,000, except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section 303, 304, 305, 306, 307, 310, 906, 1011, 1012 or 1108 or pursuant to a Notes Exchange Offer. The Initial Notes shall be known and designated as the "10- 1/4% Senior Subordinated Notes due 2007" and the New Notes shall be known and designated as the "10-1/4% Series B Senior Subordinated Notes due 2007," in each case, of the Company. The Stated Maturity of the Notes shall be July 1, 2007, and they shall bear interest at the rate of 10-1/4% per annum from July 3, 1997, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, payable on January 1, 1998 and semiannually thereafter on July 1 and January 1 in each year, until the principal thereof is paid in full and to the Person in whose name the Note (or any predecessor Note) is registered at the close of business on the June 15 or December 15 next preceding such Interest Payment Date. Interest shall be computed on the basis of a 360-day year comprised of twelve 30-day months, until the principal thereof is paid or duly provided for. Interest on any overdue principal, interest (to the extent lawful) or premium, if any, shall be payable on demand. The principal of and premium, if any, and interest on the Notes shall be payable, and the Notes shall be exchangeable and transferable, at the office or agency of the Company in The City of New York maintained for such purposes (which initially shall be the office of the Trustee located at 101 Barclay Street--21W, New York, NY 10286); provided, however, that, at the option of the Company, interest may be paid by check mailed to the address of the Person entitled thereto as such address appears in the Note Register. Holders shall have the right to require the Company to purchase their Notes, in whole or in part, in the event of a Change of Control pursuant to Section 1011. The Notes shall be subject to repurchase by the Company pursuant to an Asset Sale Offer as provided in Section 1012. The Notes shall be redeemable as provided in Article Eleven and in the Notes. 51 40 SECTION 302. DENOMINATIONS. Except at the direction of the Company, the Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof; PROVIDED, however, the Company shall be deemed to have so directed in respect of any Notes issued initially hereunder in integral multiples of other than $1,000 and any Notes issued upon exchange or transfer therefor. SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Notes shall be executed on behalf of the Company by its Chairman, its President or a Vice President, under its corporate seal reproduced thereon and attested by its Secretary or an Assistant Secretary. The signature of any of these officers on the Notes may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Notes. Notes bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company 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. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Initial Notes executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Notes, directing the Trustee to authenticate the Notes and certifying that all conditions precedent to the issuance of Notes contained herein have been fully complied with, and the Trustee in accordance with such Company Order shall authenticate and deliver such Initial Notes. On Company Order, the Trustee shall authenticate for original issue New Notes in an aggregate principal amount not to exceed $101,000,000; provided that such New Notes shall be issuable only upon the valid surrender for cancellation of Initial Notes of a like aggregate principal amount in accordance with a Notes Exchange Offer pursuant to the Notes Registration Rights Agreement. In each case, the Trustee shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of the Company that it may reasonably request in connection with such authentication of Notes. Such order shall specify the amount of Notes to be authenticated and the date on which the original issue of Initial Notes or New Notes is to be authenticated. Each Note shall be dated the date of its authentication. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Note shall be conclusive evidence, and 52 41 the only evidence, that such Note has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. In case the Company or any Subsidiary Notes Guarantor, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company or such Subsidiary Notes Guarantor shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article Eight, any of the Notes authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Notes executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Notes surrendered for such exchange and of like principal amount; and the Trustee, upon Company Request of the successor Person, shall authenticate and deliver Notes as specified in such request for the purpose of such exchange. If Notes shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section 303 in exchange or substitution for or upon registration of transfer of any Notes, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Notes at the time Outstanding for Notes authenticated and delivered in such new name. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes on behalf of the Trustee. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Note Registrar or Paying Agent to deal with the Company and its Affiliates. The Trustee shall have the right to decline to authenticate and deliver any Notes under this Section if the Trustee, being advised by counsel, reasonably determines that such action may not lawfully be taken. SECTION 304. TEMPORARY NOTES. Pending the preparation of definitive Notes, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Notes may determine, as conclusively evidenced by their execution of such Notes. 53 42 If temporary Notes are issued, the Company shall cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for such purpose pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes. SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes referred to as the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Note Register shall be in written form or any other form capable of being converted into written form within a reasonable time. At all reasonable times, the Note Register shall be open to inspection by the Trustee. The Trustee is hereby initially appointed as security registrar (the Trustee in such capacity, together with any successor of the Trustee in such capacity, the "Note Registrar") for the purpose of registering Notes and transfers of Notes as herein provided. Upon surrender for registration of transfer of any Note at the office or agency of the Company designated pursuant to Section 1002, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denomination or denominations of a like aggregate principal amount. Furthermore, any Holder of the Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interest in such Global Note may be effected only through a book-entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry. At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination and of a 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 (including an exchange of Initial Notes for New Notes), the Company shall execute, and the Trustee shall authenticate and deliver, the Notes which the Holder making the exchange is entitled to receive; provided that no exchange of Initial Notes for New Notes shall occur until a Notes Exchange Offer Registration Statement shall have been declared effective by the Commission, the Trustee shall have received an Officers' Certificate confirming that the Notes 54 43 Exchange Offer Registration Statement has been declared effective by the Commission and the Initial Notes to be exchanged for the New Notes shall be cancelled by the Trustee. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Note Registrar) be duly endorsed, or be accompanied by a written instrument of transfer, in form satisfactory to the Company and the Note Registrar, 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 or redemption of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 304, 906, 1011, 1012 or 1108, not involving any transfer. SECTION 306. BOOK-ENTRY PROVISIONS FOR THE GLOBAL NOTE. (a) The Global Note initially shall (i) be registered in the name of Cede & Co. as nominee for the Depositary (the "Global Note Holder"), (ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 202. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Notes held on their behalf by the Depositary, or the Trustee as its custodian, or under the Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) Transfers of the Global Note shall be limited to transfers of such Global Note in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in the Global Note may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 307. Beneficial owners may obtain Certificated Notes in exchange for their beneficial interests in the Global Note upon request in accordance with the Depositary's and the Note Registrar's procedures. In addition, Certificated Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in the Global Note if (i) the Company notifies the Trustee in writing that the Depositary 55 44 is unwilling or unable to act as a depositary for the Global Note and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to change the issuance of Notes into the form of Certificated Securities under this Indenture. (c) In connection with any transfer of a portion of the beneficial interest in the Global Note pursuant to subsection (b) of this Section to beneficial owners, the Note Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Certificated Notes of like tenor and amount to each Person that the Global Note Holder and the Depositary identify as being the beneficial owner of the related Notes. (d) In connection with the transfer of the entire Global Note to beneficial owners pursuant to subsection (b) of this Section, the Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Global Note Holder and the Depositary in exchange for its beneficial interest in the Global Note, an equal aggregate principal amount of Certificated Notes of authorized denominations. (e) Any Certificated Notes delivered in exchange for an interest in the Global Note pursuant to subsection (c) or subsection (d) of this Section shall, except as otherwise provided by paragraph (a)(i) of Section 307, bear the applicable legend regarding transfer restrictions applicable to the Certificated Note set forth in Section 202. (f) The registered holder of the Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 307. SPECIAL TRANSFER PROVISIONS. Unless and until (i) an Initial Note is sold under an effective Notes Shelf Registration Statement, or (ii) an Initial Note is exchanged for a New Note in connection with an effective Notes Exchange Offer Registration Statement, in each case pursuant to the Notes Registration Rights Agreement, the following provisions shall apply: (a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Note to any institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) which is not a QIB: 56 45 (i) The Note Registrar shall register the transfer of any Initial Note, whether or not such Initial Note bears the Private Placement Legend, if (x) the requested transfer is at least two years after the original issue date of the Initial Note or (y) the proposed transferee has delivered to the Note Registrar a certificate substantially in the form set forth in Section 308. (ii) If the proposed transferor is an Agent Member holding a beneficial interest in the Global Note, upon receipt by the Note Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Note Registrar's procedures therefor, the Note Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Certificated Notes of like tenor and amount. (b) TRANSFERS TO QIBS. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Note to a QIB: (i) If the Note to be transferred consists of Certificated Notes, the Note Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Initial Note stating, or has otherwise advised the Company and the Note Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Initial Note stating, or has otherwise advised the Company and the Note Registrar in writing, that it is purchasing the Initial Note for its own account or an account with respect to which it exercises sole investment discretion and that it, or the Person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, 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 Company as it 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 its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) If the proposed transferee is an Agent Member, and the Initial Note to be transferred consists of Certificated Notes, upon receipt by the Note Registrar of instructions given in accordance with the Depositary's and the Note Registrar's procedures therefor, the Note Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Note in an 57 46 amount equal to the principal amount of the Certificated Notes to be transferred, and the Trustee shall cancel the Certificated Note so transferred. (c) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Note Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Note Registrar shall deliver only Notes that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (a)(i) of this Section 307 exist or (ii) there is delivered to the Note Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (d) GENERAL. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it shall transfer such Note only as provided in this Indenture. The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. The Note Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 306 or this Section 307. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Note Registrar. 58 47 SECTION 308. FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. Citadel Broadcasting Company 140 South Ash Avenue Tempe, Arizona 85281 Prudential Securities Incorporated NationsBanc Capital Markets, Inc. BancBoston Securities Inc. c/o Prudential Securities Incorporated One New York Plaza New York, New York 10292 Ladies and Gentlemen: In connection with our proposed purchase of $ aggregate principal amount of 10-1/4% [Series B]* Senior Subordinated Notes due 2007 (the "Securities") of Citadel Broadcasting Company (the "Company"), we confirm that: 1. We have received a copy of the Offering Memorandum, dated June 30, 1997, relating to the Securities and such other information as we deem necessary in order to make our investment decision. 2. We understand that the Securities have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any affiliate or the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Securities are eligible for resale pursuant to Rule 144A under the Securities Act, to a Person we reasonably believe is a Qualified Institutional Buyer under Rule 144A that purchases for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) to an institutional "accredited investor" (as defined in subparagraph (a)(1), (2), (3) or (7) of Rule 501 of Regulation D under the Securities Act) that is purchasing for his own account or for the account of such an institutional "accredited - -------- * Include only for New Notes. 59 48 investor" or (e) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account be at all times within our or their control and to compliance with any applicable state securities laws. The foregoing restrictions on sale shall not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (d) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the trustee under the indenture relating to the Securities (the "Trustee") which shall provide, among other things, that the transferee is an institutional "accredited investor" and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to any offer, sale or other transfer of the Securities prior to the Resale Restriction Termination Date pursuant to clause (c), (d) or (e) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Trustee. 3. We are an institutional "accredited investor" (as defined above) purchasing for our own account or for the account of an institutional "accredited investor" for which we exercise sole investment discretion and we are acquiring the Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any investor accounts for which we are acting are each able to bear the economic risk of our or its investments for an indefinite period. 4. You and the Trustee are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy thereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, (Name of Purchaser) By:________________________ Name: _____________________ Title:_____________________ Date:______________________ 60 49 Upon transfer, the Securities should be registered in the name of the new beneficial owner as follows: Name:_________________________________________________________________ Address: _____________________________________________________________ Taxpayer ID Number:___________________________________________________ SECTION 309. [INTENTIONALLY OMITTED] SECTION 310. MUTILATED, DESTROYED, LOST AND STOLEN NOTES. If (i) any mutilated Note is surrendered to the Trustee, or (ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Company and the Trustee such security or indemnity, in each case, as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Note has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, 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 Company in its discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any new Note under this Section, the Company 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 (including the fees and expenses of the Trustee) in connection therewith. Every new Note issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, any Subsidiary Notes Guarantor and any other obligor upon the Notes, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. 61 50 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. SECTION 311. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; provided, however, that each installment of interest may at the Company's option be paid by mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 312, to the address of such Person as it appears in the Note Register. Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date shall forthwith cease to be payable to the Holder on the Regular Record Date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Notes (such defaulted interest and interest thereon herein collectively called "Defaulted Interest") shall be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date (not less than 30 days after such notice) of the proposed payment (the "Special Record Date"), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given in the manner provided for in Section 106, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so given, 62 51 such Defaulted Interest shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note. SECTION 312. PERSONS DEEMED OWNERS. Prior to the due presentment of a Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Persons in whose names, including the Global Note, such Notes are registered as the owners of such Note for the purpose of receiving payment of principal of (and premium, if any) and (subject to Sections 305 and 311) interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Company, any Subsidiary Notes Guarantor, the Trustee nor any agent of the Company, any Subsidiary Notes Guarantor or the Trustee shall be affected by notice to the contrary. SECTION 313. CANCELLATION. All Notes surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. If the Company shall acquire any of the Notes other than as set forth in the preceding sentence, the acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 313. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Notes held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures unless by Company Order the Company shall direct that cancelled Notes be returned to it. 63 52 SECTION 314. COMPUTATION OF INTEREST. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 315. CUSIP NUMBERS. The Company in issuing Notes may use "CUSIP" numbers (if then generally in use) in addition to serial numbers; if so, the Trustee shall use such "CUSIP" numbers in addition to serial numbers in notices of redemption and repurchase as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such CUSIP numbers either as printed on the Notes or as contained in any notice of a redemption or repurchase and that reliance may be placed only on the serial or other identification numbers printed on the Notes, and any such redemption or repurchase shall not be affected by any defect in or omission of such CUSIP numbers. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall upon request by the Company cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Notes expressly provided for herein or pursuant hereto) and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture when: (1) either (a) all the Notes theretofore authenticated and delivered (other than (i) Notes which have been lost, stolen or destroyed and which have been replaced or paid as provided in Section 310 and (ii) Notes for whose payment money has theretofore been deposited in trust with the Trustee or any Paying Agent or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation, or (b) all such Notes not theretofore delivered to the Trustee for cancellation (i) have become due and payable or 64 53 (ii) shall become due and payable at their Stated Maturity within one year or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose an amount sufficient to pay and discharge the entire Debt on such Notes not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Notes which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company or the Subsidiary Notes Guarantors have paid or caused to be paid all sums payable hereunder by the Company or the Subsidiary Notes Guarantors; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607 and, if money shall have been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 401 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and any Subsidiary Notes Guarantor's obligations 65 54 under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 401; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE FIVE REMEDIES SECTION 501. EVENTS OF DEFAULT. "Event of Default", wherever used herein, means any one of the following 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 government body): (a) 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; (b) default in the payment of the principal of (or premium, if any, on) any Note when due; (c) failure to perform or comply with Article Eight; (d) default in the performance, or breach, of any covenant or agreement of the Company or any Subsidiary Notes Guarantor contained in this Indenture or any Subsidiary Notes Guarantee (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere herein), and continuance of such default or breach for a period of 60 days after written notice has been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes then outstanding; (e) (i) the occurrence of an event of default under any mortgage, bond, indenture, loan agreement or other document evidencing an issue of Debt of the Company or any Significant Subsidiary, which issue has an aggregate outstanding principal amount of not less than $5,000,000, and such default has resulted in such Debt becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (ii) a default in any payment when due at final maturity of any such Debt; 66 55 (f) failure by the Company or any of its Restricted Subsidiaries to pay one or more final judgments the uninsured portion of which exceeds in the aggregate $5,000,000, which judgment or judgments are not paid, discharged or stayed for a period of 60 days; (g) any Subsidiary Notes Guarantee ceases to be in full force and effect or is declared null and void or any Subsidiary Notes Guarantor denies that it has any further liability under any Subsidiary Notes Guarantee, or gives notice to such effect (other than by reason of the termination of this Indenture or the release of any Subsidiary Notes Guarantee in accordance with this Indenture), and such condition has continued for a period of 30 days after written notice of such failure requiring the Subsidiary Notes Guarantor and the Company to remedy the same has been given (x) to the Company by the Trustee or (y) to the Company and the Trustee by the Holders of 25% in aggregate principal amount of the Notes then outstanding; (h) a court having jurisdiction in the premises enters a decree or order for (i) relief in respect of the Company or any Significant Subsidiary in an involuntary case under any applicable Bankruptcy Law now or hereafter in effect, (ii) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (iii) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (i) the Company or any Significant Subsidiary (i) commences a voluntary case under any applicable Bankruptcy Law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets 1of the Company or any Significant Subsidiary or (iii) effects any general assignment for the benefit of creditors. SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default (other than as specified in Section 501(h) or (i)) occurs and is continuing, the Trustee or the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding may, and the Trustee at the request of such Holders shall, declare the principal of all of the outstanding Notes immediately due and payable, by a notice in writing to the Company (and to the Trustee if given by the Holders) and, if the Credit Facility is in effect, to the Credit Facility Agent and, upon any such declaration, such principal shall become due and payable immediately. If an Event of Default specified in Section 501(h) or (i) above 67 56 occurs and is continuing, then such principal shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder of Notes. At any time after a declaration of acceleration under this Indenture, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of a majority in aggregate principal amount of the outstanding Notes, by written notice to the Company and the Trustee, may rescind such declaration and its consequences if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Notes, (B) all unpaid principal of (and premium, if any, on) any outstanding Notes that has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Notes, (C) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue principal amount at the rate borne by the Notes, and (D) all sums paid or advanced by the Trustee under this Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (ii) all Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on) or interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company and each of the Subsidiary Notes Guarantors covenants that if (a) default is made in the payment of any interest on any Note when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Note at the Stated Maturity or other maturity thereof, 68 57 the Company and the Subsidiary Notes Guarantors shall, upon demand of the Trustee, pay to the Trustee for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal (and premium, if any) and interest, with interest upon the overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest, at the rate borne by the Notes; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and all other amounts due to the Trustee under Section 607. If the Company or any Subsidiary Notes Guarantor, as the case may be, fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company, such Subsidiary Notes Guarantor or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company, such Subsidiary Notes Guarantor or any other obligor upon the Notes, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy subject, however, to Section 513. No recovery of any such judgment upon any property of the Company or any Subsidiary Notes Guarantor shall affect or impair any rights, powers or remedies of the Trustee or the Holders. SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any Subsidiary Notes Guarantor, upon the Notes or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Notes, to take such other actions (including participating as a member, voting or otherwise, of any official committee of creditors appointed in such matter) and to file such other papers or documents as may 69 58 be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of such Holders, vote for the election of a trustee in bankruptcy or other similar official. SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES. All rights of action and claims under this Indenture, the Notes or the Subsidiary Notes Guarantees may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered. SECTION 506. APPLICATION OF MONEY COLLECTED. Subject to Article Fourteen, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; 70 59 SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal (and premium, if any) and interest, respectively; and THIRD: The balance, if any, to the Person or Persons entitled thereto, including the Company or any other obligor on the Notes, as their interests may appear or as a court of competent jurisdiction may direct, provided that all sums due and owing to the Holders and the Trustee have been paid in full as required by this Indenture. SECTION 507. LIMITATION ON SUITS. No Holder of any Notes shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 30 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Holders of a majority or more in principal amount of the Outstanding Notes; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture, any Note or any Subsidiary Notes Guarantee to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, any Note or any Subsidiary Notes Guarantee, except in the manner herein provided and for the equal and ratable benefit of all the Holders. 71 60 SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST. Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment, as provided herein (including, if applicable, Article Eleven) and in such Note of the principal of (and premium, if any) and (subject to Section 311) interest on such Note on the respective Stated Maturities expressed in such Note (or, in the case of redemption or repurchase, on the Redemption Date or repurchase) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Subsidiary Notes Guarantee and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, any Subsidiary Notes Guarantor, any other obligor on the Notes, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 310, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. 72 61 SECTION 512. CONTROL BY HOLDERS. The Holders of not less than a majority in principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture or any Subsidiary Notes Guarantee; (2) the Trustee need not take any action which might involve it in personal liability or be unjustly prejudicial to the Holders not consenting; and (3) subject to the provisions of Section 315 of the Trust Indenture Act, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. WAIVER OF PAST DEFAULTS. The Holders of not less than a majority in aggregate principal amount of the outstanding Notes may, on behalf of the Holders of all of the Notes, waive any past defaults under this Indenture, except a default in the payment of the principal of (and premium, if any) or interest on any Note, or in respect of a covenant or provision that under this Indenture cannot be modified or amended without the consent of the Holder of each Note outstanding. 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 Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. SECTION 514. WAIVER OF STAY OR EXTENSION LAWS. Each of the Company and the Subsidiary Notes Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company, any Subsidiary Notes Guarantor or any such obligor from paying all or any portion of the principal of, premium, if any, or interest on the Notes contemplated herein or in the Notes or which may affect the covenants or the performance of this Indenture; and each of the Company, any Subsidiary Notes Guarantor and any such obligor (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the 73 62 Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. SECTION 515. UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Note by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Notes, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Note on or after the respective Stated Maturities expressed in such Note (or, in the case of redemption, on or after the Redemption Date). ARTICLE SIX THE TRUSTEE SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES. (a) Except during the continuance of an Event of Default, (1) the Trustee shall perform only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereby are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (b) In case a Default or an Event of Default shall have occurred and be continuing of which a Responsible Officer of the Trustee has actual knowledge or of which written notice of such Default or Event of Default shall have been given to the Trustee by the Company, any other obligor of the Notes or by any Holder, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill 74 63 in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, EXCEPT that (1) this paragraph (c) shall not be construed to limit the effect of paragraph (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in aggregate principal amount of the Outstanding Notes relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. NOTICE OF DEFAULTS. If a Default or an Event of Default occurs and is continuing and is known to the Trustee, the Trustee shall mail to each Holder of the Notes notice of the Default or Event of Default within 90 days after the occurrence thereof. Except in the case of a Default or an Event of Default in payment of principal of (and premium, if any, on) or interest on any Notes, the Trustee may withhold the notice to the Holders if a committee of its trust officers in good faith determines that withholding such notice is in the interests of the Holders. 75 64 SECTION 603. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of TIA Sections 315(a) through 315(d): (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate; (4) the Trustee may consult with counsel of its selection and any written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company; (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee 76 65 shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (8) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; and the Trustee shall not be deemed to have notice of any Default or Event of Default, except in the case of an event of default involving failures by the Company to pay principal, premium, if any, or interest on the Notes, unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Company, the Notes or this Indenture. SECTION 604. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES. The recitals contained herein and in the Notes, except for the Trustee's certificates of authentication, shall be taken as the statements of the Company and the Subsidiary Notes Guarantors, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes or of the Subsidiary Notes Guarantees, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. The Trustee shall not be accountable for the use or application by the Company of Notes or the proceeds thereof. SECTION 605. MAY HOLD NOTES. The Trustee, any Paying Agent, any Note Registrar, any Authenticating Agent or any other agent of the Company or of the Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Note Registrar, Authenticating Agent or such other agent. The Trustee is permitted to engage in other transactions; provided, however, that if it acquires any conflicting interest it must eliminate such conflict or resign. SECTION 606. MONEY HELD IN TRUST. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust hereunder for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company or any Subsidiary Notes Guarantor. 77 66 SECTION 607. COMPENSATION AND REIMBURSEMENT. The Company agrees: (1) to pay to the Trustee from time to time such compensation as shall be agreed to in writing between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel and costs and expenses of collection), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify each of the Trustee or any predecessor Trustee (and their respective directors, officers, employees and agents) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense, including taxes (other than taxes based on the income of the Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Company under this Section to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. As security for the performance of such obligations of the Company, the Trustee shall have a claim prior to the Holders of the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any) or interest on particular Notes. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(h) or (i), the expenses (including the reasonable charges and expenses of its counsel) of and the compensation for such services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the termination of this Indenture. 78 67 SECTION 608. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall be at all times a Trustee hereunder which shall be eligible to act as Trustee under TIA Section 310(a)(1) and which shall have an office in The City of New York, and shall have a combined capital and surplus of at least $100,000,000. If the Trustee does not have an office in The City of New York, the Trustee may appoint an agent in The City of New York reasonably acceptable to the Company to conduct any activities which the Trustee may be required under this Indenture to conduct in The City of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 608, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 608, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 609. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of this Section. (b) The Trustee may resign at any time by giving written notice thereof to the Company. Upon receiving such notice of resignation, the Company shall promptly appoint a successor Trustee by written instrument executed by authority of the Board of Directors, a copy of which shall be delivered to the resigning Trustee and a copy to the successor Trustee. If an instrument of acceptance required by this Section shall not have been delivered to the resigning Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of not less than a majority in principal amount of the Outstanding Notes, delivered to the Trustee and to the Company. Upon such removal, the Company shall promptly appoint a successor Trustee by written instrument executed by authority of the Board of Directors of the Company, a copy of which shall be delivered to the removed Trustee and a copy to the successor Trustee. If an instrument of acceptance required by this Section shall not have been delivered to the removed Trustee within 30 days after the giving of such notice of removal, the removed Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. 79 68 (d) If at any time: (1) the Trustee shall fail to comply with the provisions of TIA Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note for at least six months, or (2) the Trustee shall cease to be eligible under Section 608 and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a Custodian of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company, by a Board Resolution, may remove the Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Notes delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to the Holders of Notes in the manner provided for in Section 106. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. 80 69 SECTION 610. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 611. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes. In case at that time any of the Notes shall not have been authenticated, any successor Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor Trustee. In all such cases such certificates shall have the full force and effect which this Indenture provides for the certificate of authentication of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. 81 70 ARTICLE SEVEN HOLDERS LISTS AND REPORTS BY TRUSTEE SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES. The Company shall furnish or cause to be furnished to the Trustee (a) semiannually, not more than 10 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date; and (b) at such other times as the Trustee may reasonably request in writing, within 30 days after receipt by the Company of any such request, a list of similar form and content to that in Subsection (a) hereof as of a date not more than 15 days prior to the time such list is furnished; provided, however, that if and so long as the Trustee shall be the Note Registrar, no such list need be furnished. SECTION 702. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS. Every Holder of Notes, by receiving and holding the same, agrees with the Company and the Trustee that none of the Company or the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b). SECTION 703. REPORTS BY TRUSTEE. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Notes, the Trustee shall transmit to the Holders, in the manner and to the extent provided in TIA Section 313(c), a brief report dated as of such May 15 if required by TIA Section 313(a). 82 71 ARTICLE EIGHT MERGER, CONSOLIDATION, OR SALE OF ASSETS SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Company shall not consolidate with or merge with or into any other Person or, directly or indirectly, convey, transfer or lease its properties and assets substantially as an entirety to any Person or Persons, unless: (a) Either (i) the Company is the surviving corporation or (ii) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person that acquires by sale, assignment, transfer, lease or other disposition the properties and assets of the Company substantially as an entirety (the "Surviving Entity") (A) is a corporation, partnership or trust organized and validly existing under the laws of the United States, any state thereof or the District of Columbia and (B) expressly assumes, by a supplemental indenture in form satisfactory to the Trustee, all of the Company's obligations under this Indenture and the Notes. (b) Immediately after giving effect to such transaction and treating any obligation of the Company or a Restricted Subsidiary in connection with or as a result of such transaction as having been incurred at the time of such transaction, no Default or Event of Default shall have occurred and be continuing. (c) Immediately after giving effect to such transaction on a pro forma basis, (on the assumption that the transaction occurred at the beginning of the most recently ended four full fiscal quarter period for which internal financial statements are available), the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture) could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of Section 1009. (d) If the Company is not the continuing obligor under this Indenture, each Subsidiary Notes Guarantor, unless it is the other party to the transaction described above, has by supplemental indenture confirmed that its Subsidiary Notes Guarantee applies to the Surviving Entity's obligations under this Indenture and the Notes. (e) If any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of Section 1021 are complied with. (f) The Company delivers, or causes to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an 83 72 Opinion of Counsel, each stating that such transaction complies with the requirements of this Indenture. SECTION 802. SUCCESSOR SUBSTITUTED. In the event of any transaction described in and complying with the conditions listed in Section 801 in which the Company is not the continuing obligor under this Indenture, the Surviving Entity shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, and thereafter the Company shall, except in the case of a lease, be discharged from all its obligations and covenants under this Indenture and the Notes. ARTICLE NINE SUPPLEMENTS AND AMENDMENTS TO INDENTURE SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company in this Indenture and in the Notes; or (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (3) to add additional Events of Default; or (4) to provide for uncertificated Notes in addition to or in place of the Certificated Notes; or (5) to evidence and provide for the acceptance of appointment under this Indenture by a successor Trustee; or (6) to secure the Notes; or 84 73 (7) to cure any ambiguity, to correct or supplement any provision in this Indenture that may be defective or inconsistent with any other provision in this Indenture, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such actions pursuant to this clause do not adversely affect the interests of the Holders in any material respect; or (8) to comply with any requirements of the Commission in order to effect and maintain the qualification of this Indenture under the Trust Indenture Act. SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the consent of the Holders of at least a majority in principal amount of the Outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes), by Act of such Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (a) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the place of payment where, or change the coin or currency in which, any Note or any premium or 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); (b) reduce the percentage in principal amount of Outstanding Notes, the consent of whose Holders is required for any amendment or for any waiver of compliance with certain provisions of, or certain defaults and their consequences provided for under, this Indenture; (c) modify any of the provisions of this Indenture relating to the subordination of the Notes or the Subsidiary Notes Guarantees in a manner materially adverse to the Holders; or (d) waive a default in the payment of principal of, or premium, if any, or interest on the Notes. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record 85 74 date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustees own rights, duties or immunities under this Indenture or otherwise. SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby (except as provided in Section 902). SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to the Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Notes. 86 75 SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Note affected, in the manner provided for in Section 106, setting forth in general terms the substance of such supplemental indenture. SECTION 908. EFFECT ON SENIOR DEBT. No supplemental indenture shall adversely affect the rights of any holders of Senior Debt under Article Fourteen unless the requisite holders of each issue of Senior Debt affected thereby shall have consented to such supplemental indenture. ARTICLE TEN COVENANTS SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. The Company covenants and agrees for the benefit of the Holders that it shall duly and punctually pay the principal of (and premium, if any) and interest on the Notes in accordance with the terms of the Notes and this Indenture. SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in The City of New York an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Corporate Trust Office of the Trustee shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company shall give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such 87 76 designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. SECTION 1003. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST. If the Company shall at any time act as its own Paying Agent, it shall, on or before each due date of the principal of (or premium, if any) or interest on any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal of (or premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and shall promptly notify the Trustee of its action or failure to so act. Whenever the Company shall have one or more Paying Agents for the Notes, it shall, on or before each due date of the principal of (or premium, if any) or interest on any Notes, deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of such action or any failure to so act. The Company shall cause each Paying Agent (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent shall: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal (and premium, if any) or interest; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying 88 77 Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (or premium, if any) or interest on any Note and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment to the Company, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining shall be repaid to the Company. SECTION 1004. CORPORATE EXISTENCE. Subject to Article Eight, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence and that of each Restricted Subsidiary and the corporate rights (charter and statutory) licenses and franchises of the Company and each Restricted Subsidiary; provided, however, that the Company shall not be required to preserve any such existence (except the Company) right, license or franchise if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and each of its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not, and shall not be, disadvantageous in any material respect to the Holders. SECTION 1005. PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon the Company or any Restricted Subsidiary or upon the income, profits or property of the Company or any Restricted Subsidiary and (b) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a material liability or lien upon the property of the Company or any Restricted Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, 89 78 assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of the Company), are being maintained in accordance with GAAP. SECTION 1006. MAINTENANCE OF PROPERTIES. The Company shall cause all material properties owned by the Company 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 normal condition, repair and working order and shall 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 conducted at all times; provided, however, that nothing in this Section shall prevent the Company or any of its 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 its business or the business of any Restricted Subsidiary and not adverse in any material respect to the Holders. SECTION 1007. INSURANCE. To the extent available at commercially reasonable rates, the Company shall maintain, and shall cause each of its Restricted Subsidiaries to maintain, insurance with responsible carriers against such risks and in such amounts, and with such deductibles, retentions, self-insured amounts and co-insurance provisions, as are customarily carried by similar businesses, of similar size, including professional and general liability, property and casualty loss, workers' compensation and interruption of business insurance. SECTION 1008. COMPLIANCE WITH LAWS. The Company shall comply, and shall cause each of its Restricted Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental regulatory authority, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as would not in the aggregate have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries, taken as a whole. 90 79 SECTION 1009. LIMITATION ON DEBT. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Debt (including Acquired Debt and the issuance of Disqualified Stock), except that the Company or a Subsidiary Notes Guarantor may incur Debt or issue Disqualified Stock if, at the time of such event, the Consolidated Cash Flow Ratio would have been less than 7.0 to 1.0. In making the foregoing calculation, pro forma effect shall be given to: (i) the incurrence of such Debt and (if applicable) the application of the net proceeds therefrom, including to refinance other Debt, as if such Debt had been incurred and the application of proceeds therefrom occurred on the first day of the four-fiscal quarter period used to calculate the Consolidated Cash Flow Ratio, (ii) the incurrence, repayment or retirement of any other Debt by the Company or any of its Restricted Subsidiaries since the first day of such four-quarter period as if such Debt was incurred, repaid or retired at the beginning of such four-quarter period and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or any of its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period. In making a computation under the foregoing clause (i) or (ii), the amount of Debt under a revolving credit facility shall be computed based upon the average daily balance of such Debt during such four-quarter period. (b) Notwithstanding the foregoing, the Company may, and may, to the extent expressly permitted below, permit any of its Restricted Subsidiaries to, incur any of the following Debt ("Permitted Debt"): (i) Debt of the Company or any Subsidiary Notes Guarantor under the Credit Facility (including guarantees thereof by Subsidiaries) in an aggregate principal amount at any one time outstanding not to exceed $110,000,000 less any amounts applied to the permanent reduction of such Debt pursuant to Section 1012. (ii) Debt of the Company or any of its Restricted Subsidiaries outstanding on the Closing Date, other than Debt described under clause (i) above. (iii) Debt owed by the Company to any of its Restricted Subsidiaries or owed by any Subsidiary to the Company or a Restricted Subsidiary (provided that such Debt is Subordinated Debt and is held by the Company or such Restricted Subsidiary) or owed to the Company or a Subsidiary Notes Guarantor by a Restricted Subsidiary that is not a Subsidiary Notes Guarantor, provided the incurrence of such Debt did not violate the provisions of Section 1010. 91 80 (iv) Debt represented by the Notes and the Subsidiary Notes Guarantees. (v) Hedging Obligations of the Company or any of its Restricted Subsidiaries incurred in the ordinary course of business. (vi) Capitalized Lease Obligations of the Company or any of its Restricted Subsidiaries in an aggregate amount not exceeding $3,000,000 at any one time outstanding. (vii) Debt under purchase money mortgages or secured by purchase money security interests so long as (x) such Debt is not secured by any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets so acquired and (y) such Debt is created within 60 days of the acquisition of the related property; provided that the aggregate principal amount of Debt under this clause (vii) does not exceed $2,000,000 at any one time outstanding. (viii) Debt of the Company or any Subsidiary Notes Guarantor, not permitted by any other clause of this definition, in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding. (ix) Debt of the Company or any of its Restricted Subsidiaries consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock. (x) Acquired Debt of a Person, other than Debt incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or the acquisition of assets from such Person, as the case may be, provided that the Company on a pro forma basis could incur $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of this Section. (xi) Any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by the Company or any Restricted Subsidiary of any outstanding Debt of the Company or such Restricted Subsidiary, other than Debt incurred pursuant to clause (i), (v), (vi), (vii), (viii) or (ix) of this Section, including any successive refinancings thereof, so long as (A) any such new Debt is in a principal amount that does not exceed the principal amount so refinanced, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Debt refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing, (B) in the case of any refinancing of Subordinated Debt, such new Debt is made subordinate to the 92 81 Notes at least to the same extent as the Debt being refinanced, (C) in the case of any refinancing of the Notes or any Pari Passu Debt, such Debt is Pari Passu Debt or Subordinated Debt and (D) such refinancing Debt does not have a Weighted Average Life less than the Weighted Average Life of the Debt being refinanced and does not have a final scheduled maturity earlier than the final scheduled maturity, or permit redemption at the option of the holder earlier than the earliest date of redemption at the option of the holder, of the Debt being refinanced. SECTION 1010. LIMITATION ON RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, take any of the following actions: (a) declare or pay any dividend on, or make any distribution to holders of, any shares of the Capital Stock of the Company or any of its Restricted Subsidiaries other than (i) dividends or distributions payable solely in Qualified Equity Interests of the issuer of such shares of Capital Stock, (ii) dividends or distributions by a Restricted Subsidiary payable to the Company or another Restricted Subsidiary or (iii) pro rata dividends or distributions on common stock of a Restricted Subsidiary held by minority stockholders, provided that such dividends do not in the aggregate exceed the minority stockholders' pro rata share of such Restricted Subsidiary's net income from the first day of the Company's fiscal quarter during which the Closing Date occurs; (b) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of Capital Stock (or any options, warrants or other rights to acquire shares of Capital Stock) of (i) the Company or any of its Unrestricted Subsidiaries or (ii) any Restricted Subsidiary that are held by any Affiliate of the Company (other than, in either case, any such Capital Stock owned by the Company or any of its Restricted Subsidiaries); (c) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Subordinated Debt; and (d) make any Investment (other than a Permitted Investment) in any Person (such payments or other actions described in (but not excluded from) clauses (a) through (d) being referred to as "Restricted Payments"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment: (i) no Default or Event of Default shall have occurred and be continuing, 93 82 (ii) the Company could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to Section 1009, and (iii) the aggregate amount of all Restricted Payments declared or made after the Closing Date does not exceed the sum of: (A) the remainder of (x) 100% of the aggregate Consolidated Cash Flow for the period beginning on the first day of the Company's fiscal quarter during which the Closing Date occurs and ending on the last day of the Company's most recent fiscal quarter for which internal financial statements are available ending prior to the date of such proposed Restricted Payment (the "Computation Period") minus (y) the product of 1.4 times the sum of (i) Consolidated Fixed Charges for the Computation Period and (ii) all dividends or other distributions paid in cash by the Company or any of its Restricted Subsidiaries on any Disqualified Stock of the Company or any of its Restricted Subsidiaries for the Computation Period; plus (B) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Company's Board of Directors, whose good faith determination shall be conclusive) from the issuance or sale (other than to a Subsidiary) of Qualified Equity Interests of the Company (excluding from this computation any net proceeds of a Public Equity Offering received by the Company that are used by it to redeem the Notes, as discussed above); plus (C) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Company's Board of Directors, whose good faith determination shall be conclusive) from the issuance or sale (other than to a Subsidiary) of debt securities or Disqualified Stock that have been converted into or exchanged for Qualified Stock of the Company, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange; plus (D) without duplication, the Net Cash Proceeds received by the Company or a Wholly Owned Restricted Subsidiary upon the sale of any of its Unrestricted Subsidiaries; plus (E) $5,000,000. Notwithstanding the foregoing, the Company and any of its Restricted Subsidiaries may take any of the following actions, so long as (with respect to clauses (f) and (g) below) no Default or Event of Default shall have occurred and be continuing or would occur: 94 83 (a) The payment of any dividend within 60 days after the date of declaration thereof, if at the declaration date such payment would not have been prohibited by the foregoing provision. (b) The repurchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company. (c) The purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Debt in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of shares of, Qualified Stock of the Company. (d) The purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Debt in exchange for, or out of the net cash proceeds of a substantially concurrent issuance or sale (other than to a Subsidiary) of, Subordinated Debt, so long as the Company or a Restricted Subsidiary would be permitted to refinance such original Subordinated Debt with such new Subordinated Debt pursuant to clause (xi) of the definition of Permitted Debt. (e) The repurchase of any Subordinated Debt at a purchase price not greater than 101% of the principal amount of such Subordinated Debt in the event of a "change of control" in accordance with provisions similar to Section 1011; provided that, prior to such repurchase, the Company has made the Change of Control Offer as provided in such Section with respect to the Notes and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer. (f) The payment by the Company to Citadel Communications for the purpose of the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of Citadel Communications, options on any such shares or related stock appreciation rights or similar securities held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates) or by any employee benefit plan, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate cash consideration paid for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock after the date of the Closing Date does not exceed $1,000,000 in any fiscal year. (g) Loans or advances to officers, directors and employees of Citadel Communications, the Company or any of its Restricted Subsidiaries made in the ordinary 95 84 course of business after the Closing Date in an aggregate principal amount not to exceed $1,000,000 at any one time outstanding. (h) Payments to or on behalf of Citadel Communications to pay its operating and administrative expenses attributable to the Company, including, without limitation, legal and audit expenses, directors' fees, fees payable in respect of the trustee and back-up trustees under the Voting Trust Agreement, and Commission compliance expenses, in an amount not to exceed the greater of $1,000,000 per fiscal year and 1% of the net revenues of the Company for the preceding fiscal year. (i) Repayment of the note payable of the Company to Citadel Communications outstanding as of the Closing Date in an amount not to exceed $12,817,000 plus all accrued and unpaid interest thereon to the Closing Date. The payments described in clauses (b), (c), (e), (f) and (g) of this paragraph shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph but shall reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii), and the payments described in clauses (a), (d), (h) and (i) of this paragraph shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph and shall not reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii). For the purpose of making any calculations under this Indenture (i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company shall be deemed to have made an Investment in an amount equal to the fair market value of the net assets of such Restricted Subsidiary at the time of such designation as determined by the Board of Directors of the Company, whose good faith determination shall be conclusive, (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at fair market value at the time of such transfer, as determined by the Board of Directors of the Company, whose good faith determination shall be conclusive and (iii) subject to the foregoing, the amount of any Restricted Payment, if other than cash, shall be determined by the Board of Directors of the Company, whose good faith determination shall be conclusive. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other Person that thereafter becomes a Restricted Subsidiary, such Investment shall no longer be counted as a Restricted Payment for purposes of calculating the aggregate amount of Restricted Payments. If an Investment resulted in the making of a Restricted Payment, the aggregate amount of all Restricted Payments calculated under the foregoing provision shall be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise), to the extent such net reduction is 96 85 not included in Consolidated Adjusted Net Income; provided that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (x) the cash proceeds received by the Company and any of its Restricted Subsidiaries in connection with such net reduction and (y) the initial amount of such Investment. In computing Consolidated Adjusted Net Income for purposes of the foregoing clause (iii)(A), (i) the Company may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company shall be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment that, at the time of the making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of this Indenture, such Restricted Payment shall be deemed to have been made in compliance with this Indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. SECTION 1011. PURCHASE OF NOTES UPON A CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each Holder shall have the right to require the repurchase of its Notes by the Company, in whole or in part in integral multiples of $1,000, in cash pursuant to the offer described below (the "Change of Control Offer") at a purchase price equal to 101% of the principal amount thereof as of the Change of Control Purchase Date, plus accrued and unpaid interest to such date (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall notify the Trustee thereof and give written notice of such Change of Control to each Holder of Notes by first-class mail, postage prepaid, at its address appearing in the Note Register, stating: (i) that a Change of Control has occurred, that the Change of Control Offer is being made pursuant to this Section 1011 and that all Notes validly tendered shall be accepted for payment; (ii) the purchase price and the 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 (the "Change of Control Purchase Date"); (iii) that any Note not tendered shall continue to accrue interest; 97 86 (iv) that, unless the Company defaults in the payment of the Change of Control Payment, any Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Purchase Date; (v) that a Holder electing to have any Note or a portion thereof purchased pursuant to the Change of Control Offer shall be required to surrender such Note to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Change of Control Purchase Date; (vi) that the Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Change in Control Purchase Date, facsimile transmission, telex or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing its election to have such Notes purchased; (vii) that the 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; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or an integral multiple thereof (unless the Company otherwise directs); and (viii) certain other procedures that a Holder must follow to accept a Change of Control Offer or to withdraw such acceptance. On the Change of Control Purchase Date, the Company shall: (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee, all Notes or portions thereof so accepted together with an Officers' Certificate specifying the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or an integral multiple thereof (unless the Company otherwise directs). The Company shall comply with the applicable tender offer rules including Rule 14e-1 under the Exchange Act, and any other applicable securities laws and regulations to the extent such laws and regulations are applicable in the event that a Change of Control occurs and the Company is required to repurchase the Notes under this Section 1011. 98 87 The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create any restriction (other than restrictions existing under Debt as in effect on the Closing Date or in any renewals, extensions, substitutions refinancings or replacements of such Debt that would materially impair the ability of the Company to make a Change of Control Offer to purchase the Notes or, if such Change of Control Offer is made, to pay for the Notes tendered for purchase. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 1011, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Indenture. SECTION 1012. LIMITATION ON CERTAIN ASSET SALES. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any Asset Sale unless (i) the consideration received by the Company or such Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold (as determined by the Board of Directors of the Company, whose good faith determination shall be conclusive) and (ii) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 80% (A) cash or cash equivalents and/or (B) the assumption by the transferee of Debt of the Company or a Restricted Subsidiary ranked senior to or pari passu with the Notes and release of the Company or such Restricted Subsidiary from all liability on such Debt. (b) If the Company or any of its Restricted Subsidiaries engages in an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale, (i) apply all or a portion of the Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Facility or to the repayment of other Senior Debt of the Company or a Subsidiary Notes Guarantor or (ii) invest (or enter into one or more legally binding agreements to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that shall be used in the broadcast business or businesses reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, 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." (c) When the aggregate amount of Excess Proceeds exceeds $5,000,000, the Company shall make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase, on a pro rata basis, the maximum principal amount of Notes, that is an integral multiple of $1,000, that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of 99 88 the principal amount thereof, plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer (the "Offered Price"). Within 30 days after the date on which the aggregate amount of Excess Proceeds exceeds $5,000,000, the Company shall give to each Holder of the Notes, with a copy to the Trustee, in the manner provided in Section 106 a notice stating: (i) that the Holder has the right to require the Company to repurchase such Holder's Notes at the Offered Price, subject to proration in the event the Excess Proceeds are less than the aggregate Offered Price of all Notes tendered; (ii) the date of purchase of Notes pursuant to the Asset Sale Offer (the "Asset Sale Purchase Date"), which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed; (iii) that the Offered Price shall be paid to Holders electing to have Notes purchased on the asset Sale Purchase Date, provided that a Holder must surrender its Note to the Paying Agent at the address specified in the notice prior to the close of business at least five Business Days prior to the Asset Sale Purchase Date; (iv) any Note not tendered shall continue to accrue interest pursuant to its terms; (v) that unless the Company defaults in the payment of the Offered Price, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest on and after the Asset Sale Purchase Date; (vi) that Holders shall be entitled to withdraw their tendered Notes and their election to require the Company to purchase such Notes, provided that the Company receives, not later than the close of business on the third Business Day preceding the Asset Sale Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount and serial numbers of the Notes tendered for purchase, and a statement that such Holder is withdrawing its election to have such Notes purchased; (vii) that the 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 or an integral multiple thereof (unless the Company otherwise directs); and (viii) the instructions a Holder must follow in order to have his Notes purchased in accordance with this Section 1012. 100 89 To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use the deficiency for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Notes to be purchased shall be selected on a pro rata basis. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 1012, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Indenture. SECTION 1013. LIMITATION ON ASSET SWAPS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any Asset Swap, unless: (i) at the time of entering into the Asset Swap and immediately after giving effect to the proposed Asset Swap, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (ii) the Company would, at the time of entering into the Asset Swap and after giving pro forma effect to the proposed Asset Swap, as if such Asset Swap had occurred at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of Section 1009; (iii) the respective aggregate fair market values of the assets being purchased and sold by the Company or any of its Restricted Subsidiaries are substantially the same at the time of entering into the Asset Swap (or any difference in such aggregate fair market value is substantially compensated for by an equalizing (i) payment of cash, (ii) assumption of liabilities or (iii) taking of assets subject to liabilities); and (iv) at the time of the consummation of the first to occur of the relinquishment or the replacement of assets constituting part of the proposed Asset Swap, the percentage of any decline in the fair market value of the asset or assets being acquired by the Company and its Restricted Subsidiaries shall not be significantly greater than the percentage of any decline in the fair market value of the assets being disposed of the 101 90 Company, calculated from the time the last agreement constituting part of the Asset Swap was entered into. SECTION 1014. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or suffer to exist any transaction with, or for the benefit of, any Affiliate of the Company unless: (a) such transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been obtained in an arm's length transaction with third parties who are not Affiliates and (b) either (i) with respect to any transaction or series of transactions involving aggregate payments in excess of $1,000,000, but less than $5,000,000, the Company delivers an Officers' Certificate to the Trustee certifying that such transaction or transactions comply with clause (a) above or (ii) with respect to a transaction or series of transactions involving aggregate payments equal to or greater than $5,000,000, such transaction or transactions have been approved by the Board of Directors (including a majority of the Disinterested Directors) of the Company or the Company has obtained a written opinion from a nationally recognized investment banking firm to the effect that such transaction or transactions are fair to the Company or such Restricted Subsidiary from a financial point of view. The foregoing provisions shall not restrict any of the following: (A) Transactions among the Company and/or any of its Restricted Subsidiaries. (B) The Company from paying reasonable and customary regular compensation, fees, indemnification and similar arrangements and payments thereunder to directors of the Company or any of its Restricted Subsidiaries who are not employees of the Company or any of its Restricted Subsidiaries. (C) Employment agreements or compensation or employee benefits arrangements with any officer, director or employee of the Company or its Restricted Subsidiaries entered into in the ordinary course of business (including customary benefits thereunder) (it being understood that benefits of the nature in place as of the Closing Date shall be deemed permissible hereunder). (D) The performance of the Company's obligations under (a) that certain lease agreement effective December 29, 1995 with Wilson Aviation, 102 91 L.L.C. relating to the lease of an airplane, (b) that certain agreement not to compete dated December 31, 1996 with DVS Management, Inc. and (c) that certain Voting Trust Agreement dated March 17, 1997 among Citadel Communications, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P. and others and the related letter agreement dated March 17, 1997 among Citadel Communications, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P. and others (the "Affiliate Agreements"); provided that any amendments or modifications to the terms of the Affiliate Agreements (1) are no less favorable to the Company than those that could have been obtained in an arm's length transaction with third parties who are not Affiliates and (2) are approved by the Board of Directors (including a majority of the Disinterested Directors) of the Company. (E) The Company from making payments to Citadel Communications to pay its operating and administrative expenses attributable to the Company including, without limitation, legal and audit expenses, directors' fees and Commission compliance expenses, in an amount not to exceed the greater of $1,000,000 per fiscal year and 1% of the net revenues of the Company for the preceding fiscal year. (F) The Company or a Restricted Subsidiary from transferring up to $500,000 of properties and assets, including cash, to a joint venture in which the Company or a Restricted Subsidiary has an equity interest and in which one or more directors or officers of the Company or Citadel Communications has an equity interest, which joint venture is engaged in the internet service provider business. (G) The Company from repaying the note payable of the Company to Citadel Communications outstanding as of the Closing Date in an amount not to exceed $12,817,000 plus all accrued and unpaid interest thereon to the Closing Date. SECTION 1015. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries 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 of its Restricted Subsidiaries to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock, (b) pay any Debt owed to the Company or any other Restricted Subsidiary, (c) make loans or advances to the Company or any other Restricted Subsidiary or 103 92 (d) transfer any of its properties or assets to the Company or any other Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of any of the following: (i) The Credit Facility and any agreement in effect on the Closing Date and listed on a schedule attached to this Indenture. (ii) Customary non-assignment provisions of any lease governing a leasehold interest of the Company or any of its Restricted Subsidiaries. (iii) The refinancing or successive refinancings of Debt referred to in clause (i) or (iv), so long as such encumbrances or restrictions are no less favorable to the Company or any of its Restricted Subsidiaries than those contained in such original agreement. (iv) Any agreement or other instrument of a Person acquired by the Company or any of its Restricted Subsidiaries 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 Person, other than the Person, or the property or assets of the Person, so acquired. (v) Any agreement providing for the incurrence of Debt by a Restricted Subsidiary in compliance with Section 1009 provided that such Restricted Subsidiary becomes a Subsidiary Notes Guarantor. SECTION 1016. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company shall not sell, and shall not permit any of its Restricted Subsidiaries, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except (i) to the Company or a Wholly Owned Restricted Subsidiary, (ii) issuances or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law, or issuances or sales to directors of directors' qualifying shares, (iii) if, immediately after giving effect to such issuance or sale, neither the Company nor any Subsidiary owns any shares of Capital Stock of such Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) or (iv) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under Section 1010 if made on the date of such issuance or sale. 104 93 In addition, the Company shall not, and shall not permit any of its Restricted Subsidiaries to, sell, transfer or otherwise dispose of any of its properties or assets to an Unrestricted Subsidiary other than in the ordinary course of business. SECTION 1017. LIMITATION ON UNRESTRICTED SUBSIDIARIES. (a) The Board of Directors of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company nor any of its Restricted Subsidiaries is directly or indirectly liable for any Debt of such Subsidiary, (ii) no default with respect to any Debt of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Debt of the Company or any of its Restricted Subsidiaries to declare a default on such other Debt 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 shall not violate Section 1010, (iv) neither the Company nor any of its Restricted Subsidiaries 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 Restricted Subsidiary has any obligation to subscribe for additional shares of Capital Stock or other equity interest in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results. Notwithstanding the foregoing, the Company may not designate the License Subsidiary, or any Subsidiary to which any properties or assets (other than current assets) owned by the Company or the License Subsidiary on the Closing Date have been transferred, as an Unrestricted Subsidiary. (b) The Board of Directors of the Company may designate any of its Unrestricted Subsidiaries as a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Debt by a Restricted Subsidiary of any outstanding Debt of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Debt is permitted under Section 1009 and (ii) no Default or Event of Default shall have occurred and be continuing following such designation. SECTION 1018. LIMITATION ON OTHER SENIOR SUBORDINATED DEBT. The Company and each Subsidiary Notes Guarantor shall not, directly or indirectly, incur or otherwise permit to exist any Debt that is subordinate in right of payment to any Debt of the Company or such Subsidiary Notes Guarantor, as the case may be, unless such Debt is also pari passu with the Notes or the Subsidiary Notes Guarantee of the Notes by such Subsidiary Notes Guarantor, as the case may be, or subordinate in right of payment to the Notes or such Subsidiary Notes Guarantee of the Notes, as the case may be, to at least the same extent as the Notes or such Subsidiary Notes Guarantee are subordinate in right of payment to 105 94 Senior Debt or all senior debt of the Subsidiary Notes Guarantors, as the case may be, as set forth in this Indenture. SECTION 1019. SUBSIDIARY NOTES GUARANTEES. The Subsidiary Notes Guarantors shall, jointly and severally, unconditionally guarantee the due and punctual payment of the principal of, premium, if any, and interest on the Notes on a senior subordinated basis pursuant to the Subsidiary Notes Guarantees as described in Article Thirteen. The Subsidiary Notes Guarantors may be released from their obligations under the Subsidiary Notes Guarantees as described in Article Twelve and a Subsidiary Notes Guarantor may be released from its obligations under its Subsidiary Notes Guarantee as described in Article Thirteen. The Company shall (i) cause each Person that, after the Closing Date, becomes a Wholly Owned Restricted Subsidiary of the Company, as well as each other Restricted Subsidiary that guarantees any other Debt of the Company, to execute and deliver a supplemental indenture and thereby become a Subsidiary Notes Guarantor bound by the Subsidiary Notes Guarantee of the Notes in the form set forth in this Indenture (without such Subsidiary Notes Guarantor being required to execute and deliver its Subsidiary Notes Guarantee endorsed on the Notes) and (ii) deliver to the Trustee an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee, that the Subsidiary Notes Guarantee of such Subsidiary Notes Guarantor is a valid and legally binding obligation of such Subsidiary Notes Guarantor. SECTION 1020. LIMITATION ON GUARANTEES OF DEBT BY RESTRICTED SUBSIDIARIES. The Company shall not permit any of its Restricted Subsidiaries that is not a Subsidiary Notes Guarantor, directly or indirectly, to guarantee, assume or in any other manner become liable for the payment of any Debt of the Company or any Debt of any other Restricted Subsidiary, unless (a) such Restricted Subsidiary simultaneously executes and delivers a Subsidiary Notes Guarantee and (b) with respect to any guarantee of Subordinated Debt by a Restricted Subsidiary, any such guarantee is subordinated to such Restricted Subsidiary's Subsidiary Notes Guarantee at least to the same extent as such Subordinated Debt is subordinated to the Notes, provided that the foregoing provision shall not be applicable to any guarantee by any such Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary. SECTION 1021. LIMITATION ON LIENS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, incur, affirm or suffer to exist any Lien of any kind securing any Pari Passu Debt or Subordinated Debt (including any assumption, guarantee or other liability with respect thereto 106 95 by any Restricted Subsidiary) upon any property or assets (including any intercompany notes) of the Company or any of its Restricted Subsidiaries now owned or acquired after the Closing Date, or any income or profits therefrom, unless the Notes are directly secured equally and ratably with (or prior to in the case of Subordinated Debt) the obligation or liability secured by such Lien; provided that the foregoing shall not apply to Liens securing Debt of a Person acquired by the Company or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation thereof), which Lien is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired. SECTION 1022. COMMISSION REPORTS AND REPORTS TO HOLDERS. At all times from and after the earlier of (i) the date of the commencement of the Notes Exchange Offer or the effectiveness of the Notes Shelf Registration Statement (the "Registration") and (ii) the date 180 days after the Closing Date, in either case, whether or not the Company is then required to file reports with the Commission, the Company shall file with the Commission all such reports and other information as it would be required to file with the Commission by Section 13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company shall supply the Trustee and each Holder, or shall supply to the Trustee for forwarding to each such Holder, without cost to such Holder, copies of such reports and other information. In addition, at all times prior to the earlier of the date of the Registration and the date 180 days after the Closing Date, the Company shall, at its cost, deliver to each Holder of the Notes quarterly and annual reports substantially equivalent to those that would be required by the Exchange Act. In addition, at all times prior to the Registration, upon the request of any Holder or any prospective purchaser of the Notes designated by a Holder, the Company shall supply to such Holder or such prospective purchaser the information required under Rule 144A under the Securities Act. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder. SECTION 1023. STATEMENT AS TO COMPLIANCE. (a) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, commencing with the fiscal year ending December 31, 1997, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether it has kept, observed, performed and fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and fulfill, its obligations under this Indenture and further stating, as to each such officer signing such certificate, that, to the best of his or her 107 96 knowledge, the Company during such preceding fiscal year has kept, observed, performed and fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and fulfill, each and every such covenant contained in this Indenture and no Default or Event of Default occurred during such year and at the date of such certificate there is no Default or Event of Default which shall have occurred and be continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe its status, with particularity and that, to the best of his or her knowledge, no event has occurred and remains by reason of which payments on the account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action each is taking or purposes to take with respect thereto. The Officers' Certificate shall also notify the Trustee should the Company elect to change the manner in which it fixes its fiscal year end. For purposes of this Section 1023(a), such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. (b) When any Default shall have occurred and be continuing under this Indenture, or if the trustee for or the holder of any other evidence of Debt of the Company or any Subsidiary gives any notice or takes any other action with respect to a claimed default (other than with respect to Debt in the principal amount of less than $10 million), the Company shall deliver to the Trustee by registered or certified mail or facsimile transmission an Officers' Certificate specifying such event, notice or other action within five days of any officer of the Company having knowledge of any Default. SECTION 1024. DELIVERY OF CERTAIN INFORMATION. If specified as contemplated by Section 301 with respect to a series of Notes, at any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder, the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder or to a prospective purchaser of such Notes designated by such Holder in connection with the resale of such Notes by such Holder. "Rule 144A Information" shall mean such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act as in effect on the date hereof. ARTICLE ELEVEN REDEMPTION OF NOTES SECTION 1101. REDEMPTION. The Notes may or shall, as the case may be, be redeemed, as a whole or from time to time in part, subject to the conditions and at the Redemption Prices specified in the form of Note, together with accrued interest to the Redemption Date. 108 97 SECTION 1102. APPLICABILITY OF ARTICLE. Redemption of Notes at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem any Notes pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Notes to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Notes to be redeemed pursuant to Section 1104. SECTION 1104. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED. If less than all the Notes are to be redeemed, the particular Notes to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Notes not previously called for redemption, in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed, or, if such Notes are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements) and which may provide for the selection for redemption of portions of the principal of Notes; provided, however, that no such partial redemption shall reduce the portion of the principal amount of a Note not redeemed to less than $1,000. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of such Note which has been or is to be redeemed. SECTION 1105. NOTICE OF REDEMPTION. Notice of redemption shall be given in the manner provided for in Section 106 not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Notes to be redeemed. The Trustee shall give notice of redemption in the Company's name and at the 109 98 Company's expense; provided, however, that the Company shall deliver to the Trustee, at least 45 days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the following items. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price and the amount of accrued interest to the Redemption Date payable as provided in Section 1107, if any, (3) if less than all Outstanding Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption, (4) in case any Note is to be redeemed in part only, the notice which relates to such Note shall state that on and after the Redemption Date, upon surrender of such Note, the Holder shall receive, without charge, a new Note or Notes of authorized denominations for the principal amount thereof remaining unredeemed, (5) that on the Redemption Date the Redemption Price (and accrued interest, if any, to the Redemption Date payable as provided in Section 1107) shall become due and payable upon each such Note, or the portion thereof, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest on Notes called for redemption (or the portion thereof) shall cease to accrue on and after said date, (6) the place or places where such Notes are to be surrendered for payment of the Redemption Price and accrued interest, if any, (7) the name and address of the Paying Agent, (8) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price, (9) the CUSIP number, and that no representation is made as to the accuracy or correctness of the CUSIP number, if any, listed in such notice or printed on the Notes, and (10) the paragraph of the Notes pursuant to which the Notes are to be redeemed. 110 99 SECTION 1106. DEPOSIT OF REDEMPTION PRICE. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and accrued interest on, all the Notes which are to be redeemed on that date. SECTION 1107. NOTES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Notes shall cease to 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 accrued interest, if any, to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Notes, or one or more Predecessor Notes, registered as such at the close of business on the relevant Regular Record Date or Special Record Date, as the case may be, according to their terms and the provisions of Section 311. 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 borne by the Notes. SECTION 1108. NOTES REDEEMED IN PART. Any Note which is to be redeemed only in part (pursuant to the provisions of this Article) shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 1002 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holders attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered, provided, that each such new Note shall be in a principal amount of $1,000 or integral multiple thereof (unless the Company otherwise directs). 111 100 ARTICLE TWELVE LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 1201. COMPANY'S OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company and the Subsidiary Notes Guarantors may, at their option by Board Resolution, at any time, with respect to the Notes, elect to have either Section 1202 or Section 1203 be applied to all Outstanding Notes upon compliance with the conditions set forth below in this Article Twelve. SECTION 1202. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 1201 of the option applicable to this Section 1202, the Company and any Subsidiary Notes Guarantor shall be deemed to have been discharged from their obligations with respect to all Outstanding Notes on the date the conditions set forth in Section 1204 are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that the Company and any such Guarantor shall be deemed to have paid and discharged the entire Debt represented by the Outstanding Notes, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1205 and the other Sections of this Indenture referred to in (A) and (B) below, and to have satisfied all its other obligations under such Notes and this Indenture insofar as such Notes are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Notes to receive payments in respect of the principal of (and premium, if any, on) and interest on such Notes when such payments are due, (B) the Company's obligations to issue temporary Notes, register the transfer or exchange of any Notes, replace mutilated, destroyed, lost or stolen Notes, maintain an office or agency for payments in respect of the Notes and segregate and hold such payments in trust, (C) the rights, powers, trusts, duties and immunities of the Trustee and (D) the defeasance provisions of this Indenture. Subject to compliance with this Article Twelve, the Company may exercise its option under this Section 1202 notwithstanding the prior exercise of its option under Section 1203 with respect to the Notes. SECTION 1203. COVENANT DEFEASANCE. Upon the Company's exercise under Section 1201 of the option applicable to this Section 1203, the Company shall be released from its obligations under any covenant contained in Section 801 and in Sections 1006 through 1022 with respect to the Outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), 112 101 and the Notes shall thereafter be deemed not to be "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder (it being understood that such Notes shall not be outstanding for accounting purposes). For this purpose, such Covenant Defeasance means that, with respect to the Outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 501(d), but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. SECTION 1204. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The following shall be the conditions to application of either Section 1202 or Section 1203 to the Outstanding Notes: (a) the Company must irrevocably deposit or cause to be deposited with the Trustee, as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Notes, money in an amount, or U.S. Government Obligations that through the scheduled payment of principal and interest thereon shall provide money in an amount, or a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the principal of (and premium, if any, on) and interest on the outstanding Notes at maturity (or upon redemption, if applicable) of such principal or installment of interest; (b) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as an event of bankruptcy under Section 501(h) or (i) is concerned, at any time during the period ending on the 91st day after the date of such deposit; (c) such Legal Defeasance or Covenant Defeasance must not result in a breach or violation of, or constitute a default under, this Indenture or any material agreement or instrument to which the Company or any Subsidiary Notes Guarantor is a party or by which it is bound or cause the Trustee or the trust so created to be subject to the Investment Company Act of 1940, as amended; (d) in the case of Legal Defeasance, the Company must deliver to the Trustee an Opinion of Counsel stating that the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or since the date hereof, there has been a change in applicable federal income tax law, to the effect, and based thereon such 113 102 opinion must confirm that, the Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (e) in the case of Covenant Defeasance, the Company must have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Notes outstanding shall not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; and (f) the Company must have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with. SECTION 1205. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in respect of the Outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1204 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Notes. Anything in this Article Twelve to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 1204 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be 114 103 required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance, as applicable, in accordance with this Article. SECTION 1206. REINSTATEMENT. If the Trustee or any Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 1205 by reason of any legal proceeding or by any reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and each Subsidiary Notes Guarantor's obligations under this Indenture, the Notes and the Subsidiary Notes Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 1202 or 1203, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1205; provided, however, that if the Company or any Subsidiary Notes Guarantor makes any payment of principal of (or premium, if any) or interest on any Note following the reinstatement of its obligations, the Company or such Guarantor, as the case may be, shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money and U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE THIRTEEN SUBSIDIARY NOTES GUARANTEES SECTION 1301. SUBSIDIARY GUARANTEES. (a) Each Subsidiary Notes Guarantor hereby, jointly and severally, fully, absolutely, unconditionally and irrevocably guarantees to each Holder of a Note authenticated and delivered by the Trustee, and to the Trustee on behalf of each Holder, the punctual payment and performance when due of all Indenture Obligations which, for purposes of its Subsidiary Notes Guarantee, shall also be deemed to include all commissions, fees, charges, costs and other expenses (including reasonable legal fees and disbursements of counsel) arising out of or incurred by the Trustee or the Holders in connection with the enforcement of any Subsidiary Notes Guarantee. Without limiting the generality of the foregoing, each Subsidiary Notes Guarantor's liability shall extend to all amounts that constitute part of the Indenture Obligations and would be owed by the Company to such Holder or the Trustee under the Notes or this Indenture but for the fact that they are unenforceable, reduced, limited, suspended or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company. (b) Each Subsidiary Notes Guarantor and by its acceptance hereof each Holder hereby confirms that it is the intention of all such parties that the guarantee by such Subsidiary 115 104 Notes Guarantor pursuant to its Subsidiary Notes Guarantee not constitute a fraudulent transfer or conveyance for purposes of any federal or state law. To effectuate the foregoing intention, the Holders and each Subsidiary Notes Guarantor hereby irrevocably agree that the obligations of such Subsidiary Notes Guarantor under its Subsidiary Notes Guarantee shall be limited to the maximum amount as shall, after giving effect to all other contingent and fixed liabilities of such Subsidiary Notes Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Notes Guarantor in respect of the obligations of such other Subsidiary Notes Guarantor under its Subsidiary Notes Guarantee or pursuant to paragraph (c) of this Section 1301 result in the obligations of such Subsidiary Notes Guarantor under its Subsidiary Notes Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. (c) In order to provide for just and equitable contribution among the Subsidiary Notes Guarantors, the Subsidiary Notes Guarantors agree, inter se, that in the event any payment or distribution is made by any Subsidiary Notes Guarantor (a "Funding Guarantor") under its Subsidiary Notes Guarantee, such Funding Guarantor shall be entitled to a contribution from each other Subsidiary Notes Guarantor in a pro rata amount based on the Adjusted Net Assets of each Subsidiary Notes Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by the Funding Guarantor in discharging the Indenture Obligations of the Company or any other Subsidiary Notes Guarantor's obligations with respect to its Subsidiary Notes Guarantee. "Adjusted Net Assets" of such Subsidiary Notes Guarantor at any date shall mean the lesser of (x) the amount by which the fair value of the property of such Subsidiary Notes Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under the Subsidiary Notes Guarantee of such Subsidiary Notes Guarantor at such date and (y) the amount by which the present fair salable value of the assets of such Subsidiary Notes Guarantor at such date exceeds the amount that shall be required to pay the probable liability of such Subsidiary Notes Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), excluding debt in respect of the Subsidiary Notes Guarantee, as they become absolute and matured. SECTION 1302. GUARANTY ABSOLUTE. Each Subsidiary Notes Guarantor guarantees that the Notes shall be paid or performed strictly in accordance with the terms of the Notes and this Indenture, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Holder with respect thereto. The obligations of each Subsidiary Notes Guarantor under its Subsidiary Notes Guarantee are independent of the obligations of the Company under the Notes and this Indenture, and a separate action or actions may be brought and prosecuted against such Subsidiary Notes Guarantor to enforce its Subsidiary Notes Guarantee, irrespective of whether any action is brought against the Company or any other 116 105 Subsidiary Notes Guarantor or whether the Company or any other Subsidiary Notes Guarantor is joined in any such action or actions. The liability of each Subsidiary Notes Guarantor under its Subsidiary Notes Guarantee shall be absolute and unconditional and the liability and obligations of such Subsidiary Notes Guarantor hereunder shall not be released, discharged, mitigated, waived, impaired or affected in whole or in part by: (a) any lack of validity or enforceability of this Indenture or the Notes with respect to the Company or any Subsidiary Notes Guarantor or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Indenture Obligations, or any other amendment or waiver of or any consent to departure from this Indenture, including any increase in the Indenture Obligations resulting from the extension of additional credit to the Company or otherwise; (c) the failure to give notice to the Subsidiary Notes Guarantor of the occurrence of a Default under the provisions of this Indenture or the Notes; (d) any taking, release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the Indenture Obligations; (e) any failure, omission, delay by or inability on the part of the Trustee or the Holders to assert or exercise any right, power or remedy conferred on the Trustee or the Holders in this Indenture or the Notes; (f) any change in the corporate structure, or termination, dissolution, consolidation or merger of the Company or any Subsidiary Notes Guarantor with or into any other Person, the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets of the Company or any Subsidiary Notes Guarantor, the marshalling of the assets and liabilities of the Company or any Subsidiary Notes Guarantor, the receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition with the creditors, or readjustment of, or other similar proceedings affecting the Company or any Subsidiary Notes Guarantor, or any of the assets of any of them; (g) the assignment of any right, title or interest of the Trustee or any Holder in this Indenture or the Notes to any other Person; or (h) any other event or circumstance (including any statute of limitations), whether foreseen or unforeseen and whether similar or dissimilar to any of the foregoing, that might otherwise constitute a defense available to, or a discharge of, the Company 117 106 or a Subsidiary Notes Guarantor, other than payment in full of the Indenture Obligations; it being the intent of each Subsidiary Notes Guarantor that its obligations hereunder shall not be discharged except by payment of all amounts owing pursuant to this Indenture or the Notes. The Subsidiary Notes Guarantee of each Subsidiary Notes Guarantor shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Indenture Obligations is rescinded or must otherwise be returned by any Holder or the Trustee upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. Each Subsidiary Notes Guarantor further agrees, to the fullest extent that it may lawfully do so, that, as between such Subsidiary Notes Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Five of this Indenture for the purposes of this Subsidiary Notes Guarantee, notwithstanding any stay, injunction or other prohibition extant under any applicable bankruptcy law preventing such acceleration in respect of the obligations guaranteed hereby, and (ii) in the event of any declarations of acceleration of such obligations as provided in Article Five of this Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Notes Guarantor for the purpose of this Subsidiary Notes Guarantee. SECTION 1303. WAIVERS. (a) Each Subsidiary Notes Guarantor hereby expressly waives (to the extent permitted by law) notice of the acceptance of its Subsidiary Notes Guarantee and notice of the existence, renewal, extension or the non-performance, non-payment, or non-observance on the part of the Company of any of the terms, covenants, conditions and provisions of this Indenture or the Notes or any other notice whatsoever to or upon the Company or such Subsidiary Notes Guarantor with respect to the Indenture Obligations. Each Subsidiary Notes Guarantor hereby acknowledges communication to it of the terms of this Indenture and the Notes and all of the provisions herein contained and consents to and approves the same. Each Subsidiary Notes Guarantor hereby expressly waives (to the extent permitted by law) diligence, presentment and protest. (b) Without prejudice to any of the rights or recourse which the Trustee or the Holders may have against the Company, each Subsidiary Notes Guarantor hereby expressly waives (to the extent permitted by law) any right to require the Trustee or the Holders to: (1) initiate or exhaust any rights, remedies or recourse against the Company, any Subsidiary Notes Guarantor or any other Person; (2) value, realize upon, or dispose of any security of the Company or any other Person held by the Trustee or the Holders; or 118 107 (3) initiate or exhaust any other remedy which the Trustee or the Holders may have in law or equity; before requiring, becoming entitled to or demanding payment from such Subsidiary Notes Guarantor under this Subsidiary Notes Guarantee. SECTION 1304. SUBROGATION. Each Subsidiary Notes Guarantor shall not exercise any rights that it may acquire by way of subrogation under this Subsidiary Notes Guarantee, by any payment made hereunder or otherwise, until all the Indenture Obligations shall have been paid in full. If any amount shall be paid to any Subsidiary Notes Guarantor on account of any such subrogation rights at any time when all the Indenture Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Holders and the Trustees and shall forthwith be paid to the Trustee, on behalf of the Holders, to be credited and applied to the Indenture Obligations, whether matured or unmatured. SECTION 1305. NO WAIVER; REMEDIES. No failure on the part of any Holder or the Trustee to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 1306. CONTINUING GUARANTY; NO RIGHT OF SET-OFF; INDEPENDENT OBLIGATION. (a) This Subsidiary Notes Guarantee is a continuing guarantee of the payment and performance of all Indenture Obligations and shall remain in full force and effect until the payment in full of all of the Indenture Obligations and all other amounts payable under this Subsidiary Notes Guarantee and shall apply to and secure any ultimate balance due or remaining unpaid to the Trustee or the Holders under this Indenture or the Notes; and this Subsidiary Notes Guarantee shall not be considered as wholly or partially satisfied by the payment or liquidation at any time or from time to time of any sum of money for the time being due or remaining unpaid to the Trustee or the Holders. (b) Each Subsidiary Notes Guarantor hereby guarantees that the Indenture Obligations shall be paid to the Trustee without set-off or counterclaim or other reduction whatsoever (whether for taxes, withholding or otherwise) in lawful currency of the United States of America. 119 108 (c) Each Subsidiary Notes Guarantor guarantees that the Indenture Obligations shall be paid strictly in accordance with their terms regardless of any lack of validity or enforceability of any of such terms or the rights of the Holders with respect thereto. (d) Each Subsidiary Notes Guarantor's liability to pay or perform or cause the performance of the Indenture Obligations under this Subsidiary Notes Guarantee shall arise forthwith after demand for payment or performance by the Trustee has been given to such Subsidiary Notes Guarantor in the manner prescribed in this Indenture. SECTION 1307. SUBSIDIARY NOTES GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. (a) Nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Subsidiary Notes Guarantor with or into the Company or another Subsidiary Notes Guarantor or shall prevent any sale or conveyance of the property of a Subsidiary Notes Guarantor as an entirety or substantially as an entirety to the Company or another Subsidiary Notes Guarantor, which consolidation, merger, sale or conveyance is otherwise in accordance with the terms of this Indenture. (b) Other than as set forth in paragraph (a) of this Section, no Subsidiary Notes Guarantor may consolidate with or merge with or into (whether or not such Subsidiary Notes Guarantor is the surviving Person) another Person whether or not affiliated with such Subsidiary Notes Guarantor unless: (i) subject to the provisions of Section 1309, the Person formed by or surviving such consolidation or merger (if other than such Subsidiary Notes Guarantor) assumes all of the obligations of such Subsidiary Notes Guarantor under this Indenture and its Subsidiary Notes Guarantee, pursuant to a supplemental indenture in form and substance satisfactory to the Trustee, and (b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. SECTION 1308. ADDITIONAL SUBSIDIARY NOTES GUARANTORS. The Company shall cause each Person that becomes a Wholly Owned Restricted Subsidiary after the Closing Date to become a Subsidiary Notes Guarantor with respect to the Indenture Obligations by executing and delivering a supplemental indenture to this Indenture providing for a Subsidiary Notes Guarantee by such Wholly Owned Restricted Subsidiary under Article Thirteen; provided that any such Wholly Owned Restricted Subsidiary that is organized outside of the United States shall not be required to provide a Subsidiary Notes Guarantee so long as such Wholly Owned Restricted Subsidiary has not guaranteed any other Debt of the Company or any other Restricted Subsidiary. The Company shall deliver to the Trustee, together with the supplemental indenture referred to above, an Opinion of Counsel that such Subsidiary Notes Guarantee is a legal, valid, binding and enforceable obligation of such 120 109 Subsidiary Notes Guarantor, subject to customary local law exceptions and customary exceptions for bankruptcy and equitable principles. SECTION 1309. RELEASES. (a) Concurrently with any consolidation or merger of a Subsidiary Notes Guarantor with or into the Company or another Subsidiary Notes Guarantor or any sale or conveyance of the property of a Subsidiary Notes Guarantor as an entirety or substantially as an entirety to the Company or another Subsidiary Notes Guarantor, in each case as permitted by Section 1307, and upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel, each to the effect that (i) such consolidation, merger, sale or conveyance was or shall be made by a Subsidiary Notes Guarantor in accordance with Section 1307, and (ii) all conditions precedent to such release have been satisfied, the Trustee shall promptly execute any documents reasonably required in order to evidence the release of such Subsidiary Notes Guarantor from its obligations under its Subsidiary Notes Guarantee. Any Subsidiary Notes Guarantor not released from its obligations under its Subsidiary Notes Guarantee under this Article Thirteen shall remain liable for the full amount of the Indenture Obligations under its Subsidiary Notes Guarantee. (b) Concurrently with the Legal Defeasance of the Notes under Section 1202 hereof or the Covenant Defeasance of the Notes under Section 1203 hereof, the Subsidiary Notes Guarantors shall be released from all of their obligations under their Subsidiary Notes Guarantees. (c) Upon (i) the sale, transfer or other disposition of all of the Capital Stock of a Subsidiary Notes Guarantor to a Person that is not an Affiliate of the Company, (ii) the sale, transfer or other disposition of all or substantially all of the assets of a Subsidiary Notes Guarantor to a Person that is not an Affiliate of the Company, or (iii) the designation of such Subsidiary Notes Guarantor as an Unrestricted Subsidiary, in any such case in compliance with the terms of this Indenture, then such Subsidiary Notes Guarantor shall be deemed automatically and unconditionally released and discharged from all of its obligations under its Subsidiary Notes Guarantee without any further action on the part of the Trustee or any Holder of the Notes; provided that the Net Cash Proceeds of any such sale, transfer or other disposition are applied in accordance with Section 1012. 121 110 ARTICLE FOURTEEN SUBORDINATION OF SECURITIES SECTION 1401. NOTES AND SUBSIDIARY NOTES GUARANTEES SUBORDINATE TO SENIOR DEBT. (a) The Company covenants and agrees, and each Holder of a Note, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article Fourteen, the indebtedness represented by the Notes and the payment of the principal of (and premium, if any) and interest on each and all of the Notes (but not amounts owing to the Trustee by the Company pursuant to Section 607 hereof) are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Debt. (b) Each Subsidiary Notes Guarantor covenants and agrees, and each Holder of a Note, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article Fourteen, the indebtedness represented by the Subsidiary Notes Guarantee of such Subsidiary Notes Guarantor is hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Subsidiary Guarantor Senior Debt of such Subsidiary Notes Guarantor. SECTION 1402. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the event of any payment or distribution of assets of the Company or any Subsidiary Notes Guarantor to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency or similar proceedings of the Company or any Subsidiary Notes Guarantor (the Company or such Subsidiary Notes Guarantor being the "Affected Obligor"), then (except (x) in connection with the consolidation or merger of the Company or its liquidation or dissolution following the conveyance, transfer or lease of its properties and assets substantially as an entirety, upon the terms and conditions described in Article Eight or (y) in connection with the consolidation or merger of a Subsidiary Notes Guarantor, or its liquidation or dissolution, not in violation of any provision of this Indenture) (each such event, if any, herein sometimes referred to as a "Proceeding"), (i) if the Affected Obligor is the Company, the holders of Senior Debt shall first be entitled to receive payment in full, in cash or cash equivalents, of all amounts due or to become due on or in respect of such Senior Debt before the Holders of the Notes are entitled to receive any payment of principal of (and premium, if any) or interest on the Notes or on account of the purchase or redemption or other acquisition of Notes by the Company or any Subsidiary of the Company and (ii) if the Affected Obligor is a Subsidiary Notes Guarantor, the holders of Subsidiary Guarantor Senior Debt of such Subsidiary Notes Guarantor shall first be entitled to receive payment in full, in cash or cash equivalents, of principal of (or premium, 122 111 if any) and interest on such Subsidiary Guarantor Senior Debt, before the Holders of the Notes are entitled to receive any payment pursuant to the Subsidiary Notes Guarantee of such Subsidiary Notes Guarantor (any payment on or purchase, redemption or acquisition of the Notes, referred to in clause (i), and any payment on a Subsidiary Notes Guarantee, referred to in clause (ii), being, individually and collectively, a "Notes Payment"), and, to that end, if the Affected Obligor is the Company, the holders of Senior Debt and, if the Affected Obligor is a Subsidiary Notes Guarantor, the holders of Subsidiary Guarantor Senior Debt of such Subsidiary Notes Guarantor (such Senior Debt or Subsidiary Guarantor Senior Debt, as the case may be, being "Affected Obligor Senior Debt" of such Affected Obligor) shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities which may be payable or deliverable in respect of the Notes in any such Proceeding. In the event that, notwithstanding the foregoing provisions of this Section 1402, the Trustee or the Holder of any Note shall have received any payment or distribution of assets of an Affected Obligor of any kind or character, whether in cash, property or securities, before all Affected Obligor Senior Debt is paid in full, then such payment or distribution, except for amounts subject to the claim granted to the Trustee in Section 607 hereof, shall be held in trust for the holders of Affected Obligor Senior Debt and shall be paid over or delivered forthwith to the trustee in bankruptcy or other Person making payment or distribution of assets of the Affected Obligor for application to the payment of all Affected Obligor Senior Debt remaining unpaid, to the extent necessary to pay all Affected Obligor Senior Debt in full, after giving effect to any concurrent payment or distribution to or for the holders of the Affected Obligor Senior Debt. For purposes of this Article Fourteen only, the words "any payment or distribution of any kind or character, cash, property or securities" shall not be deemed to include a payment or distribution of equity or subordinated securities of the Affected Obligor provided for by a plan of reorganization or readjustment or of any other corporation provided for by such plan of reorganization or readjustment that, in the case of subordinated securities, are subordinated in right of payment to all then outstanding Affected Obligor Senior Debt to at least the same extent as the Notes or Subsidiary Notes Guarantees, as the case may be, are so subordinated as provided in this Article Fourteen. SECTION 1403. NO PAYMENT WHEN CERTAIN SENIOR DEBT IN DEFAULT. In the event that any Senior Payment Default (as defined below) shall have occurred and be continuing, then no Notes Payment shall be made unless and until such Senior Payment Default shall have been cured or waived or shall have ceased to exist or all amounts then due and payable in respect of the Specified Senior Debt or other obligations that are the subject of such Senior Payment Default shall have been paid in full. For purposes hereof, "Senior Payment Default" means any default in the payment of principal of (or premium, if 123 112 any), or interest on, Specified Senior Debt, the payment of commitment, facility or other fees, letter of credit fees or agency fees under the Credit Facility, or payments with respect to letter of credit reimbursement arrangements with the Credit Facility Agent, when due, whether at the Stated Maturity of any such payment or by declaration of acceleration, call for redemption or otherwise. In the event that any Senior Nonmonetary Default (as defined below) shall have occurred and be continuing, then, upon the receipt by the Company and the Trustee of written notice of such Senior Nonmonetary Default from the Credit Facility Agent or from an authorized Person on behalf of any holder of Specified Senior Debt, no Notes Payment shall be made during the period (the "Payment Blockage Period") commencing on the date of receipt of such written notice (the "Blockage Notice") and ending on the earliest of (i) the 179th day after the date of such receipt of the Blockage Notice (the "Initial Period"), (ii) the date, if any, on which the Specified Senior Debt to which such default relates is discharged or such default is waived or otherwise cured and (iii) the date, if any, on which such Payment Blockage Period shall have been terminated by written notice to the Company or the Trustee from the Credit Facility Agent or from the Person who gave the Blockage Notice. Any number of additional Payment Blockage Periods may be commenced during the Initial Period; provided, however, that no such additional Payment Blockage Periods shall extend beyond the Initial Period. After the expiration of the Initial Period, no Payment Blockage Period may be commenced until at least 181 consecutive days shall have elapsed from the last day of the Initial Period. No Senior Nonmonetary Default that existed or was continuing on the date of commencement of any Payment Blockage Period with respect to the Specified Senior Debt initiating such Payment Blockage Period shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period unless such Senior Nonmonetary Default shall have been cured or waived for a period of not less than 90 consecutive days. For purposes hereof, "Senior Nonmonetary Default" means the occurrence or existence of any event, circumstance, condition or state of facts that, by the terms of any instrument pursuant to which any Specified Senior Debt is outstanding, permits one or more holders of such Specified Senior Debt (or a trustee or agent on behalf of the holders thereof) to declare such Specified Senior Debt due and payable prior to the date on which it would otherwise become due and payable, other than a Senior Payment Default. In the event that, notwithstanding the foregoing, the Company or any Subsidiary Notes Guarantor shall make any payment to the Trustee or any Holder prohibited by the foregoing provisions of this Section 1403, then such payment shall be held in trust for the holders of the Affected Obligor Senior Debt and shall be paid over and delivered forthwith to the holders of the Affected Obligor Senior Debt remaining unpaid, to the extent necessary to pay in full all the Affected Obligor Senior Debt. 124 113 SECTION 1404. PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in this Article Fourteen or elsewhere in this Indenture or in any of the Notes shall, at any time except during the pendency of any Proceeding referred to in Section 1402 or under the conditions described in Section 1403, prevent (a) the Company or any Subsidiary Notes Guarantor from making Notes Payments, or (b) the application by the Trustee of any money deposited with it hereunder to Notes Payments or the retention of such payment by the Holders. SECTION 1405. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT. Subject to the payment in full of all Senior Debt, the rights of the Holders of the Notes shall be subrogated to the rights of the holders of such Senior Debt to receive payments and distributions of cash, property and securities applicable to the Senior Debt until the principal of (and premium, if any) and interest on the Notes shall be paid in full. Subject to the payment in full of all Subsidiary Guarantor Senior Debt, the rights of the Holders of the Notes shall be subrogated to the rights of the holders of such Subsidiary Guarantor Senior Debt to receive payments and distributions of cash, property and securities applicable to such Subsidiary Guarantor Senior Debt until the principal of (and premium, if any) and interest on the Notes shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Debt or Subsidiary Guarantor Senior Debt of any cash, property or securities to which the Holders of the Notes or the Trustee would be entitled except for the provisions of this Article Fourteen, and no payments over pursuant to the provisions of this Article Fourteen to the holders of Senior Debt or Subsidiary Guarantor Senior Debt by Holders of the Notes or the Trustee, shall, as among the Company, its creditors other than holders of Senior Debt and the Subsidiary Guarantor Senior Debt and the Holders of the Notes, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt. Neither the Holders of the Notes nor the Trustee shall have any claim against the holders of the Senior Debt or the Credit Facility Agent for any impairment of the subrogation rights herein granted arising out of any release of Liens securing the Senior Debt or the Subsidiary Guarantor Senior Debt. SECTION 1406. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of this Article Fourteen are and are intended solely for the purpose of defining the relative rights of the Holders on the one hand and the holders of Senior Debt and Subsidiary Guarantor Senior Debt on the other hand. Nothing contained in this Article Fourteen or elsewhere in this Indenture or in the Notes is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Debt and the Holders of the Notes, the obligation of the Company, which is absolute and unconditional (and which, subject to the rights under this Article Fourteen of the holders of Senior Debt, is intended to rank equally with all other general obligations of the Company) to pay to the Holders of the Notes the principal of 125 114 (and premium, if any) and interest on the Notes as and when the same shall become due and payable in accordance with their terms; or (b) impair, as among the Subsidiary Notes Guarantors, their creditors other than holders of Subsidiary Guarantor Senior Debt and the Holders of the Notes, the obligation of the Subsidiary Notes Guarantors, which is absolute and unconditional (and which, subject to the rights under this Article Fourteen of the holders of Subsidiary Guarantor Senior Debt, is intended to rank equally with all other general obligations of the Subsidiary Notes Guarantors) to pay to the Holders of the Notes the principal of (and premium, if any) and interest on the Notes as and when the same shall become due and payable in accordance with their terms; or (c) affect the relative rights against the Company of the Holders of the Notes and creditors of the Company other than the holders of Senior Debt or the relative rights against the Subsidiary Notes Guarantors of the Holders of the Notes and creditors of the Subsidiary Notes Guarantors other than the Holders of Subsidiary Guarantor Senior Debt; or (d) prevent the Trustee or the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Fourteen of the holders of Senior Debt and Subsidiary Guarantor Senior Debt to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. The holders of the Senior Debt and the Credit Facility Agent, as the case may be, shall be entitled to enforce the provisions of this Article Fourteen against the Company, the Subsidiary Notes Guarantors, the Holders of the Notes and the Trustee. SECTION 1407. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of a Note by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Fourteen and appoints the Trustee his attorney-in-fact for any and all such purposes. SECTION 1408. NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present or future holder of any Senior Debt or Subsidiary Guarantor Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or any Subsidiary Notes Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company or any Subsidiary Notes Guarantor with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such Holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt or Subsidiary Guarantor Senior Debt, as the case may be, may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Trustee or the Holders of the Notes and without impairing or releasing the subordination provided in this Article Fourteen or the obligations hereunder of 126 115 the Holders of the Notes to the holders of Senior Debt or Subsidiary Guarantor Senior Debt, as the case may be, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt or Subsidiary Guarantor Senior Debt, as the case may be, or otherwise amend or supplement in any manner Senior Debt or Subsidiary Guarantor Senior Debt, as the case may be, or any instrument evidencing the same or any agreement under which Senior Debt or Subsidiary Guarantor Senior Debt, as the case may be, is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt or any Subsidiary Guarantor Senior Debt, as the case may be; (iii) release any Person liable in any manner for the collection of Senior Debt or any Subsidiary Guarantor Senior Debt, as the case may be; and (iv) exercise or refrain from exercising any rights against the Company or any Subsidiary Notes Guarantor and any other Person. SECTION 1409. NOTICE TO TRUSTEE. The Company and each Subsidiary Notes Guarantor shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Notes and of any subsequent cure or waiver thereof. Notwithstanding the provisions of this Article Fourteen or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Notes, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Debt or a holder of Subsidiary Guarantor Senior Debt or from any trustee or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 601, shall be entitled in all respects to assume that no such facts exist. Subject to the provisions of Section 601, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Debt or a holder of Subsidiary Guarantor Senior Debt (or a trustee or agent therefor) to establish that such notice has been given by a holder of Senior Debt or a holder of Subsidiary Guarantor Senior Debt (or a trustee or agent therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt or a holder of Subsidiary Guarantor Senior Debt, as the case may be, to participate in any payment or distribution pursuant to this Article Fourteen, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt or Subsidiary Guarantor Senior Debt, as the case may be, held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Fourteen, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. 127 116 SECTION 1410. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATION AGENT. Upon any payment or distribution of assets of the Company or any Subsidiary Notes Guarantor referred to in this Article Fourteen, the Trustee, subject to the provisions of Section 601, and the Holders of the Notes shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in a Proceeding, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Notes, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt, Subsidiary Guarantor Senior Debt and other indebtedness of the Company and the Subsidiary Notes Guarantors, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Fourteen. SECTION 1411. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT. Except to the extent of its obligations under the penultimate paragraph of Section 1402 and the last paragraph of Section 1403, the Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt or Subsidiary Guarantor Senior Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Notes or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt or Subsidiary Guarantor Senior Debt shall be entitled by virtue of this Article Fourteen or otherwise. The Trustee's duties with respect to holders of Senior Debt and Subsidiary Guarantor Senior Debt are limited to those specifically set forth in this Indenture, and no implied covenants or obligations shall be construed by any provision hereof. SECTION 1412. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION OF TRUSTEE'S RIGHTS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article Fourteen with respect to any Senior Debt or Subsidiary Guarantor Senior Debt which may at any time be held by it, to the same extent as any other holder of Senior Debt or Subsidiary Guarantor Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article Fourteen shall apply to claims of, or payments to, the Trustee under or pursuant to Section 607. 128 SECTION 1413. APPLICABILITY TO PAYING AGENTS. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article Fourteen shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article Fourteen in addition to or in place of the Trustee; provided, however, that this Section 1413 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. SECTION 1414. DEFEASANCE OF THIS ARTICLE FOURTEEN. The subordination of the Notes and the Subsidiary Notes Guarantees provided by this Article Fourteen is expressly made subject to the provisions for Legal Defeasance or Covenant Defeasance in Article Twelve hereof and, anything herein to the contrary notwithstanding, upon the effectiveness of any such Legal Defeasance or Covenant Defeasance, the Notes and the Subsidiary Notes Guarantees then outstanding shall thereupon cease to be subordinated pursuant to this Article Fourteen. SECTION 1415. SUBORDINATION PROVISIONS CONTROLLING. Notwithstanding anything to the contrary contained in this Indenture, to the extent that any provision contained in Articles One (other than Section 101) through Thirteen of this Indenture conflicts with any provision contained in Article Fourteen (including the definitions of certain terms used in Article Fourteen) of this Indenture, the provisions contained in Article Fourteen of this Indenture shall govern and control. 129 118 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. CITADEL BROADCASTING COMPANY, a Nevada corporation By /s/ Lawrence R. Wilson --------------------------- Name: Lawrence R. Wilson Title: President CITADEL LICENSE, INC., as Guarantor By /s/ Lawrence R. Wilson --------------------------- Name: Lawrence R. Wilson Title: President THE BANK OF NEW YORK, as Trustee By /s/ Steve Giurlando --------------------------- Name: Steve Giurlando Title: Assistant Vice-President EX-4.2 13 CITADEL BROADCASTING CO. S-4 1 Exhibit 4.2 =============================================================================== CITADEL BROADCASTING COMPANY, Issuer CITADEL LICENSE, INC., Guarantor and THE BANK OF NEW YORK, Debentures Trustee -------------------- INDENTURE Dated as of July 1, 1997 --------------------- 13-1/4% Exchange Debentures due 2009 13-1/4% Series B Exchange Debentures due 2009 =============================================================================== 2 CITADEL BROADCASTING COMPANY RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND INDENTURE, DATED AS OF JULY 1, 1997
TRUST INDENTURE ACT SECTION INDENTURE SECTION Section 310(a)(1) ............................... 608 (a)(2) ............................... 608 (b) ............................... 609 Section 312(a) ............................... 701 (c) ............................... 702 Section 313(a) ............................... 703 (c) ............................... 703 Section 314(a)(4) ............................... 1010(a) (c)(1) ............................... 102 (c)(2) ............................... 102 (e) ............................... 102 Section 315(a) ............................... 601(a) (b) ............................... 602 (c) ............................... 601(b) (d) ............................... 601(c), 603 316(a)(last sentence) ............................... 101 ("Outstanding") (a)(1)(A) ............................... 502, 512 (a)(1)(B) ............................... 513 (b) ............................... 508 (c) ............................... 104(d) Section 317(a)(1) ............................... 503 (a)(2) ............................... 504 (b) ............................... 1003 Section 318(a) ............................... 111
- -------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. 3 TABLE OF CONTENTS
PAGE PARTIES................................................................... 1 RECITALS OF THE COMPANY................................................... 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions.................................................. 2 Acquired Debt.............................................. 2 Act........................................................ 3 Affiliate.................................................. 3 Agent...................................................... 3 Asset Sale................................................. 3 Asset Sale Offer........................................... 3 Asset Swap................................................. 3 Authenticating Agent....................................... 4 Bankruptcy Law............................................. 4 Banks .................................................... 4 Board of Directors......................................... 4 Board Resolution........................................... 4 Business Day............................................... 4 Capital Stock.............................................. 4 Capitalized Lease Obligation............................... 4 Certificate of Designation................................. 4 Change of Control.......................................... 5 Change of Control Offer.................................... 5 Change of Control Payment.................................. 5 Change of Control Purchase Date............................ 5 Citadel Communications..................................... 5 Closing Date............................................... 5 Commission................................................. 5 Company.................................................... 6 Company Request or Company Order........................... 6 Consolidated Adjusted Net Income........................... 6 Consolidated Cash Flow..................................... 6 Consolidated Cash Flow Ratio............................... 7 - --------
Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. 4 ii
PAGE Consolidated Fixed Charges................................. 7 Corporate Trust Office..................................... 8 Covenant Defeasance........................................ 8 Credit Facility............................................ 8 Credit Facility Agent...................................... 8 Custodian.................................................. 8 Debentures Trustee......................................... 8 Debt....................................................... 8 Default.................................................... 9 Defaulted Interest......................................... 9 Depositary................................................. 9 Disinterested Director..................................... 9 Disqualified Stock......................................... 9 Event of Default........................................... 10 Excess Proceeds............................................ 10 Exchange Act............................................... 10 Exchange Date.............................................. 10 Exchange Debentures........................................ 10 Exchange Debentures Exchange Offer......................... 10 Exchange Debentures Exchange Offer Registration Statement.. 10 Exchange Debentures Register and Exchange Debentures Registrar 10 Exchange Debentures Registration Rights Agreement.......... 10 Exchange Debentures Shelf Registration Statement........... 10 Exchange Indenture......................................... 10 Exchangeable Preferred Stock............................... 10 FCC........................................................ 11 Generally Accepted Accounting Principles or GAAP........... 11 guarantee.................................................. 11 Hedging Obligations........................................ 11 Holder .................................................... 11 Indenture Obligations...................................... 11 Initial Exchange Debentures................................ 11 Initial Purchasers......................................... 11 Interest Payment Date...................................... 11 Investment................................................. 12 Junior Subordinated Debt................................... 12 Legal Defeasance........................................... 12 License Subsidiary......................................... 12 Lien....................................................... 12 Net Cash Proceeds.......................................... 12
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PAGE New Exchange Debentures.................................... 13 Notes...................................................... 13 Offered Price.............................................. 13 Officers' Certificate...................................... 13 Opinion of Counsel......................................... 13 Outstanding................................................ 13 Pari Passu Debt............................................ 14 Paying Agent............................................... 14 Permitted Debt............................................. 14 Permitted Investments...................................... 15 Person..................................................... 16 Predecessor Exchange Debenture............................. 16 Preferred Stock............................................ 16 Public Equity Offering..................................... 16 QIB........................................................ 16 Qualified Equity Interest.................................. 16 Qualified Stock............................................ 16 Redemption Date............................................ 16 Redemption Price........................................... 16 Regular Record Date........................................ 16 Responsible Officer........................................ 16 Restricted Subsidiary...................................... 17 Rule 144A.................................................. 17 Securities Act............................................. 17 Senior Debt................................................ 17 Senior Subordinated Debt................................... 17 Significant Subsidiary..................................... 18 Special Record Date........................................ 18 Specified Senior Debt...................................... 18 Stated Maturity............................................ 18 Subordinated Debt.......................................... 18 Subsidiary................................................. 19 Subsidiary Debentures Guarantee............................ 19 Subsidiary Debentures Guarantor............................ 19 Subsidiary Guarantor Senior Debt........................... 19 Subsidiary Guarantor Senior Subordinated Debt.............. 19 Subsidiary Notes Guarantee................................. 20 Trust Indenture Act or TIA................................. 20 Unrestricted Subsidiary.................................... 20 U.S. Government Obligations................................ 20
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PAGE Vice President............................................. 21 Voting Stock............................................... 21 Voting Trust Agreement..................................... 21 Weighted Average Life...................................... 21 Wholly Owned Restricted Subsidiary......................... 21 SECTION 102. Compliance Certificates and Opinions........................ 21 SECTION 103. Form of Documents Delivered to Debentures Trustee........... 22 SECTION 104. Acts of Holders............................................. 23 SECTION 105. Notices, Etc., to Debentures Trustee, the Company and Subsidiary Debentures Guarantors.......................... 24 SECTION 106. Notice to Holders; Waiver................................... 25 SECTION 107. Effect of Headings and Table of Contents.................... 25 SECTION 108. Successors and Assigns...................................... 25 SECTION 109. Separability Clause......................................... 25 SECTION 110. Benefits of Indenture....................................... 26 SECTION 111. Governing Law............................................... 26 SECTION 112. Legal Holidays.............................................. 26 SECTION 113. No Personal Liability of Directors, Officers, Employees, Stockholders or Incorporators............................. 26 SECTION 114. Counterparts................................................ 27 ARTICLE TWO EXCHANGE DEBENTURE FORMS SECTION 201. Forms Generally............................................. 27 SECTION 202. Restrictive Legends......................................... 28 SECTION 203. [INTENTIONALLY OMITTED]..................................... 30 SECTION 204. Form of Face of Exchange Debenture.......................... 30 SECTION 205. Form of Reverse of Exchange Debenture....................... 33 SECTION 206. Form of Debentures Trustee's Certificate of Authentication......................................... 41 ARTICLE THREE THE EXCHANGE DEBENTURES SECTION 301. Title and Terms............................................. 42 SECTION 302. Denominations............................................... 43 SECTION 303. Execution, Authentication, Delivery and Dating.............. 43 SECTION 304. Temporary Exchange Debentures............................... 45
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PAGE SECTION 305. Registration, Registration of Transfer and Exchange.......... 45 SECTION 306. Book-Entry Provisions for the Global Exchange Debenture...... 47 SECTION 307. Special Transfer Provisions.................................. 48 SECTION 308. Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Institutional Accredited Investors.... 50 SECTION 309. [INTENTIONALLY OMITTED]...................................... 53 SECTION 310. Mutilated, Destroyed, Lost and Stolen Exchange Debentures.... 53 SECTION 311. Payment of Interest; Interest Rights Preserved............... 54 SECTION 312. Persons Deemed Owners........................................ 55 SECTION 313. Cancellation................................................. 55 SECTION 314. Computation of Interest...................................... 56 SECTION 315. CUSIP Numbers................................................ 56 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture...................... 56 SECTION 402. Application of Trust Money................................... 58 ARTICLE FIVE REMEDIES SECTION 501. Events of Default............................................ 58 SECTION 502. Acceleration of Maturity; Rescission and Annulment........... 60 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Debentures Trustee..................................... 61 SECTION 504. Debentures Trustee May File Proofs of Claim.................. 62 SECTION 505. Debentures Trustee May Enforce Claims Without Possession of Exchange Debentures.................................... 63 SECTION 506. Application of Money Collected............................... 63 SECTION 507. Limitation on Suits.......................................... 64 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest................................................. 64 SECTION 509. Restoration of Rights and Remedies........................... 65 SECTION 510. Rights and Remedies Cumulative............................... 65 SECTION 511. Delay or Omission Not Waiver................................. 65 SECTION 512. Control by Holders........................................... 65 SECTION 513. Waiver of Past Defaults...................................... 66
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PAGE SECTION 514. Waiver of Stay or Extension Laws............................. 66 SECTION 515. Undertaking for Costs........................................ 67 ARTICLE SIX THE DEBENTURES TRUSTEE SECTION 601. Certain Duties and Responsibilities.......................... 67 SECTION 602. Notice of Defaults........................................... 68 SECTION 603. Certain Rights of Debentures Trustee......................... 69 SECTION 604. Debentures Trustee Not Responsible for Recitals or Issuance of Exchange Debentures.............................. 70 SECTION 605. May Hold Exchange Debentures................................. 70 SECTION 606. Money Held in Trust.......................................... 71 SECTION 607. Compensation and Reimbursement............................... 71 SECTION 608. Corporate Debentures Trustee Required; Eligibility........... 72 SECTION 609. Resignation and Removal; Appointment of Successor............ 72 SECTION 610. Acceptance of Appointment by Successor....................... 74 SECTION 611. Merger, Conversion, Consolidation or Succession to Business.. 74 ARTICLE SEVEN HOLDERS LISTS AND REPORTS BY DEBENTURES TRUSTEE SECTION 701. Company to Furnish Debentures Trustee Names and Addresses.... 75 SECTION 702. Disclosure of Names and Addresses of Holders................. 75 SECTION 703. Reports by Debentures Trustee................................ 76 ARTICLE EIGHT MERGER, CONSOLIDATION, OR SALE OF ASSETS SECTION 801. Company May Consolidate, Etc., Only on Certain Terms......... 76 SECTION 802. Successor Substituted........................................ 77 ARTICLE NINE SUPPLEMENTS AND AMENDMENTS TO INDENTURE SECTION 901. Supplemental Indentures Without Consent of Holders........... 77
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PAGE SECTION 902. Supplemental Indentures with Consent of Holders.............. 78 SECTION 903. Execution of Supplemental Indentures......................... 79 SECTION 904. Effect of Supplemental Indentures............................ 79 SECTION 905. Conformity with Trust Indenture Act.......................... 80 SECTION 906. Reference in Exchange Debentures to Supplemental Indentures.. 80 SECTION 907. Notice of Supplemental Indentures............................ 80 SECTION 908. Effect on Senior Debt and Senior Subordinated Debt........... 80 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, If Any, and Interest.......... 80 SECTION 1002. Maintenance of Office or Agency.............................. 81 SECTION 1003. Money for Exchange Debenture Payments to Be Held in Trust.... 81 SECTION 1004. Corporate Existence.......................................... 83 SECTION 1005. Payment of Taxes and Other Claims............................ 83 SECTION 1006. Maintenance of Properties.................................... 83 SECTION 1007. Insurance ................................................... 84 SECTION 1008. Compliance with Laws......................................... 84 SECTION 1009. Limitation on Debt........................................... 84 SECTION 1010. Limitation on Restricted Payments............................ 87 SECTION 1011. Purchase of Exchange Debentures upon a Change of Control..... 91 SECTION 1012. Limitation on Certain Asset Sales............................ 93 SECTION 1013. Limitation on Asset Swaps.................................... 95 SECTION 1014. Limitation on Transactions with Affiliates................... 96 SECTION 1015. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries............................ 97 SECTION 1016. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries...................................... 98 SECTION 1017. Limitation on Unrestricted Subsidiaries...................... 99 SECTION 1018. Limitation on Other Subordinated Debt........................ 99 SECTION 1019. Subsidiary Debentures Guarantees.............................100 SECTION 1020. Limitation on Guarantees of Debt by Restricted Subsidiaries..100 SECTION 1021. Limitation on Liens..........................................100 SECTION 1022. Commission Reports and Reports to Holders....................101 SECTION 1023. Statement as to Compliance...................................101 SECTION 1024. Delivery of Certain Information..............................102
10 viii ARTICLE ELEVEN REDEMPTION OF EXCHANGE DEBENTURES
PAGE SECTION 1101. Redemption...................................................102 SECTION 1102. Applicability of Article.....................................102 SECTION 1103. Election to Redeem; Notice to Debentures Trustee.............103 SECTION 1104. Selection by Debentures Trustee of Exchange Debentures to Be Redeemed................................................103 SECTION 1105. Notice of Redemption.........................................103 SECTION 1106. Deposit of Redemption Price..................................105 SECTION 1107. Exchange Debentures Payable on Redemption Date...............105 SECTION 1108. Exchange Debentures Redeemed in Part.........................105 ARTICLE TWELVE LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 1201. Company's Option to Effect Legal Defeasance or Covenant Defeasance..............................................106 SECTION 1202. Legal Defeasance and Discharge...............................106 SECTION 1203. Covenant Defeasance..........................................107 SECTION 1204. Conditions to Legal Defeasance or Covenant Defeasance........107 SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions...................108 SECTION 1206. Reinstatement................................................109 ARTICLE THIRTEEN SUBSIDIARY DEBENTURES GUARANTEES SECTION 1301. Subsidiary Debentures Guarantees.............................110 SECTION 1302. Guaranty Absolute............................................111 SECTION 1303. Waivers ...................................................113 SECTION 1304. Subrogation..................................................114 SECTION 1305. No Waiver; Remedies..........................................114 SECTION 1306. Continuing Guaranty; No Right of Set-Off; Independent Obligation..............................................114 SECTION 1307. Subsidiary Debentures Guarantors May Consolidate, Etc. on Certain Terms........................................115
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PAGE SECTION 1308. Additional Subsidiary Debentures Guarantors..................115 SECTION 1309. Releases ...................................................116 ARTICLE FOURTEEN SUBORDINATION OF SECURITIES SECTION 1401. Exchange Debentures and Subsidiary Debentures Guarantees Subordinate to Senior Debt and Senior Subordinated Debt.117 SECTION 1402. Payment Over of Proceeds Upon Dissolution, Etc...............117 SECTION 1403. No Payment When Certain Senior Debt and Senior Subordinated Debt in Default.........................................119 SECTION 1404. Payment Permitted If No Default..............................120 SECTION 1405. Subrogation to Rights of Holders of Senior Debt and Senior Subordinated Debt.......................................120 SECTION 1406. Provisions Solely to Define Relative Rights..................121 SECTION 1407. Debentures Trustee to Effectuate Subordination...............122 SECTION 1408. No Waiver of Subordination Provisions........................122 SECTION 1409. Notice to Debentures Trustee.................................123 SECTION 1410. Reliance on Judicial Order or Certificate of Liquidation Agent...................................................123 SECTION 1411. Debentures Trustee Not Fiduciary for Holders of Senior Debt and Senior Subordinated Deb..................................124 SECTION 1412. Rights of Debentures Trustee as Holder of Senior Debt and Senior Subordinated Debt; Preservation of Debentures Trustee's Rights.............................................124 SECTION 1413. Applicability to Paying Agents...............................124 SECTION 1414. Defeasance of this Article Fourteen..........................125 SECTION 1415. Subordination Provisions Controlling.........................125 SIGNATURES..................................................................126
12 INDENTURE, dated as of July 1, 1997, among CITADEL BROADCASTING COMPANY, a corporation duly organized and existing under the laws of the State of Nevada (the "Company"), having its principal office at 140 South Ash Avenue, Tempe, Arizona 85281, CITADEL LICENSE, INC., a wholly owned subsidiary of the Company, as guarantor (the "Subsidiary Debentures Guarantor"), having its principal office at 140 South Ash Avenue, Tempe, Arizona 85281 and THE BANK OF NEW YORK, a New York banking corporation, as trustee (the "Debentures Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of (and, with respect to clause (a) below, the issuance of) (a) its 13-1/4% Exchange Debentures due 2009 (the "Initial Exchange Debentures"), (b) its 13-1/4% Series B Exchange Debentures due 2009 (the "New Exchange Debentures"), of substantially the tenor and amount hereinafter set forth and (c) any additional 13-1/4% Exchange Debentures due 2009 issued in lieu of interest payments in money, as provided for in this Exchange Indenture and in the Exchange Debentures (together with the Initial Exchange Debentures and New Exchange Debentures, the "Exchange Debentures") and to provide therefor the Company has duly authorized the execution and delivery of this Exchange Indenture. Upon the effectiveness of the Exchange Debentures Exchange Offer Registration Statement (as defined herein) or the Exchange Debentures Shelf Registration Statement (as defined herein), this Exchange Indenture shall be subject to, and shall be governed by, the provisions of the Trust Indenture Act of 1939, as amended, that are required or deemed to be part of and to govern indentures qualified thereunder. All things necessary have been done to make the Exchange Debentures, when executed and duly issued by the Company and authenticated and delivered hereunder by the Debentures Trustee or the Authenticating Agent, the valid obligations of the Company and to make this Exchange Indenture a valid agreement of the Company in accordance with their and its terms. NOW, THEREFORE, THIS EXCHANGE INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Exchange Debentures by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Exchange Debentures, as follows: 13 2 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Exchange Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article, and words in the singular include the plural as well as the singular, and words in the plural include the singular as well as the plural; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein, and the terms "cash transaction" and "self-liquidating paper," as used in TIA Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with Generally Accepted Accounting Principles; (d) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Exchange Indenture as a whole and not to any particular Article, Section or other subdivision; (e) the word "or" is not exclusive; and (f) provisions of this Exchange Indenture apply to successive events and transactions. Certain terms, used principally in Articles Two, Ten, Twelve, Thirteen and Fourteen, are defined in those Articles. "Acquired Debt" means Debt of a Person (a) existing at the time such Person is merged with or into the Company or becomes a Subsidiary, (b) assumed in connection with the acquisition of assets from such Person or (c) secured by a Lien encumbering assets acquired from such Person. 14 3 "Act," when used with respect to any Holder, has the meaning set forth in Section 104. "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with 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 the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Paying Agent, Authenticating Agent and Exchange Debenture Registrar under this Exchange Indenture. "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") by the Company or a Restricted Subsidiary, directly or indirectly, in one or a series of related transactions, to any Person other than the Company or a Restricted Subsidiary of (a) any Capital Stock of any of its Restricted Subsidiaries, (b) all or substantially all of the properties and assets of the Company and any of its Restricted Subsidiaries representing a division or line of business or (c) any other properties or assets of the Company or any of its Restricted Subsidiaries, other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" does not include any transfer of properties or assets (a) that is governed by the provisions of this Exchange Indenture described under (i) Article Eight or (ii) Section 1013, (b) between or among the Company and any of its Restricted Subsidiaries pursuant to transactions that do not violate any other provision of this Exchange Indenture, (c) to an Unrestricted Subsidiary, if permitted under Section 1010, (d) representing obsolete or permanently retired equipment, (e) the gross proceeds of which (exclusive of indemnities) do not exceed $100,000 for any particular item or $500,000 in the aggregate for any fiscal year or (f) the transfer of up to $500,000 of property and assets, including cash, to a joint venture in which the Company or a Restricted Subsidiary has an equity interest, which joint venture is engaged in the internet service provider business. "Asset Sale Offer" has the meaning set forth in Section 1012 herein. "Asset Swap" means the execution of one or more definitive agreements, subject only to FCC approval, if applicable, and other customary closing conditions, which the Company in good faith believes shall be satisfied, for a substantially concurrent purchase and sale, or exchange, or "deferred exchange" (for no more than 180 days) under Section 1031(a)(3) of the Internal Revenue Code of 1986, as amended, of assets used in the broadcast or related businesses between the Company or any of its Restricted Subsidiaries and one or more other Persons or groups of affiliated Persons; provided that any amendment to or waiver of any 15 4 closing conditions that individually or in the aggregate are material to the Asset Swap shall be deemed to be a new Asset Swap. "Authenticating Agent" means the Person appointed, if any, by the Debentures Trustee as an authenticating agent pursuant to the last paragraph of Section 303. "Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as amended, or any similar United States federal or state or foreign 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. "Banks" means the banks and other financial institutions that from time to time are lenders under the Credit Facility. "Board of Directors" means, with respect to any Person, either the board of directors of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the secretary or an assistant secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Debentures Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close. "Capital Stock" of any Person means any and all shares, interests, partnership interests, participations, rights in or other equivalents (however designated) of such Person's equity (however designated). "Capitalized Lease Obligation" means, with respect to any Person, an obligation incurred or assumed under or in connection with any capital lease of real or personal property that, in accordance with GAAP, has been recorded as a capitalized lease on the balance sheet of such Person. "Certificate of Designation" means the document setting forth the terms of the Exchangeable Preferred Stock, as filed with the Secretary of State of Nevada on July 2, 1997, as amended from time to time. 16 5 "Change of Control" means the occurrence 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 Lawrence R. Wilson, Scott E. Smith, John E. von Schlegell, Baker, Fentress & Company, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., The Endeavour Capital Fund Limited Partnership and any trustee, in its capacity as trustee under the Voting Trust Agreement or Citadel Communications, 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 a majority of the voting power of all classes of Voting Stock of the Company; (b) During any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election to such Board of Directors, or whose nomination for election by the stockholders of the Company, was approved by a vote of at least 66-2/3% 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 of the Company then in office; or (c) The Company is liquidated or dissolved or adopts a plan of liquidation or dissolution. "Change of Control Offer" has the meaning set forth in Section 1011 herein. "Change of Control Payment" has the meaning set forth in Section 1011 herein. "Change of Control Purchase Date" has the meaning set forth in Section 1011 herein. "Citadel Communications" means Citadel Communications Corporation, a Nevada corporation, and any successors thereof. "Closing Date" means the date on which the Exchangeable Preferred Stock is originally issued under the Certificate of Designation. "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 17 6 Exchange Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this Exchange Indenture, until a successor Person shall have become such pursuant to the applicable provisions of this Exchange Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company (i) by its chairman, a vice-chairman, its president or any vice president and (ii) by its treasurer, an assistant treasurer, its secretary or an assistant secretary and delivered to the Debentures Trustee; provided, however, that such written request or order may be signed by any two of the officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Consolidated Adjusted Net Income" means, for any period, the net income (or net loss) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, adjusted to the extent included in calculating such net income or loss by excluding (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 Sales, (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 of its Restricted Subsidiaries has an ownership interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries in cash during such period, (d) the net income (or loss) of any Person combined with the Company or any of its Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, and (e) the net income (but not the net loss) of any of its Restricted Subsidiaries to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is at the date of determination restricted, directly or indirectly, except to the extent that such net income could be paid to the Company or a Restricted Subsidiary thereof; provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated Adjusted Net Income shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Consolidated Adjusted Net Income otherwise attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1) the number of shares of outstanding common stock of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries divided by (2) the total number of shares of outstanding common stock of such Restricted Subsidiary on the last day of such period. "Consolidated Cash Flow" means, for any period, the sum of, without duplication, Consolidated Adjusted Net Income for such period, plus (or, in the case of clause (d) below, 18 7 plus or minus) the following items to the extent included in computing Consolidated Adjusted Net Income for such period: (a) the aggregate interest expense and preferred stock dividends of the Company and its Restricted Subsidiaries for such period, plus (b) the provision for federal, state, local and foreign income taxes of the Company and its Restricted Subsidiaries for such period, plus (c) the aggregate depreciation and amortization expense of the Company and any of its Restricted Subsidiaries for such period, plus (d) any other non-cash charges for such period, and minus non-cash credits for such period, other than non-cash charges or credits resulting from changes in prepaid assets or accrued liabilities in the ordinary course of business; provided that income tax expense, interest expense and preferred stock dividends, depreciation and amortization expense, and non-cash charges and credits of a Restricted Subsidiary shall be included in Consolidated Cash Flow only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Adjusted Net Income for such period. Solely for purposes of determining whether the Company could incur Debt pursuant to the first paragraph of Section 1009, if the Company is permitted to give pro forma effect to an In-Market Acquisition of a radio station pursuant to clause (iii) of the second paragraph of such Section, such calculation may also give pro forma effect to projected quantifiable improvements in operating results of such radio station due to cost reductions calculated in good faith by the Company and certified by an Officers' Certificate filed with the Debentures Trustee. As used in the preceding sentence, the term "In-Market Acquisition" means the acquisition of a radio station or group of radio stations serving a metropolitan statistical area in which the Company or its Subsidiaries has owned, or has operated under a local marketing agreement, one or more radio stations for at least the preceding six months. "Consolidated Cash Flow Ratio" means, at any date, the ratio of (i) the aggregate amount of Debt of the Company and its Restricted Subsidiaries on a consolidated basis as of the end of the immediately preceding four fiscal quarters for which internal financial statements of the Company are available (the "Reference Period") to (ii) the aggregate amount of Consolidated Cash Flow for such Reference Period. "Consolidated Fixed Charges" means, for any period, without duplication, the sum of (a) the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on a consolidated statement of operations 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 contracts (including amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) amortization of debt issuance costs, (v) the interest component of Capitalized Lease Obligations of the Company and any of its Restricted Subsidiaries, and (vi) the portion of any rental obligation of the Company and any of its Restricted Subsidiaries in respect of any sale and leaseback transaction allocable during such period to interest expense (determined as if it were treated as a Capitalized Lease Obligation), plus (b) all interest on any Debt of any other Person guaranteed by the Company or any of its Restricted Subsidiaries; provided, however, that 19 8 Consolidated Fixed Charges shall not include any gain or loss from extinguishment of debt, including any write-off of debt issuance costs. "Corporate Trust Office" means the principal corporate trust office of the Debentures Trustee, at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Exchange Indenture is located at 101 Barclay Street - 21W, New York New York 10286, except that with respect to presentation of Exchange Debentures for payment or for registration of transfer or exchange, such term shall mean any office or agency of the Debentures Trustee at which, at any particular time, its corporate agency business shall be conducted. "Covenant Defeasance" has the meaning set forth in Section 1203 herein. "Credit Facility" means the loan agreement dated October 9, 1996 among the Company, the Banks and the Credit Facility Agent, as amended, and as such agreement may be amended, restated, supplemented, replaced or refinanced or otherwise modified from time to time. "Credit Facility Agent" means the then acting Agent as defined in and under the Credit Facility or any successor thereto. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Debentures Trustee" means the Person named as the "Debentures Trustee" in the first paragraph of this Exchange Indenture until a successor Debentures Trustee shall have become such pursuant to the applicable provisions of this Exchange Indenture, and thereafter "Debentures Trustee" shall mean such successor Debentures Trustee. "Debt" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services, (e) every Capitalized Lease Obligation of such Person, (f) all Disqualified Stock of such Person valued at its maximum fixed repurchase price, plus accumulated and unpaid dividends, (g) all Hedging Obligations of such Person, and (h) every obligation of the types referred to in clauses (a) through (g) of another Person and all dividends of another Person (i) the payment of which, in either case, such Person has guaranteed or (ii) which is secured by any Lien on any property or asset of such Person, the amount of such Debt being deemed to be the lesser of the actual amount of the guarantee or the value of such 20 9 property or asset subject to such Lien, as the case may be, and the amount of the Debt so guaranteed or secured, as the case may be. For purposes of this definition, the "maximum fixed repurchase price" of any Disqualified Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were repurchased on any date on which Debt is required to be determined pursuant to this Exchange Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value shall be determined reasonably and in good faith by the board of directors of the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade accounts payable 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 Debt for purposes of this definition. The amount outstanding at any time of any Debt issued with original issue discount is the aggregate principal amount at maturity of such Debt, less the remaining unamortized portion of the original issue discount of such Debt at such time, as determined in accordance with GAAP. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Defaulted Interest" has the meaning set forth in Section 311. "Depositary" means The Depository Trust Company, its nominees and successors. "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors is required to deliver a resolution of the Board of Directors, to make a finding or otherwise take action under this Exchange Indenture, a member of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Disqualified Stock" means any class or series of Capital Stock that, either by its terms (or by the terms of any security into which it is convertible or exchangeable by contract or otherwise), 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, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof, in whole or in part, prior to one year after the Stated Maturity of the Exchange Debentures; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to cause the issuer thereof to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to one year after the Stated Maturity of the Exchange Debentures will not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Sections 1011 and 1012 of this Exchange Indenture and such Capital Stock specifically provides that the issuer will not repurchase or redeem any such Capital Stock pursuant to such provision prior to 21 10 the Company's repurchase of such Exchange Debentures as are required to be repurchased pursuant to Sections 1011 and 1012 of this Exchange Indenture. "Event of Default" has the meaning set forth in Section 501 herein "Excess Proceeds" has the meaning set forth in Section 1012 herein. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Date" means the date fixed by the Company for the exchange of the Exchangeable Preferred Stock into the Exchange Debentures. "Exchange Debentures" has the meaning stated in the first recital of this Exchange Indenture and more particularly means any Exchange Debentures authenticated and delivered under this Exchange Indenture. "Exchange Debentures Exchange Offer" means the offer by the Company to the Holders of the Initial Exchange Debentures to exchange all of the Initial Exchange Debentures for New Exchange Debentures, as provided for in the Exchange Debentures Registration Rights Agreement. "Exchange Debentures Exchange Offer Registration Statement" means the Exchange Debentures Exchange Offer Registration Statement as defined in the Exchange Debentures Registration Rights Agreement. "Exchange Debentures Register" and "Exchange Debentures Registrar" have the respective meanings specified in Section 305. "Exchange Debentures Registration Rights Agreement" means the Exchange Debentures Registration Rights Agreement, dated as of July 1, 1997, among the Company, the Subsidiary Debentures Guarantors and the Initial Purchasers. "Exchange Debentures Shelf Registration Statement" means the Exchange Debentures Shelf Registration Statement as defined in the Exchange Debentures Registration Rights Agreement. "Exchange Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Exchangeable Preferred Stock" means the 13-1/4% Series A Exchangeable Preferred Stock, no par value, of the Company. 22 11 "FCC" means the Federal Communications Commission, which has jurisdiction over the ownership, operation and sale of the Company's broadcast stations. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, consistently applied, that are in effect on the Closing Date. "guarantee" means, as applied to any obligation, (a) 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 (b) 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 limitation, the payment of amounts drawn down under letters of credit. "Hedging Obligations" means the obligations of any Person under (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (b) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or the value of foreign currencies. "Holder" means the Person in whose name an Exchange Debenture is registered in the Exchange Debenture Register. "Indenture Obligations" means the obligations of the Company and any other obligor hereunder or under the Exchange Debentures, including the Subsidiary Debentures Guarantors, to pay principal of (and premium, if any) and interest on the Exchange Debentures when due and payable at maturity, and all other amounts due or to become due under or in connection with this Exchange Indenture, the Exchange Debentures and the performance of all other obligations to the Debentures Trustee (including all amounts due to the Debentures Trustee under Section 607 hereof) and the Holders under this Exchange Indenture and the Exchange Debentures, according to the terms hereof and thereof. "Initial Exchange Debentures" has the meaning specified in the recitals to this Exchange Indenture. "Initial Purchasers" means Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities Inc., as purchasers of the Initial Exchange Debentures. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Exchange Debentures. 23 12 "Investment" (in any Person) means (a) directly or indirectly, any advance, loan or other extension of credit (including, without limitation, by way of guarantee or similar arrangement) or capital contribution to any Person, the purchase or other acquisition of any stock, bonds, notes, debentures or other securities issued by such Person or the acquisition (by purchase or otherwise) of all or substantially all of the business or assets of such Person or the making of any investment in such Person, (b) the designation of any Restricted Subsidiary as an Unrestricted Subsidiary and (c) the transfer of any assets or properties from the Company or a Restricted Subsidiary to any Unrestricted Subsidiary, other than the transfer of assets or properties made in the ordinary course of business. Investments shall exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. "Junior Subordinated Debt" means Debt of the Company that is subordinated in right of payment to the Subordinated Debt. "Legal Defeasance" has the meaning set forth in Section 1202 herein. "License Subsidiary" means Citadel License, Inc. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, assignment for security, claim, preference, 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 that 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. "Net Cash Proceeds" means, 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 of for, cash or cash equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any of its Restricted Subsidiaries), net of (a) brokerage commissions and other fees and expenses (including fees and expenses of legal counsel and investment banks) related to such Asset Sale, (b) provisions for all taxes payable as a result of such Asset Sale, (c) payments made to retire Debt where payment of such Debt is secured by the assets that are the subject of such Asset Sale, (d) amounts required to be paid to any Person (other than the Company or any of its Restricted Subsidiaries) owning a beneficial interest in the assets that are subject to the Asset Sale and (e) appropriate amounts to be provided by the Company or any of its Restricted Subsidiaries, 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 seller after such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. 24 13 "New Exchange Debentures" has the meaning stated in the first recital of this Exchange Indenture and refers to any New Exchange Debentures containing terms substantially identical to the Initial Exchange Debentures (except that (i) such New Exchange Debentures shall not contain terms with respect to transfer restrictions and shall be registered under the Securities Act, and (ii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated) that are issued and exchanged for the Initial Exchange Debentures in accordance with the Exchange Debentures Exchange Offer, as provided for in the Exchange Debentures Registration Rights Agreement and this Exchange Indenture. "Notes" means the $100,000,000 10-1/4% Senior Subordinated Notes of the Company due 2007. "Offered Price" has the meaning set forth in Section 1012 herein. "Officers' Certificate" means a certificate signed on behalf of the Company by two officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company that meets the requirements set forth in Section 102. "Opinion of Counsel" means a written opinion of counsel, which and who are reasonably acceptable to, and addressed to, the Debentures Trustee complying with the requirements of Section 102. Unless otherwise required by the TIA, such legal counsel may be an employee of or counsel to the Company or the Debentures Trustee. "Outstanding," when used with respect to Exchange Debentures, means, as of the date of determination, all Exchange Debentures theretofore authenticated and delivered under this Exchange Indenture, except: (i) Exchange Debentures theretofore cancelled by the Debentures Trustee or delivered to the Debentures Trustee for cancellation; (ii) Exchange Debentures, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Debentures Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Exchange Debentures; provided that, if such Exchange Debentures are to be redeemed, notice of such redemption has been duly given pursuant to this Exchange Indenture or provision therefor satisfactory to the Debentures Trustee has been made; 25 14 (iii) Exchange Debentures, except to the extent provided in Sections 1202 and 1203, with respect to which the Company has effected Legal Defeasance and/or Covenant Defeasance as provided in Article Twelve; and (iv) Exchange Debentures in exchange for or in lieu of which other Exchange Debentures (including pursuant to Section 310) have been authenticated and delivered pursuant to this Exchange Indenture, other than any such Exchange Debentures in respect of which there shall have been presented to the Debentures Trustee proof satisfactory to it that such Exchange Debentures are held by a bona fide purchaser in whose hands the Exchange Debentures are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Exchange Debentures have given any request, demand, authorization, direction, consent, notice or waiver hereunder, and for the purpose of making the calculations required by TIA Section 313, Exchange Debentures owned by the Company, any Subsidiary Debentures Guarantor or any other obligor upon the Exchange Debentures or any Affiliate of the Company, any Subsidiary Debentures Guarantor or such other obligor shall be disregarded and deemed not to be Outstanding (provided that, in connection with any offer by the Company or any obligor to purchase the Exchange Debentures, Exchange Debentures tendered for purchase shall be deemed to be Outstanding and held by the tendering Holder until the date of purchase), except that, in determining whether the Debentures Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Exchange Debentures which the Debentures Trustee actually knows to be so owned shall be so disregarded. Exchange Debentures so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Debentures Trustee the pledgee's right so to act with respect to such Exchange Debentures and that the pledgee is not the Company, any Subsidiary Debentures Guarantor or any other obligor upon the Exchange Debentures or any Affiliate of the Company, any Subsidiary Debentures Guarantor or such other obligor. "Pari Passu Debt" means Debt of the Company that ranks pari passu in right of payment with the Exchange Debentures. "Paying Agent" means any Person (including the Company acting as Paying Agent) authorized by the Company to pay the principal of (and premium, if any) or interest on any Exchange Debentures on behalf of the Company. "Permitted Debt" has the meaning set forth in Section 1009. 26 15 "Permitted Investments" means any of the following: (a) Investments in (i) securities with a maturity of one year or less issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof); (ii) certificates of deposit, time deposits, overnight bank deposits or bankers' acceptances with a maturity of 270 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus of not less than $500,000,000; and (iii) commercial paper with a maturity of 270 days or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings Services. (b) Investments by the Company or any of its Restricted Subsidiaries in another Person, if as a result of such Investment (i) such other Person becomes a Restricted Subsidiary that is or would be a Subsidiary Debentures Guarantor under this Exchange Indenture 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 that is a Subsidiary Debentures Guarantor. (c) Investments by the Company or any of its Restricted Subsidiaries in a Subsidiary Debentures Guarantor and Investments by any Restricted Subsidiary in the Company. (d) Investments in assets owned or used in the ordinary course of business. (e) Investments in existence on the Closing Date. (f) Promissory notes received as a result of Asset Sales permitted under Section 1012. (g) Direct or indirect loans to employees, or to a trustee for the benefit of such employees, of the Company or any of its Restricted Subsidiaries in an aggregate amount outstanding at any time not exceeding $1,000,000. (h) Investments by the Company or any of its Restricted Subsidiaries in a joint venture that is engaged in the internet service provider business in an aggregate amount outstanding at any time not exceeding $500,000. (i) Other Investments that do not exceed $2,000,000 at any one time outstanding. 27 16 "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Predecessor Exchange Debenture" of any particular Exchange Debenture means every previous Exchange Debenture evidencing all or a portion of the same debt as that evidenced by such particular Exchange Debenture; and, for the purposes of this definition, any Exchange Debenture authenticated and delivered under Section 310 in exchange for a mutilated, lost, destroyed or stolen Exchange Debenture. "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Public Equity Offering" means an underwritten public offering of Qualified Equity Interests of either (a) the Company or (b) Citadel Communications the net proceeds from which (after deducting any underwriting discounts and commissions) are used by Citadel Communications to purchase Qualified Equity Interests of the Company; provided that, in either case, such net proceeds exceed $10,000,000. "QIB" means a "Qualified Institutional Buyer" under Rule 144A. "Qualified Equity Interest" means any Qualified Stock and all warrants, options or other rights to acquire Qualified Stock (but excluding any debt security that is convertible into or exchangeable for Capital Stock). "Qualified Stock" of any Person means any and all Capital Stock of such Person, other than Disqualified Stock. "Redemption Date," when used with respect to any Exchange Debenture to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Exchange Indenture. "Redemption Price," when used with respect to any Exchange Debenture to be redeemed, means the price at which it is to be redeemed pursuant to this Exchange Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the June 15 or December 15 (whether or not a Business Day), as the case may be, next preceding an Interest Payment Date. "Responsible Officer," when used with respect to the Debentures Trustee, means the chairman or any vice chairman of the board of directors, the chairman or any vice chairman 28 17 of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Debentures Trustee customarily performing functions similar to those performed by any of the above-designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means any Subsidiary other than an Unrestricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Senior Debt" means the principal of and premium, if any, and interest on (including interest accruing after the filing of a petition initiating any proceeding pursuant to any Bankruptcy Law, whether or not allowed) and other amounts due on or in connection with any Debt of the Company, whether outstanding on the Closing Date or thereafter incurred, unless, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt shall be subordinate in right of payment to any Debt or other general unsecured obligations of the Company. Without limiting the generality of the foregoing, "Senior Debt" includes the principal of and premium, if any, fees and interest (including interest accruing after the occurrence of an event of default or after the filing of a petition initiating any proceeding pursuant to any Bankruptcy Law, whether or not allowed) on all obligations of every nature of the Company from time to time owed to the Banks under the Credit Facility. Notwithstanding the foregoing, "Senior Debt" shall not include (a) Debt that is Disqualified Stock, (b) Debt consisting of trade payables, (c) Debt of the Company to a Subsidiary or any other Affiliate of the Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt that, at the time of the incurrence, is incurred by the Company in violation of this Exchange Indenture, other than any Debt incurred under the Credit Facility not in excess of $150,000,000 (less any amounts applied to the permanent reduction of such Debt pursuant to Section 1012) if the Company has certified to the Credit Facility Agent, at the time such Debt is incurred, that the Company is permitted to incur such Debt under this Exchange Indenture. "Senior Subordinated Debt" means the principal of and premium, if any, and interest on (including interest accruing after the filing of a petition initiating any proceeding pursuant to any bankruptcy law, whether or not allowed) and other amounts due on or in connection with any Debt of the Company (including the Notes), whether outstanding on the Closing Date or thereafter incurred, for which, in the case of any particular Debt, the instrument 29 18 creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt shall be subordinate in right of payment to any Senior Debt or other general unsecured obligations of the Company, unless such instrument expressly provides that such Debt will be subordinate in right of payment to the Notes or any Debt that is pari passu in right of payment with the Notes. Notwithstanding the foregoing, "Senior Subordinated Debt" shall not include (a) Debt that is represented by Disqualified Stock, (b) Debt consisting of trade payables, (c) Debt of the Company to a Subsidiary or any other Affiliate of the Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt that, at the time of the incurrence, is incurred by the Company in violation of this Exchange Indenture. "Significant Subsidiary" means any Restricted Subsidiary of the Company that, together with its Subsidiaries, (a) for the most recent fiscal year of the Company, accounted for more than 10% of the consolidated net sales of the Company and its Restricted Subsidiaries, (b) as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the most recently available consolidated financial statements of the Company for such fiscal year, (c) was organized or acquired after the beginning of such fiscal year and would have been a Significant Subsidiary if it had been owned during the entire fiscal year or (d) holds one or more licenses material to the Company's business. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Debentures Trustee pursuant to Section 311. "Specified Senior Debt" means (i) all Senior Debt under the Credit Facility and Senior Subordinated Debt under the Notes and (ii) any other issue of Senior Debt having a principal amount of at least $10,000,000. "Stated Maturity" means, when used with respect to any Exchange Debenture or any installment of interest thereon, the date specified in such Exchange Debenture as the fixed date on which the principal of such Exchange Debenture or such installment of interest is due and payable, and, when used with respect to any other Debt, means the date specified in the instrument governing such Debt as the fixed date on which the principal of such Debt or any installment of interest thereon is due and payable. "Subordinated Debt" means the principal of and premium, if any, and interest on (including interest accruing after the filing of a petition initiating any proceeding pursuant to any Bankruptcy Law, whether or not allowed) and other amounts due on or in connection with any Debt of the Company (including the Exchange Debentures), whether outstanding on the Closing Date or thereafter incurred, for which, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt will be subordinate in right of payment to any Senior Debt or other general unsecured obligations of the Company, and to any Senior Subordinated Debt, unless such instrument 30 19 expressly provides that such Debt will be subordinate in right of payment to the Exchange Debentures or any Debt that is pari passu in right of payment with the Exchange Debentures. Notwithstanding the foregoing, "Subordinated Debt" will not include (a) Debt that is represented by Disqualified Stock, (b) Debt consisting of trade payables, (c) Debt of the Company to a Subsidiary or any other Affiliate of the Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt that, at the time of the incurrence, is incurred by the Company in violation of this Exchange Indenture. "Subsidiary" means any Person a majority of the equity ownership or Voting Stock of which is at the time owned, directly or indirectly, by the Company and/or one or more other Subsidiaries of the Company. "Subsidiary Debentures Guarantee" means a guarantee of the Exchange Debentures by a Restricted Subsidiary in accordance with the provisions of this Exchange Indenture. "Subsidiary Debentures Guarantor" means the License Subsidiary and each other Restricted Subsidiary that issues a Subsidiary Debentures Guarantee as described in Article Thirteen herein. "Subsidiary Guarantor Senior Debt" means, as to any Subsidiary Debentures Guarantor, the principal of and premium, if any, and interest on (including interest accruing after the filing of a petition initiating any proceeding pursuant to any Bankruptcy Law, whether or not allowed) and other amounts due on or in connection with any Debt of such Subsidiary Debentures Guarantor (other than the Subsidiary Debentures Guarantee made by such Subsidiary Debentures Guarantor), whether outstanding on the Closing Date or thereafter incurred, unless, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt shall be subordinate in right of payment to any Debt or other general unsecured obligations of such Subsidiary Debentures Guarantor. Notwithstanding the foregoing, "Subsidiary Guarantor Senior Debt" shall not include (a) Debt that is Disqualified Stock, (b) Debt consisting of trade payables, (c) Debt of such Subsidiary Debentures Guarantor to the Company or any Subsidiary or any other Affiliate of the Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt that, at the time of the incurrence, is incurred by such Subsidiary Debentures Guarantor in violation of this Exchange Indenture, other than any Debt incurred under the Credit Facility not in excess of $150,000,000 (less any amounts applied to the permanent reduction of such Debt pursuant to Section 1012) if the Company has certified to the Credit Facility Agent, at the time such Debt is incurred, that the Subsidiary Debentures Guarantor is permitted to incur such Debt under this Exchange Indenture. "Subsidiary Guarantor Senior Subordinated Debt" means, as to any Subsidiary Debentures Guarantor, the principal of and premium, if any, and interest on (including interest 31 20 accruing after the filing of a petition initiating any proceeding pursuant to any Bankruptcy Law, whether or not allowed) and other amounts due on or in connection with any Debt of such Subsidiary Debentures Guarantor (other than the Subsidiary Debentures Guarantee made by such Subsidiary Debentures Guarantor), whether outstanding on the Closing Date or thereafter incurred, for which, in the case of any particular Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Debt shall be subordinate in right of payment to any Senior Debt or other general unsecured obligations of the Company, unless such instrument expressly provides that such Debt will be subordinate in right of payment to the Notes or any Debt that is pari passu in right of payment with the Notes. Notwithstanding the foregoing, "Subsidiary Guarantor Senior Subordinated Debt" shall not include (a) Debt that is Disqualified Stock, (b) Debt consisting of trade payables, (c) Debt of such Subsidiary Debentures Guarantor to the Company or any Subsidiary or any other Affiliate of the Company or any of such Affiliate's Subsidiaries and (d) that portion of any Debt that, at the time of the incurrence, is incurred by such Subsidiary Debentures Guarantor in violation of this Exchange Indenture. "Subsidiary Notes Guarantee" means a guarantee of the Notes by a Restricted Subsidiary in accordance with the provisions of the Indenture, dated July 1, 1997, governing the Notes. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in force on the date as of which this Exchange Indenture was executed, except as provided in Section 905. "Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary in accordance with Section 1017 and (b) any Subsidiary of an Unrestricted Subsidiary. "U.S. Government Obligations" means obligations that are (a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such U.S. Government Obligations or a specific payment of principal of or interest on any such U.S. Government Obligations held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligations or the specific payment of principal of or interest on the U.S. Government Obligations evidenced by such depository receipt. 32 21 "Vice President," when used with respect to the Company or the Debentures Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." "Voting Stock" means any class or classes of Capital Stock 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 or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes has, or might have, voting power by reason of the happening of any contingency). "Voting Trust Agreement" means that certain Voting Trust Agreement dated as of March 17, 1997 by and among Citadel Communications, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P., Christopher Hall, as the initial Trustee thereunder and J. Walter Corcoran and Harlan Levy, each as an initial Back-Up Trustee thereunder, as amended from time to time. "Weighted Average Life" means, as of the date of determination with respect to any Debt or Disqualified Stock, 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 or liquidation value payment of such Debt or Disqualified Stock, respectively, multiplied by (ii) the amount of each such principal or liquidation value payment by (b) the sum of all such principal or liquidation value payments. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all of the outstanding voting securities (other than directors' qualifying shares or an immaterial number of shares required to be owned by other Persons pursuant to applicable law) of which are owned, directly or indirectly, by the Company. SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Debentures Trustee to take any action under any provision of this Exchange Indenture, the Company and any Subsidiary Debentures Guarantor and any other obligor on the Exchange Debentures (if applicable) shall furnish to the Debentures Trustee an Officers' Certificate in form and substance reasonably acceptable to the Debentures Trustee stating that all conditions precedent, if any, provided for in this Exchange Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Exchange Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. 33 22 Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Exchange Indenture shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual or such firm, he or it has made such examination or investigation as is necessary to enable him or it to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Debentures Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company, any Subsidiary Debentures Guarantor or other obligor on the Exchange Debentures may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company, any Subsidiary Debentures Guarantor or other obligor on the Exchange Debentures stating that the information with respect to such factual matters is in the possession of the Company, any Subsidiary Debentures Guarantor or other obligor on the Exchange Debentures unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. 34 23 Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Exchange Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Exchange Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in Person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Debentures Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Exchange Indenture and conclusive in favor of the Debentures Trustee and the Company, if made in the manner provided in this Section 104. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Debentures Trustee deems sufficient. (c) The principal amount and serial numbers of Exchange Debentures held by any Person, and the date of holding the same, shall be proved by the Exchange Debenture Register. (d) If the Company or any Subsidiary Debentures Guarantor shall solicit from the Holders of Exchange Debentures any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company or any such Subsidiary Debentures Guarantor (as the case may be) may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company or any such Subsidiary Debentures Guarantor (as the case may be) shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, 35 24 authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Exchange Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Exchange Debentures shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Exchange Indenture not later than six months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Exchange Debenture shall bind every future Holder of the same Exchange Debenture and the Holder of every Exchange Debenture issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof (including in accordance with Section 310) in respect of anything done, omitted or suffered to be done by the Debentures Trustee, any Paying Agent or the Company or any Subsidiary Debentures Guarantor in reliance thereon, whether or not notation of such action is made upon such Exchange Debenture. SECTION 105. Notices, Etc., to Debentures Trustee, the Company and Subsidiary Debentures Guarantors. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Exchange Indenture to be made upon, given or furnished to, or filed with: (1) the Debentures Trustee by any Holder or by the Company or any Subsidiary Debentures Guarantor or any other obligor on the Exchange Debentures shall be sufficient for every purpose hereunder if made, given, furnished or delivered in writing and mailed, first-class postage prepaid, or delivered by recognized overnight courier, to or with the Debentures Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, or (2) the Company or any Subsidiary Debentures Guarantor by the Debentures Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or delivered, in writing, or mailed, first-class postage prepaid, or delivered by recognized overnight courier, to the Company or such Subsidiary Debentures Guarantor addressed to it at the address of its principal office specified in the first paragraph of this Exchange Indenture, or at any other address previously furnished in writing to the Debentures Trustee by the Company or such Subsidiary Debentures Guarantor. 36 25 SECTION 106. Notice to Holders; Waiver. Where this Exchange Indenture provides for notice of any event to Holders by the Company or the Debentures Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Exchange Debenture Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. Where this Exchange Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Debentures Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event to Holders when such notice is required to be given pursuant to any provision of this Exchange Indenture, then any manner of giving such notice as shall be satisfactory to the Debentures Trustee shall be deemed to be a sufficient giving of such notice for every purpose hereunder. SECTION 107. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 108. Successors and Assigns. All covenants and agreements in this Exchange Indenture by the Company and any Subsidiary Debentures Guarantor and their Subsidiaries shall bind their successors and assigns, whether so expressed or not. SECTION 109. Separability Clause. In case any provision in this Exchange Indenture or in the Exchange Debentures shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 37 26 SECTION 110. Benefits of Indenture. Nothing in this Exchange Indenture or in the Exchange Debentures, express or implied, shall give to any Person (other than the parties hereto, any Agent and their successors hereunder, any Paying Agent, the Holders and the holders of Senior Debt and Senior Subordinated Debt) any benefit or any legal or equitable right, remedy or claim under this Exchange Indenture. SECTION 111. Governing Law. THIS EXCHANGE INDENTURE, THE EXCHANGE DEBENTURES AND THE SUBSIDIARY DEBENTURES GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. UPON THE EFFECTIVENESS OF THE EXCHANGE DEBENTURES EXCHANGE OFFER REGISTRATION STATEMENT OR THE EXCHANGE DEBENTURES SHELF REGISTRATION STATEMENT, THIS EXCHANGE INDENTURE SHALL BE SUBJECT TO, AND GOVERNED BY, THE PROVISIONS OF THE TRUST INDENTURE ACT OF 1939, AS AMENDED, THAT ARE REQUIRED OR DEEMED TO BE PART OF AND TO GOVERN INDENTURES QUALIFIED THEREUNDER. SECTION 112. Legal Holidays. In any case where any Interest Payment Date, any date established for payment of Defaulted Interest pursuant to Section 311 or Redemption Date or Stated Maturity or other maturity of any Exchange Debenture shall not be a Business Day, then (notwithstanding any other provision of this Exchange Indenture or of the Exchange Debentures) payment of principal (or premium, if any) or interest need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or date established for payment of Defaulted Interest pursuant to Section 311, Redemption Date, or at the Stated Maturity or other maturity; provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or date established for payment of Defaulted Interest pursuant to Section 311, Stated Maturity or other maturity, as the case may be, to the next succeeding Business Day. SECTION 113. No Personal Liability of Directors, Officers, Employees, Stockholders or Incorporators. No director, officer, employee, incorporator or stockholders, as such, of the Company or any Subsidiary Debentures Guarantor shall have any liability for any obligations of the Company or such Subsidiary Debentures Guarantor under the Exchange Debentures, this Exchange Indenture or any Subsidiary Debentures Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creations. Each Holder by accepting an 38 27 Exchange Debenture waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Exchange Debentures. SECTION 114. Counterparts. This Exchange Indenture may be executed in any number of counterparts, each of which shall be original; but such counterparts shall together constitute but one and the same instrument. ARTICLE TWO EXCHANGE DEBENTURE FORMS SECTION 201. Forms Generally. The Exchange Debentures and the Debentures Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Exchange Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Exchange Debentures, as evidenced by their execution of the Exchange Debentures. Any portion of the text of any Exchange Debenture may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Exchange Debenture. Each Exchange Debenture shall be dated the date of its authentication. The definitive Exchange Debentures shall be printed, lithographed or engraved on steel-engraved borders or may be produced in any other manner, all as determined by the officers of the Company executing such Exchange Debentures, as evidenced by their execution of such Exchange Debentures. Initial Exchange Debentures offered and sold to "Qualified Institutional Buyers" (as defined in Rule 144A in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A) shall initially be issued in the form of one permanent global Exchange Debenture substantially in the form set forth in Sections 204 and 205 (the "Global Exchange Debenture") deposited with the Debentures Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Debentures Trustee as hereinafter provided. The aggregate principal amount of the Global Exchange Debenture may from time to time be increased or decreased by adjustments made on the records of the Debentures Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. 39 28 Initial Exchange Debentures offered and sold to "accredited investors" (as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act) who are not Qualified Institutional Buyers shall initially be issued in the form of permanent certificated Exchange Debentures in registered form in substantially the form set forth in Sections 204 and 205 (the "Certificated Exchange Debentures"). SECTION 202. Restrictive Legends. Unless and until (i) an Initial Exchange Debenture is sold under an Exchange Debentures Shelf Registration Statement or (ii) an Initial Exchange Debenture is exchanged for a New Exchange Debenture in connection with an effective Exchange Debentures Exchange Offer Registration Statement, in each case pursuant to the Exchange Debentures Registration Rights Agreement, each such Global Exchange Debenture and Certificated Exchange Debenture shall bear the following legend (the "Private Placement Legend") on the face thereof: For each Global Exchange Debenture: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CITADEL BROADCASTING COMPANY (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" 40 29 WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT SUBJECT TO THE COMPANY'S, AND THE DEBENTURES TRUSTEE'S/TRANSFER AGENT'S, RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND SHALL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. For each Certificated Exchange Debenture: THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THE SECURITIES EVIDENCED BY THIS CERTIFICATE, NOR ANY INTEREST THEREIN, MAY BE OFFERED, SOLD, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS EITHER (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND LAWS RELATING THERETO OR (II) THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE ISSUER, STATING THAT SUCH REGISTRATION IS NOT REQUIRED. Each Global Exchange Debenture, whether or not an Initial Exchange Debenture, shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN 41 30 AUTHORIZED REPRESENTATIVE OF THE DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE. SECTION 203. [INTENTIONALLY OMITTED]. SECTION 204. Form of Face of Exchange Debenture. CITADEL BROADCASTING COMPANY 13-1/4% [Series B]* Exchange Debenture due 2009 CUSIP No. _____ No. __________ $________ CITADEL BROADCASTING COMPANY, a Nevada corporation (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to ____________________ or registered assigns, the principal sum of___________ ____________________ Dollars on July 1, 2009, at the office or agency of the Company referred to below, and to pay interest thereon semi-annually, on July 1 and January 1 in each year, commencing on the first such date after the Exchange Date, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 13-1/4% per annum, until the principal hereof is paid or duly provided for, and (to the extent lawful) to pay on demand interest on any overdue interest at the rate borne by the Exchange Debentures from the date on which such overdue interest becomes payable to the date payment of such interest has been made or duly provided for. On or prior to July 1, 2002, interest is payable in additional Exchange Debentures having an aggregate principal amount equal to the amount of such interest, or, at the option of the Company, in cash. Thereafter, all interest will be payable only in cash. Interest on the Exchange Debentures will accrue from the date of issuance thereof. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in such Indenture, be paid to the Person in whose name this Exchange Debenture (or one or more Predecessor Exchange Debentures) is registered __________________________________ * Include only for New Exchange Debentures. 42 31 at the close of business on the Regular Record Date for such interest, which shall be the June 15 or December 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and such defaulted interest, and (to the extent lawful) interest on such defaulted interest at the rate borne by the Exchange Debentures, may be paid to the Person in whose name this Exchange Debenture (or one or more Predecessor Exchange Debentures) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Debentures Trustee, notice whereof shall be given to Holders of Exchange Debentures not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Exchange Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. [The Holder of this Exchange Debenture is entitled to the benefits of the Exchange Debentures Registration Rights Agreement, dated as of July 1, 1997 (the "Exchange Debentures Registration Rights Agreement"), between the Company, the Subsidiary Debentures Guarantors and the Initial Purchasers named therein. In the event that either (a) the Exchange Debentures Exchange Offer Registration Statement is not filed with the Commission on or prior to the 90th calendar day following the Closing Date or (b) the Exchange Debentures Exchange Offer is not consummated or an Exchange Debentures Shelf Registration Statement is not declared effective on or prior to the 210th calendar day following the Closing Date, the interest rate borne by the Exchange Debentures shall be increased by 0.25% per annum for the first 30 days following the 90-day period referred to in clause (a) above or the first 90 days following the 210-day period referred to in clause (b) above. Such interest shall increase by an additional 0.25% per annum at the beginning of each subsequent 30-day period in the case of clause (a) above or 90-day period in the case of clause (b) above; provided, however, that in no event shall the interest rate borne by the Exchange Debentures be increased by more than 1.5%. Upon the filing of the Exchange Debentures Exchange Offer Registration Statement, the consummation of the Exchange Debentures Exchange Offer or the effectiveness of an Exchange Debentures Shelf Registration Statement, as the case may be, the interest rate borne by the Exchange Debentures from the date of such filing, consummation or effectiveness, as the case may be, shall be reduced to the original interest rate set forth in the first paragraph of this Exchange Debenture; provided, however, that, if after any such reduction in interest rate, a different event specified in clause (a) or (b) above occurs, the interest rate may again be increased pursuant to the foregoing provisions.]* [If the Company issues a notice that the Exchange Debentures Shelf Registration Statement is unusable pending the announcement of a material corporate transaction or otherwise pursuant to Section 3(k) of the Exchange Debentures Registration Rights Agreement, or such a notice is required under applicable securities laws to be issued by the Company, and the aggregate number of days in any consecutive twelve-month period for which all such notices are 43 32 issued or required to be issued exceeds 30 days in the aggregate, then the interest rate borne by the Exchange Debentures shall be increased by one-quarter of one percent per annum following the date that such Exchange Debentures Shelf Registration Statement ceases to be usable beyond the 30-day period permitted above, which rate shall be increased by an additional one-quarter of one percent per annum for each 90-day period that such additional interest continues to accrue; provided that the aggregate increase in such annual interest rate may in no event exceed one percent. Upon the Company declaring that the Exchange Debentures Shelf Registration Statement is usable after the interest rate has been increased pursuant to the preceding sentence, the interest rate borne by the Exchange Debentures shall be reduced to the original interest rate if the Company is otherwise in compliance with this paragraph; provided, however, that if after any such reduction in interest rate the Exchange Debentures Shelf Registration Statement again ceases to be usable beyond the period permitted above, the interest rate shall again be increased and thereafter reduced pursuant to the foregoing provisions.]* The principal of and premium, if any, and interest on the Exchange Debentures shall be payable, and the Exchange Debentures shall be exchangeable and transferable, at the office or agency of the Company in The City of New York maintained for such purposes (which initially shall be the office of the Debentures Trustee located at 101 Barclay Street - 21W, New York, New York 10286); provided, however, that, at the option of the Company, interest may be paid by check (or, if an Exchange Debenture has been issued as payment of interest in lieu of money, by such Exchange Debenture) mailed to the address of the Person entitled thereto as such address appears in the Exchange Debentures Register. Reference is hereby made to the further provisions of this Exchange Debenture set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been duly executed by the Debentures Trustee or the Authenticating Agent referred to on the reverse hereof by manual signature, this Exchange Debenture shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. __________________________________ * Include only for the Initial Exchange Debentures. 44 33 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: CITADEL BROADCASTING COMPANY By ______________________________ Name: Title: Attest: [SEAL] ___________________________ Authorized Officer SECTION 205. Form of Reverse of Exchange Debenture. This Exchange Debenture is one of a duly authorized issue of securities of the Company designated as its 13-1/4% [Series B]* Exchange Debentures due 2009 (the "Exchange Debentures"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $400,000,000, which may be issued under an indenture (the "Indenture") dated as of July 1, 1997 between the Company, Citadel License, Inc., as guarantor (the "Subsidiary Debentures Guarantor"), and The Bank of New York, as trustee (the "Debentures Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Subsidiary Debentures Guarantor, the Debentures Trustee and the Holders of the Exchange Debentures, and of the terms upon which the Exchange Debentures are, and are to be, authenticated and delivered. This Exchange Debenture is subordinated to the prior payment in full of all Senior Debt and Senior Subordinated Debt in the manner and to the extent set forth in Article Fourteen of the Indenture. On or before each payment date, the Company shall deliver or cause to be delivered to the Debentures Trustee or the Paying Agent an amount in dollars sufficient to pay the amount due on such payment date, or, if Exchange Debentures have been issued as payment of interest in lieu of money, Exchange Debentures sufficient to pay the amount due on such payment date. __________________________________ * Include only for the New Exchange Debentures. 45 34 The Exchange Debentures shall be redeemable (subject to contractual and other restrictions with respect thereto and to the legal availability of funds therefor) at the election of the Company, as a whole or from time to time in part, at any time on or after July 1, 2002 on not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed as percentages of the principal amount thereof) set forth below, together with accrued and unpaid interest, if any, to the redemption date, if redeemed during the 12-month period beginning on July 1 of the years indicated below (subject to the right of Holders of record on the relevant record date to receive interest due on an Interest Payment Date): REDEMPTION YEAR PRICE ---- ---------------------- 2002 . . . . . . . . . . . . . . . . . . . . . . . 107.729% 2003 . . . . . . . . . . . . . . . . . . . . . . . 106.625% 2004 . . . . . . . . . . . . . . . . . . . . . . . 105.521% 2005 . . . . . . . . . . . . . . . . . . . . . . . 104.417% 2006 . . . . . . . . . . . . . . . . . . . . . . . 103.313% 2007 . . . . . . . . . . . . . . . . . . . . . . . 102.208% 2008 . . . . . . . . . . . . . . . . . . . . . . . 101.104%
In addition, at any time and from time to time prior to July 1, 2000, the Company may at its option redeem Exchange Debentures having an aggregate principal amount of up to 35% of the aggregate principal amount of Exchange Debentures issued upon exchange of the Exchangeable Preferred Stock or in payment of interest on the Exchange Debentures, at a redemption price equal to 113.25% of the principal amount thereof, together with accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on an Interest Payment Date); provided that, immediately after giving effect to any such redemption, at least $75,000,000 aggregate principal amount of the Exchange Debentures remains outstanding. Any such redemption must be made within 90 days of the related Public Equity Offering. If less than all the Exchange Debentures are to be redeemed, the particular Exchange Debentures to be redeemed shall be selected not more than 60 days prior to the redemption date by the Debentures Trustee by such method as the Debentures Trustee deems fair and appropriate. In the event of redemption or repurchase of this Exchange Debenture in part only, a new Exchange Debenture or Exchange Debentures for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. Upon the occurrence of a Change of Control, the Company shall be required to make an offer to purchase on the Change of Control Purchase Date all outstanding Exchange Debentures at a purchase price in cash equal to 101% of the aggregate principal amount thereof, 46 35 plus accrued and unpaid interest thereon, if any, to the date of purchase, in accordance with the Indenture. Holders of Exchange Debentures that are subject to an offer to purchase shall receive a Change of Control Offer from the Company prior to any related Change of Control Purchase Date. Under certain circumstances, in the event the Net Cash Proceeds received by the Company from an Asset Sale, which proceeds are not used (i) towards the permanent reduction of amounts outstanding under the Credit Facility or to the repayment of other Senior Debt or Senior Subordinated Debt of the Company or a Subsidiary Debentures Guarantor or (ii) to invest (or enter into one or more legally binding agreements 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 shall be used in the broadcasting business or businesses reasonably related thereto, equal or exceed a specified amount, the Company shall be required to make an offer to all Holders to purchase the maximum principal amount of Exchange Debentures, in an integral multiple of $1,000, that may be purchased out of such amount at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase, in accordance with the Indenture. Holders of Exchange Debentures that are subject to any offer to purchase shall receive an Asset Sale Offer from the Company prior to any related Asset Sale Purchase Date. In the case of any redemption or repurchase of Exchange Debentures, interest installments whose Stated Maturity is on or prior to the Redemption Date or Asset Sale Purchase Date, as the case may be, shall be payable to the Holders of such Exchange Debentures, or one or more Predecessor Exchange Debentures, of record at the close of business on the relevant Regular Record Date or Special Record Date, as the case may be, referred to on the face hereof. Exchange Debentures (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date or Asset Sale Purchase Date, as the case may be. If an Event of Default shall occur and be continuing, the principal of all the Exchange Debentures may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Exchange Debenture and (b) certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Exchange Debenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the Subsidiary Debentures Guarantors and the rights of the Holders under the Indenture and the Exchange Debentures and the Subsidiary Debentures Guarantees, if any, at any time by the Company, the 47 36 Subsidiary Debentures Guarantors and the Debentures Trustee with the consent of the Holders of a specified percentage in aggregate principal amount of the Exchange Debentures at the time Outstanding. Additionally, the Indenture permits that with certain exceptions as therein provided, without notice to or consent of any Holder, the Company, any Subsidiary Debentures Guarantor and the Debentures Trustee together may amend or supplement the Indenture, any Subsidiary Debentures Guarantee or this Exchange Debenture (i) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company in the Indenture and in the Exchange Debentures; or (ii) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power conferred upon the Company in the Indenture; or (iii) to add additional Events of Default; or (iv) to provide for uncertificated Exchange Debentures in addition to or in place of the certificated Exchange Debentures; or (v) to evidence and provide for the acceptance of appointment under the Indenture by a successor Debentures Trustee; or (vi) to secure the Exchange Debentures; or (vii) to cure any ambiguity, to correct or supplement any provision in the Indenture that may be defective or inconsistent with any other provision in the Indenture, or to make any other provisions with respect to matters or questions arising under the Indenture, provided that such actions pursuant to this clause do not adversely affect the interests of the Holders in any material respect; or (viii) to comply with any requirements of the Commission in order to effect and maintain the qualification of the Indenture under the Trust Indenture Act. The Indenture also contains provisions permitting the Holders of not less than a majority in aggregate principal amount of the Exchange Debentures at the time Outstanding, on behalf of the Holders of all the Exchange Debentures, to waive any past defaults by the Company with certain provisions of the Indenture, the Exchange Debentures and the Subsidiary Debentures Guarantees, if any, and certain past Defaults under the Indenture and the Exchange Debentures and the Subsidiary Debentures Guarantees, if any, and their consequences. Any such consent or waiver by or on behalf of the Holder of this Exchange Debenture shall be conclusive and binding upon such Holder and upon all future Holders of this Exchange Debenture and of any Exchange Debenture issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Exchange Debenture. No reference herein to the Indenture and no provision of this Exchange Debenture or of the Indenture shall alter or impair the obligation of the Company or the Subsidiary Debentures Guarantors or any other obligor on the Exchange Debentures (in the event any Subsidiary Debentures Guarantor or other obligor is obligated to make payments in respect of the Exchange Debentures), which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Exchange Debenture at the times, place, and rate, and in the coin or currency, herein prescribed, subject to the subordination provisions of the Indenture. 48 37 As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Exchange Debenture is registerable on the Exchange Debenture Register of the Company, upon surrender of this Exchange Debenture for registration of transfer at the office or agency of the Company maintained for such purpose in The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Exchange Debenture Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Exchange Debentures, of authorized denominations and for the same aggregate principal amount, shall be issued to the designated transferee or transferees. The Exchange Debentures are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Exchange Debentures are exchangeable for a like aggregate principal amount of Exchange Debentures of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any registration of transfer or exchange or redemption of Exchange Debentures, but the Company may require payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charge payable in connection therewith. The Exchange Debentures are entitled to the benefit of a Subsidiary Debentures Guarantee by each Subsidiary Debentures Guarantor to the extent provided in each such Subsidiary Debentures Guarantee. Prior to the time of due presentment of this Exchange Debenture for registration of transfer, the Company, the Debentures Trustee and any agent of the Company or the Debentures Trustee may treat the Person in whose name this Exchange Debenture is registered as the owner hereof for all purposes, whether or not this Exchange Debenture be overdue, and neither the Company, the Debentures Trustee nor any agent shall be affected by notice to the contrary. THIS EXCHANGE DEBENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Interest on this Exchange Debenture shall be computed on the basis of a 360-day year of twelve 30-day months. All terms used in this Exchange Debenture which are defined in the Indenture shall have the meanings assigned to them in the Indenture. 49 38 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 Exchange Debenture and all rights thereunder, hereby irrevocably constituting and appointing ________________________________________________________________________________ attorney to transfer said Exchange Debenture on the books of the Company with full power of substitution in the premises Your Signature:_________________________________________________________ (sign exactly as your name appears on the other side of this Exchange Debenture) Signature Guarantee:_____________________________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Exchange Debentures Registrar, 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 Exchange Debentures Registrar in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act. 50 39 [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATED EXCHANGE DEBENTURES] In connection with any transfer of this Exchange Debenture occurring prior to the date that is the earlier of the date of an effective Registration Statement or July 3, 1999, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] ----------- [ ] (a) this Exchange Debenture 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 Exchange Debenture is being transferred other than in accordance with (a) above and documents are being furnished that comply with the conditions of transfer set forth in this Exchange Debenture and the Indenture. If none of the foregoing boxes is checked, the Debentures Trustee or other Exchange Debenture Registrar shall not be obligated to register this Exchange Debenture 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 307 of the Indenture shall have been satisfied. Date: ____________________ __________________________________________ NOTICE: The signature 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: _______________________________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Exchange Debentures Registrar, 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 Exchange Debentures Registrar in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act. TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Exchange Debenture for its own account or an account with respect to which it exercises sole investment 51 40 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 Company 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. 52 41 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Exchange Debenture purchased by the Company pursuant to Section 1011 of the Indenture, check the Box: [ ]. If you wish to have a portion of this Exchange Debenture purchased by the Company pursuant to Section 1012 of the Indenture, state the amount (in original principal amount) below: $_____________________. Date: _________________________________________________ Your Signature: __________________________________________________________ (Sign exactly as your name appears on the other side of this Exchange Debenture) Signature Guarantee: _____________________________________________________ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Exchange Debentures Registrar, 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 Exchange Debentures Registrar in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act. SECTION 206. Form of Debentures Trustee's Certificate of Authentication. The Debentures Trustee's certificate of authentication shall be in substantially the following form: DEBENTURES TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: ____________________ This is one of the Exchange Debentures referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Debentures Trustee By___________________________ Authorized Signatory 53 42 ARTICLE THREE THE EXCHANGE DEBENTURES SECTION 301. Title and Terms. The aggregate principal amount of Exchange Debentures which may be authenticated and delivered under this Exchange Indenture is limited to $400,000,000, except for Exchange Debentures authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Exchange Debentures pursuant to Section 303, 304, 305, 306, 307, 310, 906, 1011, 1012 or 1108 or pursuant to an Exchange Debentures Exchange Offer. The Initial Exchange Debentures shall be known and designated as the "13-1/4% Exchange Debentures due 2009" and the New Exchange Debentures shall be known and designated as the "13-1/4% Series B Exchange Debentures due 2009," in each case, of the Company. The Stated Maturity of the Exchange Debentures shall be July 1, 2009, and they shall bear interest at the rate of 13-1/4% per annum from the Exchange Date, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, payable semiannually on July 1 and January 1 in each year, commencing on the first such date after the Exchange Date until the principal thereof is paid in full and to the Person in whose name the Exchange Debenture (or any predecessor Exchange Debenture) is registered at the close of business on the June 15 or December 15 next preceding such Interest Payment Date. Interest shall be computed on the basis of a 360-day year comprised of twelve 30-day months, until the principal thereof is paid or duly provided for. Interest on any overdue principal, interest (to the extent lawful) or premium, if any, shall be payable on demand. On or prior to July 1, 2002, interest is payable in additional Exchange Debentures having an aggregate principal amount equal to the amount of such interest, or, at the option of the Company, in cash. Thereafter, all interest will be payable only in cash. Interest on the Exchange Debentures will accrue from the date of issuance thereof. The principal of and premium, if any, and interest on the Exchange Debentures shall be payable, and the Exchange Debentures shall be exchangeable and transferable, at the office or agency of the Company in The City of New York maintained for such purposes (which initially shall be the office of the Debentures Trustee located at 101 Barclay Street - 21W, New York, New York 10286); provided, however, that, at the option of the Company, interest may be paid by check (or, if Exchange Debentures have been issued as payment of interest in lieu of money, by such Exchange Debentures) mailed to the address of the Person entitled thereto as such address appears in the Exchange Debentures Register. Holders shall have the right to require the Company to purchase their Exchange Debentures, in whole or in part, in the event of a Change of Control pursuant to Section 1011. 54 43 The Exchange Debentures shall be subject to repurchase by the Company pursuant to an Asset Sale Offer as provided in Section 1012. The Exchange Debentures shall be redeemable as provided in Article Eleven and in the Exchange Debentures. SECTION 302. Denominations. The Exchange Debentures shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 303. Execution, Authentication, Delivery and Dating. The Exchange Debentures shall be executed on behalf of the Company by its Chairman, its President or a Vice President, under its corporate seal reproduced thereon and attested by its Secretary or an Assistant Secretary. The signature of any of these officers on the Exchange Debentures may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Exchange Debentures. Exchange Debentures bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company 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 Exchange Debentures or did not hold such offices at the date of such Exchange Debentures. At any time and from time to time after the execution and delivery of this Exchange Indenture, the Company may deliver (i) Initial Exchange Debentures and (ii) any additional Exchange Debentures issued in lieu of interest payments in money as provided in this Exchange Indenture and in the Exchange Debentures, in each case executed by the Company to the Debentures Trustee for authentication, together with a Company Order for the authentication and delivery of such Exchange Debentures, directing the Debentures Trustee to authenticate the Exchange Debentures and certifying that all conditions precedent to the issuance of Exchange Debentures contained herein have been fully complied with, and the Debentures Trustee in accordance with such Company Order shall authenticate and deliver such Initial Exchange Debentures and Exchange Debentures issued in lieu of interest payments in money, as the case may be. On Company Order, the Debentures Trustee shall authenticate for original issue New Exchange Debentures in an aggregate principal amount not to exceed $400,000,000; provided that New Exchange Debentures shall be issuable only upon the valid surrender for cancellation of Initial Exchange Debentures of a like aggregate principal amount in accordance with an Exchange Debentures Exchange Offer pursuant to the Exchange Debentures Registration Rights Agreement. In each case, the Debentures Trustee shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of the Company that it may reasonably request in 55 44 connection with such authentication of Exchange Debentures. Such order shall specify the amount of Exchange Debentures to be authenticated and the date on which the original issue of Initial Exchange Debentures or New Exchange Debentures is to be authenticated. Each Exchange Debenture shall be dated the date of its authentication. No Exchange Debenture shall be entitled to any benefit under this Exchange Indenture or be valid or obligatory for any purpose unless there appears on such Exchange Debenture a certificate of authentication substantially in the form provided for herein duly executed by the Debentures Trustee by manual signature of an authorized signatory, and such certificate upon any Exchange Debenture shall be conclusive evidence, and the only evidence, that such Exchange Debenture has been duly authenticated and delivered hereunder and is entitled to the benefits of this Exchange Indenture. In case the Company or any Subsidiary Debentures Guarantor, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company or such Subsidiary Debentures Guarantor shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Debentures Trustee pursuant to Article Eight, any of the Exchange Debentures authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Exchange Debentures executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Exchange Debentures surrendered for such exchange and of like principal amount; and the Debentures Trustee, upon Company Request of the successor Person, shall authenticate and deliver Exchange Debentures as specified in such request for the purpose of such exchange. If Exchange Debentures shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section 303 in exchange or substitution for or upon registration of transfer of any Exchange Debentures, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Exchange Debentures at the time Outstanding for Exchange Debentures authenticated and delivered in such new name. The Debentures Trustee may appoint an authenticating agent acceptable to the Company to authenticate Exchange Debentures on behalf of the Debentures Trustee. Unless limited by the terms of such appointment, an authenticating agent may authenticate Exchange Debentures whenever the Debentures Trustee may do so. Each reference in this Exchange Indenture to authentication by the Debentures Trustee includes authentication by such agent. An authenticating agent has the same rights as any Exchange Debenture Registrar or Paying Agent to deal with the Company and its Affiliates. 56 45 The Debentures Trustee shall have the right to decline to authenticate and deliver any Exchange Debentures under this Section if the Debentures Trustee, being advised by counsel, reasonably determines that such action may not lawfully be taken. SECTION 304. Temporary Exchange Debentures. Pending the preparation of definitive Exchange Debentures, the Company may execute, and upon Company Order the Debentures Trustee shall authenticate and deliver, temporary Exchange Debentures which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Exchange Debentures in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Exchange Debentures may determine, as conclusively evidenced by their execution of such Exchange Debentures. If temporary Exchange Debentures are issued, the Company shall cause definitive Exchange Debentures to be prepared without unreasonable delay. After the preparation of definitive Exchange Debentures, the temporary Exchange Debentures shall be exchangeable for definitive Exchange Debentures upon surrender of the temporary Exchange Debentures at the office or agency of the Company designated for such purpose pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Exchange Debentures, the Company shall execute and the Debentures Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Exchange Debentures of authorized denominations. Until so exchanged, the temporary Exchange Debentures shall in all respects be entitled to the same benefits under this Exchange Indenture as definitive Exchange Debentures. SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Debentures Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes referred to as the "Exchange Debenture Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Exchange Debentures and of transfers of Exchange Debentures. The Exchange Debenture Register shall be in written form or any other form capable of being converted into written form within a reasonable time. At all reasonable times, the Exchange Debenture Register shall be open to inspection by the Debentures Trustee. The Debentures Trustee is hereby initially appointed as security registrar (the Debentures Trustee in such capacity, together with any successor of the Debentures Trustee in such capacity, the "Exchange Debenture Registrar") for the purpose of registering Exchange Debentures and transfers of Exchange Debentures as herein provided. 57 46 Upon surrender for registration of transfer of any Exchange Debenture at the office or agency of the Company designated pursuant to Section 1002, the Company shall execute, and the Debentures Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Exchange Debentures of any authorized denomination or denominations of a like aggregate principal amount. Furthermore, any Holder of the Global Exchange Debenture shall, by acceptance of such Global Exchange Debenture, agree that transfers of beneficial interest in such Global Exchange Debenture may be effected only through a book-entry system maintained by the Holder of such Global Exchange Debenture (or its agent), and that ownership of a beneficial interest in the Exchange Debenture shall be required to be reflected in a book entry. At the option of the Holder, Exchange Debentures may be exchanged for other Exchange Debentures of any authorized denomination and of a like aggregate principal amount, upon surrender of the Exchange Debentures to be exchanged at such office or agency. Whenever any Exchange Debentures are so surrendered for exchange (including an exchange of Initial Exchange Debentures for New Exchange Debentures), the Company shall execute, and the Debentures Trustee shall authenticate and deliver, the Exchange Debentures which the Holder making the exchange is entitled to receive; provided that no exchange of Initial Exchange Debentures for New Exchange Debentures shall occur until an Exchange Debentures Exchange Offer Registration Statement shall have been declared effective by the Commission, the Debentures Trustee shall have received an Officers' Certificate confirming that the Exchange Debentures Exchange Offer Registration Statement has been declared effective by the Commission and the Initial Exchange Debentures to be exchanged for the New Exchange Debentures shall be cancelled by the Debentures Trustee. All Exchange Debentures issued upon any registration of transfer or exchange of Exchange Debentures shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Exchange Indenture, as the Exchange Debentures surrendered upon such registration of transfer or exchange. Every Exchange Debenture presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Exchange Debenture Registrar) be duly endorsed, or be accompanied by a written instrument of transfer, in form satisfactory to the Company and the Exchange Debenture Registrar, 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 or redemption of Exchange Debentures, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Exchange Debentures, other than exchanges pursuant to Section 304, 906, 1011, 1012 or 1108, not involving any transfer. 58 47 SECTION 306. Book-Entry Provisions for the Global Exchange Debenture. (a) The Global Exchange Debenture initially shall (i) be registered in the name of Cede & Co. as nominee for the Depositary (the "Global Exchange Debenture Holder"), (ii) be delivered to the Debentures Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 202. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Exchange Indenture with respect to any Exchange Debentures held on their behalf by the Depositary, or the Debentures Trustee as its custodian, or under the Global Exchange Debenture, and the Depositary may be treated by the Company, the Debentures Trustee and any agent of the Company or the Debentures Trustee as the absolute owner of such Global Exchange Debenture for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Debentures Trustee or any agent of the Company or the Debentures Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Exchange Debenture. (b) Transfers of the Global Exchange Debenture shall be limited to transfers of such Global Exchange Debenture in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in the Global Exchange Debenture may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 307. Beneficial owners may obtain Certificated Exchange Debentures in exchange for their beneficial interests in the Global Exchange Debenture upon request in accordance with the Depositary's and the Exchange Debenture Registrar's procedures. In addition, Certificated Exchange Debentures shall be transferred to all beneficial owners in exchange for their beneficial interests in the Global Exchange Debenture if (i) the Company notifies the Debentures Trustee in writing that the Depositary is unwilling or unable to act as a depositary for the Global Exchange Debenture and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Debentures Trustee in writing that it elects to change the issuance of Exchange Debentures into the form of Certificated Securities under this Exchange Indenture. (c) In connection with any transfer of a portion of the beneficial interest in the Global Exchange Debenture pursuant to subsection (b) of this Section to beneficial owners, the Exchange Debenture Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Global Exchange Debenture in an amount equal to the principal amount of the beneficial interest in the Global Exchange Debenture to be transferred, and the Company shall execute, and the Debentures Trustee shall authenticate and deliver, one or more Certificated Exchange Debentures of like tenor and amount to each Person that the Global 59 48 Exchange Debenture Holder and the Depositary identify as being the beneficial owner of the related Exchange Debentures. (d) In connection with the transfer of the entire Global Exchange Debenture to beneficial owners pursuant to subsection (b) of this Section, the Global Exchange Debenture shall be deemed to be surrendered to the Debentures Trustee for cancellation, and the Company shall execute, and the Debentures Trustee shall authenticate and deliver, to each beneficial owner identified by the Global Exchange Debenture Holder and the Depositary in exchange for its beneficial interest in the Global Exchange Debenture, an equal aggregate principal amount of Certificated Exchange Debentures of authorized denominations. (e) Any Certificated Exchange Debentures delivered in exchange for an interest in the Global Exchange Debenture pursuant to subsection (c) or subsection (d) of this Section shall, except as otherwise provided by paragraph (a)(i) of Section 307, bear the applicable legend regarding transfer restrictions applicable to the Certificated Exchange Debenture set forth in Section 202. (f) The registered holder of the Global Exchange Debenture may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Exchange Indenture or the Exchange Debentures. SECTION 307. Special Transfer Provisions. Unless and until (i) an Initial Exchange Debenture is sold under an effective Exchange Debentures Shelf Registration Statement, or (ii) an Initial Exchange Debenture is exchanged for a New Exchange Debenture in connection with an effective Exchange Debentures Exchange Offer Registration Statement, in each case pursuant to the Exchange Debentures Registration Rights Agreement, the following provisions shall apply: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Exchange Debenture to any institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) which is not a QIB: (i) The Exchange Debenture Registrar shall register the transfer of any Initial Exchange Debenture, whether or not such Initial Exchange Debenture bears the Private Placement Legend, if (x) the requested transfer is at least two years after the original issue date of the Initial Exchange Debenture or (y) the proposed transferee has delivered to the Exchange Debenture Registrar a certificate substantially in the form set forth in Section 308. 60 49 (ii) If the proposed transferor is an Agent Member holding a beneficial interest in the Global Exchange Debenture, upon receipt by the Exchange Debenture Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Exchange Debenture Registrar's procedures therefor, the Exchange Debenture Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Global Exchange Debenture in an amount equal to the principal amount of the beneficial interest in the Global Exchange Debenture to be transferred, and the Company shall execute, and the Debentures Trustee shall authenticate and deliver, one or more Certificated Exchange Debentures of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Exchange Debenture to a QIB: (i) If the Exchange Debenture to be transferred consists of Certificated Exchange Debentures, the Exchange Debenture Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Initial Exchange Debenture stating, or has otherwise advised the Company and the Exchange Debenture Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Initial Exchange Debenture stating, or has otherwise advised the Company and the Exchange Debenture Registrar in writing, that it is purchasing the Initial Exchange Debenture for its own account or an account with respect to which it exercises sole investment discretion and that it, or the Person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, 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 Company as it 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 its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) If the proposed transferee is an Agent Member, and the Initial Exchange Debenture to be transferred consists of Certificated Exchange Debentures, upon receipt by the Exchange Debenture Registrar of instructions given in accordance with the Depositary's and the Exchange Debenture Registrar's procedures therefor, the Exchange Debenture Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Exchange Debenture in an amount equal to the principal amount of the Certificated Exchange Debentures to be transferred, and the Debentures Trustee shall cancel the Certificated Exchange Debenture so transferred. (c) Private Placement Legend. Upon the transfer, exchange or replacement of Exchange Debentures not bearing the Private Placement Legend, the Exchange Debenture 61 50 Registrar shall deliver Exchange Debentures that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Exchange Debentures bearing the Private Placement Legend, the Exchange Debenture Registrar shall deliver only Exchange Debentures that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (a)(i) of this Section 307 exist or (ii) there is delivered to the Exchange Debenture Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Debentures Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (d) General. By its acceptance of any Exchange Debenture bearing the Private Placement Legend, each Holder of such an Exchange Debenture acknowledges the restrictions on transfer of such Exchange Debenture set forth in this Exchange Indenture and in the Private Placement Legend and agrees that it shall transfer such Exchange Debenture only as provided in this Exchange Indenture. The Debentures Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Exchange Indenture or under applicable law with respect to any transfer of any interest in any Exchange Debenture (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Exchange Debenture) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Exchange Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. The Exchange Debenture Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 306 or this Section 307. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Exchange Debenture Registrar. SECTION 308. Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Institutional Accredited Investors. Citadel Broadcasting Company 140 South Ash Avenue Tempe, Arizona 85281 Prudential Securities Incorporated NationsBanc Capital Markets, Inc. BancBoston Securities Inc. c/o Prudential Securities Incorporated One New York Plaza New York, New York 10292 62 51 Ladies and Gentlemen: In connection with our proposed purchase of $ aggregate principal amount of 13-1/4% [Series B]* Exchange Debentures due 2009 (the "Securities") of Citadel Broadcasting Company (the "Company"), we confirm that: 1. We have received a copy of the Offering Memorandum, dated June 30, 1997, relating to the Securities and such other information as we deem necessary in order to make our investment decision. 2. We understand that the Securities have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date which is two years after the later of the date of original issue and the last date on which the Company or any affiliate or the Company was the owner of such Securities (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) for so long as the Securities are eligible for resale pursuant to Rule 144A under the Securities Act, to a Person we reasonably believe is a Qualified Institutional Buyer under Rule 144A that purchases for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) to an institutional "accredited investor" (as defined in subparagraph (a)(1), (2), (3) or (7) of Rule 501 of Regulation D under the Securities Act) that is purchasing for his own account or for the account of such an institutional "accredited investor" or (e) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account be at all times within our or their control and to compliance with any applicable state securities laws. The foregoing restrictions on sale shall not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made pursuant to clause (d) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the trustee under the indenture relating to the Securities (the "Debentures Trustee") which shall provide, among other things, that the transferee is an institutional "accredited investor" and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Debentures Trustee reserve the right prior to any offer, sale or other transfer of the Securities prior to the Resale __________________________________ * Include only for New Exchange Debentures. 63 52 Restriction Termination Date pursuant to clauses (c), (d) or (e) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Debentures Trustee. 3. We are an institutional "accredited investor" (as defined above) purchasing for our own account or for the account of an institutional "accredited investor" for which we exercise sole investment discretion and we are acquiring the Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any investor accounts for which we are acting are each able to bear the economic risk of our or its investments for an indefinite period. 4. You and the Debentures Trustee are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy thereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, (Name of Purchaser) By:________________________________________ Name:_____________________________ Title:_____________________________________ Date:______________________________________ Upon transfer, the Securities should be registered in the name of the new beneficial owner as follows: Name:___________________________________________________________________________ 64 53 Address:________________________________________________________________________ Taxpayer ID Number:_________________________________________________________________________ SECTION 309. [INTENTIONALLY OMITTED] SECTION 310. Mutilated, Destroyed, Lost and Stolen Exchange Debentures. If (i) any mutilated Exchange Debenture is surrendered to the Debentures Trustee, or (ii) the Company and the Debentures Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Exchange Debenture, and there is delivered to the Company and the Debentures Trustee such security or indemnity, in each case, as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Debentures Trustee that such Exchange Debenture has been acquired by a bona fide purchaser, the Company shall execute and upon Company Order the Debentures Trustee shall authenticate and deliver, in exchange for any such mutilated Exchange Debenture or in lieu of any such destroyed, lost or stolen Exchange Debenture, a new Exchange Debenture of like tenor and principal amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Exchange Debenture has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Exchange Debenture, pay such Exchange Debenture. Upon the issuance of any new Exchange Debenture under this Section, the Company 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 (including the fees and expenses of the Debentures Trustee) in connection therewith. Every new Exchange Debenture issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Exchange Debenture shall constitute an original additional contractual obligation of the Company, any Subsidiary Debentures Guarantor and any other obligor upon the Exchange Debentures, whether or not the mutilated, destroyed, lost or stolen Exchange Debenture shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Exchange Indenture equally and proportionately with any and all other Exchange Debentures 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 Exchange Debentures. 65 54 SECTION 311. Payment of Interest; Interest Rights Preserved. Interest on any Exchange Debenture which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Exchange Debenture (or one or more Predecessor Exchange Debentures) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; provided, however, that each installment of interest may, if the installment of interest is payable in money, at the Company's option be paid by mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 312, to the address of such Person as it appears in the Exchange Debenture Register. Any interest on any Exchange Debenture which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date shall forthwith cease to be payable to the Holder on the Regular Record Date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Exchange Debentures (such defaulted interest and interest thereon herein collectively called "Defaulted Interest") shall be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Exchange Debentures (or their respective Predecessor Exchange Debentures) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Debentures Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Exchange Debenture and the date (not less than 30 days after such notice) of the proposed payment (the "Special Record Date"), and at the same time the Company shall deposit with the Debentures Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest (or, if an Exchange Debenture has been issued as payment of interest in lieu of money, the Company shall deposit such Exchange Debenture in principal amount equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest) or shall make arrangements satisfactory to the Debentures Trustee for such deposit prior to the date of the proposed payment, such money (or, if an Exchange Debenture has been issued as payment of interest, such Exchange Debenture) when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Debentures Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Debentures Trustee of the notice of the proposed payment. The Debentures Trustee shall promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, shall cause notice of the proposed payment of such 66 55 Defaulted Interest and the Special Record Date therefor to be given in the manner provided for in Section 106, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so given, such Defaulted Interest shall be paid to the Persons in whose names the Exchange Debentures (or their respective Predecessor Exchange Debentures) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Exchange Debentures may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Debentures Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Debentures Trustee. Subject to the foregoing provisions of this Section, each Exchange Debenture delivered under this Exchange Indenture upon registration of transfer of or in exchange for or in lieu of any other Exchange Debenture shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Exchange Debenture. SECTION 312. Persons Deemed Owners. Prior to the due presentment of an Exchange Debenture for registration of transfer, the Company, the Debentures Trustee and any agent of the Company or the Debentures Trustee may treat the Persons in whose names, including the Global Exchange Debenture, such Exchange Debentures are registered as the owners of such Exchange Debenture for the purpose of receiving payment of principal of (and premium, if any) and (subject to Sections 305 and 311) interest on such Exchange Debenture and for all other purposes whatsoever, whether or not such Exchange Debenture be overdue, and none of the Company, any Subsidiary Debentures Guarantor, the Debentures Trustee nor any agent of the Company, any Subsidiary Debentures Guarantor or the Debentures Trustee shall be affected by notice to the contrary. SECTION 313. Cancellation. All Exchange Debentures surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Debentures Trustee, be delivered to the Debentures Trustee and shall be promptly cancelled by it. If the Company shall acquire any of the Exchange Debentures other than as set forth in the preceding sentence, the acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Exchange Debentures unless and until the same are surrendered to the Debentures Trustee for cancellation pursuant to this Section 313. No Exchange Debentures shall be authenticated in lieu of or in exchange for any Exchange Debentures cancelled as provided in this Section, 67 56 except as expressly permitted by this Exchange Indenture. All cancelled Exchange Debentures held by the Debentures Trustee shall be disposed of by the Debentures Trustee in accordance with its customary procedures unless by Company Order the Company shall direct that cancelled Exchange Debentures be returned to it. SECTION 314. Computation of Interest. Interest on the Exchange Debentures shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 315. CUSIP Numbers. The Company in issuing Exchange Debentures may use "CUSIP" numbers (if then generally in use) in addition to serial numbers; if so, the Debentures Trustee shall use such "CUSIP" numbers in addition to serial numbers in notices of redemption and repurchase as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such CUSIP numbers either as printed on the Exchange Debentures or as contained in any notice of a redemption or repurchase and that reliance may be placed only on the serial or other identification numbers printed on the Exchange Debentures, and any such redemption or repurchase shall not be affected by any defect in or omission of such CUSIP numbers. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Exchange Indenture shall upon request by the Company cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Exchange Debentures expressly provided for herein or pursuant hereto) and the Debentures Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Exchange Indenture when: (1) either (a) all the Exchange Debentures theretofore authenticated and delivered (other than (i) Exchange Debentures which have been lost, stolen or destroyed and which have been replaced or paid as provided in Section 310 and (ii) Exchange Debentures for whose payment money has theretofore been deposited in trust with the Debentures Trustee or any Paying Agent or segregated 68 57 and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Debentures Trustee for cancellation, or (b) all such Exchange Debentures not theretofore delivered to the Debentures Trustee for cancellation (i) have become due and payable or (ii) shall become due and payable at their Stated Maturity within one year or (iii) are to be called for redemption within one year under arrangements satisfactory to the Debentures Trustee for the giving of notice of redemption by the Debentures Trustee in the name, and at the expense, of the Company, and the Company has irrevocably deposited or caused to be deposited with the Debentures Trustee as trust funds in trust for such purpose an amount sufficient to pay and discharge the entire Debt on such Exchange Debentures not theretofore delivered to the Debentures Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Exchange Debentures which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company or the Subsidiary Debentures Guarantors have paid or caused to be paid all sums payable hereunder by the Company or the Subsidiary Debentures Guarantors; and (3) the Company has delivered to the Debentures Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Exchange Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Exchange Indenture, the obligations of the Company to the Debentures Trustee under Section 607 and, if money shall have been deposited with the Debentures Trustee pursuant to subclause (b) of clause (1) of this Section, the obligations of the Debentures Trustee under Section 402 and the last paragraph of Section 1003 shall survive. 69 58 SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Debentures Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Exchange Debentures and this Exchange Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Debentures Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Debentures Trustee; but such money need not be segregated from other funds except to the extent required by law. If the Debentures Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 401 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and any Subsidiary Debentures Guarantor's obligations under this Exchange Indenture and the Exchange Debentures shall be revived and reinstated as though no deposit had occurred pursuant to Section 401; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Exchange Debentures because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Exchange Debentures to receive such payment from the money or U.S. Government Obligations held by the Debentures Trustee or Paying Agent. ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Event of Default", wherever used herein, means any one of the following 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 government body): (a) Default in the payment of any interest on any Exchange Debenture when it becomes due and payable, and continuance of such default for a period of 30 days. (c) Default in the payment of the principal of (or premium, if any, on) any Exchange Debenture when due. (c) Failure to perform or comply with Article Eight. 70 59 (d) Default in the performance, or breach, of any covenant or agreement of the Company or any Subsidiary Debentures Guarantor contained in this Exchange Indenture or any Subsidiary Debentures Guarantee (other than a default in the performance, or breach, of a covenant or agreement that is specifically dealt with elsewhere herein), and continuance of such default or breach for a period of 60 days after written notice has been given to the Company by the Debentures Trustee or to the Company and the Debentures Trustee by the Holders of at least 25% in aggregate principal amount of the Exchange Debentures then outstanding. (e) (i) The occurrence of an event of default under any mortgage, bond, indenture, loan agreement or other document evidencing an issue of Debt of the Company or any Significant Subsidiary, which issue has an aggregate outstanding principal amount of not less than $5,000,000, and such default has resulted in such Debt becoming, whether by declaration or otherwise, due and payable prior to the date on which it would otherwise become due and payable or (ii) a default in any payment when due at final maturity of any such Debt. (f) Failure by the Company or any of its Restricted Subsidiaries to pay one or more final judgments the uninsured portion of which exceeds in the aggregate $5,000,000, which judgment or judgments are not paid, discharged or stayed for a period of 60 days. (g) Any Subsidiary Debentures Guarantee ceases to be in full force and effect or is declared null and void or any Subsidiary Debentures Guarantor denies that it has any further liability under any Subsidiary Debentures Guarantee, or gives notice to such effect (other than by reason of the termination of this Exchange Indenture or the release of any Subsidiary Debentures Guarantee in accordance with this Exchange Indenture), and such condition has continued for a period of 30 days after written notice of such failure requiring the Subsidiary Debentures Guarantor and the Company to remedy the same has been given (x) to the Company by the Debentures Trustee or (y) to the Company and the Debentures Trustee by the Holders of 25% in aggregate principal amount of the Exchange Debentures then outstanding. (h) A court having jurisdiction in the premises enters a decree or order for (i) relief in respect of the Company or any Significant Subsidiary in an involuntary case under any applicable Bankruptcy Law now or hereafter in effect, (ii) apointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (iii) the winding up or liquidation of the affairs of the Company or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days. 71 60 (i) The Company or any Significant Subsidiary (A) commences a voluntary case under any applicable Bankruptcy Law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Significant Subsidiary or for all or substantially all of the property and assets of the Company or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors. SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than as specified in Section 501(h) or (i)) occurs and is continuing, the Debentures Trustee or the Holders of not less than 25% in aggregate principal amount of the Exchange Debentures then outstanding may, and the Debentures Trustee at the request of such Holders shall, declare the principal of all of the outstanding Exchange Debentures immediately due and payable, by a notice in writing to the Company (and to the Debentures Trustee if given by the Holders) and, if the Credit Facility is in effect, to the Credit Facility Agent, and, upon any such declaration, such principal shall become due and payable immediately. If an Event of Default specified in Section 501(h) or (i) above occurs and is continuing, then such principal shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Debentures Trustee or any Holder of Exchange Debentures. At any time after a declaration of acceleration under this Exchange Indenture, but before a judgment or decree for payment of the money due has been obtained by the Debentures Trustee, the Holders of a majority in aggregate principal amount of the outstanding Exchange Debentures, by written notice to the Company and the Debentures Trustee, may rescind such declaration and its consequences if: (i) the Company has paid or deposited with the Debentures Trustee a sum sufficient to pay (A) all overdue interest on all Exchange Debentures, (B) all unpaid principal of (and premium, if any, on) any outstanding Exchange Debentures that has become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Exchange Debentures, (C) to the extent that payment of such interest is lawful, interest upon overdue interest and overdue principal amount at the rate borne by the Exchange Debentures, and 72 61 (D) all sums paid or advanced by the Debentures Trustee under this Exchange Indenture and the reasonable compensation, expenses, disbursements and advances of the Debentures Trustee, its agents and counsel; and (ii) all Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on) or interest on the Exchange Debentures that have become due solely by such declaration of acceleration, have been cured or waived. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Debentures Trustee. The Company and each of the Subsidiary Debentures Guarantors covenants that if (a) default is made in the payment of any interest on any Exchange Debenture when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Exchange Debenture at the Stated Maturity or other maturity thereof, the Company and the Subsidiary Debentures Guarantors shall, upon demand of the Debentures Trustee, pay to the Debentures Trustee for the benefit of the Holders of such Exchange Debentures, the whole amount then due and payable on such Exchange Debentures for principal (and premium, if any) and interest, with interest upon the overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest, at the rate borne by the Exchange Debentures; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Debentures Trustee, its agents and counsel and all other amounts due to the Debentures Trustee under Section 607. If the Company or any Subsidiary Debentures Guarantor, as the case may be, fails to pay such amounts forthwith upon such demand, the Debentures Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company, such Subsidiary Debentures Guarantor or any other obligor upon the Exchange Debentures and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company, such Subsidiary Debentures Guarantor or any other obligor upon the Exchange Debentures, wherever situated. 73 62 If an Event of Default occurs and is continuing, the Debentures Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Debentures Trustee shall deem most effectual to protect and enforce such rights, whether for the specific enforcement of any covenant or agreement in this Exchange Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy subject, however, to Section 512. No recovery of any such judgment upon any property of the Company or any Subsidiary Debentures Guarantor shall affect or impair any rights, powers or remedies of the Debentures Trustee or the Holders. SECTION 504. Debentures Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any Subsidiary Debentures Guarantor, upon the Exchange Debentures or the property of the Company or of such other obligor or their creditors, the Debentures Trustee (irrespective of whether the principal of the Exchange Debentures shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Debentures Trustee shall have made any demand on the Company for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Exchange Debentures, to take such other actions (including participating as a member, voting or otherwise, of any official committee of creditors appointed in such matter) and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Debentures Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Debentures Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Debentures Trustee and, in the event that the Debentures Trustee shall consent to the making of such payments directly to the Holders, to pay the Debentures Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Debentures Trustee, its agents and counsel, and any other amounts due the Debentures Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Debentures Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, 74 63 arrangement, adjustment or composition affecting the Exchange Debentures or the rights of any Holder thereof, or to authorize the Debentures Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Debentures Trustee may, on behalf of such Holders, vote for the election of a trustee in bankruptcy or other similar official. SECTION 505. Debentures Trustee May Enforce Claims Without Possession of Exchange Debentures. All rights of action and claims under this Exchange Indenture, the Exchange Debentures or the Subsidiary Debentures Guarantees may be prosecuted and enforced by the Debentures Trustee without the possession of any of the Exchange Debentures or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Debentures Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Debentures Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Exchange Debentures in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Subject to Article Fourteen, any money collected by the Debentures Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Debentures Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Exchange Debentures and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Debentures Trustee under Section 607; SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Exchange Debentures in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Exchange Debentures for principal (and premium, if any) and interest, respectively; and THIRD: The balance, if any, to the Person or Persons entitled thereto, including the Company or any other obligor on the Exchange Debentures, as their interests may appear or as a court of competent jurisdiction may direct, provided that all sums due and owing to the Holders and the Debentures Trustee have been paid in full as required by this Exchange Indenture. 75 64 SECTION 507. Limitation on Suits. No Holder of any Exchange Debentures shall have any right to institute any proceeding, judicial or otherwise, with respect to this Exchange Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Debentures Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Exchange Debentures shall have made written request to the Debentures Trustee to institute proceedings in respect of such Event of Default in its own name as Debentures Trustee hereunder; (3) such Holder or Holders have offered to the Debentures Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Debentures Trustee for 30 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Debentures Trustee during such 30-day period by the Holders of a majority or more in principal amount of the Outstanding Exchange Debentures; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Exchange Indenture, any Exchange Debenture or any Subsidiary Debentures Guarantee to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Exchange Indenture, any Exchange Debenture or any Subsidiary Debentures Guarantee, except in the manner herein provided and for the equal and ratable benefit of all the Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Exchange Indenture, the Holder of any Exchange Debenture shall have the right, which is absolute and unconditional, to receive payment, as provided herein (including, if applicable, Article Eleven) and in such Exchange Debenture of the principal of (and premium, if any) and (subject to Section 311) interest on such Exchange Debenture on the respective Stated Maturities expressed in such Exchange Debenture (or, in the case of redemption or repurchase, on the Redemption Date or repurchase) and to 76 65 institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Debentures Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Exchange Indenture or any Subsidiary Debentures Guarantee and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Debentures Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, any Subsidiary Debentures Guarantor, any other obligor on the Exchange Debentures, the Debentures Trustee and the Holders shall be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Debentures Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Exchange Debentures in the last paragraph of Section 310, no right or remedy herein conferred upon or reserved to the Debentures Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Debentures Trustee or of any Holder of any Exchange Debenture to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Debentures Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Debentures Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of not less than a majority in principal amount of the Outstanding Exchange Debentures shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debentures Trustee, or exercising any trust or power conferred on the Debentures Trustee, provided that 77 66 (1) such direction shall not be in conflict with any rule of law or with this Exchange Indenture or any Subsidiary Debentures Guarantee; (2) the Debentures Trustee need not take any action which might involve it in personal liability or be unjustly prejudicial to the Holders not consenting; and (3) subject to the provisions of Section 315 of the Trust Indenture Act, the Debentures Trustee may take any other action deemed proper by the Debentures Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the outstanding Exchange Debentures may, on behalf of the Holders of all of the Exchange Debentures, waive any past defaults under this Exchange Indenture, except a default in the payment of the principal of (and premium, if any) or interest on any Exchange Debenture, or in respect of a covenant or provision that under this Exchange Indenture cannot be modified or amended without the consent of the Holder of each Exchange Debenture outstanding. 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 Exchange Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. SECTION 514. Waiver of Stay or Extension Laws. Each of the Company and the Subsidiary Debentures Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company, any Subsidiary Debentures Guarantor or any such obligor from paying all or any portion of the principal of, premium, if any, or interest on the Exchange Debentures contemplated herein or in the Exchange Debentures or which may affect the covenants or the performance of this Exchange Indenture; and each of the Company, any Subsidiary Debentures Guarantor and any such obligor (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Debentures Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. 78 67 SECTION 515. Undertaking for Costs. All parties to this Exchange Indenture agree, and each Holder of any Exchange Debenture by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Exchange Indenture, or in any suit against the Debentures Trustee for any action taken, suffered or omitted by it as Debentures Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Debentures Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Exchange Debentures, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Exchange Debenture on or after the respective Stated Maturities expressed in such Exchange Debenture (or, in the case of redemption, on or after the Redemption Date). ARTICLE SIX THE DEBENTURES TRUSTEE SECTION 601. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default, (1) the Debentures Trustee shall perform only such duties as are specifically set forth in this Exchange Indenture and no implied covenants or obligations shall be read into this Exchange Indenture against the Debentures Trustee; and (2) in the absence of bad faith on its part, the Debentures Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Debentures Trustee and conforming to the requirements of this Exchange Indenture; but in the case of any such certificates or opinions which by any provision hereby are specifically required to be furnished to the Debentures Trustee, the Debentures Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Exchange Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (b) In case a Default or an Event of Default shall have occurred and be continuing of which a Responsible Officer of the Debentures Trustee has actual knowledge or of which written notice of such Default or Event of Default shall have been given to the Debentures Trustee by the Company, any other obligor of the Exchange Debentures or by any Holder, the Debentures Trustee shall exercise such of the rights and powers vested in it by this 79 68 Exchange Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Exchange Indenture shall be construed to relieve the Debentures Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (1) this paragraph (c) shall not be construed to limit the effect of paragraph (a) of this Section; (2) the Debentures Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Debentures Trustee was negligent in ascertaining the pertinent facts; (3) the Debentures Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in aggregate principal amount of the Outstanding Exchange Debentures relating to the time, method and place of conducting any proceeding for any remedy available to the Debentures Trustee, or exercising any trust or power conferred upon the Debentures Trustee, under this Exchange Indenture; and (4) no provision of this Exchange Indenture shall require the Debentures Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Exchange Indenture relating to the conduct or affecting the liability of or affording protection to the Debentures Trustee shall be subject to the provisions of this Section. SECTION 602. Notice of Defaults. If a Default or an Event of Default occurs and is continuing and is known to the Debentures Trustee, the Debentures Trustee shall mail to each Holder of the Exchange Debentures notice of the Default or Event of Default within 90 days after the occurrence thereof. Except in the case of a Default or an Event of Default in payment of principal of (and premium, if any, on) or interest on any Exchange Debentures, the Debentures Trustee may withhold the notice to the Holders if a committee of its trust officers in good faith determines that withholding such notice is in the interests of the Holders. 80 69 SECTION 603. Certain Rights of Debentures Trustee. Subject to the provisions of TIA Sections 315(a) through 315(d): (1) the Debentures Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Exchange Indenture the Debentures Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Debentures Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate; (4) the Debentures Trustee may consult with counsel of its selection and any written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Debentures Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Exchange Indenture at the request or direction of any of the Holders pursuant to this Exchange Indenture, unless such Holders shall have offered to the Debentures Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (6) the Debentures Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Debentures Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Debentures Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company; 81 70 (7) the Debentures Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Debentures Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (8) the Debentures Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Exchange Indenture; and they Debentures Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Debentures Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Debentures Trustee at the Corporate Trust Office of the Debentures Trustee, and such notice references the Company, the Exchange Debentures or this Exchange Indenture. (c) The Debentures Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 604. Debentures Trustee Not Responsible for Recitals or Issuance of Exchange Debentures. The recitals contained herein and in the Exchange Debentures, except for the Debentures Trustee's certificates of authentication, shall be taken as the statements of the Company and the Subsidiary Debentures Guarantors, and the Debentures Trustee assumes no responsibility for their correctness. The Debentures Trustee makes no representations as to the validity or sufficiency of this Exchange Indenture or of the Exchange Debentures or of the Subsidiary Debentures Guarantees, except that the Debentures Trustee represents that it is duly authorized to execute and deliver this Exchange Indenture, authenticate the Exchange Debentures and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. The Debentures Trustee shall not be accountable for the use or application by the Company of Exchange Debentures or the proceeds thereof. SECTION 605. May Hold Exchange Debentures. The Debentures Trustee, any Paying Agent, any Exchange Debenture Registrar, any Authenticating Agent or any other agent of the Company or of the Debentures Trustee, in its individual or any other capacity, may become the owner or pledgee of Exchange Debentures and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the 82 71 same rights it would have if it were not Debentures Trustee, Paying Agent, Exchange Debenture Registrar, Authenticating Agent or such other agent. The Debentures Trustee is permitted to engage in other transactions; provided, however, that if it acquires any conflicting interest it must eliminate such conflict or resign. SECTION 606. Money Held in Trust. All moneys received by the Debentures Trustee shall, until used or applied as herein provided, be held in trust hereunder for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Debentures Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company or any Subsidiary Debentures Guarantor. SECTION 607. Compensation and Reimbursement. The Company agrees: (1) to pay to the Debentures Trustee from time to time such compensation as shall be agreed to in writing between the Company and the Debentures Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Debentures Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Debentures Trustee in accordance with any provision of this Exchange Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel and costs and expenses of collection), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify each of the Debentures Trustee or any predecessor Debentures Trustee (and their respective directors, officers, employees and agents) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense, including taxes (other than taxes based on the income of the Debentures Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Company under this Section to compensate the Debentures Trustee, to pay or reimburse the Debentures Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Debentures Trustee shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Exchange 83 72 Indenture. As security for the performance of such obligations of the Company, the Debentures Trustee shall have a claim prior to the Holders of the Exchange Debentures upon all property and funds held or collected by the Debentures Trustee as such, except funds held in trust for the payment of principal of (and premium, if any) or interest on particular Exchange Debentures. When the Debentures Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(h) or (i), the expenses (including the reasonable charges and expenses of its counsel) of and the compensation for such services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the termination of this Exchange Indenture. SECTION 608. Corporate Debentures Trustee Required; Eligibility. There shall be at all times a Debentures Trustee hereunder which shall be eligible to act as Debentures Trustee under TIA Section 310(a)(1) and which shall have an office in The City of New York, and shall have a combined capital and surplus of at least $100,000,000. If the Debentures Trustee does not have an office in The City of New York, the Debentures Trustee may appoint an agent in The City of New York reasonably acceptable to the Company to conduct any activities which the Debentures Trustee may be required under this Exchange Indenture to conduct in The City of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 608, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Debentures Trustee shall cease to be eligible in accordance with the provisions of this Section 608, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 609. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Debentures Trustee and no appointment of a successor Debentures Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Debentures Trustee in accordance with the applicable requirements of this Section. (b) The Debentures Trustee may resign at any time by giving written notice thereof to the Company. Upon receiving such notice of resignation, the Company shall promptly appoint a successor Debentures Trustee by written instrument executed by authority of the Board of Directors, a copy of which shall be delivered to the resigning Debentures Trustee and a copy 84 73 to the successor Debentures Trustee. If an instrument of acceptance required by this Section shall not have been delivered to the Debentures Trustee within 30 days after the giving of such notice of resignation, the resigning Debentures Trustee may petition any court of competent jurisdiction for the appointment of a successor Debentures Trustee. (c) The Debentures Trustee may be removed at any time by Act of the Holders of not less than a majority in principal amount of the Outstanding Exchange Debentures, delivered to the Debentures Trustee and to the Company. Upon such removal, the Company shall promptly appoint a successor Debentures Trustee by written instrument executed by authority of the Board of Directors of the Company, a copy of which shall be delivered to the removed Debentures Trustee and a copy to the successor Debentures Trustee. If an instrument of acceptance required by this Section shall not have been delivered to the resigning Debentures Trustee within 30 days after the giving of such notice of removal, the removed Debentures Trustee may petition any court of competent jurisdiction for the appointment of a successor Debentures Trustee. (d) If at any time: (1) the Debentures Trustee shall fail to comply with the provisions of TIA Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of an Exchange Debenture for at least six months, or (2) the Debentures Trustee shall cease to be eligible under Section 608 and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of an Exchange Debenture for at least six months, or (3) the Debentures Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a Custodian of the Debentures Trustee or of its property shall be appointed or any public officer shall take charge or control of the Debentures Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company, by a Board Resolution, may remove the Debentures Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona fide Holder of an Exchange Debenture for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Debentures Trustee and the appointment of a successor Debentures Trustee. (e) If the Debentures Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Debentures Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Debentures Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such 85 74 vacancy, a successor Debentures Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Exchange Debentures delivered to the Company and the retiring Debentures Trustee, the successor Debentures Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Debentures Trustee and supersede the successor Debentures Trustee appointed by the Company. If no successor Debentures Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of an Exchange Debenture for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Debentures Trustee. (f) The Company shall give notice of each resignation and each removal of the Debentures Trustee and each appointment of a successor Debentures Trustee to the Holders of Exchange Debentures in the manner provided for in Section 106. Each notice shall include the name of the successor Debentures Trustee and the address of its Corporate Trust Office. SECTION 610. Acceptance of Appointment by Successor. Every successor Debentures Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Debentures Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Debentures Trustee shall become effective and such successor Debentures Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Debentures Trustee; but, on request of the Company or the successor Debentures Trustee, such retiring Debentures Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Debentures Trustee all the rights, powers and trusts of the retiring Debentures Trustee and shall duly assign, transfer and deliver to such successor Debentures Trustee all property and money held by such retiring Debentures Trustee hereunder. Upon request of any such successor Debentures Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Debentures Trustee all such rights, powers and trusts. No successor Debentures Trustee shall accept its appointment unless at the time of such acceptance such successor Debentures Trustee shall be qualified and eligible under this Article. SECTION 611. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Debentures Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Debentures Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Debentures Trustee, shall be the 86 75 successor of the Debentures Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Exchange Debentures shall have been authenticated, but not delivered, by the Debentures Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Debentures Trustee may adopt such authentication and deliver the Exchange Debentures so authenticated with the same effect as if such successor Debentures Trustee had itself authenticated such Exchange Debentures. In case at that time any of the Exchange Debentures shall not have been authenticated, any successor Debentures Trustee may authenticate such Exchange Debentures either in the name of any predecessor hereunder or in the name of the successor Debentures Trustee. In all such cases such certificates shall have the full force and effect which this Exchange Indenture provides for the certificate of authentication of the Debentures Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Debentures Trustee or to authenticate Exchange Debentures in the name of any predecessor Debentures Trustee shall apply only to its successor or successors by merger, conversion or consolidation. ARTICLE SEVEN HOLDERS LISTS AND REPORTS BY DEBENTURES TRUSTEE SECTION 701. Company to Furnish Debentures Trustee Names and Addresses. The Company shall furnish or cause to be furnished to the Debentures Trustee (a) semiannually, not more than 10 days after each Regular Record Date, a list, in such form as the Debentures Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date; and (b) at such other times as the Debentures Trustee may reasonably request in writing, within 30 days after receipt by the Company of any such request, a list of similar form and content to that in Subsection (a) hereof as of a date not more than 15 days prior to the time such list is furnished; provided, however, that if and so long as the Debentures Trustee shall be the Exchange Debenture Registrar, no such list need be furnished. SECTION 702. Disclosure of Names and Addresses of Holders. Every Holder of Exchange Debentures, by receiving and holding the same, agrees with the Company and the Debentures Trustee that none of the Company or the Debentures Trustee or any agent of either of them shall be held accountable by reason of the disclosure of 87 76 any such information as to the names and addresses of the Holders in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Debentures Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b). SECTION 703. Reports by Debentures Trustee. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Exchange Debentures, the Debentures Trustee shall transmit to the Holders, in the manner and to the extent provided in TIA Section 313(c), a brief report dated as of such May 15 if required by TIA Section 313(a). ARTICLE EIGHT MERGER, CONSOLIDATION, OR SALE OF ASSETS SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge with or into any other Person or, directly or indirectly, convey, transfer or lease its properties and assets substantially as an entirety to any Person or Persons, unless: (a) Either (i) the Company is the surviving corporation or (ii) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person that acquires by sale, assignment, transfer, lease or other disposition the properties and assets of the Company substantially as an entirety (the "Surviving Entity") (A) is a corporation, partnership or trust organized and validly existing under the laws of the United States, any state thereof or the District of Columbia and (B) expressly assumes, by a supplemental indenture in form satisfactory to the Debentures Trustee, all of the Company's obligations under this Exchange Indenture and the Exchange Debentures. (b) Immediately after giving effect to such transaction and treating any obligation of the Company or a Restricted Subsidiary in connection with or as a result of such transaction as having been incurred at the time of such transaction, no Default or Event of Default shall have occurred and be continuing. (c) Immediately after giving effect to such transaction on a pro forma basis, (on the assumption that the transaction occurred at the beginning of the most recently ended four full fiscal quarter period for which internal financial statements are available), the Company (or the Surviving Entity if the Company is not the continuing obligor under 88 77 this Exchange Indenture) could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of Section 1009. (d) If the Company is not the continuing obligor under this Exchange Indenture, each Subsidiary Debentures Guarantor, unless it is the other party to the transaction described above, has by supplemental indenture confirmed that its Subsidiary Debentures Guarantee applies to the Surviving Entity's obligations under this Exchange Indenture and the Exchange Debentures. (e) If any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of Section 1021 are complied with. (f) The Company delivers, or causes to be delivered, to the Debentures Trustee, in form and substance reasonably satisfactory to the Debentures Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction complies with the requirements of this Exchange Indenture. SECTION 802. Successor Substituted. In the event of any transaction described in and complying with the conditions listed in Section 801 in which the Company is not the continuing obligor under this Exchange Indenture, the Surviving Entity shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Exchange Indenture, and thereafter the Company shall, except in the case of a lease, be discharged from all its obligations and covenants under this Exchange Indenture and the Exchange Debentures. ARTICLE NINE SUPPLEMENTS AND AMENDMENTS TO INDENTURE SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Debentures Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Debentures Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company in this Exchange Indenture and in the Exchange Debentures; or 89 78 (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (3) to add additional Events of Default; or (4) to provide for uncertificated Exchange Debentures in addition to or in place of the Certificated Exchange Debentures; or (5) to evidence and provide for the acceptance of appointment under this Exchange Indenture by a successor Debentures Trustee; or (6) to secure the Exchange Debentures; or (7) to cure any ambiguity, to correct or supplement any provision in this Exchange Indenture that may be defective or inconsistent with any other provision in this Exchange Indenture, or to make any other provisions with respect to matters or questions arising under this Exchange Indenture, provided that such actions pursuant to this clause do not adversely affect the interests of the Holders in any material respect; or (8) to comply with any requirements of the Commission in order to effect and maintain the qualification of this Exchange Indenture under the Trust Indenture Act. SECTION 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of at least a majority in principal amount of the Outstanding Exchange Debentures (including consents obtained in connection with a tender offer or exchange offer for the Exchange Debentures), by Act of such Holders delivered to the Company and the Debentures Trustee, the Company, when authorized by a Board Resolution, and the Debentures Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Exchange Indenture or of modifying in any manner the rights of the Holders under this Exchange Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Exchange Debenture affected thereby: (a) change the Stated Maturity of the principal of, or any installment of interest on, any Exchange Debenture, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the place of payment where, or change the coin or currency in which, any Exchange Debenture or any premium or 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); 90 79 (b) reduce the percentage in principal amount of Outstanding Exchange Debentures, the consent of whose Holders is required for any such amendment or for any waiver of compliance with certain provisions of, or certain defaults and their consequences provided for under, this Exchange Indenture; (c) modify any of the provisions of this Exchange Indenture relating to the subordination of the Exchange Debentures or the Subsidiary Debentures Guarantees in a manner materially adverse to the Holders; or (d) waive a default in the payment of principal of, or premium, if any, or interest on the Exchange Debentures. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Exchange Indenture, the Debentures Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Exchange Indenture. The Debentures Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Debentures Trustees own rights, duties or immunities under this Exchange Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Exchange Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Exchange Indenture for all purposes; and every Holder of Exchange Debentures theretofore or thereafter authenticated and delivered hereunder shall be bound thereby (except as provided in Section 902). 91 80 SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to the Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Exchange Debentures to Supplemental Indentures. Exchange Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Debentures Trustee, bear a notation in form approved by the Debentures Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Exchange Debentures so modified as to conform, in the opinion of the Debentures Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Debentures Trustee in exchange for Outstanding Exchange Debentures. SECTION 907. Notice of Supplemental Indentures. Promptly after the execution by the Company and the Debentures Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Exchange Debenture affected, in the manner provided for in Section 106, setting forth in general terms the substance of such supplemental indenture. SECTION 908. Effect on Senior Debt and Senior Subordinated Debt. No supplemental indenture shall adversely affect the rights of any holders of Senior Debt and Senior Subordinated Debt under Article Fourteen unless the requisite holders of each issue of Senior Debt and Senior Subordinated Debt affected thereby shall have consented to such supplemental indenture. ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, If Any, and Interest. The Company covenants and agrees for the benefit of the Holders that it shall duly and punctually pay the principal of (and premium, if any) and interest on the Exchange Debentures in accordance with the terms of the Exchange Debentures and this Exchange Indenture. 92 81 SECTION 1002. Maintenance of Office or Agency. The Company shall maintain in The City of New York an office or agency where Exchange Debentures may be presented or surrendered for payment, where Exchange Debentures may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Exchange Debentures and this Exchange Indenture may be served. The Corporate Trust Office of the Debentures Trustee shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company shall give prompt written notice to the Debentures Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Debentures Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Debentures Trustee, and the Company hereby appoints the Debentures Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Exchange Debentures may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company shall give prompt written notice to the Debentures Trustee of any such designation or rescission and any change in the location of any such other office or agency. SECTION 1003. Money for Exchange Debenture Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it shall, on or before each due date of the principal of (or premium, if any) or interest on any of the Exchange Debentures, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal of (or premium, if any) or interest so becoming due (or, in the case of interest, Exchange Debentures issued in lieu of payment thereof in money in accordance with the Exchange Debentures and this Exchange Indenture) until such sums shall be paid to such Persons or otherwise disposed of as herein provided and shall promptly notify the Debentures Trustee of its action or failure to so act. Whenever the Company shall have one or more Paying Agents for the Exchange Debentures, it shall, on or before each due date of the principal of (or premium, if any) or interest on any Exchange Debentures, deposit with a Paying Agent a sum in same day funds (or New York Clearing House funds if such deposit is made prior to the date on which such deposit is required to be made) sufficient to pay the principal (and premium, if any) or interest so becoming due (or, in the case of interest, Exchange Debentures issued in lieu of payment thereof 93 82 in money in accordance with the Exchange Debentures and this Exchange Indenture), such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Debentures Trustee) the Company shall promptly notify the Debentures Trustee of such action or any failure to so act. The Company shall cause each Paying Agent (other than the Debentures Trustee) to execute and deliver to the Debentures Trustee an instrument in which such Paying Agent shall agree with the Debentures Trustee, subject to the provisions of this Section, that such Paying Agent shall: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest (or, in the case of interest, Exchange Debentures issued in lieu of payment thereof in money in accordance with the Exchange Debentures and this Exchange Indenture) on Exchange Debentures in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Debentures Trustee notice of any default by the Company (or any other obligor upon the Exchange Debentures) in the making of any payment of principal (and premium, if any) or interest; and (3) at any time during the continuance of any such default, upon the written request of the Debentures Trustee, forthwith pay to the Debentures Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Exchange Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Debentures Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Debentures Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Debentures Trustee, such Paying Agent shall be released from all further liability with respect to such sums. Any money deposited with the Debentures Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (or premium, if any) or interest (or, in the case of interest, Exchange Debentures issued in lieu of payment thereof in money in accordance with the Exchange Debentures and this Exchange Indenture) on any Exchange Debenture and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Exchange Debenture shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Debentures Trustee or such Paying Agent 94 83 with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Debentures Trustee or such Paying Agent, before being required to make any such repayment to the Company, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining shall be repaid to the Company. SECTION 1004. Corporate Existence. Subject to Article Eight, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence and that of each Restricted Subsidiary and the corporate rights (charter and statutory) licenses and franchises of the Company and each Restricted Subsidiary; provided, however, that the Company shall not be required to preserve any such existence (except the Company) right, license or franchise if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and each of its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not, and shall not be, disadvantageous in any material respect to the Holders. SECTION 1005. Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon the Company or any Restricted Subsidiary or upon the income, profits or property of the Company or any Restricted Subsidiary and (b) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a material liability or lien upon the property of the Company or any Restricted Subsidiary; provided, however, that the Company 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 and for which appropriate reserves, if necessary (in the good faith judgment of management of the Company), are being maintained in accordance with GAAP. SECTION 1006. Maintenance of Properties. The Company shall cause all material properties owned by the Company 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 normal condition, repair and working order and shall 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 95 84 business carried on in connection therewith may be properly conducted at all times; provided, however, that nothing in this Section shall prevent the Company or any of its 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 its business or the business of any Restricted Subsidiary and not adverse in any material respect to the Holders. SECTION 1007. Insurance. To the extent available at commercially reasonable rates, the Company shall maintain, and shall cause each of its Restricted Subsidiaries to maintain, insurance with responsible carriers against such risks and in such amounts, and with such deductibles, retentions, self-insured amounts and co-insurance provisions, as are customarily carried by similar businesses, of similar size, including professional and general liability, property and casualty loss, workers' compensation and interruption of business insurance. SECTION 1008. Compliance with Laws. The Company shall comply, and shall cause each of its Restricted Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental regulatory authority, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as would not in the aggregate have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries, taken as a whole. SECTION 1009. Limitation on Debt. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, issue, assume, guarantee or in any manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Debt (including Acquired Debt and the issuance of Disqualified Stock), except that the Company or a Subsidiary Debentures Guarantor may incur Debt or issue Disqualified Stock if, at the time of such event, the Consolidated Cash Flow Ratio would have been less than 7.0 to 1.0. In making the foregoing calculation, pro forma effect shall be given to: (i) the incurrence of such Debt and (if applicable) the application of the net proceeds therefrom, including to refinance other Debt, as if such Debt had been incurred and the application of proceeds therefrom occurred on the first day of the four-fiscal quarter period used to calculate the Consolidated Cash Flow Ratio, (ii) the incurrence, repayment or retirement of any other Debt by the Company or any of its Restricted Subsidiaries since the first day of such four-quarter period as if such Debt was incurred, repaid or retired at the beginning of such four-quarter period and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition 96 85 (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or any of its Restricted Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition occurred at the beginning of such four-quarter period. In making a computation under the foregoing clause (i) or (ii), the amount of Debt under a revolving credit facility shall be computed based upon the average daily balance of such Debt during such four-quarter period. (b) Notwithstanding the foregoing, the Company may, and may, to the extent expressly permitted below, permit any of its Restricted Subsidiaries to, incur any of the following Debt ("Permitted Debt"): (i) Debt of the Company or any Subsidiary Debentures Guarantor under the Credit Facility (including guarantees thereof by the Subsidiaries) in an aggregate principal amount at any one time outstanding not to exceed $110,000,000 less any amounts applied to the permanent reduction of such Debt pursuant to Section 1012. (ii) Debt of the Company or any of its Restricted Subsidiaries outstanding on the Closing Date, other than Debt described under clause (i) above. (iii) Debt owed by the Company to any of its Restricted Subsidiaries or owed by any Subsidiary to the Company or a Restricted Subsidiary (provided that such Debt is Junior Subordinated Debt and is held by the Company or such Restricted Subsidiary) or owed to the Company or a Subsidiary Debentures Guarantor by a Restricted Subsidiary that is not a Subsidiary Debentures Guarantor, provided the incurrence of such Debt did not violate the provisions of Section 1010. (iv) Debt represented by the Notes and the Subsidiary Notes Guarantees. (v) Debt represented by the Exchange Debentures and the Subsidiary Debentures Guarantees. (vi) Hedging Obligations of the Company or any of its Restricted Subsidiaries incurred in the ordinary course of business. (vii) Capitalized Lease Obligations of the Company or any of its Restricted Subsidiaries in an aggregate amount not exceeding $3,000,000 at any one time outstanding. (viii) Debt under purchase money mortgages or secured by purchase money security interests so long as (x) such Debt is not secured by any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets so acquired and (y) such Debt is created within 60 days of the acquisition of the related 97 86 property; provided that the aggregate principal amount of Debt under this clause (viii) does not exceed $2,000,000 at any one time outstanding. (ix) Debt of the Company or any Subsidiary Debentures Guarantor, not permitted by any other clause of this definition, in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding. (x) Debt of the Company or any of its Restricted Subsidiaries consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets, including, without limitation, shares of Capital Stock. (xi) Acquired Debt of a Person, other than Debt incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or the acquisition of assets from such Person, as the case may be, provided that the Company on a pro forma basis could incur $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of this Section. (xii) Any renewals, extensions, substitutions, refinancings or replacements (each, for purposes of this clause, a "refinancing") by the Company or any Restricted Subsidiary of any outstanding Debt of the Company or such Restricted Subsidiary, other than Debt incurred pursuant to clause (i), (vi), (vii), (viii), (ix) or (x) of this Section, including any successive refinancings thereof, so long as (A) any such new Debt is in a principal amount that does not exceed the principal amount so refinanced, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Debt refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing, (B) in the case of any refinancing of Junior Subordinated Debt, such new Debt is made subordinate to the Exchange Debentures at least to the same extent as the Debt being refinanced, (C) in the case of any refinancing of the Exchange Debentures or any Pari Passu Debt, such Debt is Pari Passu Debt or Junior Subordinated Debt and (D) such refinancing Debt does not have a Weighted Average Life less than the Weighted Average Life of the Debt being refinanced and does not have a final scheduled maturity earlier than the final scheduled maturity, or permit redemption at the option of the holder earlier than the earliest date of redemption at the option of the holder, of the Debt being refinanced. 98 87 SECTION 1010. Limitation on Restricted Payments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, take any of the following actions: (a) declare or pay any dividend on, or make any distribution to holders of, any shares of the Capital Stock of the Company or any of its Restricted Subsidiaries other than (i) dividends or distributions payable solely in Qualified Equity Interests of the issuer of such shares of Capital Stock, (ii) dividends or distributions by a Restricted Subsidiary payable to the Company or another Restricted Subsidiary or (iii) pro rata dividends or distributions on common stock of a Restricted Subsidiary held by minority stockholders, provided that such dividends do not in the aggregate exceed the minority stockholders' pro rata share of such Restricted Subsidiary's net income from the first day of the Company's fiscal quarter during which the Closing Date occurs; (b) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any shares of Capital Stock (or any options, warrants or other rights to acquire shares of Capital Stock) of (i) the Company or any of its Unrestricted Subsidiaries or (ii) any Restricted Subsidiary that are held by any Affiliate of the Company (other than, in either case, any such Capital Stock owned by the Company or any of its Restricted Subsidiaries); (c) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, sinking fund payment or maturity, any Junior Subordinated Debt; and (d) make any Investment (other than a Permitted Investment) in any Person (such payments or other actions described in (but not excluded from) clauses (a) through (d) being referred to as "Restricted Payments"), unless at the time of, and immediately after giving effect to, the proposed Restricted Payment: (i) no Default or Event of Default shall have occurred and be continuing, (ii) the Company could incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to Section 1009, and (iii) the aggregate amount of all Restricted Payments declared or made after the Closing Date does not exceed the sum of: (A) the remainder of (x) 100% of the aggregate Consolidated Cash Flow for the period beginning on the first day of the Company's fiscal quarter 99 88 during which the Closing Date occurs and ending on the last day of the Company's most recent fiscal quarter for which internal financial statements are available ending prior to the date of such proposed Restricted Payment (the "Computation Period") minus (y) the product of 1.4 times the sum of (i) Consolidated Fixed Charges for the Computation Period and (ii) all dividends or other distributions paid in cash by the Company or any of its Restricted Subsidiaries on any Disqualified Stock of the Company or any of its Restricted Subsidiaries for the Computation Period; plus (B) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Company's Board of Directors, whose good faith determination shall be conclusive) from the issuance or sale (other than to a Subsidiary) of Qualified Equity Interests of the Company (excluding from this computation any net proceeds of a Public Equity Offering received by the Company that are used by it to redeem the Exchange Debentures, as discussed above); plus (C) the aggregate net proceeds received by the Company after the Closing Date (including the fair market value of property other than cash as determined by the Company's Board of Directors, whose good faith determination shall be conclusive) from the issuance or sale (other than to a Subsidiary) of debt securities or Disqualified Stock that have been converted into or exchanged for Qualified Stock of the Company, together with the aggregate net cash proceeds received by the Company at the time of such conversion or exchange; plus (D) without duplication, the Net Cash Proceeds received by the Company or a Wholly Owned Restricted Subsidiary upon the sale of any of its Unrestricted Subsidiaries; plus (E) $5,000,000. Notwithstanding the foregoing, the Company and any of its Restricted Subsidiaries may take any of the following actions, so long as (with respect to clauses (f) and (g) below) no Default or Event of Default shall have occurred and be continuing or would occur: (a) The payment of any dividend within 60 days after the date of declaration thereof, if at the declaration date such payment would not have been prohibited by the foregoing provision. (b) The repurchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash 100 89 proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity Interests of the Company. (c) The purchase, redemption, defeasance or other acquisition or retirement for value of Junior Subordinated Debt in exchange for, or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Restricted Subsidiary) of shares of, Qualified Stock of the Company. (d) The purchase, redemption, defeasance or other acquisition or retirement for value of Junior Subordinated Debt in exchange for, or out of the net cash proceeds of a substantially concurrent issuance or sale (other than to a Subsidiary) of, Junior Subordinated Debt, so long as the Company or a Restricted Subsidiary would be permitted to refinance such original Junior Subordinated Debt with such new Junior Subordinated Debt pursuant to clause (xii) of the definition of Permitted Debt. (e) The repurchase of any Junior Subordinated Debt at a purchase price not greater than 101% of the principal amount of such Junior Subordinated Debt in the event of a "change of control" in accordance with provisions similar to Section 1011; provided that, prior to such repurchase, the Company has made the Change of Control Offer as provided in such Section with respect to the Exchange Debentures and has repurchased all Exchange Debentures validly tendered for payment in connection with such Change of Control Offer. (f) The payment by the Company to Citadel Communications for the purpose of the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of Citadel Communications, options on any such shares or related stock appreciation rights or similar securities held by officers or employees or former officers or employees (or their estates or beneficiaries under their estates) or by any employee benefit plan, upon death, disability, retirement or termination of employment or pursuant to the terms of any employee benefit plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate cash consideration paid for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Capital Stock after the date of the Closing Date does not exceed $1,000,000 in any fiscal year. (g) Loans or advances to officers, directors and employees of Citadel Communications, the Company or any of its Restricted Subsidiaries made in the ordinary course of business after the Closing Date in an aggregate principal amount not to exceed $1,000,000 at any one time outstanding. (h) Payments to or on behalf of Citadel Communications to pay its operating and administrative expenses attributable to the Company, including, without limitation, 101 90 legal and audit expenses, directors' fees, fees payable in respect of the trustee and back-up trustees under the Voting Trust Agreement, and Commission compliance expenses, in an amount not to exceed the greater of $1,000,000 per fiscal year and 1% of the net revenues of the Company for the preceding fiscal year. (i) Repayment of the note payable of the Company to Citadel Communications outstanding as of the Closing Date in an amount not to exceed $12,817,000 plus all accrued and unpaid interest thereon to the Closing Date. The payments described in clauses (b), (c), (e), (f) and (g) of this Section shall be Restricted Payments that shall be permitted to be taken in accordance with this Section but shall reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii), and the payments described in clauses (a), (d), (h) and (i) of this section shall be Restricted Payments that shall be permitted to be taken in accordance with this section and shall not reduce the amount that would otherwise be available for Restricted Payments under the foregoing clause (iii). For the purpose of making any calculations under this Exchange Indenture (i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company shall be deemed to have made an Investment in an amount equal to the fair market value of the net assets of such Restricted Subsidiary at the time of such designation as determined by the Board of Directors of the Company, whose good faith determination shall be conclusive, (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at fair market value at the time of such transfer, as determined by the Board of Directors of the Company, whose good faith determination shall be conclusive and (iii) subject to the foregoing, the amount of any Restricted Payment, if other than cash, shall be determined by the Board of Directors of the Company, whose good faith determination shall be conclusive. If the aggregate amount of all Restricted Payments calculated under the foregoing provision includes an Investment in an Unrestricted Subsidiary or other Person that thereafter becomes a Restricted Subsidiary, such Investment shall no longer be counted as a Restricted Payment for purposes of calculating the aggregate amount of Restricted Payments. If an Investment resulted in the making of a Restricted Payment, the aggregate amount of all Restricted Payments calculated under the foregoing provision shall be reduced by the amount of any net reduction in such Investment (resulting from the payment of interest or dividends, loan repayment, transfer of assets or otherwise), to the extent such net reduction is not included in Consolidated Adjusted Net Income; provided that the total amount by which the aggregate amount of all Restricted Payments may be reduced may not exceed the lesser of (x) the cash proceeds received by the Company and any of its Restricted Subsidiaries in connection with such net reduction and (y) the initial amount of such Investment. 102 91 In computing Consolidated Adjusted Net Income for purposes of the foregoing clause (iii)(A), (i) the Company may use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company shall be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment that, at the time of the making of such Restricted Payment, would in the good faith determination of the Company be permitted under the requirements of this Exchange Indenture, such Restricted Payment shall be deemed to have been made in compliance with this Exchange Indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Adjusted Net Income of the Company for any period. SECTION 1011. Purchase of Exchange Debentures upon a Change of Control. Upon the occurrence of a Change of Control, each Holder shall have the right to require the repurchase of its Exchange Debentures by the Company, in whole or in part in integral multiples of $1,000, in cash pursuant to the offer described below (the "Change of Control Offer") at a purchase price equal to 101% of the principal amount thereof as of the Change of Control Purchase Date, plus accrued and unpaid interest to such date (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall notify the Trustee thereof and give written notice of such Change of Control (a "Change of Control Offer") to each Holder of Exchange Debentures by first-class mail, postage prepaid, at its address appearing in the Exchange Debentures Register, stating: (i) that a Change of Control has occurred, that the Change of Control Offer is being made pursuant to this Section 1011 and that all Exchange Debentures validly tendered shall be accepted for payment; (ii) the purchase price and the 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 (the "Change of Control Purchase Date"); (iii) that any Exchange Debenture not tendered shall continue to accrue interest; (iv) that, unless the Company defaults in the payment of the Change of Control Payment, any Exchange Debentures accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Purchase Date; 103 92 (v) that a Holder electing to have any Exchange Debenture or a portion thereof purchased pursuant to the Change of Control Offer shall be required to surrender such Exchange Debenture to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Change of Control Purchase Date; (vi) that the Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Change in Control Purchase Date, facsimile transmission, telex or letter setting forth the name of such Holder, the principal amount of Exchange Debentures delivered for purchase and a statement that such Holder is withdrawing its election to have such Exchange Debentures purchased; (vii) that the Holders whose Exchange Debentures are being purchased only in part shall be issued new Exchange Debentures equal in principal amount to the unpurchased portion of the Exchange Debentures surrendered; provided that each Exchange Debenture purchased and each new Exchange Debenture issued shall be in a principal amount of $1,000 or an integral multiple thereof; and (viii) certain other procedures that a Holder must follow to accept a Change of Control Offer or to withdraw such acceptance. On the Change of Control Purchase Date, the Company shall: (i) accept for payment Exchange Debentures or portions thereof tendered pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Exchange Debentures or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee, all Exchange Debentures or portions thereof so accepted together with an Officers' Certificate specifying the Exchange Debentures or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail to the Holders of Exchange Debentures so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Exchange Debenture equal in principal amount to any unpurchased portion of the Exchange Debentures surrendered; provided that each Exchange Debenture purchased and each new Exchange Debenture issued shall be in a principal amount of $1,000 or an integral multiple thereof. The Company shall comply with the applicable tender offer rules including Rule 14e-1 under the Exchange Act, and any other applicable securities laws and regulations to the extent such laws and regulations are applicable in the event that a Change of Control occurs and the Company is required to repurchase the Exchange Debentures under this Section 1011. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create any restriction (other than restrictions existing under Debt as in effect on the Closing Date 104 93 or in any renewals, extensions, substitutions refinancings or replacements of such Debt that would materially impair the ability of the Company to make a Change of Control Offer to purchase the Exchange Debentures or, if such Change of Control Offer is made, to pay for the Exchange Debentures tendered for purchase. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 1011, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Exchange Indenture. SECTION 1012. Limitation on Certain Asset Sales. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any Asset Sale unless (i) the consideration received by the Company or such Restricted Subsidiary for such Asset Sale is not less than the fair market value of the assets sold (as determined by the Board of Directors of the Company, whose good faith determination shall be conclusive) and (ii) the consideration received by the Company or the relevant Restricted Subsidiary in respect of such Asset Sale consists of at least 80% (A) cash or cash equivalents and/or (B) the assumption by the transferee of Debt of the Company or a Restricted Subsidiary ranked senior to or pari passu with the Exchange Debentures and release of the Company or such Restricted Subsidiary from all liability on such Debt. (b) If the Company or any of its Restricted Subsidiaries engages in an Asset Sale, the Company may, at its option, within 12 months after such Asset Sale, (i) apply all or a portion of the Net Cash Proceeds to the permanent reduction of amounts outstanding under the Credit Facility or to the repayment of other Senior Debt or Senior Subordinated Debt of the Company or a Subsidiary Debentures Guarantor or (ii) invest (or enter into one or more legally binding agreements to invest) all or a portion of such Net Cash Proceeds in properties and assets to replace the properties and assets that were the subject of the Asset Sale or in properties and assets that shall be used in the broadcast business or businesses reasonably related thereto. If any such legally binding agreement to invest such Net Cash Proceeds is terminated, the Company may, within 90 days of such termination or within 12 months of such Asset Sale, whichever is later, 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." (c) When the aggregate amount of Excess Proceeds exceeds $5,000,000, the Company shall make an offer to all Holders of Exchange Debentures (an "Asset Sale Offer") to purchase, on a pro rata basis, the maximum principal amount of Exchange Debentures, that is an integral multiple of $1,000, that may be purchased with the Excess Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer (the "Offered Price"). Within 30 days after 105 94 the date on which the aggregate amount of Excess Proceeds exceeds $5,000,000, the Company shall give to each Holder of the Exchange Debentures, with a copy to the Debentures Trustee, in the manner provided in Section 106 a notice stating: (i) that the Holder has the right to require the Company to repurchase such Holder's Exchange Debentures at the Offered Price, subject to proration in the event the Excess Proceeds are less than the aggregate Offered Price of all Exchange Debentures tendered; (ii) the date of purchase of Exchange Debentures pursuant to the Asset Sale Offer (the "Asset Sale Purchase Date"), which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed; (iii) that the Offered Price shall be paid to Holders electing to have Exchange Debentures purchased on the Asset Sale Purchase Date, provided that a Holder must surrender its Exchange Debenture to the Paying Agent at the address specified in the notice prior to the close of business at least five Business Days prior to the Asset Sale Purchase Date; (iv) any Exchange Debenture not tendered shall continue to accrue interest pursuant to its terms; (v) that unless the Company defaults in the payment of the Offered Price, any Exchange Debenture accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest on and after the Asset Sale Purchase Date; (vi) that Holders shall be entitled to withdraw their tendered Exchange Debentures and their election to require the Company to purchase such Exchange Debentures, provided that the Company receives, not later than the close of business on the third Business Day preceding the Asset Sale Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount and serial numbers of the Exchange Debentures tendered for purchase, and a statement that such Holder is withdrawing its election to have such Exchange Debentures purchased; (vii) that the Holders whose Exchange Debentures are being purchased only in part shall be issued new Exchange Debentures equal in principal amount to the unpurchased portion of the Exchange Debentures surrendered; which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof; and (viii) the instructions a Holder must follow in order to have his Exchange Debentures purchased in accordance with this Section 1012. 106 95 To the extent that the aggregate amount of Exchange Debentures tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use the deficiency for general corporate purposes. If the aggregate principal amount of Exchange Debentures surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Exchange Debentures to be purchased shall be selected on a pro rata basis. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Exchange Debentures pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 1012, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Exchange Indenture. SECTION 1013. Limitation on Asset Swaps. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any Asset Swap, unless: (i) at the time of entering into the Asset Swap and immediately after giving effect to the proposed Asset Swap, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (ii) the Company would, at the time of entering into the Asset Swap and after giving pro forma effect to the proposed Asset Swap, as if such Asset Swap had occurred at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Debt (other than Permitted Debt) pursuant to the first paragraph of Section 1009; (iii) the respective aggregate fair market values of the assets being purchased and sold by the Company or any of its Restricted Subsidiaries are substantially the same at the time of entering into the Asset Swap (or any difference in such aggregate fair market value is substantially compensated for by an equalizing (i) payment of cash, (ii) assumption of liabilities or (iii) taking of assets subject to liabilities); and (iv) at the time of the consummation of the first to occur of the relinquishment or the replacement of assets constituting part of the proposed Asset Swap, the percentage of any decline in the fair market value of the asset or assets being acquired by the Company and its Restricted Subsidiaries shall not be significantly greater than the percentage of any decline in the fair market value of the assets being disposed of the 107 96 Company, calculated from the time the last agreement constituting part of the Asset Swap, was entered into. SECTION 1014. Limitation on Transactions with Affiliates. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or suffer to exist any transaction with, or for the benefit of, any Affiliate of the Company unless: (a) such transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could have been obtained in an arm's-length transaction with third parties who are not Affiliates and (b) either (i) with respect to any transaction or series of transactions involving aggregate payments in excess of $1,000,000, but less than $5,000,000, the Company delivers an Officers' Certificate to the Debentures Trustee certifying that such transaction or transactions comply with clause (a) above or (ii) with respect to a transaction or series of transactions involving aggregate payments equal to or greater than $5,000,000, such transaction or transactions have been approved by the Board of Directors (including a majority of the Disinterested Directors) of the Company or the Company has obtained a written opinion from a nationally recognized investment banking firm to the effect that such transaction or transactions are fair to the Company or such Restricted Subsidiary from a financial point of view. The foregoing provisions shall not restrict any of the following: (A) Transactions among the Company and/or any of its Restricted Subsidiaries. (B) The Company from paying reasonable and customary regular compensation, fees, indemnification and similar arrangements and payments thereunder to directors of the Company or any of its Restricted Subsidiaries who are not employees of the Company or any of its Restricted Subsidiaries. (C) Employment agreements or compensation or employee benefits arrangements with any officer, director or employee of the Company or its Restricted Subsidiaries entered into in the ordinary course of business (including customary benefits thereunder) (it being understood that benefits of the nature in place as of the Closing Date shall be deemed permissible hereunder). (D) The performance of the Company's obligations under (a) that certain lease agreement effective December 29, 1995 with Wilson Aviation, L.L.C. relating to the lease of an airplane, (b) that certain agreement not to compete dated December 31, 1996 108 97 with DVS Management, Inc. and (c) that certain Voting Trust Agreement dated March 17, 1997 among Citadel Communications, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P. and others and the related letter agreement dated March 17, 1997 among Citadel Communications, ABRY Broadcast Partners II, L.P., ABRY/Citadel Investment Partners, L.P. and others (the "Affiliate Agreements"); provided that any amendments or modifications to the terms of the Affiliate Agreements (1) are no less favorable to the Company than those that could have been obtained in an arm's-length transaction with third parties who are not Affiliates and (2) are approved by the Board of Directors (including a majority of the Disinterested Directors) of the Company. (E) The Company from making payments to Citadel Communications to pay its operating and administrative expenses attributable to the Company including, without limitation, legal and audit expenses, directors' fees and Commission compliance expenses, in an amount not to exceed the greater of $1,000,000 per fiscal year and 1% of the net revenues of the Company for the preceding fiscal year. (F) The Company or a Restricted Subsidiary from transferring up to $500,000 of properties and assets, including cash, to a joint venture in which the Company or a Restricted Subsidiary has an equity interest and in which one or more directors or officers of the Company or Citadel Communications has an equity interest, which joint venture is engaged in the internet service provider business. (G) The Company from repaying the note payable of the Company to Citadel Communications outstanding as of the Closing Date in an amount not to exceed $12,817,000 plus all accrued and unpaid interest thereon to the Closing Date. SECTION 1015. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries 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 of its Restricted Subsidiaries to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock, (b) pay any Debt owed to the Company or any other Restricted Subsidiary, (c) make loans or advances to the Company or any other Restricted Subsidiary or (d) transfer any of its properties or assets to the Company or any other Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of any of the following: (i) The Credit Facility and any agreement in effect on the Closing Date. 109 98 (ii) Customary non-assignment provisions of any lease governing a leasehold interest of the Company or any of its Restricted Subsidiaries. (iii) The refinancing or successive refinancings of Debt referred to in clause (i) or (iv), so long as such encumbrances or restrictions are no less favorable to the Company or any of its Restricted Subsidiaries than those contained in such original agreement. (iv) Any agreement or other instrument of a Person acquired by the Company or any of its Restricted Subsidiaries 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 Person, other than the Person, or the property or assets of the Person, so acquired. (v) Any agreement providing for the incurrence of Debt by a Restricted Subsidiary in compliance with Section 1009 provided that such Restricted Subsidiary becomes a Subsidiary Debentures Guarantor. SECTION 1016. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Company shall not sell, and shall not permit any of its Restricted Subsidiaries, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except (i) to the Company or a Wholly Owned Restricted Subsidiary, (ii) issuances or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law, or issuances or sales to directors of directors' qualifying shares, (iii) if, immediately after giving effect to such issuance or sale, neither the Company nor any Subsidiary owns any shares of Capital Stock of such Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) or (iv) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under Section 1010 if made on the date of such issuance or sale. In addition, the Company shall not, and shall not permit any of its Restricted Subsidiaries to, sell, transfer or otherwise dispose of any of its properties or assets to an Unrestricted Subsidiary other than in the ordinary course of business. 110 99 SECTION 1017. Limitation on Unrestricted Subsidiaries. (a) The Board of Directors of the Company may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company nor any of its Restricted Subsidiaries is directly or indirectly liable for any Debt of such Subsidiary, (ii) no default with respect to any Debt of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Debt of the Company or any of its Restricted Subsidiaries to declare a default on such other Debt 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 shall not violate Section 1010, (iv) neither the Company nor any of its Restricted Subsidiaries 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 Restricted Subsidiary has any obligation to subscribe for additional shares of Capital Stock or other equity interest in such Subsidiary, or to maintain or preserve such Subsidiary's financial condition or to cause such Subsidiary to achieve certain levels of operating results. Notwithstanding the foregoing, the Company may not designate the License Subsidiary, or any Subsidiary to which any properties or assets (other than current assets) owned by the Company or the License Subsidiary on the Closing Date have been transferred, as an Unrestricted Subsidiary. (b) The Board of Directors of the Company may designate any of its Unrestricted Subsidiaries as a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Debt by a Restricted Subsidiary of any outstanding Debt of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Debt is permitted under Section 1009 and (ii) no Default or Event of Default shall have occurred and be continuing following such designation. SECTION 1018. Limitation on Other Subordinated Debt. The Company and each Subsidiary Debentures Guarantor shall not, directly or indirectly, incur or otherwise permit to exist any Debt that is subordinate in right of payment to any Senior Subordinated Debt of the Company or such Subsidiary Debentures Guarantor, as the case may be, unless such Debt is also pari passu with the Exchange Debentures or the Subsidiary Debentures Guarantee of the Exchange Debentures by such Subsidiary Debentures Guarantor, as the case may be, or subordinate in right of payment to the Exchange Debentures or such Subsidiary Debentures Guarantee of the Exchange Debentures, as the case may be, to at least the same extent as the Exchange Debentures or such Subsidiary Debentures Guarantee are subordinate in right of payment to Senior Subordinated Debt or all senior subordinated debt of the Subsidiary Debentures Guarantors, as the case may be, as set forth in this Exchange Indenture. 111 100 SECTION 1019. Subsidiary Debentures Guarantees. The Subsidiary Debentures Guarantors shall, jointly and severally, unconditionally guarantee the due and punctual payment of the principal of, premium, if any, and interest on the Exchange Debentures on a subordinated basis pursuant to the Subsidiary Debentures Guarantees as described in Article Thirteen. The Subsidiary Debentures Guarantors may be released from their obligations under the Subsidiary Debentures Guarantees as described in Article Twelve and a Subsidiary Debentures Guarantor may be released from its obligations under its Subsidiary Debentures Guarantee as described in Article Thirteen. The Company shall (i) cause each Person that, after the Closing Date, becomes a Wholly Owned Restricted Subsidiary of the Company, as well as each other Restricted Subsidiary that guarantees any other Debt of the Company, to execute and deliver a supplemental indenture and thereby become a Subsidiary Debentures Guarantor bound by the Subsidiary Debentures Guarantee of the Exchange Debentures in the form set forth in this Exchange Indenture (without such Subsidiary Debentures Guarantor being required to execute and deliver its Subsidiary Debentures Guarantee endorsed on the Exchange Debentures) and (ii) deliver to the Debentures Trustee an Opinion of Counsel, in form and substance reasonably satisfactory to the Debentures Trustee, that the Subsidiary Debentures Guarantee of such Subsidiary Debentures Guarantor is a valid and legally binding obligation of such Subsidiary Debentures Guarantor. SECTION 1020. Limitation on Guarantees of Debt by Restricted Subsidiaries. The Company shall not permit any of its Restricted Subsidiaries that is not a Subsidiary Debentures Guarantor, directly or indirectly, to guarantee, assume or in any other manner become liable for the payment of any Debt of the Company or any Debt of any other Restricted Subsidiary, unless (a) such Restricted Subsidiary simultaneously executes and delivers a Subsidiary Debentures Guarantee and (b) with respect to any guarantee of Junior Subordinated Debt by a Restricted Subsidiary, any such guarantee is subordinated to such Restricted Subsidiary's Subsidiary Debentures Guarantee at least to the same extent as such Junior Subordinated Debt is subordinated to the Exchange Debentures, provided that the foregoing provision shall not be applicable to any guarantee by any such Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary. SECTION 1021. Limitation on Liens. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, incur, affirm or suffer to exist any Lien of any kind securing any Pari Passu Debt or Junior Subordinated Debt (including any assumption, guarantee or other liability with respect thereto by any Restricted Subsidiary) upon any property or assets (including any intercompany 112 101 notes) of the Company or any of its Restricted Subsidiaries now owned or acquired after the Closing Date, or any income or profits therefrom, unless the Exchange Debentures are directly secured equally and ratably with (or prior to in the case of Junior Subordinated Debt) the obligation or liability secured by such Lien; provided that the foregoing shall not apply to Liens securing Debt of a Person acquired by the Company or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation thereof), which Lien is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired. SECTION 1022. Commission Reports and Reports to Holders. At all times while the Exchange Debentures are issued and outstanding, whether or not the Company is then required to file reports with the Commission, the Company will file with the Commission all such reports and other information as it would be required to file with the Commission by Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company will supply the Debentures Trustee and each Holder, or will supply to the Debentures Trustee for forwarding to each such Holder, without cost to such Holder, copies of such reports and other information. Delivery of such reports, information and documents to the Debentures Trustee is for informational purposes only and the Debentures Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder. SECTION 1023. Statement as to Compliance. (a) The Company shall deliver to the Debentures Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether it has kept, observed, performed and fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and fulfill its obligations under this Exchange Indenture and further stating, as to each such officer signing such certificate, that, to the best of his or her knowledge, the Company during such preceding fiscal year has kept, observed, performed and fulfilled, and has caused each of its Subsidiaries to keep, observe, perform and fulfill each and every such covenant contained in this Exchange Indenture and no Default or Event of Default occurred during such year and at the date of such certificate there is no Default or Event of Default which shall have occurred and be continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe its status, with particularity and that, to the best of his or her knowledge, no event has occurred and remains by reason of which payments on the account of the principal of or interest, if any, on the Exchange Debentures is prohibited or if such event has occurred, a 113 102 description of the event and what action each is taking or purposes to take with respect thereto. The Officers' Certificate shall also notify the Debentures Trustee should the Company elect to change the manner in which it fixes its fiscal year end. For purposes of this Section 1023(a), such compliance shall be determined without regard to any period of grace or requirement of notice under this Exchange Indenture. (b) When any Default shall have occurred and be continuing under this Exchange Indenture, or if the trustee for or the holder of any other evidence of Debt of the Company or any Subsidiary gives any notice or takes any other action with respect to a claimed default (other than with respect to Debt in the principal amount of less than $10 million), the Company shall deliver to the Debentures Trustee by registered or certified mail or facsimile transmission an Officers' Certificate specifying such event, notice or other action within five days of any officer of the Company having knowledge of any Default. SECTION 1024. Delivery of Certain Information. If specified as contemplated by Section 301 with respect to a series of Exchange Debentures, at any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder, the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder or to a prospective purchaser of such Exchange Debentures by such Holder. "Rule 144A Information" shall mean such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act as in effect on the date hereof. ARTICLE ELEVEN REDEMPTION OF EXCHANGE DEBENTURES SECTION 1101. Redemption. The Exchange Debentures may or shall, as the case may be, be redeemed, as a whole or from time to time in part, subject to the conditions and at the Redemption Prices specified in the form of Exchange Debenture, together with accrued interest to the Redemption Date. SECTION 1102. Applicability of Article. Redemption of Exchange Debentures at the election of the Company or otherwise, as permitted or required by any provision of this Exchange Indenture, shall be made in accordance with such provision and this Article. 114 103 SECTION 1103. Election to Redeem; Notice to Debentures Trustee. The election of the Company to redeem any Exchange Debentures pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Debentures Trustee), notify the Debentures Trustee of such Redemption Date and of the principal amount of Exchange Debentures to be redeemed and shall deliver to the Debentures Trustee such documentation and records as shall enable the Debentures Trustee to select the Exchange Debentures to be redeemed pursuant to Section 1104. SECTION 1104. Selection by Debentures Trustee of Exchange Debentures to Be Redeemed. If less than all the Exchange Debentures are to be redeemed, the particular Exchange Debentures to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Debentures Trustee, from the Outstanding Exchange Debentures not previously called for redemption, in compliance with the requirements of the principal national securities exchange, if any, on which such Exchange Debentures are listed, or, if such Exchange Debentures are not so listed, on a pro rata basis, by lot or by such other method as the Debentures Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements) and which may provide for the selection for redemption of portions of the principal of Exchange Debentures; provided, however, that no such partial redemption shall reduce the portion of the principal amount of an Exchange Debenture not redeemed to less than $1,000. The Debentures Trustee shall promptly notify the Company in writing of the Exchange Debentures selected for redemption and, in the case of any Exchange Debentures selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Exchange Indenture, unless the context otherwise requires, all provisions relating to redemption of Exchange Debentures shall relate, in the case of any Exchange Debenture redeemed or to be redeemed only in part, to the portion of the principal amount of such Exchange Debenture which has been or is to be redeemed. SECTION 1105. Notice of Redemption. Notice of redemption shall be given in the manner provided for in Section 106 not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Exchange Debentures to be redeemed. The Debentures Trustee shall give notice of redemption in the Company's name and at the Company's expense; provided, however, that the Company shall deliver to the Debentures Trustee, at least 45 days prior to the Redemption Date (unless a 115 104 shorter notice shall be satisfactory to the Debentures Trustee), an Officers' Certificate requesting that the Debentures Trustee give such notice and setting forth the information to be stated in such notice as provided in the following items. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price and the amount of accrued interest to the Redemption Date payable as provided in Section 1107, if any, (3) if less than all Outstanding Exchange Debentures are to be redeemed, the identification of the particular Exchange Debentures (or portion thereof) to be redeemed, as well as the aggregate principal amount of Exchange Debentures to be redeemed and the aggregate principal amount of Exchange Debentures to be outstanding after such partial redemption, (4) in case any Exchange Debenture is to be redeemed in part only, the notice which relates to such Exchange Debenture shall state that on and after the Redemption Date, upon surrender of such Exchange Debenture, the Holder shall receive, without charge, a new Exchange Debenture or Exchange Debentures of authorized denominations for the principal amount thereof remaining unredeemed, (5) that on the Redemption Date the Redemption Price (and accrued interest, if any, to the Redemption Date payable as provided in Section 1107) shall become due and payable upon each such Exchange Debenture, or the portion thereof, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest on Exchange Debentures called for redemption (or the portion thereof) shall cease to accrue on and after said date, (6) the place or places where such Exchange Debentures are to be surrendered for payment of the Redemption Price and accrued interest, if any, (7) the name and address of the Paying Agent, (8) that Exchange Debentures called for redemption must be surrendered to the Paying Agent to collect the Redemption Price, (9) the CUSIP number, and that no representation is made as to the accuracy or correctness of the CUSIP number, if any, listed in such notice or printed on the Exchange Debentures, and 116 105 (10) the paragraph of the Exchange Debentures pursuant to which the Exchange Debentures are to be redeemed. SECTION 1106. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Debentures Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and accrued interest on, all the Exchange Debentures which are to be redeemed on that date. SECTION 1107. Exchange Debentures Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Exchange Debentures so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Exchange Debentures shall cease to bear interest. Upon surrender of any such Exchange Debenture for redemption in accordance with said notice, such Exchange Debenture shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Exchange Debentures, or one or more Predecessor Exchange Debentures, registered as such at the close of business on the relevant Regular Record Date or Special Record Date, as the case may be, according to their terms and the provisions of Section 311. If any Exchange Debenture 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 borne by the Exchange Debentures. SECTION 1108. Exchange Debentures Redeemed in Part. Any Exchange Debenture which is to be redeemed only in part (pursuant to the provisions of this Article) shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 1002 (with, if the Company or the Debentures Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Debentures Trustee duly executed by, the Holder thereof or such Holders attorney duly authorized in writing), and the Company shall execute, and the Debentures Trustee shall authenticate and deliver to the Holder of such Exchange Debenture without service charge, a new Exchange Debenture or Exchange Debentures, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the 117 106 unredeemed portion of the principal of the Exchange Debenture so surrendered, provided, that each such new Exchange Debenture shall be in a principal amount of $1,000 or integral multiple thereof. ARTICLE TWELVE LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 1201. Company's Option to Effect Legal Defeasance or Covenant Defeasance. The Company and the Subsidiary Debentures Guarantors may, at their option by Board Resolution, at any time, with respect to the Exchange Debentures, elect to have either Section 1202 or Section 1203 be applied to all Outstanding Exchange Debentures upon compliance with the conditions set forth below in this Article Twelve. SECTION 1202. Legal Defeasance and Discharge. Upon the Company's exercise under Section 1201 of the option applicable to this Section 1202, the Company and any Subsidiary Debentures Guarantor shall be deemed to have been discharged from their obligations with respect to all Outstanding Exchange Debentures on the date the conditions set forth in Section 1204 are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that the Company and any such Subsidiary Debentures Guarantor shall be deemed to have paid and discharged the entire Debt represented by the Outstanding Exchange Debentures, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 1205 and the other Sections of this Exchange Indenture referred to in (A) and (B) below, and to have satisfied all its other obligations under such Exchange Debentures and this Exchange Indenture insofar as such Exchange Debentures are concerned (and the Debentures Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Exchange Debentures to receive payments in respect of the principal of (and premium, if any, on) and interest on such Exchange Debentures when such payments are due, (B) the Company's obligations to issue temporary Exchange Debentures, register the transfer or exchange of any Exchange Debentures, replace mutilated, destroyed, lost or stolen Exchange Debentures, maintain an office or agency for payments in respect of the Exchange Debentures and segregate and hold such payments in trust, (C) the rights, powers, trusts, duties and immunities of the Debentures Trustee and (D) the defeasance provisions of this Exchange Indenture. 118 107 Subject to compliance with this Article Twelve, the Company may exercise its option under this Section 1202 notwithstanding the prior exercise of its option under Section 1203 with respect to the Exchange Debentures. SECTION 1203. Covenant Defeasance. Upon the Company's exercise under Section 1201 of the option applicable to this Section 1203, the Company shall be released from its obligations under any covenant contained in Section 801 and in Sections 1006 through 1022 with respect to the Outstanding Exchange Debentures on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Exchange Debentures shall thereafter be deemed not to be "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder (it being understood that such Exchange Debentures shall not be outstanding for accounting purposes). For this purpose, such Covenant Defeasance means that, with respect to the Outstanding Exchange Debentures, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 501(d), but, except as specified above, the remainder of this Exchange Indenture and such Exchange Debentures shall be unaffected thereby. SECTION 1204. Conditions to Legal Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1202 or Section 1203 to the Outstanding Exchange Debentures: (a) the Company must irrevocably deposit or cause to be deposited with the Debentures Trustee, as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Exchange Debentures, money in an amount, or U.S. Government Obligations that through the scheduled payment of principal and interest thereon shall provide money in an amount, or a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the principal of (and premium, if any, on) and interest on the outstanding Exchange Debentures at maturity (or upon redemption, if applicable) of such principal or installment of interest; (b) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as an event of bankruptcy under Section 501(h) or 119 108 (i) is concerned, at any time during the period ending on the 91st day after the date of such deposit; (c) such Legal Defeasance or Covenant Defeasance must not result in a breach or violation of, or constitute a default under, this Exchange Indenture or any material agreement or instrument to which the Company or any Subsidiary Debentures Guarantor is a party or by which it is bound or cause the Debentures Trustee or the trust so created to be subject to the Investment Company Act of 1940, as amended; (d) in the case of Legal Defeasance, the Company must deliver to the Debentures Trustee an Opinion of Counsel stating that the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or since the date hereof, there has been a change in applicable federal income tax law, to the effect, and based thereon such opinion must confirm that, the Holders of the outstanding Exchange Debentures shall not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (e) in the case of Covenant Defeasance, the Company must have delivered to the Debentures Trustee an Opinion of Counsel to the effect that the Holders of the Exchange Debentures outstanding shall not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; and (f) the Company must have delivered to the Debentures Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with. SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Debentures Trustee (or other qualifying trustee, collectively for purposes of this Section 1205, the "Debentures Trustee") pursuant to Section 1204 in respect of the Outstanding Exchange Debentures shall be held in trust and applied by the Debentures Trustee, in accordance with the provisions of such Exchange Debentures and this Exchange Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Debentures Trustee may determine, to the Holders of such Exchange Debentures of all 120 109 sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Debentures Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1204 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Exchange Debentures. Anything in this Article Twelve to the contrary notwithstanding, the Debentures Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 1204 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Debentures Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance, as applicable, in accordance with this Article. SECTION 1206. Reinstatement. If the Debentures Trustee or any Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 1205 by reason of any legal proceeding or by any reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and each Subsidiary Debentures Guarantor's obligations under this Exchange Indenture, the Exchange Debentures and the Subsidiary Debentures Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 1202 or 1203, as the case may be, until such time as the Debentures Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1205; provided, however, that if the Company or any Subsidiary Debentures Guarantor makes any payment of principal of (or premium, if any) or interest on any Exchange Debenture following the reinstatement of its obligations, the Company or such Guarantor, as the case may be, shall be subrogated to the rights of the Holders of such Exchange Debentures to receive such payment from the money and U.S. Government Obligations held by the Debentures Trustee or Paying Agent. 121 110 ARTICLE THIRTEEN SUBSIDIARY DEBENTURES GUARANTEES SECTION 1301. Subsidiary Debentures Guarantees. (a) Each Subsidiary Debentures Guarantor hereby, jointly and severally, fully, absolutely, unconditionally and irrevocably guarantees to each Holder of an Exchange Debenture authenticated and delivered by the Debentures Trustee, and to the Debentures Trustee on behalf of each Holder, the punctual payment and performance when due of all Indenture Obligations which, for purposes of its Subsidiary Debentures Guarantee, shall also be deemed to include all commissions, fees, charges, costs and other expenses (including reasonable legal fees and disbursements of counsel) arising out of or incurred by the Debentures Trustee or the Holders in connection with the enforcement of any Subsidiary Debentures Guarantee. Without limiting the generality of the foregoing, each Subsidiary Debentures Guarantor's liability shall extend to all amounts that constitute part of the Indenture Obligations and would be owed by the Company to such Holder or the Debentures Trustee under the Exchange Debentures or this Exchange Indenture but for the fact that they are unenforceable, reduced, limited, suspended or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company. (b) Each Subsidiary Debentures Guarantor and by its acceptance hereof each Holder hereby confirms that it is the intention of all such parties that the guarantee by such Subsidiary Debentures Guarantor pursuant to its Subsidiary Debentures Guarantee not constitute a fraudulent transfer or conveyance for purposes of any federal or state law. To effectuate the foregoing intention, the Holders and each Subsidiary Debentures Guarantor hereby irrevocably agree that the obligations of such Subsidiary Debentures Guarantor under its Subsidiary Debentures Guarantee shall be limited to the maximum amount as shall, after giving effect to all other contingent and fixed liabilities of such Subsidiary Debentures Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Debentures Guarantor in respect of the obligations of such other Subsidiary Debentures Guarantor under its Subsidiary Debentures Guarantee or pursuant to paragraph (c) of this Section 1301 result in the obligations of such Subsidiary Debentures Guarantor under its Subsidiary Debentures Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. (c) In order to provide for just and equitable contribution among the Subsidiary Debentures Guarantors, the Subsidiary Debentures Guarantors agree, inter se, that in the event any payment or distribution is made by any Subsidiary Debentures Guarantor (a "Funding Guarantor") under its Subsidiary Debentures Guarantee, such Funding Guarantor shall be entitled to a contribution from each other Subsidiary Debentures Guarantor in a pro rata amount based on the Adjusted Net Assets of each Subsidiary Debentures Guarantor (including 122 111 the Funding Guarantor) for all payments, damages and expenses incurred by the Funding Guarantor in discharging the Indenture Obligations of the Company or any other Subsidiary Debentures Guarantor's obligations with respect to its Subsidiary Debentures Guarantee. "Adjusted Net Assets" of such Subsidiary Debentures Guarantor at any date shall mean the lesser of (x) the amount by which the fair value of the property of such Subsidiary Debentures Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under the Subsidiary Debentures Guarantee of such Subsidiary Debentures Guarantor at such date and (y) the amount by which the present fair salable value of the assets of such Subsidiary Debentures Guarantor at such date exceeds the amount that shall be required to pay the probable liability of such Subsidiary Debentures Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), excluding debt in respect of the Subsidiary Debentures Guarantee, as they become absolute and matured. SECTION 1302. Guaranty Absolute. Each Subsidiary Debentures Guarantor guarantees that the Exchange Debentures shall be paid or performed strictly in accordance with the terms of the Exchange Debentures and this Exchange Indenture, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Holder with respect thereto. The obligations of each Subsidiary Debentures Guarantor under its Subsidiary Debentures Guarantee are independent of the obligations of the Company under the Exchange Debentures and this Exchange Indenture, and a separate action or actions may be brought and prosecuted against such Subsidiary Debentures Guarantor to enforce its Subsidiary Debentures Guarantee, irrespective of whether any action is brought against the Company or any other Subsidiary Debentures Guarantor or whether the Company or any other Subsidiary Debentures Guarantor is joined in any such action or actions. The liability of each Subsidiary Debentures Guarantor under its Subsidiary Debentures Guarantee shall be absolute and unconditional and the liability and obligations of such Subsidiary Debentures Guarantor hereunder shall not be released, discharged, mitigated, waived, impaired or affected in whole or in part by: (a) any lack of validity or enforceability of this Exchange Indenture or the Exchange Debentures with respect to the Company or any Subsidiary Debentures Guarantor or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Indenture Obligations, or any other amendment or waiver of or any consent to departure from this Exchange Indenture, including any increase in the Indenture Obligations resulting from the extension of additional credit to the Company or otherwise; 123 112 (c) the failure to give notice to the Subsidiary Debentures Guarantor of the occurrence of a Default under the provisions of this Exchange Indenture or the Exchange Debentures; (d) any taking, release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the Indenture Obligations; (e) any failure, omission, delay by or inability on the part of the Debentures Trustee or the Holders to assert or exercise any right, power or remedy conferred on the Debentures Trustee or the Holders in this Exchange Indenture or the Exchange Debentures; (f) any change in the corporate structure, or termination, dissolution, consolidation or merger of the Company or any Subsidiary Debentures Guarantor with or into any other Person, the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets of the Company or any Subsidiary Debentures Guarantor, the marshalling of the assets and liabilities of the Company or any Subsidiary Debentures Guarantor, the receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition with the creditors, or readjustment of, or other similar proceedings affecting the Company or any Subsidiary Debentures Guarantor, or any of the assets of any of them; (g) the assignment of any right, title or interest of the Debentures Trustee or any Holder in this Exchange Indenture or the Exchange Debentures to any other Person; or (h) any other event or circumstance (including any statute of limitations), whether foreseen or unforeseen and whether similar or dissimilar to any of the foregoing, that might otherwise constitute a defense available to, or a discharge of, the Company or a Subsidiary Debentures Guarantor, other than payment in full of the Indenture Obligations; it being the intent of each Subsidiary Debentures Guarantor that its obligations hereunder shall not be discharged except by payment of all amounts owing pursuant to this Exchange Indenture or the Exchange Debentures. The Subsidiary Debentures Guarantee of each Subsidiary Debentures Guarantor shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Indenture Obligations is rescinded or must otherwise be returned by any Holder or the Debentures Trustee upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. Each Subsidiary Debentures Guarantor further agrees, to the fullest extent that it may lawfully do so, that, as between such Subsidiary Debentures Guarantor, on the one hand, and the Holders and the Debentures Trustee, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as 124 113 provided in Article Five of this Exchange Indenture for the purposes of this Subsidiary Debentures Guarantee, notwithstanding any stay, injunction or other prohibition extant under any applicable bankruptcy law preventing such acceleration in respect of the obligations guarantied hereby, and (ii) in the event of any declarations of acceleration of such obligations as provided in Article Five of this Exchange Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Debentures Guarantor for the purpose of this Subsidiary Debentures Guarantee. SECTION 1303. Waivers. (a) Each Subsidiary Debentures Guarantor hereby expressly waives (to the extent permitted by law) notice of the acceptance of its Subsidiary Debentures Guarantee and notice of the existence, renewal, extension or the non-performance, non-payment, or non-observance on the part of the Company of any of the terms, covenants, conditions and provisions of this Exchange Indenture or the Exchange Debentures or any other notice whatsoever to or upon the Company or such Subsidiary Debentures Guarantor with respect to the Indenture Obligations. Each Subsidiary Debentures Guarantor hereby acknowledges communication to it of the terms of this Exchange Indenture and the Exchange Debentures and all of the provisions herein contained and consents to and approves the same. Each Subsidiary Debentures Guarantor hereby expressly waives (to the extent permitted by law) diligence, presentment and protest. (b) Without prejudice to any of the rights or recourse which the Debentures Trustee or the Holders may have against the Company, each Subsidiary Debentures Guarantor hereby expressly waives (to the extent permitted by law) any right to require the Debentures Trustee or the Holders to: (1) initiate or exhaust any rights, remedies or recourse against the Company, any Subsidiary Debentures Guarantor or any other Person; (2) value, realize upon, or dispose of any security of the Company or any other Person held by the Debentures Trustee or the Holders; or (3) initiate or exhaust any other remedy which the Debentures Trustee or the Holders may have in law or equity; before requiring, becoming entitled to or demanding payment from such Subsidiary Debentures Guarantor under this Subsidiary Debentures Guarantee. 125 114 SECTION 1304. Subrogation. Each Subsidiary Debentures Guarantor shall not exercise any rights that it may acquire by way of subrogation under this Subsidiary Debentures Guarantee, by any payment made hereunder or otherwise, until all the Indenture Obligations shall have been paid in full. If any amount shall be paid to any Subsidiary Debentures Guarantor on account of any such subrogation rights at any time when all the Indenture Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Holders and the Debentures Trustees and shall forthwith be paid to the Debentures Trustee, on behalf of the Holders, to be credited and applied to the Indenture Obligations, whether matured or unmatured. SECTION 1305. No Waiver; Remedies. No failure on the part of any Holder or the Debentures Trustee to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 1306. Continuing Guaranty; No Right of Set-Off; Independent Obligation. (a) This Subsidiary Debentures Guarantee is a continuing guarantee of the payment and performance of all Indenture Obligations and shall remain in full force and effect until the payment in full of all of the Indenture Obligations and all other amounts payable under this Subsidiary Debentures Guarantee and shall apply to and secure any ultimate balance due or remaining unpaid to the Debentures Trustee or the Holders under this Exchange Indenture or the Exchange Debentures; and this Subsidiary Debentures Guarantee shall not be considered as wholly or partially satisfied by the payment or liquidation at any time or from time to time of any sum of money for the time being due or remaining unpaid to the Debentures Trustee or the Holders. (b) Each Subsidiary Debentures Guarantor hereby guarantees that the Indenture Obligations shall be paid to the Debentures Trustee without set-off or counterclaim or other reduction whatsoever (whether for taxes, withholding or otherwise) in lawful currency of the United States of America. (c) Each Subsidiary Debentures Guarantor guarantees that the Indenture Obligations shall be paid strictly in accordance with their terms regardless of any lack of validity or enforceability of any of such terms or the rights of the Holders with respect thereto. 126 115 (d) Each Subsidiary Debentures Guarantor's liability to pay or perform or cause the performance of the Indenture Obligations under this Subsidiary Debentures Guarantee shall arise forthwith after demand for payment or performance by the Debentures Trustee has been given to such Subsidiary Debentures Guarantor in the manner prescribed in this Exchange Indenture. SECTION 1307. Subsidiary Debentures Guarantors May Consolidate, Etc. on Certain Terms. (a) Nothing contained in this Exchange Indenture or in any of the Exchange Debentures shall prevent any consolidation or merger of a Subsidiary Debentures Guarantor with or into the Company or another Subsidiary Debentures Guarantor or shall prevent any sale or conveyance of the property of a Subsidiary Debentures Guarantor as an entirety or substantially as an entirety to the Company or another Subsidiary Debentures Guarantor, which consolidation, merger, sale or conveyance is otherwise in accordance with the terms of this Exchange Indenture. (b) Other than as set forth in paragraph (a) of this Section, no Subsidiary Debentures Guarantor may consolidate with or merge with or into (whether or not such Subsidiary Debentures Guarantor is the surviving Person) another Person whether or not affiliated with such Subsidiary Debentures Guarantor unless: (i) subject to the provisions of Section 1309, the Person formed by or surviving such consolidation or merger (if other than such Subsidiary Debentures Guarantor) assumes all of the obligations of such Subsidiary Debentures Guarantor under this Exchange Indenture and its Subsidiary Debentures Guarantee, pursuant to a supplemental indenture in form and substance satisfactory to the Debentures Trustee, and (b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. SECTION 1308. Additional Subsidiary Debentures Guarantors. The Company shall cause each Person that becomes a Wholly Owned Restricted Subsidiary after the date of this Exchange Indenture to become a Subsidiary Debentures Guarantor with respect to the Indenture Obligations by executing and delivering a supplemental indenture to this Exchange Indenture providing for a Subsidiary Debentures Guarantee by such Wholly Owned Restricted Subsidiary under Article Thirteen; provided that any such Wholly Owned Restricted Subsidiary that is organized outside of the United States shall not be required to provide a Subsidiary Debentures Guarantee so long as such Wholly Owned Restricted Subsidiary has not guaranteed any other Debt of the Company or any other Restricted Subsidiary. The Company shall deliver to the Debentures Trustee, together with the supplemental indenture referred to above, an Opinion of Counsel that such Subsidiary Debentures Guarantee is a legal, valid, binding and enforceable obligation of such Subsidiary 127 116 Debentures Guarantor, subject to customary local law exceptions and customary exceptions for bankruptcy and equitable principles. SECTION 1309. Releases. (a) Concurrently with any consolidation or merger of a Subsidiary Debentures Guarantor with or into the Company or another Subsidiary Debentures Guarantor or any sale or conveyance of the property of a Subsidiary Debentures Guarantor as an entirety or substantially as an entirety to the Company or another Subsidiary Debentures Guarantor, in each case as permitted by Section 1307, and upon delivery by the Company to the Debentures Trustee of an Officers' Certificate and an Opinion of Counsel, each to the effect that (i) such consolidation, merger, sale or conveyance was or shall be made by a Subsidiary Debentures Guarantor in accordance with Section 1307, and (ii) all conditions precedent to such release have been satisfied, the Debentures Trustee shall promptly execute any documents reasonably required in order to evidence the release of such Subsidiary Debentures Guarantor from its obligations under its Subsidiary Debentures Guarantee. Any Subsidiary Debentures Guarantor not released from its obligations under its Subsidiary Debentures Guarantee under this Article Thirteen shall remain liable for the full amount of the Indenture Obligations under its Subsidiary Debentures Guarantee. (b) Concurrently with the Legal Defeasance of the Exchange Debentures under Section 1202 hereof or the Covenant Defeasance of the Exchange Debentures under Section 1203 hereof, the Subsidiary Debentures Guarantors shall be released from all of their obligations under their Subsidiary Debentures Guarantees. (c) Upon (i) the sale, transfer or other disposition of all of the Capital Stock of a Subsidiary Debentures Guarantor to a Person that is not an Affiliate of the Company, (ii) the sale, transfer or other disposition of all or substantially all of the assets of a Subsidiary Debentures Guarantor to a Person that is not an Affiliate of the Company, or (iii) the designation of such Subsidiary Debentures Guarantor as an Unrestricted Subsidiary, in any such case in compliance with the terms of this Exchange Indenture, then such Subsidiary Debentures Guarantor shall be deemed automatically and unconditionally released and discharged from all of its obligations under its Subsidiary Debentures Guarantee without any further action on the part of the Debentures Trustee or any Holder of the Exchange Debentures; provided that the Net Cash Proceeds of any such sale, transfer or other disposition are applied in accordance with Section 1012. 128 117 ARTICLE FOURTEEN SUBORDINATION OF SECURITIES SECTION 1401. Exchange Debentures and Subsidiary Debentures Guarantees Subordinate to Senior Debt and Senior Subordinated Debt. (a) The Company covenants and agrees, and each Holder of an Exchange Debenture, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article Fourteen, the indebtedness represented by the Exchange Debentures and the payment of the principal of (or premium, if any) and interest on each and all of the Exchange Debentures (but not amounts owing to the Debentures Trustee by the Company pursuant to Section 607 hereof) are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Debt and Senior Subordinated Debt. (b) Each Subsidiary Debentures Guarantor covenants and agrees, and each Holder of an Exchange Debenture, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article Fourteen, the indebtedness represented by the Subsidiary Debentures Guarantee of such Subsidiary Debentures Guarantor is hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt of such Subsidiary Debentures Guarantor. SECTION 1402. Payment Over of Proceeds Upon Dissolution, Etc. In the event of any payment or distribution of assets of the Company or any Subsidiary Debentures Guarantor to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency or similar proceedings of the Company or any Subsidiary Debentures Guarantor (the Company or such Subsidiary Debentures Guarantor being the "Affected Obligor"), then (except (x) in connection with the consolidation or merger of the Company or its liquidation or dissolution following the conveyance, transfer or lease of its properties and assets substantially as an entirety, upon the terms and conditions described in Article Eight or (y) in connection with the consolidation or merger of a Subsidiary Debentures Guarantor, or its liquidation or dissolution, not in violation of any provision of this Exchange Indenture) (each such event, if any, herein sometimes referred to as a "Proceeding"), (i) if the Affected Obligor is the Company, the holders of Senior Debt and Senior Subordinated Debt shall first be entitled to receive payment in full, in cash or cash equivalents, of all amounts due or to become due on or in respect of such Senior Debt and Senior Subordinated Debt before the Holders of the Exchange Debentures are entitled to receive any payment of principal of (or premium, if any) or interest on the Exchange Debentures or on account of the purchase or redemption or other acquisition of Exchange Debentures by the Company or any Subsidiary of the Company and (ii) if the 129 118 Affected Obligor is a Subsidiary Debentures Guarantor, the holders of Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt of such Subsidiary Debentures Guarantor shall first be entitled to receive payment in full, in cash or cash equivalents, of principal of (and premium, if any) and interest on such Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, before the Holders of the Exchange Debentures are entitled to receive any payment pursuant to the Subsidiary Debentures Guarantee of such Subsidiary Debentures Guarantor (any payment on or purchase, redemption or acquisition of the Exchange Debentures, referred to in clause (i), and any payment on a Subsidiary Debentures Guarantee, referred to in clause (ii), being, individually and collectively, an "Exchange Debentures Payment"), and, to that end, if the Affected Obligor is the Company, the holders of Senior Debt and Senior Subordinated Debt and, if the Affected Obligor is a Subsidiary Debentures Guarantor, the holders of Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt of such Subsidiary Debentures Guarantor (such Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, as the case may be, being "Affected Obligor Senior Debt" of such Affected Obligor) shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities which may be payable or deliverable in respect of the Exchange Debentures in any such Proceeding. In the event that, notwithstanding the foregoing provisions of this Section 1402, the Debentures Trustee or the Holder of any Exchange Debenture shall have received any payment or distribution of assets of an Affected Obligor of any kind or character, whether in cash, property or securities, before all Affected Obligor Senior Debt is paid in full, then such payment or distribution, except for amounts subject to the claim granted to the Debentures Trustee in Section 607 hereof, shall be held in trust for the holders of Affected Obligor Senior Debt and shall be paid over or delivered forthwith to the trustee in bankruptcy or other Person making payment or distribution of assets of the Affected Obligor for application to the payment of all Affected Obligor Senior Debt remaining unpaid, to the extent necessary to pay all Affected Obligor Senior Debt in full, after giving effect to any concurrent payment or distribution to or for the holders of the Affected Obligor Senior Debt. For purposes of this Article Fourteen only, the words "any payment or distribution of any kind or character, cash, property or securities" shall not be deemed to include a payment or distribution of equity or subordinated securities of the Affected Obligor provided for by a plan of reorganization or readjustment or of any other corporation provided for by such plan of reorganization or readjustment that, in the case of subordinated securities, are subordinated in right of payment to all then outstanding Affected Obligor Senior Debt to at least the same extent as the Exchange Debentures or Subsidiary Debentures Guarantees, as the case may be, are so subordinated as provided in this Article Fourteen. 130 119 SECTION 1403. No Payment When Certain Senior Debt and Senior Subordinated Debt in Default. In the event that any Senior Payment Default (as defined below) shall have occurred and be continuing, then no Exchange Debentures Payment shall be made unless and until such Senior Payment Default shall have been cured or waived or shall have ceased to exist or all amounts then due and payable in respect of the Specified Senior Debt or other obligations that are the subject of such Senior Payment Default shall have been paid in full. For purposes hereof, "Senior Payment Default" means any default in the payment of principal of (or premium, if any) or interest on Specified Senior Debt, the payment of commitment, facility or other fees, letter of credit fees or agency fees under the Credit Facility, or payments with respect to letter of credit reimbursement arrangements with the Credit Facility Agent, when due, whether at the Stated Maturity of any such payment or by declaration of acceleration, call for redemption or otherwise. In the event that any Senior Nonmonetary Default (as defined below) shall have occurred and be continuing, then, upon the receipt by the Company and the Debentures Trustee of written notice of such Senior Nonmonetary Default from the Credit Facility Agent or from an authorized Person on behalf of any holder of Specified Senior Debt, no Exchange Debentures Payment shall be made during the period (the "Payment Blockage Period") commencing on the date of receipt of such written notice (the "Blockage Notice") and ending on the earliest of (i) the 179th day after the date of such receipt of the Blockage Notice (the "Initial Period"), (ii) the date, if any, on which the Specified Senior Debt to which such default relates is discharged or such default is waived or otherwise cured and (iii) the date, if any, on which such Payment Blockage Period shall have been terminated by written notice to the Company or the Debentures Trustee from the Credit Facility Agent or from the Person who gave the Blockage Notice. Any number of additional payment blockage periods may be commenced during the Initial Period; provided, however, that no such additional payment blockage periods shall extend beyond the Initial Period. After the expiration of the Initial Period, no payment blockage period may be commenced until at least 181 consecutive days shall have elapsed from the last day of the Initial Period. No Senior Nonmonetary Default that existed or was continuing on the date of commencement of any Payment Blockage Period with respect to the Specified Senior Debt initiating such Payment Blockage Period shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period unless such Senior Nonmonetary Default shall have been cured or waived for a period of not less than 90 consecutive days. For purposes hereof, "Senior Nonmonetary Default" means the occurrence or existence of any event, circumstance, condition or state of facts that, by the terms of any instrument pursuant to which any Specified Senior Debt is outstanding, permits one or more holders of such Specified Senior Debt (or a trustee or agent on behalf of the holders thereof) to declare such Specified Senior Debt due and payable prior to the date on which it would otherwise become due and payable, other than a Senior Payment Default. 131 120 In the event that, notwithstanding the foregoing, the Company or any Subsidiary Debentures Guarantor shall make any payment to the Debentures Trustee or any Holder prohibited by the foregoing provisions of this Section 1403, then such payment shall be held in trust for the holders of the Affected Obligor Senior Debt and shall be paid over and delivered forthwith to the holders of the Affected Obligor Senior Debt remaining unpaid, to the extent necessary to pay in full all the Affected Obligor Senior Debt. SECTION 1404. Payment Permitted If No Default. Nothing contained in this Article Fourteen or elsewhere in this Exchange Indenture or in any of the Exchange Debentures shall, at any time except during the pendency of any Proceeding referred to in Section 1402 or under the conditions described in Section 1403, prevent (a) the Company or any Subsidiary Debentures Guarantor from making Exchange Debentures Payments, or (b) the application by the Debentures Trustee of any money deposited with it hereunder to Exchange Debentures Payments or the retention of such payment by the Holders. SECTION 1405. Subrogation to Rights of Holders of Senior Debt and Senior Subordinated Debt. Subject to the payment in full of all Senior Debt and Senior Subordinated Debt, the rights of the Holders of the Exchange Debentures shall be subrogated to the rights of the holders of such Senior Debt and Senior Subordinated Debt to receive payments and distributions of cash, property and securities applicable to the Senior Debt and Senior Subordinated Debt until the principal of (and premium, if any) and interest on the Exchange Debentures shall be paid in full. Subject to the payment in full of all Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, the rights of the Holders of the Exchange Debentures shall be subrogated to the rights of the holders of such Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt to receive payments and distributions of cash, property and securities applicable to such Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt until the principal of (and premium, if any) and interest on the Exchange Debentures shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt of any cash, property or securities to which the Holders of the Exchange Debentures or the Debentures Trustee would be entitled except for the provisions of this Article Fourteen, and no payments over pursuant to the provisions of this Article Fourteen to the holders of Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt by Holders of the Exchange Debentures or the Debentures Trustee, shall, as among the Company, its creditors other than holders of Senior Debt and Senior Subordinated Debt and the Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt and the Holders of the Exchange Debentures, be deemed to be a payment or distribution by the 132 121 Company to or on account of the Senior Debt and Senior Subordinated Debt. Neither the Holders of the Exchange Debentures nor the Debentures Trustee shall have any claim against the holders of the Senior Debt or the Credit Facility Agent for any impairment of the subrogation rights herein granted arising out of any release of Liens securing the Senior Debt or the Subsidiary Guarantor Senior Debt. SECTION 1406. Provisions Solely to Define Relative Rights. The provisions of this Article Fourteen are and are intended solely for the purpose of defining the relative rights of the Holders on the one hand and the holders of Senior Debt and Senior Subordinated Debt and Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt on the other hand. Nothing contained in this Article Fourteen or elsewhere in this Exchange Indenture or in the Exchange Debentures is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Debt and Senior Subordinated Debt and the Holders of the Exchange Debentures, the obligation of the Company, which is absolute and unconditional (and which, subject to the rights under this Article Fourteen of the holders of Senior Debt and Senior Subordinated Debt, is intended to rank equally with all other general obligations of the Company) to pay to the Holders of the Exchange Debentures the principal of (and premium, if any) and interest on the Exchange Debentures as and when the same shall become due and payable in accordance with their terms; or (b) impair, as among the Subsidiary Debentures Guarantors, their creditors other than holders of Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt and the Holders of the Exchange Debentures, the obligation of the Subsidiary Debentures Guarantors, which is absolute and unconditional (and which, subject to the rights under this Article Fourteen of the holders of Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, is intended to rank equally with all other general obligations of the Subsidiary Debentures Guarantors) to pay to the Holders of the Exchange Debentures the principal of (and premium, if any) and interest on the Exchange Debentures as and when the same shall become due and payable in accordance with their terms; or (c) affect the relative rights against the Company of the Holders of the Exchange Debentures and creditors of the Company other than the holders of Senior Debt and Senior Subordinated Debt or the relative rights against the Subsidiary Debentures Guarantors of the Holders of the Exchange Debentures and creditors of the Subsidiary Debentures Guarantors other than the Holders of Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt; or (d) prevent the Debentures Trustee or the Holder of any Exchange Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Exchange Indenture, subject to the rights, if any, under this Article Fourteen of the holders of Senior Debt and Senior Subordinated Debt and Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt to receive cash, property and securities otherwise payable or deliverable to the Debentures Trustee or such Holder. The holders of the Senior Debt and the Credit Facility Agent, as the case may be, shall be entitled to enforce the provisions of this Article Fourteen against the Company, the Subsidiary Notes Guarantors, the Holders of the Exchange Debentures and the Debentures Trustee. 133 122 SECTION 1407. Debentures Trustee to Effectuate Subordination. Each Holder of an Exchange Debenture by his acceptance thereof authorizes and directs the Debentures Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Fourteen and appoints the Debentures Trustee his attorney-in-fact for any and all such purposes. SECTION 1408. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or any Subsidiary Debentures Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company or any Subsidiary Debentures Guarantor with the terms, provisions and covenants of this Exchange Indenture, regardless of any knowledge thereof any such Holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, as the case may be, may, at any time and from time to time, without the consent of or notice to the Debentures Trustee or the Holders of the Exchange Debentures, without incurring responsibility to the Debentures Trustee or the Holders of the Exchange Debentures and without impairing or releasing the subordination provided in this Article Fourteen or the obligations hereunder of the Holders of the Exchange Debentures to the holders of Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, as the case may be, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, as the case may be, or otherwise amend or supplement in any manner Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, as the case may be, or any instrument evidencing the same or any agreement under which Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, as the case may be, is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt and Senior Subordinated Debt or any Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, as the case may be; (iii) release any Person liable in any manner for the collection of Senior Debt and Senior Subordinated Debt or any Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, as the case may be; and (iv) exercise or refrain from exercising any rights against the Company or any Subsidiary Debentures Guarantor and any other Person. 134 123 SECTION 1409. Notice to Debentures Trustee. The Company and each Subsidiary Debentures Guarantor shall give prompt written notice to the Debentures Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Debentures Trustee in respect of the Exchange Debentures and of any subsequent cure or waiver thereof. Notwithstanding the provisions of this Article Fourteen or any other provision of this Exchange Indenture, the Debentures Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Debentures Trustee in respect of the Exchange Debentures, unless and until the Debentures Trustee shall have received written notice thereof from the Company or a holder of Senior Debt and Senior Subordinated Debt or a holder of Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt or from any trustee or agent therefor; and, prior to the receipt of any such written notice, the Debentures Trustee, subject to the provisions of Section 601, shall be entitled in all respects to assume that no such facts exist. Subject to the provisions of Section 601, the Debentures Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Debt and Senior Subordinated Debt or a holder of Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt (or a trustee or agent therefor) to establish that such notice has been given by a holder of Senior Debt and Senior Subordinated Debt or a holder of Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt (or a trustee or agent therefor). In the event that the Debentures Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt and Senior Subordinated Debt or a holder of Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, as the case may be, to participate in any payment or distribution pursuant to this Article Fourteen, the Debentures Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Debentures Trustee as to the amount of Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, as the case may be, held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Fourteen, and if such evidence is not furnished, the Debentures Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 1410. Reliance on Judicial Order or Certificate of Liquidation Agent. Upon any payment or distribution of assets of the Company or any Subsidiary Debentures Guarantor referred to in this Article Fourteen, the Debentures Trustee, subject to the provisions of Section 601, and the Holders of the Exchange Debentures shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in a Proceeding, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for 135 124 the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Debentures Trustee or to the Holders of Exchange Debentures, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and Senior Subordinated Debt, Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt and other indebtedness of the Company and the Subsidiary Debentures Guarantors, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Fourteen. SECTION 1411. Debentures Trustee Not Fiduciary for Holders of Senior Debt and Senior Subordinated Debt. Except to the extent of its obligations under the penultimate paragraph of Section 1402 and the last paragraph of Section 1403, the Debentures Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Exchange Debentures or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt shall be entitled by virtue of this Article Fourteen or otherwise. The Debentures Trustee's duties with respect to holders of Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt are limited to those specifically set forth in this Exchange Indenture, and no implied covenants or obligations shall be construed by any provision hereof. SECTION 1412. Rights of Debentures Trustee as Holder of Senior Debt and Senior Subordinated Debt; Preservation of Debentures Trustee's Rights. The Debentures Trustee in its individual capacity shall be entitled to all the rights set forth in this Article Fourteen with respect to any Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt which may at any time be held by it, to the same extent as any other holder of Senior Debt and Senior Subordinated Debt or Subsidiary Guarantor Senior Debt and Subsidiary Guarantor Senior Subordinated Debt, and nothing in this Exchange Indenture shall deprive the Debentures Trustee of any of its rights as such holder. Nothing in this Article Fourteen shall apply to claims of, or payments to, the Debentures Trustee under or pursuant to Section 607. SECTION 1413. Applicability to Paying Agents. In case at any time any Paying Agent other than the Debentures Trustee shall have been appointed by the Company and be then acting hereunder, the term "Debentures Trustee" 136 125 as used in this Article Fourteen shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article Fourteen in addition to or in place of the Debentures Trustee; provided, however, that this Section 1413 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. SECTION 1414. Defeasance of this Article Fourteen. The subordination of the Exchange Debentures and the Subsidiary Debentures Guarantees provided by this Article Fourteen is expressly made subject to the provisions for Legal Defeasance or Covenant Defeasance in Article Twelve hereof and, anything herein to the contrary notwithstanding, upon the effectiveness of any such Legal Defeasance or Covenant Defeasance, the Exchange Debentures and the Subsidiary Debentures Guarantees then outstanding shall thereupon cease to be subordinated pursuant to this Article Fourteen. SECTION 1415. Subordination Provisions Controlling. Notwithstanding anything to the contrary contained in this Exchange Indenture, to the extent that any provision contained in Articles One (other than Section 101) through Thirteen of this Exchange Indenture conflicts with any provision contained in Article Fourteen (including the definitions of certain terms used in Article Fourteen) of this Exchange Indenture, the provisions contained in Article Fourteen of this Exchange Indenture shall govern and control. 137 126 IN WITNESS WHEREOF, the parties hereto have caused this Exchange Indenture to be duly executed as of the day and year first above written. CITADEL BROADCASTING COMPANY, a Nevada corporation By /s/ Lawrence R. Wilson -------------------------------- Name: Lawrence R. Wilson Title: President CITADEL LICENSE, INC., as Guarantor By /s/ Lawrence R. Wilson ------------------------------- Name: Lawrence R. Wilson Title: President THE BANK OF NEW YORK, as Debentures Trustee By /s/ S. Giurlando -------------------------------- Name: Stephen J. Giurlando Title: Assistant Vice President EX-9 14 CITADEL BROADCASTING CO. S-4 1 Exhibit 9 VOTING TRUST AGREEMENT This VOTING TRUST AGREEMENT is made as of March 17, 1997, by and among Citadel Communications Corporation, a Nevada corporation (the "Company"), ABRY BROADCAST PARTNERS II, L.P., a Delaware limited partnership ("ABRY"), ABRY/CITADEL INVESTMENT PARTNERS, L.P., a Delaware limited partnership ("ABRY/CIP"), Christopher Hall (together with his successors-in-interest as trustee, the "Trustee"), as the initial Trustee hereunder, and J. Walter Corcoran and Harlan Levy, each an initial Back-Up Trustee hereunder. ABRY and ABRY/CIP are collectively referred to herein as the "Stockholders". Certain capitalized terms used herein are defined in Section 4.1. WHEREAS, the Company and certain other Persons are parties to, and the Stockholders are express third-party beneficiaries of, that certain Third Amended and Restated Voting Agreement dated as of the date hereof (as in effect from time to time, the "Voting Agreement"); and WHEREAS, the Company, the Stockholders and certain other Persons have entered into that certain Securities Purchase and Exchange Agreement dated as of June 28, 1996, as amended through and in effect on the date hereof (as in effect from time to time, the "Securities Purchase Agreement"), that certain Second Amended and Restated Stockholders Agreement, dated as of June 28, 1996, as amended through and in effect on the date hereof (as in effect from time to time, the "Stockholders Agreement"), that certain Third Amended and Restated Registration Rights Agreement, dated as of June 28, 1996, as amended through and in effect on the date hereof (as in effect from time to time, the "Registration Rights Agreement"), and that certain letter agreement dated as of March 17, 1997 pursuant to which the Stockholders agreed to enter into this Voting Trust Agreement and deposit their Shares hereunder (as in effect from time to time, the "March 1997 Letter Agreement"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and for the mutual agreements contained herein, the parties hereto agree as follows: ARTICLE I VOTING TRUST 1.1 CREATION OF VOTING TRUST. Subject to the terms and conditions of this Agreement, a voting trust (the "Voting Trust") is hereby created and established in accordance with Section 78.365 of the Nevada Revised Statutes. The Trustee accepts the trust created by this Agreement and agrees to its appointment his Trustee (with all attendant rights and duties hereunder). Upon the 2 execution of this Agreement by all the parties hereto, the Trustee shall file an executed counterpart of this Agreement (and of every supplemental or amendatory agreement) at the Company's registered office in the State of Nevada. The copy of this Agreement so filed shall be open to inspection at any reasonable time by any stockholder of the Company, the holder of any Voting Trust Certificate(s) or any holder of a beneficial interest in the Voting Trust, in person or by agent or attorney, as provided in Section 78.365 of the Nevada Revised Statutes. The Trustee shall also maintain, or cause to be maintained, such other records and books as are necessary or appropriate to enable the Trustee to carry out the terms and provisions of this Agreement. By his execution and delivery of this Agreement, each of the initial Trustee and the initial Back-Up Trustees certifies to the Company that he has no familial or extra-trust business relationship (within the meaning of the rules and policies of the FCC under the Communications Act) with any Stockholder or any Affiliate of any Stockholder. 1.2 DEPOSIT OF SHARES; VOTING TRUST CERTIFICATES. (a) Upon execution and delivery of this Agreement by the parties hereto, each of the Stockholders shall deposit with the Trustee certificates representing all of the outstanding Capital Stock then owned by such Stockholder. The Stockholders shall deposit additional shares of Capital Stock with the Trustee from time-to-time as necessary to ensure that the Shares subject hereto at all times represent all of the shares of Capital Stock owned by all of the Stockholders. Each such deposit shall be accompanied by stock powers duly executed in blank or such other instrument as may be reasonably requested by the Trustee to enable the Trustee to transfer the Shares to the Trustee's name, as trustee. Upon each such deposit, all certificates representing the Shares so deposited shall be surrendered by the Trustee to the Company or its transfer agent and canceled and new certificates representing the Shares shall be issued to and in the name of the Trustee, as Trustee of the Voting Trust. Except as hereinafter provided, such Share certificates shall at all times be and remain in the possession, and under the control, of the Trustee or his agent. (b) In addition to any other legends required by the Stockholders Agreement, each new certificate for Shares issued to the Trustee shall bear a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ISSUED PURSUANT TO AND ARE SUBJECT TO THE TERMS OF A CERTAIN VOTING TRUST AGREEMENT, DATED MARCH 17, 1997 AMONG THE ISSUER, THE TRUSTEE OF THE VOTING TRUST AND THE BENEFICIAL OWNER OF THESE SECURITIES. THESE SECURITIES MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE VOTING TRUST AGREEMENT, A COPY OF WHICH IS ON FILE AT THE ISSUER'S REGISTERED OFFICE IN THE STATE OF NEVADA. A like notation shall be made in the Company's stock transfer records with respect to such Shares. - 2 - 3 (c) Upon receipt of the new certificate representing the Shares, the Trustee shall deliver to the Stockholders one or more voting trust certificates therefor, each substantially in the form of Exhibit A hereto (each, a "Voting Trust Certificate"). Each Voting Trust Certificate shall specify the number of Shares in respect of which it is issued, shall be dated the date of its issuance and shall be signed manually by the Trustee. (d) The Trustee shall retain and hold the certificates representing the Shares only in accordance with, and subject to the terms and conditions set forth in, this Agreement. The Trustee shall have no authority to, and shall not, Transfer the Shares, except to the extent otherwise specifically required by this Agreement. All Shares and all cash, securities or other property distributed in respect of the Shares that is held by Trustee shall be held in trust for the benefit of the Stockholders and no creditors of the Trustee shall have any right to or claim against any of the assets of the Voting Trust. (e) The Stockholders will not communicate with the Voting Trustee regarding the management or operation of the Company's and its Subsidiaries' radio broadcast stations. 1.3 TRANSFER OR EXCHANGE OF VOTING TRUST CERTIFICATES. (a) The Trustee will maintain an office or agency at the address specified for the Trustee in Section 4.4 (or at such other address as the Trustee may indicate to the Stockholders from time to time in accordance with Section 4.4) at which Voting Trust Certificates may be presented or surrendered for registration of transfer or for exchange (the "Registrar"). The Registrar shall keep a register of the Voting Trust Certificates and of their transfer and exchange. The Trustee may appoint any Person to act as the Registrar on its behalf, but in the absence of an effective appointment, the Trustee shall act as the Registrar hereunder. (b) When Voting Trust Certificates are presented to the Registrar with a request to register the transfer of such Voting Trust Certificates, or to exchange them for Voting Trust Certificates of different denominations which in the aggregate represent the Shares for which such Voting Trust Certificates are being exchanged, in each case, accompanied by a duly executed instrument of assignment or exchange substantially in the form attached as Exhibit B hereto, then the Registrar shall register the transfer or make the exchange as requested; provided that the Registrar shall require, as a condition to registering a transfer of Voting Trust Certificates, that the transferee execute and deliver to the Trustee its written agreement to be bound by the terms of this Agreement as a Stockholder hereunder and to be bound by the terms of the Stockholders Agreement as a Stockholder thereunder, substantially in the form of Exhibit C hereto. 1.4 REGISTRATION OF HOLDERS. The Trustee may treat the registered holder of a Voting Trust Certificate as the owner thereof for all purposes. Every transferee of a Voting Trust Certificate shall be required to become a party to this Agreement, with the same force and effect as if such transferee had signed this Agreement, and each such transferee shall for all purposes be considered a Stockholder hereunder. - 3 - 4 1.5 REPLACEMENT OF VOTING TRUST CERTIFICATE. Upon receipt of evidence reasonably satisfactory to the Trustee (and an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of a Voting Trust Certificate, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Trustee (provided that if the registered holder is ABRY, ABRY/CIP or a financial institution or other institutional investor, its own agreement will be satisfactory), or, in the case of any such mutilation, upon surrender of such certificate, the Trustee shall (at the registered holder's expense) execute and deliver in lieu of such certificate a new Voting Trust Certificate of like kind representing the number of Shares represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate. ARTICLE II THE TRUSTEE 2.1 VOTING OF SHARES. During the term of this Agreement and for so long as the Trustee shall hold the Shares pursuant to this Agreement, the Trustee shall possess and in his sole discretion shall be entitled to and have, the duty to exercise, in person or by his nominees or proxies, all of the Stockholders' voting rights and voting powers in respect of the Shares, and to take part in any stockholders' meetings, including the right to vote the Shares for the election of directors of the Company (subject to any limitations imposed by law, the Company's certificate of incorporation or bylaws or this Agreement). In discharging such duty, the Trustee shall, with respect to matters covered by Section 2.1 of the Voting Agreement, vote all of the Shares in the manner required by such Section 2.1; provided that any Person's right to direct the Trustee's action pursuant to Section 2.1 of the Voting Agreement shall be subject to the limitations on such right as are expressed in the Voting Agreement. This Section 2.1 shall not be deemed to empower the Trustee to exercise any other rights of the Stockholders with respect to ownership of the Shares, including but not limited to (i) pursuant to Section 11 or Section 13.a. of the Securities Purchase Agreement, (ii) pursuant to all provisions of the Stockholders Agreement, (iii) pursuant to Sections 2, 3 and 12(c) of the Registration Rights Agreement, or (iv) pursuant to Section 7.2 of the Voting Agreement, and with respect to any of the matters set forth in clauses (i) through (iv) above, the Company agrees to submit such matters solely to the holders of the Voting Trust Certificates. 2.2 DIVIDENDS AND DISTRIBUTIONS. (a) Subject to Section 2.2(b) below, the Stockholders shall be entitled to receive dividends or distributions of money, securities, or other property, if any, collected or received by the Trustee with respect to the Shares represented by the Voting Trust Certificates. Any such payments received by the Trustee shall be held in trust for the benefit of the Stockholders and shall be paid over to the Stockholders by Trustee promptly upon the Trustee's receipt of such dividends or distributions. In lieu of receiving dividends or distributions and paying them to the Stockholders, the Trustee may instruct the Company in writing to pay the dividends or distributions (other than dividends consisting of Capital Stock) directly to the Stockholders. In the event any such instruction is given to the Company, all liability of the Trustee with regard to the payment of such dividends or distributions shall cease, unless and until such instruction is revoked. - 4 - 5 (b) Notwithstanding Section 2.2(a) above, in the event that the Trustee receives any additional shares of Capital Stock through a dividend or other distribution with respect to any Shares, the Trustee shall hold such Capital Stock subject to this Agreement for the benefit of the Stockholders and such Capital Stock shall become subject to all of the terms and conditions of this Agreement to the same extent as if it were originally deposited as Shares hereunder. The Trustee shall issue Voting Trust Certificates in respect of such Capital Stock to the Stockholders as soon as practicable after the Trustee's receipt of such Capital Stock. 2.3 EXPENSES; EXCULPATION; ETC. The Trustee, and each Person who is at any time a Back-Up Trustee, shall be entitled to receive compensation for his services as Trustee and availability as a Back-Up Trustee hereunder or agreement to provide services hereunder in the amount of $25,000 per annum. The Trustee is expressly authorized to incur and pay and be promptly reimbursed by the Stockholders for all reasonable charges and other expenses which the Trustee deems necessary and proper in the performance of his duties under this Agreement. The Trustee need only perform such duties as are specifically set forth in this Agreement and no covenants or obligations shall be implied in this Agreement that are adverse to the Trustee. The Trustee shall not be liable for his action or failure to act hereunder, unless such action or failure to act constitutes gross negligence or willful misconduct on its part. The Trustee shall not be required to give any bond or other security for the discharge of its duties under this Agreement. 2.4 SUCCESSOR TRUSTEE. The Trustee may assign his rights and delegate his obligations to a successor Trustee, who shall be a Back-Up Trustee or another Person appointed in the same manner as an additional Back-Up Trustee would be appointed hereunder, so long as such successor Trustee is not an Affiliate of any Stockholder, is a U.S. citizen and otherwise is qualified to be the Trustee under the Communications Act of 1934, as amended (the "Communications Act"), and the rules and policies of Federal Communications Commission (the "FCC") thereunder; provided that if the Trustee is unable to perform as Trustee hereunder, the Stockholders and the Company hereby designate J. Walter Corcoran to serve as the successor Trustee, and if J. Walter Corcoran is unable or unwilling to perform as Trustee hereunder, the Company and the Stockholders hereby designate Harlan Levy to serve as the successor Trustee. Each individual named in the preceding proviso is referred to as a "Back-Up Trustee"; if at any time any individual which is a Back-Up Trustee becomes ineligible to serve as the Trustee or becomes the Trustee, then the Trustee (or, if there is no Trustee or Back-Up Trustee, then the Company (by action approved by not fewer than three-fourths (3/4) of the members of the Company's board of directors) and Majority Beneficial Owners) shall appoint one or more additional Back-Up Trustees so that, as nearly as practicable, at all times there are two Back-Up Trustees. As a condition to any such appointment of any additional Back-Up Trustee, the Company may require that such additional Back-Up Trustee certify that he or she is an independent person having no familial or extra-trust business relationship (within the meaning of the rules and policies of the FCC under the Communications Act) with any Stockholder or any Affiliate of any Stockholder. Any successor Trustee appointed as herein provided shall indicate his or her acceptance of such appointment by executing a counterpart of this Agreement and thereupon such successor shall be vested with all the rights, powers, duties and immunities herein conferred upon the Trustee as though such successor had been originally a party to this Agreement as Trustee. Upon assignment of his rights and delegation of his duties pursuant to this Section 2.4 and such acceptance, the assigning Trustee's authority to vote or otherwise exercise any rights with respect - 5 - 6 to the Shares shall immediately terminate, and the assigning Trustee shall immediately surrender all certificates for Shares held by him to the Company accompanied by stock powers duly executed in blank. The Company shall cancel such certificates and shall issue new certificates representing the Shares to and in the name of the successor Trustee, as Trustee of this Voting Trust. ARTICLE III TERM OF VOTING TRUST; RELEASE OF SECURITIES 3.1 TERM OF VOTING TRUST; TRANSFER OF SHARES. (a) The Voting Trust shall commence upon the execution of this Agreement by the parties hereto and shall continue until terminated in accordance with Section 3.1(b). (b) This Agreement and/or the Voting Trust shall terminate upon the written agreement of the Company (by action approved by not fewer than three-fourths (3/4) of the members of the Company's board of directors) and Majority Beneficial Owners; provided, that the Voting Trust shall terminate with respect to any Shares upon any Transfer of such Shares to a Person which is not an Affiliate of either Stockholder or upon a distribution of Shares by a Stockholder to its partners. Upon any termination of the Voting Trust for any reason (other than pursuant to the foregoing proviso), the Shares will revert to the Stockholders which hold the Voting Trust Certificates which relate to the Shares. Upon and as a condition to any such termination (other than pursuant to the foregoing proviso), each Stockholder will execute and deliver to the Company and the other Stockholders (as that term is defined in the Voting Agreement) a counterpart of the Voting Agreement; until such a Stockholder has done so, the Company will not record such reversion on its books or treat for any purpose such Stockholder as the owner of the Shares which are to revert to such Stockholder. (c) Upon the termination of the Voting Trust by written agreement pursuant to Section 3.1(b) above, and the surrender by the Stockholders to the Trustee of the Voting Trust Certificates issued by the Trustee in respect of the Shares, the Trustee shall surrender the certificates representing the Shares to the Company properly endorsed for transfer to the Stockholders, shall take all other actions appropriate to effectuate the transfer of the Shares to the Stockholders and shall distribute all other property held in trust for the Stockholders. (d) Upon the termination of the Voting Trust with respect to any Shares pursuant to the proviso to Section 3.1(b) above, and the surrender by the Stockholders to the Trustee of the Voting Trust Certificates issued by the Trustee in respect of such Shares, the Trustee shall surrender the Certificates representing such Shares to the Company properly endorsed for transfer to transferee in question and shall take all other actions appropriate to effectuate the transfer of such Shares to such transferee. If less than all of the Shares which are represented by a stock certificate are involved in the Transfer in question, then the Company shall, or shall cause its transfer agent to, issue and deliver to the Trustee a certificate for the Shares which were not involved in such Transfer. If less than all of the Shares represented by a Voting Trust Certificate are involved in the Transfer - 6 - 7 in question, then the Trustee shall issue and deliver to the surrendering holder a Voting Trust Certificate representing the Shares which were not involved in such Transfer. (e) At any time when the Voting Agreement has not been terminated, it shall be a condition to any Transfer of any Shares (other than in a Public Sale or to a Successor Trustee in such Person's capacity as a Successor Trustee) that the prospective transferee execute and deliver to the Company and the other Stockholders (as that term is defined in the Voting Agreement) a counterpart of the Voting Agreement. Any Transfer or attempted Transfer of any Shares in violation of the preceding sentence will be void, and the Company will not record such Transfer on its books or treat any purported transferee of such Shares as the owner of such Shares for any purpose. 3.2 RELEASE OF SECURITIES FOR PUBLIC SALE. If at any time after the Company has effected an initial public offering of its equity securities, a Stockholder desires to effect a Public Sale of Shares which are held in the Voting Trust, such Stockholder shall give notice to the Trustee of such sale prior to the proposed date of sale, specifying the intended method of distribution and the number of shares to be sold, and shall surrender to the Trustee the Voting Trust Certificates issued by the Trustee in respect of the Shares proposed to be sold. Upon receipt of such notice and the related Voting Trust Certificates, the Trustee shall deliver the certificates representing the Shares to be sold, endorsed in blank, to the Company or its transfer agent for registration of transfer to the purchaser (or its intermediary) in such Public Sale. If less than all the Shares represented by a particular certificate are being sold in such Public Sale, the Company shall, or shall cause its transfer agent to, issue and deliver to the Trustee a certificate for the Shares not being sold. If less than all of the Shares represented by a Voting Trust Certificate are to be sold in such Public Sale, then the Trustee will issue and deliver to the surrendering holder a Voting Trust Certificate representing the Shares which are not involved in such Public Sale. ARTICLE IV MISCELLANEOUS 4.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings: "AFFILIATE" of a particular Person means any other Person that directly or indirectly controls, is controlled by, or is under common control with such first Person, or with respect to an individual, such individual's spouse and descendants (whether natural or adopted) and any trust for the benefit of such individual and/or his or her spouse and/or descendants. "AGREEMENT" has the meaning given such term in the preface. "CAPITAL STOCK" means the Company's Series C Convertible Preferred Stock, par value $.001 per share (the "Series C Preferred"), the Company's Series D Convertible Preferred Stock, par value $.001 per share (the "Series D Preferred"), the Company's Class A Common Stock, par value $.001 per share (the "Class A Common"), and the Company's Class B Common Stock, par value $.001 per share (the "Class B Common"). - 7 - 8 "COMPANY" has the meaning given such term in the preface. "FACILITY A NOTE" means the Convertible Promissory Notes issued by the Company to ABRY and ABRY/CIP on or after June 28, 1996 pursuant to the terms and conditions of the Securities Purchase Agreement. "MAJORITY BENEFICIAL OWNERS" means holders of Voting Trust Certificates which represent a majority of the Shares held in the Voting Trust at the time in question (assuming the conversion in full into Common Stock of all Shares which are Series C Preferred or Series D Preferred immediately prior to such time). "PERSON" means an individual, a partnership, a joint venture, a corporation, an association, a joint stock company, a limited liability company, a trust, an unincorporated organization or a government or any department or agency or political subdivision thereof. "PUBLIC SALE" means any sale of Shares (i) to the public pursuant to an offering registered under the Securities Act or (ii) to the public pursuant to the provisions of Rule 144 under the Securities Act of 1933, as amended. "REGISTRAR" has the meaning given such term in Section 1.3(a). "REGISTRATION RIGHTS AGREEMENT" has the meaning given such term in the preface. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SECURITIES PURCHASE AGREEMENT" has the meaning given such term in the preface. "SHARES" means and includes all shares of Capital Stock deposited by the Stockholders with the Trustee pursuant to this Agreement and any additional shares of Capital Stock of the Company issued or distributed by the Company to the Trustee by way of a dividend or distribution on other Shares or issued by the Company to the Stockholders upon the conversion of any Series C Preferred, Series D Preferred, Class B Common or Facility A Note. "STOCKHOLDERS" has the meaning given such term in the preface. "STOCKHOLDERS AGREEMENT" has the meaning given such term in the preface. "TRANSFER" means to sell, transfer, assign, pledge, hypothecate or otherwise dispose of any interest in any securities. "TRUSTEE" has the meaning given such term in the preface. "VOTING AGREEMENT" has the meaning given such term in the preface. - 8 - 9 "VOTING TRUST" has the meaning given such term in Section 1.1. "VOTING TRUST CERTIFICATE" has the meaning given such term in Section 1.2(c). 4.2 MERGER; AMENDMENT. This Agreement, the March 1997 Letter Agreement, the Voting Agreement, the Stockholders Agreement, the Securities Purchase Agreement and the Registration Rights Agreement constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein. This Agreement shall not be amended, altered or modified except by a written instrument that expressly refers to this Agreement, is signed by each of the Company, the Trustee and the Stockholders and is filed with the Company's registered office within the State of Nevada. 4.3 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted successors and permitted assigns. The rights and duties of any party to this Agreement shall not be assigned or delegated, except in connection with the resignation of any Trustee and the appointment of a successor Trustee in accordance with Section 2.4 hereof or the Transfer of any Voting Trust Certificate effected in accordance with the terms hereof. 4.4 NOTICES. All notices and other communications given under this Agreement shall be in writing and shall be deemed to have been duly given when delivered in person or mailed by first class, registered or certified mail, postage prepaid or telegram and addressed to the parties hereto as follows: (i) If to the Company: Citadel Communications Corporation 140 South Ash Avenue Tempe, Arizona 85281 Attention: Ms. Donna Hefner and Lawrence R. Wilson 1015 Eastman Drive Bigfork, Montana 59911 - 9 - 10 with a copy, which shall not constitute notice, to: Osborn Maledon, P.A. 2929 North Central Suite 2100 Phoenix, Arizona 85012 Attention: Michelle M. Matiski, Esq. (ii) If to Trustee: Christopher Hall, Esq. Piliero, Goldstein, Jenkins & Hall 292 Madison Avenue New York, New York 10017-6307 (iii) If to the Stockholders: c/o Paradigm Consulting Ltd. 22 Church Street, 2nd Floor Hamilton HM11 Bermuda Attention: Mr. Andrew Banks with a copy, which shall not constitute notice, to: Kirkland & Ellis 153 East 53rd Street New York, New York 10022 Attention: John L. Kuehn, Esq. and to any subsequent holder of Voting Trust Certificates at the address as indicated in the Registrar's records, or in each case to such other address as any of them by written notice to the sending party may from time to time designate, with copies also sent to such attorney as the parties hereto may from time to time designate. Each notice or other communication which shall be personally delivered, mailed or transmitted in the manner described above shall be deemed sufficiently received for all purposes at such time as it is delivered to the addressee (with any return receipt on delivery receipt being deemed conclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 4.5 SEVERABILITY. If any provision of this Agreement or any other agreement, document or writing given pursuant to or in connection with this Agreement shall be found by a court of competent jurisdiction to be invalid or unenforceable under applicable law, such provision shall be ineffective to the extent of such invalidity only, without in any way affecting the remainder of such provision or the remaining provisions of this Agreement. - 10 - 11 4.6 SPECIFIC ENFORCEMENT. The Company, the Trustee and the Stockholders shall be entitled to enforce their rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that the Company, the Trustee or any Stockholder may in its or his sole discretion apply to any court of law or equity of competent jurisdiction for specific performance or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement. 4.7 HEADINGS. The headings of the paragraphs of this Agreement are inserted for convenience of reference only and do not form a part or affect the meaning hereof. 4.8 GOVERNING LAW. This Agreement, the rights and obligations of the parties hereto, and any claims and disputes relating thereto, shall be governed by and construed in accordance with the local laws (and not the laws of conflicts) of the State of Nevada. 4.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which shall be deemed to be one and the same instrument. [SIGNATURE PAGE FOLLOWS] - 11 - 12 SIGNATURE PAGE TO VOTING TRUST AGREEMENT IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. /s/ Christopher P. Hall ------------------------------------------ Christopher Hall, as the initial Trustee /s/ J. Walter Corcoran ------------------------------------------ J. Walter Corcoran, as an initial Back-Up Trustee /s/ Harlan Levy ------------------------------------------ Harlan Levy, as an initial Back-Up Trustee CITADEL COMMUNICATIONS CORPORATION By: /s/ Lawrence R. Wilson ---------------------------------------- Name: Larry Wilson Title: President STOCKHOLDERS: ABRY BROADCAST PARTNERS II, L.P. By: ABRY CAPITAL, L.P. Its General Partner By: ABRY HOLDINGS, INC. Its General Partner By: /s/ Royce Yudkoff ---------------------------------------- Name: Royce Yudkoff Title: President 13 ABRY/CITADEL INVESTMENT PARTNERS, L.P. By: ABRY CAPITAL, L.P. Its General Partner By: ABRY HOLDINGS, INC. Its General Partner By: /s/ Royce Yudkoff ---------------------------------------- Name: Royce Yudkoff Title: President 14 Exhibit A to Voting Trust Agreement THIS VOTING TRUST CERTIFICATE IS ISSUED PURSUANT TO AND IS SUBJECT TO THE TERMS OF A CERTAIN VOTING TRUST AGREEMENT, DATED MARCH __, 1997 BY AND AMONG CITADEL COMMUNICATIONS CORPORATION (THE "COMPANY"), THE TRUSTEE OF THE VOTING TRUST AND THE BENEFICIAR(Y)(IES) OF THE VOTING TRUST. THE BENEFICIAL INTEREST IN SHARES OF THE CAPITAL STOCK OF THE COMPANY REPRESENTED BY THIS VOTING TRUST CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE VOTING TRUST AGREEMENT, A COPY OF WHICH IS ON FILE AT THE ISSUER'S REGISTERED OFFICE IN THE STATE OF NEVADA. THE SECURITIES REPRESENTED BY THIS VOTING TRUST CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAW AND THE SECURITIES REPRESENTED HEREBY CANNOT BE TRANSFERRED UNLESS IT IS REGISTERED OR QUALIFIED UNDER SUCH FEDERAL AND ANY APPLICABLE STATE SECURITIES LAW OR UNLESS AN EXEMPTION FROM REGISTRATION OR QUALIFICATION IS AVAILABLE. THE SECURITIES REPRESENTED BY THIS CERTIFICATE CONSTITUTE ABRY STOCK UNDER A CERTAIN SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT DATED AS OF JUNE 28, 1996, AS AMENDED, AND CERTAIN OF THE COMPANY'S STOCKHOLDERS AND, AS SUCH, ARE SUBJECT TO CERTAIN VOTING PROVISIONS, PURCHASE RIGHTS AND RESTRICTIONS ON TRANSFER SET FORTH IN THE STOCKHOLDERS AGREEMENT. A COPY OF SUCH STOCKHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST. Certificate No. VTC - Date of Issuance: ------ ------ Number of Shares Beneficially Represented Hereby: shares ------ of stock, par value ------ $ per share ------ VOTING TRUST CERTIFICATE This Voting Trust Certificate (this "Certificate") certifies that the undersigned Trustee has received certificate(s) representing ____________ shares of ________ stock, par value $_____ per share (the "Shares") of Citadel Communications Corporation, a Nevada corporation (the "Company"), on behalf of (the "Holder"), duly registered in the name of the undersigned Trustee, on the following terms and conditions: RIGHTS OF HOLDERS The Holder agrees to, accepts and ratifies all of the terms, conditions and covenants of that certain Voting Trust Agreement dated March __, 1997 (the "Agreement") which is hereby incorporated herein by reference. Capitalized terms used but not otherwise defined in this Certificate shall have the meanings given such terms in the Agreement. The Holder shall possess and be entitled to rights of ownership of the Shares only as provided in the Agreement. The Holder of this Certificate shall transfer or replace this Certificate only as provided in the Agreement. A-1 15 VOTING AND OTHER RIGHTS The Trustee during the term of the Agreement shall have sole voting rights and certain other rights with respect to the Shares as specified in the Agreement (subject to the limitations imposed by the Company's certificate of incorporation, bylaws or any Agreement to which the Shares may be subject). DIVIDENDS AND DISTRIBUTIONS The Holder of this Certificate shall be entitled to receive all dividends or other distributions of cash, securities or other property by the Company received by the undersigned Trustee in respect of the Shares, except that in the event of dividends or distributions of shares of Capital Stock the Trustee shall receive and hold any such dividends or distributions pursuant to the terms of the Agreement and shall issue to the Holder hereof additional Certificates representing such additional Shares. In lieu of the Trustee receiving dividends and distributions and paying them to the Holder of this Certificate, the Trustee may instruct the Company to pay the dividends or distributions directly to the Holder, as provided in the Agreement. TERMINATION The Voting Trust shall terminate as provided in the Agreement. SUBJECT TO VOTING TRUST AGREEMENT This Certificate is governed in all respects by the Agreement. In the event of any inconsistency between the terms and conditions of this Certificate and the Agreement, the Agreement shall control. A-2 16 IN WITNESS WHEREOF, this Certificate is executed and issued to the Holder by the undersigned Trustee as of the date first written above. ------------------------- ------------------------- , as Trustee A-3 17 Exhibit B to Voting Trust Agreement ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers its right, title and interest in and to the attached Voting Trust Certificate, certificate number __, the beneficial interest in the shares of capital stock of Citadel Communications Corporation, a Nevada corporation (the "Company") represented thereby and all related rights under the Voting Trust Agreement dated as of March __, 1997 (the "Voting Trust Agreement"), among Christopher Hall or his successor-in-interest, as trustee (the "Trustee") and the other parties thereto, to ______________________ and authorizes _______________________ to surrender the attached Voting Trust Certificate to the Trustee or its designee for registration of transfer. Date: ------------------------- ---------------------------------- [SIGNATURE OF STOCKHOLDER] B-1 18 Exhibit C to Voting Trust Agreement JOINDER This Joinder is made as of the date written below by the undersigned (the "Joining Party") in favor of and for the benefit of ________________, or its successor-in-interest (the "Voting Trustee") and the other Persons party to the Voting Trust Agreement, dated as of March __, 1997 (the "Voting Trust Agreement"), among the Voting Trustee and Citadel Communications Corporation, a Nevada corporation (the "Company"), and the other Persons party to the Second Amended and Restated Stockholders Agreement, dated as of June 28, 1996, as amended (the "Stockholders Agreement") among the Company and such other Persons. Capitalized terms used but not defined herein shall have the meanings given such terms in the Voting Trust Agreement. Accordingly, the Joining Party hereby agrees as follows: 1. The Joining Party hereby acknowledges, agrees and confirms that, by its execution of this Joinder, the Joining Party will be deemed to be a party to the Voting Trust Agreement and shall have all of the obligations of a party thereunder as if it had executed the Voting Trust Agreement. The Joining Party hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Voting Trust Agreement. 2. The Joining Party hereby acknowledges, agrees and confirms that, by its execution of this Joinder, the Joining Party will be deemed to be a party to the Stockholders Agreement and shall have all of the obligations of a Stockholder and a holder of ABRY Stock thereunder as if it had executed the Stockholders Agreement. The Joining Party hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Stockholders Agreement. C-1 19 IN WITNESS WHEREOF, the undersigned has executed this Joinder as of the date written below. Date: ------------------------- ---------------------------------- By: ------------------------------- Name: Title: Accepted and agreed as of the date first above written: - ---------------------------------- - --------------------- , as Trustee CITADEL COMMUNICATIONS CORPORATION By: ------------------------------- Name: Title: C-2 EX-10.1 15 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of June 28, 1996, by and between CITADEL BROADCASTING COMPANY, a Nevada corporation ("Citadel"), CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation ("Parent") and LAWRENCE R. WILSON, an individual ("Executive"). WITNESSETH: WHEREAS, Citadel desires to retain the services of Executive, and Executive desires to be employed by Citadel, on the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, Citadel, Parent and Executive, intending to be legally bound, hereby agree as follows: 1. Employment. Citadel hereby employs Executive as Chief Executive Officer of Parent and Citadel, and Executive accepts such employment and agrees to perform services for Parent and Citadel subject always to such resolutions as are established from time to time by the respective Boards of Directors of Parent and Citadel (each, a "Board"), for the period and upon the other terms and conditions set forth in this Agreement. 2. Term. The term of Executive's employment hereunder shall commence on the date hereof, and shall continue for a term of five (5) years (the "Initial Term"), unless terminated earlier pursuant to Section 5. After the expiration of the Initial Term, the term of Executive's employment pursuant to this Agreement shall automatically be renewed for successive one-year terms unless terminated (i) as of the end of such five-year term or any such one-year term by the Executive, or by the Company by written notice to the other (in the case of the Company, following Two-Thirds Board Action (as defined in Section 5.c. below) to terminate Executive's employment pursuant to this Agreement), or (ii) otherwise pursuant to the terms hereof. 3. Position and Duties. a. Service with Citadel. During the term of Executive's employment pursuant to this Agreement, Executive shall be the President and Chief Executive Officer of Parent and Citadel, and the Chairman of each Board. Executive agrees to perform such executive employment duties as either Board shall assign to him from time to time and which are commensurate with his position as chief executive officer. Executive will devote his best efforts to his employment with Parent and Citadel and shall devote substantially all of his business time and attention to the performance of his duties under this Agreement. b. No Conflicting Duties; Other Activities. Executive hereby confirms that he is under no contractual commitments inconsistent with his obligations set forth in this Agreement, 2 and that during the term of his employment pursuant to this Agreement, he will not (i) render or perform services, or enter into any contract to do so, for any natural person, corporation, partnership, joint venture, or other entity (a "Person") which are inconsistent with the provisions of this Agreement, or (ii) engage in any business or be employed by, act as a consultant to or act as a director of any Person, other than on behalf of Parent, Citadel or any of their subsidiaries. Except as provided in the preceding sentence, nothing in this Agreement shall prohibit Executive from having investment interests (including acting as a director of one or more non-broadcast companies) as long as those interests do not require Executive to spend substantial time or effort and do not interfere with Executive's performance of the duties assigned him pursuant to Section 3.a. of this Agreement and compliance with the final sentence of Section 3.a. of this Agreement. Executive, however, shall not have any interest as a beneficial owner or creditor in any Person that owns, operates or manages radio or television properties other than beneficial ownership of five percent (5%) or less (by vote and value) of any class of equity or debt securities of one or more publicly held radio companies which are not affiliated with one another. 4. Compensation. a. Base Salary. As compensation for services to be rendered by Executive under this Agreement, during the term of Executive's employment pursuant to this Agreement (and thereafter, to the extent provided in this Agreement), Citadel shall pay to Executive a base annual salary of Three Hundred Twenty Five Thousand Dollars ($325,000) (the "Base Salary"), which shall be paid on a regular basis in accordance with Citadel's normal payroll procedures and policies. The amount of the Base Salary shall increase effective each January 1, beginning January 1, 1997, so that the new Base Salary will be 105% of Base Salary for the previous calendar year. b. Performance Bonus. As additional compensation for Executive's services, with respect to each calendar year at the end of which Executive is employed by Parent and Citadel pursuant to this Agreement, Executive shall receive an annual performance bonus (the "Performance Bonus") calculated as a percentage of Executive's Base Salary in effect at the end of such calendar year, which percentage will depend on whether certain benchmarks relating to Citadel's annual performance are met, as follows: i. For calendar year 1996, the benchmark shall be Citadel's broadcast cash flow ("BCF"), which shall mean (A) Citadel's gross revenues from radio station operations (other than revenues from trade and barter transactions), less (B) radio station operating expenses (other than expenses from trade and barter transactions) of the radio stations owned or operated by Citadel or any subsidiary or for which Citadel or any subsidiary sells advertising time, excluding depreciation, amortization, interest, taxes and corporate overhead. Citadel and Executive have projected Citadel's BCF for calendar year 1996 to be $12,291,094. Payment of the Performance Bonus shall be made according to the following scale: 2 3
1996 BCF Bonus as a % of -------- Executive's Base Salary ------ Less than $11,676,539 -0- $11,676,539 ( 95% of projected BCF) or more, but less than $12,291,094 25.0% $12,291,094 (100% of projected BCF) or more, but less than $12,905,649 37.5% $12,905,649 (105% of projected BCF) or more, but less than $13,520,203 50.0% $13,520,203 (110% of projected BCF) or more 62.5%
ii. For each calendar year following 1996, the benchmark shall be Citadel's operating cash flow ("OCF"), which shall mean Citadel's BCF minus Corporate Overhead (as defined below). Executive shall propose a budget of OCF for Parent and its subsidiaries prepared on a monthly basis for the succeeding calendar year at least 30 days prior to the close of each calendar year during the term of Executive's employment pursuant to this Agreement. The Performance Bonus for a calendar year after 1996 shall be calculated and paid based on Citadel's operating results as a percentage of the budgeted OCF reflected in the budget for such calendar year approved by the Parent's Board, as follows:
Applicable Year's OCF Bonus as a Percentage of --------------------- Executive's Base Salary ----------------------- Less than 95% of budgeted OCF -0- 95% or more of budgeted OCF but less than 100% 25.0% 100% or more of budgeted OCF but less than 105% 37.5% 105% or more of budgeted OCF but less than 110% 50.0% 110% or more of budgeted OCF 62.5%
For purposes of this Section 4, "Corporate Overhead" means during any period, the aggregate of all compensation, rent, traveling, aircraft, entertainment and automobile expenses of personnel of Parent, Citadel and their subsidiaries and all other costs and expenses which are not allocable or are not incurred directly in the operation of any of the radio stations owned or operated by Parent, Citadel or their subsidiaries, or for which Parent, Citadel or a subsidiary sells advertising, but excluding (i) the management fees paid and all expense reimbursements made to ABRY Partners, Inc. pursuant to the Management and Consulting Services Agreement dated as of June 28, 1996 between Citadel and ABRY Partners, Inc., (ii) transaction-related legal and accounting expenses, (iii) fees and other charges paid to obtain financing, and (iv) any other items not customarily included in corporate overhead. In any calendar year in which (x) Citadel, Parent or any subsidiary commences or ceases the ownership, operation or management of one or more radio stations (including commencing or ceasing selling advertising time therefor), or (y) any local marketing, joint sales or other arrangement pursuant to which Parent, Citadel or any subsidiary sells advertising time on any radio station commences or ceases, the benchmark for OCF or BCF for such calendar year shall be equitably adjusted by the Compensation Committee of the Parent's Board to take into account such commencement or cessation. 3 4 Except to the extent expressly provided to the contrary in this Section 4 (e.g., the exclusion of trade revenues and expenses from BCF), the calculations provided for in this Section shall be made on a consolidated basis and in accordance with generally accepted accounting principles and shall reflect the results of the Parent's and its subsidiaries' operations set forth in Parent's audited consolidated financial statements for the calendar year in question. c. Stock Options. i. 1993 Performance Bonus Options. In October of 1993, the Board of Parent granted Executive annual performance stock options for the years 1993 to 1997 for the annual purchase of a certain number of shares of Parent's Class A Common Stock to be determined based the Performance Bonus received by Executive. The terms of this grant are documented in that certain Citadel Communications Corporation Nonqualified Stock Option Agreement of even date herewith. ii. 1996 Equity Incentive Plan. Contemporaneous with the execution of this Agreement, Parent will grant Executive an option to purchase up to 150,000 shares of Parent's Class A Common Stock at an exercise price of $17.17 per share. Such option shall be granted pursuant to Parent's 1996 Equity Incentive Plan (the "Plan") and Award Agreements setting forth the terms and conditions of this option, including without limitation vesting conditions and restrictions on transfer of such stock. A portion of such option shall be a "qualified" incentive stock option, and the balance of such option shall be a "non-qualified" stock option. iii. 1994 Stock Options. Parent granted Executive an option to purchase 28,568 shares of Parent's Class A Common Stock pursuant to that certain Citadel Communications Corporation Nonqualified Stock Option Agreement dated December 21, 1994. Such option fully vested on that date and must be exercised on or before December 21, 2004. d. Participation in Benefit Plans. During the term of Executive's employment pursuant to this Agreement, Executive shall be included to the extent eligible thereunder in any and all plans of Citadel providing general benefits for Citadel's employees, including but not limited to insurance, 401(k) plan, vacation, sick days, and holidays. Executive's participation in any such plan or program shall be subject to the provisions, rules and regulations applicable thereto. e. Business Expenses. In accordance with Citadel's policies established from time to time, Citadel will pay or reimburse Executive for all reasonable and necessary out-of- pocket expenses incurred by him in the performance of his duties under this Agreement, subject to the presentment of appropriate vouchers. 4 5 5. Termination. a. Death of Executive. Executive's employment shall terminate immediately upon the death of Executive. b. Disability. Executive's employment shall terminate upon Executive's becoming totally permanently disabled. For purposes of this Agreement, the term "totally permanently disabled" or "total permanent disability" means Executive's inability on account of sickness or accident, whether or not job-related, to engage in regularly or to perform adequately his assigned duties under this Agreement. c. Termination for Cause. Parent may terminate Executive's employment at any time for "Cause" (as hereinafter defined) immediately upon the affirmative vote or written consent of not less than 66-2/3% of the members of the Board of Parent ("Two-Thirds Board Action"), followed by written notice to Executive. Such written notice shall set forth with reasonable specificity the basis for such termination. As used herein, the term "Cause" shall mean that Executive shall have (i) performed an act or failed to act, which if he were prosecuted and convicted for such act or failure to act, would constitute a crime or offense involving money or property of Parent, Citadel or any of their subsidiaries or would cause substantial harm to the standing or reputation of Parent, Citadel or any of their subsidiaries, (ii) engaged in fraudulent conduct with respect to the business of Parent, Citadel or any of their subsidiaries, (iii) been convicted of a felony involving dishonesty, fraud, theft or embezzlement, or (iv) used illegal drugs or other illegal substances. d. Resignation. Executive's employment shall be terminated on the earlier of (i) the date that is three (3) months following the written submission of Executive's resignation to the Board of Parent and (ii) the date such resignation is accepted by the Board of Parent. e. Sale of Company. Executive's employment shall terminate immediately and without further action on the part of any party upon (i) a liquidation or dissolution of the Parent, (ii) a sale, transfer or other disposition of all or substantially all of the assets of Citadel on a consolidated basis, or (iii) any transaction or series of transactions whereby any Person, excluding affiliates of the Company and Citadel and excluding ABRY Broadcast Partners II, L.P. or its affiliates, is or becomes the beneficial owner (as that term is used in Section 13(d) of the Securities Exchange Act) directly or indirectly of securities of Parent or Citadel representing 50% or more of the combined voting power of Parent's or Citadel's then outstanding securities. f. Termination Without Cause. Executive's employment shall terminate for any reason other than a reason set forth above in this Section 5, or for no reason, only upon Two-Thirds Board Action. 6. Compensation Upon the Termination of Executive's Employment by Citadel. a. In the event Executive's employment terminates pursuant to Section 5.a, 5.b, 5.d. or 5.e, any of Executive, Executive's beneficiary or a beneficiary designated by Executive 5 6 in writing to Citadel, or in the absence of such beneficiary, Executive's estate, shall be entitled to receive Executive's then current monthly Base Salary through the end of the month in which termination occurs. b. In the event that Executive's employment terminates pursuant to Section 5.c, then Executive shall be entitled to receive Executive's then current monthly Base Salary through the date his employment is terminated. c. In the event that Executive's employment terminates pursuant to Section 5.f, Executive shall be entitled to receive Executive's then current monthly Base Salary through the end of the then-current term of this Agreement. Executive hereby waives any claim for severance compensation except as expressly set forth in this Section 6. All payments required to be made by Citadel to Executive pursuant to this Section 6 shall be paid in the manner and at the times specified in Section 4.a hereof. 7. Covenants of Executive. a. During any period described in Section 7.b. (the "Covenant Period"), Executive covenants and agrees that Executive will not, whether directly or indirectly, with or without compensation: (1) engage in the business of radio or television broadcasting in any radio or television broadcast market in which, as of the date Executive's employment pursuant to this Agreement terminates, Parent, Citadel or a subsidiary owned, operated or sold advertising for a radio property, or in which an acquisition of a radio station or the commencement of any such operating or advertising sales arrangement by Parent, Citadel or a subsidiary was pending pursuant to an executed agreement or executed letter of intent (the "Covenant Territory"); (2) be employed by, act as a consultant to, act as a director of or own beneficially five percent (5%) or more of any class of equity or debt securities of any Person engaged in the business of radio or television broadcasting that operates any radio or television property in the Covenant Territory; provided, however, that Executive may be employed by, act as a consultant to, act as a director of or own beneficially five percent (5%) or more of any class of equity or debt securities of any such Person as long as Executive's new responsibilities do not include responsibility for or require any contact (and Executive does not have any contact) with any radio station in the Covenant Territory; (3) solicit or do any business in the Covenant Territory with respect to radio or television broadcasting with any customers of Parent, Citadel or a subsidiary who were customers of Parent, Citadel or a subsidiary as of the date Executive's employment pursuant to this Agreement terminates; 6 7 (4) solicit himself or through his affiliates or any other Person the employment or independent contracting with of any person who was an officer, employee or independent contractor of Parent, Citadel or a subsidiary as of the date of Executive's termination; or (5) interfere with any significant consulting arrangement of Parent, Citadel or any of their subsidiaries. b. For purposes of Sections 7.a.(1) and 7.a.(2), "Covenant Period" means (i) the longer of one year and the duration of the then-current term of Executive's employment pursuant to this Agreement if such employment had not terminated, if Executive's employment terminated pursuant to Section 5.c. or 5.d., or 5.f, or (ii) one year following termination of Executive's employment pursuant to Section 2(i) as of the end of the Initial Term or any one-year term described in Section 2, if the Board of Parent, by the affirmative vote or written consent of a majority of the members of the Board of Citadel, authorizes Citadel to pay, and Citadel pays, Executive's Base Salary during such one-year period at the rate paid immediately prior to the termination of such employment. For purposes of Sections 7.a.(3), 7.a.(4) and 7.a.(5), "Covenant Period" means the longer of (a) one year following the termination of Executive's employment pursuant to any provision of this Agreement other than Section 5.e., or (b) the period, if any, for which Executive is entitled to receive Base Salary payments pursuant to Section 6 of this Agreement. c. Except as expressly set forth below, Executive agrees, whether during his employment pursuant to this Agreement or thereafter, except as authorized or directed by Citadel in writing or pursuant to the normal exercise of his responsibilities hereunder, not to disclose to others, or use for his benefit or the benefit of any Person other than Parent, Citadel or any subsidiary, any information of or relating to the business, activities or facilities of Citadel which may come to his knowledge during his employment pursuant to this Agreement or thereafter if the use or disclosure of such information could damage Citadel, Parent or any subsidiary, unless; (i) the information disclosed has become part of the public domain by publication or otherwise through no fault of Executive; (ii) the information disclosed has been previously disclosed to the recipient by a third party and Executive reasonably believes such third party is in lawful possession of the knowledge or information and has the lawful right to make disclosure thereof; or (iii) Executive is required to disclose such information pursuant to applicable law or by a court of competent jurisdiction. d. The parties understand and agree that the remedies at law for breach of the covenants in this Section 7 would be inadequate and that Citadel shall be entitled to injunctive or such other equitable relief as a court may deem appropriate for any breach of these covenants. If 7 8 any of these covenants shall at any time be adjudged invalid to any extent by any court of competent jurisdiction, such covenant shall be deemed modified to the extent necessary to render it enforceable. e. Executive, Parent and Citadel acknowledge and mutually agree that (i) the covenants set forth in Section 7.a. and 7.c. are reasonable in all respects, (ii) the covenants contained herein have been made to induce Parent and Citadel to enter into this Agreement and (iii) Parent and Citadel would not have entered into this Agreement and certain of Parent's investors would not have invested in Parent but for the covenants of Executive contained herein. 8. Assignment. This Agreement shall not be assignable, in whole or in part, by either party without the written consent of the other party. 9. Miscellaneous. a. Key Man Insurance. Executive shall cooperate fully, including answering all questions and submitting to one or more physical examinations, requested by Citadel to assist Citadel in satisfying its obligations to obtain key man life insurance pursuant to a Securities Purchase and Exchange Agreement dated June 28, 1996 to which Citadel and the Company are party. b. Governing Law. This Agreement is made under and shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts of, of the State of Arizona. c. Prior Agreements. This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes all prior agreements and understanding with respect to such subject matter, and the parties hereto have made no agreements, representations or warranties relating to the subject matter of this Agreement which are not set forth herein. d. Withholding Taxes. Citadel may withhold from any amount payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. e. Amendments. No amendment or modification of this Agreement shall be deemed effective unless made in writing signed by the parties hereto. Any amendment or modification of this agreement shall be signed by a duly authorized officer of each of Citadel and Parent other than Executive. f. No Waiver. No term or condition of this Agreement shall be deemed to have been waived nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against whom enforcement of the waiver or 8 9 estoppel is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. g. Severability. To the extent any provision of this Agreement shall be invalid or unenforceable, it shall be considered deleted here from and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect. h. Counterparts. This Agreement may be executed in any number of counterparts, all such counterparts shall be deemed to constitute one and the same instrument, and each of the executed counterparts shall be deemed an original hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year set forth above. [SIGNATURES APPEAR ON FOLLOWING PAGE] 9 10 [SIGNATURE PAGE FOR EMPLOYMENT AGREEMENT] CITADEL BROADCASTING COMPANY By /s/ Donna L. Heffner ------------------------------------- Its Secretary -------------------------------- "CITADEL" CITADEL COMMUNICATIONS COMPANY By /s/ Donna L. Heffner ------------------------------------- Its Secretary -------------------------------- "PARENT" /s/ Lawrence R. Wilson ---------------------------------------- Lawrence R. WILSON "EXECUTIVE" 9 EX-10.2 16 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.2 CITADEL COMMUNICATIONS CORPORATION 1996 EQUITY INCENTIVE PLAN, AS AMENDED ARTICLE 1: PURPOSE 1.1 General. The purpose of the CITADEL COMMUNICATIONS CORPORATION 1996 EQUITY INCENTIVE PLAN (the "Plan") is to promote the interests of Citadel Communications Corporation (the "Company"), by enabling the Company to motivate, attract, and retain the services of persons upon whose judgment, efforts, and contributions the success of the Company's business depends. The plan is further intended to align the personal interests of such persons with the interests of shareholders of the Company through equity participation in the Company's growth and success. Capitalized terms not otherwise defined in the text are defined in Article 15. ARTICLE 2: EFFECTIVE DATE; TERM 2.1 Effective Date. The effective date of the Plan is June 28, 1996 (the "Effective Date"), which is the date as of which the Plan was approved by the Board of Directors and stockholders of the Company. 2.2 Term. This Plan shall terminate on the tenth (10th) anniversary of the Effective Date, subject to Article 13. ARTICLE 3: SHARES SUBJECT TO THE PLAN 3.1 Number of Shares. The aggregate number of shares of Stock reserved and available for Awards or which may be used to provide a basis of measurement or valuation of an Award (such as a Performance Unit Award) shall be Five Hundred and Thirty-Two Thousand Seven Hundred and Forty Three (532,743) (the "Shares"). 3.2 Lapsed Awards. To the extent that an Award terminates, expires or lapses for any reason, any shares of Stock subject to the Award will again be available for the grant of an Award under the Plan, in each case to the full extent available pursuant to the applicable rules and interpretations of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 3.3 Payments in Stock. Any shares of Stock tendered to or withheld by the Company in connection with payment for Stock purchased pursuant to the Plan or withholding taxes thereon shall be deducted from the aggregate number of shares reserved and available for Awards under the Plan. 2 3.4 Stock Distributed. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock, or Stock purchased on the open market. ARTICLE 4: ELIGIBILITY 4.1 General. Awards may be granted only to an individual who is an employee (including an employee who also is an officer or director), officer, director, consultant, inde pendent contractor, or adviser of the Company or a Subsidiary, as determined by the Board; provided, however, that if the Board shall appoint a Committee to administer the Plan as provided in Article 5, non-employee directors shall no longer be eligible to receive Awards hereunder. ARTICLE 5: ADMINISTRATION 5.1 Board. The Plan shall be administered by the Board or a Committee appointed by the Board to administer the Plan at any time or from time to time; provided, however, that all matters relating to Awards of current directors shall be administered by a committee appointed by the Board in accordance with that certain Amended and Restated Voting Agreement dated as of June 28, 1996 among the company and certain shareholders of the Company. If the Company has a class of equity securities registered under Section 12 of the Exchange Act, the Plan shall be administered by the Board or a Committee of the Board in accordance with Rule 16b-3, or successor legislation, under the Exchange Act. Once appointed, the Committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause), appoint new members in substitution therefor, and fill vacancies however caused; provided, however, that at no time may any person serve on the Committee if the Company has a class of equity securities registered under Section 12 of the Exchange Act and that person's membership would cause the Committee not to satisfy the "disinterested administration" requirements of Rule 16b-3 or successor legislation. 5.2 Authority of Board. The Board has the exclusive power, authority, and discretion, subject to the terms hereof, to: (a) Designate Participants; (b) Determine the type or types of Awards to be granted to each Participant; (c) Determine the number of Awards to be granted and the number of shares of Stock subject to an Award; 1996 EQUITY INCENTIVE PLAN 2 3 (d) Prescribe the form of each Award Agreement, which need not be identical for each Participant; (e) Determine the terms and conditions of any Award granted under the Plan, including but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award and accelerations or waivers thereof, and any modification or amendment of any Award previously granted, based in each case on such considerations as the Board in its sole discretion determines; (f) Determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered; (g) Decide all other matters that must be determined in connection with an Award; (h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan; (i) Interpret the Plan, any Award, and any Award Agreement in its discretion; and (j) Make all other decisions and determinations that may be required under the Plan or as the Board deems necessary or advisable to administer the Plan. 5.3 Decisions Binding. All decisions, interpretations, and determinations by the Board with respect to the Plan, any Award, and any Award Agreement are final, binding, and conclusive on all parties. ARTICLE 6: STOCK OPTIONS 6.1 General. The Board is authorized to grant Options to Participants on the following terms and conditions: (a) Exercise Price. The exercise price per share of Stock under an Option shall be determined by the Board. 1996 EQUITY INCENTIVE PLAN 3 4 (b) Payment. Payment for Stock issued upon exercise of an Option shall be made in accordance with Article 10 of the Plan. (c) Time and Conditions of Exercise. The Board shall determine the time or times at which an Option may be exercised in whole or in part, provided that, if the Company has a class of equity registered under the Exchange Act, no Option may be exercisable prior to six months following the date of the grant of such Option. The Board also shall determine the expiration date of each Option and the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised. (d) Evidence of Option. All Options shall be evidenced by a written Award Agreement between the Company and the Participant. The Award Agreement shall include such provisions as may be specified by the Board. 6.2 Incentive Stock Options. The terms of any Incentive Stock Options granted under the Plan must comply with the following additional rules: (a) Employees Only. Incentive Stock Options may only be granted to employees (including officers and directors who are also employees) of the Company or a Subsidiary. (b) Exercise Price. The exercise price per share of Stock shall be set by the Board, provided that the exercise price for any Incentive Stock Option may not be less than the Fair Market Value as of the date of the grant. (c) Exercise. In no event may any Incentive Stock Option be exercisable for more than ten years from the date of its grant. (d) Individual Dollar Limitation. The aggregate Fair Market Value (determined as of the time an Award is made) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000.00. (e) Ten Percent Owners. An Incentive Stock Option may be granted to a Ten Percent Owner, provided that at the time such option is granted the exercise price per share of Stock shall not be less than 110% of the Fair Market Value and such option by its terms is not exercisable after the expiration of five (5) years from the date of its grant. 1996 EQUITY INCENTIVE PLAN 4 5 (f) Expiration of Incentive Stock Options. No Award of an Incentive Stock Option may be made pursuant to this Plan after the expiration of ten (10) years from the Effective Date. (g) Right to Exercise. During a Participant's lifetime, an Incentive Stock Option may be exercised only by the Participant. 6.3 Termination of Participant. Notwithstanding the exercise periods set forth in any Award Agreement, Options shall be subject to the following: (a) An Option shall lapse ten years after it is granted, unless an earlier time is set in the Award Agreement. (b) If a Participant's employment is terminated due to (i) Disability, (ii) Retirement, or (iii) for any other reason, such Participant may exercise his or her Incentive Stock Options only to the extent that such Incentive Stock Options would have been exercisable on the Termination Date; provided, that such exercise is made prior to the earlier of (i) the expiration of three (3) months (six (6) months in the case of Disability) after the Termination Date or (ii) the expiration date of the Option set forth in the Award Agreement. (c) If a Participant's employment, contractual or other relationship with the Company is terminated due to (i) Disability, (ii) Retirement, or (iii) for any other reason, such Participant may exercise his or her Non-Qualified Stock Options, only to the extent that such Options would have been exercisable on the Termination Date; provided, that such exercise is made within the applicable time period for exercise as set forth in the Award Agreement. (d) If a Participant dies before his or her Options lapse pursuant to this Section, then the Participant's Options may be exercised, only to the extent that such Options would have been exercisable on the date of the Participant's death; provided that such exercise is made prior to the earlier of (i) the first anniversary of such Participant's death or (ii) the expiration date of the Option set forth in the Award Agreement. Upon the Participant's death, any exercisable Options may be exercised by the Participant's legal representative or representatives. 1996 EQUITY INCENTIVE PLAN 5 6 ARTICLE 7: PERFORMANCE UNITS 7.1 Grant of Performance Units. The Board is authorized to grant Performance Units to Participants on such terms and conditions as may be selected by the Board. The Board shall have the complete discretion to determine the number of Performance Units granted to each Participant. All Awards of Performance Units shall be evidenced by an Award Agreement. 7.2 Right Under Performance Units. A grant of Performance Units gives the Participant rights, valued as determined by the Board, and payable to, or exercisable by, the Participant to whom the Performance Units are granted, in whole or in part, as the Board shall establish at grant or thereafter. The Board shall set performance goals and other terms or conditions to payment of the Performance Units in its discretion which, depending on the extent to which they are met, will determine the amount and value of cash, Stock, Awards, and/or other property that will be paid to the Participant; provided, however, that if the Company has a class of equity registered under Section 12 of the Exchange Act, the time period during which the performance goals must be met shall, in all cases, exceed six months. 7.3 Other Terms. Performance Units may be payable in cash, Stock, or other Awards or property, or any combination thereof, and have such other terms and conditions as determined by the Board and reflected in the Award Agreement. ARTICLE 8: RESTRICTED STOCK AWARDS 8.1 Restricted Stock Awards. The Board is authorized to make Awards of Restricted Stock to Participants either in the form of a grant of Stock or an offer to sell Stock to a Participant, in such amounts and subject to such terms, conditions and restrictions as may be selected by the Board. All Awards of Restricted Stock shall be evidenced by an Award Agreement. 8.2 Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions, including without limitation "vesting" or forfeiture restrictions, as the Board may impose. These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, or otherwise, as the Board determines at the time of the grant of the Award or thereafter. 8.3 Forfeiture. Except as otherwise determined by the Board at the time of the grant of the Award or thereafter, upon termination of employment during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided, however, that the Board may provide in any Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in specified circumstances, and the Board may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock. 1996 EQUITY INCENTIVE PLAN 6 7 8.4 Payment and Certificates for Restricted Stock. If a Restricted Stock Award provides for the purchase of Stock by a Participant, payment shall be made pursuant to Article 10 of the Plan. Restricted Stock granted under the Plan may be evidenced in such manner as the Board shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company shall retain physical possession of the certificate until such time as all applicable restrictions lapse. ARTICLE 9: GRANT OF STOCK-REFERENCE AWARDS 9.1 Grant of Stock-Reference Awards. The Board is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of Stock, as deemed by the Board to be consistent with the purposes of the Plan, including without limitation shares of Stock awarded purely as a "bonus" and not subject to any restrictions or conditions, other rights convertible or exchangeable into shares of Stock, and awards valued by reference to book value of shares of Stock or the value of securities of or the performance of specified divisions or Subsidiaries of the Company. The Board shall determine the terms and conditions of such Awards. ARTICLE 10: PAYMENT FOR STOCK PURCHASES; WITHHOLDING TAXES 10.1 Payment. Payment for Stock purchased pursuant to the Plan may be made in cash (by check) or, where expressly approved for the Participant by the Board in an Award Agreement or otherwise in writing and where permitted by law: (a) by cancellation of indebtedness of the Company to the Participant; (b) by surrender of Stock that either: (1) has been owned by the Participant for more than six (6) months and has been paid for within the meaning of Rule 144 promulgated under the Securities Act; (2) was obtained by the Participant in the public market; or (3) is otherwise acceptable to the Board in its discretion; (c) by waiver of compensation due or accrued to Participant for services rendered; (d) by tender of property acceptable to the Board; 1996 EQUITY INCENTIVE PLAN 7 8 (e) with respect only to purchases upon exercise of an Option, and provided that a public market for the Company's stock then exists: (1) through a "same day sale" commitment from Participant and a broker-dealer that is a member of the National Association of Securities Dealers (a "NASD Dealer") whereby Participant irrevocably elects to exercise the Option and to sell a portion of the Stock so purchased to pay for the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of such Stock to forward the exercise price directly to the Company; (2) through a "margin" commitment from Participant and a NASD Dealer whereby Participant irrevocably elects to exercise the Option and to pledge the Stock so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of such Stock to forward the exercise price directly to the Company; or (3) through any other "cashless exercise" procedure approved by the Board; or (f) by any combination of the foregoing, or any other method of payment acceptable to the Board in its sole discretion. 10.2 Loan Guarantees. The Board may, in its discretion and consistent with its obligations to its existing lenders and all other applicable restrictions, help the Participant pay for Shares purchased under the Plan by authorizing a guarantee by the Company of a third-party loan to the Participant. 10.3 Tax Withholding. The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of this Plan. Whenever, under the Plan, payments in satisfaction of Awards are to be made in cash, such payment shall be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements. With respect to withholding required upon any taxable event relating to the issuance of Stock under the Plan, Participants may elect, subject to the Board's approval and any rules or policies adopted by the Board from time to time, to satisfy the withholding requirement, in whole or in part, by having the Company or any Subsidiary withhold shares of Stock having a Fair Market Value on the date of withholding equal to the amount to be withheld for tax 1996 EQUITY INCENTIVE PLAN 8 9 purposes. The Board may, at the time any Award is granted, require that any and all applicable tax withholding requirements be satisfied by the withholding of shares of Stock as set forth above. ARTICLE 11: PROVISIONS APPLICABLE TO AWARDS 11.1 Stand-Alone, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Board, be granted either alone or in addition to, in tandem with, or in substitution for, any other Award granted under the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards. 11.2 Exchange Provisions. The Board may at any time offer to exchange or buy out any previously granted Award for a payment in cash, Stock, or another Award, based on the terms and conditions the Board determines and communicates to the Participant at the time the offer is made. Any shares so exchanged or purchased shall be deducted from the aggregate number of shares reserved and available for Awards under the Plan. 11.3 Term of Award. The term of each Award shall be for the period as determined by the Board, provided that in no event shall the term of any Incentive Stock Option exceed a period of ten years from the date of its grant. 11.4 Form of Payment for Awards. Subject to the terms of the Plan and any applicable law or Award Agreement, payments or transfers to be made by the Company or a Subsidiary on the grant or exercise of an Award may be made in such forms as the Board determines at or after the time of grant, including without limitation, cash, Stock, other Awards, or other property, or any combination, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case determined in accordance with rules adopted by, and at the discretion of, the Board. 11.5 Limits on Transfer. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. Except as otherwise provided below, no Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order as defined in Section 414(p)(1)(A) of the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. In the Award Agreement for any Award other than an Award that includes an Incentive Stock Option, the Board may allow a Participant to assign or otherwise transfer all or a portion of the rights represented by the Award to specified individuals or classes of individuals, or to a trust benefitting such individuals or classes of individuals, subject to such restrictions, limitations, or conditions as the Board deems appropriate. At the discretion of the Board, the Company may reserve to itself or its assignees in 1996 EQUITY INCENTIVE PLAN 9 10 any Award (a) a right of first refusal to purchase any Stock which a Participant may propose to transfer to a third party and/or (b) a right to repurchase any and all Stock held by a Participant upon the Participant's termination of employment or other relationship with the Company or its Parent or Subsidiary for any reason, including Death or Disability, at a price for such Stock as determined by the Board. 11.6 Lock-up Agreement. In addition to any other restrictions on transfer, a Participant shall not, without the prior written consent of the Board and any underwriters in their discretion, offer or sell any Stock acquired pursuant to the Plan for at least one hundred eighty (180) days after the closing of the initial public offering of securities of the Company registered under the Securities Act of 1993. 11.7 Stock Certificates. All Stock certificates delivered under the Plan are subject to any stop-transfer orders and other restrictions as the Board deems necessary or advisable to comply with federal or state securities laws, rules, and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Board may place legends on any Stock certificate to reference restrictions applicable to the Stock. ARTICLE 12: CHANGES IN CAPITAL STRUCTURE; LIQUIDATION; DISSOLUTION 12.1 General. In the event a stock dividend, stock-split or reverse stock split is declared after the Effective Date upon the Stock, the shares of Stock then subject to each Award and the number of shares which have been authorized for issuance under the Plan but for which no Awards have yet been granted, shall be increased or decreased proportionately without any change in the aggregate purchase price therefor. In the event that after the Effective Date the Stock shall be changed into or exchanged for a different number or class of shares of Stock, without receipt of material consideration, whether through reorganization, recapitalization, stock split-up, combination of shares, merger, consolidation, or any other increase or decrease in the number issued shares of common stock effected without consideration (provided, that conversion of any convertible securities shall not be deemed to have been "effected without receipt of consideration") there shall be substituted for each such share of Stock then subject to each Award and each share of Stock issuable under the Plan the number and class of shares of Stock into which each outstanding share of Stock shall be so exchanged, all without any change in the aggregate purchase price for the shares then subject to each Award. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof, shall be made with respect to the number or price of Awards hereunder. 1996 EQUITY INCENTIVE PLAN 10 11 ARTICLE 13: AMENDMENT, MODIFICATION, AND TERMINATION 13.1 Amendment, Modification, and Termination. With the approval of the Board, at any time and from time to time, the Board may terminate, amend, or modify the Plan. However, without approval of the shareholders of the Company (if required in accordance with the Code, the Exchange Act, the rules and regulations thereunder or other applicable law and rules), no such termination, amendment, or modification may: (a) Increase the total number of shares of Stock that may be issued under the Plan, except as provided in Section 12.1; (b) Materially modify the eligibility requirements for participation in the Plan; or (c) Materially increase the benefits accruing to Participants under the Plan. Any such termination, amendment, or modification shall comply with such other requirements as may be required by the Code, by the rules under Section 16 of the Exchange Act, by any national securities exchange or system on which the Stock is listed or reported, or by a regulatory body having jurisdiction. 13.2 Awards Previously Granted. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant. ARTICLE 14: GENERAL PROVISIONS 14.1 No Rights to Awards. No Participant or employee shall have any claim to be granted any Award under the Plan, and neither the Company nor the Board is obligated to treat Participants and employees uniformly. 14.2 No Stockholders Rights. No Award gives the Participant any of the rights of a shareholder of the Company unless and until shares of Stock are in fact issued to such person in connection with such Award. 14.3 No Right to Employment. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant's employment or other relationship with the Company at any time, nor confer upon any Participant any right to continue in the employment or any other relationship of the Company or any Subsidiary. 1996 EQUITY INCENTIVE PLAN 11 12 14.4 Unfunded Status of Awards. The Plan is intended to be an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary. 14.5 Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary. 14.6 Expenses. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries. 14.7 Titles and Headings. The titles and headings of the Articles and Sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. 14.8 Fractional Shares. No fractional shares of stock shall be issued and the Board shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up. 14.9 Securities Law Compliance. With respect to any person who is, on the relevant date, obligated to file reports under Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or any Award Agreement or any action by the Board fails to so comply, it shall be void to the extent permitted by law and voidable as deemed advisable by the Board. 14.10 Government and Other Regulations. The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register under the Securities Act, any of the shares of Stock paid under the Plan. If the shares of Stock paid under the Plan may in certain circumstances be exempt from registration under the Securities Act, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption. 14.11 Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the internal laws, and not the laws of conflicts, of the State of Arizona. 1996 EQUITY INCENTIVE PLAN 12 13 ARTICLE 15: DEFINITIONS 15.1 Definitions. The following words and phrases shall have the following meanings for purposes of this Plan: (a) "Award" means any Option, Restricted Stock Award, Performance Unit, Stock-Reference Award or any other right or interest relating to Stock, cash or property, granted to a Participant under the Plan. (b) "Award Agreement" means any written agreement, contract, or other instrument or document evidencing an Award. (c) "Board" means the Board of Directors of the Company or, if the context so requires, a Committee thereof appointed pursuant to Article 5. (d) "Cause" means (i) conviction of any crime (other than a misdemeanor offense not involving fraud or moral turpitude), (ii) noncompliance with reasonable directives of the Board or its designees, (iii) violation of Company rules, policies or procedures or of the Plan or any applicable Award Agreement. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (f) "Committee" means the committee of the Board described in Article 5. (g) "Disability" means the following: A Participant shall be disabled if he or she is unable to perform the duties of his or her customary position of employment by reason of any medically determinable physical or mental impairment which can be expected to result in death or which can be expected to last for a continuous period of not less than 12 months. The Board may require such medical or other evidence as it deems necessary to judge the nature and permanency of the Participant's condition. (h) "Fair Market Value" with respect to Stock shall be the mean between the bid and asked quotations for the Stock on that date as reported by the Nasdaq National Market System or, if there are no bid or asked quotations on such date, the mean between the bid and asked quotations on the next preceding date for which quotations are available. If the Stock is subsequently listed and traded upon a recognized securities exchange or shall be quoted on a recognized national market system, the Fair Market Value shall be the closing 1996 EQUITY INCENTIVE PLAN 13 14 price on such date or, if no closing price is so reported for that date, the closing price on the next preceding date for which a closing price was reported. If at any time the Stock is not listed upon a recognized securities exchange, or with respect to any other property, Fair Market Value shall be the fair market value of such Stock or other property determined by the Board in good faith using such methods or procedures as may be established from time to time by the Board in its discretion. (i) "Incentive Stock Option" means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto. (j) "Non-Qualified Stock Option" means an Option that is not intended to be an Incentive Stock Option. (k) "Option" means a right granted to a Participant under Article 6 of the Plan to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option. (l) "Participant" means a person who, as an officer, employee, consultant, independent contractor, or adviser of the Company or any Subsidiary, has been granted an Award under the Plan. (m) "Performance Unit" means a right granted to a Participant under Article 7 to receive cash, Stock, or other Awards. (n) "Plan" means the Citadel Communications Corporation 1996 Equity Incentive Plan, as amended from time to time. (o) "Restricted Stock Award" means Stock granted to a Participant or offered for sale to a Participant under Article 8. (p) "Retirement" means a Participant's termination of employment with the Company after attaining any normal or early retirement age specified in any pension, profit sharing, or other retirement program sponsored by the Company, if any. (q) "Securities Act" means the Securities Act of 1933, as amended. 1996 EQUITY INCENTIVE PLAN 14 15 (r) "Stock" means Class A Stock ($.001 par value) of the Company and such other securities of the Company that may be substituted for Stock pursuant to Article 12. (s) "Stock-Reference Award" means a right, granted to a Participant under Article 9. (t) "Subsidiary" means any corporation of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. (u) "Ten Percent Owner" means any individual who, at the date of grant of an Incentive Stock Option, owns stock possessing more than ten percent of the total combined voting power of all classes of Stock of the Company or a Subsidiary. For purposes of determining such percentage, the following rules shall apply: (1) the individual with respect to whom such percentage is being determined shall be considered as owning the Stock owned, directly or indirectly, by or for his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants; and (2) Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. (v) "Termination Date" means the date on which the employment (or other service or relationship in the case of a Participant who is not an employee of the Company) of a Participant terminates for any reason or no reason. 1996 EQUITY INCENTIVE PLAN 15 EX-10.3 17 CITADEL BROADCASTING CO. S-4 1 EXHIBIT 10.3 CITADEL COMMUNICATIONS CORPORATION NONQUALIFIED STOCK OPTION AGREEMENT This Option Agreement is made and entered into by and between CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation (the "Company") and Lawrence R. Wilson ("Wilson") as of June 28, 1996. WHEREAS, in October of 1993, the Company's Board of Directors (the "Board") granted Wilson annual performance stock options for the years 1993 to 1997 for the annual purchase 17,187 shares of the Company's Class A Common Stock (the "Stock") per year at the Purchase Price (as that term is defined in Section 2 below) for each year in which he receives a Performance Bonus (as that term is defined in that certain Employment Agreement of even date herewith between Citadel Broadcasting Company, a Nevada corporation, and Wilson); WHEREAS, because Wilson received a Performance Bonus during the calendar years 1993 and 1994 he is entitled to options to purchase 17,187 shares of the Stock for each year, for a total of 34,374 shares (the "Vested Options"); WHEREAS, during the calendar year 1995 Wilson did not receive a Performance Bonus; and WHEREAS, the Company and Wilson now wish to document the terms and conditions of the Company's grant of all performance stock options to Wilson, including the Vested Options and any options Wilson might earn during the calendar years 1996 and 1997; THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth and for good and valuable consideration, the Company and Wilson agree as follows: 1. Grant of Option. a. Vested Options. The Company acknowledges that Wilson has a vested right to purchase a total of 34,374 shares of the Stock at the Purchase Price based on his Performance Bonuses during 1993 and 1994. b. Future Options. For the calendar years 1996 and 1997, the Company grants to Wilson the right and option to purchase 17,187 shares of Stock per year at the Purchase Price for each year in which he receives a Performance Bonus (the "Future Options," and together with the Vested Options, the "Options" or "Option"). 2. Purchase Price. The price at which Wilson shall be entitled to purchase the Stock covered by the Options shall be $2.9091 per share (the "Purchase Price"). 3. Exercise of Option. The Vested Options may be exercised by Wilson as of the date hereof. The Future Options vest, if earned, as of January 1, 1997 for the Options based on the 2 Company's performance during 1996 and January 1, 1998 for the Options based on the Company's performance during 1997 (the "Vesting Dates"), but such options shall not be exercisable until the Company has determined, based on its internal accounting records, that a Performance Bonus was earned for each preceding calendar year. Such determination shall be made by the Company as soon as practical after the end of each calendar year. The Options may be exercised from time to time, as to all or any part of the shares covered hereby, by delivery to the Company of written notice of exercise and payment of the Purchase Price. 4. Method of Exercising Option. Subject to the terms and conditions of this Agreement, the Options may be exercised by timely delivery to the Company of a written notice, which notice shall be effective on the date received by the Company. The written notice shall state Wilson's election to exercise the Options, the number of shares in respect of which an election to exercise has been made, the method of payment elected, the exact name or names in which the shares will be registered and Wilson's Social Security number. Such notice shall be signed by Wilson and shall be accompanied by payment of the purchase price of such shares. In the event the Options shall be exercised by a person or persons other than Wilson pursuant to Section 6 hereof, such notice shall be signed by such other person or persons and shall be accompanied by proof acceptable to the Company of the legal right of such person or persons to exercise the Options. All shares delivered by the Company upon exercise of the Options as provided herein shall be fully paid and nonassessable upon delivery. 5. Method of Payment for Options. Upon the exercise of all or any part of an Option, the Purchase Price shall be payable in full by check, or, in the event the Company is at the time of exercise a reporting Company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in shares of Stock owned by Wilson to the extent permitted by law, or in any combination thereof at the election of Wilson. Payment of the Purchase Price with shares of Stock owned by Wilson, to the extent permitted under this Agreement, shall be made by assigning and delivering such shares to the Company. The shares shall be valued at Fair Market Value on the exercise date of the Option. For purposes of this Agreement, the "Fair Market Value" of the Stock as of any date shall be the average of the closing bid and asked prices for the Stock as reported on the Nasdaq National Market System (or on any national securities exchange on which the Stock is then listed) for the date or, if no prices are so reported for that date, such prices on the next preceding date for which closing bid and asked prices were reported. If at any time the Stock is not listed on any national securities exchange, the Fair Market Value shall be the fair market value determined by the Board in good faith and in its reasonable discretion using such methods or procedures as may be established from time to time by the Board in its reasonable discretion. To the extent permitted under this Agreement, if Wilson elects to pay for all or part of the shares purchased upon the exercise of the Option in Stock, a share certificate or certificates, together with a duly executed stock power authorizing the transfer of such shares to the Company, shall be delivered to the Company with the notice of exercise. Should the number of such shares delivered for credit against the purchase price have a Fair Market Value less than the full purchase price, Wilson shall pay the difference between the Fair Market Value of the Stock to be conveyed to the 2 3 Company and the full purchase price by check. Should the share certificate delivered be for a number of shares in excess of that number to be conveyed to the Company for credit against the full purchase price, the Company will issue to Wilson a new share certificate representing the number of shares in excess of the nearest whole number of shares having a Fair Market Value not in excess of the amount required to pay the full purchase price. No fractional shares shall be accepted in payment or be reissued by the Company under this provision. 6. Death of Wilson. In the event of the death of Wilson, the Option shall lapse unless it is exercised within one hundred eighty days (180) days after the date of Wilson's death by Wilson's legal representative or representatives or by the person or persons entitled to do so under Wilson's last will and testament or if Wilson fails to make a testamentary disposition of such Option or shall die intestate, by the person or persons entitled to receive such Option under the applicable laws of descent and distribution. The Company shall have the right to require evidence satisfactory to it of the rights of any person or persons seeking to exercise the Option under this Section 6 to exercise the Option. 7. Nontransferability. The Options granted by this Agreement shall be exercisable, except as provided in Section 6 above, only by Wilson during his lifetime. No Option granted by this Agreement shall be transferable by Wilson other than by will or pursuant to applicable laws of descent and distribution. The Options, and any rights and privileges in connection therewith, shall not be transferred, assigned, pledged or hypothecated by Wilson, or by any other person or persons, in any way, whether by operation of law, or otherwise, and shall not be subject to execution, attachment, garnishment or similar process. In the event of such an occurrence, the Options shall automatically be terminated and shall thereafter be null and void. 8. Adjustments in Number of Shares and Purchase Price. In the event a stock dividend is declared upon the Stock, the remaining shares of Stock then subject to Options under this Agreement shall be adjusted proportionately without any change in the aggregate purchase price therefor. In the event the Stock shall be changed into or exchanged for a different number or class of shares of stock of the Company or of another corporation, whether through reorganization, recapitalization, stock split, combination of shares, merger or consolidation, there shall be substituted for each such remaining share of Stock then subject to Options granted under this Agreement the number and class of shares of stock into which each outstanding share of Stock shall be so exchanged, all without any change in the aggregate purchase price for the shares then subject to Options granted under this Agreement. 9. Delivery of Shares. No shares of Stock shall be delivered upon exercise of the Options unless and until (i) the purchase price shall have been paid in full in the manner herein provided; (ii) applicable taxes required to be withheld have been paid or withheld in full; (iii) approval of any governmental authority required in connection with the Options, or the issuance of shares thereunder, has been received by the Company; (iv) Wilson has complied with all terms and conditions of this Agreement; and (v) if required by the Committee, Wilson has delivered to the 3 4 Committee an Investment Letter in form and content satisfactory to the Company as provided for in Section 10 hereof. 10. Securities Act. The Company shall have the right, but not the obligation, to cause the shares of Stock issuable upon exercise of the Options to be registered under the appropriate rules and regulations of the Securities and Exchange Commission. The Company shall not be required to deliver any shares of Stock pursuant to the exercise of all or any part of the Options if, in the opinion of counsel for the Company, such issuance would violate the Securities Act of 1933, as amended (the "Securities Act"), or any other applicable federal or state securities laws or regulations. The Company may require that Wilson, prior to the issuance of any such shares pursuant to exercise of the Options, sign and deliver to the Company a written statement ("Investment Letter") stating (i) that Wilson is acquiring the shares for investment and not with a view to the sale or distribution thereof; (ii) that Wilson will not sell any shares received upon exercise of the Options or any other shares of the Company that Wilson may then own or thereafter acquire except either (a) through a broker on a national securities exchange or (b) with the prior written approval of the Company; and (iii) containing such other terms and conditions as counsel for the Company may reasonably require to assure compliance with the Securities Act or other applicable federal or state securities laws and regulations. Such Investment Letter shall be in form and content acceptable to the Committee in its sole discretion. If shares of Stock or other securities issuable pursuant to the exercise of the Options have not been registered under the Securities Act of 1933 or other applicable federal or state securities laws or regulations, the certificates representing such shares shall bear a legend restricting the transferability thereof, such legend to be substantially in the following form: The Securities evidenced by this certificate have not been registered under the Securities Act of 1993, as amended (the "Act"), or qualified under any applicable state securities laws. They have been acquired for investment and not with a view to distribution thereof within the meaning of the Act and regulations thereunder. They may not be sold or otherwise transferred unless (a) there is an effective registration statement under such Act and applicable state securities laws covering such transaction involving said securities or (b) this Corporation receives an opinion of legal counsel for the holder of these securities (concurred in by legal counsel for this Corporation) stating that such transaction is exempt from registration or this Corporation otherwise satisfies itself that such transaction is exempt from resolution. Any such shares of Stock shall also bear the restrictive legends, in substantially the same form, that are contained in: (a) that certain Second Amended and Restated Stockholders Agreement among the Company, Wilson, and certain other stockholders; and (b) that certain Amended and Restated Voting Agreement among the Company, Wilson, and certain other stockholders. 4 5 11. Federal and State Taxes. Upon exercise of the Options, or any part thereof, Wilson may incur certain liabilities for federal, state or local taxes and the Company may be required by law to withhold such taxes for payment to taxing authorities. Upon determination by the Company of the amount of taxes required to be withheld, if any, with respect to the shares to be issued pursuant to the exercise of the Options, Wilson shall pay to the Company by check by authorizing the Company to withhold from monies owing by the Company to Wilson an amount equal to the amount of any taxes which the Company is required to withhold with respect to such Stock. In the event the Company becomes a reporting Company under the Exchange Act, Wilson may pay taxes with shares of Stock owned by Wilson. Payment of taxes with shares of Stock owned by Wilson shall be made by assigning and delivering such shares to the Company. Such shares shall be valued at Fair Market Value on the business day coinciding with or immediately preceding the date on which such shares are assigned or delivered. Except as otherwise provided by law, any taxes which are required to be withheld with respect to an exercised Option may also be paid by Wilson directing the Company to withhold from the shares of Stock that would otherwise be issued pursuant to the Option, that number of shares having a Fair Market Value on the date the Option is exercised (the "Applicable Date") equal to the taxes due. In the event of such an election, Wilson shall notify the Company in writing of his intent to do so and shall receive the number of shares of Stock determined pursuant to the following formula: Number Number of Shares Fair Market Value _ Taxes of = Subject to Award X on Applicable Date Due Shares ----------------------------------------------------------------- Fair Market Value on Applicable Date Authorization of Wilson to the Company to withhold taxes pursuant to this Section 11 shall be in form and content acceptable to the Company. Payment or authorization to withhold taxes by Wilson shall be completed prior to the delivery of any shares pursuant to this Agreement. An authorization to withhold taxes pursuant to this provision shall be irrevocable unless and until the tax liability of Wilson has been fully paid. 12. Administration. This Agreement shall in all respects be administered by the Committee. The Committee shall have the sole and complete discretion with respect to all matters under this Agreement and decisions of the majority of the Committee with respect to this Agreement shall be final and binding upon Wilson and the Company. 13. Continuation of Employment. This Agreement shall not be construed to confer upon Wilson any right to continue in the employ of the Company or its subsidiaries and shall not limit any right of the Company to terminate the employment of Wilson. Wilson shall not be entitled to any Future Option based on performance during the year in which his employment terminates for any reason or for no reason. Except as provided in Section 7, however, termination shall not affect Wilson's entitlement to any Options that were exercisable pursuant to Section 3 prior to his termination. 5 6 14. Obligation to Exercise. Wilson shall have no obligation to exercise any Option granted by this Agreement. 15. Governing Law. This Agreement shall be interpreted and administered under the internal laws, and not the laws of conflicts, of the State of Arizona. 16. Amendment and Termination. Except as otherwise provided in this Agreement, this Agreement may be amended or terminated only by a written agreement executed by the Company and Wilson. Any amendment or modification of this agreement shall be signed by a duly authorized officer of the Company other than Wilson. 17. Counterparts. This Agreement may be executed in any number of counterparts, all such counterparts shall be deemed to constitute one and the same instrument, and each of the executed counterparts shall be deemed an original hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year set forth above. [SIGNATURES APPEAR ON FOLLOWING PAGE] 6 7 [SIGNATURE PAGE FOR CITADEL COMMUNICATIONS CORPORATION NONQUALIFIED STOCK OPTION AGREEMENT] CITADEL COMMUNICATIONS CORPORATION By /s/ Donna L. Heffner --------------------- Its Secretary ----------------- /s/ Lawrence R. Wilson ---------------------- LAWRENCE R. WILSON The undersigned, as spouse of Lawrence R. Wilson, hereby confirms that the community property of Lawrence R. Wilson and the undersigned is subject to and bound by the agreement set forth above. /s/ Claire Wilson - -------------------- CLAIRE WILSON 7 EX-10.4 18 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.4 FORM OF CITADEL COMMUNICATIONS CORPORATION NONQUALIFIED STOCK OPTION AGREEMENT This Option Agreement is made and entered into by and between CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation ("Company") and ________________________ ("Employee"), effective as of the 21st day of December, 1994. The Company has elected to provide an incentive to encourage key employees and officers of the Company and its wholly-owned subsidiaries to remain in the employment of such companies and to enhance the ability of the Company and its subsidiaries to attract new employees whose services are considered unusually valuable by providing an opportunity to have a proprietary interest in the success of the Company. The Company believes that the granting of the Option herein described to Employee is consistent with the foregoing goals. The Company and Employee desire to enter into an Agreement reflecting the terms and conditions of the Option granted to Employee. NOW, THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth and for other good and valuable consideration, the Company and Employee agree as follows: 1. Grant of Option. The Company hereby grants to Employee the right and option (the "Option") to purchase an aggregate of __________ shares (such number being subject to adjustment as provided in Paragraph 10 hereof) of the Class A Common Stock of the Company (the "Stock") on the terms and conditions herein set forth. This Option may be exercised in whole or in part and from time to time as hereinafter provided. 2. Purchase Price. The price at which Employee shall be entitled to purchase the Stock covered by the Option shall be $5.37 per share. 3. Term of Option. The Option hereby granted shall remain in force and effect for a period of ten (10) years from December 21, 1994 (the "Date of Grant"), through and including the normal close of business of the Company on December 21, 2004 (the "Expiration Date"), subject to earlier termination as provided in Paragraphs 7, 8, 9, 10 and 18 hereof. 4. Exercise of Option. The Option may be exercised by Employee with respect to the shares specified below beginning on the dates specified below and ending on the Expiration Date as to all or any part of the shares covered hereby by delivery to the Company of written notice of exercise and payment of the purchase price, and by execution of a Stock Transfer Agreement in the form attached hereto as Exhibit A (or in such similar form as the Company may hereafter require), as provided in Paragraphs 5 and 6 hereof. The Option shall vest and become exercisable as of the dates specified below: 2 (i) December 21, 1995, with respect to one-fifth (1/5) of the shares of the Stock subject to the Option; (ii) December 21, 1996, with respect to one-fifth (1/5) of the shares of Stock subject to the Option; (iii) December 21, 1997, with respect to one-fifth (1/5) of the shares of the Stock subject to the Option; (iv) December 21, 1998, with respect to one-fifth (1/5) of the shares of the Stock subject to the Option; (v) December 21, 1999, with respect to the remaining one-fifth (1/5) of the shares of the Stock subject to the Option. The Option shall cease to be exercisable as to any share when Employee exercises the Option and purchases the share or when the Option lapses as provided in Paragraph 3. In the event of a public tender for all or any portion of the Stock of the Company, or in the event that a proposal to merge, consolidate, or otherwise combine with another company is submitted for shareholder approval, the Committee (as defined in Paragraph 14) may in its sole discretion declare the Option immediately exercisable even if the original date for the exercise of the Option, as set forth in the first paragraph of this Paragraph 4, has not yet passed. 5. Method of Exercising Option. Subject to the terms and conditions of this Option Agreement, the Option may be exercised by timely delivery to the Company of (i) written notice, which notice shall be effective on the date received by the Company (the "Effective Date"), and (ii) execution and delivery by Employee (or another permitted person or persons other than Employee pursuant to Paragraph 8 hereof) to Company, contemporaneously with the written notice described in the next sentence, of a Stock Transfer Restriction Agreement in the form attached hereto as Exhibit A (or in such similar form as the Company may hereafter require). The written notice pursuant to subparagraph (i) of this Paragraph shall state Employee's election to exercise the Option, the number of shares in respect of which an election to exercise has been made, the method of payment elected, the exact name or names in which the shares will be registered and Employee's Social Security number. Such notice shall be signed by Employee and shall be accompanied by payment of the purchase price of such shares. In the event the Option shall be exercised by a person or persons other than Employee pursuant to Paragraph 8 hereof, such notice shall be signed by such other person or persons and shall be accompanied by proof acceptable to the Company of the legal right of such person or persons to exercise the Option. All shares delivered by the Company upon exercise of the Option as provided herein shall be fully paid and nonassessable upon delivery. -2- 3 6. Method of Payment for Options. Upon the exercise of all or any part of an Option, the option price shall be payable in full by check, or, in the event the Company is at the time of exercise a reporting Company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in shares of Stock owned by Employee to the extent permitted by law, or in any combination thereof at the election of Employee. Payment of the option price with shares of Stock owned by Employee, to the extent permitted under this Agreement, shall be made by assigning and delivering such shares to the Company. The shares shall be valued at Fair Market Value on the exercise date of the Option. For purposes of this Agreement, the "Fair Market Value" of the Stock as of any date shall be the average of the closing bid and asked prices for the Stock as reported on the NASDAQ National Market System (or on any national securities exchange on which the Stock is then listed) for the date or, if no prices are so reported for that date, such prices on the next preceding date for which closing bid and asked prices were reported. In the event the Company becomes a reporting Company under the Exchange Act, Employee may also pay on the option price, to the extent permitted by applicable law, and subject to the approval of the Committee to the extent required by Rule 16b-3(e)(2)(ii) of the Exchange Act, by directing the Company to withhold from the shares of Stock that would otherwise be issued upon exercise of the Option that number of shares having a Fair Market Value on the exercise date equal to the option price. If Employee elects to exercise all or any part of his or her Option by directing the Company to withhold shares subject to the exercised Option, Employee must notify the Company in writing of his or her intent to do so. In such case, the number of shares of Stock received by Employee shall be determined pursuant to the following formula: Number of Shares Fair Market Value - Purchase Number = as to which the on Exercise Date Price of Shares Option is to be ------------------------------ Received Exercised X Fair Market Value on Exercise Date
To the extent permitted under this Agreement, if Employee elects to pay for all or part of the shares purchased upon the exercise of the Option in Stock, a share certificate or certificates, together with a duly executed stock power authorizing the transfer of such shares of the Company, shall be delivered to the Company with the notice of exercise. Should the number of such shares delivered for credit against the purchase price have a Fair Market Value less than the full purchase price, the Company will issue to Employee a new share certificate representing the number of shares in excess of the nearest whole number of shares having a Fair Market Value not in excess of the amount required to pay the full purchase price. No fractional shares shall be accepted in payment or be reissued by the Company under this provision. 7. Termination of Employee. In the event that the employment of Employee is terminated, either by Employee or by Company, for any reason other than death of Employee, including a termination with or without cause, any unexercised Option shall -3- 4 lapse and terminate on the effective date of the Employee's termination unless the Committee elects, in its sole and absolute discretion, to allow the Employee to exercise it for a period of 90 days following his termination. In no event shall the Option, or any part thereof, be exercisable after the Expiration Date. 8. Death of Employee. In the event of the death of Employee within a period during which the Option, or any part thereof, could have been exercised by Employee (the "Option Period"), the Option shall lapse unless it is exercised within the Option Period, and in no event later than ninety (90) days after the date of Employee's death, by Employee's legal representative or representatives or by the person or persons entitled to do so under Employee's last will and testament or if Employee fails to make a testamentary disposition of such Option or shall die intestate, by the person or persons entitled to receive such Option under the applicable laws of descent and distribution. An Option may be exercised following the death of Employee only if the Option was exercisable by Employee immediately prior to his death. In no event shall the Option, or any part thereof, be exercisable after the Expiration Date. The Company shall have the right to require evidence satisfactory to it of the rights of any person or persons seeking to exercise the Option under this Paragraph 8 to exercise the Option. 9. Nontransferability. The Option granted by this Agreement shall be exercisable only during the term of the Option provided in Paragraph 3 hereof and, except as provided in Paragraphs 7 and 8 above, only by Employee during his lifetime and while an employee of the Company. No Option granted by this Agreement shall be transferable by Employee other than by will or pursuant to applicable laws of descent and distribution. The Option, and any rights and privileges in connection therewith, shall not be transferred, assigned, pledged or hypothecated by Employee, or by any other person or persons, in any way, whether by operation of law, or otherwise, and shall not be subject to execution, attachment, garnishment or similar process. In the event of such an occurrence, the Option shall automatically be terminated and shall thereafter be null and void. 10. Adjustment in Number of Shares and Option Price. In the event a stock dividend is declared upon the Stock, the remaining shares of Stock then subject to this Option shall be adjusted proportionately without any change in the aggregate purchase price therefor. In the event the Stock shall be changed into or exchanged for a different number or class of shares of stock of the Company or of another corporation, whether through reorganization, recapitalization, stock split, combination of shares, merger or consolidation, there shall be substituted for each such remaining share of Stock then subject to this Option the number and class of shares of stock into which each outstanding share of Stock shall be so exchanged, all without any change in the aggregate purchase price for the shares then subject to the Option. Subject to any required action by the stockholders, if the Company shall be the surviving or resulting corporation in any merger or consolidation, the Option granted hereunder shall pertain to and apply to the securities or rights to which a holder of the -4- 5 number of shares of Stock subject to the Option would have been entitled; but a dissolution or liquidation of the Company, or a merger or consolidation in which the Company is not the surviving or resulting corporation, shall, in the sole discretion of the Committee: (a) Cause the Option outstanding hereunder to terminate as of the date specified by the Committee, except that the surviving or resulting corporation, in its absolute and uncontrolled discretion, may tender an option to purchase its shares or exercise such rights on terms and conditions, as to the number of shares and rights and otherwise, which shall substantially preserve the rights and benefits of the Option then outstanding hereunder; or (b) Give Employee the right to exercise this Option prior to the occurrence of the event otherwise terminating the Option over such period as the Committee, in its sole and absolute discretion, shall determine. 11. Delivery of Shares. No shares of Stock shall be delivered upon exercise of the Option unless and until (i) the purchase price shall have been paid in full in the manner herein provided; (ii) applicable taxes required to be withheld have been paid or withheld in full; (iii) approval of any governmental authority required in connection with the Option, or the issuance of shares thereunder; has been received by the Company; (iv) Employee has complied with all terms and conditions of this Agreement; and (v) if required by the Committee, Employee has delivered to the Committee an Investment Letter in form and content satisfactory to the Company as provided in Paragraph 12 hereof. 12. Securities Act. The Company shall have the right, but not the obligation, to cause the shares of Stock issuable upon exercise of the Option to be registered under the appropriate rules and regulations of the Securities and Exchange Commission. The Company shall not be required to deliver any shares of Stock pursuant to the exercise of all or any part of the Option if, in the opinion of counsel for the Company, such issuance would violate the Securities Act of 1933, as amended (the "Securities Act") or any other applicable federal or state securities laws or regulations. The Company may require that Employee, prior to the issuance of any such shares pursuant to exercise of the Option, sign and deliver to the Company a written statement ("Investment Letter") stating (i) that Employee is acquiring the shares for investment and not with a view to the sale or distribution thereof; (ii) that Employee will not sell any shares received upon exercise of the Option or any other shares of the Company that Employee may then own or thereafter acquire except either (a) through a broker on a national securities exchange or (b) with the prior written approval of the Company; and (iii) containing such other terms and conditions as counsel for the Company may reasonably require to assure compliance with the Securities Act or other applicable federal or state securities laws and regulations. Such Investment Letter shall be in form and content acceptable to the Committee in its sole discretion. -5- 6 If shares of Stock or other securities issuable pursuant to the exercise of the Option have not been registered under the Securities of 1933 or other applicable federal or state securities laws or regulations, the certificates representing such shares shall bear a legend restricting the transferability thereof, such legend to be substantially in the following form: The Securities evidenced by this certificate have not been registered under the Securities Act of 1933 (the "Act") or qualified under any applicable state securities laws. They have been acquired for investment and not with a view to distribution thereof within the meaning of the Act and regulations thereunder. They may not be sold or otherwise transferred unless (a) there is an effective registration statement under such Act and applicable state securities laws covering such transaction involving said securities or (b) this Corporation receives an opinion of legal counsel for the holder of these securities (concurred in by legal counsel for this Corporation) stating that such transaction is exempt from registration or this Corporation otherwise satisfies itself that such transaction is exempt from resolution. The sale, transfer, assignment or encumbrance of the shares represented by this certificate is restricted by the provisions of that certain Agreement dated December 21, 1994 and a Stock Transfer Restriction Agreement dated December ___, 1994. The Corporation will mail to any shareholder a copy of such Agreement within five days after receipt of written request therefor. 13. Federal and State Taxes. Upon exercise of the Option, or any part thereof, Employee may incur certain liabilities for federal, state or local taxes and the Company may be required by law to withhold such taxes for payment to taxing authorities. Upon determination by the Company of the amount of taxes required to be withheld, if any, with respect to the shares to be issued pursuant to the exercise of the Option, Employee shall pay to the Company by check by authorizing the Company to withhold from monies owing by the Company to Employee or in shares of Stock owned by Employee an amount equal to the amount of any taxes which the Company is required to withhold with respect to such Stock. In the event the Company becomes a reporting Company under the Exchange Act, Employee may pay taxes with shares of stock owned by Employee. Payment of taxes with shares of Stock owned by Employee shall be made by assigning and delivering such shares to the Company. Such shares shall be valued at Fair Market Value on the business day coinciding with or immediately preceding the date on which such shares are assigned or -6- 7 delivered. Except as otherwise provided by law, any taxes which are required to be withheld with respect to an exercised Option may also be paid by Employee directing the Company to withhold from the shares of Stock that would otherwise be issued pursuant to the Option, that number of shares having a Fair Market Value on the date the Option is exercised (the "Applicable Date") equal to the taxes due. In the event of such an election, Employee shall notify the Company in writing of his intent to do so and shall receive the number of shares of Stock determined pursuant to the following formula. Number Number of Fair Market Value - Taxes of Shares Subject X on Applicable Date Due Shares to Award ------------------------------------- Fair Market Value on Applicable Date
Authorization of Employee to the Company to withhold taxes pursuant to this Paragraph 13 shall be in form and content acceptable to the Company. Payment or authorization to withhold taxes by Employee shall be completed prior to the delivery of any shares pursuant to this Option Agreement. An authorization to withhold taxes pursuant to this provision shall be irrevocable unless and until the tax liability of Employee has been fully paid. 14. Administration. This Agreement shall in all respects be administered by the Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee shall have the sole and complete discretion with respect to all matters under this Agreement and decisions of the majority of the Committee with respect to this Agreement shall be final and binding upon Employee and the Company. 15. Continuation of Employment. This Agreement shall not be construed to confer upon Employee any right to continue in the employ of the Company and shall not limit the right of the Company, in its sole discretion, to terminate the employment of Employee at any time. 16. Obligation to Exercise. Employee shall have no obligation to exercise any option granted by this Agreement. 17. Governing Law. This Agreement shall be interpreted and administered under the laws of the State of Nevada. 18. Amendment and Termination. Except as otherwise provided in this Agreement, this Agreement may be amended or terminated only by a written agreement executed by the Company and Employee. The Company may amend or terminate this Agreement without the written consent of Employee to the extent necessary to comply with applicable federal or state securities or other laws. -7- 8 IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officers thereunto duly authorized, and Employee has hereunto set his (her) hand as of the day and year first above written. CITADEL COMMUNICATIONS CORPORATION By: _________________________________ Its: _________________________________ __________________________________ -8- EX-10.5 19 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.5 FORM OF CITADEL COMMUNICATIONS CORPORATION NONQUALIFIED STOCK OPTION AGREEMENT This Option Agreement is made and entered into by and between CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation ("Company") and ________________________ ("Employee"), effective as of the 21st day of February, 1994. The Company has elected to provide an incentive to encourage key employees and officers of the Company and its wholly-owned subsidiaries to remain in the employment of such companies and to enhance the ability of the Company and its subsidiaries to attract new employees whose services are considered unusually valuable by providing an opportunity to have a proprietary interest in the success of the Company. The Company believes that the granting of the Option herein described to Employee is consistent with the foregoing goals. The Company and Employee desire to enter into an Agreement reflecting the terms and conditions of the Option granted to Employee. NOW, THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth and for other good and valuable consideration, the Company and Employee agree as follows: 1. Grant of Option. The Company hereby grants to Employee the right and option (the "Option") to purchase an aggregate of __________ shares (such number being subject to adjustment as provided in Paragraph 10 hereof) of the Class A Common Stock of the Company (the "Stock") on the terms and conditions herein set forth. This Option may be exercised in whole or in part and from time to time as hereinafter provided. 2. Purchase Price. The price at which Employee shall be entitled to purchase the Stock covered by the Option shall be $11.6363 per share. 3. Term of Option. The Option hereby granted shall remain in force and effect for a period of ten (10) years from February 21, 1994 (the "Date of Grant"), through and including the normal close of business of the Company on February 21, 2004 (the "Expiration Date"), subject to earlier termination as provided in Paragraphs 7, 8, 9, 10 and 18 hereof. 4. Exercise of Option. The Option may be exercised by Employee with respect to the shares specified below beginning on the dates specified below and ending on the Expiration Date as to all or any part of the shares covered hereby by delivery to the Company of written notice of exercise and payment of the purchase price, and by execution of a Stock Transfer Agreement in the form attached hereto as Exhibit A (or in such similar form as the Company may hereafter require), as provided in Paragraphs 5 and 6 hereof. The Option shall vest and become exercisable as of the dates specified below: 2 (i) February 21, 1995, with respect to one-fifth (1/5) of the shares of the Stock subject to the Option; (ii) February 21, 1996, with respect to one-fifth (1/5) of the shares of Stock subject to the Option; (iii) February 21, 1997, with respect to one-fifth (1/5) of the shares of the Stock subject to the Option; (iv) February 21, 1998, with respect to one-fifth (1/5) of the shares of the Stock subject to the Option; (v) February 21, 1999, with respect to the remaining one-fifth (1/5) of the shares of the Stock subject to the Option. The Option shall cease to be exercisable as to any share when Employee exercises the Option and purchases the share or when the Option lapses as provided in Paragraph 3. In the event of a public tender for all or any portion of the Stock of the Company, or in the event that a proposal to merge, consolidate, or otherwise combine with another company is submitted for shareholder approval, the Committee (as defined in Paragraph 14) may in its sole discretion declare the Option immediately exercisable even if the original date for the exercise of the Option, as set forth in the first paragraph of this Paragraph 4, has not yet passed. 5. Method of Exercising Option. Subject to the terms and conditions of this Option Agreement, the Option may be exercised by timely delivery to the Company of (i) written notice, which notice shall be effective on the date received by the Company (the "Effective Date"), and (ii) execution and delivery by Employee (or another permitted person or persons other than Employee pursuant to Paragraph 8 hereof) to Company, contemporaneously with the written notice described in the next sentence, of a Stock Transfer Restriction Agreement in the form attached hereto as Exhibit A (or in such similar form as the Company may hereafter require). The written notice pursuant to subparagraph (i) of this Paragraph shall state Employee's election to exercise the Option, the number of shares in respect of which an election to exercise has been made, the method of payment elected, the exact name or names in which the shares will be registered and Employee's Social Security number. Such notice shall be signed by Employee and shall be accompanied by payment of the purchase price of such shares. In the event the Option shall be exercised by a person or persons other than Employee pursuant to Paragraph 8 hereof, such notice shall be signed by such other person or persons and shall be accompanied by proof acceptable to the Company of the legal right of such person or persons to exercise the Option. All shares delivered by the Company upon exercise of the Option as provided herein shall be fully paid and nonassessable upon delivery. -2- 3 6. Method of Payment for Options. Upon the exercise of all or any part of an Option, the option price shall be payable in full by check, or, in the event the Company is at the time of exercise a reporting Company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in shares of Stock owned by Employee to the extent permitted by law, or in any combination thereof at the election of Employee. Payment of the option price with shares of Stock owned by Employee, to the extent permitted under this Agreement, shall be made by assigning and delivering such shares to the Company. The shares shall be valued at Fair Market Value on the exercise date of the Option. For purposes of this Agreement, the "Fair Market Value" of the Stock as of any date shall be the average of the closing bid and asked prices for the Stock as reported on the NASDAQ National Market System (or on any national securities exchange on which the Stock is then listed) for the date or, if no prices are so reported for that date, such prices on the next preceding date for which closing bid and asked prices were reported. In the event the Company becomes a reporting Company under the Exchange Act, Employee may also pay on the option price, to the extent permitted by applicable law, and subject to the approval of the Committee to the extent required by Rule 16b-3(e)(2)(ii) of the Exchange Act, by directing the Company to withhold from the shares of Stock that would otherwise be issued upon exercise of the Option that number of shares having a Fair Market Value on the exercise date equal to the option price. If Employee elects to exercise all or any part of his or her Option by directing the Company to withhold shares subject to the exercised Option, Employee must notify the Company in writing of his or her intent to do so. In such case, the number of shares of Stock received by Employee shall be determined pursuant to the following formula: Number of Shares Fair Market Value - Purchase Number = as to which the on Exercise Date Price of Shares Option is to be ------------------------------------ Received Exercised X Fair Market Value on Exercise Date
To the extent permitted under this Agreement, if Employee elects to pay for all or part of the shares purchased upon the exercise of the Option in Stock, a share certificate or certificates, together with a duly executed stock power authorizing the transfer of such shares of the Company, shall be delivered to the Company with the notice of exercise. Should the number of such shares delivered for credit against the purchase price have a Fair Market Value less than the full purchase price, the Company will issue to Employee a new share certificate representing the number of shares in excess of the nearest whole number of shares having a Fair Market Value not in excess of the amount required to pay the full purchase price. No fractional shares shall be accepted in payment or be reissued by the Company under this provision. 7. Termination of Employee. In the event that the employment of Employee is terminated, either by Employee or by Company, for any reason other than death of Employee, including a termination with or without cause, any unexercised Option shall -3- 4 lapse and terminate on the effective date of the Employee's termination unless the Committee elects, in its sole and absolute discretion, to allow the Employee to exercise it for a period of 90 days following his termination. In no event shall the Option, or any part thereof, be exercisable after the Expiration Date. 8. Death of Employee. In the event of the death of Employee within a period during which the Option, or any part thereof, could have been exercised by Employee (the "Option Period"), the Option shall lapse unless it is exercised within the Option Period, and in no event later than ninety (90) days after the date of Employee's death, by Employee's legal representative or representatives or by the person or persons entitled to do so under Employee's last will and testament or if Employee fails to make a testamentary disposition of such Option or shall die intestate, by the person or persons entitled to receive such Option under the applicable laws of descent and distribution. An Option may be exercised following the death of Employee only if the Option was exercisable by Employee immediately prior to his death. In no event shall the Option, or any part thereof, be exercisable after the Expiration Date. The Company shall have the right to require evidence satisfactory to it of the rights of any person or persons seeking to exercise the Option under this Paragraph 8 to exercise the Option. 9. Nontransferability. The Option granted by this Agreement shall be exercisable only during the term of the Option provided in Paragraph 3 hereof and, except as provided in Paragraphs 7 and 8 above, only by Employee during his lifetime and while an employee of the Company. No Option granted by this Agreement shall be transferable by Employee other than by will or pursuant to applicable laws of descent and distribution. The Option, and any rights and privileges in connection therewith, shall not be transferred, assigned, pledged or hypothecated by Employee, or by any other person or persons, in any way, whether by operation of law, or otherwise, and shall not be subject to execution, attachment, garnishment or similar process. In the event of such an occurrence, the Option shall automatically be terminated and shall thereafter be null and void. 10. Adjustment in Number of Shares and Option Price. In the event a stock dividend is declared upon the Stock, the remaining shares of Stock then subject to this Option shall be adjusted proportionately without any change in the aggregate purchase price therefor. In the event the Stock shall be changed into or exchanged for a different number or class of shares of stock of the Company or of another corporation, whether through reorganization, recapitalization, stock split, combination of shares, merger or consolidation, there shall be substituted for each such remaining share of Stock then subject to this Option the number and class of shares of stock into which each outstanding share of Stock shall be so exchanged, all without any change in the aggregate purchase price for the shares then subject to the Option. Subject to any required action by the stockholders, if the Company shall be the surviving or resulting corporation in any merger or consolidation, the Option granted hereunder shall pertain to and apply to the securities or rights to which a holder of the -4- 5 number of shares of Stock subject to the Option would have been entitled; but a dissolution or liquidation of the Company, or a merger or consolidation in which the Company is not the surviving or resulting corporation, shall, in the sole discretion of the Committee: (a) Cause the Option outstanding hereunder to terminate as of the date specified by the Committee, except that the surviving or resulting corporation, in its absolute and uncontrolled discretion, may tender an option to purchase its shares or exercise such rights on terms and conditions, as to the number of shares and rights and otherwise, which shall substantially preserve the rights and benefits of the Option then outstanding hereunder; or (b) Give Employee the right to exercise this Option prior to the occurrence of the event otherwise terminating the Option over such period as the Committee, in its sole and absolute discretion, shall determine. 11. Delivery of Shares. No shares of Stock shall be delivered upon exercise of the Option unless and until (i) the purchase price shall have been paid in full in the manner herein provided; (ii) applicable taxes required to be withheld have been paid or withheld in full; (iii) approval of any governmental authority required in connection with the Option, or the issuance of shares thereunder; has been received by the Company; (iv) Employee has complied with all terms and conditions of this Agreement; and (v) if required by the Committee, Employee has delivered to the Committee an Investment Letter in form and content satisfactory to the Company as provided in Paragraph 12 hereof. 12. Securities Act. The Company shall have the right, but not the obligation, to cause the shares of Stock issuable upon exercise of the Option to be registered under the appropriate rules and regulations of the Securities and Exchange Commission. The Company shall not be required to deliver any shares of Stock pursuant to the exercise of all or any part of the Option if, in the opinion of counsel for the Company, such issuance would violate the Securities Act of 1933, as amended (the "Securities Act") or any other applicable federal or state securities laws or regulations. The Company may require that Employee, prior to the issuance of any such shares pursuant to exercise of the Option, sign and deliver to the Company a written statement ("Investment Letter") stating (i) that Employee is acquiring the shares for investment and not with a view to the sale or distribution thereof; (ii) that Employee will not sell any shares received upon exercise of the Option or any other shares of the Company that Employee may then own or thereafter acquire except either (a) through a broker on a national securities exchange or (b) with the prior written approval of the Company; and (iii) containing such other terms and conditions as counsel for the Company may reasonably require to assure compliance with the Securities Act or other applicable federal or state securities laws and regulations. Such Investment Letter shall be in form and content acceptable to the Committee in its sole discretion. -5- 6 If shares of Stock or other securities issuable pursuant to the exercise of the Option have not been registered under the Securities of 1933 or other applicable federal or state securities laws or regulations, the certificates representing such shares shall bear a legend restricting the transferability thereof, such legend to be substantially in the following form: The Securities evidenced by this certificate have not been registered under the Securities Act of 1933 (the "Act") or qualified under any applicable state securities laws. They have been acquired for investment and not with a view to distribution thereof within the meaning of the Act and regulations thereunder. They may not be sold or otherwise transferred unless (a) there is an effective registration statement under such Act and applicable state securities laws covering such transaction involving said securities or (b) this Corporation receives an opinion of legal counsel for the holder of these securities (concurred in by legal counsel for this Corporation) stating that such transaction is exempt from registration or this Corporation otherwise satisfies itself that such transaction is exempt from resolution. The sale, transfer, assignment or encumbrance of the shares represented by this certificate is restricted by the provisions of that certain Agreement dated February 21, 1994 and a Stock Transfer Restriction Agreement dated December ___, 1994. The Corporation will mail to any shareholder a copy of such Agreement within five days after receipt of written request therefor. 13. Federal and State Taxes. Upon exercise of the Option, or any part thereof, Employee may incur certain liabilities for federal, state or local taxes and the Company may be required by law to withhold such taxes for payment to taxing authorities. Upon determination by the Company of the amount of taxes required to be withheld, if any, with respect to the shares to be issued pursuant to the exercise of the Option, Employee shall pay to the Company by check by authorizing the Company to withhold from monies owing by the Company to Employee or in shares of Stock owned by Employee an amount equal to the amount of any taxes which the Company is required to withhold with respect to such Stock. In the event the Company becomes a reporting Company under the Exchange Act, Employee may pay taxes with shares of stock owned by Employee. Payment of taxes with shares of Stock owned by Employee shall be made by assigning and delivering such shares to the Company. Such shares shall be valued at Fair Market Value on the business day coinciding with or immediately preceding the date on which such shares are assigned or -6- 7 delivered. Except as otherwise provided by law, any taxes which are required to be withheld with respect to an exercised Option may also be paid by Employee directing the Company to withhold from the shares of Stock that would otherwise be issued pursuant to the Option, that number of shares having a Fair Market Value on the date the Option is exercised (the "Applicable Date") equal to the taxes due. In the event of such an election, Employee shall notify the Company in writing of his intent to do so and shall receive the number of shares of Stock determined pursuant to the following formula. Number Number of Fair Market Value - Taxes of Shares Subject X on Applicable Date Due Shares to Award ------------------------------------- Fair Market Value on Applicable Date
Authorization of Employee to the Company to withhold taxes pursuant to this Paragraph 13 shall be in form and content acceptable to the Company. Payment or authorization to withhold taxes by Employee shall be completed prior to the delivery of any shares pursuant to this Option Agreement. An authorization to withhold taxes pursuant to this provision shall be irrevocable unless and until the tax liability of Employee has been fully paid. 14. Administration. This Agreement shall in all respects be administered by the Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee shall have the sole and complete discretion with respect to all matters under this Agreement and decisions of the majority of the Committee with respect to this Agreement shall be final and binding upon Employee and the Company. 15. Continuation of Employment. This Agreement shall not be construed to confer upon Employee any right to continue in the employ of the Company and shall not limit the right of the Company, in its sole discretion, to terminate the employment of Employee at any time. 16. Obligation to Exercise. Employee shall have no obligation to exercise any option granted by this Agreement. 17. Governing Law. This Agreement shall be interpreted and administered under the laws of the State of Nevada. 18. Amendment and Termination. Except as otherwise provided in this Agreement, this Agreement may be amended or terminated only by a written agreement executed by the Company and Employee. The Company may amend or terminate this Agreement without the written consent of Employee to the extent necessary to comply with applicable federal or state securities or other laws. -7- 8 IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officers thereunto duly authorized, and Employee has hereunto set his (her) hand as of the day and year first above written. CITADEL COMMUNICATIONS CORPORATION By: __________________________________ Its: __________________________________ __________________________________ -8- EX-10.6 20 CITADEL BROADCASTING CO. S-4 1 EXHIBIT 10.6 EXECUTION COPY JOINT SALES AGREEMENT between POURTALES RADIO PARTNERSHIP; POURTALES HOLDINGS, INC.; SPRINGS RADIO, INC.; KVUU/KSSS, INC.; AND CITADEL BROADCASTING COMPANY December 15, 1995 2 TABLE OF CONTENTS
PAGE 1. Certain Definitions.................................................1 Additional Station..............................................1 Additional Station Acquisition..................................2 Change of Control...............................................2 Citadel Colorado Springs Stations...............................2 Citadel Spokane Stations........................................2 Citadel Stations................................................2 Collection Period...............................................2 Colorado Springs Market.........................................2 Commencement Date...............................................2 Delinquent Accounts.............................................2 FCC.............................................................2 FCC Laws........................................................2 Foreclosure.....................................................2 Independent Third Party.........................................3 Initial Term....................................................3 JSA Fee.........................................................3 Lender..........................................................3 Liquidation.....................................................3 Permitted Designee..............................................3 Person..........................................................3 Pourtales Colorado Springs Station..............................3 Pourtales Existing Accounts Receivable..........................3 Pourtales Future Accounts Receivable............................3 Pourtales Spokane Stations......................................3 Pourtales Stations..............................................4 Reorganizing Transaction........................................4 Sale of a Station...............................................4 Spokane Market..................................................4 Station.........................................................4 Station Collateral..............................................4 Term............................................................4 Termination Date................................................4 Trade Agreements................................................4 Trade Expenses..................................................4 Trade Imbalance.................................................5 Trade Liabilities...............................................5 Trade Receivables...............................................5 Trade Revenue...................................................5 Trade Schedule..................................................5 Triathlon Agreement.............................................5 2. Exclusive Right to Sell Advertising.................................5 3. Term................................................................5 4. Certain Matters Relating to Citadel Sales Functions.................6
i 3 5. Traffic; Invoicing..................................................7 6. Trade...............................................................8 7. Accounts Receivable.................................................9 8. JSA Fee............................................................10 9. Termination........................................................11 10. Acquisitions and Transfers.........................................12 11. Representations and Warranties.....................................14 12. Additional Covenants of the Parties................................15 13. Triathlon Agreement Consummation...................................16 14. Relationship of Parties............................................17 15. General Provisions.................................................18
ii 4 JOINT SALES AGREEMENT This Joint Sales Agreement (the "Agreement") is made and entered into as of the 15th day of December, 1995, by and between Pourtales Radio Partnership, a Colorado partnership ("Pourtales"); Pourtales Holdings, Inc., a Colorado corporation ("PHI"); Springs Radio, Inc., a Colorado corporation ("SRI") and KVUU/KSSS, Inc., a Colorado corporation ("KKI"), on the one hand; and Citadel Broadcasting Company, a Nevada corporation ("Citadel"), on the other hand, with agreement by Triathlon Broadcasting Company, a Delaware corporation ("Triathlon"), for purposes of Section 13. Pourtales, PHI, SRI and KKI and sometimes referred to herein collectively as the "Pourtales Entities," and individually as a "Pourtales Entity." PREAMBLE Citadel is the licensee of the Citadel Stations (as such term is defined below). Pourtales is the licensee of the Pourtales Spokane Stations (as such term is defined below), SRI is the licensee of radio stations KVOR-AM and KSPZ-FM, each licensed to Colorado Springs, Colorado and KKI is the licensee of radio stations KTWK-AM and KUVV-FM, each licensed to Colorado Springs, Colorado. PHI owns all of the outstanding capital stock of SRI. The Pourtales Entities and Citadel desire to enter into an arrangement whereby Citadel will provide certain sales and services to Pourtales with respect to the Pourtales Stations (as such term is defined below), and the parties are entering into this Agreement for that purpose. The Pourtales Entities and Triathlon intend to enter into an Amended and Restated Purchase and Sale Agreement dated as of August 12, 1995, which will be amended and restated after the date hereof, under which Triathlon will agree to purchase, among others, all of the Pourtales Stations. The parties to this Agreement intend that if Triathlon becomes the licensee of any of the Pourtales Stations, Triathlon will, with respect to such radio stations, be entitled to the benefits and be subject to the obligations of the Pourtales Entities under this Agreement as and to the same extent as if Triathlon were an original party hereto in place of the Pourtales Entities. Therefore, for and in consideration of the foregoing and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings ascribed to them below: "Additional Station" means a radio station acquired, programmed or marketed by a party pursuant to an Additional Station Acquisition. 5 "Additional Station Acquisition" means the purchase of, or the entering into of an agreement to program or market, a radio station, directly or indirectly, by a party to this Agreement, which radio station is licensed to either the Colorado Springs Market or the Spokane Market; provided, however, that the purchase of any of the Pourtales Stations by Triathlon pursuant to the Triathlon Agreement shall not be deemed an Additional Station Acquisition. "Change of Control" with respect to a party to this Agreement means (a) the sale of such party to an Independent Third Party or group of Independent Third Parties pursuant to which the Independent Third Party or group of Independent Third Parties acquires capital stock of such party possessing the voting power under normal circumstances to elect a majority of such party's board of directors (whether by merger, consolidation or sale or transfer of such party's capital stock) or (b) the sale or other transfer of all or substantially all of such party's assets determined on a consolidated basis; provided, however, that a Change of Control shall not be deemed to occur with respect to any of the Pourtales Entities solely by reason of the purchase of any of the Pourtales Stations by Triathlon pursuant to the Triathlon Agreement. "Citadel Colorado Springs Stations" means radio stations KKFM-FM and KKMG-FM, each licensed to Citadel. "Citadel Spokane Stations" means radio stations KGA-AM, KJRB-AM, KDRK-FM and KEZE-FM (application pending to change call sign to KAEP-FM), each licensed to Citadel. "Citadel Stations" means the Citadel Colorado Springs Stations and the Citadel Spokane Stations. "Collection Period" has the meaning provided in Section 7(a). "Colorado Springs Market" means the Arbitron Metro Survey Area that includes Colorado Springs, Colorado, as published by The Arbitron Company from time to time. "Commencement Date" means January 1, 1996. "Delinquent Accounts" has the meaning provided in Section 7(b). "FCC" means the Federal Communications Commission. "FCC Laws" has the meaning provided in Section 9(d). "Foreclosure" means and includes a foreclosure by a lender on its security interest, an assignment of collateral to a 2 6 lender in lieu of foreclosure, or any other realization on collateral by a lender. "Independent Third Party" with respect to any party to this Agreement means any Person who, immediately prior to the contemplated transaction, does not own (assuming the conversion, exchange or exercise of all outstanding options, warrants, convertible securities and similar rights held by such Person, regardless of whether currently exercisable) in excess of 5% of the common stock on a fully diluted basis of such party (a "5% Owner"), who is not controlling, controlled by or under common control with any such 5% Owner and who is not the spouse or descendant (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or any of such other Persons. "Initial Term" has the meaning provided in Section 3. "JSA Fee" has the meaning provided in Section 8. "Lender" means any Person holding a security interest in or to any of the Station Collateral. "Liquidation" of a party to this Agreement means the dissolution of such party in accordance with applicable law and the liquidation of such party's assets following dissolution. "Permitted Designee" has the meaning provided in Section 10(d). "Person" means an individual, a partnership, a corporation, an association, a limited liability company, a joint stock company, a trust, a joint venture, an unincorporated organization or governmental entity or any department, agency or political subdivision thereof. "Pourtales Colorado Springs Stations" means radio stations KTWK-AM, KVOR-AM, KVUU-FM and KSPZ-FM, each licensed to Pourtales Entities as set forth in the Preamble. "Pourtales Existing Accounts Receivable" means the accounts receivable, other than Trade Receivables, of the Pourtales Stations existing as of the Commencement Date. "Pourtales Future Accounts Receivable" means the accounts receivable, other than Trade Receivables, of the Pourtales Stations, and all other revenue from the sale of advertising time on any of the Pourtales Stations, arising from and after the Commencement Date. "Pourtales Spokane Stations" means radio stations KEYF-AM/FM, KUDY-AM and KKZX-FM, each licensed to Pourtales. 3 7 "Pourtales Stations" means the Pourtales Colorado Springs Stations and the Pourtales Spokane Stations. "Reorganizing Transaction" with respect to a party to this Agreement means any assignment, sale or other transfer by such party to any Person other than an Independent Third Party (a) of capital stock of such party possessing the voting power under normal circumstances to elect a majority of such party's board of directors (whether by merger, consolidation or sale or transfer of directors (whether by merger, consolidation or sale or transfer of such party's capital stock) or (b) of all or substantially all of such party's assets determined on a consolidated basis; provided, however, that a Reorganizing Transaction shall not be deemed to occur by reason of the distribution of assets of any party pursuant to the Liquidation of such party, or (c) with respect to which the parties to the transaction would be entitled to obtain required FCC approval pursuant to a "pro forma" transfer or assignment application (FCC Form 316). "Sale of a Station" means and includes (a) the sale of, or the entering into of an agreement with another Person to program, a Station by any party to this Agreement, other than (i) pursuant to a Change of Control, (ii) a Foreclosure or (iii) a sale of any of the Pourtales Stations to Triathlon pursuant to the Triathlon Agreement, and (b) the distribution or other transfer of any Station pursuant to the Liquidation of a party. "Spokane Market" means the Arbitration Metro Survey Area that includes Spokane, Washington, as published by The Arbitron Company from time to time. "Station" means one of the Citadel Stations or the Pourtales Stations, as required by the context. "Station Collateral" has the meaning provided in Section 10(b). "Term" has the meaning provided in Section 3. "Termination Date" has the meaning provided in Section 9(c). "Trade Agreements" of a radio station means all barter agreements, arrangements, commitments or understandings, whether written or oral, requiring the licensee of such radio station to provide advertising time on such radio station. "Trade Expenses" of a radio station means expenses of such radio station which have been paid through the use of goods or services received by such radio station pursuant to a Trade Agreement. 4 8 "Trade Imbalance" of a radio station means, at any point in time, the amount by which the Trade Receivables of the radio station exceed the amount of its Trade Liabilities. "Trade Liabilities" of a radio station means the unperformed obligation of the radio station to run advertising time pursuant to one or more Trade Agreements, valued in accordance with the historical practices of the radio station. "Trade Receivables" of a radio station means the value of the goods and services received or to be received but not yet used by the radio station in exchange for advertising that has been or is required to be run on the radio station pursuant to a Trade Agreement, which value is determined in accordance with historical practices of the radio station. "Trade Revenue" of a radio station means revenue of the radio station received pursuant to a Trade Agreement. "Trade Schedule" has the meaning provided in Section 6(a). "Triathlon Agreement" means that certain Amended and Restated Purchase and Sale Agreement dated as of August 12, 1995 among Triathlon and the Pourtales Entities to be entered into by such parties. 2. Exclusive Right to Sell Advertising. The Pourtales Entities hereby grant Citadel the exclusive right to sell advertising on their respective Pourtales Stations, as sales agent for the Pourtales Entities, during the Term to local, regional or national advertisers pursuant to the terms and conditions set forth herein. Citadel agrees at all times during the Term to exercise the same efforts it historically has exercised for the Citadel Stations to sell advertising on the Pourtales Stations to local, regional and national advertisers. The Pourtales Entities agree to exercise reasonable efforts at all times during the Term to program and promote their respective Pourtales Stations so as to enhance their ratings. 3. Term. The term of this Agreement (the "Initial Term") shall commence on the Commencement Date and, unless sooner terminated or extended in accordance with any of the remaining provisions of this Agreement, shall expire on December 31, 2000. The Initial Term may be extended for up to two additional consecutive five year terms by Citadel or the Pourtales Entities upon written notice to the other prior to expiration of the then existing term. Such extension or consent thereto by any of the Pourtales Entities shall bind all of the Pourtales Entities. The Initial Term, as so extended, if applicable, is referred to herein as the "Term." Notwithstanding any provision contained in this Agreement to the contrary, either Citadel or the Pourtales Entities may, upon written notice to the other parties hereto, terminate 5 9 this Agreement prior to the Commencement Date, in which event none of the parties hereto shall have any further liability or obligation to any other party, unless, prior to such date, (a) Citadel has approved the Triathlon Agreement as contemplated by Section 13(b) and (b) each of the parties hereto has obtained the consent of their lender as contemplated by Section 10(c). Such a termination by any of the Pourtales Entities shall be deemed a termination by all of the Pourtales Entities. 4. Certain Matters Relating to Citadel Sales Functions. (a) Citadel shall have the right to offer advertising spots on the Pourtales Stations to advertisers individually and in combination with advertising on any or all of the Citadel Stations. (b) The Pourtales Entities shall prepare a rate card for their respective Pourtales Stations presenting the rates of each such Station for all classes of time and day-parts it makes available to advertisers and provide such rate cards to Citadel. Citadel shall be entitled to rely on the rates contained on such rate cards in offering to sell advertising on the Pourtales Stations. When offering the rates of any of the Pourtales Stations in combination with any or all of the Citadel Stations, Citadel may offer a discount of not more than 25% from the stated rates. The Pourtales Entities shall have the right to change the rates listed on their respective rate cards, but shall promptly provide written notice of all such changes to Citadel. Such rate changes shall be effective only after Citadel has received written notice thereof. The Pourtales Entities agree to honor all advertising arranged by Citadel that is based on rates in effect prior to any changes for 30 days following the date such rate change becomes effective. (c) In offering to sell advertising on any of the Pourtales Stations, Citadel shall have the right, in its sole discretion, to determine the particular spot packages that shall be offered to advertisers and to decide on a case-by-case basis whether to offer a particular spot packages that shall be offered to advertisers and to decide on a case-by-case basis whether to offer a particular potential advertiser the opportunity to purchase time on any of the Pourtales Stations in combination with any of the Citadel Stations; provided, however, that the parties agree that all advertisers offered the opportunity to purchase spots in combination will also be provided the opportunity to purchase time on the Pourtales Stations individually. Upon request of any of the Pourtales Entities, Citadel shall provide the requesting party with information concerning the packages Citadel is offering or has offered for sale to any advertisers. The Pourtales Entities agree to provide Citadel with any information in their possession with respect to the programming, demographics and ratings of the Pourtales Stations to assist Citadel in its efforts to solicit advertising sales. (d) All advertising placed on the Pourtales Stations by Citadel shall be governed by this Agreement. Citadel 6 10 shall be permitted to solicit advertising for the Pourtales Stations directly from current clients of and agencies customarily dealing with the Pourtales Stations. Citadel shall have full authority to handle all advertising sales for such accounts unless the advertiser or agency with which Citadel is dealing subsequently instructs Citadel that accounts must be handled by one of the Pourtales Entities. (e) Citadel and the Pourtales Entities agree that any advertising offer to any candidates for political office to air on the Pourtales Stations will be handled in strict accordance with the Communications Act of 1934, as amended, and the rules and regulations of the FCC, and will be supported by documentation as required by the FCC and the Pourtales Entities. Citadel shall promptly provide all required related documentation to the Pourtales Entities for inclusion in their respective public inspection files at the Pourtales Stations. The parties acknowledge that although the appropriate Pourtales Entities, under applicable FCC laws, have sole authority and responsibility to assure that all candidate advertising on their respective Pourtales Stations complies with FCC rules and regulations, it shall be Citadel's responsibility to conduct itself at all times in a manner that will permit the Pourtales Entities to be and remain in compliance with such rules and regulations. (f) During the term of this Agreement, Citadel shall maintain books and records relating to its activities hereunder in accordance with commercially reasonable practices, and afford any of the Pourtales Entities or Triathlon, at their sole cost and expense and at a mutually convenient time, the right to review and inspect such books and records; provided, that such inspection shall be conducted in a manner that does not disrupt the normal business operations of the Stations. 5. Traffic; Invoicing. (a) Citadel shall perform all traffic functions for the Pourtales Stations. All orders sold by Citadel shall be run unless the relevant Pourtales Entity has previously sold out all of the inventory of the relevant Pourtales Stations for a day-part that is included in a particular advertising buy; provided, however, that each Pourtales Entity shall at all times have the right to reject any advertising spot containing matter which, in its sole opinion, is unsatisfactory, unsuitable, contrary to the public interest or violative of any federal, state or local law, including, without limitation, the rules and regulations of the FCC. (b) Citadel shall be responsible for sending in a timely manner invoices and billing statements to clients and agencies for all advertising run on the Pourtales Stations, and copies of all invoices shall be provided to the Pourtales Entities along with weekly pacing reports, monthly account summaries and 7 11 other billing information reasonably requested by the Pourtales Entities. (c) Citadel shall use commercially reasonable efforts to ensure that advertisers and agencies pay the Pourtales Entities separately from Citadel for advertising purchased to air on the Pourtales Stations, whether such advertising is carried independently on the Pourtales Stations or in combination with one or more Citadel Stations. Citadel shall collect and hold such payments, as agent for the Pourtales Entities, pursuant to Section 7(b). (d) Citadel will ensure that the Pourtales Stations receive individual tapes and traffic orders from all advertisers on their respective Stations, including providing copies of such tapes and orders from other Stations that may be involved in combination buys in the event that the Station's copies do not arrive on schedule. The Pourtales Entities and Citadel shall keep each other informed as to the status of all production materials for advertising sold by Citadel to air on the Pourtales Stations. 6. Trade. (a) The Pourtales Entities shall exercise reasonable efforts between the date hereof and the Commencement Date to eliminate any Trade Imbalance existing at any of the Pourtales Stations. On or before the Commencement Date, the Pourtales Entities shall deliver to Citadel a schedule (the "Trade Schedule"), certified by the chief financial officer of the appropriate Pourtales Entities as true and correct, setting forth, as of the Commencement Date, (i) a description of each of the Trade Agreements then in effect with respect to each of the Pourtales Stations, (ii) the Trade Receivables of each of the Pourtales Stations and (iii) the Trade Liabilities of each of the Pourtales Stations. The Trade Liabilities set forth on the Trade Schedule shall be run in accordance with the terms of the applicable Trade Agreement set forth on the Trade Schedule. Citadel shall be entitled to all the Trade Receivables of the Pourtales Stations existing as of the Commencement Date for use in satisfying its obligations under this Agreement and otherwise operating the Citadel Stations. (b) Citadel may in its discretion enter into Trade Agreements during the Term which require advertising time to be run on the Pourtales Stations; provided, however, that Citadel shall obtain the prior written approval of the Pourtales Entities before entering into any Trade Agreements that will result in Trade Receivables that will not be used by Citadel for the sole purpose of satisfying its obligations under this Agreement or otherwise operating the Citadel Stations. Trade Liabilities resulting from such Trade Agreements shall be run on the Pourtales Stations, as appropriate, in accordance with the terms of the applicable Trade Agreements. Citadel shall be entitled to all of the resulting 8 12 Trade Receivables for use in satisfying its obligations under this Agreement and otherwise operating the Citadel Stations. 7. Accounts Receivable. (a) On or before the Commencement Date, the Pourtales Entities shall deliver to Citadel a list of the Pourtales Existing Accounts Receivable. Citadel, for a period of 120 days commencing with the Commencement Date (the "Collection Period", as agent for the Pourtales Entities, shall collect the Pourtales Existing Accounts Receivable in accordance with Citadel's normal collection processes and procedures. In no event shall Citadel be required to institute litigation or to retain third parties to institute litigation or to retain third parties to institute collection procedures with respect to the Pourtales Existing Accounts Receivable. All remittances will be applied first to the oldest Pourtales Existing Accounts Receivable. One-half of the remittances on the Pourtales Existing Accounts Receivable collected by Citadel on behalf of the Pourtales Entities shall be remitted to the appropriate Pourtales Entities on or before the expiration of each 15-day period during the Collection Period, and the balance of all remittances on Pourtales Existing Accounts Receivable collected by Citadel on behalf of the Pourtales during the Collection Period shall be remitted to the appropriate Pourtales Entities within five days after termination of the Collection Period. Citadel shall be under no obligation to segregate any remittances prior to their payment to the Pourtales Entities, and Citadel may commingle and otherwise use such funds in its sole discretion. During the Collection Period, at the option of the Pourtales Entities, the Pourtales Entities shall be permitted to collect their respective Pourtales Existing Accounts Receivable that remain outstanding after 60 days, or are disputed in writing by the relevant account debtor. Each remittance by Citadel to the Pourtales Entities shall be accompanied by a written report by Citadel setting forth the aggregate amount of the Pourtales Existing Accounts Receivable during the period for which payment is made, along with a breakdown by account debtor. At the end of the Collection Period, Citadel shall account for all collected Pourtales Existing Accounts Receivable and provide the Pourtales Entities with all documentation relating to their respective uncollected Pourtales Existing Accounts Receivable. Citadel shall have no obligation with respect to Pourtales Existing Accounts Receivable that it is unable to collect. After the end of the Collection Period, the Pourtales Entities shall be entitled to collect any of their respective Pourtales Existing Accounts Receivable that remain uncollected. (b) The Pourtales Entities hereby grant Citadel the exclusive right, as agent for the Pourtales Entities, to collect the Pourtales Future Accounts Receivable. Citadel shall make such collections in accordance with Citadel's normal collection processes and procedures. In no event shall Citadel be required to 9 13 institute litigation or to retain third parties to institute collection efforts with respect to the Pourtales Future Accounts Receivable. All remittances will be applied first to the oldest Pourtales Future Accounts Receivable. Citadel shall be entitled to deduct from all remittances on Pourtales Future Accounts Receivable collected on behalf of the Pourtales Entities the JSA Fee payable to Citadel. All remittances on Pourtales Future Accounts Receivable collected by Citadel on behalf of their appropriate Pourtales Entities net of the JSA Fee shall be remitted to the appropriate Pourtales Entities in accordance with Exhibit A annexed hereto. Citadel shall be under no obligation to segregate any remittances prior to their payment to the Pourtales Entities, and Citadel may commingle and otherwise use such funds in its sole discretion. During the Term, at option of the Pourtales Entities, the Pourtales Entities shall be permitted to collect their respective Pourtales Future Accounts Receivable that remain outstanding after 60 days, or are disputed in writing by the relevant account debtor ("Delinquent Accounts". Each remittance by Citadel to the Pourtales Entities shall be accompanied by a written report from Citadel setting forth the aggregate amount of the Pourtales Future Accounts Receivable and the aggregate amount of cash collections of such Pourtales Future Accounts Receivable during the period for which payment is made, along with a breakdown by account debtor. Promptly after the end of the Term, Citadel shall account for all collected Pourtales Future Accounts Receivable and provide the Pourtales Entities with all documentation relating to their respective uncollected Pourtales Future Accounts Receivable. Citadel shall have no obligation with respect to any Pourtales Future Accounts Receivable that it is unable to collect. 8. JSA Fee. In consideration for its services under this Agreement, Citadel shall be entitled to a fee (the "JSA Fee"), calculated in accordance with Exhibit A. The parties acknowledge and agree that (a) Citadel, as the joint sales agent for both the Citadel Stations and the Pourtales Stations, will possess certain discretionary authority in directing advertising opportunities to the Stations, (b) it would be impracticable for the Pourtales Entities to monitor each of the discretionary decisions of Citadel in making such allocations and (c) to ensure that advertising opportunities of the Stations are allocated to the Citadel Stations and the Pourtales Stations equitably, the parties have established the formula set forth on Exhibit A for determining the JSA Fee. The parties acknowledge and agree that the formula set forth on Exhibit A fairly reflects the apportionment of advertising among the Stations that could reasonably be expected in light of the relative market positions of the Citadel Stations and the Pourtales Stations. The JSA Fee shall be payable within ten days after the end of each calendar month during the Term (the first payment to commence in February 1996), and within ten days after termination of the Agreement, except where a different time is permitted by the provisions of Exhibit A. 10 14 9. Termination. (a) Subject to clause (c) below, the Pourtales Entities on one hand, and Citadel on the other hand, may terminate this Agreement upon the occurrence of any of the following events: (i) The breach by the non-terminating party of any material provision in this Agreement, other than a payment breach of the type described in clause (b) below, which remains uncured as of the expiration of the 30-day period following written notice of breach to the non-terminating party by the terminating party; (ii) Any representation or warranty by the non-terminating party herein shall be incorrect in any material respect; or (iii) The non-terminating party shall (A) make a general assignment for the benefit of its creditors, (B) have filed against it a petition in bankruptcy which is not dismissed within 60 days after the filing thereof, (C) be adjudicated as bankrupt or insolvent, (D) have appointed a receiver or other custodian (permanent or temporary) of the assets of its company or property, or any portion thereof, by any court of competent jurisdiction, (E) have filed against it any proceedings for a composition with creditors under any state or federal law, which proceedings are not dismissed within 60 days after the filing thereof, or (F) file a petition under any federal or state bankruptcy law or similar law affording protection with respect to its creditors. (b) Subject to clause (c) below, any of the Pourtales Entities may terminate this Agreement upon the breach by Citadel of its remittance obligations under Section 7 of this Agreement or Exhibit A, which breach remains uncured as of the expiration of the five-day period following written notice of breach to Citadel by any of the Pourtales Entities. (c) Termination of this Agreement by any party pursuant to Sections 9(a) or 9(b) shall be effective as of a date ("Termination Date") specified in a written notice by the terminating party to the other; provided, however, that in the event of any termination pursuant to Section 9(a), the Termination Date shall be a date not sooner than 180 days after the date of such written notice. Such termination right may be exercised in addition to and not in lieu of any other right or remedy to which the terminating party may be entitled, at law or in equity. (d) If for any reason this Agreement or the parties' relationship contemplated hereunder is determined to be in violation of the Communications Act of 1934, as amended, or the rules, regulations or policies of the FCC (collectively, the "FCC Laws"), this Agreement shall promptly terminate without further 11 15 obligation on the part of any party except as provided in Section 9(h). (e) This Agreement shall be terminated automatically and without notice to or further action by any party upon the consummation of Citadel's purchase of the Pourtales Stations pursuant to Section 13(b). (f) In the event of the termination of this Agreement by any party pursuant to this Section 9 (other than Section 9(e)), or the expiration of the Term, Citadel shall exercise commercially reasonable efforts to encourage its then existing sales staff for the Pourtales Stations to accept employment offers from the Pourtales Entities, if any. (g) Any termination of this Agreement by any of the Pourtales Entities pursuant to this Section 9 shall effect a termination of this Agreement by all of the Pourtales Entities. Any termination of this Agreement by Citadel with respect to any of the Pourtales Entities shall constitute a termination of this Agreement by Citadel with respect to all of the Pourtales Entities. (h) Upon termination of this Agreement pursuant to this Section 9, no further rights, obligations or liabilities shall accrue from and after the date of termination with respect to any party, except (i) to the extent permitted by FCC Laws, the parties shall perform those obligations arising through and including the date of termination, (ii) the obligation of each party to cooperate reasonably and in good faith to effect the transfer to the other, as appropriate, of the obligations theretofore undertaken by such party pursuant to this Agreement, (ii) the obligations imposed upon Citadel by Section 9(f) and (iv) the obligation of the Pourtales Entities to collect the Pourtales Future Accounts Receivable existing as of the date of termination and the obligation of the parties to make post-termination payments pursuant to Exhibit A, each of which obligations shall survive the termination of this Agreement notwithstanding any other provision contained herein to the contrary. 10. Acquisitions and Transfers. (a) In the event any party to this Agreement effects an Additional Station Acquisition, the Additional Station shall be subject to all of the provisions of this Agreement. In such event, the parties agree to negotiate in good faith any modifications to this Agreement required to preserve for the parties, following the addition of the Additional Station to this Agreement, the relative benefits and obligations of the parties contemplated hereby. (b) In the event of a Foreclosure on any of the Stations, any of the assets related thereto, or any interest in this Agreement (the "Station Collateral") by any Lender, such 12 16 Lender shall be bound by each of the provisions of this Agreement, from and after the date of Foreclosure, as and to the same extent as if an original party hereto in place of the party against whom such Foreclosure was effected. If such Lender, in effecting a Foreclosure, elects to take possession of or title to any of the Station Collateral through a trust or other entity, such Lender shall cause such other entity, prior to taking possession or title and as a condition thereto, to execute a written agreement to be bound by the provisions of this Agreement, in form and substance reasonably acceptable to the party against whom the Foreclosure has not been effected. (c) Citadel and the Pourtales Entities shall exercise commercially reasonable efforts to obtain prior to the Commencement Date, and shall at all times thereafter maintain in full force and effect, for the benefit of each of the other parties to this Agreement, a written agreement executed by each of the Lenders of such party (including both existing and future Lenders) to comply with the provisions of clause (b) above, such agreement to be in form and substance reasonably acceptable to each of the parties to this Agreement. (d) If any party to this Agreement desires to effect a Sale of a Station, the selling party shall first deliver to the other party (the "Other Party") a written offer to sell to the Other Party the Station on the terms and conditions set forth in the written offer. The Other Party shall have the right, exercisable by written notice delivered to the selling party within 45 days from the date of delivery of such offer to the Other Party, to purchase the Station for the price and on the terms and conditions contained in such written offer. If the Other Party is at the time of such written action prohibited by the ownership limitations imposed by the FCC Laws from purchasing the Station, the Other Party may designate another Person (a "Permitted Designee") to accept the written offer in place of the Other Party. If the Other Party or a Permitted Designee accepts the offer, the parties shall promptly negotiate and execute a definitive purchase agreement and file the appropriate applications with the FCC for transfer of the Station. The definitive purchase agreement shall include customary representations and warranties for transactions of this type. If the Other Party or a Permitted Designee does not accept the written offer within the foregoing time, the selling party may sell the Station to a third party pursuant to and on the terms contained in such written offer; provided that if an agreement is not entered into within 120 days after delivery of the written offer to the Other Party, or if there is a material change in the terms of sales from those contained in the written offer, the selling party shall again offer the Other Party the right to purchase the Station, within the foregoing time periods and subject to the foregoing terms, before effecting any Sale of a Station to another party. Upon the Sale of a Station to a third party in 13 17 accordance with the provisions of this Section 10(d), such third party shall be subject to each of the provisions of this Agreement as and to the same extent if an original party hereto in place of the selling party. In the event of a sale to a third party permitted by this Section 10(d), as a condition to the consummation thereof, such third party shall, at the request of the Other Party, provide written assurance, in form and substance reasonably acceptable to the Other Party, that the provisions of this Agreement shall be binding upon such third party effective upon its purchase of the Station. (e) For purposes of this Section 10, the Pourtales Entities shall be treated as a single party, and unless otherwise agreed in a writing executed by all of the Pourtales Entities and delivered to Citadel, Pourtales shall act as the representative of all of the Pourtales Entities, with full power and authority to bind them with respect to any actions taken under this Section 10. (f) This Agreement shall be binding upon the parties and their successors and assigns notwithstanding any Change of Control or Reorganizing Transaction with respect to any party hereto. Any party effecting a Change of Control or Reorganizing Transaction shall provide written notice thereof to the other party at least 30 days prior to the consummation of such transaction and prior to such consummation shall provide written assurance, in form and substance reasonably acceptable to the other party, that the provisions of this Agreement shall remain binding upon the party effecting a Change of Control or Reorganizing Transaction and/or its successor notwithstanding the consummation thereof. 11. Representations and Warranties. Citadel represents and warrants to the Pourtales Entities and Triathlon, and the Pourtales Entities and Triathlon each represent and warrant to Citadel, as follows: (a) Such Person is duly organized, validly existing and in good standing under the laws of the state of its formation, with all requisite power to own all of its property and assets and to carry on its business as it is now being conducted, and to execute, perform and deliver this Agreement and related agreements, documents and instruments referred to herein. The execution, performance and delivery of this Agreement have been duly and validly authorized by all necessary action on the part of such Person, all requisite stockholder or partner consents and approvals have been obtained by such Person to the execution and such related agreements, documents and instruments are and will be the valid and binding obligations of such Person, enforceable against such Person in accordance with the terms hereof. (b) The execution, performance and delivery of this Agreement in accordance with the terms hereof by such Person will not, as of the date hereof or as of the Commencement Date (i) violate any existing provision of any law or violate any existing 14 18 term or provision of any order, writ, judgment, injunction or decree applicable to such Person, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of the formation or organizational documents of such Person or any other material agreement or instrument to which such Person is a party by which such Person is bound or subject, (iii) constitute a breach or default of or an acceleration under, or an event that with the passing of time or the giving of notice or both would constitute a breach or default of or acceleration under, any material agreement or instrument to which such Person is a party or by which such Person is bound or (iv) result in a creation or imposition of any lien, charge, security interest, encumbrance or claim upon or in any of the Stations of such Person. (c) The execution, performance and delivery by such Person of this Agreement and the related agreements, instruments and documents referred to herein do not require the consent, approval or action of, or any filing with, or notice to, any Person except for consents or approvals previously disclosed in writing by such Person to the other parties to this Agreement, which consents shall, in any event, be obtained on or before the Commencement Date. 12. Additional Covenants of the Parties. (a) Each party shall, at all times during the Term, comply with all federal, state and local laws, ordinances, requirements and regulations, and all judgments, orders, injunctions and decrees applicable to such party and its operations, the failure to comply with which would have a material adverse effect on such party's ability to perform its obligations under this Agreement. (b) Each party shall, at all times during the Term, maintain in full force and effect, and apply in a timely manner for the renewal of, all licenses, trademarks, trade names and agreements necessary for the operation of its business, the loss of any of which would have a material adverse effect on such party's ability to perform its obligations under this Agreement. (c) Each party shall keep confidential the terms and conditions of this Agreement and all information obtained by it with respect to the other in connection with the performance of this Agreement, except for disclosures to such party's employees, investors, lenders, agents and other representatives as may be necessary in connection with the business operations of such party, and except for such disclosures as may be required on the part of any party to comply with the disclosure requirements imposed upon such party by applicable securities laws. Upon expiration or termination of this Agreement, each Party shall return to the other, without retaining any copy thereof, all confidential documents, correspondence and other information relating to the other party. 15 19 (d) All rights, powers and remedies herein may be exercised only to the extent that the exercise thereof does not violate any applicable law, and are intended to be limited to the extent necessary so they will not render this Agreement invalid or unenforceable, in whole or in part, under applicable law. (e) Each party shall, at the request of the other, execute and deliver to the other such further instruments and perform all such further actions as may be reasonably requested in order to effectuate the purposes of this Agreement. 13. Triathlon Agreement Consummation. (a) Upon becoming a licensee of any of the Pourtales Stations pursuant to consummation of the Triathlon Agreement, Triathlon shall, with respect to such radio stations, be entitled to the benefits and be subject to the obligations of the Pourtales Entities under this Agreement as and to the same extent as if Triathlon were an original party hereto in place of the Pourtales Entities. Upon becoming a licensee of any of the Pourtales Stations, Triathlon shall, upon request of Citadel, deliver to Citadel a certificate in form and substance satisfactory to Citadel setting forth (a) the representations and warranties on behalf of the Pourtales Entities as set forth in Section 11, dated as of the date Triathlon becomes the licensee of the Pourtales Station, and (b) the written agreement of Triathlon to be bound by this Agreement. In addition, Triathlon shall, prior to purchasing any of the Pourtales Stations, deliver to Citadel the written consent of Triathlon's Lenders, if any, as required by Section 10(c). At such time as Triathlon becomes the licensee of all of the Pourtales Stations, the Pourtales Entities shall automatically be released from any liability or obligation accruing under this Agreement from and after such date, without notice to or further action by any party hereto. (b) Citadel shall have the right to review the Triathlon Agreement promptly following its execution. Subject to Citadel's written approval of such Triathlon Agreement, and to the occurrence of a "Law Change" or the obtaining by Citadel of a "Waiver," as each of such terms is defined below, in the event Triathlon for any reason fails to consummate the acquisition of the Pourtales Stations in accordance with the provisions of the Triathlon Agreement (a "Triathlon Breach"), the Pourtales Entities agree to sell to Citadel, and Citadel agrees to purchase from the Pourtales Entities, the Pourtales Stations on the terms and conditions set forth in the Triathlon Agreement, except that (i) the date for the consummation thereof shall be delayed for a commercially reasonable time in order to permit Citadel to obtain the appropriate FCC approvals for such purchase and as further provided in Section 13(d), (ii) the aggregate $18,500,000 purchase price payable under the Triathlon Agreement shall be allocated $17.0 million to the Pourtales Stations and the balance to assets unrelated to the Pourtales Stations and (iii) the Pourtales 16 20 Entities shall be entitled to retain any liquidated damages (and related deposits and letter of credit proceeds) to which they are entitled from Triathlon as a result of the Triathlon Breach. The Pourtales Entities shall provide Citadel with written notice of a Triathlon Breach (the "Breach Notice"), and Triathlon hereby agrees that Citadel shall be permitted to rely conclusively upon such Breach Notice and may proceed in accordance with this Section 13(b) and Section 13(c) without interference from Triathlon. The term "Law Change" means a change in the Communications Act of 1934, as amended, or the rules, regulations and policies of the FCC, which would permit Citadel to own the Pourtales Stations in addition to the radio stations owned, marketed and/or programmed by Citadel. The term "Waiver" means a waiver from the FCC that would permit Citadel to own the Pourtales Stations in addition to the other radio stations owned, marketed and/or Programmed by Citadel. (c) If a Law Change has not occurred as of the date of a Breach Notice, Citadel shall promptly and diligently attempt to obtain a Waiver. If, despite such efforts, Citadel is unable to obtain a Waiver, and as a result Citadel is unable to purchase the Pourtales Stations pursuant to Section 13(b), Citadel shall have the right and the obligation to exercise commercially reasonable efforts to identify a purchaser (a "Substitute Purchaser") to purchase the Pourtales Stations pursuant to Section 13(b) in place of Citadel. The Triathlon Entities agree to accept any Substitute Purchaser so identified by Citadel. (d) In the event Citadel or a Substitute Purchaser purchases the Pourtales Stations pursuant to Sections 13(b) or 13(c), the purchaser and the Pourtales Entities shall enter into an agreement in the form of the Triathlon Agreement, modified only to reflect the substitution of parties and any changes contemplated by this Section 13 (a "Substitute Purchase Agreement"). If a Law Change has not occurred as of the date of a Breach Notice, Citadel shall have a period of 180 days from the date of the Breach Notice within which to enter into a Substitute Purchase Agreement, or to cause a Substitute Purchaser to enter into a Substitute Purchase Agreement, and a commercially reasonable time thereafter within which to obtain the appropriate FCC approvals for such purchase. 14. Relationship of Parties. Citadel shall serve solely as an independent contractor and agent for the sale of advertising time in the performance of its duties hereunder, and except as expressly provided in this Agreement, shall not be authorized to act as an agent of or otherwise represent any of the Pourtales Entities in any capacity or manner. Nothing in this Agreement shall constitute a partnership or joint venture between the Pourtales Entities and Citadel. The parties acknowledge that the call letters, trademarks and other intellectual property of each shall at all times remain the property of the respective parties and that neither party shall obtain any ownership interest in the other's intellectual property by virtue of this Agreement. 17 21 15. General Provisions. (a) No modification or waiver of any provision of this Agreement shall in any event be effective unless such modification or waiver is made in a writing signed by the party against whom such modification or waiver is sought to be enforced, and then only in the specific instance and for the specific purpose for which consent has been given. (b) No failure or delay on the part of any party in exercising any right or power under this Agreement 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 right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties provided in this Agreement are cumulative and are not exclusive of any right or remedy which either may otherwise have under applicable law. (c) This Agreement shall be construed in accordance with the laws of the State of Arizona without regard to its principles of choice or conflicts of laws. (d) This Agreement and the obligations of the parties hereunder shall at all times be subject to the FCC Laws and the parties shall at all times operate under this Agreement so as to be and remain in compliance with the FCC Laws. (e) This Agreement may be signed in one or more counterparts, each or which shall be deemed a duplicate original, binding on the parties hereto notwithstanding that the parties are not signatory to the same original or the same counterpart. (f) Any notice, demand, consent, approval or request required or permitted to be given under the provisions of this Agreement shall be in writing, addressed to the following addresses, or to such other addresses as any party may request in writing: To Citadel: Citadel Broadcasting Company 1015 Eastman Drive Bigfork, Montana 59911 Attn: Lawrence R. Wilson With copy to: Donna L. Heffner 1839 South Alma School Road Suite 264 Mesa, Arizona 85210 18 22 With copies to: Michael J. Ahearn, Esq. GALLAGHER & KENNEDY, P.A. 2600 North Central Avenue Phoenix, Arizona 85004-3020 and Peter D. O'Connell, Esq. REED, SMITH, SHAW & McCLAY 1301 K Street, N.W. Suite 1100-East Tower Washington, DC 20005-3317 To the Pourtales c/o Pourtales Radio Partnership Entities: 205 East Cheyenne Mountain Boulevard Suite 100 Colorado Springs, Colorado 80906 Attn: C. T. Robinson With copy to: HOGAN & HARTSON, L.L.P. Two North Cascade Avenue Suite 1300 Colorado Springs, Colorado 80903 Attn: Scott A. Blackmun, Esq. To Triathlon: Triathlon Broadcasting Company 750 B Street, Suite 1920 San Diego, California 92101 Attn: Norman Feuer With copy to: Howard J. Tytel, Esq. The Sillerman Companies, Inc. 150 East 58th Street, 19th Floor New York, New York 10155 All notices shall be deemed to have been duly delivered and received on the date of personal delivery, on the date of receipt if mailed by registered or certified mail, postage prepaid and return receipt requested, or on the date of the signed receipt if sent by a nationally recognized overnight delivery service. (g) Subject to the provisions of Section 10, this Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties. (h) Exhibit A annexed hereto is hereby incorporated herein by this reference. (i) This Agreement embodies the complete and entire agreement and understanding of the parties with respect to the subject matter hereof. No alteration, modification or change of 19 23 this Agreement shall be valid unless made in writing and signed by all parties. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date above first written. [SIGNATURES APPEAR ON FOLLOWING PAGE] 20 24 [SIGNATURE PAGE TO JOINT SALES AGREEMENT] CITADEL BROADCASTING COMPANY By: /s/ Lawrence R. Wilson --------------------------- Its: President POURTALES RADIO PARTNERSHIP By: /s/ Terry Robinson --------------------------- Its: General Partner POURTALES HOLDINGS, INC. By: /s/ Terry Robinson --------------------------- Its: ______________________ SPRINGS RADIO, INC. By: /s/ Terry Robinson --------------------------- Its: ______________________ KVUU/KSSS, INC. By: /s/ Terry Robinson --------------------------- Its: ______________________ TRIATHLON BROADCASTING COMPANY (for purposes of Section 13) By: /s/ Norman Fever --------------------------- Its: President 21 25 EXHIBIT A The JSA Fee payable to Citadel shall be determined as follows: 1. Incorporation By Reference. The provisions of the Joint Sales Agreement (the "Agreement") of even date, to which this Exhibit A is annexed, are incorporated herein by this reference in their entirety, with the same force and effect as if fully set forth herein. 2. Certain Definitions. For purposes of this Exhibit A, the following terms will have the meanings set forth below: "Applicable Multiplier" means, for each calendar month during the Term through and including June 1997, 55%, and for each calendar month during the Term from and after July 1997, 60%. "Broadcast Cash Flow" for a specified period means (a) the aggregate revenue of the Citadel Stations and the Pourtales Stations for the period, inclusive of Trade Revenues, reduced by (b) the aggregate Citadel Operating Expenses and Pourtales Operating Expenses for the period. "Citadel Accounts Receivable" means (a) the accounts receivable of the Citadel Stations, including Trade Receivables, and all other revenue from the sale of advertising time on any of the Citadel Stations, arising from and after the Commencement Date and (b) the Trade Receivables of the Pourtales Stations arising from and after the Commencement Date. "Citadel Operating Expenses" means (a) the aggregate expenses, whether cash expenses or Trade Expenses, incurred by Citadel directly in connection with the operation of the Citadel Stations and in the performance of its functions for the Pourtales Stations as contemplated by the Agreement, excluding (b) Citadel's Corporate Overhead. "Corporate Overhead" of a Person means (a) costs and expenses of such Person not incurred solely and directly in connection with the operation of one or more of the Stations and (b) the compensation expense of any employees of such Person not employed for the exclusive purpose of rendering services to one or more of the Stations in connection with its operations. "Monthly BCF Report" has the meaning set forth in Section 3. 22 26 "Monthly Receivable Collections" means the total collections by Citadel of the Pourtales Future Accounts Receivable and the Citadel Accounts Receivable during a calendar month within the Term. "Pourtales Operating Expenses" means (a) the aggregate expenses, whether cash expenses or Trade Expenses, incurred by Pourtales directly in connection with the operation of the Pourtales Stations, including programming costs, music license fees, rating service, promotion expenses, occupancy costs, broadcast tower leases, engineering costs, telephone and power costs and compensation expenses to Pourtales for a general manager/program director, engineer and receptionist/office manager in each of the Colorado Springs Market and the Spokane Market, excluding (b) Pourtales' Corporate Overhead and any severance expenses incurred by Pourtales in connection with the termination of any of its employees resulting from the commencement of the Agreement. "Pourtales Operating Report" has the meaning set forth in Section 3. 3. Calculation and Payment of JSA Fee. (a) Promptly (and in any event within five days) after the last day of each month during the Term, the Pourtales Entities shall deliver to Citadel a statement setting forth in reasonable detail the Pourtales Operating Expenses for the month most recently ended and any revenue of the Pourtales Stations received directly by the Pourtales Entities during such month (including any revenue resulting from the collection of any Delinquent Accounts) (the "Pourtales Operating Report"). Citadel shall prepare and deliver to the Pourtales Entities, on or before five days after Citadel's receipt of the Pourtales Operating Report, a statement (the "Monthly BCF Report") setting forth in reasonable detail the Broadcast Cash Flow for such month. Each Pourtales Operating Report and Monthly BCF Report shall be prepared in accordance with generally accepted accounting principles consistently applied. The Pourtales Entities and Citadel, by signature of their respective chief financial officers, shall certify that each Pourtales Operating Report and Monthly BCF Report delivered by such Person pursuant to this Agreement is true and correct in all material respects and prepared in conformity with this Section 3(a). (b) Citadel shall be entitled, as its JSA Fee, to an amount equal to the Broadcast Cash Flow for the period covered by each Monthly BCF Report, as reported thereon, multiplied by the Applicable Multiplier in effect during the month covered by such Monthly BCF Report. 23 27 (c) The Pourtales Operating Expenses and the Broadcast Cash Flow included in the initial Pourtales Operating Report and the initial Monthly BCF Report shall reflect the results of operations of the Stations beginning on the Commencement Date and continuing through the last day of the first month of the Term, and the parties shall appropriately prorate, as of the Commencement Date, all expenses included in the Broadcast Cash Flow calculation for such period. 4. Payment of Pourtales Operating Expenses. Citadel shall remit payment to the Pourtales Entities, on the 15th day and on the last day of each calendar month during the Term, in an amount equal to one-half of the Pourtales Operating Expenses incurred and to be incurred for such calendar month, as estimated by the Pourtales Entities in good faith. 5. Additional Payments. Subject to the adjustments contemplated by Section 6: (a) Contemporaneously with Citadel's preparation of each Monthly BCF Report. Citadel shall determine the Monthly Receivable Collections for such month and set forth the amount of such Monthly Receivable Collections on such Monthly BCF Report. Contemporaneously with Citadel's delivery of each Monthly BCF Report, (i) Citadel shall deliver to the Pourtales Entities, from such Monthly Receivable Collections, an amount equal to the Pourtales Operating Expenses reflected on the Pourtales Operating Report for such month which have not already been advanced to Pourtales pursuant to Section 4 and (ii) Citadel shall retain from such Monthly Receivable Collections, an amount equal to the Pourtales Operating Expenses reflected on the Pourtales Operating Report for such month equal to the amount advanced by Citadel for such month pursuant to Section 4. (b) Upon making the payments described in Section 5(a), Citadel shall deduct from the Monthly Receivable Collections an amount equal to the Citadel Operating Expenses for such month as reflected on the Monthly BCF Report. (c) Upon making the payments described in Sections 5(a) and 5(b), (i) Citadel shall deduct from the remaining Monthly Receivable Collections an amount equal to its JSA Fee for such month and (ii) Citadel shall remit to the Pourtales Entities an amount equal to the Broadcast Cash Flow for such month as reflected on the Monthly BCF Report, reduced by the JSA Fee payable to Citadel for such month. (d) If the Monthly Receivable Collections for any month are insufficient to pay the amounts described in Sections 5(a), 5(b) and 5(c) for such month, the Monthly Receivable Collections shall be applied in the following order of priority: (i) first, to the payments required by Section 5(a), (ii) second, 24 28 to the payments required by Section 5(b) and (iii) third, to the payments described in Section 5(c), on a pro rata basis based upon the relative amounts owed to the parties. (e) If, as a result of the application of the provisions of Section 5(d), the amounts owed to any of the parties pursuant to Sections 5(a), 5(b) and 5(c) are not fully paid out of Monthly Receivable Collections during any calendar month (the "Unpaid Amounts"), the Unpaid Amounts shall be paid from the Monthly Receivable Collections during the immediately following month after the payments required to be made for such following month described in Sections 5(a) and 5(b) and prior to the payments required to be made for such following month described in 5(c). 6. Notwithstanding any provision contained in Section 5 to the contrary: (a) If in any month during the Term any of the Pourtales Entities receives directly any revenue from any of the Pourtales Stations, the amounts otherwise payable to any of the Pourtales Entities under Section 5 shall be reduced by the amount of such payment. (b) If the Pourtales Entities receive payment pursuant to Section 4 for any month in an amount which exceeds the Pourtales Operating Expenses actually incurred by the Pourtales Entities for such month, such excess shall be deducted from the payment otherwise due to the Pourtales Entities for such month pursuant to Section 5(c)(ii). (c) If Monthly Receivable Collections for any month are insufficient to permit Citadel to make the payments required by Section 5(a)(i), Citadel shall nevertheless make such payment directly to the Pourtales Entities (a "Citadel Expense Payment"). Citadel shall be entitled to recover any Citadel Expense Payment from available Monthly Receivable Collections, and prior to making any further payments under Section 5. 7. Promptly (and in any event within five days) after termination of the Agreement, the Pourtales Entities shall deliver to Citadel a Pourtales Operating Report covering any period during the Term for which Citadel has not previously been paid a JSA Fee (the "Termination Period"). Within five days after receiving the Pourtales Operating Report, Citadel shall prepare and deliver to the Pourtales Entities a Monthly BCF Report covering the Termination Period. Notwithstanding the termination of the Agreement, the Pourtales Entities shall continue to collect the Pourtales Future Accounts Receivable existing as of the date of termination and each of the parties shall remain obligated to pay to the other, from their collection of the Pourtales Future Accounts Receivable and Citadel Accounts Receivable, respectively, 25 29 the payments to which the parties are entitled for the Termination Period pursuant to Section 5. 8. Within 20 days of the date of execution of the Agreement, the Pourtales Entities shall deliver to Citadel a budget setting forth their budgeted Pourtales Operating Expenses for calendar year 1996, and Citadel shall deliver to the Pourtales Entities a budget setting forth the budgeted Broadcast Cash Flow, exclusive of the Pourtales Operating Expenses, for the calendar year 1996. Commencing in 1996 and continuing during each successive year within the Term, the Pourtales Entities shall deliver to Citadel, on or before November 15 of such year, a budget setting forth the budgeted Pourtales Operating Expenses for the immediately following year, and on or before December 1 of such year, Citadel shall deliver to the Pourtales Entities a budget setting forth the budgeted Broadcast Cash Flow (incorporating the budget provided by the Pourtales Entities) for the immediately following year. Each party shall prepare its budget reasonably and in good faith. The parties shall exercise commercially reasonable efforts to perform their respective obligations under the Agreement so as to achieve the results set forth in their respective budgets, subject to the right of any party to deviate from its budget as it reasonably deems appropriate to respond to competitive conditions. 26 EX-10.7 21 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.7 CITADEL COMMUNICATIONS CORPORATION ---------------------- SECURITIES PURCHASE AND EXCHANGE AGREEMENT ---------------------- AMONG CITADEL COMMUNICATIONS CORPORATION CITADEL BROADCASTING COMPANY, ABRY BROADCAST PARTNERS II, L.P., ABRY/CITADEL INVESTMENT PARTNERS, L.P. BAKER, FENTRESS & COMPANY, BANK OF AMERICA ILLINOIS, OPPENHEIMER & CO., INC., AND CERTAIN OTHER PARTIES ---------------------- DATED AS OF JUNE 28, 1996 2 SECURITIES PURCHASE AND EXCHANGE AGREEMENT THIS AGREEMENT is made as of June 28, 1996 among CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation (the "Company"), CITADEL BROADCASTING COMPANY, a Nevada corporation ("Citadel"), ABRY BROADCAST PARTNERS II, L.P., a Delaware limited partnership ("ABRY"), ABRY/CITADEL INVESTMENT PARTNERS, L.P., a Delaware limited partnership ("ABRY/CIP"), BAKER, FENTRESS & COMPANY, a Delaware corporation ("BFC"), OPPENHEIMER & CO., INC., a Delaware corporation ("Oppenheimer"), BANK OF AMERICA ILLINOIS, an Illinois banking corporation formerly known as Continental Bank, N.A. ("BofA"), and CHRISTOPHER J. PERRY, ROBERT F. PERILLE, M. ANN O'BRIEN, FORD S. BARTHOLOW, JEFFREY M. MANN, MATTHEW W. CLARY and THOMAS E. VAN PELT, JR. (collectively, the "BofA Co-Investors"). Except as otherwise indicated herein or the context otherwise requires, capitalized terms used herein are defined in Section 1 hereof. PREAMBLE A. Citadel has agreed to make the Acquisitions pursuant to the KASY Purchase Agreement, the KDJK Purchase Agreement and the KHFM/KHFN Purchase Agreement. B. The Company holds all of the issued and outstanding capital stock of Citadel. C. Citadel (under its former name, Citadel Communications Corporation), BFC, AMEV, AMEV International, Oppenheimer, and Old Citadel entered into the Class A Note Agreement as of July 24, 1992, pursuant to which Citadel issued and BFC purchased the Class A Notes and certain other subordinated notes which have been redeemed by Citadel, Citadel issued and BFC purchased 40,500 shares of the Original Series A Preferred Stock of Citadel, and Citadel issued and AMEV, AMEV International and Oppenheimer purchased an aggregate of 20,100 shares of the Original Series B Convertible Preferred Stock of Citadel. D. The Company (under its former name CCC Holdings, Inc.) was formed as the parent of Citadel on March 24, 1993. E. The Company, Citadel, BFC, AMEV, AMEV International and Oppenheimer entered into a Purchase Agreement dated as of May 3, 1993, which Purchase Agreement was amended and restated pursuant to the Series A/B Purchase Agreement. Pursuant to the Series A/B Purchase Agreement, the Original Series A Preferred Stock was exchanged for 40,500 shares of Old Series A Preferred Stock and the Original Series B Preferred Stock was exchanged for 20,100 shares of Old Series B Preferred Stock. The Company subsequently repurchased the Old Series B Preferred Stock owned by AMEV and AMEV International. After giving effect to the Stock Splits, on the date of this Agreement, Baker Fentress owns (immediately prior to the consummation of the transactions contemplated herein) 972,000 shares of Old Series A Preferred Stock and Oppenheimer owns 14,400 shares of Old Series B Preferred Stock, which are convertible into 1,353,598 and 17,201, respectively, shares of Class A Common Stock. F. The Company, Citadel and BFC entered into the Series C Purchase Agreement as of May 28, 1993, pursuant to which the Company issued and BFC purchased 11,496 shares of Old Series C Preferred Stock, and warrants to purchase 2,250 shares of Old Series C Preferred Stock, 1 3 which warrants have subsequently lapsed. As a result of the Stock Splits, BFC owns (immediately prior to the consummation of the transactions contemplated by this Agreement) 275,904 shares of Old Series C Preferred Stock on the date of this Agreement, which are convertible into 384,221 shares of Class A Common Stock or Old Class B Common Stock. G. The Company, Citadel, BofA and the BofA Co-Investors entered into the Note and Warrant Purchase Agreement as of October 1, 1993, pursuant to which Citadel issued and BofA and the BofA Co-Investors purchased the Senior Subordinated Notes, and the Company issued and BofA and the BofA Co-Investors purchased the BofA Warrants to purchase 91,344 shares of Old Class C Common Stock. Upon consummation of the purchase of the BofA Co-Investor Warrants, the BofA Co-Investors exercised their warrants, and, as a result of the Second Stock Split, the BofA Co-Investors now own an aggregate of 43,845.12 shares of Old Class C Common Stock. As a result of the Second Stock Split, the BofA Warrants now entitle BofA to purchase 321,530.88 shares of Old Class C Common Stock. H. The Company, Citadel and Mesirow entered into the Series D Purchase Agreement as of October 1, 1993, pursuant to which the Company issued and Mesirow purchased 171,876 shares of Old Series D Preferred Stock. As a result of the Second Stock Split, Mesirow owns 687,504 shares of Old Series D Preferred Stock, which are convertible into that number of shares of Class A Common Stock. I. The Selling Investors have requested that the Company make the Redemptions of certain of the Preferred Stock owned by them, for an aggregate redemption price of $29,455,362.99 and the Company desires to make the Redemptions, as more particularly described below. The Company further desires to prepay the Senior Subordinated Notes. J. The Company has borrowed the sum of $2,000,000 from ABRY under the Bridge Note. The Bridge Note provides that it is due and payable upon the consummation of the transactions contemplated by this Agreement. K. The Company desires to finance the Acquisitions, the Redemptions, the prepayment of the Senior Subordinated Notes, the payment of the Bridge Note and working capital requirements through the issuance to ABRY and ABRY/CIP of Series C Preferred Stock and Series D Preferred Stock, and through borrowings from ABRY and ABRY/CIP under the Facility A Loan. L. Simultaneously with the purchase by ABRY and ABRY/CIP of Series C Preferred Stock and Series D Preferred Stock by ABRY and ABRY/CIP, the Company, and the Investors desire to effect the Reclassification and the Exchange. The parties hereto agree as follows: 1. Definitions. Except as otherwise expressly provided in this Agreement, all accounting terms used in this Agreement, whether or not defined in this Section 1, shall be construed in accordance with GAAP. At any time that the Company has one or more Subsidiaries, such accounting terms shall be determined on a consolidated basis for the Company and each of its 2 4 Subsidiaries, and the financial statements and other financial information to be furnished by the Company pursuant to this Agreement shall be consolidated and presented with consolidating financial statements of the Company and each of its Subsidiaries. "ABRY Directors" means Peggy Koenig and Jay Grossman, or such other individuals elected to serve as a member of the Board of Directors of each of the Company and Citadel as designated by ABRY pursuant to the Voting Agreement. "ABRY/CIP Director" means Royce Yudkoff, or such other individual elected to serve as a member of the Board of Directors of each of the Company and Citadel as designated by ABRY/CIP pursuant to the Voting Agreement. "ABRY Holders"means the Holders of (i) Investor Stock described in any of clauses (ix) through (xi) of the definition of the term "Investor Stock," (ii) Facility A Notes Conversion Stock, and (iii) Equity Securities of the Company issued or issuable with respect to any Equity Securities referred to in clause (i) or clause (ii) above or this clause (iii) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. "Acquisition Agreements" means, collectively, the KASY Purchase Agreement, the KDJK Purchase Agreement and the KHFM/KHFN Purchase Agreement. "Acquisitions" means Citadel's acquisition of substantially all of the assets of radio station KASY-FM, Albuquerque, New Mexico pursuant to the KASY Asset Purchase Agreement, substantially all of the assets of radio station KDJK-FM, Oakdale, California pursuant to the KDJK Purchase Agreement, and all of the stock of the New Mexico Corporations, which own radio stations KHFM-FM, Albuquerque, New Mexico and KHFN-AM, Los Ranchos, New Mexico, pursuant to the KHFN/KHFN Purchase Agreement. "Affiliate" of a Person means any Person that directly or indirectly controls, is controlled by, or is under common control with, such Person and, with respect to an individual, such individual's spouse and descendants (whether natural or adopted) and any trust solely for the benefit of such individual and/or his or her spouse and/or descendants. "Agreement" means this Agreement. "Amended and Restated BofA Warrants" means the Amended and Restated Warrant of even date with this Agreement issued by the Company to BofA, in the form attached to this Agreement as Exhibit "A". "Amended and Restated Certificate of Incorporation" means the Fifth Amended and Restated Certificate of Incorporation of the Company, in the form attached to this Agreement as Exhibit "B". "Amended and Restated Class A Note Agreement" means the Amended and Restated Class A Note Agreement of even date with this Agreement among the Company, Citadel and BFC, in the form attached to this Agreement as Exhibit "C". 3 5 "AMEV" means AMEV Venture Associates III, L.P. "AMEV International" means AMEV Venture Associates III International, L.P. "Board of Directors" means the Board of Directors of the Company or Citadel, as the case may be. "BofA Proxy" shall mean the Security Holder Agreement of even date herewith, by and among BofA, the BofA Co-Investors, the Company and Citadel, in the form attached to the Voting Agreement as Exhibit "A". "BofA Warrants" means the warrants issued pursuant to the Note and Warrant Purchase Agreement and owned beneficially and of record by BofA as of the date of this Agreement, and prior to their amendment and restatement pursuant to the Amended and Restated BofA Warrants. "Bridge Note" means the Junior Subordinated Convertible Note Due 1996 in the principal amount of $2,000,000, dated May 24, 1996, issued by Citadel to ABRY. "Change of Control" means the sale of the Company or Citadel to an Independent Third Party or group of Independent Third Parties pursuant to which such party or parties acquire (i) Equity Securities of the Company or Citadel possessing the voting power under normal circumstances to elect a majority of the Company's or Citadel's board of directors (whether by merger, consolidation or sale or transfer of the Company's or Citadel's Equity Securities) or (ii) all or substantially all of the Company's or Citadel's assets determined on a consolidated basis. "Change of Control Payment" means any payment to or other consideration transferred to any officer or employee of the Company, Citadel or any of their Subsidiaries who holds or owns beneficially or otherwise Equity Securities of the Company by any Person whatsoever in connection with any transaction resulting in a Change of Control of the Company or Citadel including, without limitation, payments in respect of (i) employment agreements or consulting agreements in excess of such employee's historical ordinary cash compensation as an officer or employee of the Company, Citadel or any of their Subsidiaries (as the case may be) prior to such transaction, (ii) non-competition agreements, (iii) licenses or (iv) forbearances of any kind; provided, however, that payments in respect of such officer's or employee's Equity Securities of the Company shall not constitute a Change of Control Payment if such payments do not exceed the price per share of Common Stock (adjusted to reflect any applicable exercise price or the like) paid to Holders of Equity Securities of the Company who are not employees. "Class A Common Stock" means the Class A Common Stock of the Company, par value $.001 per share. "Class A Note Agreement" means the Purchase Agreement dated as of July 24, 1992, as amended, among the Company (under its former name, Citadel Communications Corporation), Old Citadel, BFC, AMEV, AMEV International, Oppenheimer, as amended and in effect on the date of this Agreement and prior to its amendment and restatement pursuant to the Amended and Restated Class A Note Agreement. 4 6 "Class A Notes" means the 12% Subordinated Notes due June 30, 2000, Class A, in the aggregate principal amount of $7,000,000 issued by Citadel to BFC. "Class B Common Stock" means the Class B Common Stock of the Company, par value $.001 per share, existing after the Reclassification. "Class C Common Stock" means the Class C Common Stock of the Company, par value $.001 per share, existing after the Reclassification. "Closing" shall have the meaning assigned to it in Section 5. "Closing Advance" shall have the meaning assigned to it in Section 7.d.(iii). "Closing Date" shall have the meaning assigned to it in Section 5. "Common Stock" means, collectively, the Class A Common Stock, the Class B Common Stock and the Class C Common Stock. "Commission" shall mean the Securities and Exchange Commission. "Compensation Committee" means the compensation committee of the Board of Directors of the Company. "Corporate Overhead" shall have the meaning assigned to such term in the FINOVA Credit Agreement; provided, however, that (i) all determinations shall be made with respect to the Company on a consolidated basis, (ii) references to specific individuals shall be deemed to include other individuals who succeed to the responsibilities of such individuals, and (iii) the term "Station" as used in such definition shall include radio stations owned by the Company, Citadel or any other Subsidiary. "Employee Incentive Securities" means and includes (a) options exercisable for Class A Common Stock, in an aggregate amount not in excess of 62,942 shares of Class A Common Stock (assuming the full exercise of all such issued stock options without regard to any restrictions or limitations on exercise) issued or granted to LRW prior to the date of this Agreement under the Wilson Option Agreement or pursuant to a separate grant of options made to LRW on December 21, 1994, (b) options exercisable for Class A Common Stock, in an aggregate amount not in excess of 34,374 shares of Class A Common Stock (assuming the full exercise of all such stock options without regard to any restrictions or limitations on exercise) to which LRW may become eligible after the date of this Agreement pursuant to the Wilson Option Agreement, (c) options exercisable for Class A Common Stock, in an aggregate amount not in excess of 150,000 shares of Class A Common Stock (assuming the full exercise of all such stock options without regard to any restrictions or limitations on exercise) granted to LRW as of the date of this Agreement pursuant to the 1996 Equity Incentive Plan, (d) options exercisable for Class A Common Stock, in an aggregate amount not in excess of 380,892 shares of Class A Common Stock (assuming the full exercise of all such issued stock options without regard to any restrictions or limitations on exercise) issued or granted to other employees of Citadel prior to the date of this Agreement, (e) options exercisable for Class A Common Stock, in an aggregate amount not in excess of 150,000 shares of Class A Common Stock (assuming the full 5 7 exercise of all such stock options without regard to any restrictions or limitations on exercise) granted to other employees of Citadel as of the date of this Agreement pursuant to the 1996 Equity Incentive Plan, and (f) options exercisable for Class A Common Stock, in an aggregate amount not in excess of 114,000 shares of Class A Common Stock (assuming the full exercise of all such stock options without regard to any restrictions or limitations on exercise) granted by the Compensation Committee to LRW and/or by the Board of Directors to other employees of Citadel after the date of this Agreement pursuant to the 1996 Equity Incentive Plan. "Employment Agreement" means the Employment Agreement between Citadel and LRW of even date herewith, in the form attached to this Agreement as Exhibit "D". "Equity Securities" of any Person means (i) any capital stock, partnership, membership, joint venture or other ownership or equity interest, participation or securities (whether voting or non voting, whether preferred, common or otherwise, and including any stock appreciation, contingent interest or similar right) and (ii) any option, warrant, security or other right (including debt securities) directly or indirectly convertible into or exercisable or exchangeable for, or otherwise to acquire directly or indirectly, any stock, interest, participation or security described in clause (i) above. "Event of Default" has the meaning assigned to such term in the FINOVA Credit Agreement as in effect from time to time (including, for purposes of this definition, all amendments to the FINOVA Credit Agreement after the Closing Date which are effectuated in accordance with this Agreement). "Exchange" means the physical exchange of certificates representing Old Class C Common Stock for certificates representing Class B Common Stock, and of certificates representing Old Class B Common Stock for certificates representing Class C Common Stock upon the Reclassification. "Existing Investors" means BFC, Oppenheimer, BofA, and the BofA Co-Investors. "Facility A Commitments" means the revolving credit facilities established by ABRY and ABRY/CIP in favor of the Company, as provided for in Section 4.e. below. "Facility A Advance" means an advance made to the Company by ABRY and ABRY/CIP in separate pro rata advances based upon their proportionate commitment under the Facility A Commitment, including but not limited to the Closing Advance, each of which shall be evidenced by the issuance by the Company of a Facility A Note to each of ABRY and ABRY/CIP. "Facility A Notes" mean the Convertible Promissory Notes issued by the Company to ABRY and ABRY/CIP on or after the date of this Agreement pursuant to the terms and conditions of this Agreement, in the form attached to this Agreement as Exhibit "E". "Facility A Notes Conversion Stock" means (i) Preferred Stock issued or issuable upon the conversion of any Facility A Note, (ii) Preferred Stock issued or issuable upon the conversion of any Preferred Stock described in clause (i) above or in this clause (ii), (iii) Common Stock issued or issuable upon the conversion of any Preferred Stock described in clause (i) or clause (ii) above, 6 8 (iv) Common Stock issued or issuable upon the conversion or exchange of any Common Stock described in clause (iii) above or in this clause (iv), and (v) Equity Securities of the Company issued or issuable with respect to any Equity Securities referred to in any of clauses (i) through (iv) above or this clause (v) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting Facility A Notes Conversion Stock, such securities shall continue to constitute Facility A Notes Conversion Stock in the hands of any permitted transferee thereof, but will cease to constitute Facility A Notes Conversion Stock when they have been disposed of in a Public Sale. "FCC" means the Federal Communications Commission. "FINOVA" means FINOVA Capital Corporation, a Delaware corporation, formerly known as Greyhound Financial Corporation. "FINOVA Amendment" means the Fifth Amendment of Loan Instruments of even date herewith executed by FINOVA with respect to certain provisions of the FINOVA Credit Agreement, in the form attached to this Agreement as Exhibit "F". "FINOVA Credit Agreement" means mean the Amended and Restated Loan Agreement by and between Citadel and FINOVA, dated as of May 12, 1994, as amended and in effect on the Closing Date. "First Stock Split" means the 6:1 stock split of the Company's stock, effective on October 1, 1993. "Fully Diluted Basis" refers to the outstanding Common Stock, assuming the conversion, exercise, exchange and acquisition to the fullest extent possible of or under all Equity Securities which are directly or indirectly convertible into, are directly or indirectly exercisable or exchangeable for, or provide for the acquisition directly or indirectly of, Common Stock, in each case without regard to any limitation or restriction on any such conversion, exercise, exchange or acquisition, but in each case other than (i) any such Equity Security for which the conversion, exercise, exchange or acquisition price is greater than the fair market value at the time in question of the Common Stock so issuable (i.e., not assuming the conversion, exercise, exchange or acquisition of any "out of the money" security) or (ii) the conversion of any Facility A Note on or prior to the Maturity Date of such Facility A Note. "Funds Flow Memorandum" means a summary of the flow of money on the Closing Date identifying by name, amount and date, the sources and uses of all funds to be received or paid by the Company on, immediately prior to, or immediately following the Closing Date, or otherwise in connection with the Closing and the closings of the transactions occurring on or about the Closing Date pursuant to the Acquisitions, the Redemptions, the prepayment of the Senior Subordinated Notes, the payment of the Bridge Note, and any other agreement, document or instrument contemplated hereby or thereby. "GAAP" means United States generally accepted accounting principles consistently applied. 7 9 "Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder. "Hart-Scott Filing" means any filing with the Department of Justice and the Federal Trade Commission required under the Hart-Scott Act. "Holder" of any security means the record or beneficial owner of such security. "Indebtedness for Borrowed Money" means (a) all indebtedness of the Company or any Subsidiary of the Company in respect of money borrowed (including, without limitation, indebtedness which represents the unpaid amount of the purchase price of any property and is incurred in lieu of borrowing money or using available funds to pay such amounts and not constituting an account payable or expense accrual incurred or assumed in the ordinary course of business of the Company or any Subsidiary), (b) all indebtedness of the Company or any Subsidiary of the Company evidenced by a promissory note, bond or similar written obligation to pay money, (c) all indebtedness directly or indirectly guaranteed in any manner by the Company or any Subsidiary or for which the Company or any Subsidiary is otherwise contingently liable, including, without limitation, guarantees in the form of an agreement to repurchase, reimburse or provide funds, and any commitment by which the Company or any Subsidiary assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit, and (d) all obligations under capitalized leases in respect of which obligations the Company or any Subsidiary is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations the Company or any Subsidiary assures a creditor against loss. "Independent Third Party" means any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Common Stock on a Fully-Diluted Basis (a "5% Owner"), who is not controlling, controlled by or under common control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or any of such other persons. "Investment" as applied to any Person means (i) any direct or indirect purchase or other acquisition by such Person of any notes, obligations, instruments, Equity Securities, or other securities or ownership interest of any other Person and (ii) any capital contribution by such Person to any other Person. "Investor Stock" means (i) the Amended and Restated BofA Warrants, (ii) Class B Common Stock held by the BofA Co-Investors on the date hereof after giving effect to the Redemptions and the Reclassification, (iii) Class B Common Stock issued or issuable upon the exercise of the Amended and Restated BofA Warrants, (iv) Class A Common Stock issued or issuable upon the conversion of Class B Common Stock described in clause (ii) or clause (iii) above, (v) Series A Preferred Stock held by BFC on the date hereof after giving effect to the Redemptions and the Reclassification, (vi) Class A Common Stock issued or issuable upon the conversion of any Series A Preferred Stock described in clause (v) above, (vii) Series B Preferred Stock held by Oppenheimer on the date of this Agreement after giving effect to the Redemptions and the Reclassification, (viii) Class A Common Stock issued or issuable upon the conversion of any Series B Preferred Stock described in clause (viii) above, (ix) the Shares, (x) Common Stock issued or issuable upon the conversion of any Share, 8 10 (xi) Common Stock issued or issuable upon the conversion or exchange of any Common Stock described in clause (x) above or this clause (xi), (xii) Facility A Notes Conversion Stock, and (xiii) Equity Securities of the Company issued or issuable with respect to any Equity Securities referred to in any of clauses (i) through (xii) above or this clause (xii) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting Investor Stock, such securities shall continue to constitute Investor Stock in the hands of any permitted transferee thereof, but will cease to constitute Investor Stock when they have been disposed of in a Public Sale. "Investors" means ABRY, ABRY/CIP and the Existing Investors, and their respective heirs, personal representatives, successors and assigns. "KASY Purchase Agreement" means the Asset Purchase Agreement dated September 18, 1995, between Ramar Communications Company and Citadel as amended pursuant to First Amendment to Asset Purchase Agreement dated as of June 1, 1996, and Second Amendment to Asset Purchase Agreement dated as of June 28, 1996. "KDJK Purchase Agreement" means the Asset Purchase Agreement dated April 13, 1996 between Photosphere Broadcasting Limited Partnership and Citadel. "KHFM/KHFN Purchase Agreement" means the Agreement of Purchase and Sale dated February 15, 1996 among New Mexico News Radio, Inc. New Mexico Classical Radio, Inc., Peter Besheer and F. Michael Langner and Citadel. "Latest Balance Sheet" has the meaning assigned to it in Section 8.d.(ii). "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by statute or other law, which secures the payment of a debt (including, without limitation, any tax) or the performance of an obligation. "LRW" means Lawrence R. Wilson. "Management and Consulting Services Agreement" means the Management and Consulting Services Agreement of even date herewith between ABRY Partners, Inc. and Citadel, in the form attached to this Agreement as Exhibit "G". "Maturity Date" of any Facility A Note has the meaning assigned to it in such Facility A Note. "Mesirow" means Mesirow Capital Partners VI, an Illinois limited partnership. 9 11 "Mesirow Repurchase Agreement" means the Repurchase Agreement of even date with this Agreement between the Company and Mesirow, in the form attached to this Agreement as Exhibit "H". "New Mexico Corporations" means New Mexico Classical Radio, Inc., a New Mexico corporation, and New Mexico News Radio, Inc., a New Mexico corporation. "New Mexico Stock Pledge Agreement" means the Stock Pledge Agreement of even date herewith executed and delivered by Citadel to FINOVA, pursuant to which Citadel has agreed to pledge all of the issued and outstanding stock of the New Mexico Corporations to FINOVA, as provided for in the FINOVA Amendment. "New Mexico Subsidiary Mergers" means the mergers to be consummated between Citadel and each of the New Mexico Corporations following the Closing Date, pursuant to which each of the New Mexico Corporations shall be merged with and into Citadel, and Citadel shall be the surviving corporation. "1996 Equity Incentive Plan" means the Citadel Communications Corporation 1996 Equity Incentive Plan of even date with this Agreement together with the LRW ISO Award Agreement Under 1996 Equity Incentive Plan, LRW Nonqualified Stock Option Award Agreement Under 1996 Equity Incentive Plan, Form ISO Award Agreement For Employees Under 1996 Equity Incentive Plan and Form Non-Qualified Stock Option Award Agreement For Employees Under 1996 Equity Incentive Plan, in the form attached to this Agreement as Exhibit "I". "Note Conversion Price" for any Facility A Note shall have the meaning assigned to it in such Facility A Note. "Note and Warrant Purchase Agreement" means the Senior Subordinated Note and Warrant Purchase Agreement dated as of October 1, 1993, among the Company, Citadel, BofA, and the BofA Co-Investors, as amended and in effect immediately prior to the Closing. "Officers Certificate" means a certificate signed on behalf of the Company by the Company's president or its chief financial officer, stating that (i) the officer signing such certificate has made or has caused to be made such investigations as are necessary to permit him or her to verify the accuracy of the information set forth in such certificate and (ii) to the best of such officer's knowledge, such certificate does not misstate any material fact and does not omit to state any fact necessary to make the certificate not misleading. "Old Citadel" means Citadel Associates Limited Partnership, an Arizona limited partnership, and Citadel Associates Montana Limited Partnership, a Montana Limited Partnership. "Old Class B Common Stock" means the Class B Common Stock of the Company, par value $.001 per share, existing immediately prior to the Reclassification. "Old Class C Common Stock" means the Class C Common Stock of the Company, par value $.001 per share, existing immediately prior to the Reclassification. 10 12 "Old Series A Preferred Stock" means the Series A Convertible Preferred Stock of the Company, par value $.001 per share, existing immediately prior to the Reclassification. "Old Series B Preferred Stock" means the Series B Convertible Preferred Stock of the Company, par value $.001 per share, existing immediately prior to the Reclassification. "Old Series C Preferred Stock" means the Series C Convertible Preferred Stock of the Company, par value $.001 per share, existing immediately prior to the Reclassification. "Old Series D Preferred Stock" means the Series D Convertible Preferred Stock of the Company, par value $.001 per share, existing immediately prior to the Reclassification. "Operating Cash Flow" shall have the meaning set forth in the FINOVA Credit Agreement; provided, however, that all determinations shall be made with respect to the Company on a consolidated basis. "Original Series A Preferred Stock" means the Series A Convertible Preferred Stock of Citadel purchased by BFC pursuant to the Class A Note Agreement. "Original Series B Preferred Stock" means the Series B Convertible Preferred Stock of Citadel purchased by AMEV, AMEV International and Oppenheimer pursuant to the Class A Note Agreement. "Other Documents" means the Registration Rights Agreement, the Stockholders Agreement, the Voting Agreement, the Employment Agreement, the 1996 Equity Incentive Plan, the Wilson Option Agreement, the Amended and Restated Certificate of Incorporation, the Amended and Restated Class A Note Agreement, the Amended and Restated Warrant, the Mesirow Repurchase Agreement, the Facility A Notes, the Wilson Note Forgiveness Agreement, the Management and Consulting Services Agreement, and the New Mexico Stock Pledge Agreement. "Pending Acquisition Stations" shall have the meaning assigned to such term in Section 8.w. below. "Permitted Increase" means any increase in the Indebtedness for Borrowed Money permitted by Section 11.e.(i); provided, however, that the aggregate amount of such increase outstanding at any one time shall not exceed $500,000. "Permitted Liens" means: i. the Security Interests (as defined in the Senior Credit Agreement); ii. the Permitted Senior Indebtedness Liens (as defined in the Senior Credit Agreement); iii. Liens for taxes or assessments and similar charges which either are (A) not delinquent or (B) being contested diligently and in good faith by appropriate proceedings, and as to 11 13 which the Company has set aside reserves on its books which are satisfactory to Holders of 66-2/3% of the Underlying Common Stock; iv. Liens securing any Permitted Senior Substitution; and v. Liens securing any Permitted Increase. "Person" shall include all natural persons, corporations, business trusts, limited liability companies, associations, companies, partnerships, joint ventures, governments, agencies, political subdivisions and other entities. "Permitted Senior Substitution" shall have the meaning assigned to such term in the Subordination Agreement; provided however, that for purposes of this Agreement and the Stockholders Agreement, the following shall be substituted for Clause (A) of subparagraph (iv): "(A) terms and conditions which, whether directly or indirectly, are more onerous with respect to Citadel, the Company or the rights of the Investors, including, without limitation, terms which may further limit or restrict the rights of the Investors to receive payments of the Put Price pursuant to Section 4.5 of the Stockholders Agreement." "Preferred Stock" means the Preferred Stock of the Company, par value $.001 per share. "Public Sale" means any sale of Equity Securities to the public pursuant to an offering registered under the Securities Act, following a Qualified Public Offering, or to the public pursuant to the provisions of Rule 144 under the Securities Act (or any similar provision then in force). "Purchase Price" shall have the meaning set forth in Section 4.a. hereof. "Qualified Public Offering" means the closing of the issuance and sale of Common Stock in an underwritten public offering which is registered pursuant to the Securities Act and which results in the receipt by the Company of cash proceeds of at least $25,000,000 (net of applicable commissions, discounts and expenses). "Reclassification" means the amendment and restatement of the Company's certificate of incorporation pursuant to which (i) each share of Old Class B Common Stock is automatically converted into the right to receive one share of Class C Common Stock, (ii) each share of Old Class C Common Stock is automatically converted into the right to receive one share of Class B Common Stock, (iii) each share of Old Series A Preferred Stock is automatically converted into the right to receive 1.3925899 shares of Series A Preferred Stock, and (iv) each share of Old Series B Preferred Stock is automatically converted into the right to receive 1.1944947 shares of Series B Preferred Stock. "Redemption Payment" shall have the meaning assigned to such term in Section 4.b. hereof. "Redemptions" means the repurchase by the Company of the Redemption Shares from the Selling Investors. 12 14 "Redemption Shares" means an aggregate of 1,887,353.7 shares on a Common Stock equivalent basis of the Old Class C Common Stock and the Company's Preferred Stock and warrants to purchase Preferred Stock, as set forth on Schedule 1 to this Agreement. "Registration Rights Agreement" means the Third Amended and Restated Registration Rights Agreement of even date herewith among the Company, the Investors, and Wilson, in the form attached to this Agreement as Exhibit "J". "Second Stock Split" means the 4:1 stock split of the Company's stock, effective on December 21, 1994. "Securities Act" means the Securities Act of 1933, as amended. "Selling Investors" means BFC, BofA, the BofA Co-Investors and Mesirow. "Senior Credit Agreement" shall have the meaning assigned to it in the Stockholders Agreement. "Senior Subordinated Notes" means Citadel's Senior Subordinated Notes due 1999 in the aggregate original principal amount of $4,000,000 issued to BofA and the BofA Co-Investors. "Series A Preferred Stock" means the Series A Convertible Preferred Stock of the Company, par value $.001 per share, existing after the effective time of the Reclassification. "Series A/B Purchase Agreement" means the Amended and Restated Purchase Agreement dated as of May 3, 1993 by and among the Company, Citadel, BFC, AMEV, AMEV International and Oppenheimer, as in effect immediately prior to the Closing. "Series B Preferred Stock" means the Series B Convertible Preferred Stock of the Company, par value $.001 per share, existing after the effective time of the Reclassification. "Series C Preferred Stock" means the Series C Convertible Preferred Stock of the Company, par value $.001 per share, existing after the effective time of the Reclassification. "Series C Purchase Agreement" means the Purchase Agreement dated as of May 28, 1993 by and among the Company, Citadel and BFC, as in effect immediately prior to the Closing. "Series D Preferred Stock" means the Series D Convertible Preferred Stock of the Company, par value $.001 per share, existing after the effective time of the Reclassification. "Series D Purchase Agreement" means the Purchase Agreement dated as of October 1, 1993 by and among the Company, Citadel and Mesirow, as in effect immediately prior to the Closing. "Shares" shall have the meaning assigned to such term in Section 3.a. hereof. If any Series C Preferred Stock or Series D Preferred Stock which constitute "Shares" (including by reason of this 13 15 sentence) is converted into Series D Preferred Stock or Series C Preferred Stock, then the Preferred Stock issued upon such conversion shall thereafter constitute "Shares." "Stockholders Agreement" means the Second Amended and Restated Stockholders Agreement of even date herewith by and among the Company, the Investors, FINOVA, Wilson and certain other parties , in the form attached as Exhibit "K". "Stock Splits" means, collectively, the First Stock Split and the Second Stock Split. "Subordination Agreement" means the Subordination Agreement dated May 12, 1994 by and among FINOVA, BFC, BofA and the BofA Co-Investors, as amended and in effect on the Closing Date. "Subsidiary" shall mean any Person at least a majority of the outstanding voting Equity Securities of which is at the time owned or controlled directly or indirectly by the Company or by one or more Subsidiaries or both, and with respect to the Company shall include without limitation Citadel, and upon consummation of the acquisition of the stock of the New Mexico Corporations, with respect to both the Company and Citadel shall include the New Mexico Corporations. "Termination of Agreement Re Section 5 Issuances" means the letter dated of even date herewith terminating the letter agreement dated October 1, 1993 among the Company and the BofA Co-Investors, in the form attached to this Agreement as Exhibit "L". "Transactions Contemplated by this Agreement" means the execution, delivery and performance of this Agreement and the Other Documents, the Reclassification, the Exchange, the Redemptions, the payment of all accrued and unpaid dividends on the Old Series B Preferred Stock and the Old Series D Preferred Stock, the prepayment of the Senior Subordinated Notes and payment of the Bridge Note, the issuance of the Facility A Notes and authorizing borrowings thereunder, the issuance and sale of the Shares, the reservation for issuance upon conversion of the Shares of an aggregate of 725,818.444 shares of Series C Preferred Stock for issuance upon conversion of Series C Preferred Stock into Series D Preferred Stock and 2,443,035.256 shares of Series D Preferred Stock for issuance upon the conversion of Series D Preferred Stock into Series C Preferred Stock from time to time as permitted and/or required by this Agreement, the reservation for issuance of 3,168,853.70 shares of Class A Common Stock and the reservation for issuance of 3,168,853.70 shares of Class C Common Stock upon conversion of the Shares into either Class A Common Stock or Class C Common Stock, the reservation for issuance of 325,463 shares of Series C Preferred Stock and 325,463 shares of Series D Preferred Stock upon conversion of the Facility A Notes issued on the Closing Date, the reservation for issuance of 325,463 shares of Class A Common Stock and 325,463 shares of Class C Common Stock upon conversion of any Series C Preferred Stock and/or Series D Preferred Stock received upon the conversion of the Facility A Notes issued on the Closing Date, the New Mexico Stock Pledge Agreement, the New Mexico Subsidiary Mergers, and the consummation of all other transactions contemplated by this Agreement and the Other Documents. "Underlying Common Stock" means all Investor Stock which is Class A Common Stock. For purposes of this Agreement, any Person who holds any Investor Stock which is not Class A Common Stock will be deemed to be the Holder of the Class A Common Stock obtainable upon the 14 16 conversion, exercise or exchange to the fullest extent possible of such Investor Stock (including the conversion, exercise or exchange of all other Investor Stock directly or indirectly obtainable upon any such conversion, exercise or exchange), without regard to any restriction or limitation on any such conversion, exercise or exchange; provided that no Holder of any Facility A Note, on or prior to the Maturity Date of such Facility A Note, shall be deemed to be the Holder of any such Class A Common Stock by reason of holding such Facility A Note. "Voting Agreement" shall mean the Amended and Restated Voting Agreement of even date herewith by and among the Company, the Investors, and Wilson, in the form attached to this Agreement as Exhibit "M". "Wilson" means, collectively, LRW and Claire Wilson. "Wilson Note Forgiveness Agreement" means the Agreement of even date herewith between LRW and Citadel, pursuant to which Citadel shall forgive certain indebtedness of LRW to Citadel in the amount of $408,637, in the form attached to this Agreement as Exhibit "N". "Wilson Option Agreement" means the Citadel Communications Nonqualified Stock Option Agreement between the Company and LRW of even date herewith, in the form attached to this Agreement as Exhibit "O". 2. Simultaneous Transactions; Amendment, Restatement and Consolidation of Purchase Agreements. Each of the transactions provided for in this Agreement, including but not limited to the Reclassification, the Exchange, the Redemptions, ABRY's and ABRY/CIP's purchase of the Shares and issuance of the Facility A Notes in connection with the Closing Advance, is dependent upon the occurrence of each of the other transactions provided for in this Agreement, and each such transaction shall and shall be deemed to occur simultaneously. Each of the Series A/B Purchase Agreement, the Series C Purchase Agreement and the Note and Warrant Purchase Agreement is hereby amended, restated and consolidated into this Agreement, and from and after the date of this Agreement, the existing Series A/B Purchase Agreement, Series C Purchase Agreement and the Note and Warrant Purchase Agreement shall be of no further force or effect; provided, however, that no novation with respect to such existing agreements shall occur as a result of the Transactions Contemplated by this Agreement. 3. Authorization of Securities. The Company has authorized the issuance and sale of the following securities: a. Authorization of Shares. The Company has authorized the issuance and sale of 3,168,853.70 shares of Preferred Stock (the "Shares"), as follows: i. ABRY Series C Preferred Stock. The issuance and sale to ABRY of 1,473,857.714 shares of Series C Preferred Stock having the rights, preferences and privileges set forth in the Amended and Restated Certificate of Incorporation. The Series C Preferred Stock is convertible into the Class A Common Stock (voting), Class C Common Stock (voting) or Series D Preferred Stock (non-voting). 15 17 ii. ABRY/CIP Series C Preferred Stock. The issuance and sale to ABRY/CIP of 182,162.193 shares of Series C Preferred Stock having the rights, preferences and privileges set forth in the Amended and Restated Certificate of Incorporation. iii. ABRY Series D Preferred Stock. The issuance and sale to ABRY of 1,346,422.052 shares of Series D Preferred Stock having the rights, preferences and privileges set forth in the Amended and Restated Certificate of Incorporation. The Series D Preferred Stock is non-voting and is convertible into Class A Common Stock (voting), Class C Common Stock (non-voting) or Series C Preferred Stock (voting). iv. ABRY/CIP Series D Preferred Stock. The issuance and sale to ABRY/CIP of 166,411.714 shares of Series D Preferred Stock having the rights, preferences and privileges set forth in the Amended and Restated Certificate of Incorporation. b. Authorization of Stock Issuable Upon Conversion of Shares. Additionally, the Company has authorized the issuance of 3,168,853.7 shares of Class A Common Stock, 3,168,853.70 shares of Class C Common Stock, 1,512,833.766 shares of Series C Preferred Stock and 1,656,019.934 shares of Series D Preferred Stock, which shares shall be available for the conversion of the Shares, as permitted by the Certificate of Incorporation, and subject to the limitations set forth in Section 12 of this Agreement. 4. Transactions to be Consummated at the Closing. At the Closing, upon the terms and subject to the conditions herein contained, and in reliance upon the representations, warranties and agreements set forth herein: a. Sale of Shares. The Company agrees to sell the Shares to ABRY and ABRY/CIP, and ABRY and ABRY/CIP agree to purchase the Shares from the Company, for $15.6067 per share, for an aggregate purchase price of $49,455,349.04 (the "Purchase Price"), which shall be paid $44,015,260.65 by ABRY and $5,440,088.39 by ABRY/CIP. b. Redemptions. The Company agrees to repurchase the Redemption Shares from the Selling Investors, and the Selling Investors other than Mesirow agree (and Mesirow has separately agreed), to sell the Redemption Shares to the Company for an aggregate purchase price of $29,455,362.99 (the "Redemption Payment"). The Redemption Shares to be repurchased by the Company from each Selling Investor and the payments to be made therefor to each Selling Investor are set forth on Schedule 1 to this Agreement. c. Reclassification and Exchange. The Company shall effect the Reclassification by adopting the Amended and Restated Certificate of Incorporation, and the Exchange by physically exchanging the Old Class C Common Stock for an identical number of shares of Class B Common Stock, and the Old Class B Common Stock for an identical number of shares of Class C Common Stock. The Investor Stock to be held by the Existing Investors immediately following the Redemptions, the Reclassification and the Exchange will be as set forth on Schedule 2 to this Agreement. 16 18 d. Payment of Accrued Dividends. The Company agrees to pay all accrued and unpaid dividends on the Old Series B Preferred Stock and the Old Series D Preferred Stock. e. Payment of Bridge Note. The Company agrees to pay the principal balance and all accrued interest on the Bridge Note. f. Prepayment of Senior Subordinated Notes. The Company agrees to prepay all principal and accrued interest on the Senior Subordinated Notes, and BofA and the BofA Co- Investors agree to accept such prepayment, and waive all rights to receive any Additional Premium Amount (as defined in the Senior Subordinated Notes) pursuant to Section 2(b) of the Senior Subordinated Notes. g. Establishment of Facility A Commitment. ABRY and ABRY/CIP shall establish the Facility A Commitment as revolving lines of credit against which ABRY and ABRY/CIP will make Facility A Advances. Subject to the terms of this Agreement, the aggregate commitment of ABRY and ABRY/CIP shall be in the principal amount of $20,000,000 and each of ABRY and ABRY/CIP shall have a commitment to make its portion of Facility A Advances under the Facility A Commitment of which ABRY's commitment to make its portion of Facility A Advances will be in the principal amount of not more than $17,800,000 outstanding at any one time, and ABRY/CIP's commitment to make its portion of Facility A Advances will be in the principal amount of not more than $2,200,000 outstanding at any one time, (in each case reduced by the amount of any Facility A Note issued to it to the extent such Facility A Note is not paid in full on or prior to the Maturity Date). Subject to the terms of this Agreement, the Company shall have the right to obtain Facility A Advances from time to time, to repay Facility A Advances, and to obtain additional Facility A Advances including Facility A Advances made following the conversion of earlier Facility A Notes into Facility A Notes Conversion Stock. Interest shall accrue on the unpaid balance of each Facility A Note from time to time at the rate specified in such Facility A Note. Each Facility A Advance shall be made pro rata by ABRY and ABRY/CIP based on the amounts of their respective commitments, and shall be evidenced by the Company's delivery to ABRY and ABRY/CIP of Facility A Notes in the respective principal amounts of the portion of such Facility A Advance made by them to the Company. i. Closing Advance. At the Closing, ABRY and ABRY/CIP shall make the Closing Advance to the Company as specified in the Funds Flow Memorandum. ii. Conversion. If any Facility A Note is not paid in full on or prior to its Maturity Date, the principal balance and all accrued and unpaid interest thereon shall automatically convert into Preferred Stock of the Company, as more particularly described in such Facility A Note, which Preferred Stock shall be Facility A Note Conversion Stock. The Note Conversion Price shall be $15.6067 (as such amount may be proportionately adjusted for stock splits, stock dividends and the like effected after the date hereof and prior to the making of the related Facility A Advance) for any Facility A Note issued in connection with a Facility A Advance made before January 1, 1998. iii. Subsequent Facility A Advances. Facility A Advances made after the Closing Date shall be available to the Company for the purpose of funding the purchase prices of 17 19 acquisitions of radio stations. The obligation of ABRY and ABRY/CIP to make Facility A Advances following the Closing Date shall be conditioned upon the following: (1) No Event of Default described in Section 10 of any Facility A Notes shall have occurred and be continuing; (2) The Company shall have reserved sufficient Preferred Stock and Common Stock to permit the issuance of the Facility A Notes Conversion Stock upon the conversion of all or part of the Facility A Notes issued in connection with such Facility A Note Advance or any other related Facility A Notes Conversion Stock. (3) For any Facility A Advance to be made on or after January 1, 1998: (a) The Company and ABRY and ABRY/CIP shall have agreed in writing to the Note Conversion Price for Facility A Notes issued with respect to that Facility A Advance; and (b) If the Note Conversion Price with respect to a particular Facility A Advance is different from $15.6067 (as such amount may be proportionately adjusted for stock splits, stock dividends and the like effected after the date hereof and prior to the making of such Facility A Advance), the Company shall have (I) authorized in a Certificate of Designation (as defined in the Amended and Restated Certificate of Incorporation) which is then in full force and effect two new series of Preferred Stock having designations, powers, preferences, rights, qualifications, limitations and restrictions identical in all respects to the Series C Preferred Stock and the Series D Preferred Stock, respectively, except that each share of Preferred Stock of such new series of Preferred Stock shall have an initial Conversion Price (as defined in the Certificate of Incorporation) equal to the initial Note Conversion Price agreed to with respect to the applicable advance, and (II) authorized the issuance of sufficient shares of the new series of Preferred Stock so created so as to provide for the maximum number of shares of such series as would be issuable upon the conversion of the applicable Facility A Notes or the conversion or exchange of the Preferred Stock so issued. iv. Maturity. The Maturity Date for each Facility A Note will be the earlier of the first anniversary of the date on which the related Facility A Advance is made, and June 30, 1999. Neither ABRY nor ABRY/CIP shall be required to make its portion of any Facility A Advance after June 29, 1999. v. Facility A Advances. The Company will be limited to one Facility A Advance per calendar quarter. The Company will give ABRY and ABRY/CIP not less than fifteen (15) business days' prior written notice in advance of the date on which any Facility A Advance is to be made, specifying the amount of the Facility A Advance requested, the purpose thereof, the date on which the Facility A Advance is requested to be made, and if the advance is to be made on or after January 1, 1998, the proposed Note Conversion Price with respect to the Facility A Advance. 18 20 5. Closing. Subject to the satisfaction of the conditions specified in Section 6 hereof, the closing of the transactions contemplated by this Agreement (the "Closing") shall occur on June 28, 1996, at the offices of Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois, commencing at 10:00 local time, or at such other place or on such other date as may be mutually agreeable to the Company and the Investors. The date and time of the Closing as finally determined pursuant to this Section 5 are referred to herein as the "Closing Date." 6. Conditions to the Investors' Obligations. The obligation of the Investors to consummate the transactions provided for in this Agreement is subject to the fulfillment prior to or as of the Closing of the following conditions: a. Representations and Warranties. The representations and warranties of the Company and Citadel under this Agreement shall be true and correct at and as of the Closing Date as though then made. The representations and warranties of Citadel contained in the Acquisition Agreements, and, to the best knowledge of the Company and Citadel, the representations and warranties of the sellers contained in the Acquisition Agreements shall be true and correct at and as of the Closing Date. b. Compliance with Agreement. Each of the Company and Citadel shall have performed and complied in all material respects with all agreements and conditions required by this Agreement. c. Third Party Consents and Filings. No permit, consent, approval or authorization of, or declaration to or filing with, any governmental authority (including, without limitation, the FCC) or other third party (including, without limitation, waivers of statutory or contractual preemptive rights or rights of first refusal) is required in connection with the execution, delivery and performance by the Company of this Agreement, the Other Documents or any other agreements contemplated hereby, or the consummation by the Company of any other transactions contemplated hereby or thereby except as for such consents, approvals, authorizations, declarations or filings which have been received or made prior to the Closing and copies of which have been delivered to the Investors. The Company and ABRY shall have received early termination of the waiting period under the Hart-Scott Act with respect to the Hart-Scott Filing made by them on June 10, 1996. d. No Default. There shall not exist any failure by the Company or Citadel to observe or perform in any material respect, any covenant, condition or agreement to be observed or performed pursuant to the terms of the FINOVA Credit Agreement, the Note and Warrant Purchase Agreement, the Class A Note Agreement, the Series A/B Purchase Agreement, or the Series C Purchase Agreement. e. Amendment and Restatement of Class A Note Agreement. The Company, Citadel and BFC shall have executed and delivered the Amended and Restated Class A Note Agreement, and the Amended and Restated Class A Note Agreement shall be in full force and effect as of the Closing. 19 21 f. Amendment and Restatement of BofA Warrants. The Company shall have issued the Amended and Restated BofA Warrant to BofA, and the Amended and Restated BofA Warrant shall be in full force and effect as of the Closing. g. 1996 Equity Incentive Plan. The Company shall have adopted the 1996 Equity Incentive Plan, and shall have granted options thereunder to purchase an aggregate of 300,000 shares of Class A Common Stock at an exercise price of $17.17, of which options to purchase 150,000 shares of Class A Common Stock shall have been granted to LRW, and the remainder of the initial grant shall have been made to the persons and in the numbers of shares set forth on Schedule 3 to this Agreement. h. LRW Agreements. The Company and LRW shall have entered into the Wilson Option Agreement, and the Company, Citadel and LRW shall have entered into the Employment Agreement, and the Wilson Note Forgiveness Agreement, and each of the Wilson Option Agreement, the Employment Agreement and the Wilson Note Forgiveness Agreement shall be in full force and effect as of the Closing. i. BofA Agreements. BofA and the BofA Co-Investors shall have entered into the BofA Proxy, and the BofA Proxy shall be in full force and effect as of the Closing. The Company and the BofA Co-Investors shall have executed the Termination of Letter Agreement Re Section 5 Issuances. j. Mesirow Repurchase Agreement. The Company and Mesirow shall have entered into the Mesirow Repurchase Agreement, and the Mesirow Repurchase Agreement shall be in full force and effect as of the Closing. k. Investor Documents. The parties to the Registration Rights Agreement, the Stockholders Agreement, and the Voting Agreement shall have entered into those agreements, and each of the Registration Agreement, the Stockholders Agreement and the Voting Agreement shall be in full force and effect as of the Closing. l. Management and Consulting Services Agreement. Citadel and ABRY Partners, Inc. shall have entered into the Management and Consulting Services Agreement, and the Management and Consulting Services Agreement shall be in full force and effect as of the Closing. m. Amendment of Certificate of Incorporation. The Amended and Restated Certificate of Incorporation shall be in full force and effect under the laws of Nevada as of the Closing as so amended and restated, and shall not have been further amended or modified. n. FINOVA Amendment and Exchange. FINOVA shall have delivered the FINOVA Amendment, and the FINOVA Amendment shall be in full force and effect as of the Closing; and FINOVA shall have exchanged its certificates representing the Old Class B Common Stock for certificates representing the same number of shares of Class C Common Stock. o. Opinions of the Company's Counsels. The Investors and Mesirow shall have received from Osborn Maledon, P.A., counsel for the Company, Hartman & Armstrong, Ltd., special 20 22 Nevada counsel for the Company, and Reed, Smith, Shaw & McClay, special FCC counsel for the Company, the legal opinions dated the Closing Date substantially in the form of Exhibits P-R, respectively. p. Acquisition Agreements. The Acquisition Agreements shall be in full force and effect as of the Closing and shall not have been amended or modified. As of the Closing, the conditions precedent to Citadel's obligations set forth in the Acquisition Agreements shall have been satisfied in full (without reliance on any waiver by the Company or Citadel), and the acquisitions contemplated by the Acquisition Agreements shall have been consummated in accordance with its terms in all material respects. q. Qualification Under State Securities Laws. All registrations, qualifications, permits and approvals required under applicable state securities laws shall have been obtained for the lawful execution, delivery and performance of this Agreement, the effectiveness of the Amended and Restated Certificate of Incorporation, the Redemptions, the Reclassification, the Exchange, the prepayment of the Senior Subordinated Notes, the offer and sale of the Series C Preferred Stock and the Series D Preferred Stock, the issuance of, and borrowings under, the Facility A Notes, and any issuance of Investor Stock. r. Closing Deliveries. The Company and Citadel shall have made the deliveries listed in Section 7, in form and substance satisfactory to the Investors and their counsel. s. Proceedings and Documents. All corporate and other proceedings and actions taken in connection with the transactions contemplated hereby and all certificates, opinions, agreements, instruments and documents mentioned herein or incident to any such transactions, shall be reasonably satisfactory in form and substance to the Investors. t. Resignation of Director. William P. Sutter, Jr. shall have resigned as a member of the Board of Directors of each of the Company and Citadel. u. Fees and Expenses. The Company shall have reimbursed the Investors for the fees and expenses provided in Section 13.i. hereof, to the extent the Investors have requested such reimbursement. v. Waiver. Any condition specified in this Section 6 may be waived if consented to in writing by the Investors. 7. Closing Deliveries. a. Deliveries By the Company to ABRY and ABRY/CIP. At the Closing, the Company shall deliver the documents to ABRY and ABRY/CIP: i. certificates representing the Shares, duly authorized and issued by the Company; and ii. Facility A Notes in the aggregate amount of the Closing Advance. 21 23 b. Deliveries By the Company to the Selling Investors. At the Closing, the Company shall deliver the following to the Selling Investors: i. the Redemption Payment to be paid for Redemption Shares held by the Selling Investors; ii. all accrued and unpaid dividends on the Old Series B Preferred Stock and the Old Series D Preferred Stock; and iii. all outstanding principal and interest on the Senior Subordinated Notes. Each payment to be made pursuant to this Section 7.b. shall be by a cashier's or certified check, or by wire transfer of immediately available funds to the payee's account pursuant to wire transfer instructions to be provided by the payee at least two days prior to the Closing Date, or such other account as the payee shall direct. c. Deliveries By the Company to the Investors. At the Closing, the Company shall deliver the following to the Investors: i. each of the documents and agreements listed in Sections 6.e. through 6.p., inclusive; ii. an Officer's Certificate dated the Closing Date, stating that the conditions specified in Sections 6.a. through 6.v., inclusive, have been fully satisfied; iii. certified copies of (A) the resolutions duly adopted by the Board of Directors and the stockholders of the Company and the Board of Directors of Citadel authorizing the Transactions Contemplated By This Agreement, including, (1) waivers of statutory and contractual preemptive rights or rights of first refusal with respect to the issuance and sale of the Shares, the issuance of the Facility A Notes and the issuance of any Investor Stock, and (2) the election of the ABRY Directors and the ABRY/CIP Director as directors of the Company and of Citadel, and (B) the resolutions duly adopted by the Company's stockholders adopting the Amended and Restated Certificate of Incorporation; iv. certified copies of the Amended and Restated Certificate of Incorporation, all amendments thereto and the Company and Citadel's Bylaws, each as in effect at the Closing; v. certified copies of (A) the Acquisition Agreements, and (B) the Funds Flow Memorandum, each as in effect at the Closing and with all other agreements, documents or instruments related thereto; vi. certificates of good standing of the Company and Citadel from their state of incorporation; 22 24 vii. an officer's certificate listing (A) the name of each of the Company's and Citadel's directors as of the Closing, (B) the name and title of each of the Company's officers as of the Closing and (C) after giving effect to the transactions contemplated by this Agreement, the name of each stockholder of the Company, Citadel, and Citadel's Subsidiaries setting forth the number and class of shares held and the percentage of the total of such shares held; viii. copies of all third party and governmental consents, approvals and filings required in connection with the consummation of the transactions hereunder (including, without limitation, all filings with the FCC and similar state regulatory authorities, blue sky law filings and waivers of all preemptive rights and rights of first refusal); and ix. such other documents relating to the transactions contemplated by this Agreement as the Investor may reasonably request. d. Deliveries Among the Company and the Investors. i. Delivery of Stock Certificates and Warrants. At the Closing, the BofA Co-Investors shall deliver to the Company their stock certificates representing the Old Class C Common Stock, duly endorsed, for exchange in connection with the redemption of the Old Class C Common Stock being redeemed in the Redemptions, and the Company shall deliver to the BofA Co- Investors certificates for their Class B Common Stock. The Selling Investors other than the BofA Co-Investors shall deliver to the Company stock certificates, duly endorsed, representing the shares of Preferred Stock and BofA Warrants to be repurchased by the Company in the Redemptions, and the Company shall deliver to the Selling Investors other than the BofA Co-Investors and Mesirow their Investor Stock to be held by them immediately after the Redemptions, the Reclassification and the Exchange. Upon presentation by FINOVA of its certificate representing the Old Class B Common Stock, the Company shall deliver to FINOVA its certificate for Class C Common Stock. ii. Payment of the Purchase Price. The Company's delivery of the Shares to ABRY and ABRY/CIP at the Closing shall be against delivery to the Company of the Purchase Price by a cashier's or certified check, or by wire transfers of immediately available funds to the account or accounts designated by the Company as set forth in the Funds Flow Memorandum. iii. Closing Advance. ABRY shall advance to the Company the sum of $4,147,400 under its Facility A Commitment, and ABRY/CIP shall advance to the Company the sum of $512,600 under its Facility A Commitment (collectively, the "Closing Advance"). 8. Representations and Warranties by Company and Citadel. Each of the Company and Citadel represents and warrants to the Investors as follows as of the date hereof: a. Organization and Standing: Certificate of Incorporation and Bylaws. i. Each of the Company and Citadel is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. Each of the Company and Citadel has all requisite corporate power and authority to own its properties and conduct its business, enter into this Agreement and each of the Other Documents to which it is a party, and 23 25 consummate the transactions contemplated hereby and thereby. The copies of the charter documents and bylaws of the Company and Citadel which have been furnished to the Investors reflect all amendments made thereto at any time prior to the date of this Agreement and are correct and complete. Each of the New Mexico Corporations is a corporation duly organized, validly existing and in good standing under the laws of the State of New Mexico. Each of the New Mexico Corporations has all requisite corporate power and authority to own its properties and conduct its business. The copies of the charter documents and bylaws of the New Mexico Corporations which have been furnished to the Investors reflect all amendments made thereto at any time prior to the date of this Agreement and are true and correct. ii. The Company and each of the Subsidiaries is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which the character and location of its properties (owned or leased) or the nature of its business activities makes such qualification necessary, except for such jurisdictions where the failure to be so qualified would not have a material adverse effect on its business, properties, financial condition or results of operations. b. Subsidiaries. Neither the Company nor Citadel has any Subsidiary (other than Citadel, with respect to the Company) or owns or holds the right to acquire (directly or indirectly) any Equity Securities in any other Person, except for its rights to acquire the stock of the New Mexico Corporations pursuant to the KHFM/KHFN Purchase Agreement. The Company owns all of the issued and outstanding Equity Securities of Citadel free and clear of any Liens other than the Lien in favor of FINOVA. Upon its acquisition of the stock of the New Mexico Corporations, Citadel shall own all of the issued and outstanding Equity Securities of the New Mexico Corporations free and clear of any Liens. c. Equity Securities of the Company. As of the Closing and immediately thereafter, the authorized Equity Securities of the Company will consist of (a) 26,906,933 shares of Common Stock, (i) of which (A) 14,750,000 shares are voting shares of Class A Common Stock, (B) 156,933 shares are non-voting shares of Class B Common Stock, and (C) 12,000,000 shares are non-voting shares of Class C Common Stock, and (ii) of which 960,000 shares of Class A Common Stock, 18,831.954 shares of Class B Common Stock and 74,488 shares of Class C Common Stock will be issued and outstanding, and (b) 24,767,201 shares of Preferred Stock, of which (w) 750,000 shares will have been designated as the Company's Series A Preferred Stock, of which 746,411.86 shares will be issued and outstanding, (x) 17,201 shares will have been designated as the Company's Series B Preferred Stock, of which 17,200.724 shares will be issued and outstanding, (y) 12,000,000 shares will have been designated as the Company's Series C Preferred Stock, of which 1,656,019.934 shares will be issued and outstanding, and (z) 12,000,000 shares will have been designated as the Company's Series D Preferred Stock, of which 1,512,833.766 shares will be issued and outstanding. Schedule 4 lists the names of the beneficial holders of all the outstanding shares of Class A Common Stock, Class B Common Stock, Class C Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock as of the Closing. Such issued and outstanding shares of Class A Common Stock, Class B Common Stock, Class C Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will be, as of the Closing and immediately thereafter, duly authorized, validly issued, fully paid and nonassessable. As of the Closing and immediately thereafter, neither the Company nor Citadel will have outstanding any stock or securities convertible or exchangeable for any shares of 24 26 its Equity Securities, except for the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and the Series D Preferred Stock, each of which is convertible into Common Stock, the Series C Preferred Stock, which is convertible into Series D Preferred Stock, the Series D Preferred Stock, which is convertible into Series C Preferred Stock, the Class B Common Stock and the Class C Common Stock, which is convertible into Class A Common Stock, the BofA Warrants, which are exercisable for shares of Class B Common Stock, the Facility A Notes issued in connection with the Closing Advance, and Employee Incentive Securities which are exercisable for Class A Common Stock. As of the Closing, neither the Company nor Citadel shall be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its Equity Securities, except as expressly provided in the Stockholders Agreement. No holder of Equity Securities or any other security of the Company or Citadel and no other Person is entitled to any preemptive right, right of first refusal or similar right as a result of the issuance and sale of the Shares and the issuance of Investor Stock. Except for the Stockholders Agreement, the Voting Agreement, the BofA Proxy, the options previously granted to employees of Citadel, the Wilson Stock Options and the 1996 Equity Incentive Plan, there are no agreements, arrangements or trusts between or for the benefit of the Company's or any Subsidiary's stockholders with respect to the voting or transfer of the Company's or such Subsidiary's Equity Securities or with respect to any other aspect of the Company's or such Subsidiary's affairs. Neither the Company nor Citadel have violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its Equity Securities. The Common Stock and Preferred Stock of the Company, when issued pursuant to the terms of this Agreement, will have the rights, preferences, and privileges specified in the Amended and Restated Certificate of Incorporation and will be free and clear of all Liens and restrictions, other than Liens that might have been created or suffered solely by the Holders thereof, and restrictions on transfer imposed by the Securities Act or applicable state securities laws. The Investor Stock is duly authorized and has been reserved for issuance upon conversion of the Investor Stock and the Facility A Notes, and when issued upon such conversion in accordance with the terms of the Amended and Restated Certificate of Incorporation, or the Facility A Notes, as the case may be, will be duly authorized, validly issued, fully paid and nonassessable, and free and clear of all Liens and restrictions, other than Liens that might have been created or suffered solely by the Holders thereof. d. Delivery of Documents. The Company has delivered to the Investors complete and accurate copies of all amendments to each of the documents listed on Schedule 5, relating to indebtedness of the Company and/or Citadel, each of which amendments are also listed on Schedule 5. Each of the documents listed on Schedule 5, as amended as provided on Schedule 5, is in full force and effect, without default on the part of the Company or Citadel. e. Financial Condition. The Company has delivered to the Investors complete and accurate copies of the financial statements of the Company and Citadel consisting of: 25 27 i. the audited consolidated balance sheets of the Company and Citadel as of December 31, 1992, 1993, 1994 and 1995 and the related statements of income and cash flows (or the equivalent) for the period then ended; and ii. the unaudited consolidated balance sheet of the Company and Citadel as of May 31, 1996, (the "Latest Balance Sheet"), and the related statements of income and cash flows (or the equivalent) for the five-month period then ended. Each of the foregoing financial statements (including in all cases the notes thereto) is accurate and complete in all material respects, is consistent with the books and records of the Company and Citadel (which, in turn, are accurate and complete in all material respects), presents fairly the consolidated financial condition, results of operations and, in the case of the statements described in Section 8.e.(i) above, changes in financial position of the Company and Citadel in accordance with GAAP, consistently applied, as of the dates and for the periods set forth therein, subject in the case of the unaudited financial statements to the lack of footnote disclosure and changes resulting from normal year-end audit adjustments (none of which would, alone or in the aggregate, be materially adverse to the financial condition, operating results, assets, operations or business prospects of the Company and Citadel taken as a whole). There has been no material adverse change in the business, operations, assets, liabilities, condition (financial or other) or prospects of the Company or any Subsidiary since May 31, 1996. f. Absence of Undisclosed Liabilities. Neither the Company nor any Subsidiary has any obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, including without limitation any tax liabilities due or to become due) which is not fully disclosed and adequately provided for in the financial statements delivered by the Company to the Investors prior to the date hereof, fully disclosed on Schedules to this Agreement, or in the Funds Flow Memorandum, except current liabilities incurred and obligations under agreements entered into in the usual and ordinary course of business since the date of such financial statements, none of which (individually or in the aggregate) is material to the business, properties, financial condition or results of operations of the Company or the Subsidiaries, and contingent liabilities that are not (individually or in the aggregate) material to the business, properties, financial condition or results of operations of the Company or the Subsidiaries. g. Other Agreements. The representations and warranties made by Citadel in the Acquisition Agreements, and, to the best knowledge of the Company and Citadel, the representations and warranties made by the other parties to the Acquisition Agreements in the Acquisition Agreements, are true and correct in all material respects, in each case regardless of any limitation on survival set forth in the Acquisition Agreements. h. Indebtedness. The table on Schedule 6 sets forth all outstanding short-term and long-term indebtedness of the Company and Citadel, and identifies specifically any such indebtedness in excess of $25,000. Neither of the Company nor any Subsidiary has any outstanding Indebtedness for Borrowed Money nor is a guarantor or otherwise contingently liable for any Indebtedness for Borrowed Money except as disclosed on Schedule 6. There exists no default, or event or condition which with the giving of notice and/or the passage of time, would constitute a 26 28 default, under the provisions of any instrument evidencing such Indebtedness for Borrowed Money or of any agreement relating thereto. i. Authorization; No Conflicts. i. All corporate actions and proceedings on the part of each of the Company and Citadel and their respective directors and stockholders necessary for the authorization, execution, filing, delivery and performance by the Company and Citadel of the Transactions Contemplated by This Agreement, have been lawfully and validly conducted. The execution, delivery and performance of this Agreement, the Other Documents, the Acquisition Agreements and the filing of the Amended and Restated Certificate of Incorporation have been duly authorized by the Company and Citadel, as the case may be. ii. Neither the execution, delivery and performance by each of the Company and Citadel of this Agreement, the Other Documents, the Acquisition Agreements or the other agreements contemplated hereby and thereby, nor the consummation of the Transactions Contemplated by This Agreement, do or shall (i) result in any violation of, (ii) conflict with, (iii) result in a breach of, (iv) constitute a default under, (v) result in the creation of any Lien upon the Company's or any Subsidiary's Equity Securities or assets pursuant to, (vi) give any third party the right to accelerate any obligation under, (vii) require any authorization, consent, approval, exemption or other action by or notice to or filing with any third party or any court or administrative or governmental body pursuant to, any of the terms of (A) any provision of federal or state law, (B) any judgment, decree, order, rule or regulation to which the Company or any Subsidiary is subject, (C) the certificate of incorporation or bylaws of the Company or any Subsidiary, (D) any mortgage, indenture, agreement or instrument to which the Company or any Subsidiary is a party or by which any of them or any of their respective assets is bound (including, without limitation, any preemptive or other rights in favor of any holders of Equity Securities of the Company or Citadel), except for any such authorizations, consents, approvals, exemptions and other actions by or notices to or filings with third parties which have been made or received; provided, however, that with respect to the immediately preceding clause (vii), no disclosures need be made pursuant to this Section with respect to consents required pursuant to the Acquisition Agreements. None of the Subsidiaries are subject to any restrictions upon making loans or advances or paying dividends to, transferring property to, or repaying any Indebtedness owed to, the Company or another Subsidiary, except pursuant to the FINOVA Credit Agreement and the Amended and Restated Class A Note Agreement. j. Binding Obligations. This Agreement, the Other Documents and the other agreements contemplated thereby constitute the legal, valid and binding obligations of the Company and Citadel and are enforceable against the Company and Citadel in accordance with their respective terms. k. Securities Laws. Assuming the accuracy and completeness of the representations and warranties of the Investors under this Agreement, the offer and sale of the Shares, and the issuance of the Facility A Notes and any Investor Stock (including any Investor Stock issuable upon conversion of the Facility A Notes) are and will be exempt from the registration and prospectus delivery requirements of the Securities Act. 27 29 l. No Brokers or Finders. No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against the Company, Citadel or the Investors for any commission, fee or other compensation as a finder or broker, or in any similar capacity, except as expressly provided in the Acquisition Agreements. The Company and Citadel shall pay, and hold the Investors harmless against, any liability, loss or expense (including, without limitation, attorneys' fees and out-of-pocket expenses) arising in connection with any claim for any such commission, fee or other compensation, whether or not disclosed. m. Holding Company Status. The Company's sole asset consists of the Equity Securities of Citadel. The Company has no employees and conducts no business operations. n. Litigation. Except as disclosed on Schedule 7, there is no legal action, suit, arbitration or other legal, administrative or other governmental investigation, inquiry or proceeding (whether federal, state, local or foreign) pending or threatened against or affecting the Company or any Subsidiary, any of their respective properties, assets or businesses, or the consummation of the Transactions Contemplated by this Agreement. Neither the Company nor any Subsidiary is in default with respect to any order, writ, judgment, injunction, decree, determination or award of any court or of any governmental agency or instrumentality (whether federal, state, local or foreign). Neither the Company nor any Subsidiary has knowledge of any unasserted claim, the assertion of which is likely and that, if asserted, will be for legal or equitable relief that, if granted, would have a material adverse effect on the business, properties, financial condition or results of operations of the Company or such Subsidiary. No injunction, stay or restraining order is in affect prohibiting the consummation of any of the Transactions Contemplated by this Agreement. o. Interested Party Transactions. Except as disclosed on Schedule 8, no officer, director or shareholder of the Company or any Subsidiary or any Affiliate or "associate" (as such term is defined in Rule 405 of the Commission under the Securities Act) of any such Person or the Company or any Subsidiary has or has had, either directly or indirectly, (a) an interest in any Person which (i) furnishes or sells services or products which are furnished or sold or are proposed to be furnished or sold by the Company or any Subsidiary, or (ii) purchases from or sells or furnishes to, or proposes to purchase from, sell to or furnish to, the Company or any Subsidiary any goods or securities, or (b) a beneficial interest in any contract or agreement to which the Company or any Subsidiary is a party or by which any of them may be bound or affected. p. Company not an "Investment Company". The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. q. Compliance with Applicable Laws. Neither the Company nor any Subsidiary is in default in respect of any judgment, order, writ, injunction, decree or decision of any governmental body, which default would have a material adverse effect on the business, properties, financial condition or results of operations of the Company or any Subsidiary. The Company and the Subsidiaries are in compliance in all material respects with all applicable statutes and regulations of all governmental bodies, a violation of which would have a material adverse effect on the business, properties, financial condition or results of operations of the Company or any Subsidiary. No condemnation, eminent domain or expropriation has been commenced or, to the best knowledge of the Company and Citadel, threatened against the property which the Company or any Subsidiary will 28 30 own upon the Closing. Neither the Company nor any Subsidiary has at any time made any payments for political contributions or made any bribes, kickback payments or other illegal payments. All necessary Federal Aviation Authority ("FAA") authorizations have been obtained with respect to the towers on which the Company's or any Subsidiary's equipment is located. r. FCC Matters. The Company and the Subsidiaries (i) have duly and timely filed all reports and other filings which are required to be filed by such Persons under the Communications Act of 1934 or any other applicable law, rule or regulation of any governmental body, the non-filing of which would have a material adverse effect on the business, properties, financial condition or results of operations of the Company or any Subsidiary, and (ii) are in compliance with all such laws, rules and regulations, the noncompliance with which would have a material adverse effect on the business, properties, financial condition or results of operations of the Company or any Subsidiary. All information provided by or on behalf of the Company or any Subsidiary in any material filing with the FCC was, at the time of filing, true, complete and correct in all material respects when made, and the FCC has been notified of any substantial or significant changes in such information as may be required in accordance with applicable laws, rules and regulations. s. Licenses and Permits. Schedule 9 contains a complete and accurate list and summary description of all material licenses, permits, franchises, certificates, approvals and other authorizations of federal, state and local governments or other similar rights (collectively, the "Licenses") used by the Company or any of its Subsidiaries (assuming for this purpose consummation of the Acquisition Agreements) in the conduct of its businesses. Except as indicated on Schedule 9, each of the Company and its Subsidiaries has or possesses all right, title and interest in and to all of the Licenses which are necessary to conduct its businesses. Each of the Company and its Subsidiaries has taken all necessary action to maintain such Licenses. No loss or expiration of any such License is threatened, pending or reasonably foreseeable (other than expiration upon the end of the term thereof) if the Company or such Subsidiary has complied with all of the terms thereof. t. Insurance. Schedule 10 contains a description of each insurance policy maintained by the Company or its Subsidiaries with respect to its properties, assets and businesses, and each such policy is in full force and effect as of the Closing. Neither the Company nor any Subsidiary is in default with respect to its obligations under any insurance policy maintained by it. The insurance coverage of the Company and its Subsidiaries is customary for well-insured corporations of similar size engaged in similar lines of business. u. Employees and ERISA. i. Employees. Neither the Company nor Citadel is aware that any executive or key employee of the Company or any Subsidiary or any group of employees of the Company or any Subsidiary has any plans to terminate employment with the Company or any Subsidiary. Neither the Company, any of its Subsidiaries nor any of their employees is subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreements relating to, affecting or in conflict with the present or proposed business activities of the Company and its Subsidiaries, except for agreements between the Company or Citadel, on the one hand, and its present and former employees, on the other hand. 29 31 ii. No ERISA Plans. Neither the Company nor any of its Subsidiaries has any obligation to contribute to, or any other liability with respect to (i) any "multiemployer plan" (as defined in Section 3(37) of ERISA), (ii) any plan or arrangement, whether or not terminated, which provides medical, health, life insurance or other welfare-type benefits for current or future terminated or retired employees (except for limited continued medical benefit coverage required to be provided under the Consolidated Omnibus Budget Reconciliation Act, as amended), (iii) any employee plan which is a "defined benefit plan" (as defined in Section 3(35) of ERISA), whether or not terminated, or (iv) except as disclosed on Schedule 11 any employee plan which is a "defined contribution plan" (as defined in Section 3(34) of ERISA), whether or not terminated. iii. Other Plans, Agreements or Arrangements. Except as set forth on Schedule 11, neither the Company nor any of its Subsidiaries maintains or has any obligation to contribute to, or any other liability with respect to, any plan or arrangement providing benefits to current or former employees, including any bonus plan or plan for deferred compensation, or pursuant to any employment agreement, consulting agreement, noncompetition agreement or otherwise. True and complete copies of each such plan, agreement or other arrangement are attached to and included as part of Schedule 11. v. Taxes. Each of the Company and its Subsidiaries has filed all tax returns which it is required to file, or filed extensions pursuant to which such tax returns are not yet due, and, except as disclosed on Schedule 12 with respect to certain potential tax liabilities relating to the use of net operating losses by the New Mexico Corporations (which liabilities are being retained by the sellers of the stock of the New Mexico Corporations) all such tax returns are true and correct in all material respects. Except as disclosed on Schedule 12 with respect to certain potential tax liabilities relating to the use of net operating losses by the New Mexico Corporations (which liabilities are being retained by the sellers of the stock of the New Mexico Corporations), each of the Company and its Subsidiaries has paid to the appropriate taxing authorities all taxes owed by it and has properly withheld and paid over all taxes which it is obligated to withhold from amounts owing to any employee, creditor or third party. Neither the Company nor any of its Subsidiaries has waived any statute of limitations with respect to taxes or agreed to any extension of time with respect to a tax assessment or deficiency. The assessment of any additional taxes for periods for which tax returns have been filed is not expected. The federal income tax returns of each of the Company and its Subsidiaries have never been audited and are closed for all tax years through December 31, 1992. There are no pending federal or state tax audits being conducted or which any of the Company and its Subsidiaries has notice. Neither the Company nor any Subsidiary is liable for taxes incurred by any Person other than the Company or such Subsidiary. Neither the Company nor any Subsidiary has entered into any tax allocation or taxsharing agreement. w. Pending Acquisitions. Citadel has agreed to acquire the radio stations listed on Schedule 13 (the "Pending Acquisition Stations"), pursuant to the purchase agreements listed on Schedule 13. Citadel's acquisition of each Pending Acquisition Station is expected to occur during the periods listed on Schedule 13. Each of the acquisitions of the Pending Acquisition Stations is subject only to customary closing conditions, and neither the Company nor Citadel has any knowledge of any impediments to the closing of Citadel's acquisition of the Pending Acquisition Stations pursuant to the terms of the applicable purchase agreement. 30 32 x. Disclosure. The representations and warranties contained in this Agreement or incorporated herein by reference and the information appearing in the writings furnished by the Company or Citadel to the Investors pursuant hereto taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements herein or therein not misleading. There is no fact which the Company and Citadel have not disclosed to the Investors in writing which materially and adversely affects the properties, business, prospects, results of operation or condition (financial or other) of the Company or any Subsidiary or the ability of the Company or Citadel to perform this Agreement or the Other Documents or observe the terms of the Amended and Restated Certificate of Incorporation. 9. Representations, Warranties and Covenants of the Investors. a. Representations and Warranties of the Investors. Each Investor hereby represents, warrants and covenants on behalf of himself, herself or itself, severally and not jointly, to and with the Company as follows: i. Power to Execute Agreements. Each Investor has full power and authority to execute, deliver and perform this Agreement and each of the Other Documents to which such Investor is a party, all of which are valid and binding obligations of such Investor, enforceable against such Investor in accordance with their respective terms, except as such enforcement may be limited by insolvency, bankruptcy, reorganization, or other laws relating to the enforcement of creditors, rights or by general equity principles, and to consummate the Transactions Contemplated by this Agreement. ii. Agreements Not in Breach of Other Instruments. The execution, delivery and performance by each Investor of this Agreement and the Other Documents to which such Investor is a party and the consummation of the Transactions Contemplated by this Agreement will not result in any violation of, conflict with, result in a breach of any of the terms of, or constitute a default under, any federal or state law or any judgment, decree, rule or regulation to which such Investor is subject or any agreement or other instrument to which such Investor is a party or by which such Investor is bound. iii. Securities to be Restricted. Each Investor understands that all Investor Stock held by such Investor is, and all Investor Stock to be received by such Investor will constitute, when issued,"restricted securities" within the meaning of Rule 144 under the Securities Act. Each Investor understands that the Investor Stock has not been registered under the Securities Act and must be held indefinitely without any transfer, sale or other disposition unless such Investor Stock is subsequently registered under the Securities Act or registration is not required under the Securities Act as the result of an available exemption. Each Investor acknowledges that such Investor must bear the economic risk of its investment in the Investor Stock for an indefinite period of time since they have not been registered under the Securities Act and therefore cannot be sold unless they are subsequently registered or an exemption from registration is available. iv. Reliance Upon Information. Each Investor understands that the Investor Stock is being issued in reliance on specific exemptions from the registration requirements of federal and state securities laws and that the Company is relying upon the truth and accuracy of 31 33 such Investor's representations, warranties, agreements, acknowledgments and understandings set forth herein to determine such Investor's suitability to acquire the Investor Stock to be acquired by it. v. No Brokers or Finders. Such Investor has not contracted for or otherwise arranged for the services of any Person who has, or as a result of the transactions contemplated herein will have, any right or valid claim against the Company, any Subsidiary or any Investor for any commission, fee or other compensation as a finder to broker, or in any similar capacity. b. Additional Representations and Warranties of ABRY and ABRY/CIP. Each of ABRY and ABRY/CIP hereby represents and warrants on behalf of itself, severally and not jointly, to the Company as follows: i. No Distribution. It is acquiring the Shares for its own account without a view to public distribution and, except as contemplated by this Agreement, the Other Documents and the Amended and Restated Certificate of Incorporation, such Investor has no contract, undertaking, agreement or arrangement to transfer, sell or otherwise dispose of any of the Investor Stock issued to it or any interest therein to any other Person. ii. Accredited Investor. It is an accredited investor, as that term is defined in Regulation D, Section 501 of the Securities Act. c. Additional Representations and Warranties of the Existing Investors. Each of the Existing Investors hereby represents and warrants on behalf of itself, severally and not jointly, to the Company as follows: i. Title to Shares. Such Existing Investor has, and will deliver to the Company at the Closing, good and marketable title to all of the Redemption Shares owned by it, free and clear of any pledge or other encumbrance arising out of the acts or omissions of any Person other than acts or omissions of the Company. ii. Accredited Investor; Suitability; No Distribution. Each of BofA and BFC hereby certifies that it is an accredited investor, as that term is defined in Regulation D, Section 501 of the Securities Act. Each of the BofA Co-Investors represents that he or she is sophisticated in financial matters and is able to evaluate the risks and benefits of the Investor Stock being acquired. Each Existing Investor understands that the Investor Stock being acquired is being delivered in reliance on exemptions from the registration requirements of federal and state securities laws and that the Company is relying upon the truth and accuracy of such Existing Investor's representations, warranties, agreements, acknowledgments and understandings set forth herein to determine its suitability to acquire the Investor Stock. Each Existing Investor (other than Thomas E. Van Pelt, who intends to transfer his Class B Common Stock to Cheryl Bartol and Andrea P. Joselit) and has acquired and/or is acquiring the Investor Stock being acquired by it for such Investor's own accounts without a view to public distribution and, except as contemplated by this Agreement, the Other Documents and the Amended and Restated Certificate of Incorporation, such Investor has no 32 34 contract, undertaking, agreement or arrangement to transfer, sell or otherwise dispose of any Investor Stock or any interest therein to any other Person. 10. Affirmative Covenants. Unless any of the following (other than the covenants set forth in Section 10.b., which may not be waived with respect to a Person without that Person's consent) is waived in writing by the Holders of a majority of the Underlying Stock, until the consummation of a Qualified Public Offering, the Company covenants as follows: a. Business Maintenance. The Company shall, and the Company shall cause each Subsidiary to: i. at all times cause to be done all things necessary to maintain, preserve and renew their existence and will use their best efforts to maintain, preserve and renew all material licenses, authorizations and permits necessary to the conduct of their business including, without limitation, all broadcast licenses, whether federal, state or otherwise; ii. maintain and keep their properties that are used in and necessary to their business taken as a whole in good repair, working order and condition in all material respects, and from time to time make all necessary or desirable repairs, renewals and replacements, so that their businesses may be properly and advantageously conducted at all times; iii. apply for and continue in force with good and responsible insurance companies insurance policies covering risks of such types and in such amounts as are customary for corporations of similar size engaged in similar lines of business, provided, that the Company and its Subsidiaries may self-insure in accordance with good business practice; iv. pay and discharge when payable all taxes, assessments and governmental charges imposed upon their properties or upon the income or profits therefrom (in each case before the same becomes delinquent and before penalties accrue thereon) and all claims for labor, materials or supplies that if unpaid might by law become a lien upon any of their property, unless and to the extent that (i) the same are being contested in good faith and by appropriate proceedings and adequate reserves (as determined in accordance with generally accepted accounting principles, consistently applied) have been established on the books with respect thereto or (ii) such failure to pay or discharge does not have, and cannot reasonably be expected to have, a material adverse effect upon the business, properties, financial condition or results of operations of the Company or such Subsidiary; v. comply with all other obligations that the Company or any Subsidiary incurs pursuant to any material contract or agreement, whether oral or written, express or implied, as such obligations become due, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves (as determined in accordance with generally accepted accounting principles, consistently applied) have been established on the books with respect thereto; vi. comply with all applicable laws, rules and regulations of all governmental authorities including, without limitation, the rules and regulations of the FCC, the 33 35 violation of which might reasonably be expected to have a material adverse effect on the business, properties, financial condition or results of operations of the Company or such Subsidiary; vii. maintain proper books of record and account that fairly present its financial condition and results of operations and make provisions on its financial statements for all such proper reserves as in each case are required in accordance with generally accepted accounting principles, consistently applied; viii. use reasonable efforts to consummate the acquisition of each of the Pending Acquisitions Stations in an expedient manner pursuant to the terms of the applicable purchase agreement; and ix. use best efforts to cause the Company's holders of stock options (which such options are granted pursuant to the 1996 Equity Incentive Plan or any prior or future plan or grant) to enter into an agreement to be bound by the provisions of Section 3 (restrictions on transfer) and Section 6 (drag along rights) of the Stockholders Agreement. b. Financial Statements, Other Information, Inspection of Property; Board of Directors' Meetings. As to each of BofA, BFC, ABRY and ABRY/CIP, as long as such Investor holds any Equity Securities of the Company, and as to any Holder of 10% or more of the Underlying Common Stock: i. Financial Statements. The Company shall deliver: (1) as soon as available but in any event within 30 days after the end of each monthly accounting period in each fiscal year, unaudited consolidated statements of income of the Company and its Subsidiaries for such monthly period and for the period from the beginning of the fiscal year to the end of such month, and consolidated balance sheets of the Company and its Subsidiaries as of the end of such monthly period, setting forth in each case comparison to the annual budget referred to in Section 10.b(i)(4) and to the corresponding period in the preceding year, and all such statements will be prepared in accordance with generally accepted accounting principles, consistently applied, except for the omission of footnotes thereto; (2) within 120 days after the end of each fiscal year, audited consolidated statements of income and cash flow of the Company and its Subsidiaries for such fiscal year, and consolidated balance sheets of the Company and its Subsidiaries as of the end of such fiscal year, all prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by an opinion (not qualified as to the going concern nature of the Company) of an independent accounting firm of recognized national standing, which opinion must be accompanied by a written statement stating whether, in connection with their audit examination, any Event of Default has come to their attention and specifying the nature and period of existence thereof, and a copy of such firm's annual management letter to the Board of Directors; (3) promptly upon receipt thereof, any additional reports, management letters or other detailed information concerning significant aspects of the Company's 34 36 operations and financial affairs given to the Company by its independent accountants (and not otherwise contained in other materials provided hereunder); (4) as soon as available, and in any event no later than 30 days before the close of each fiscal year, an annual budget prepared on a monthly basis for the Company and its Subsidiaries for the succeeding fiscal year (displaying anticipated statements of income and cash flows), and promptly upon preparation thereof any other significant budgets prepared by the Company or any of its Subsidiaries and any revisions of such annual or other budgets; (5) promptly (but in any event within five business days) after the discovery or receipt of notice of any event of default, any default by the Company or any Subsidiary under any other material agreement to which it or any of its Subsidiaries is a party or any other material adverse event or circumstance affecting the Company or any Subsidiary (including, without limitation, threatened or actual governmental investigations or proceedings and the filing of any material litigation against the Company or any Subsidiary or the existence of any dispute with any Person which involves threatened or probable material litigation being commenced), an Officer's Certificate specifying the nature and period of existence thereof and what actions the Company has taken and proposes to take with respect thereto; and (6) concurrently with the transmission thereof, copies of all financial statements, proxy statements, reports and any other general written communications which the Company sends to its stockholders, copies of all written notices given by the Company or any of its Subsidiaries to its senior lenders, and copies of all registration statements and all regular, special or periodic reports which it files, or any of its officers or directors file with respect to the Company, with the Commission or with any securities exchange or other agency or entity on which any of its securities are then listed or quoted and copies of all press releases and other statements made available generally by the Company to the public concerning material developments in the Company's or any of its Subsidiary's businesses. Each of the financial statements referred to in subsection (1) and (2) will be true and correct in all material respects as of the dates and for the periods stated therein, subject in the case of the unaudited financial statements to changes resulting from normal year-end audit adjustments (none of which would, alone or in the aggregate, have a material adverse effect on the business, properties, financial condition or results of operations of the Company, Citadel or any of their Subsidiaries). ii. Inspection of Property. The Company will permit any representatives designated by such Investor or Holder upon reasonable prior notice, during normal business hours and at such party's expense to (a) visit and inspect any of the properties of the Company and its Subsidiaries, (b) examine the corporate and financial records of the Company and its Subsidiaries and make copies thereof or extracts therefrom and (c) discuss the affairs, finances and accounts of any such corporations with the directors, officers, key employees and independent accountants of the Company and its Subsidiaries. The presentation of an executed copy of this Agreement by an Investor to the Company's independent accountants shall constitute the Company's and each of its Subsidiary's permission to its independent accountants to participate in discussions with such Persons. iii. Board Meetings. Each of the Company and Citadel shall hold no fewer than four meetings of its Board of Directors per year, and shall hold at least one such meeting during 35 37 every 120-day period. Each of the Company and Citadel will give each such Investor and Holder written notice of each meeting of the Board of Directors and each committee thereof at least five business days prior to the date of each such meeting, and each of the Company and Citadel shall permit a representative of each such Person to attend as an observer all meetings of its Board of Directors and all committees thereof, provided that in the case of telephonic meetings conducted in accordance with the Company's bylaws and applicable law, each such Person need receive only actual notice thereof at least 48 hours prior to any such meeting, and each such Person's representative shall be given the opportunity to listen to such telephonic meetings. Each representative shall be entitled to receive all written materials and other information (including, without limitation, copies of meeting minutes) given to directors in connection with such meetings at the same time such materials and information are given to the directors. If the Company proposes to take any action by written consent in lieu of a meeting of its Board of Directors or of any committee thereof, the Company shall give written notice thereof to each such Person prior to the effective date of such consent describing in reasonable detail the nature and substance of such action. c. Removal of Transfer Restrictions. Any legend endorsed on a certificate evidencing Equity Securities of the Company and any stop transfer instructions or notations on the Company's records with respect to Equity Securities of the Company issued hereunder directly or indirectly shall be removed or lifted and the Company shall issue a certificate without such legend to the Holder of such Equity Securities (i) if the transfer of such Equity Securities has been registered under the Securities Act, (ii) if such Equity Securities may be sold under Rule 144(k) of the Commission under the Securities Act or (iii) if such Holder provides the Company with an opinion of counsel (which counsel and opinion are reasonably satisfactory to the Company) stating that a sale or transfer of such Equity Securities may be made without registration under the Securities Act. d. Loss, Theft and Destruction of Securities. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Equity Securities of the Company and, in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Company, or in the case of any such mutilation, upon surrender and cancellation of any Equity Securities of the Company, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Equity Securities, a new certificate of like number of shares. e. Agreements with Employees. i. Agreements Governing Disposition of Common Stock. As of the Closing Date, and thereafter, the Company and, if applicable, each Subsidiary, shall enter into an agreement with each employee of any such Person who owns Equity Securities of the Company (excluding LRW), which agreement shall provide, in substance, that such employee shall not transfer Equity Securities of the Company owned by him or her to any Person who is not a member of the immediate family of such employee unless such employee shall first offer to sell his or her Equity Securities to the Company for a price per share of Common Stock equivalent equal to (x) 7.5 times the sum of (1) Operating Cash Flow and (2) Corporate Overhead, in each case for the twelve calendar months most recently concluded, plus (y) Consolidated Cash (as defined in the Stockholders Agreement) as of the end of the most recently concluded calendar month, minus (z) consolidated indebtedness of the Company (determined in accordance with GAAP) as of the end of the most 36 38 recently concluded calendar month, divided by the number of shares of Common Stock outstanding on the date of such offer (counted as if all outstanding Equity Securities of the Company were exercised, converted or exchanged on such date). The Company shall provide the Investors with a true and complete copy of each such agreement no later than 10 days after the receipt of such agreement by the Company from any employee. ii. Agreements Governing Consideration upon Sale of Equity Securities. As of the Closing Date, and thereafter, the Company and, if applicable, each Subsidiary, shall enter into an agreement (the form of which shall be reasonably satisfactory to the Investor) with each employee of any such Person who owns Equity Securities of the Company, which agreement shall provide, in substance, that if such employee shall receive any Change of Control Payment, such employee shall transfer such Change of Control Payment to the Company for disposition in accordance with the next sentence. The Company shall deem any such Change of Control Payment received by it to constitute additional consideration (i) payable to the Company (in the case of a sale of assets of the Company) or (ii) payable to all the holders of Equity Securities of the Company in accordance with the respective terms of such Equity Securities (in the case of a merger or sale of part or all of the Equity Securities of the Company), and shall pay or distribute such funds accordingly. The Company shall provide any Investor with true and complete copies of each such agreement upon the request of such Investor. f. Cooperation in Obtaining Regulatory Approvals. The parties hereto shall cooperate fully to prepare expeditiously, and cause to be filed with the FCC, the Department of Justice and the Federal Trade Commissions, such applications and other instruments as may be necessary (i) in connection with the change of control of the Company or any of its Subsidiaries if at any time an Investor notifies the Company that it desires to sell or otherwise transfer, shares of Equity Securities owned by it or to convert Equity Securities, or (ii) to take any other action requiring the approval or consent of the FCC, or a Hart Scott filing, at the request of the Investor. g. Reservation of Common Stock. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, Class B Common Stock, Class C Common Stock, Series C Preferred Stock and Series D Preferred Stock solely for the purpose of issuance upon the conversion of Investor Stock, such number of shares of Investor Stock issuable upon any such conversion. All shares of Investor Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, Liens and charges. The Company shall take all such actions as may be necessary to assure that all such shares of Investor Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange. h. Further Senior Credit Agreement. Upon any senior financing with a lender other than the FINOVA Credit Agreement, the Company and Citadel shall use reasonable efforts to cause the senior credit agreement not to prohibit payment of the principal and interest of the Facility A Notes or the payment of amounts by Citadel to the Company to enable the Company to pay such principal and interest. i. Market Revenue, Pacing Reports and Ratings Reports. Promptly following their receipt by Citadel, the Company shall deliver to ABRY and BFC copies of all Miller Kaplan 37 39 Monthly Market Revenue Reports subscribed to by Citadel. Promptly upon preparation thereof, Citadel shall deliver to ABRY and BFC copies of Citadel's weekly revenue pacing reports and quarterly rating reports. j. Key Man Insurance. Citadel shall use best efforts to obtain and maintain key man life insurance on the life of LRW in such amounts as may be reasonably requested by the Investors from time to time. 11. Negative Covenants. Unless any of the following is waived in writing by the Holders of a majority of the Underlying Common Stock, until the consummation of a Qualified Public Offering, the Company shall not, and the Company shall not permit any of its Subsidiaries to: a. Merger; Consolidation. Merge or consolidate with any Person or permit any Subsidiary to merge, consolidate with or to exchange shares with any Person (other than the Company or a wholly-owned Subsidiary of the Company), or acquire, directly or indirectly all or substantially all of the Equity Securities, equity interests or assets of any Person or business (other than a wholly-owned Subsidiary). b. Sale or Transfer of Assets. Sell, lease or otherwise dispose of, or permit any Subsidiary to sell, lease or otherwise dispose of any assets in violation of the FINOVA Credit Agreement or sell or otherwise dispose of any Equity Securities of any Subsidiary. c. Distributions. With respect to the Company, make any dividends, distributions or other shareholder expenditures with respect to its Equity Securities or apply any of its assets to the purchase, redemption or other retirement of, or set apart any sum for the payment of, or make any other distributions or reduction of capital or otherwise in respect of any of its Equity Securities, except pursuant to the Stockholders Agreement; provided, however, that this Section 11.c. (1) shall not apply to any Subsidiary, and (2) shall not prevent the Company from prepaying any of the Facility A Notes to the extent permitted under the FINOVA Credit Agreement and the Amended and Restated Class A Note Agreement. d. Investments. Make, or permit any Subsidiary to make, any loans or advances to, guarantees for the benefit of, or Investments in, any Person (other than a wholly-owned Subsidiary), except for (x) reasonable advances to employees in the ordinary course of business and (y) Investments having a stated maturity no greater than 180 days from the date the Company (or any Subsidiary) makes such Investment in (A) obligations of the United States government or any agency thereof or obligations guaranteed by the United States government, (B) certificates of deposit of commercial banks having combined capital and surplus of at least $100 million or (C) commercial paper with a rating from a nationally recognized credit rating agency in such agency's highest rating category. Notwithstanding the foregoing, no provision of this Section 11.d shall operate to prevent (i) advances in the ordinary course of business, not to exceed in aggregate of $25,000 at any time, in connection with local marketing arrangements to which the Company (or any Subsidiary) may be party from time to time; or (ii) Investments in Citadel. e. Limitations on Indebtedness for Borrowed Money. Create, incur, issue, assign, become liable with respect to, or extend the maturity of, or permit any Subsidiary to create, incur, 38 40 issue, assume, become liable with respect to, or extend the maturity of any Indebtedness for Borrowed Money except: i. any Indebtedness for Borrowed Money outstanding as of the date hereof pursuant to the FINOVA Credit Agreement and any notes issued pursuant thereto, and all Indebtedness for Borrowed Money outstanding as of the date hereof and disclosed on Schedule 6, plus up to $500,000 in aggregate amount outstanding at any one time; ii. the Amended and Restated Class A Note; iii. the Facility A Notes; and iv. any Indebtedness for Borrowed Money pursuant to a Permitted Senior Substitution; provided, however, that neither the Company nor any of its Subsidiaries shall extend the maturity of any Indebtedness for Borrowed Money described in the immediately preceding clauses (i) or (ii) without the prior written consent of the Holders of a majority of the Underlying Common Stock. f. Liens. Create, incur, assume or suffer to exist any Liens except Permitted Liens. g. Amendment to Certificate of Incorporation and Bylaws. Except as contemplated by this Agreement, make any amendment to the certificate or articles of incorporation or the bylaws of the Company or any of its Subsidiaries, or file any resolution of the Board of Directors of the Company or Citadel with the Nevada Secretary of State designating any series of Preferred Stock or amending the same. h. Subsidiaries. Establish or acquire by investment or expenditure any Subsidiaries other than wholly-owned Subsidiaries, establish or acquire any Subsidiaries organized outside of the United States and its territorial possessions, or permit any Subsidiary to be other than wholly-owned by the Company. i. Sale of Securities. Except as expressly contemplated by this Agreement, (a) authorize, issue or enter into any agreement providing for the issuance (contingent or otherwise) of, (i) any notes or debt securities containing equity features (including, without limitation, any notes or debt securities convertible into or exchangeable for Equity Securities, issued in connection with the issuance of Equity Securities or containing profit participation features) or (ii) any Equity Securities (or any securities convertible into or exchangeable for any Equity Securities) which are senior to or on a parity with the Preferred Stock with respect to redemptions or distributions upon liquidation or otherwise, or (b) sell any securities for consideration other than cash except shares of Common Stock issued pursuant to Employee Incentive Securities. j. Fundamental Business Change. Materially change the nature of its business or engage in any business other than directly or indirectly owning and/or operating radio stations and related ancillary activities, or permit any Subsidiary to do so. 39 41 k. Affiliated Transactions. Enter into or permit any Subsidiary to enter into any material transaction with an Affiliate of the Company or stockholders of the Company or their Affiliates (each an "Affiliated Person") (1) except for employment arrangements on terms that are comparable to the terms of the employment arrangements the Company and Citadel have with employees who are not affiliated persons, and (2) Citadel shall be entitled to renew the current lease and/or enter into new leases from time to time with Wilson Aviation, L.L.C. l. Amendment of Debt Documents. Amend, supplement, modify or waive, any term or provision of (a) the FINOVA Credit Agreement, the Class A Notes, or the Facility A Notes, if the effect of any such amendment, supplement modification or waiver would be to (i) increase the principal or interest payable on such indebtedness or change the date on which any such Indebtedness shall be or become due and payable, other than the Permitted Increase (ii) shorten the term of any such indebtedness or (iii) create any additional defaults under any of the FINOVA Credit Agreement, the Class A Notes or the Facility A Notes or impose any additional obligation on any obligor thereto (whether affirmative or negative covenants, or otherwise), the failure to comply with which would cause an event of default under any of such documents, or (b) the Acquisition Agreements. 12. ABRY and ABRY/CIP Covenants Regarding Conversion of Shares and Facility A Notes. a. 49% Limitation. Subject to Section 12.c. below, ABRY and ABRY/CIP agree that neither they nor any ABRY Holders shall hold in the aggregate more than 49% of the voting Equity Securities of the Company on a non-diluted basis. Except as provided in Section 12.c., below, if, by virtue of any repurchases of Equity Securities of the Company or for any other reason, ABRY, ABRY/CIP and/or any ABRY Holders hold in the aggregate more than 49% of the voting securities of the Company on a non-diluted basis, ABRY, ABRY/CIP and/or the other ABRY Holders shall immediately convert or exchange such number of voting Equity Securities into or for non-voting Equity Securities as is necessary to result in ABRY, ABRY/CIP and the ABRY Holders holding in the aggregate no more than 49% of the voting Equity Securities of the Company. In addition, none of ABRY, ABRY/CIP or any ABRY Holders shall convert non-voting Equity Securities into voting Equity Securities in an amount which would result in ABRY, ABRY/CIP and/or any ABRY Holders owning, in the aggregate, more than 49% of the voting Equity Securities of the Company on an undiluted basis. b. Cooperation by Company, ABRY and ABRY/CIP. If the Company, ABRY, ABRY/CIP and/or any other ABRY Holder determines that it will be necessary for ABRY, ABRY/CIP and/or the other ABRY Holders to convert or exchange voting Equity Securities into or for non-voting Equity Securities in order to comply with Section 12.a., or that ABRY, ABRY/CIP and/or the other ABRY Holders would be entitled to convert or exchange non-voting Equity Securities into or for voting Equity Securities and maintain compliance with Section 12.a. (and, in the latter case, ABRY, ABRY/CIP and/or the other ABRY Holders desire to convert or exchange non-voting Equity Securities into or for voting Equity Securities), the Company, ABRY, ABRY/CIP, the other ABRY Holders and all other Investors shall take all such actions as are reasonably necessary in order to (1) effectuate and facilitate the conversion or exchange of non-voting Equity Securities into or for voting Equity Securities or voting Equity Securities into or for non-voting Equity Securities, as the case may be, (2) implement the conversion or exchange of non-voting Equity 40 42 Securities into or for voting Equity Securities or voting Equity Securities into or for non-voting Equity Securities, as the case may be, and (3) amend the Amended and Restated Certificate of Incorporation to effectuate and reflect the foregoing, including but not limited to increasing the number of authorized shares of one or more classes of Equity Securities, or designating one or more series of Preferred Stock. c. Exception. The foregoing limitation on ownership of voting Equity Securities of the Company shall not apply from and after any time at which (i) any Facility A Note is not paid in full on or prior to its Maturity Date, (ii) LRW ceases for any reason to be the chief executive officer of the Company and Citadel, or (iii) LRW no longer owns at least 650,000 shares of Class A Common Stock (as such amount may be proportionately adjusted for any stock splits, stock dividends and the like effected after the date hereof and prior to the determination of LRW's stock ownership). 13. Miscellaneous. a. Waivers and Amendments. With the written consent of the Holders of a majority of the Underlying Common Stock, (a) the obligations of the Company and the rights of the Holders of the Investor Stock (other than the obligations of the Company pursuant to Section 10.b. to each of BofA, BFC, ABRY, ABRY/CIP which shall not be waived as against any of BofA, BFC, ABRY and ABRY/CIP without the prior written consent of such Person) under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely), and (b) the Company may enter into a supplementary agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of any supplemental agreement or modifying in any manner the rights and obligations hereunder of the Holders of the Investor Stock, on the one hand, and the Company and Citadel, on the other hand. The foregoing notwithstanding, no such waiver or supplemental agreement shall affect any of the rights of any Holder of Investor Stock created by the Amended and Restated Certificate of Incorporation or by the applicable law of corporations without compliance with all applicable provisions of the Amended and Restated Certificate of Incorporation and such applicable law of corporations. b. Rights of Holders Inter Se. Except as provided in Section 12.a., each Holder of Investor Stock shall have the absolute right to exercise or refrain from exercising any right or rights which such Holder may have by reason of this Agreement or its status as a Holder of Investor Stock, including, without limitation, the right to consent to the waiver of any obligation of the Company under this Agreement and to enter into an agreement with the Company for the purpose of modifying this Agreement or any agreement effecting any such modification, and such Holder shall not incur any liability to any other Holder or Holders of Investor Stock with respect to exercising or refraining from exercising any such right or rights. Notwithstanding the foregoing, ABRY and ABRY/CIP shall jointly exercise all of their rights under this Agreement and under all of the Other Documents, except that (1) they may individually exercise their "Put" rights under the Stockholders Agreement, and (2) each has the right to cause directors to be elected to the Board of Directors of each of the Company and Citadel, as provided in the Voting Agreement. 41 43 c. Notices. All notices, requests, consents and other communications required or permitted hereunder shall be in writing and shall be hand delivered or mailed postage prepaid by registered or certified mail, i. if to any Holder of Investor Stock, addressed to such Holder at its address shown on the signature pages hereof, or at such other address as such Holder may specify by written notice to the Company, or ii. if to the Company or Citadel at 1839 South Alma School Road, Suite 264, Mesa, Arizona 85210, with a copy to 1015 Eastman Drive, Bigfork, Montana 59911, and each such notice, request, consent and other communication shall for all purposes of the Agreement be treated as being effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and postage prepaid as aforesaid. d. Survival of Representations and Warranties etc. All representations and warranties made in, pursuant to or in connection with this Agreement shall survive the execution and delivery of this Agreement (including, without limitation, the representations and warranties of the Investor), any investigation at any time made by or on behalf of the Investors, and the issuance of Investor Stock and the Facility A Notes. All statements contained in any certificate, instrument or other writing delivered by or on behalf of the Company pursuant hereto shall constitute representations and warranties by the Company. e. Severability. Should any one or more of the provisions of this Agreement or of any agreement entered into pursuant to this Agreement be determined to be illegal or unenforceable, all other provisions of this Agreement and of each other agreement entered into pursuant to this Agreement shall be given effect separately from the provision or provisions determined to be illegal or unenforceable and shall not be affected thereby. f. Parties in Interest. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, whether so expressed or not, and, in particular, shall inure to the benefit of and be enforceable by the Holder or Holders at the time of any of the Investor Stock. This Agreement shall not run to the benefit of or enforceable by any Person other than a party to this Agreement and its successors and assigns. g. Headings. The headings of the sections and paragraphs of this Agreement have been inserted for convenience of reference only and do not constitute a part of this Agreement. h. Choice of Law. It is the intention of the parties that the internal laws, and not the laws of conflicts, of Arizona should govern the enforceability and validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties; provided, however, that the laws of the State of Nevada shall govern the relationship between the Company and its stockholders. 42 44 i. Expenses. The Company agrees, whether or not the transactions contemplated hereby are consummated, to pay, and hold each of the Investors harmless from liability for the payment of, i. the fees and expenses of each Investor's special counsel arising in connection with the negotiation and execution of this Agreement and the related documents and the consummation of the transactions contemplated hereby including, without limitation, in connection with application for necessary or appropriate approvals from the FCC relating to the acquisition or approval of voting of the Investor Stock; ii. stamp and other taxes, excluding income taxes, which may be payable with respect to the execution and delivery of this Agreement or the issuance, delivery or acquisition of the Facility A Notes or Investor Stock; and iii. all costs of compliance with this Agreement, the Other Documents, the Amended and Restated Certificate of Incorporation and any other agreements, documents or instruments contemplated hereby or thereby; provided, however, that the Company's obligation to reimburse ABRY and ABRY/CIP in connection with the Closing of the Transactions Contemplated by this Agreement shall be limited in the aggregate to $200,000; provided, further, that such limitations shall not apply to the out-of-pocket disbursements made by ABRY and ABRY/CIP for services and disbursements of their non-affiliated advisors. j. Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. k. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of the Agreement. l. Integration. This Agreement, together with the Annexes and Schedules hereto represent the entire understanding and agreement among the parties with respect to the subject matter hereof and shall supersede any prior writings, understandings or agreements among the parties with respect to the subject matter hereof. m. FCC Matters. In order to comply with the rules, regulations and policies of the FCC, each of ABRY, ABRY/CIP and BFC hereby represents, warrants, covenants and agrees on behalf of itself, severally and not jointly, as follows: i. Each of the Investors represents and warrants that it does not own in excess of 5 percent (5%) of the voting stock in, or serve as an officer or director of, any company engaged in the ownership or operation of one or more radio stations, television stations or daily newspapers, or serve as a general partner in any partnership engaged in the ownership or operation of one or more radio stations, television stations or daily newspapers, except as disclosed in Schedule 43 45 14. If an Investor acquires in excess of 5 percent (5%) of the voting stock in, or serves as an officer or director of, any company engaged in the ownership or operation of one or more radio stations, television stations or daily newspapers, or serves as a partner in any partnership engaged in the ownership or operation of one or more radio stations, television stations or daily newspapers after the date of this Agreement, such Investor shall promptly give written notice of its acquisition or service to the Company, and shall provide the Company and its FCC counsel with such details about the acquisition or service as the Company or its FCC counsel may reasonably request from time to time. ii. Notwithstanding anything contained to the contrary herein or in any of the Other Documents, no party hereto (i) shall exercise any voting right, take any action or exercise any right or remedy that would constitute or result in the transfer or assignment of any FCC license or a transfer of control over any such license, permit or authorization, if such assignment or transfer would require the prior approval of and/or notice to the FCC, without such party first having notified the FCC of any such assignments or transfer and, if required, obtained the approval of the FCC therefore, or (ii) seek to influence decisions by or membership on the Board of Directors if the rules and regulations of the FCC would prohibit such action, or otherwise violate any rules or regulations of the FCC. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. [SIGNATURES APPEAR ON FOLLOWING PAGES] 44 46 [SIGNATURE PAGE FOR SECURITIES PURCHASE AND EXCHANGE AGREEMENT] CITADEL COMMUNICATIONS CORPORATION By /s/ Lawrence R. Wilson ---------------------------------- Its President ------------------------------- CITADEL BROADCASTING COMPANY By /s/ Lawrence R. Wilson ---------------------------------- Its President ------------------------------- ABRY BROADCAST PARTNERS II, L.P. By ABRY CAPITAL, L.P. ---------------------------------- Its General Partner ------------------------------- By ABRY HOLDINGS, INC. ---------------------------------- Its General Partner ------------------------------- By /s/ Jay M. Grossman ---------------------------------- Its Attorney-In-Fact ------------------------------- ABRY/CITADEL INVESTMENT PARTNERS, L.P. By ABRY CAPITAL, L.P. ---------------------------------- Its General Partner ------------------------------- by ABRY HOLDINGS, INC. ---------------------------------- Its General Partner ------------------------------- By /s/ Jay M. Grossman ---------------------------------- Its Attorney-In-Fact ------------------------------- 45 47 [SIGNATURE PAGE FOR SECURITIES PURCHASE AND EXCHANGE AGREEMENT] BAKER, FENTRESS & COMPANY By /s/ Scott E. Smith ---------------------------------- Its Executive Vice President ------------------------------- OPPENHEIMER & CO., INC. By /s/ Mark Leavitt ---------------------------------- Its Managing Director ------------------------------- BANK OF AMERICA ILLINOIS By /s/ Robert F. Perille ---------------------------------- Its Managing Director ------------------------------- BofA CO-INVESTORS: * ------------------------------------- Christopher J. Perry * ------------------------------------- Robert F. Perille * ------------------------------------- M. Ann O'Brien * ------------------------------------- Ford S. Bartholow * ------------------------------------- Jeffrey M. Mann * ------------------------------------- Matthew W. Clary * ------------------------------------- Thomas E. Van Pelt, Jr. By: /s/ Robert F. Perille ---------------------------------- Name: Robert F. Perille Attorney-In-Fact 46 48 LIST OF EXHIBITS (To Securities Purchase and Exchange Agreement) Exhibit "A" - Amended and Restated Warrant Exhibit "B" - Amended and Restated Certificate of Incorporation Exhibit "C" - Amended and Restated Class A Note Agreement Exhibit "D" - Employment Agreement Exhibit "E" - FINOVA Consent and Amendment Exhibit "F" - Facility A Notes Exhibit "G" - Management and Consulting Services Agreement Exhibit "H" - Mesirow Repurchase Agreement Exhibit "I" - 1996 Equity Incentive Plan Exhibit "J" - Registration Rights Agreement Exhibit "K" - Stockholders Agreement Exhibit "L" - Termination of Agreement Re Section 5 Issuances Exhibit "M" - Voting Agreement Exhibit "N" - Wilson Note Forgiveness Agreement Exhibit "O" - Wilson Option Agreement Exhibit "P" - Opinion of Osborn Maledon, P.A. Exhibit "Q" - Opinion of Hartman & Armstrong, Ltd. Exhibit "R" - Opinion of Reed, Smith, Shaw & McClay 47 49 LIST OF SCHEDULES (To Securities Purchase and Exchange Agreement) Schedule 1 - Stock Repurchases Schedule 2 - Reclassification and Exchange Schedule 3 - 1996 Equity Incentive Plan Initial Option Grants Schedule 4 - Capitalization Schedule 5 - Delivery of Documents Schedule 6 - Indebtedness Schedule 7 - Litigation Schedule 8 - Interested Party Transactions Schedule 9 - Licenses and Permits Schedule 10 - Insurance Schedule 11 - Employee Benefits Schedule 12 - Tax Matters Schedule 13 - Pending Acquisitions Schedule 14 - Investor Ownership of Media Interests [Pursuant to Regulation S-K, Item 601(b)(2), Registrant agrees to furnish supplementally a copy of these schedules or exhibits to the Securities Exchange Commission upon request.] 48 EX-10.8 22 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.8 FIRST AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT This FIRST AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT (this "First Amendment") is made as of December 31, 1996 by and among CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation (the "Company"); CITADEL BROADCASTING COMPANY, a Nevada corporation ("Citadel"); DESCHUTES ACQUISITION CORPORATION, a Nevada corporation ("DAC"); ABRY BROADCAST PARTNERS II, L.P., a Delaware limited partnership ("ABRY"); ABRY/CITADEL INVESTMENT PARTNERS, L.P., a Delaware limited partnership ("ABRY/CIP"); BAKER, FENTRESS & COMPANY, a Delaware corporation ("BFC"); OPPENHEIMER & CO., INC., a Delaware corporation ("Oppenheimer") BANK OF AMERICA ILLINOIS, an Illinois banking corporation formerly known as Continental Bank, N.A. ("BofA"); CHRISTOPHER J. PERRY, ROBERT F. PERILLE, M. ANN O'BRIEN, FORD S. BARTHOLOW, JEFFREY M. MANN, MATTHEW W. CLARY, SHERYL E. BARTOL, and ANDREA P. JOSELIT (Bartol and Joselit being successors in interest to Thomas E. Van Pelt, Jr.) (collectively, the "BofA Co-Investors"); THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP, an Oregon limited partnership ("Endeavour"); and JOSEPH P. TENNANT, THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94, BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP, an Oregon limited partnership; TAL JOHNSON, EDWARD T. HARDY, and RALPH W. MCKEE (collectively, the "Endeavour Co-Investors"). RECITALS A. As of June 28, 1996, certain parties to this agreement entered into that certain Securities Purchase and Exchange Agreement (the "Securities Purchase and Exchange Agreement"). Capitalized terms that are not otherwise defined herein shall have the meanings ascribed to those terms in the Securities Purchase and Exchange Agreement. B. Endeavour and the Endeavour Co-Investors are the sole owners of all of the outstanding preferred stock of Deschutes River Broadcasting Inc., an Oregon corporation ("Deschutes"). As of August 30, 1996, the Company, Citadel Acquisition Corporation, a Nevada corporation and wholly-owned subsidiary of the Company ("CAC"), and Deschutes entered into that certain Merger Agreement (the "Merger Agreement"). As of September 17, 1996, CAC changed its name to Deschutes License, Inc. ("DLI"), and as of December 18, 1996 DLI assigned its rights under the Merger Agreement to DAC. Pursuant to the Merger Agreement, Deschutes and DAC will merge, with DAC to be the surviving corporation. In consideration of such merger, Endeavour, the Endeavour Co-Investors and the holders of the Common Stock of Deschutes will receive Class A Common Stock, Series E Preferred Stock and/or options to purchase Class A Common Stock. C. In order to induce Endeavour and the Endeavour Co-Investors to permit the transactions contemplated by the Merger Agreement, the parties to this First Amendment wish to amend the Securities Purchase and Exchange Agreement to (i) grant Endeavour and the 2 Endeavour Co-Investors all of the rights (and make Endeavour and the Endeavour Co-Investors subject to all of the obligations) as Investors under the Securities Purchase and Exchange Agreement and (ii) make Endeavour and the Endeavour Co-Investors parties to the Securities Purchase and Exchange Agreement. D. In connection with the transactions contemplated by the Merger Agreement, the Company, Endeavour, the Endeavour Co-Investors, and certain other parties have also agreed to enter into the following agreements, each of even date: that certain First Amendment to Third Amended and Restated Registration Rights Agreement; that certain First Amendment to Second Amended and Restated Stockholders Agreement; that certain First Amendment to Amended and Restated Voting Agreement; and that certain Security Holder Agreement (the "Endeavour Proxy") (together with this First Amendment, the Merger Agreement, and the transactions contemplated thereby, the "Contemplated Transactions"). ACCORDINGLY, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this First Amendment agree as follows: 1. Consents and Waivers. Each of the parties hereto hereby consents to this First Amendment and the inclusion of Endeavour and the Endeavour Co-Investors as "Investors" under the Securities Purchase and Exchange Agreement pursuant to the terms and conditions of this First Amendment. Further, each of the parties hereto waives in connection with the Contemplated Transactions any rights he/she/it may possess pursuant to the negative covenants contained in Sections 11.a, 11.d, 11.e, 11.f, 11.g, 11.i, 11.k and 11.l of the Securities Purchase and Exchange Agreement. No other provisions are waived. 2. Amendments. 2.1. Section 1 of the Securities Purchase and Exchange Agreement is amended by adding the following definitions in appropriate alphabetical order: 2.1.1. "Deschutes Option Exchange Agreements" shall mean those award agreements between the Company and certain former employees of Deschutes pursuant to which such employees receive Parent Options upon conversion of the Deschutes Options (as those terms are defined in the Merger Agreement), in the form attached to the Securities Purchase and Exchange Agreement as Exhibit I.iii. for incentive stock options and in the form "Deschutes Option Exchange Agreement" attached hereto as Exhibit A for nonqualified stock options. 2.1.2. "Endeavour" shall mean and refer to The Endeavour Capital Fund Limited Partnership, an Oregon limited partnership. 2.1.3. "Endeavour Co-Investors" shall mean and refer, individually and collectively, to those individuals who are designated on the Signature Pages to the First Amendment as the "Endeavour Co-Investors." 2 3 2.1.4. "Endeavour Proxy" means the Security Holder Agreement of even date herewith, by and among Endeavour, the Endeavour Co-Investors, the Company, Citadel and DAC. 2.1.5. "Endeavour Stock" means (i) Series E Preferred Stock held by Endeavour or by the Endeavour Co-Investors on the date of the First Amendment, (ii) Class A Common Stock issued or issuable upon conversion of any Series E Preferred Stock described in clause (i) above, (iii) Equity Securities of the Company issued or issuable with respect to any Equity Securities referred to in any of clauses (i) through (ii) above or this clause (iii) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. 2.1.6. "First Amendment" shall mean that First Amendment to this Agreement dated as of December 31, 1996 among Endeavour, the Endeavour CoInvestors and the Original Investors. 2.1.7. "Series E Preferred Stock" shall mean the Series E Convertible Preferred Stock of the Company, par value $.001 per share. 2.2. Section 1 of the Securities Purchase and Exchange Agreement is further amended by modifying and/or adding the following language to the following definitions: 2.2.1. FINOVA Credit Agreement. The current definition is deleted and replaced with: "FINOVA Credit Agreement" means the Loan Agreement by and between Citadel, DAC, DLI, Citadel License Inc, FINOVA and certain other Lenders (as that term is defined therein), dated as of October 9, 1996, as amended and in effect as of December 31, 1996. 2.2.2. Sixth Amended and Restated Certificate of Incorporation. The following definition is added: "Sixth Amended and Restated Certificate of Incorporation" means the Certificate of Incorporation of the Company as amended and in effect on the date of the First Amendment (immediately after the Sixth Amendment and Restatement thereof). 2.2.3. Change of Control. The current definition is deleted and replaced with: "Change of Control" means the sale of the Company or any of its Subsidiaries to an Independent Third Party or group of Independent Third Parties pursuant to which such party or parties acquire (i) Equity Securities of the Company or any of its Subsidiaries possessing the voting power 3 4 under normal circumstances to elect a majority of the Company's or any of its Subsidiaries' boards of directors (whether by merger, consolidation or sale or transfer of the Company's or any of its Subsidiaries' Equity Securities) or (ii) all or substantially all of the Company's or any of its Subsidiaries' assets determined on a consolidated basis. 2.2.4. Change of Control Payment. The current definition is deleted and replaced with: "Change of Control Payment" means any payment to or other consideration transferred to any officer or employee of the Company, or any of its Subsidiaries who holds or owns beneficially or otherwise Equity Securities of the Company by any Person whatsoever in connection with any transaction resulting in a Change of Control of the Company or any of its Subsidiaries, including, without limitation, payments in respect of (i) employment agreements or consulting agreements in excess of such employee's historical ordinary cash compensation as an officer or employee of the Company or any of its Subsidiaries (as the case may be) prior to such transaction, (ii) non-competition agreements, (iii) licenses or (iv) forbearances of any kind; provided, however, that payments in respect of such officer's or employee's Equity Securities of the Company shall not constitute a Change of Control Payment if such payments do not exceed the price per share of Common Stock (adjusted to reflect any applicable exercise price or the like) paid to Holders of Equity Securities of the Company who are not employees. 2.2.5. Employee Incentive Securities. The current definition is deleted and replaced with: "Employee Incentive Securities" means and includes (a) options exercisable for Class A Common Stock, in an aggregate amount not in excess of 62,942 shares of Class A Common Stock (assuming the full exercise of all such issued stock options without regard to any restrictions or limitations on exercise) issued or granted to LRW prior to the date of this Agreement under the Wilson Option Agreement or pursuant to a separate grant of options made to LRW on December 21, 1994, (b) options exercisable for Class A Common Stock, in an aggregate amount not in excess of 34,374 shares of Class A Common Stock (assuming the full exercise of all such stock options without regard to any restrictions or limitations on exercise) to which LRW may become eligible after the date of this Agreement pursuant to the Wilson Option Agreement, (c) options exercisable for Class A Common Stock, in an aggregate amount not in excess of 150,000 shares of Class A Common Stock (assuming the full exercise of all such stock options without regard to any restrictions or limitations on exercise) granted to LRW as of the date of this Agreement pursuant to the 1996 Equity Incentive Plan, (d) options exercisable for 4 5 Class A Common Stock, in an aggregate amount not in excess of 414,783 shares of Class A Common Stock (assuming the full exercise of all such issued stock options without regard to any restrictions or limitations on exercise) issued or granted to other employees of Citadel prior to the date of the First Amendment, (e) options exercisable for Class A Common Stock, in an aggregate amount not in excess of 236,578 shares of Class A Common Stock (assuming the full exercise of all such stock options without regard to any restrictions or limitations on exercise) granted to other employees of Citadel as of the date of the First Amendment pursuant to the 1996 Equity Incentive Plan, and (f) options exercisable for Class A Common Stock, in an aggregate amount not in excess of 146,165 shares of Class A Common Stock (assuming the full exercise of all such stock options without regard to any restrictions or limitations on exercise) granted by the Compensation Committee to LRW and/or by the Board of Directors to other employees of Citadel after the date of the First Amendment pursuant to the 1996 Equity Incentive Plan. 2.2.6. Investor Stock. The current definition is deleted and replaced with: "Investor Stock" means (i) the Amended and Restated BofA Warrants, (ii) Class B Common Stock held by the BofA Co-Investors on the date hereof, (iii) Class B Common Stock issued or issuable upon the exercise of the Amended and Restated BofA Warrants, (iv) Class A Common Stock issued or issuable upon the conversion of Class B Common Stock described in clause (ii) or clause (iii) above, (iv)(a) Series E Preferred Stock held by Endeavour or by the Endeavour Co-Investors on the date of the First Amendment, (iv)(b) Class A Common Stock issued or issuable upon conversion of any Series E Preferred Stock described in clause (iv)(a) above, (v) Series A Preferred Stock held by BFC on the date hereof, (vi) Class A Common Stock issued or issuable upon the conversion of any Series A Preferred Stock described in clause (v) above, (vii) Series B Preferred Stock held by Oppenheimer on the date of this Agreement, (viii) Class A Common Stock issued or issuable upon the conversion of any Series B Preferred Stock described in clause (viii) above, (ix) the Shares, (x) Common Stock issued or issuable upon the conversion of any Share, (xi) Common Stock issued or issuable upon the conversion or exchange of any Common Stock described in clause (x) above or this clause (xi), (xii) Facility A Notes Conversion Stock, and (xiii) Equity Securities of the Company issued or issuable with respect to any Equity Securities referred to in any of clauses (i) through (xii) above or this clause (xii) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting Investor Stock, such securities shall continue to constitute Investor Stock in the hands of any permitted transferee thereof, but will cease to constitute Investor Stock when they have been disposed of in a Public Sale. 5 6 2.2.7. Investors. The current definition is deleted and replaced with: "Investors" means ABRY, ABRY/CIP, the Existing Investors, Endeavour and the Endeavour Co-Investors, and their respective heirs, personal representatives, successors and assigns. 2.2.8. Registration Rights Agreement. The current definition is deleted and replaced with: "Registration Rights Agreement" shall mean the Third Amended and Restated Stockholders Agreement dated as of June 28, 1996 among the Corporation and the persons signatory thereto, as amended as of December 31, 1996. 2.2.9. Stockholders Agreement. The current definition is deleted and replaced with: "Stockholders Agreement" shall mean the Second Amended and Restated Stockholders Agreement dated as of June 28, 1996 among the Corporation and the persons signatory thereto, as amended as of December 31, 1996. 2.2.10. Voting Agreement. The current definition is deleted and replaced with: "Voting Agreement" shall mean the Second Amended and Restated Voting Agreement dated as of December 31, 1996. 2.3. Equity Securities of the Company. Section 8.c. of the Securities Purchase and Exchange Agreement is amended by adding the following at the end of Section 8.c: c.1 Equity Securities of the Company Upon Closing of the Merger Agreement. As of the Closing (as that term is defined in the Merger Agreement) and immediately thereafter, the authorized Equity Securities of the Company will consist of (a) 27,553,504 shares of Common Stock, (i) of which (A) 15,396,571 shares are voting shares of Class A Common Stock, (B) 156,933 shares are non-voting shares of Class B Common Stock, and (C) 12,000,000 shares are non-voting shares of Class C Common Stock, and (ii) of which 971,208 shares of Class A Common Stock, 18,831.954 shares of Class B Common Stock and 74,488 shares of Class C Common Stock will be issued and outstanding, and (b) 25,249,930 shares of Preferred Stock, of which (v) 750,000 shares will have been designated as the Company's Series A Preferred Stock, of which 746,411.86 shares will be issued and outstanding, (w) 17,201 shares will have been designated as the Company's Series B Preferred Stock, of which 17,200.724 shares will be issued and outstanding, (x) 12,000,000 shares will have been designated as the Company's Series C Preferred Stock, of which 1,656,019.934 shares will be issued and outstanding, (y) 12,000,000 shares will have been designated as the Company's Series D Preferred Stock, of which 6 7 1,512,833.766 shares will be issued and outstanding, and (z) 482,729 shares will have been designated as the Company's Series E Preferred Stock, of which 482,729 shares will be issued and outstanding. Schedule 4 to the First Amendment lists the names of the beneficial holders of all the outstanding shares of Class A Common Stock, Class B Common Stock, Class C Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock as of the date of the First Amendment. Such issued and outstanding shares of Class A Common Stock, Class B Common Stock, Class C Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock will be, as of the date of the First Amendment and immediately thereafter, duly authorized, validly issued, fully paid and nonassessable. As of the date of the First Amendment and immediately thereafter, neither the Company, Citadel nor DAC will have outstanding any stock or securities convertible or exchangeable for any shares of its Equity Securities, except for the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, each of which is convertible into Common Stock, the Series C Preferred Stock, which is convertible into Series D Preferred Stock, the Series D Preferred Stock, which is convertible into Series C Preferred Stock, the Class B Common Stock and the Class C Common Stock, which are convertible into Class A Common Stock, the BofA Warrants, which are exercisable for shares of Class B Common Stock, the Facility A Notes issued in connection with the Closing Advance, and Employee Incentive Securities which are exercisable for Class A Common Stock. As of the Closing (as that term is defined in the Merger Agreement), neither the Company, Citadel nor DAC shall be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its Equity Securities, except as expressly provided in the Stockholders Agreement, as amended as of the date of the First Amendment. As of the Closing (as that term is defined in the Merger Agreement), no holder of Equity Securities or any other security of the Company, Citadel or DAC and no other Person is entitled to any preemptive right, right of first refusal or similar right as a result of the issuance and sale of the Shares and the issuance of Investor Stock, except for certain preemptive rights of the Original Investors in connection with the issuance of the Endeavour Stock that are enumerated in Section 2 of the Stockholders Agreement, which have been waived. Except for the Stockholders Agreement, the Voting Agreement, the BofA Proxy, the Endeavour Proxy, the options previously granted to employees of Citadel, the Wilson Stock Options, the 1996 Equity Incentive Plan and options granted pursuant to the Deschutes Option Exchange Agreements, there are no agreements, arrangements or trusts between or for the benefit of the Company's or any Subsidiary's stockholders with respect to the voting or transfer of the Company's or such Subsidiary's Equity Securities or with respect to any other aspect of the Company's or such Subsidiary's affairs. Neither the Company, Citadel nor DAC have violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its Equity Securities. 7 8 The Common Stock and Preferred Stock of the Company, when issued pursuant to the terms of this Agreement and pursuant to the terms of the Merger Agreement, will have the rights, preferences, and privileges specified in the Sixth Amended and Restated Certificate of Incorporation and will be free and clear of all Liens and restrictions, other than Liens that might have been created or suffered solely by the Holders thereof, and restrictions on transfer imposed by the Securities Act or applicable state securities laws. The Investor Stock is duly authorized and has been reserved for issuance upon conversion of the Investor Stock and the Facility A Notes, and when issued upon such conversion in accordance with the terms of the Sixth Amended and Restated Certificate of Incorporation, or the Facility A Notes, as the case may be, will be duly authorized, validly issued, fully paid and nonassessable, and free and clear of all Liens and restrictions, other than Liens that might have been created or suffered solely by the Holders thereof. 3. Representations and Warranties by Company and Citadel. Each of the Company and Citadel remakes each of the representations and warranties contained in Section 8 of the Securities Purchase and Exchange Agreement, as amended by this First Amendment, to the Investors as of the date hereof. 4. Representations, Warranties and Covenants of the Investors. Each of Endeavour and the Endeavour Co-Investors on behalf of himself, herself or itself, severally and not jointly, makes each of the representations, warranties and covenants contained in Section 9.a of the Securities Purchase and Exchange Agreement, as amended by this First Amendment, to and with the Company as of the date hereof. For purposes of the representations made by Endeavour and the Endeavour Co-Investors pursuant to Section 9.a of the Securities Purchase and Exchange Agreement and this Section 4 the term "Agreement" shall mean this First Amendment and the term "Other Documents" shall mean the Merger Agreement and the other agreements contemplated by the Merger Agreement. Endeavour hereby certifies that it is an accredited investor, as that term is defined in Regulation D, Section 501 of the Securities Act. Each of the Endeavour Co-Investors represents and warrants that he or she is sophisticated in financial matters and is able to evaluate the risks and benefits of the Endeavour Investor Stock being acquired. Each of Endeavour and the Endeavour Co-Investors understands that the Endeavour Investor Stock is being delivered in reliance on exemptions from the registration requirements of federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, and acknowledgments of Endeavour and the Endeavour Co-Investors set forth herein to determine each such Investor's suitability to acquire the Endeavour Investor Stock. Each of Endeavour and the Endeavour Co-Investors is acquiring the Endeavour Investor Stock for such Investor's own accounts without a view to public distribution and, except as contemplated by this Agreement, the Other Documents and the Sixth Amended and Restated Certificate of Incorporation, such Investor has no contract, undertaking, agreement or arrangement to transfer, sell or otherwise dispose of any Endeavour Investor Stock or any interest therein to any Person. 5. Schedules. Schedules 4 through 13 of the schedules to the Securities Purchase and Exchange Agreement, as amended as of the date hereof, are attached to this First Amendment as Schedules 4 through 13. Each of the Company, Citadel and DAC represent and warrant that the information contained in Schedules 4 through 13 is complete and accurate. Each of Endeavour 8 9 and the Endeavour Co-Investors represent and warrant that, other than Deschutes, he/she/it does not own in excess of 5 percent (5%) of the voting stock in, or serve as an officer or director of, any company engaged in the ownership or operation of one or more radio stations, television stations or daily newspapers, or serve as a general partner in any partnership engaged in the ownership or operation of one or more radio stations, television stations or daily newspapers. 6. Notice. All notices and other communications provided for or permitted under the Registration Rights Agreement shall be made pursuant to Section 12(d) thereof to Endeavour and the Endeavour Co-Investors at the following initial addresses: To Endeavour: The Endeavour Capital Fund Limited Partnership 4380 SW Macadam Suite 460 Portland, Oregon 97201 Attn: John von Schlegell Facsimile: (503) 223-1384 With copy to: Stephen E. Babson, Esq. Stoel Rives, LLP 900 S.W. Fifth Avenue Suite 2300 Portland, Oregon 97204 Facsimile: (503) 220-2480 To Endeavour Co-Investors: The Endeavour Capital Fund Limited Partnership 4380 SW Macadam Suite 460 Portland, Oregon 97201 Attn: John von Schlegell Facsimile: (503) 223-1384 With copy to: Stephen E. Babson, Esq. Stoel Rives, LLP 900 S.W. Fifth Avenue Suite 2300 Portland, Oregon 97204 Facsimile: (503) 220-2480 To DAC: The same addresses listed for the Company and Citadel in Section 13.c.ii of the Securities Purchase and Exchange Agreement. 7. Incorporation of Recitals. The Recitals set forth in this First Amendment are incorporated herein. 9 10 8. Choice of Law. It is the intention of the parties that the internal laws, and not the laws of conflicts, of Arizona should govern the enforceability and validity of this First Amendment, the construction of its terms and the interpretation of the rights and duties of the parties; provided, however, that the laws of the State of Nevada shall govern the relationship between the Company and its stockholders. 5. Counterparts. This First Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. 6. Fees and Expenses. The Company shall pay the reasonable legal fees and expenses of the Investors (excluding Endeavour and the Endeavour Co-Investors) incurred in the preparation of this First Amendment, review of the documents and agreements in connection with the transactions described in the Recital hereof and the preparation of additional documents and agreements related to such transactions. IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. [SIGNATURES APPEAR ON FOLLOWING PAGE] 10 11 [SIGNATURE PAGE FOR FIRST AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT] CITADEL COMMUNICATIONS CORPORATION By /s/ Lawrence R. Wilson ---------------------------- Its ---------------------------- ABRY BROADCAST PARTNERS II, L.P. By ABRY CAPITAL, L.P. Its General partner By ABRY HOLDINGS, INC. Its General Partner By /s/ Royce Yudkoff ----------------------- Its ----------------------- ABRY/CITADEL INVESTMENT PARTNERS, L.P. By ABRY CAPITAL, L.P. ----------------------- Its General partner By ABRY HOLDINGS, INC. ----------------------- Its General Partner By /s/ Royce Yudkoff ---------------------------- Its ---------------------------- 11 12 [SIGNATURE PAGE FOR FIRST AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT] BAKER, FENTRESS & COMPANY By /s/ Scott E. Smith ----------------------------- Its Executive Vice President -------------------------- OPPENHEIMER & CO., INC. By ------------------------------- Its ---------------------------- BANK OF AMERICA ILLINOIS By /s/ Robert F. Perille ------------------------------ Its ---------------------------- BOFA CO-INVESTORS: * --------------------------------- Christopher J. Perry * --------------------------------- Robert F. Perille * --------------------------------- M. Ann O'Brien * --------------------------------- Ford S. Bartholow * --------------------------------- Jeffrey M. Mann * --------------------------------- Matthew W. Clary * --------------------------------- Sheryl E. Bartol * --------------------------------- Andrea P. Joselit * By: /s/ Robert F. Perille ---------------------------- Name: Attorney-In-Fact 12 13 [SIGNATURE PAGE FOR FIRST AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT] ENDEAVOUR: THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP By DVS Management, Inc. Its General Partner By /s/ John W. Dixon ------------------------ Its Chairman ------------------------ ENDEAVOUR CO-INVESTORS: /s/ Joseph P. Tennant -------------------------------- Joseph P. Tennant THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94 By: /s/ Richard M. Schafbuch ------------------------- Richard M. Schafbuch, Trustee By: /s/ Susan P. Schafbuch ------------------------- Susan P. Schafbuch, Trustee BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP By /s/ Stephen E. Babson ------------------------- Its General Partner ----------------------- /s/ Tal Johnson ------------------------- Tal Johnson /s/ Edward T. Hardy ------------------------- Edward T. Hardy /s/ Ralph W. McKee ------------------------- Ralph W. McKee 13 14 EXHIBIT A (To First Amendment to Securities Purchase and Exchange Agreement) FORM OF DESCHUTES OPTION EXCHANGE AGREEMENT 15 LIST OF SCHEDULES (To First Amendment to Securities Purchase and Exchange Agreement As of December 31, 1996) Schedule 4 - Capitalization Schedule 5 - Delivery of Documents Schedule 6 - Indebtedness Schedule 7 - Litigation Schedule 8 - Interested Party Transactions Schedule 9 - Licenses and Permits Schedule 10 - Insurance Schedule 11 - Employee Benefits Schedule 12 - Tax Matters Schedule 13 - Pending Acquisitions [Pursuant to Regulation S-K, Item 601(b)(2), Registrant agrees to furnish supplementally a copy of these schedules or exhibits to the Securities Exchange Commission upon request.] EX-10.9 23 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.9 SECOND AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT This SECOND AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT (this "Second Amendment") is made as of March 17, 1997 by and among CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation (the "Company"); CITADEL BROADCASTING COMPANY, a Nevada corporation ("Citadel"); DESCHUTES ACQUISITION CORPORATION, a Nevada corporation ("DAC"); ABRY BROADCAST PARTNERS II, L.P., a Delaware limited partnership ("ABRY"); ABRY/CITADEL INVESTMENT PARTNERS, L.P., a Delaware limited partnership ("ABRY/CIP"); BAKER, FENTRESS & COMPANY, a Delaware corporation ("BFC"); OPPENHEIMER & CO., INC., a Delaware corporation ("Oppenheimer") BANK OF AMERICA ILLINOIS, an Illinois banking corporation formerly known as Continental Bank, N.A. ("BofA"); CHRISTOPHER J. PERRY, ROBERT F. PERILLE, M. ANN O'BRIEN, FORD S. BARTHOLOW, JEFFREY M. MANN, MATTHEW W. CLARY, SHERYL E. BARTOL, and ANDREA P. JOSELIT (Bartol and Joselit being successors in interest to Thomas E. Van Pelt, Jr.) (collectively, the "BofA Co-Investors"); THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP, an Oregon limited partnership ("Endeavour"); and JOSEPH P. TENNANT, THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94, BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP, an Oregon limited partnership; TAL JOHNSON, EDWARD T. HARDY, and RALPH W. MCKEE (collectively, the "Endeavour Co-Investors"). RECITALS A. As of June 28, 1996, certain parties to this Second Amendment entered into that certain Securities Purchase and Exchange Agreement (as amended by the First Amendment thereto dated as of December 31, 1996 and as supplemented by the Agreement Regarding Facility A Advances dated as of the date of this Second Amendment among the Company, ABRY and ABRY/CIP, the "Securities Purchase and Exchange Agreement"). Capitalized terms that are not otherwise defined herein shall have the meanings ascribed to those terms in the Securities Purchase and Exchange Agreement. B. In connection with their entry into a letter agreement dated the date of this Agreement, the parties to the Securities Purchase and Exchange Agreement have agreed to make certain changes to the terms thereof. ACCORDINGLY, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Second Amendment agree as follows: 1. AMENDMENTS. (a) Section 1 of the Securities Purchase and Exchange Agreement is amended to add the following additional defined terms and the accompanying definitions: 2 "BACK-UP TRUSTEE" means a "Back-Up Trustee," as that term is defined in the Voting Trust Agreement. A "QUALIFIED STATION ACQUISITION" means (a) the Tele-Media Acquisition, (b) the Sabre Communications Acquisition, or (c) any other direct or indirect acquisition by the Company or any Subsidiary of all or substantially all of the assets of any radio station by means of a transaction of a type described in clause (b)(i) or (b)(ii) of Section 11, or any arrangement by the Company or any Subsidiary of a type described in clause (b)(iii) of Section 11 with respect to any radio station, which is consummated after March 17, 1997, so long as (i) the aggregate fair value of the consideration payable by the Company and the Subsidiaries in connection with such transaction and all related transactions of any such type with any single Person or two or more affiliated Persons is not greater than $30,000,000, (ii) if such aggregate fair value is greater than $10,000,000, then the amount of such aggregate fair value is not greater than the product of 12 multiplied by the net operating cash flow of the radio station in question (together with the net operating cash flow of all radio stations which are the subject of such transaction or any related transaction of any such type with any single Person or two or more affiliated Persons, and in each case giving pro forma effect to all cost and expense reductions or increases reasonably expected to be realized following such acquisition, to the extent such pro forma adjustments are approved by holders of a majority of the Series D Preferred Stock) for the twelve full calendar months ending prior to the date upon which the Company or the Subsidiary in question entered into a definitive agreement to consummate such transaction, and (iii) such transaction or series of related transactions is consummated solely with the proceeds of Indebtedness which the Company or any Subsidiary incurs in a manner which does not require a Consent pursuant to clause (f) above and cash on hand. For purposes of this definition, the "net operating cash flow" of any radio station for any period will have the same meaning with respect to such radio station as Operating Cash Flow (as that term is defined in the Stockholders Agreement) has with respect to the Company for any period. No holder of Series D Preferred Stock 2 3 will unreasonably withhold the approval of pro forma adjustments described in the preceding paragraph. A "QUALIFIED STATION DISPOSITION" means any sale, conveyance, lease, exchange or other disposition by the Company or any Subsidiary (in each case, a "DISPOSITION TRANSACTION") of any assets of any broadcast radio station, or the equity securities of any Subsidiary which owns only the assets of one or more broadcast radio stations, which were the subject of a Qualified Station Acquisition, so long as the fair value of the consideration received by the Company and its Subsidiaries (other than any Subsidiary the equity securities of which are being so disposed of), net of related fees, taxes and expenses, is not less than the fair value of the consideration furnished by the Company and/or its Subsidiaries with respect to such radio station in the Acquisition Transaction for such radio station, plus the amount of fees and expenses incurred by the Company and the Subsidiaries in connection with such Qualified Station Acquisition. For purposes of this definition, if more than one radio station is acquired or disposed of by the Company or any Subsidiary in any Qualified Station Acquisition or Disposition Transaction or in any series of related Qualified Station Acquisitions or Disposition Transactions, then, for purposes of this definition, the consideration paid or received by the Company and the Subsidiaries in such transaction(s), and the fees and expenses incurred by them in connection with such transaction(s), shall be deemed to have been paid, received or incurred by them pro rata, in proportion to the respective fair values of such radio stations at the time of such transaction(s). For purposes of this definition, the fair value of any consideration will be based upon any independent appraisal thereof performed in connection with the transaction in question; if no such appraisal has been performed, the same will be based on any reasonable allocation made by the parties thereto, if their interests with respect to such allocation are adverse; and if no such appraisal or allocation is performed, then such fair value will be the amount determined by the Company and approved by the holders of a majority of the Series D Preferred Stock. No holder of Series D Preferred Stock will unreasonably withhold any approval described in the preceding sentence. "SABRE COMMUNICATIONS ACQUISITION" means the acquisition by a Subsidiary of the Company of all of the then-outstanding capital stock and other equity securities of Sabre Communications, Inc. ("Sabre") for aggregate consideration consisting solely of shares of a series of the Company's preferred stock (the shares being so issued being the "Sabre Shares"), so long as: (a) Sabre and/or one or more of its Subsidiaries then owns and operates radio stations WHTO FM and WZXR FM (each, Williamsport, Pennsylvania), WRQK FM (Canton, Ohio), WPIG FM and WHDL AM (each, Olean, New York), and WNKI FM, WPGI AM and WQIX AM (each, Elmira, New York), and operates under local marketing or similar arrangements and has options to acquire radio stations WILQ FM, WLYC 3 4 FM and WLYC AM (each, Williamsport, Pennsylvania) and WCXR FM (Lewisburg, Pennsylvania); (b) the Sabre Shares are issued in a quantity and have terms such that the Sabre Shares are convertible into not more than 275,000 shares of Class A Common (subject to antidilution adjustments which are comparable to those applicable to the Series E Preferred) and the aggregate initial liquidation value of the Sabre Shares is not greater than $5,500,000; (c) the terms and conditions relating to the Sabre Shares and their issuance, including rights granted to the holders thereof by contract or otherwise, are not less favorable to the Company, its Subsidiaries and its other stockholders than the terms and conditions relating to the issuance of Class E Common pursuant to the Merger Agreement; (d) the sum of the consolidated indebtedness for borrowed money of Sabre and its Subsidiaries, the aggregate amount of any deferred purchase price payable by them in connection with any radio station acquisition and the aggregate exercise price payable in connection with the exercise of the options described in clause (a) above (whether or not any such option has been exercised) at the time of such acquisition does not exceed $11,300,000; and (e) such acquisition has been approved by the prior vote or written consent of a majority of the members of the Board of Directors. "SABRE COMMUNICATIONS FINANCING" means the issuance of the Sabre Shares as described in the definition of the term "Sabre Communications Acquisition." "SABRE SHARES" has the meaning set forth in the definition of the term "Sabre Communications Acquisition." "TELE-MEDIA ACQUISITION" means the purchase and sale of certain capital stock proposed to be consummated by the Company and/or its Subsidiaries on material terms and conditions which are not less favorable to the Company and its Subsidiaries than those set forth in the draft (dated March 13, 1997) of the Agreement of Purchase and Sale proposed to be entered into among the Company, Citadel, Tele-Media Broadcasting Company, Tele-Media Broadcasting Company of Centre Region, Tele-Media Broadcasting Holding Corporation and the shareholders of the latter three corporations, so long as such purchase and sale is consummated on or prior to February 28, 1998. 4 5 "TELE-MEDIA FINANCING" means transactions necessary for the Company and its Subsidiaries to obtain the funds necessary to pay the purchase price and expenses to be incurred by them in connection with the Tele-Media Acquisition, by means of the issuance of approximately $100,000,000 in face amount of Senior Subordinated Notes, and approximately $100,000,000 in face amount of Exchangeable Preferred Stock, of the Company, as such financing transactions are more particularly described in the Citadel Communications Corporation, Presentation to The Board of Directors dated February 14, 1997 prepared by Prudential Securities, so long as such financing transactions are consummated on or prior to February 28, 1998. "VOTING TRUSTEE" means the "Trustee," as that term is defined in the Voting Trust Agreement. "VOTING TRUST AGREEMENT" means the Voting Trust Agreement dated as of March 17, 1997 among the Company, ABRY, ABRY/CIP, the initial Trustee named therein and the initial Back-Up Trustees named therein, as in effect from time to time. (b) Section 1 of the Securities Purchase and Exchange Agreement is further amended by amending and restating in its entirety the definition of the term "FINOVA Credit Agreement" as follows: "FINOVA CREDIT AGREEMENT" means the Loan Agreement dated as of October 9, 1996 among Citadel, certain other Borrowers referred to therein, NationsBank of Texas, N.A., The First National Bank of Boston, Union Bank, The Bank of New York and FINOVA Capital Corporation, a Delaware corporation, in its individual capacity and as agent for all lenders, as amended by First Amendment to Loan Instruments dated as of December 31, 1996 and Second Amendment to Loan Instruments dated February 14, 1997, and as the same may be further amended, supplemented or modified in a manner which is not prohibited by either this Agreement or the Voting Agreement. (c) Section 10.b.iii. of the Securities Purchase and Exchange Agreement is amended and restated in its entirety to read as set forth on the attached Exhibit A. (d) Section 11 of the Securities Purchase and Exchange Agreement is amended and restated in its entirety to read as set forth on the attached Exhibit B. (e) Section 13.c.ii. of the Securities Purchase and Exchange Agreement is amended and restated to read in its entirety as follows: 5 6 ii. if to the Company or Citadel, at 140 South Ash Avenue, Tempe, Arizona 85281, and to 1015 Eastman Drive, Bigfork, Montana 59911. 2. FACILITY A NOTES. (a) ABRY and ABRY/CIP have made, or soon after the date hereof will make, Facility A Advances in the aggregate amount of $1,000,000, the proceeds of which Facility A Advances have been or will be used to make certain non-refundable payments to the sellers in connection with Citadel's entry into a definitive agreement to consummate the Tele-Media Acquisition and thereafter as required by such agreement. ABRY and ABRY/CIP hereby waive the fifteen (15) business days' prior written notice requirement set forth in Section 4.g.v of the Securities Purchase and Exchange Agreement with respect to such Facility A Advances, so long as such Facility A Advances are made on or prior to March 31, 1997. ABRY and ABRY/CIP agree that such Facility A Advances will not be deemed to have been made for purposes of the application of the first sentence of Section 4.g.v. of the Securities Purchase and Exchange Agreement. (b) ABRY, ABRY/CIP and the Company anticipate that the Company will request that ABRY and ABRY/CIP provide Facility A Advances in the aggregate amount of not greater than $1,000,000, the proceeds of which Facility A Advances will be used to make a deposit in escrow in connection with the Company's (and/or one or more Subsidiaries') entry into a definitive agreement to consummate the Sabre Communications Acquisition. ABRY and ABRY/CIP agree that such Facility A Advances will not be deemed to have been made for purposes of the application of the first sentence of Section 4.g.v. of the Securities Purchase and Exchange Agreement. (c) Notwithstanding the terms and conditions of the Securities Purchase and Exchange Agreement and the Facility A Notes: (i) contemporaneously with the consummation of the Tele-Media Acquisition, the Company and Citadel will cause a portion of the proceeds of the related financing to be applied to the prepayment in full of the entire unpaid principal amount of, and all unpaid accrued interest in respect of, all Facility A Notes which are then outstanding, and (ii) effective at the time of such consummation, the Facility A Commitments shall terminate and be of no further effect, and ABRY and ABRY/CIP shall have no further obligations to make Facility A Advances to the Company. 3. VOTING TRUST. On the date hereof, ABRY and ABRY/CIP have contributed the shares of the Company's capital stock which are held by them, and have agreed to contribute all other shares of the Company's capital stock which hereafter may be acquired by them, to a voting trust (the "Voting Trust") established pursuant to a Voting Trust Agreement dated as of the date hereof among the Company, ABRY, ABRY/CIP and the initial Voting Trustee thereunder. For purposes of the Securities Purchase and Exchange Agreement, ABRY and ABRY/CIP (and any Persons who from time to time may hold Voting Trust Certificates 6 7 issued in respect of capital stock of the Company held in the Voting Trust), as the beneficial owners of the capital stock in the Voting Trust, will be deemed to hold the capital stock of the Company which is held in the Voting Trust. 4. CHOICE OF LAW. It is the intention of the parties that the internal laws, and not the laws of conflicts, of Arizona should govern the enforceability and validity of this Second Amendment, the construction of its terms and the interpretation of the rights and duties of the parties; provided, however, that the laws of the State of Nevada shall govern the relationship between the Company and its stockholders. 5. COUNTERPARTS. This Second Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have caused this Second Amendment to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. [SIGNATURES APPEAR ON FOLLOWING PAGE] 7 8 [SIGNATURE PAGE FOR SECOND AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT] CITADEL COMMUNICATIONS CORPORATION By /s/ Lawrence R. Wilson ------------------------------- Its President ---------------------------- CITADEL BROADCASTING COMPANY By /s/ Lawrence R. Wilson ------------------------------- Its President ---------------------------- ABRY BROADCAST PARTNERS II, L.P. By ABRY CAPITAL, L.P. Its General partner By ABRY HOLDINGS, INC. Its General Partner By /s/ Royce Yudkoff ------------------------- Its President ------------------------- ABRY/CITADEL INVESTMENT PARTNERS, L.P. By ABRY CAPITAL, L.P. Its General partner By ABRY HOLDINGS, INC. Its General Partner By /s/ Royce Yudkoff ------------------------- Its President ------------------------- 9 [SIGNATURE PAGE FOR SECOND AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT] BAKER, FENTRESS & COMPANY By /s/ Scott E. Smith ------------------------------------- Its --------------------------------- OPPENHEIMER & CO., INC. By /s/ Rob Blum ------------------------------------- Its Assistant Secretary --------------------------------- BANK OF AMERICA ILLINOIS By /s/ Robert F. Perille ------------------------------------- Its --------------------------------- BOFA CO-INVESTORS: * --------------------------------------- Christopher J. Perry * --------------------------------------- Robert F. Perille * --------------------------------------- M. Ann O'Brien * --------------------------------------- Ford S. Bartholow * --------------------------------------- Jeffrey M. Mann * --------------------------------------- Matthew W. Clary * --------------------------------------- Sheryl E. Bartol * --------------------------------------- Andrea P. Joselit * By: Robert F. Perille ------------------------------------ Name: Attorney-In-Fact 10 [SIGNATURE PAGE FOR SECOND AMENDMENT TO SECURITIES PURCHASE AND EXCHANGE AGREEMENT] ENDEAVOUR: THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP By DVS Management, Inc. Its General Partner By /s/ John von Schlegell --------------------------------------- Its Managing Partner ----------------------------------- ENDEAVOUR CO-INVESTORS: /s/ Joseph P. Tennant ----------------------------------------- Joseph P. Tennant THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94 By: /s/ Richard M. Schafbuch -------------------------------------- Richard M. Schafbuch, Trustee By: /s/ Susan P. Schafbuch -------------------------------------- Susan P. Schafbuch, Trustee BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP By /s/ Stephen E. Babson -------------------------------------- Its General Partner ---------------------------------- /s/ Tal Johnson ----------------------------------------- Tal Johnson /s/ Edward T. Hardy ----------------------------------------- Edward T. Hardy /s/ Ralph W. McKee ----------------------------------------- Ralph W. McKee 11 EXHIBIT A 11. ACTIONS REQUIRING SUPERMAJORITY APPROVAL. Without the prior vote or written consent of the holders of a majority of the Series D Preferred Stock (each a "Consent"), the Company shall not take and shall not permit any Subsidiary to take any of the following actions: (A) TRANSFERS; DISPOSITIONS. Other than pursuant to Section 6 of the Stockholders Agreement, sell, convey, lease (as lessor), exchange or otherwise dispose of or transfer in any fiscal year, any portion of or any interest in any property of the Company or any Subsidiary in the aggregate having a fair market value of more than $5,000,000; provided that no Consent shall be required for any Qualified Station Disposition (as that term is defined below). (B) ACQUISITIONS; INVESTMENTS; CERTAIN OTHER TRANSACTIONS. Other than in a Qualified Station Acquisition: (i) directly or indirectly, by operation of law or otherwise, merge with, consolidate with, acquire, directly or indirectly, all or any substantial portion of the assets, Equity Securities or business of any Person or any radio station, or otherwise combine with any Person (in each case other than the Company or any wholly owned Subsidiary of the Company); (ii) Purchase or otherwise directly or indirectly acquire, hold or invest in the Equity Securities of any other Person (other than any wholly-owned Subsidiary of the Company), or make any loan to, or enter into any arrangement for the purpose of directly or indirectly providing funds or credit to, or make any other investment, whether by way of capital contribution, time deposit or otherwise, in, through or with any Person (other than any wholly owned Subsidiary of the Company), other than up to $100,000 in aggregate principal amount outstanding at any time of loans made to other Persons in the ordinary course of business; or (iii) Enter into any joint venture agreement, or enter into local marketing, time brokerage or similar arrangement if such arrangement is entered into in connection with the grant of an option to purchase or agreement to purchase the station that is the subject of such arrangement. (C) ISSUANCE OR REPURCHASE OF EQUITY SECURITIES. Except for any issuance described in any of clauses (ii) through (vi) of Section 2.4 of the Stockholders Agreement or any issuance of Equity Securities as part of the Tele-Media Financing or the Sabre Communications Financing, any issuance upon the conversion, exercise or exchange in accordance with its terms of any Equity Security issued in accordance with this Section 1(c), the grant of any option pursuant to the 1996 Equity Incentive Plan or any other stock option plan which is approved by 11 12 the holders of a majority of the Series C Preferred Stock after the date hereof, or any repurchase pursuant to any of Sections 3, 4 and 5 of the Stockholders Agreement: (i) authorize, issue or enter into any agreement, stock option, incentive, compensation or other plan or arrangement providing for the issuance (contingent or otherwise) of any Equity Securities, whether for cash or for non-cash consideration (provided that this clause (i) will not apply to any issuance of Equity Securities of any Subsidiary of the Company to the Company or any wholly-owned Subsidiary of the Company), (ii) redeem, repurchase or otherwise retire any of the Company's Equity Securities, other than (A) the Class A Common Stock owned by certain members of management of the Company or any Subsidiary (other than Wilson) upon the termination of the employment thereof (which such repurchases shall not in the aggregate exceed $500,000 in an amount during any twelve-month period) or (B) any payment in respect of any Facility A Note, or (iii) with respect to the Company, make any dividend, distribution or other stockholder expenditures with respect to any Equity Securities or apply any of its assets to the purchase, redemption or other retirement of, or set apart any sum or any non-cash consideration for the payment of, or make any other distributions or reduction or capital or otherwise in respect of any of its Equity Securities or in respect of any Facility A Note; provided, that this clause (iii) shall not apply to any Subsidiary. (D) AMENDMENT OF CERTIFICATE OF INCORPORATION; BYLAWS. Except as contemplated by Section 4(g) of the Securities Purchase and Exchange Agreement, make any amendment to the certificate or articles of incorporation or the bylaws of the Company or any of its Subsidiaries, or file any resolution of the Board or the board of directors of any Subsidiary designating or amending the terms of any Additional Preferred Stock. (E) PUBLIC OFFERINGS. Except as part of the Tele-Media Financing, issue, sell or offer to sell any of the securities of the Company or any Subsidiary in a public offering that is registered under the Securities Act. (F) INDEBTEDNESS; AMENDMENT OF DEBT DOCUMENTS. (i) Create, incur, issue, assume, become liable with respect to, or extend that maturity of, or permit any Subsidiary to create, incur, issue, assume, become liable with respect to, or extend the maturity of any Indebtedness for Borrowed Money (as defined in the Securities Purchase and Exchange Agreement) except: 1) Up to $150,000,000 in principal amount of Indebtedness for Borrowed Money outstanding at any time and incurred pursuant to the FINOVA Credit Agreement (or pursuant to a replacement facility entered into in connection with the 12 13 Tele-Media Acquisition which (i) permits all or a portion of the amounts of prior borrowings which have been repaid to be reborrowed to pay the purchase price and expenses associated with radio station acquisitions, and (ii) otherwise has terms and conditions not less favorable to the Company and its Subsidiaries than the terms and conditions of the FINOVA Credit Agreement) and any notes issued pursuant thereto, and all Indebtedness for Borrowed Money outstanding as of the date hereof and disclosed on Schedule to this Agreement; 2) the Facility A Notes; 3) any Indebtedness for Borrowed Money pursuant to a Permitted Senior Substitution (as defined in the Securities Purchase and Exchange Agreement); 4) Indebtedness for Borrowed Money incurred as part of the Tele- Media Financing or the Sabre Communications Financing; and 5) other Indebtedness for Borrowed Money in an aggregate principal which does not exceed $3,000,000 at any time; and the Company will not, and will not permit any Subsidiary to, extend the maturity of any Indebtedness for Borrowed Money described in clause (A) or (C) above without Consent. (ii) Amend, supplement, modify or waive in any material respect, any term or provision of the FINOVA Credit Agreement, the Facility A Notes or any other agreement or arrangement relating to Indebtedness for Borrowed Money (other than (A) to add any wholly-owned Subsidiary of the Company as a party thereto or as an additional guarantor of the Indebtedness for Borrowed Money incurred thereunder, (B) to identify, refer to or reflect any Person, radio station or assets acquired, or to effect any required deletion so that such agreement or arrangement no longer identifies, refers to or reflects any Person, radio station or assets disposed of, in any Qualified Station Acquisition or Qualified Station Disposition), (C) to amend Exhibit 1E to the FINOVA Credit Agreement to remove Peggy Koenig, Royce Yudkoff and Jay Grossman and to refer to the members of the Board of Directors the expenses of whom are reimbursed by the Company, each Observer, the Voting Trustee and the Back-Up Trustees, or (D) to modify the exhibits to the FINOVA Credit Agreement to reflect the addition of liabilities and expenses undertaken in connection with any Qualified Station Acquisition, to the extent such liabilities and expenses are not material to the acquired stations(s) in question); or (G) AGREEMENT; COMMITMENT. Agree or commit to take any action which, by reason of any of clauses (a) through (f) above, would require Consent. 13 14 EXHIBIT B iii. Attendance at Board Meetings. A. For purposes of this Section, a "Qualifying Investor" means any holder of Underlying Common Stock which at the time in question, either alone or together with its Affiliates, holds Underlying Common Stock which is neither BFC Underlying Common Stock (as that term is defined in the Voting Agreement) nor Endeavour Underlying Common Stock (as that term is defined in the Voting Agreement) and which represents not less than 10% of the Underlying Common Stock. B. The Company will give each Qualifying Investor written notice of each meeting of the Board of Directors, the board of directors of any Subsidiary (each a "Sub Board") or any committee of the Board of Directors or of any Sub Board, at the same time and in the same manner as notice is given to the directors who are members thereof (which notice shall be promptly confirmed in writing to each Qualifying Investor if such notice is not given to such directors in writing) and, in any event, a sufficient time to permit a person designated by such Qualifying Investor a reasonable opportunity to attend such meeting (or to listen to such meeting by telephone, in the case of a telephonic meeting). C. The Company shall permit, and shall cause each Subsidiary to permit, a representative of each Qualifying Investor (each an "Observer") to attend (or, in the case of a telephonic meeting, to listen by telephone to) each meeting of its board of directors or any committee thereof as an observer. The Company shall pay the reasonable out-of-pocket expenses incurred by each Observer in connection with attending the meetings of the Board of Directors, any Sub Board and any committees thereof. D. Each Observer shall be entitled to receive all written materials and other information (including, without limitation, copies of meeting minutes) given to directors in connection with any such meeting at the same time as such materials and information are given to the directors in question and, in any event, will be informed by the Company as to the material terms and conditions of each Qualified Station Acquisition or Qualified Station Disposition which is effected or proposed to be effected. E. If the Company or any Subsidiary proposes to take any action by written consent in lieu of a meeting of its board of directors or of any committee thereof, then the Company shall give written notice of such action to the person then most-recently designated by each Qualified Investor as an Observer, prior to the effective date of such consent, describing in reasonable detail the nature and substance of such action. F. Nothing contained herein shall be construed to entitle an Observer to do any more than monitor the meeting activities of the Board of Directors, any Sub Board or any committee thereof; no Observer shall be entitled to participate in any such meeting by voicing comments or suggestions with respect to matters being considered in the meeting or documents relating thereto. 14 EX-10.11 24 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.11 EXECUTION COPY SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT This SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT is dated as of June 28, 1996, by and among CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation (the "Company"), BAKER, FENTRESS & COMPANY, a Delaware corporation ("BFC"), BANK OF AMERICA ILLINOIS (an Illinois banking corporation f/k/a Continental Bank, N.A., the "Bank"), certain individuals listed on the Bank Co-Investor Signature Page attached hereto (the "Bank Co-Investors"), ABRY BROADCAST PARTNERS II, L.P., a Delaware limited partnership ("ABRY"), ABRY/CITADEL INVESTMENT PARTNERS, L.P., a Delaware limited partnership ("ABRY/CIP"), OPPENHEIMER & CO., INC., a Delaware corporation ("Oppenheimer"), FINOVA CAPITAL CORPORATION, a Delaware corporation ("FINOVA"), LAWRENCE R. WILSON (the "Executive"), CLAIRE WILSON ("CW") and certain members of management listed on the Management Signature Page attached hereto (the "Managers"). The Executive and CW sometimes are referred to herein collectively as "Wilson." Wilson and the Managers sometimes are referred to herein collectively as "Management". The Bank and the Bank Co-Investors sometimes are referred to herein collectively as "BofA." BFC, BofA, ABRY, ABRY/CIP and Oppenheimer sometimes are referred to herein collectively as the "Investors" and individually as an "Investor." The Investors, FINOVA, and Management sometimes are referred to herein collectively as the "Stockholders" and individually as a "Stockholder." Capitalized terms used and not otherwise defined in this Agreement shall have the meanings ascribed to such terms in Section 1 hereof. WHEREAS, upon consummation of the Securities Purchase and Exchange Agreement, the Stockholders will own, respectively, beneficially and of record, that number and type of the Company's Equity Securities indicated opposite each Stockholder's name on Schedule A attached hereto; and WHEREAS, the Company and the Stockholders desire to enter into this Agreement for the purposes, among others, of (i) assuring continuity in the ownership of the Company, (ii) limiting the manner and terms by which Wilson's Stockholder Shares may be transferred and (iii) providing for the sale of the Company under certain circumstances; and WHEREAS, certain parties hereto executed and delivered an Amended and Restated Stockholders Agreement dated as of December 21, 1994 (the "Previous Stockholders Agreement"), and in connection with the Securities Purchase and Exchange Agreement, the parties hereto desire to amend and restate the Previous Stockholders Agreement and are entering into this Agreement for that purpose; and WHEREAS, the execution and delivery of this Agreement is a condition to the closing of the transactions contemplated by the Securities Purchase and Sale Agreement. 2 NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree that the Previous Stockholders Agreement is amended and restated in its entirety as follows: 1. Definitions. For purposes of this Agreement, the following terms have the meanings set forth below. "ABRY" has the meaning set forth in the preamble to this Agreement. "ABRY/CIP" has the meaning set forth in the preamble to this Agreement. "ABRY Stock" means (i) Shares (as that term is defined in the Securities Purchase and Exchange Agreement), (ii) Common Stock issued or issuable upon the conversion of any such Share, (iii) Common Stock issued or issuable upon the conversion or exchange of any Common Stock described in clause (ii) above or this clause (iii), (iv) Facility A Notes Conversion Stock (as that term is defined in the Securities Purchase and Exchange Agreement), and (v) Equity Securities of the Company issued or issuable with respect to any Equity Securities referred to in any of clauses (i) through (iv) above or this clause (v) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting ABRY Stock, such securities shall continue to constitute ABRY Stock in the hands of any permitted transferee thereof, but will cease to constitute ABRY Stock when they have been disposed of in a Public Sale. "ABRY Underlying Common Stock" means all ABRY Stock which is Class A Common Stock. For purposes of this Agreement, any Person who holds any ABRY Stock which is not Class A Common Stock will be deemed to be the Holder of the Class A Common Stock obtainable upon the conversion, exercise or exchange to the fullest extent possible of such ABRY Stock (including the conversion, exercise or exchange of all other ABRY Stock directly or indirectly obtainable upon any such conversion, exercise or exchange), without regard to any restriction or limitation on any such conversion, exercise or exchange; provided that no Holder of any Facility A Note, on or prior to the Maturity Date of such Facility A Note, shall be deemed to be the Holder of any such Class A Common Stock by reason of holding such Facility A Note. "Additional Preferred Stock" means any additional shares of preferred stock issued by the Company other than the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock. "Affiliate" of a particular Person means any other Person that directly or indirectly controls, is controlled by, or is under common control with such first Person, and, with respect to an individual, such individual's spouse and descendants (whether natural or adopted) and any trust solely for the benefit of such individual and/or his or her spouse and/or descendants. For purposes hereof, each of the Bank, the Bank Co-Investors and the officers of the Bank shall be deemed -2- 3 "Affiliates" of one another. For purposes hereof ABRY and ABRY/CIP shall be deemed "Affiliates" of one another. "Agreement" means this Agreement. "Approved Sale" (i) prior to a Put Default means: the sale of the Company, in a single transaction or a series of related transactions, to one or more Independent Third Parties (a) pursuant to which such Independent Third Party or Parties proposes to acquire all or substantially all of the outstanding Stockholder Shares (whether by merger, consolidation, recapitalization, reorganization, purchase of the outstanding Equity Securities or otherwise) or all or substantially all of the consolidated assets of the Company, (b) which has been approved by affirmative vote or written consent of not less than two-thirds of the members of the Board and by holders of a majority of the Underlying Common Stock, and (c) pursuant to which all holders of Common Stock and Underlying Common Stock will receive with respect thereto (whether in such transaction(s) or, with respect to an asset sale, upon a subsequent liquidation) the same form and amount (adjusted for any applicable exercise price) of consideration per share of Common Stock and Underlying Common Stock or, if any holders of any class of Common Stock or Underlying Common Stock are given an option as to the form and amount of consideration to be received, all holders of Common Stock or Underlying Common Stock of such class are given the same option; and (ii) following a Put Default means: the sale of the Company, in a single transaction or a series of related transactions, to one or more Independent Third Parties (a) pursuant to which such Independent Third Party or Parties proposes to acquire all or substantially all of the outstanding Stockholder Shares (whether by merger, consolidation, recapitalization, reorganization, purchase of the outstanding Equity Securities or otherwise) or all or substantially all of the consolidated assets of the Company, (b) which has been approved by holders of a majority of the ABRY Underlying Common Stock, and (c) pursuant to which all holders of Common Stock and Underlying Common Stock will receive with respect thereto (whether in such transaction(s) or, with respect to an asset sale, upon a subsequent liquidation) the same form and amount (adjusted for any applicable exercise price) of consideration per share of Common Stock and Underlying Common Stock or, if any holders of any class of Common Stock or Underlying Common Stock are given an option as to the form and amount of consideration to be received, all holders of Common Stock or Underlying Common Stock of such class are given the same option; "Bank" has the meaning set forth in the Preamble to this Agreement. -3- 4 "Bank Co-Investors" has the meaning set forth in the Preamble to this Agreement. "BFC" has the meaning set forth in the Preamble to this Agreement. "BFC Stock" means (i) Series A Preferred Stock held by BFC on the date of this Agreement after giving effect to the "Redemptions" and the "Reclassification" (as those terms are defined in the Securities Purchase and Exchange Agreement), (ii) Class A Common Stock issued or issuable upon the conversion of any Series A Preferred Stock described in clause (i) above, and (iii) Equity Securities of the Company issued or issuable with respect to any Equity Securities referred to in any of clauses (i) and (ii) above or this clause (iii) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting BFC Stock, such securities shall continue to constitute BFC Stock in the hands of any permitted transferee thereof, but will cease to constitute BFC Stock when they have been disposed of in a Public Sale. "BFC Underlying Common Stock" means all BFC Stock which is Class A Common Stock. For purposes of this Agreement, any Person who holds any BFC Stock which is not Class A Common Stock will be deemed to be the Holder of the Class A Common Stock obtainable upon the conversion, exercise or exchange to the fullest extent possible of such BFC Stock (including the conversion, exercise or exchange of all other BFC Stock directly or indirectly obtainable upon any such conversion, exercise or exchange), without regard to any restriction or limitation on any such conversion, exercise or exchange. "Board" means the Board of Directors of the Company. "BofA" has the meaning set forth in the Preamble to this Agreement. "BofA Stock" means (i) the BofA Warrants, (ii) Class B Common Stock held by the BofA Co-Investors on the date hereof after giving effect to the "Redemptions" and the "Reclassification" (as those terms are defined in the Securities Purchase and Exchange Agreement), (iii) Class B Common Stock issued or issuable upon the exercise of the BofA Warrants, (iv) Class A Common Stock issued or issuable upon the conversion of Class B Common Stock described in clause (ii) or clause (iii) above, and (v) Equity Securities of the Company issued or issuable with respect to any Equity Securities referred to in any of clauses (i) through (iv) above or this clause (v) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting BofA Stock, such securities shall continue to constitute BofA Stock in the hands of any permitted transferee thereof, but will cease to constitute BofA Stock when they have been disposed of in a Public Sale. "BofA Underlying Common Stock" means all BofA Stock which is Class A Common Stock. For purposes of this Agreement, any Person who holds any BofA Stock which is not Class A Common Stock will be deemed to be the Holder of the Class A Common Stock obtainable upon the conversion, exercise or exchange to the fullest extent possible of such BofA Stock (including -4- 5 the conversion, exercise or exchange of all other BofA Stock directly or indirectly obtainable upon any such conversion, exercise or exchange), without regard to any restriction or limitation on any such conversion, exercise or exchange. "BofA Warrants" means the warrants issued by the Company pursuant to the Senior Subordinated Note and Warrant Purchase Agreement dated October 1, 1993 among the Company, Citadel, the Bank and the BofA Co-Investors, as amended and restated and in effect on the date hereof. "Call" has the meaning set forth in Section 5.3 hereof. "Call Closing" has the meaning set forth in Section 5.5 hereof. "Call Price" has the meaning set forth in Section 5.2 hereof. "Call Notice" has the meaning set forth in Section 5.3 hereof. "Call Shares" has the meaning set forth in Section 5.3 hereof. "Certificate of Incorporation" means the Certificate of Incorporation of the Company, as amended and in effect on the date hereof (immediately after the Fifth Amendment and Restatement thereof). "Citadel" means Citadel Broadcasting Company, a Nevada corporation and wholly owned Subsidiary of the Company. "Class A Common Stock" means the voting Class A Common Stock of the Company, par value $.001 per share. "Class A Note Agreement" means the Amended and Restated Class A Note Agreement dated as of the date hereof by and between Citadel and BFC, as amended and in effect on the date hereof. "Class B Common Stock" means the nonvoting Class B Common Stock of the Company, par value $.001 per share. "Class C Common Stock" means the nonvoting Class C Common Stock of the Company, par value $.001 per share. "Common Stock" means, collectively, the Company's Class A Common Stock, Class B Common Stock and Class C Common Stock, and is sometimes used to refer to any such Common Stock. "Company" has the meaning set forth in the Preamble to this Agreement. -5- 6 "Company's First Notice" has the meaning set forth in Section 4.2 hereof. "Consolidated Cash" means the sum of all cash, amounts in deposit accounts and securities maturing within six months as shown on the consolidated balance sheet of the Company prepared and dated as of the appropriate Determination Date. "Corporate Overhead" means during any period, the aggregate of all compensation, traveling, aircraft, entertainment and automobile expenses of personnel of the Company and Citadel and all other costs and expenses which are not allocable or are not incurred directly in the operation of any of the Stations, including, but not limited to (i) the management fee payable to ABRY Partners, Inc. pursuant to the Management and Consulting Services Agreement between Citadel and ABRY Partners, Inc., (ii) rent, and (iii) any legal expenses and auditing fees. For purposes of determining Corporate Overhead (1) all determinations shall be made with respect to the Company and on a consolidated basis, (2) references to specific individuals shall be deemed to include other individuals who succeed to the responsibilities to such individuals, (3) the term "Station" shall include radio stations owned or operated by the Company, Citadel or any other Subsidiary, or for which the Company, Citadel or any other Subsidiary sells advertising, and (4) Corporate Overhead shall be calculated for the 12-month period ending on the appropriate Determination Date. "CW" has the meaning set forth in the Preamble to this Agreement. "Date of Receipt" has the meaning set forth in Section 4.2 hereof. "Debt" means the Company's consolidated indebtedness (determined in accordance with GAAP consistently applied) as reflected on the consolidated balance sheet of the Company dated as of the Determination Date. "Demand Registration Notice" has the meaning set forth in Section 5.2 hereof. "Demand Registration" has the meaning set forth in Section 5.2 hereof. "Determination Date" means (i) in the case of a Put, the last day of the month immediately preceding the date of any Put Notice, (ii) in the case of a Call, the last day of the month immediately preceding the date of any Call Notice, and (iii) in the case of a Look-Back Event, the date of consummation of the Transaction relating to the Look-Back Event. "Election Period" has the meaning set forth in Section 3.1 hereof. "Equity Securities" of any Person means (i) any capital stock, partnership, membership, joint venture or other ownership or equity interest, participation or securities (whether voting or non-voting, whether preferred, common or otherwise, and including any stock appreciation, contingent interest or similar right) and (ii) any option, warrant, security or other right (including debt securities) directly or indirectly convertible into or exercisable or exchangeable for, -6- 7 or otherwise to acquire directly or indirectly, any stock, interest, participation or security described in clause (i) above. "Executive" has the meaning set forth in the preamble to this Agreement. "Family Group" means for any member of Management, such member's spouse and descendants (whether natural or adopted) and any trust solely for the benefit of such member and/or such member's spouse and/or descendants. "Facility A Note" has the meaning ascribed to such term in the Securities Purchase and Exchange Agreement. "Fair Market Value" means the fair market value on the Determination Date of the Company's Common Stock outstanding on a Fully Diluted Basis determined on a going concern basis and assuming a sale of 100% of the Company's Common Stock on a Fully Diluted Basis between a willing buyer and a willing seller and taking into account all relevant factors determinative of value; provided, however, that in the case of a Look-Back Event, "Fair Market Value" with respect to such Look-Back Event shall be determined in accordance with Section 5.7 below. Unless otherwise agreed by the Company and the Holder(s) who are then exercising, or are then (or in the case of a Look-Back Event, were) subject to, a Repurchase Option, Fair Market Value shall be determined by an investment banking firm reasonably acceptable to the Company and the holders of a majority of the Investor Underlying Common Stock exercising, or subject to, a Repurchase Option (the "Selection Majority Holders"), which firm shall submit to the Company and the Holders a written report setting forth such determination. If the Company and the Selection Majority Holders are unable to agree on an investment banking firm within 5 business days after the Holders Meeting Date, a firm shall be selected by lot from the top-tier New York-based investment banking firms (other than any top-tier New York based investment banking firm with whom ABRY has had a significant relationship or Oppenheimer or any of its Affiliates), after the Company and the Selection Majority Holders have each eliminated one such firm. The expenses of such selected firm will be borne by the Company, and the determination of such firm will be final and binding upon all parties, except that any Holder may rescind its exercise of a Put after the determination of Fair Market Value following the exercise of such Put. "FINOVA" has the meaning set forth in the Preamble to this Agreement. "Fully Diluted Basis" refers to the outstanding Common Stock, assuming the conversion, exercise, exchange and acquisition to the fullest extent possible of or under all Equity Securities which are directly or indirectly convertible into, are directly or indirectly exercisable or exchangeable for, or provide for the acquisition directly or indirectly of, Common Stock, in each case without regard to any limitation or restriction on any such conversion, exercise, exchange or acquisition, but in each case other than (i) any such Equity Security for which the conversion, exercise, exchange or acquisition price is greater than the fair market value at the time in question of the Common Stock so issuable (i.e., not assuming the conversion, exercise, exchange or -7- 8 acquisition of any "out of the money" security) or (ii) the conversion of any Facility A Note on or prior to the Maturity Date of such Facility A Note. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Holders" has the meaning set forth in Section 4.2 hereof. "Holders Meeting Date" has the meaning set forth in Section 4.2 hereof. "Independent Third Party" means any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not controlling, controlled by or under common control with any such 5% Owner, and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or any of such other Persons. "Investor" and "Investors" have the meanings set forth in the Preamble to this Agreement. "Investor Stock" means (i) the BofA Warrants, (ii) Class B Common Stock held by the BofA Co-Investors on the date hereof after giving effect to the "Redemptions" and the "Reclassification" (as those terms are defined in the Securities Purchase and Exchange Agreement), (iii) Class B Common Stock issued or issuable upon the exercise of the BofA Warrants, (iv) Class A Common Stock issued or issuable upon the conversion of Class B Common Stock described in clause (ii) or clause (iii) above, (v) Series A Preferred Stock held by BFC on the date hereof after giving effect to such Redemptions and such Reclassification, (vi) Class A Common Stock issued or issuable upon the conversion of any Series A Preferred Stock described in clause (v) above, (vii) Series B Preferred Stock held by Oppenheimer on the date of this Agreement after giving effect to such Redemptions and such Reclassification, (viii) Class A Common Stock issued or issuable upon the conversion of any Series B Preferred Stock described in clause (viii) above, (ix) the Shares (as that term is defined in the Securities Purchase and Exchange Agreement), (x) Common Stock issued or issuable upon the conversion of any such Share, (xi) Common Stock issued or issuable upon the conversion or exchange of any Common Stock described in clause (x) above or this clause (xi), (xii) Facility A Notes Conversion Stock (as that term is defined in the Securities Purchase and Exchange Agreement), (xiii) Equity Securities issued or issuable with respect to any Equity Securities referred to in any of clauses (i) through (xii) above or in this clause (xiii) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise, and (xiv) for purposes of Section 4 only, (A) Class C Common Stock held by FINOVA on the date of this Agreement after giving effect to such Redemptions and such Reclassification, (B) Common Stock issued upon the conversion of Common Stock described in clause (A) above, and (C) Equity Securities issued or issuable with respect to any Equity Securities referred to in clause (A) or clause (B) above or in this clause (C) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any -8- 9 particular securities constituting Investor Stock, such securities shall continue to constitute Investor Stock in the hands of any permitted transferee thereof, but will cease to constitute Investor Stock when they have been disposed of in a Public Sale. "Investor Underlying Common Stock" means all Investor Stock which is Class A Common Stock. For purposes of this Agreement, any Person who holds any Investor Stock which is not Class A Common Stock will be deemed to be the Holder of the Class A Common Stock obtainable upon the conversion, exercise or exchange to the fullest extent possible of such Investor Stock (including the conversion, exercise or exchange of all other Investor Stock directly or indirectly obtainable upon any such conversion, exercise or exchange), without regard to any restriction or limitation on any such conversion, exercise or exchange; provided that no Holder of any Facility A Note, on or prior to the Maturity Date of such Facility A Note, shall be deemed to be the Holder of any such Class A Common Stock by reason of holding such Facility A Note. "Look-Back Call Price" has the meaning set forth in Section 5.7 hereof. "Look-Back Event" has the meaning set forth in Section 5.7 hereof. "Look-Back Fair Market Value" has the meaning set forth in Section 5.7 hereof. "Majority Bank Holders" means, at any time, holders of a majority of the BofA Underlying Common Stock. "Management" and "Managers" have the meanings set forth in the preamble to this Agreement. "Maturity Date" for any Facility A Note has the meaning set forth in such Facility A Note. "Offer Notice" has the meaning set forth in Section 3.2 hereof. "Operating Cash Flow" means for any period, the consolidated net income of the Company for such period: (i) plus the sum of the following, to the extent deducted in determining such net income for such period: (a) losses from sales, transaction, exchanges and other dispositions of property not in the ordinary course of business; (b) interest, fees or other charges paid or accrued on indebtedness, including, without limitation, interest on capitalized leases that is imputed in accordance with GAAP; -9- 10 (c) depreciation and amortization of assets; (d) income taxes which are accrued during such period; (e) expenses incurred in connection with exchanges of advertising time for non-cash consideration; (f) non-cash compensation to employees of the Company; and (g) extraordinary losses; (ii) minus the sum of the following, to the extent included in determining such net income for such period: (a) revenue received in connection with exchanges of advertising time for non-cash consideration; (b) proceeds of any insurance; (c) gains from sales, transactions, exchanges and other dispositions of property not in the ordinary course of business; and (d) extraordinary gains. For purposes of determining Operating Cash Flow, (1) all determinations shall be made with respect to the Company on a consolidated basis, (2) Operating Cash Flow shall be calculated for the 12-month period ending on the appropriate Determination Date, and (3) any acquisitions or divestitures during such 12-month period shall be treated on a pro forma basis as though such acquisition or divestiture, as the case may be, had occurred on the first day of such 12-month period. Certain terms used in the foregoing definition but not defined therein shall have the meaning assigned to such terms by GAAP. "Oppenheimer" has the meaning set forth in the Preamble to this Agreement. "Ordinary Call" has the meaning set forth in Section 5.1 hereof. "Ordinary Call Price" has the meaning set forth in Section 5.1 hereof. "Ordinary Repurchase Price" means the sum of (a) the greater of: -10- 11 (i) the sum of [8.0 x (OCF + CO)] + CC - D as of the Determination Date, where: OCF = Operating Cash Flow CC = Consolidated Cash CO = Corporate Overhead, and D = Debt; and (ii) the Fair Market Value of the Company, plus (b) the exercise or conversion price, if any, payable upon exercise of any options, warrants or other Equity Securities directly or indirectly convertible into, exercisable, or exchangeable for or permitting the acquisition of Common Stock which are outstanding as of the Determination Date (assuming full conversion, exercise, exchange and acquisition as contemplated by the definition of the term "Fully Diluted Basis"). For purposes of computing the Ordinary Repurchase Price for any Puts pursuant to the penultimate sentence of Section 4.1, any Facility A Note which is outstanding on the Determination Date but for which the Maturity Date is prior to the date upon which the related Put Notice is given will be deemed not to have been outstanding on the Determination Date but will be deemed instead to have been converted into Preferred Stock immediately prior to such Conversion Date, unless such Facility A Note was paid in full on or prior to its Maturity Date (in which case such Facility A Note will be deemed to have been outstanding on the Determination Date). In calculating the Ordinary Repurchase Price, all accounting determinations shall be made in accordance with GAAP consistently applied. "Other Stockholders" has the meaning set forth in Section 3.2 hereof. "Permitted Transfer" has the meaning set forth in Section 3.4 hereof. "Permitted Transferees" has the meaning set forth in Section 3.4 hereof. "Preferred Stock" means, collectively, the Company's Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Additional Preferred Stock, and is sometimes used to refer to any of such Preferred Stock. "Premium Repurchase Price" has the same meaning as the Ordinary Repurchase Price, except that "9.0" shall be substituted for "8.0" in clause (a)(i) of such definition. "Process Agent" has the meaning set forth in Section 6.14 hereof. "Pro Rata Share" has the meaning set forth in Section 3.2 hereof. -11- 12 "Public Sale" means any sale of Stockholder Shares (i) to the public pursuant to an offering registered under the Securities Act or (ii) following a Qualified Public Offering, to the public pursuant to the provisions of Rule 144 under the Securities Act (or any similar provision then in force). "Put" has the meaning set forth in Section 4.1 hereof. "Put Closing" has the meaning set forth in Section 4.4 hereof. "Put Default" has the meaning set forth in Section 4.7 hereof. "Put Election Notice" has the meaning set forth in Section 4.3 hereof. "Put Notice" has the meaning set forth in Section 4.1 hereof. "Put Price" has the meaning set forth in Section 4.6 hereof. "Put Shares" has the meaning set forth in Section 4.3 hereof. "Qualified Public Offering" means the closing of the issuance and sale of Common Stock in an underwritten public offering which is registered pursuant to the Securities Act and which results in the receipt by the Company of cash proceeds of at least $25,000,000 (net of applicable commissions, discounts and expenses). "Registration Agreement" means the Third Amended and Restated Registration Rights Agreement of even date herewith by and among the Company, the Investors and certain other parties thereto, as in effect from time to time. "Repurchase" means the repurchase of any of the Equity Securities of any Investor pursuant to a Repurchase Option. "Repurchase Fraction" means a fraction, the numerator of which is the number of shares of Underlying Common Stock to be repurchased pursuant to a Repurchase Option and the denominator of which is the total number of shares of Common Stock on a Fully Diluted Basis outstanding as of the Determination Date. "Repurchase Majority Holders" means, at any time, any of the (a) holders of a majority of the BFC Underlying Common Stock, (b) holders of a majority of the ABRY Underlying Common Stock then in existence and (c) the Majority Bank Holders. "Repurchase Notice" means a Put Notice or a Call Notice. "Repurchase Option" means a Put or a Call. -12- 13 "Securities Act" means the Securities Act of 1933, as amended from time to time. "Securities Purchase and Exchange Agreement" means that certain Securities Purchase and Exchange Agreement dated as of the date hereof by and among the Company and the Investors, as in effect from time to time. "Senior Credit Agreement" means the Loan Agreement by and between Citadel and FINOVA (f/k/a Greyhound Financial Corporation) dated as of May 12, 1994, as amended and in effect on the date hereof, as the same may be further amended from time to time in accordance with the Voting Agreement, or any other senior debt facility, whether with FINOVA and/or one or more other lenders, which represents the senior secured debt of Citadel or the Company and is entered into in accordance with the Voting Agreement. "Senior Lender" means FINOVA or any other senior lender of the Company or Citadel pursuant to the Senior Credit Agreement. "Series A Preferred Stock" means the Series A Convertible Preferred Stock of the Company, par value $.001 per share. "Series B Preferred Stock" means the Series B Convertible Preferred Stock of the Company, par value $.001 per share. "Series C Preferred Stock" means the Series C Convertible Preferred Stock of the Company, par value $.001 per share. "Series D Preferred Stock" means the Series D Convertible Preferred Stock of the Company, par value $.001 per share. "Special Call" has the meaning set forth in Section 5.2 hereof. "Special Call Price" has the meaning set forth in Section 5.2 hereof. "Stockholder" and "Stockholders" have the meanings set forth in the Preamble to this Agreement. "Stockholder Shares" means (i) Investor Stock described in clauses (i) through (xii) of the definition of the term "Investor Stock," (ii) Common Stock held by Management on the date hereof, (iii) Common Stock held by FINOVA on the date hereof, (iv) Common Stock issued or issuable upon the conversion of Common Stock described in clause (iii) above, (v) options or other rights to acquire Common Stock issued prior to, on or after the date of this Agreement to Management, (vi) Common Stock issued or issuable upon the exercise of any option or other right described in clause (v) above, and (vii) Equity Securities of the Company issued or issuable with respect to any Equity Securities referred to in any of clauses (i) through (vi) above or in this clause (vii) by way of any stock dividend or stock split, or in connection with a combination or exchange -13- 14 of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting Stockholder Shares, such securities will continue to constitute Stockholder Shares in the hands of any Permitted Transferee thereof, but will cease to constitute Stockholder Shares when they have been disposed of in a Public Sale. "Subsidiary" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, a majority of the total voting power of Equity Securities 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 the Person or a combination thereof, or (b) if a partnership, limited liability company, association or other business entity, a majority of the partnership or other Equity Securities thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this Agreement, a Person or Persons will be deemed to have a majority ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated a majority of partnership, limited liability company, association or other business entity gains or losses or control the managing director or general partner of such Partnership, association or other business entity. "Transaction" has the meaning set forth in Section 5.7 hereof. "Transfer" means to sell, transfer, assign, pledge, hypothecate or otherwise dispose of any interest in any Stockholder Shares. "Underlying Common Stock" means all Stockholder Shares which are Class A Common Stock. For purposes of this Agreement, any Person who holds any Stockholder Shares which are not Class A Common Stock will be deemed to be the Holder of the Class A Common Stock obtainable upon the conversion, exercise or exchange to the fullest extent possible of such Stockholder Shares (including the conversion, exercise or exchange of all other Stockholder Shares directly or indirectly obtainable upon any such conversion, exercise or exchange), without regard to any restriction or limitation on any such conversion, exercise or exchange; provided that no Holder of any Facility A Note, on or prior to the Maturity Date of such Facility A Note, shall be deemed to be the Holder of any such Class A Common Stock by reason of holding such Facility A Note. "Voting Agreement" means the Amended and Restated Voting Agreement by and among the Company, the Investors, Wilson and certain other parties thereto, as in effect from time to time. "Wilson" has the meaning set forth in the Preamble to this Agreement. "Wilson Employment Agreement" means the Employment Agreement by and among the Company, Citadel and the Executive dated as of the date hereof. -14- 15 2. Limited Preemptive Rights. 2.1 First Refusal Rights. Prior to the completion of a Qualified Public Offering, if the Company or any of its Subsidiaries authorizes the issuance or sale of any Equity Securities of the Company or such Subsidiary, the Company shall first deliver a written notice to each holder of Investor Underlying Common Stock and Wilson (i) describing in reasonable detail the Equity Securities being offered, the purchase price thereof, the payment and other terms of purchase thereof and (ii) offering to sell to such holder a portion of such Equity Securities equal to the quotient determined by dividing (1) the number of shares of Investor Underlying Common Stock, or, in the case of Wilson, Common Stock, held by such holder by (2) the total number of shares of Investor Underlying Common Stock and the number of shares of Common Stock held by Wilson. Wilson and each holder of Investor Underlying Common Stock (or an Affiliate of any such holder designated by such holder), shall be entitled to purchase such Equity Securities at the price most favorable to a purchaser thereof and on the terms most favorable to a purchaser thereof as such Equity Securities are to be offered to any other Person; provided that, at the request of any holder of Investor Underlying Common Stock, the Company shall offer to such holder Equity Securities which have no voting rights and are convertible into voting securities on the same terms as the Class B Common Stock or the Class C Common Stock is convertible into Class A Common Stock but which are otherwise identical (other than for any changes required to avoid a "Regulatory Problem" as such term is defined in the Certificate of Incorporation) to the Equity Securities being offered (or, if the Equity Securities to be offered are nonvoting but convertible into or exercisable or exchangeable for voting securities, the Company shall offer to any such holder Equity Securities which are convertible into voting securities on the same terms as the Class B Common Stock or Class C Common Stock, as applicable, is convertible into Class A Common Stock). The purchase price for all Equity Securities offered to Wilson and the holders of Investor Underlying Common Stock shall be payable in cash or, to the extent otherwise required hereunder, notes issued by such offerees. 2.2 Exercise of Rights. In order to exercise its purchase rights hereunder, a holder of Investor Underlying Common Stock or Wilson, as the case may be, must deliver a written notice to the Company within 15 days after receipt of written notice from the Company, describing such Person's election hereunder to purchase all or any portion of the Equity Securities so offered to such Person. If all of the Equity Securities offered to the holders of Investor Underlying Common Stock and Wilson are not fully subscribed by such Persons, the remaining Equity Securities shall be reoffered by the Company to the Persons purchasing their full allotment upon the terms set forth in this Section 2, except that any such Person who wishes to purchase any of the remaining Equity Securities must notify the Company of such Person's intention to exercise his or its purchase rights within five days after receipt of such reoffer. The closing of the purchases and sales by the Persons electing to purchase such Equity Securities shall occur at least 10 days after the completion of such 15-day (or, if applicable, such 5-day) response period. Upon the expiration of the offering periods described above and for a period of 90 days following such expiration, the Company shall be entitled to sell the Equity Securities which the holders of Investor Underlying Common Stock and Wilson have not elected to purchase on terms -15- 16 and conditions no more favorable to the purchasers thereof than those offered to such Persons. Any Equity Securities offered or sold by the Company after such 90-day period must first be reoffered to Wilson and the holders of Investor Underlying Common Stock pursuant to the terms of this Section 2. 2.3 Termination of Preemptive Rights. The rights under this Section 2 shall terminate upon the consummation of a Qualified Public Offering. 2.4 Exceptions. The foregoing provisions of this Section 2 shall not apply to (i) any issuance of Class A Common Stock or options exercisable for shares of Class A Common Stock to employees or directors of the Company or any Subsidiary of the Company pursuant to employee compensation plans in effect as of the date hereof or approved by the Company's Board of Directors in accordance with the Voting Agreement, (ii) any issuance of Common Stock upon conversion or exchange of any other Common Stock, (iii) any issuance of Common Stock upon the conversion of any Preferred Stock or the exercise of any BofA Warrant, (iv) any issuance of Common Stock pursuant to a public offering registered under the Securities Act, or (v) any issuance of any Facility A Note or any issuance of Preferred Stock upon the conversion of any Facility A Note, or (vi) any issuance of Preferred Stock upon the conversion of any other Preferred Stock. 3. Restrictions on Transfers. All Transfers of Stockholder Shares shall be subject to the terms and conditions of this Section 3. 3.1 Transfer of Wilson's Stockholder Shares. Wilson will not Transfer any interest in any Stockholder Shares except pursuant to the provisions of this Section 3. Wilson agrees not to consummate any Transfer (other than a Permitted Transfer or a Transfer permitted by Section 3.8) until 30 days after the delivery to the Company and the other Stockholders of an Offer Notice unless the parties to the Transfer have been finally determined pursuant to this Section 3 prior to the expiration of such 30-day period (the "Election Period"). 3.2 First Offer Right. At least 30 days prior to making any Transfer of any Stockholder Shares (other than a Permitted Transfer or a Transfer permitted by Section 3.8), Wilson will deliver a written notice (the "Offer Notice") to the Company and the holders of Investor Underlying Common Stock (the "Other Stockholders"). The Offer Notice will disclose in reasonable detail the proposed number of Stockholder Shares to be transferred and the proposed terms and conditions of the Transfer. First, the Company may elect to purchase all, but not less than all, of the Stockholder Shares specified in the Offer Notice at the price and on the terms specified therein by delivering written notice of such election to the Executive and the Other Stockholders as soon as practicable, but in any event within 10 days after the Company's receipt of the Offer Notice. If the Company has not elected to purchase all of the Stockholder Shares within such 10-day period, each Other Stockholder may elect to purchase (directly or through an Affiliate designated by such Other Stockholder) all, but not less than all, of such Other Stockholder's Pro Rata Share of the Stockholder Shares specified in the Offer Notice at the price and on the terms specified therein by delivering written notice of such election to the Executive as soon as practicable, but in any event within 20 days after delivery of the Offer Notice. Any Stockholder Shares not elected to be purchased by the -16- 17 end of such 20-day period will be reoffered for the 10-day period prior to the expiration of the Election Period by Wilson on a pro rata basis to the Other Stockholders who have elected to purchase their respective Pro Rata Shares. If the Company or any Other Stockholders have so elected to purchase Stockholder Shares from Wilson, the Transfer of such shares will be consummated as soon as practicable after the delivery of the election notices, but in any event within 15 days after the expiration of the Election Period. In the event that the Company and the Other Stockholders have not elected to purchase all of the Stockholder Shares being offered, Wilson may, within 90 days after the expiration of the Election Period and subject to the provisions of Section 3.3, Transfer to one or more third parties at a price no less than the price per share specified in the Offer Notice and on other terms no more favorable to the transferees than offered to the Company and the Other Stockholders in the Offer Notice the number of such Stockholder Shares which the Company and the Other Stockholders have not elected to purchase. The purchase price specified in any Offer Notice will be payable solely in cash at the closing of the transaction or in installments over time, as specified pursuant to the Offer Notice. No Stockholder Shares may be pledged, hypothecated or in any other manner encumbered by Wilson without the prior written consent of the holders of a majority of the Investor Underlying Common Stock, which consent may be withheld in each such holder's sole discretion. Each Other Stockholder's "Pro Rata Shares" will be the percentage which reflects such Other Stockholder's proportionate ownership of all Investor Underlying Common Stock. 3.3 Participation Rights. The Other Stockholders who have not elected to purchase any of the Stockholder Shares specified in the Offer Notice may elect to participate in the contemplated Transfer by Wilson by delivering written notice to the Executive within 30 days after delivery of the Offer Notice. If any Other Stockholders have so elected to participate in such Transfer, each of Wilson and such Other Stockholders will be entitled to sell in the contemplated Transfer, at the same price and on the same terms, Equity Securities which are, or which are convertible into or exercisable for, shares of Common Stock and Investor Underlying Common Stock in a quantity equal to the product of (a) the quotient determined by dividing the number of shares of Investor Underlying Common Stock and Common Stock, without duplication, held by such Stockholder by the aggregate number of shares of Investor Underlying Common Stock and Common Stock held by Wilson and the Other Stockholders (including the number of shares of Investor Underlying Common Stock held by such Stockholder) participating in such sale and (b) the sum of the number of shares of Common Stock and the number of shares of Underlying Common Stock to be sold in the contemplated Transfer. The Executive will use reasonable efforts to obtain the agreement of the prospective transferee to the participation of the Other Stockholders in any contemplated Transfer and to the inclusion of a transfer of Investor Stock which is not Class A Common Stock in the contemplated Transfer, and Wilson will not Transfer any of such Stockholder Shares to the prospective transferee if the prospective transferee declines to allow the participation of the Other Stockholders or the inclusion of the Investor Stock which is not Class A Common Stock. If any portion of the BofA Warrants is included in any Transfer of Stockholder Shares under this Section 3.3, the purchase price for the BofA Warrants shall be equal to the full purchase price determined hereunder for the Stockholder Shares covered by the portion of the BofA Warrants to be transferred, reduced by the aggregate exercise price for such shares. -17- 18 3.4 Permitted Transferees. The restrictions contained in Section 3.1 through 3.3 apply only with respect to any Transfer of Stockholder Shares by Wilson and do not apply to any Transfer of Stockholder Shares by Wilson (i) pursuant to a Public Sale or Section 6 hereof, or (ii) pursuant to applicable laws of descent and distribution or among Wilson's Family Group or as contemplated by Section 3.8 hereof. Transfers of the type described in clauses (i) and (ii) above and Transfers by any Stockholder other than Wilson are referred to collectively herein as "Permitted Transfers" and individually as a "Permitted Transfer." Prior to any such Permitted Transfer (other than in a Public Sale), the transferees of such Stockholder Shares will agree in writing, in form and substance reasonably acceptable to the Company and delivered to the Company and each of the holders of Investor Underlying Common Stock, to be bound by the provisions of this Agreement affecting such Transferring Stockholder and such Stockholder Shares so Transferred. The restrictions contained in this Section 3 will continue to be applicable to the Stockholder Shares and to the transferee after any Permitted Transfer to the extent applicable to such Stockholder Shares and the Transferring Stockholder prior to such Transfer. Without limiting the foregoing, transferees who receive Stockholder Shares in accordance with this Section 3.4 shall be deemed a "Stockholder" (and an "Investor," if the Transferring Stockholder is an Investor, or a member of "Management," if the Transferring Stockholder is a member of Management, or a or a "BofA Co-Investor" if the Transferring Stockholder is a BofA Co-Investor and so on) for purposes of this Agreement and are referred to collectively herein as "Permitted Transferees". 3.5 Legend. Each certificate for Stockholder Shares will be imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT DATED AS OF JUNE 28, 1996, BY AND AMONG THE ISSUER (THE "COMPANY") AND CERTAIN OF ITS STOCKHOLDERS, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST." 3.6 Termination of Restrictions. The provisions of this Section 3 will terminate upon the consummation of a Qualified Public Offering. 3.7 Transfers in Violation of Agreement. Any Transfer or attempted Transfer of any Stockholder Shares in violation of any provision of this Agreement will be void, and the -18- 19 Company will not record such Transfer on its books or treat any purported transferee of such Stockholder Shares as the owner of such shares for any purpose. 3.8 Permitted Pledge. Notwithstanding the provisions of this Section 3, Wilson may pledge any shares of Wilson's Common Stock (a) to the Company to secure indebtedness to Company incurred by Wilson in connection with the purchase of Common Stock by Wilson from Company and (b) to a reputable financial institution to secure a loan to Wilson not to exceed $500,000 in principal amount at any time outstanding; provided, however, that any such pledge is made expressly subject to the terms, restrictions and conditions contained in this Agreement and the pledgee executes and delivers to the holders of Investor Underlying Common Stock prior thereto the agreement required pursuant to Section 3.4 above. 4. Put Arrangements. 4.1 Basic Put Rights. At any time beginning August 1, 2000, any of the Repurchase Majority Holders shall have the right to require the Company to repurchase all or any portion of the Preferred Stock or BofA Warrants held by such Investor(s) (the "Put") at the Put Price by delivering a written notice to the Company specifying the quantity of such securities to be purchased (the "Put Notice"). Subject to Section 4.3 hereof (regarding Puts deemed to have been exercised as of the Date of Receipt), other than a Put exercised by the holders of a majority of the ABRY Underlying Common Stock, no additional Put(s) shall be exercised within the one-year period beginning on the Date of Receipt. For so long as the Bank or any Affiliate thereof (excluding from the definition of "Affiliate" for such purposes the last two sentences of such definition) holds the BofA Warrants, the BofA Co-Investors and the Class B Common Stock held by the BofA Co- Investors shall be subject to the provisions of this Section 4 and the Class B Common Stock held by the BofA Co-Investors shall be treated the same as the BofA Warrants held by the Bank or such Affiliate for all purposes of this Section 4, except that the reduction described in clause (b) of Section 4.6 shall not apply to such Class B Common Stock. Notwithstanding the foregoing, if at any time (a) ABRY delivers written notice to the Company requesting the Company to terminate the Executive's employment pursuant to the Wilson Employment Agreement and (b) the Company fails within 20 business days to terminate the Executive's employment in accordance with the terms thereof, then ABRY and ABRY/CIP shall be entitled to exercise a Put. Furthermore, in the event of a Put pursuant to the immediately preceding sentence, (i) notwithstanding the provisions of Section 4(g) of the Securities Purchase and Exchange Agreement, neither ABRY nor ABRY/CIP shall have any further obligation to make any Facility A Advance and (ii) notwithstanding the provisions of any Facility A Note, none of the Facility A Notes thereafter shall be converted into Preferred Stock. 4.2 The Company's First Notice. Within five business days after receipt (the "Date of Receipt" for purposes of this Section 4) of the Put Notice, the Company shall deliver a written notice (the "Company's First Notice") to all holders of Investor Stock which is Preferred Stock, a BofA Warrant or held by FINOVA (with respect to such Put, the "Eligible Holders") informing them of the receipt of the Put Notice, the Date of Receipt, the quantity of Investor Stock requested to be purchased pursuant to the Put Notice, the number of shares of Investor Underlying -19- 20 Common Stock then existing with respect to outstanding shares of Preferred Stock, BofA Warrants and shares held by FINOVA and number of shares of Common Stock on a Fully Diluted Basis in existence at the close of business on the Date of Receipt. The Company's First Notice will also specify a place, date and time for a meeting of all Eligible Holders who deliver a Put Notice and all Eligible Holders who deliver a Put Election Notice pursuant to Section 4.3 (collectively, the "Put Holders") to participate in the selection of an investment banking firm for purposes of determining Fair Market Value, which date (the "Holders Meeting Date") shall not be less than five business days nor more than 30 days after the Date of Receipt. 4.3 Put Election. Within 10 business days after delivery of the Company's First Notice, any Eligible Holder who desires to Put any Preferred Stock, BofA Warrants or Investor Stock which is held by FINOVA shall deliver written notice of such election to the Company indicating the number, class and type of such Equity Securities such Eligible Holder elects to sell (the "Put Election Notice"). By timely delivery of such Put Election Notice, the Eligible Holder shall be deemed for all purposes of this Section 4 to have exercised a Put as of the Date of Receipt of the Put Notice giving rise to the Company's First Notice. All shares of Preferred Stock, BofA Warrants or Investor Stock which is held by FINOVA with respect to which a Put has been exercised are referred to herein collectively as the "Put Shares." 4.4 Put Closing. Upon the delivery of the Put Notice and all Put Election Notices, the Company and the Put Holders shall in good faith promptly determine the Put Price as provided in this Agreement, and subject to the provisions hereof, within 10 days after the determination of the Put Price, the Company will purchase and each Put Holder will sell the number of such Put Holder's Put Shares specified in such Put Holder's Put Notice or Put Election Notice at a time and place mutually agreeable to the Company and the Selection Majority Holders (the "Put Closing"). 4.5 Payment of Put Price. At the Put Closing, each Put Holder shall deliver to the Company certificates representing such Put Holder's Put Shares to be Repurchased by the Company and the Company shall deliver to such Put Holder the Put Price for such Put Shares by cashier's or certified check payable to such Put Holder or by wire transfer of immediately available funds to an account designated by such Put Holder to the extent any such Repurchase for cash is not prohibited (either directly or by prohibition of distributions from Citadel to the Company) by (i) the provisions of applicable state law, (ii) the provisions of the Senior Credit Agreement, the Class A Note Agreement or the Voting Agreement or (iii) the terms and provisions of any refinancing of the principal amount outstanding pursuant to the Senior Credit Agreement at the time of such refinancing and the note(s) issued pursuant to the Senior Credit Agreement at the time of such refinancing, to the extent any such refinancing does not increase the principal amount which would otherwise then be outstanding under the Senior Credit Agreement and the related note(s) by more than $500,000; provided that such Put Holder shall be entitled to rescind any portion of the exercised Put if any portion of the Put Price for such Put Holder's Put Shares is not paid in cash during the 10- day period described in Section 4.4. The Company agrees to (x) use best efforts, and to cause Citadel to use best efforts, to request after the exercise of a Put that the Senior Lender, the lenders under the Class A Note Agreement, and any lender under any refinancing permitted pursuant to clause (iii) in the immediately preceding sentence, allow the Company to pay the Put Price for all -20- 21 Put Shares in full (and allow Citadel to make distributions to the Company for said purpose) within 10 days after determination of the Put Price. If the Company is not able to Repurchase all of the Put Shares, the Company shall Repurchase the maximum number of Put Shares that it has the funds and is legally entitled to Repurchase, pro rata from each Put Holder on the basis of the number of shares of Underlying Common Stock held by each Put Holder. At any time thereafter when additional funds become actually and legally available to the Company for the Repurchase of its capital stock, such funds will immediately be used to purchase the balance of the Put Shares (or as much of such balance as may be Repurchased with such available funds, allocated as set forth in the immediately preceding sentence), provided, however, that (a) with respect to any portion of the Put Price to be paid within one year after the Date of Receipt, the price to be paid for Put Shares shall be increased by interest accrued on such amount, from and including the Date of Receipt through and including the date such price is paid, at the Prime Rate of interest as published in the "Money Rates" Section of the Wall Street Journal from time to time and (b) with respect to any portion of the Put Price to be paid at any time after one year after the Date of Receipt, the price to be paid for Put Shares shall be the greater of the Put Price determined in connection with the original Determination Date and the Put Price which would have been payable if the Ordinary Repurchase Price was determined as of the last day of the Company's fiscal quarter most recently ended prior to or upon the date when such additional funds became actually and legally available for such Repurchase. 4.6 Determination of Put Price. Subject to Section 4.8 below, the "Put Price" for shares of the Preferred Stock, BofA Warrants or shares of Investor Stock held by FINOVA to be repurchased shall mean the sum of (a) the product of (i) the Ordinary Repurchase Price multiplied by (ii) the Repurchase Fraction, less (b) in the case of any BofA Warrants, the exercise price, if any, payable upon the exercise of such BofA Warrant. 4.7 Put Default. In the event of the failure of the Company within 180 days of the Company's receipt of the Put Notice to pay in full the Put Price for all ABRY Stock pursuant to a Put with respect to the ABRY Stock (a "Put Default"), the holders of a majority of the ABRY Underlying Common Stock shall have certain affirmative rights in connection with an Approved Sale as set forth in Section 6 hereof. 4.8 Termination of Put Rights. The rights to exercise a Put hereunder shall terminate upon the consummation of a Qualified Public Offering. 5. Call Options. 5.1 Ordinary Call. At any time beginning August 1, 2000 the Company may, at its option (the "Ordinary Call"), require all holders of Preferred Stock and BofA Warrants to sell to the Company all, but not less than all, of the Preferred Stock and BofA Warrants held by such holders at the Ordinary Call Price. Subject to Section 5.7 below, the "Ordinary Call Price" for shares of Preferred Stock or BofA Warrants to be Repurchased pursuant to the Ordinary Call shall be sum of (a) the product of (i) the Ordinary Repurchase Price multiplied by (ii) the Repurchase Fraction, less (b) in the case of any BofA Warrants, the exercise price, if any, payable upon the exercise of such BofA Warrants. For so long as the Bank or any Affiliate thereof (excluding from -21- 22 the definition of "Affiliate" for such purposes the last two sentences of such definition) holds the BofA Warrants, the BofA Co-Investors and the Class B Common Stock held by the BofA Co-Investors shall be subject to the provisions of this Section 5 and the Class B Common Stock held by the BofA Co-Investors shall be treated the same as BofA Warrants held by the Bank or such Affiliate for all purposes of this Section 5, except that the reductions described in clause (b) above and clause (b) of Section 5.2 shall not apply to such Class B Common Stock. 5.2 Special Call. Upon receipt of notice (the "Demand Registration Notice") of a demand for registration of Investor Underlying Common Stock pursuant to Section 2 of the Registration Agreement (a "Demand Registration"), the Company may, at its option (the "Special Call"), require the party or parties requiring such Demand Registration to sell to the Company all, but not less than all, of the Investor Underlying Common Stock identified in the Demand Registration Notice as the Investor Underlying Common Stock to be registered pursuant to such Demand Registration, at the Special Call Price. The "Special Call Price" for shares of Investor Underlying Common Stock to be repurchased pursuant to the Special Call shall be sum of (a) the product of (i) the Premium Repurchase Price multiplied by (ii) the Repurchase Fraction, less (b) in the case of any BofA Warrants, the exercise price, if any, payable upon the exercise of such BofA Warrants. The term "Call Price" shall mean the Ordinary Call Price or the Special Call Price, as the case may be. 5.3 Call Procedure. If the Company elects to exercise the Ordinary Call or the Special Call (each, a "Call"), the Company shall deliver written notice (the "Call Notice") of its exercise of the Call to each holder of Investor Underlying Common Stock. The "Call Holders" refers to the Persons which are subject to any particular Call. In the case of the Special Call, the Call Notice shall be delivered to each Call Holder no later than five business days after the Company's receipt of the Demand Registration Notice. The Call Notice shall indicate whether the Call being exercised is an Ordinary Call or a Special Call, the quantity of Investor Underlying Common Stock subject to the Call (collectively, the "Call Shares"), the number of shares of Investor Underlying Common Stock then existing with respect to the Call Shares and the number of shares of Common Stock on a Fully Diluted Basis in existence at the close of business on the date of the Call Notice. The Call Notice shall also specify a Call Holders Meeting Date (which shall not be less than 10 business days after the date of the Call Notice) for a meeting of the Call Holders to participate in the selection of an investment banking firm for purposes of determining Fair Market Value. 5.4 Call Election. Within 10 business days after delivery of the Call Notice, any Holder of Investor Underlying Common Stock who desires to participate in the Special Call shall deliver written notice of such election to the Company (the "Call Election Notice"). By timely delivery of such Call Election Notice, the Holder shall be deemed for all purposes of this Section 5 to be subject to such Special Call as if such Holder had been the party or one of the parties requiring the applicable Demand Registration. 5.5 Call Closing. Upon delivery of the Call Notice, the Company and the Call Holders shall in good faith promptly determine the Call Price and in not less than 10 nor more than 30 days after determination of the Call Price, the Company shall purchase and each Call Holder shall -22- 23 sell such Call Holder's Call Shares at a time and place mutually agreeable to the Company and the Selection Majority Holders (the "Call Closing"). 5.6 Payment of Call Price. At the Call Closing, each Call Holder shall deliver to the Company certificates representing the Call Holder's Call Shares to be Repurchased by the Company and the Company shall deliver to the Call Holder the Call Price for such Call Shares by cashier's or certified check payable to the Call Holder or by wire transfer of immediately available funds to an account designated by the Call Holder. Should the Company for any reason not deliver the Call Price to any Call Holder within 10 days after determination of the Call Price, the Call shall be null and void as to such Call Holder. 5.7 Look-Back Provisions. If within one year following the Call Closing, (a) there is a Change of Control or a public offering of any of the Company's Equity Securities registered under the Securities Act (each, a "Transaction"), or the Company takes any actions intended to result in a Change of Control or a public offering (for example, entering into a letter of intent or negotiations with a potential purchaser of the Company's assets or capital stock, or retaining an investment banking firm for purposes of a public offering) (a "Look-Back Event") and (b) the Fair Market Value determined by or in relation to any such Transaction (including for this purpose (x) the payment of the Call Price to the Call Holders, and (y) the payment of any Put Price by the Company and the aggregate fair market value of all dividends and distributions declared or paid by the Company to its stockholders from the Determination Date of the Call Price to and including the date of the consummation of such Transaction) (the "Look-Back Fair Market Value") exceeds the Fair Market Value used in the determination of the Call Price for such exercise of the Call, the Call Holders shall be entitled to receive the benefit of such higher valuation for the Call Shares sold pursuant to the Call. The Call Price of the Call Shares sold pursuant to the Call shall be redetermined by substituting the Look-Back Fair Market Value for the Fair Market Value originally used in determination of the Call Price for such exercise of the Call (the "Look-Back Call Price"). The excess, if any, of (i) the Look-Back Call Price over (ii) the Call Price received by the Holders upon exercise of the Call shall be paid to Call Holders who had previously sold securities to the Company pursuant to such Call immediately upon consummation of any such Transaction. 5.8 Voidability of the Ordinary Call. Notwithstanding any other provision of this Agreement, the Ordinary Call shall become null and void with respect to any Call Shares upon (a) the conversion to Common Stock of any such Call Shares which are shares of Preferred Stock, or (b) the exercise of any Call Shares which are BofA Warrants, and the Ordinary Call shall be null and void with respect to any Investor Underlying Common Stock which is issued upon such conversion (and shall be null and void with respect to all Class B Common Stock held by the BofA Co-Investors, in the case of an exercise described in clause (b) above). 5.9 Termination of Call Rights. The Company's rights to exercise any Call hereunder shall terminate upon the consummation of a Qualified Public Offering. -23- 24 6. Sale of the Company. 6.1 In the event of an Approved Sale, each Stockholder agrees to (i) consent to and raise no objections against the Approved Sale or the process pursuant to which the Approved Sale was arranged, (ii) waive any dissenter's rights and other similar rights, and (iii) sell its Stockholder Shares, if the Approved Sale is structured as a sale of Equity Securities, on the terms and conditions of the Approved Sale. Each Stockholder will take all commercially reasonable actions as directed by the Board (or, following a Put Default, as directed by holders of a majority of the ABRY Underlying Common Stock) in connection with the consummation of any Approved Sale, including without limitation executing the applicable purchase agreement and granting identical indemnification rights; provided, that the liability of each Stockholder shall be no greater than the dollar amount of the proceeds received by such Stockholder in connection with such Approved Sale. Subject to the proviso in the immediately preceding sentence, each Stockholder required to make indemnification payments in connection with any Approved Sale shall have a right to recover from all the other Stockholders to the extent that the amount required to be paid by such Stockholder was disproportionate to the proportion of the Common Stock or Underlying Common Stock (without duplication) held by such Stockholder as compared to the total Common Stock on a Fully Diluted Basis immediately prior to the consummation of such Approved Sale. 6.2 If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) under the Securities Act may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the Stockholders who are not accredited investors (as such term is defined in Rule 501) will, at the request of the Company, appoint a purchaser representative (as such term is defined in Rule 501) reasonably acceptable to the Company. If any Stockholder appoints a purchaser representative designated by the Company, the Company will pay the fees of such purchaser representative, but if any Stockholder declines to appoint the purchaser representative designated by the Company such holder will appoint another purchaser representative (reasonably acceptable to the Company), and such holder will be responsible for the fees of the purchaser representative so appointed. 6.3 All Stockholders will bear their pro rata share (based, without duplication, upon the number of shares of Common Stock on a Fully Diluted Basis immediately prior to the consummation of such Approved Sale) of the reasonable costs of any sale of Stockholder Shares pursuant to an Approved Sale to the extent such costs are incurred for the benefit of or on behalf of the Company or all selling Stockholders and are not otherwise paid by the acquiring party or paid or payable by the Company pursuant to the Securities Purchase and Exchange Agreement. Costs incurred by any Stockholder on its own behalf will not be considered costs of the transaction hereunder. 6.4 Upon the occurrence of a Put Default, a Person designated by the holders of a majority of the ABRY Underlying Common Stock (the "ABRY Representative") shall have the right to (i) solicit offers from and make presentations and proposals to prospective buyers of the Company, (ii) disseminate information regarding the Company, including any financial information, -24- 25 marketing pieces or offering memoranda, for the purposes of arranging a sale of the Company, (iii) enter into negotiations and/or agreements regarding the potential sale of the Company, and (iv) hire an investment banking firm to handle any or all of the foregoing; provided, that ABRY shall have no interest, whether direct or indirect, in any such prospective buyers. In furtherance of this Section 6.4, the Company agrees that it will (a) provide access to the ABRY Representative to the books and records of the Company (including access to the Company's personnel) to enable the ABRY Representative to perform the responsibilities set forth in clauses (i), (ii) and (iii) above, (b) use its best efforts to cause the Company's management to participate fully in the sale process, including, without limitation, the preparation and delivery of any presentations to buyers and (c) pay all expenses incurred by the Company or the ABRY Representative in connection with the foregoing clauses (a) and (b) and the immediately preceding sentence. The Executive, for so long as he is employed by the Company or any of its Subsidiaries, agrees to participate fully in the sale process, including, without limitation, the preparation and delivery of any such presentations to buyers. 6.5 This Section 6 shall automatically terminate upon a Qualified Public Offering. 7. Miscellaneous. 7.1 Remedies. Each holder of Stockholder Shares will have all rights and remedies set forth in this Agreement, the Certificate of Incorporation and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. 7.2 Consent to Amendments. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement will be effective against the Company or the Stockholders unless such modification, amendment or waiver is approved in writing by the Company, Wilson (for so long as he holds any Common Stock) and each of the Repurchase Majority Holders, respectively; provided, however, that no amendment or waiver with respect to any provision of Section 2 or Section 3 hereof that would adversely affect any rights or benefits of FINOVA hereunder shall be effective as to FINOVA unless also approved in writing by FINOVA. The failure of any party to enforce any of the provisions of this Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. No amendment to Section 6 of this Agreement that would materially and adversely affect Management shall be made without the prior written consent of the Executive. 7.3 Survival of Representations and Warranties. All representations and warranties contained herein or made in writing by any party in connection herewith will survive the execution and delivery of this Agreement, regardless of any investigation made by any party. -25- 26 7.4 Successors and Assigns. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any party of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. In addition, and whether or not any express assignment has been made, the provisions of this Agreement which are for any Stockholder's benefit as a purchase or holder of Stockholder Shares are also for the benefit of, and enforceable by, any subsequent holder of such Stockholders Shares. 7.5 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 7.6 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. 7.7 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 7.8 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient one business day after the date when sent to the recipient by reputable express courier service (charges prepaid) or five business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notice, demands and other communications will be sent to the Purchaser and to the Company at the addresses indicated below: If to the Company: Citadel Communications Corporation 1839 South Alma School Road, Suite 264 Mesa, Arizona 85210 Attn: Ms. Donna L. Heffner With a copy (which will not constitute notice) to: Osborn Maledon, P.A. 2929 North Central Avenue Suite 2100 Phoenix, Arizona 85012-2794 Attn: Michelle M. Matiski, Esq. -26- 27 If to a Stockholder: To the respective address set forth on the Schedule A attached to this Agreement, including any copies to be provided in accordance with such Schedule A. or to such other address or to the attention of such Person as the recipient party has specified by prior written notice to the sending party. 7.9 No Third-Party Beneficiaries. This Agreement will not confer any rights or remedies upon any Person other than the Company and the Stockholders and their respective successors and permitted assigns. 7.10 Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the parties and supersedes any prior understandings, agreements, or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof, including, without limitation, the Previous Stockholders Agreement. 7.11 Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local, or foreign statute or law will be deemed also to refer to text requires otherwise. The use of the word "including" in this Agreement is intended by the parties to be by way of example rather than limitation. 7.12 Incorporation of Schedules. The Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. 7.13 Governing Law. The General Corporation Law of the State of Nevada will govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the schedules hereto will be governed by the internal law, and not the law of conflicts, of the State of Illinois. 7.14 Submission to Jurisdiction. Each of the parties to this Agreement submits to the jurisdiction of any state or federal court sitting in either of Chicago, Illinois, Boston, Massachusetts, Nevada or Arizona in any action or proceeding arising out of or relating to his Agreement, agrees that all claims in respect of the action or proceeding may be heard and determined in any such court, and agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each of the parties to this Agreement waives any -27- 28 defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. Each party to this Agreement appoints CT Corporation System (the "Process Agent"), with addresses of 208 South LaSalle Street, Chicago, Illinois 60604, 2 Oliver Street, Boston, Massachusetts 02109, One East First Street, Reno, Nevada and Suite 1601, 3225 North Central Avenue, Phoenix Arizona 85012, as its agent to receive on its behalf service of copies of the summons and complaint and any other process that might be served in the action or proceeding. Any party to this Agreement may make service on any other party by sending or delivering a copy of the process (a) to the party to be served at the address and in the manner provided for the giving of notices in Section 7.8 or (b) to the party to be served in care of the Process Agent at the address and in the manner provided for the giving of notices in Section 7.8. Nothing in this Section, however, will affect the right of any party to serve legal process in any other manner permitted by law. Each party agrees that a final judgment in any action or proceeding so brought will be conclusive and may be enforced by suit on the judgment or in other manner provided by law. 7.15 Bank Action on behalf of Bank Co-Investors. Each of the parties hereto agrees that Bank, or any Affiliate thereof (excluding from the definition of "Affiliate" for such purposes the last two sentences thereof) holding any Stockholder Shares, may exercise the rights of the Bank Co-Investors for all Stockholders Shares initially issued to the Bank Co-Investors. 7.16 FCC Matters. Notwithstanding any provision contained herein to the contrary, no party hereto may exercise any of its rights or remedies hereunder, or take any actions permitted hereby, if prior thereto the Company receives a written opinion from its nationally recognized FCC counsel that after consultation with the staff of the Federal communications Commission ("FCC") such exercise or action will violate the Communication Act of 1934 or the rules, regulations, or policies promulgated thereunder. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written * * * * * [SIGNATURES APPEAR ON FOLLOWING PAGES] -28- 29 SIGNATURES PAGES FOR SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT CITADEL COMMUNICATIONS CORPORATION By: /s/ Lawrence R. Wilson -------------------------------- Name: Lawrence R. Wilson --------------------------- Title: President -------------------------- BAKER, FENTRESS & COMPANY By: /s/ Scott E. Smith -------------------------------- Name: Scott E. Smith --------------------------- Title: Executive Vice President -------------------------- BANK OF AMERICA ILLINOIS By: /s/ Robert F. Perille -------------------------------- Name: Robert F. Perille --------------------------- Title: Managing Director -------------------------- OPPENHEIMER & CO., INC. By: /s/ Mark Leavitt -------------------------------- Name: Mark Leavitt --------------------------- Title: Managing Director -------------------------- FINOVA CAPITAL CORPORATION By: /s/ Matthew H. Breyne -------------------------------- Name: Matthew H. Breyne -------------------------- Title: Group Vice President -------------------------- 30 ABRY BROADCAST PARTNERS II, L.P. By: ABRY CAPITAL, L.P. Its General Partner By: ABRY HOLDINGS, INC. Its General Partner By: /s/ Jay M. Grossman ----------------------- Name: Jay M. Grossman ------------------ Title: Attorney-in-Fact ------------------ ABRY/CITADEL INVESTMENT PARTNERS, L.P. By: ABRY CAPITAL, L.P. Its General Partner By: ABRY HOLDINGS, INC. Its General Partner By: /s/ Jay M. Grossman ------------------------- Name: Jay M. Grossman ---------------------- Title: Attorney-in-Fact -------------------- /s/ Lawrence R. Wilson ------------------------- Lawrence R. Wilson ------------------------- /s/ Claire Wilson ------------------------- Claire Wilson -30- 31 BANK CO-INVESTORS SIGNATURE PAGE * -------------------------------- Christopher J. Perry * -------------------------------- Robert F. Perille * -------------------------------- M. Ann O'Brien * -------------------------------- Ford S. Bartholow * -------------------------------- Jeffrey M. Mann * -------------------------------- Matthew W. Clary * -------------------------------- Thomas E. Van Pelt, Jr. * By: /s/ Robert F. Perille ----------------------------- Name: Robert F. Perille ------------------------ Attorney-in-Fact - 31- 32 MANAGEMENT SIGNATURE PAGE /s/ Donna L. Heffner ------------------------------ Donna L. Heffner /s/ Stuart Stanek ------------------------------ Stuart Stanek -32- 33 SCHEDULE A OF THE AMENDED AND RESTATED STOCKHOLDERS'S AGREEMENT
SHARES OF CLASS A COMMON STOCK ON A NAME SHARES FULLY DILUTED BASIS ---- ------ ------------------- ABRY Broadcast Partners II, L.P. 1,473,857.741 Shares of Series C 2,820,279.793 Attn: Penny Koenig and Royce Preferred Stock and Yudkoff 1,346,422.052 Shares of Series D 18 Newbury Street Preferred Stock Boston, Massachusetts 02116 With a copy (which will not constitute notice) to: John L. Kuehn, Esq. Kirkland & Ellis 153 East 53rd Street New York, New York 10022 ABRY Broacast Partners II, L.P. 182,162.193 Shares of Series C 348,573.907 Attn: Penny Koenig and Royce Preferred Stock and 166,411.714 Yudkoff Shares of Series D Preferred 18 Newbury Street Stock Boston, Massachusetts 02116 With a copy (which will not constitute notice) to: John L. Kuehn, Esq. Kirkland & Ellis 153 East 53rd Street New York, New York 10022
34
Baker, Fentress & Company 746,411.860 Shares of Series A 746,411.860 Attn: Scott Smith Preferred Stock 200 West Madison Suite 3510 Chicago, Illinois 60602 With a copy (which will not constitute notice) to: Carl Witschy, Esq. Latham & Watkins Sears Tower, Suite 5800 Chicago, Illinois 60606 Bank of America Illinois Warrant to Purchase 138,100.993 138,100.993 Attn: Bob Perille Shares of Class B Common Stock 231 South LaSalle Street Chicago, Illinois 60606 With a copy (which will not constitute notice) to: Carl Witschy, Esq. Latham & Watkins Sears Tower, Suite 5800 Chicago, Illinois 60606 If to any of: Christopher J. Perry 8,042.814 Shares of Class B 8,042.814 Common Stock Robert F. Perille 4,511.822 Shares of Class B 4,511.822 Common Stock M. Ann O'Brien 4,119.490 Shares of Class B 4,119.490 Common Stock Ford S. Bartholow 784.665 Shares of Class B 784.665 Common Stock
35
Jeffrey M. Mann 588.499 Shares of Class B 588.499 Common Stock Thomas E. Van Pelt, Jr. 392.332 Shares of Class B 392.332 Common Stock Matthew W. Clary 392.332 Shares of Class B 392.332 Common Stock With a copy (which will not constitute notice) to: Carl Witschy, Esq. Latham & Watkins Sears Tower, Suite 5800 Chicago, Illinois 60606 Oppenheimer & Co., Inc. 17,200.724 Shares of Series B 17,200.724 Attn: Mark Leavitt Preferred Stock Oppenheimer Tower World Financial Center New York, New York 10281 With a copy (which will not constitute notice) to: Carl Witschy, Esq. Latham & Watkins Sears Tower, Suite 5800 Chicago, Illinois 60606
36
FINOVA Capital Corporation 74,488.000 Shares of Class C Attn: Vice President Law Common Stock 74,488.000 Dial Tower, Dial Corporate Center Phoenix, Arizona 85077 With copies (which will not constitute notices) to: FINOVA Capital Corporation Attn: Matthew M. Byrne 311 South Wacker Drive Suite 2725 Chicago, Illinois 60604 Maurice Jacobs, Esq. Katten Muchin & Zavis 525 West Monroe Street Suite 1600 Chicago, Illinois 60661 Lawrence R. Wilson 756,225.000 Shares of Class A 756,225.000 Claire Wilson Common Stock 1015 Eastman Drive Bigfork, Montana 59911 With a copy (which will not constitute notice) to: Michelle Matiski, Esq. Osborn Maledon, P.A. 2929 North Central Avenue Suite 2100 Phoenix, Arizona 85012 Donna L. Heffner 11,820.000 Shares of Class A 11,820.000 Common Stock 3260 South Holly Court Chandler AZ 85248 Stuart Stanek 20,994.000 Shares of Class A 20,994.000 Common Stock 7408 Tall Oaks Dr. Park City, UT 84060 TOTAL 4,952,926.231
EX-10.12 25 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.12 FIRST AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT This FIRST AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "First Amendment") is made as of December 31, 1996 by and among CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation (the "Company"); ABRY BROADCAST PARTNERS II, L.P., a Delaware limited partnership ("ABRY"); ABRY/CITADEL INVESTMENT PARTNERS, L.P., a Delaware limited partnership ("ABRY/CIP"); BAKER, FENTRESS & COMPANY, a Delaware corporation ("BFC"); OPPENHEIMER & CO., INC., a Delaware corporation ("Oppenheimer") BANK OF AMERICA ILLINOIS, an Illinois banking corporation formerly known as Continental Bank, N.A. ("BofA"); CHRISTOPHER J. PERRY, ROBERT F. PERILLE, M. ANN O'BRIEN, FORD S. BARTHOLOW, JEFFREY M. MANN, MATTHEW W. CLARY, SHERYL E. BARTOL, and ANDREA P. JOSELIT (Bartol and Joselit being successors in interest to Thomas E. Van Pelt, Jr.) (collectively, the "BofA Co-Investors"); FINOVA CAPITAL CORPORATION, a Delaware corporation ("FINOVA"); THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP, an Oregon limited partnership ("Endeavour"); JOSEPH P. TENNANT, THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94, BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP, an Oregon limited partnership; TAL JOHNSON, EDWARD T. HARDY, and RALPH W. MCKEE (collectively, the "Endeavour Co-Investors"); and LAWRENCE R. WILSON (the "Executive"), and CLAIRE WILSON ("CW"). RECITALS A. As of June 28, 1996, the Company and certain other parties entered into that certain Securities Purchase and Exchange Agreement (the "Securities Purchase and Exchange Agreement"). In connection with the execution of the Securities Purchase and Exchange Agreement, that certain Second Amended and Restated Stockholders Agreement as of June 28, 1996 (the "Stockholders Agreement") was executed by the parties thereto. Capitalized terms that are not otherwise defined herein shall have the meanings ascribed to those terms in the Stockholders Agreement. B. Endeavour and the Endeavour Co-Investors are the sole owners of all of the outstanding preferred stock of Deschutes River Broadcasting Inc., an Oregon corporation ("Deschutes"). As of August 30, 1996, the Company, Citadel Acquisition Corporation, a Nevada corporation and wholly-owned subsidiary of the Company ("CAC"), and Deschutes entered into that certain Merger Agreement (the "Merger Agreement"). As of September 17, 1996, CAC changed its name to Deschutes License, Inc. ("DLI"), and as of December 18, 1996 DLI assigned its rights under the Merger Agreement to Deschutes Acquisition Corporation, a Nevada corporation and wholly-owned subsidiary of the Company ("DAC"). Pursuant to the Merger Agreement, Deschutes and DAC will merge, with DAC to be the surviving corporation. In consideration of such merger, Endeavour, the Endeavour Co-Investors and the holders of the Common Stock of Deschutes will receive Class A Common Stock, Series E Preferred Stock and/or options to purchase Class A Common Stock. 2 C. In order to induce Endeavour and the Endeavour Co-Investors to permit the transactions contemplated by the Merger Agreement, the parties to this First Amendment wish to amend the Stockholders Agreement to grant Endeavour and the Endeavour Co-Investors all of the rights (and make Endeavour and the Endeavour Co-Investors subject to all of the obligations) as Investors under the Stockholders Agreement by amending the Stockholders Agreement to make Endeavour and the Endeavour Co-Investors parties to the Stockholders Agreement. D. In connection with the transactions contemplated by the Merger Agreement, the Company, Endeavour, the Endeavour Co-Investors, and certain other parties have also agreed to enter into the following agreements, each of even date herewith: that certain First Amendment to Third Amended and Restated Registration Rights Agreement; that certain First Amendment to Securities Purchase and Exchange Agreement; that certain First Amendment to Amended and Restated Voting Agreement; and that certain Security Holder Agreement (the "Endeavour Proxy") (together with this First Amendment, the Merger Agreement, and the transactions contemplated thereby, the "Contemplated Transactions"). ACCORDINGLY, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this First Amendment agree as follows: 1. Consents and Waivers. Each of the parties hereto hereby consents to this First Amendment and the inclusion of Endeavour and the Endeavour Co-Investors as "Investors" under the Stockholders Agreement pursuant to the terms and conditions of this First Amendment. Further, each of the parties hereto waives in connection with the Contemplated Transactions any preemptive rights he/she/it may possess pursuant to Section 2 of the Stockholders Agreement. 2. Amendments. 2.1. Section 1 of the Stockholders Agreement is amended by adding the following definitions in appropriate alphabetical order: "Endeavour" shall mean and refer to The Endeavour Capital Fund Limited Partnership, an Oregon limited partnership. "Endeavour Co-Investors" shall mean and refer, individually and collectively, to those individuals who are designated on the Signature Pages to the First Amendment as the "Endeavour Co-Investors." "Endeavour Stock" means (i) Series E Preferred Stock held by Endeavour or by the Endeavour Co-Investors on the date of the First Amendment, (ii) Class A Common Stock issued or issuable upon conversion of any Series E Preferred Stock described in clause (i) above, (iii) Equity Securities of the Company issued or issuable with respect to any Equity Securities referred to in any of clauses (i) 2 3 through (ii) above or this clause (iii) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting Endeavour Stock, such securities shall continue to constitute Endeavour Stock in the hands of any permitted transferee thereof, but will cease to constitute Endeavour Stock when they have been disposed of in a Public Sale. "Endeavour Underlying Common Stock" means all Endeavour Stock which is Class A Common Stock. For purposes of this Agreement, any Person who holds any Endeavour Stock which is not Class A Common Stock will be deemed to be the Holder of the Class A Common Stock obtainable upon the conversion, exercise or exchange to the fullest extent possible of such Endeavour Stock (including the conversion, exercise or exchange of all other Endeavour Stock directly or indirectly obtainable upon any such conversion, exercise or exchange), without regard to any restriction or limitation on any such conversion, exercise or exchange. "First Amendment" shall mean that First Amendment to this Agreement dated as of December ___, 1996 between the Company, Endeavour, the Endeavour Co- Investors and certain original parties to this Agreement. "Majority Endeavour Holders" means, at any time, holders of a majority of the Endeavour Underlying Common Stock. "Series E Preferred Stock" shall mean the Series E Convertible Preferred Stock of the Company, par value $.001 per share. 2.2. Section 1 of the Stockholders Agreement is further amended by modifying and/or adding the following language to the following definitions: 2.2.1. Additional Preferred Stock. The current definition is deleted and replaced with: "Additional Preferred Stock" shall mean any additional shares of preferred stock issued by the Company other than the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock. 2.2.2. Affiliate. Add the following sentence at the end of the definition: For purposes hereof, each of Endeavour and the Endeavour Co-Investors shall be deemed "Affiliates" of one another. 3 4 2.2.3. Certificate of Incorporation. The current definition is deleted and replaced with: "Certificate of Incorporation" means the Certificate of Incorporation of the Company as amended and in effect on the date of the First Amendment (immediately after the Sixth Amendment and Restatement thereof). 2.2.4. Investor and Investors. The current definition is deleted and replaced with: "Investor" and "Investors" shall mean BFC, BofA, ABRY, ABRY/CIP, Oppenheimer, Endeavour and the Endeavour Co-Investors. 2.2.5. Investor Stock. Add the following new subsections (iv)(a) and (iv)(b) immediately following subsection (iv) and preceding subsection (v) in the current definition: (iv)(a) Series E Preferred Stock held by Endeavour or by the Endeavour Co-Investors on the date of the First Amendment, (iv)(b) Class A Common Stock issued or issuable upon conversion of any Series E Preferred Stock described in clause (iv)(a) above, 2.2.6. Preferred Stock. The current definition is deleted and replaced with: "Preferred Stock" means, collectively, the Company's Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Additional Preferred Stock, and is sometimes used to refer to any of such Preferred Stock. 2.2.7. Repurchase Majority Holders. The current definition is deleted and replaced with: "Repurchase Majority Holders" means, at any time, any of the (a) holders of a majority of the BFC Underlying Common Stock, (b) holders of a majority of the ABRY Underlying Common Stock then in existence, (c) the Majority Bank Holders and (d) the Majority Endeavour Holders. 4 5 2.2.8. Stockholder and Stockholders. The current definition is deleted and replaced with: "Stockholder" and "Stockholders" shall mean the Investors, FINOVA and Management. 2.3. Section 7.15 of the Stockholders Agreement is amended by deleting the current 7.15 and replacing it with the following: 7.15 Action on behalf of Co-Investors. Each of the parties hereto agrees that: (a) Bank, or any Affiliate thereof (excluding from the definition of "Affiliate" for such purposes the last three sentences thereof) holding any Stockholder Shares, may exercise the rights of the Bank Co-Investors for all Stockholders Shares initially issued to the Bank Co-Investors; and (b) Endeavour, or any Affiliate thereof (excluding from the definition of "Affiliate" for such purposes the last three sentences thereof) holding any Stockholder Shares, may exercise the rights of the Endeavour Co-Investors for all Stockholders Shares initially issued to the Endeavour Co-Investors. 2.4. Schedule A of the Stockholders Agreement is amended to include the Endeavour and the Endeavour Co-Investors as set forth in the First Addendum to Schedule A of the Second Amended and Restated Stockholders Agreement, a copy of which is attached to this First Amendment as Exhibit A. 2.5. The parties listed on Exhibit A attached hereto shall be deemed parties to the Stockholders Agreement, as amended, and are deemed added to Schedule A of the Stockholders Agreement, as amended. 2.6. The following additional Section 7.17 is added to Section 7 of the Stockholders Agreement: 7.17 Incorporation of Recitals. The Recitals set forth in the First Amendment are incorporated herein. 3. Notice. All notices and other communications provided for or permitted under the Registration Rights Agreement shall be made pursuant to Section 12(d) thereof to Endeavour and the Endeavour Co-Investors at the following initial addresses: 5 6 To Endeavour: The Endeavour Capital Fund Limited Partnership 4380 SW Macadam Suite 460 Portland, Oregon 97201 Attn: John von Schlegell Facsimile: (503) 223-1384 With copy to: Stephen E. Babson, Esq. Stoel Rives, LLP 900 S.W. Fifth Avenue Suite 2300 Portland, Oregon 97204 Facsimile: (503) 220-2480 To Endeavour Co-Investors: The Endeavour Capital Fund Limited Partnership 4380 SW Macadam Suite 460 Portland, Oregon 97201 Attn: John von Schlegell Facsimile: (503) 223-1384 With copy to: Stephen E. Babson, Esq. Stoel Rives, LLP 900 S.W. Fifth Avenue Suite 2300 Portland, Oregon 97204 Facsimile: (503) 220-2480 4. Choice of Law. The General Corporation Law of the State of Nevada will govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this First Amendment and the schedules hereto will be governed by the internal law, and not the law of conflicts, of the State of Illinois. 5. Counterparts. This First Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. 6. Fees and Expenses. The Company shall pay the reasonable legal fees and expenses of the Investors (excluding Endeavour and the Endeavour Co-Investors) incurred in the preparation of this First Amendment, review of the documents and agreements in connection with 6 7 the transactions described in the Recital hereof and the preparation of additional documents and agreements related to such transactions. IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. [SIGNATURES APPEAR ON FOLLOWING PAGE] 7 8 [SIGNATURE PAGE FOR FIRST AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT] CITADEL COMMUNICATIONS CORPORATION By /s/ Lawrence R. Wilson ------------------------------------- Its -------------------------------- /s/ Lawrence R. Wilson ------------------------------------- Lawrence R. Wilson (for purposes of Section 4(a) of the Registration Rights Agreement only) /s/ Claire Wilson ------------------------------------- Claire Wilson (for purposes of Section 4(a) of the Registration Rights Agreement only) ABRY BROADCAST PARTNERS II, L.P. By ABRY CAPITAL, L.P. Its General partner By ABRY HOLDINGS, INC. Its General Partner By /s/ Royce Yudkoff ------------------------------------- Its -------------------------------- ABRY/CITADEL INVESTMENT PARTNERS, L.P. By ABRY CAPITAL, L.P. Its General partner By ABRY HOLDINGS, INC. Its General Partner By /s/ Royce Yudkoff ------------------------------------- Its -------------------------------- 8 9 [SIGNATURE PAGE FOR FIRST AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT] BAKER, FENTRESS & COMPANY By /s/ Scott E. Smith ------------------------------------- Its Executive Vice President ---------------------------------- OPPENHEIMER & CO., INC. By ------------------------------------- Its ---------------------------------- BANK OF AMERICA ILLINOIS By /s/ Robert F. Perille ------------------------------------- Its ---------------------------------- FINOVA CAPITAL CORPORATION By /s/ Matthew M. Grey ------------------------------------- Its Group Vice President ---------------------------------- 9 10 [SIGNATURE PAGE FOR FIRST AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT] BOFA CO-INVESTORS: * -------------------------------- Christopher J. Perry * -------------------------------- Robert F. Perille * -------------------------------- M. Ann O'Brien * -------------------------------- Ford S. Bartholow * -------------------------------- Jeffrey M. Mann * -------------------------------- Matthew W. Clary * -------------------------------- Sheryl E. Bartol * -------------------------------- Andrea P. Joselit * By: /s/ Robert F. Perille -------------------------- Name: Attorney-In-Fact 10 11 [SIGNATURE PAGE FOR FIRST AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT] ENDEAVOUR: THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP By DVS Management, Inc. Its General Partner By /s/ John W. Dixon ------------------------------------- Its Chairman ---------------------------------- ENDEAVOUR CO-INVESTORS: /s/ Joseph P. Tennant ---------------------------------------- Joseph P. Tennant THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94 By /s/ Richard M. Schafbuch ------------------------------------- Richard M. Schafbuch, Trustee By /s/ Susan P. Schafbuch ------------------------------------- Susan P. Schafbuch, Trustee BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP By /s/ Stephen E. Babson ------------------------------------- Its General Partner --------------------------------- /s/ Tal Johnson ---------------------------------------- Tal Johnson /s/ Edward T. Hardy ---------------------------------------- Edward T. Hardy /s/ Ralph W. McKee ---------------------------------------- Ralph W. McKee 11 12 EXHIBIT A FIRST ADDENDUM TO SCHEDULE A OF THE SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
SHARES OF CLASS A COMMON STOCK ON NAME SHARES A ---- ------ FULLY DILUTED BASIS ------------------- The Endeavour Capital Fund Limited 418,612 shares of Series E 418,612 Partnership Preferred Stock Attn: John von Schlegell 4380 SW Macadam Suite 460 Portland, Oregon 97201 Facsimile: (503) 223-1384 With copy (which will not constitute notice) to: Stephen E. Babson, Esq. Stoel Rives, LLP 900 S.W. Fifth Avenue Suite 2300 Portland, Oregon 97204 Facsimile: (503) 220-2480 If any of: 32,700 - ---------- Joseph P. Tennant 32,700 Shares of Series E 937 SW 14th, Suite 200 Preferred Stock Portland, OR 97205 Facsimile: (503) 299-6653 The Schafbuch Family Trust U/a/d 9,894 Shares of Series E 9,894 2-15-94 Preferred Stock c/o Richard M. Schafbuch 4444 W. Burnside Portland, OR 97210-1084 Facsimile: (503) 241-7422 Babson Capital Partners Limited 3,956 Shares of Series E 3,956 Partnership Preferred Stock c/o Stephen E. Babson 900 SW Fifth Ave., Suite 2300 Portland, OR 97202 Facsimile: (503) 220-2480
13 Tal Johnson 1,977 Shares of Series E 1,977 3401 SE 8th Ave. Preferred Stock Portland, OR 97202 Facsimile: (503) 231-8801 Edward T. Hardy 12,029 Shares of Series E 12,029 Deschutes River Broadcasting, Inc. Preferred Stock 6420 SW Macadam, Suite 206 Portland, OR 97201 Facsimile: (503) 244-7953 Ralph W. McKee 3,561 Shares of Series E 3,561 223 Pacific Court Preferred Stock Ridgeland, WA 99352 With copy (which will not constitute notice) to: Stephen E. Babson, Esq. Stoel Rives, LLP 900 S.W. Fifth Avenue, Suite 2300 Portland, Oregon 97204 Facsimile: (503) 220-2480 TOTAL (this Addendum only): 482,729
EX-10.13 26 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.13 SECOND AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT This SECOND AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Second Amendment") is made as of March 17, 1997 by and among CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation (the "Company"); ABRY BROADCAST PARTNERS II, L.P., a Delaware limited partnership ("ABRY"); ABRY/CITADEL INVESTMENT PARTNERS, L.P., a Delaware limited partnership ("ABRY/CIP"); BAKER, FENTRESS & COMPANY, a Delaware corporation ("BFC"); OPPENHEIMER & CO., INC., a Delaware corporation ("Oppenheimer") BANK OF AMERICA ILLINOIS, an Illinois banking corporation formerly known as Continental Bank, N.A. ("BofA"); CHRISTOPHER J. PERRY, ROBERT F. PERILLE, M. ANN O'BRIEN, FORD S. BARTHOLOW, JEFFREY M. MANN, MATTHEW W. CLARY, SHERYL E. BARTOL, and ANDREA P. JOSELIT (Bartol and Joselit being successors in interest to Thomas E. Van Pelt, Jr.) (collectively, the "BofA Co-Investors"); FINOVA CAPITAL CORPORATION, a Delaware corporation ("FINOVA"); THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP, an Oregon limited partnership ("Endeavour"); JOSEPH P. TENNANT, THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94, BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP, an Oregon limited partnership; TAL JOHNSON, EDWARD T. HARDY, and RALPH W. MCKEE (collectively, the "Endeavour Co-Investors"); and LAWRENCE R. WILSON (the "Executive"), and CLAIRE WILSON ("CW"). RECITALS A. As of June 28, 1996, the Company and certain other parties entered into that certain Stockholders Agreement (as amended by the First Amendment thereto dated as of December 31, 1996, the "Stockholders Agreement"). B. In connection with their entry into a letter agreement dated the date of this Agreement, the parties to the Stockholders Agreement have agreed to make certain changes to the terms thereof. ACCORDINGLY, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Second Amendment agree as follows: 1. AMENDMENTS. 1.1. Section 1 of the Stockholders Agreement is amended by adding thereto the following defined term and accompanying definition: 2 "Eligible Firm" at any time means the media-industry investment banking group, subsidiary or division of any of CS First Boston, Donaldson Lufkin & Jenrette, Furman Selz LLC, Goldman Sachs & Co., Merrill Lynch & Co., Morgan Stanley & Co. Incorporated, Prudential Securities Inc. and Salomon Brothers Inc. or any then-existing successor to any such group, subsidiary or division. 1.2. Section 1 of the Stockholders Agreement is amended by adding thereto the following references: "Call Holders" has the meaning set forth in Section 5.3. "Eligible Holders" has the meaning set forth in Section 4.2. "Put Holders" has the meaning set forth in Section 4.2. 1.3. Section 1 of the Stockholders Agreement is amended by amending and restating in its entirety the definition of the term "Fair Market Value" as follows: "Fair Market Value" means the fair market value on the Determination Date of the Company's Common Stock outstanding on a Fully Diluted Basis determined on a going concern basis and assuming a sale of 100% of the Company's Common Stock on a Fully Diluted Basis between a willing buyer and a willing seller and taking into account all relevant factors determinative of value; provided, however, that in the case of a Look-Back Event, "Fair Market Value" with respect to such Look-Back Event shall be determined in accordance with Section 5.7 below. With respect to the determination of Fair Market Value: (a) For purposes of Section 4, unless otherwise agreed by the Company and the Eligible Holder(s) who are then exercising the Put in question, Fair Market Value shall be determined by the Eligible Firm specified by the Company in the Company's First Notice, which firm shall submit to the Company and the Put Holders a written report setting forth such determination. (b) For purposes of Section 5, unless otherwise agreed by the Company and the Call Holder(s) who are then (or in the case of a Look-Back Event, were) subject to the Call in question, Fair Market Value shall be determined by an investment banking firm reasonably acceptable to the Company and holders of a majority of the Investor Underlying Common Stock which are then (or in the case of a Look-Back Event, which were) subject to the Call (the "Selection Majority Holders"), which firm shall submit to the Company and the Call Holders a written report setting forth such determination. If the Company and such Selection Majority Holders are unable to agree on an investment banking firm within 5 business days after 2 3 the date of the meeting described in Section 5.3, then a firm shall be selected by lot from the top-tier New York-based investment banking firms (other than any top-tier New York based investment banking firm with whom ABRY has had a significant relationship or Oppenheimer or any of its Affiliates), after the Company and such Selection Majority Holders have each eliminated one such firm. In either case, the expenses of such selected firm will be borne by the Company, and the determination of such firm will be final and binding upon all parties, except that any Holder may rescind its exercise of a Put after the determination of Fair Market Value following the exercise of such Put. 1.4. Section 1 of the Stockholders Agreement is amended by deleting from such Section the definitions of the terms "Holders" and "Holders Meeting Date." 1.5. Sections 4.1, 4.2, 4.4 and 4.7 of the Stockholders Agreement are amended and restated in their entirety as follows: 4.1 Basic Put Rights. At any time beginning August 1, 2000, any of the Repurchase Majority Holders shall have the right to require the Company to repurchase all or any portion of the Preferred Stock or BofA Warrants held by such Investor(s) (the "Put") at the Put Price by delivering a written notice to the Company specifying the quantity of such securities to be purchased (the "Put Notice"). Such notice will indicate not more than two (2) Eligible Firms (the "Excluded Firms") which are to be excluded by the Company from consideration in selecting an Eligible Firm to determine the Fair Market Value for the relevant Determination Date. Subject to Section 4.3 hereof (regarding Puts deemed to have been exercised as of the Date of Receipt), other than a Put exercised by the holders of a majority of the ABRY Underlying Common Stock, no additional Put(s) shall be exercised within the one-year period beginning on the Date of Receipt. For so long as the Bank or any Affiliate thereof (excluding from the definition of "Affiliate" for such purposes the last two sentences of such definition) holds the BofA Warrants, the BofA Co- Investors and the Class B Common Stock held by the BofA Co-Investors shall be subject to the provisions of this Section 4 and the Class B Common Stock held by the BofA Co-Investors shall be treated the same as the BofA Warrants held by the Bank or such Affiliate for all purposes of this Section 4, except that the reduction described in clause (b) of Section 4.6 shall not apply to such Class B Common Stock. 4.2 The Company's First Notice. Within five (5) business days after receipt (the "Date of Receipt" for purposes of this Section 4) of the Put Notice, the Company shall deliver a written notice (the "Company's First Notice") to all holders of Investor Stock which is Preferred Stock, a BofA Warrant or held by FINOVA (with respect to such Put, the "Eligible Holders") informing them of (a) the receipt of the Put Notice, (b) the Date of Receipt, (c) the quantity of Investor Stock 3 4 requested to be purchased pursuant to the Put Notice, (d) the number of shares of Investor Underlying Common Stock then existing with respect to outstanding shares of Preferred Stock, BofA Warrants and shares held by FINOVA, (e) the number of shares of Common Stock on a Fully Diluted Basis in existence at the close of business on the Date of Receipt, and (f) the name of the Eligible Firm (which shall not be an Excluded Firm identified in such Put Notice) which the Company has selected to determine the Fair Market Value. The Eligible Holders who delivered the Put Notice and all Eligible Holders who deliver a related Put Election Notice pursuant to Section 4.3 are referred to as the "Put Holders." 4.4 Put Closing. Upon the delivery of the Put Notice and all Put Election Notices, the Company and the Put Holders shall in good faith promptly determine the Put Price as provided in this Agreement, and subject to the provisions hereof, within 10 days after the determination of the Put Price, the Company will purchase and each Put Holder will sell the number of such Put Holder's Put Shares specified in such Put Holder's Put Notice or Put Election Notice at a time and place mutually agreeable to the Company and holders of a majority of the Investor Underlying Common Stock as to which the Put is being exercised (the "Put Closing"). 4.7 Put Default. In the event of the failure of the Company within 210 days of the Company's receipt of the Put Notice to pay in full the Put Price for all ABRY Stock pursuant to a Put with respect to the ABRY Stock (a "Put Default"), the holders of a majority of the ABRY Underlying Common Stock shall have certain affirmative rights in connection with an Approved Sale as set forth in Section 6 hereof. 1.6. Section 7.8 of the Stockholders Agreement is amended to change the address for notices of the Company to 140 South Ash Avenue, Tempe, AZ 85281, and 1015 Eastman Drive, Bigfork, Montana 59911. 2. VOTING TRUST. On the date hereof, ABRY and ABRY/CIP have contributed the shares of the Company's capital stock which are held by them, and have agreed to contribute all other shares of the Company's capital stock which hereafter may be acquired by them, to a voting trust (the "Voting Trust") established pursuant to a Voting Trust Agreement dated as of the date hereof among the Company, ABRY, ABRY/CIP and the initial Voting Trustee thereunder. For purposes of the Stockholders Agreement, ABRY and ABRY/CIP (and any Persons who from time to time may hold Voting Trust Certificates issued in respect of capital stock of the Company held in the Voting Trust), as the beneficial owners of the capital stock in the Voting Trust, will be deemed to hold the capital stock of the Company which is held in the Voting Trust. 3. CHOICE OF LAW. The General Corporation Law of the State of Nevada will govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Second Amendment and the schedules hereto will be governed by the internal law, and not the law of conflicts, of the State of Illinois. 4 5 4. COUNTERPARTS. This Second Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have caused this Second Amendment to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. [SIGNATURES APPEAR ON FOLLOWING PAGE] 5 6 [SIGNATURE PAGE FOR SECOND AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT] CITADEL COMMUNICATIONS CORPORATION By /s/ Lawrence R. Wilson --------------------------------- Its President ----------------------------- /s/ Lawrence R. Wilson ------------------------------------- Lawrence R. Wilson /s/ Claire Wilson ------------------------------------- Claire Wilson ABRY BROADCAST PARTNERS II, L.P. By ABRY CAPITAL, L.P. Its General partner By ABRY HOLDINGS, INC. Its General Partner By /s/ Royce Yudkoff ------------------------- Its President ------------------------- ABRY/CITADEL INVESTMENT PARTNERS, L.P. By ABRY CAPITAL, L.P. Its General partner By ABRY HOLDINGS, INC. Its General Partner By /s/ Royce Yudkoff ------------------------- Its President ------------------------- 6 7 [SIGNATURE PAGE FOR SECOND AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT] BAKER, FENTRESS & COMPANY By /s/ Scott E. Smith ---------------------------------- Its Executive Vice President ------------------------------ OPPENHEIMER & CO., INC. By /s/ Rob Blum ---------------------------------- Its Assistant Secretary ------------------------------ BANK OF AMERICA ILLINOIS By /s/ Robert F. Perille ---------------------------------- Its ------------------------------ FINOVA CAPITAL CORPORATION By /s/ Matthew M. Grey ---------------------------------- Its Group Vice President ------------------------------ 7 8 [SIGNATURE PAGE FOR SECOND AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT] BOFA CO-INVESTORS: * ------------------------------------- Christopher J. Perry * ------------------------------------- Robert F. Perille * ------------------------------------- M. Ann O'Brien * ------------------------------------- Ford S. Bartholow * ------------------------------------- Jeffrey M. Mann * ------------------------------------- Matthew W. Clary * ------------------------------------- Sheryl E. Bartol * ------------------------------------- Andrea P. Joselit * By: /s/ Robert F. Perille ------------------------------ Name: Attorney-In-Fact 8 9 [SIGNATURE PAGE FOR SECOND AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT] ENDEAVOUR: THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP By DVS Management, Inc. Its General Partner By /s/ John von Schlegell --------------------------------- Its ----------------------------- ENDEAVOUR CO-INVESTORS: /s/ Joseph P. Tennant ---------------------------------------- Joseph P. Tennant THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94 By: /s/ Richard M. Schafbuch --------------------------------- Richard M. Schafbuch, Trustee By: /s/ Susan P. Schafbuch --------------------------------- Susan P. Schafbuch, Trustee BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP By /s/ Stephen E. Babson ------------------------------------- Its General Partner --------------------------------- /s/ Tal Johnson ---------------------------------------- Tal Johnson /s/ Edward T. Hardy ---------------------------------------- Edward T. Hardy /s/ Ralph W. McKee ---------------------------------------- Ralph W. McKee 9 EX-10.15 27 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.15 THIRD AMENDED AND RESTATED VOTING AGREEMENT This THIRD AMENDED AND RESTATED VOTING AGREEMENT dated as of March 17, 1997 (the "Agreement"), by and among CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation (the "Company"), Christopher Hall, as the initial trustee pursuant to the Voting Trust Agreement described below (including any additional or successor trustee thereunder, the "Voting Trustee"), BAKER FENTRESS & COMPANY, a Delaware corporation ("BFC"), FINOVA CAPITAL CORPORATION, a Delaware corporation ("FINOVA"), OPPENHEIMER & CO., INC., a Delaware corporation ("Oppenheimer"), THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP, an Oregon limited partnership ("Endeavour"), JOSEPH P. TENNANT ("Tennant"), THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94 (the "Schafbuch Trust"), BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP, an Oregon limited partnership ("Babson"); TAL JOHNSON ("Johnson"), EDWARD T. HARDY ("Hardy"), and RALPH W. MCKEE ("McKee") and, collectively with Tennant, the Schafbuch Trust, Babson, Johnson and Hardy, the "Endeavour Co-Investors"), LAWRENCE R WILSON ("LRW") and CLAIRE WILSON ("CW"). LRW and CW sometimes are herein collectively referred to as "Wilson." The Voting Trustee, BFC, FINOVA, Oppenheimer, Endeavour and the Endeavour Co-Investors are sometimes collectively referred to herein as the "Investors" and individually as an "Investor." The Investors and Wilson are sometimes collectively referred to herein as "Stockholders" and individually as a "Stockholder." Capitalized terms used and not otherwise defined in this Agreement shall have the meanings ascribed to such terms in Section 1 hereof. RECITALS A. As of June 28, 1996, the Company and certain other parties entered into that certain Securities Purchase and Exchange Agreement (as amended pursuant to the First Amendment thereto dated as of December 31, 1996 and the Second Amendment thereto dated as of the date hereof and as supplemented by the Agreement Regarding Facility A Advances dated as of the date hereof among the Company, ABRY and ABRY/CIP, the "Securities Purchase and Exchange Agreement"). As of December 31, 1996, the Company and certain other parties entered into that certain Second Amended and Restated Voting Agreement dated as of such date (the "Voting Agreement"). B. On the date hereof, ABRY Broadcast Partners II, L.P., a Delaware limited partnership ("ABRY"), and ABRY/Citadel Investment Partners, L.P., a Delaware limited partnership ("ABRY/CIP"), have contributed the shares of the Company's capital stock which are held by them, and have agreed to contribute all other shares of the Company's capital stock which hereafter may be acquired by them, to a voting trust (the "Voting Trust") established pursuant to a Voting Trust Agreement dated as of the date hereof among the Company, ABRY, ABRY/CIP and the initial Voting Trustee (the "Voting Trust Agreement"). ABRY and ABRY/CIP are express third-party beneficiaries of this Agreement. For purposes of this Agreement, the Voting Trustee will be deemed to hold the capital stock of the Company which is in the Voting Trust. 1 2 C. As of the date hereof, the following Stockholders own, beneficially and (except in the case of ABRY and ABRY/CIP) of record the following Equity Securities in the Company: ABRY -- 1,896,222.301 shares of the Series C Preferred Stock (which are held of record by the Voting Trustee) and 924,057.492 shares of the Series D Preferred Stock (which are held of record by ABRY); ABRY/CIP -- 234,364.555 shares of the Series C Preferred Stock (which are held of record by the Voting Trustee) and 114,209.352 shares of the Series D Preferred Stock (which are held of record by ABRY/CIP); BFC -- 746,411.860 shares of the Series A Preferred Stock; FINOVA -- 74,488.000 shares of the Class C Common Stock; Oppenheimer -- 17,200.724 shares of the Series B Preferred Stock; Endeavour -- 418,612 shares of Series E Preferred Stock; Tennant -- 32,700 shares of Series E Preferred Stock; the Schafbuch Trust -- 9,894 shares of Series E Preferred Stock; Babson -- 3,956 shares of Series E Preferred Stock; Johnson -- 1,977 shares of Series E Preferred Stock; Hardy -- 12,029 shares of Series E Preferred Stock; McKee -- 3,561 shares of Series E Preferred Stock; and Wilson -- 756,225.000 shares of the Class A Common Stock. D. The parties to the Voting Agreement have agreed that, in view of the establishment of the Voting Trust, ABRY and ABRY/CIP should cease to be parties to the Voting Agreement (but should be third-party beneficiaries thereof) and the Voting Trustee should become a party to the Voting Agreement. In addition, the parties to the Voting Agreement have agreed to make certain other changes thereto. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree that the Voting Agreement is amended and restated in its entirety as follows: 1. DEFINITIONS. For purposes of this Agreement, the following terms have the meanings set forth below. "AGREEMENT" shall mean this Agreement. "ABRY" has the meaning set forth in the preamble to this Agreement. "ABRY/CIP" has the meaning set forth in the preamble to this Agreement. "ADDITIONAL PREFERRED STOCK" means any Preferred Stock which may be issued upon the conversion of any Facility A Note. "AFFILIATE" of any Person means any Person that directly or indirectly controls, is controlled by, or is under common control with such Person and, with respect to an individual, such individual's spouse and descendants (whether natural or adopted) and any trust solely for the benefit of such individual and/or his or her spouse and/or descendants. "AIRPLANE LEASE" means that Aircraft Lease Agreement between Wilson Aviation, L.L.C. as lessor and Citadel as lessee, dated as of December 29, 1995. 2 3 "BFC" has the meaning set forth in the preamble to this Agreement. "BFC DIRECTOR" has the meaning set forth in Section 2.1(b)(iii). "BFC STOCK" means (i) Series A Preferred Stock held by BFC on the date of this Agreement after giving effect to the "Redemptions" and the "Reclassification" (as those terms are defined in the Securities Purchase and Exchange Agreement), (ii) Class A Common Stock issued or issuable upon the conversion of any Series A Preferred Stock described in clause (i) above, and (iii) Equity Securities issued or issuable with respect to any Equity Securities referred to in any of clauses (i) and (ii) above or this clause (iii) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting BFC Stock, such securities shall continue to constitute BFC Stock in the hands of any permitted transferee thereof, but will cease to constitute BFC Stock when they have been disposed of in a Public Sale. "BFC UNDERLYING COMMON STOCK" means all BFC Stock which is Class A Common Stock. For purposes of this Agreement, any Person who holds any BFC Stock which is not Class A Common Stock will be deemed to be the Holder of the Class A Common Stock obtainable upon the conversion, exercise or exchange to the fullest extent possible of such BFC Stock (including the conversion, exercise or exchange of all other BFC Stock directly or indirectly obtainable upon any such conversion, exercise or exchange), without regard to any restriction or limitation on any such conversion, exercise or exchange. "BOARD" means the Company's board of directors. "CERTIFICATE OF INCORPORATION" means the Sixth Amended and Restated Certificate of Incorporation of the Company as in effect on the date hereof. "CLASS A COMMON STOCK" means the voting Class A Common Stock of the Company, par value $.001 per share. "CLASS B COMMON STOCK" means the nonvoting Class B Common Stock of the Company, par value $.001 per share. "CLASS C COMMON STOCK" means the nonvoting Class C Common Stock of the Company, par value $.001 per share. "COMMON STOCK" means, collectively, the Company's Class A Common Stock, Class B Common Stock and Class C Common Stock. "COMPANY" has the meaning set forth in the preamble to this Agreement. "CW" has the meaning set forth in the recitals to this Agreement. 3 4 "DESCHUTES OPTION EXCHANGE AGREEMENT" shall mean any agreements between the Company and certain former employees of Deschutes pursuant to which such employees receive Parent Options upon conversion of the Deschutes Options (as those terms are defined in the Merger Agreement dated as of August 30, 1996 among the Company, Citadel Acquisition Corporation and Deschutes). "DESCHUTES" means Deschutes River Broadcasting Inc., an Oregon corporation which has merged with and into Deschutes Acquisition Corporation. "EMPLOYMENT AND INCENTIVE AGREEMENTS" means collectively, the Employment Agreement between Citadel and Wilson dated as of June 28, 1996, the 1996 Equity Incentive Plan of the Company, any option grants under the 1996 Equity Incentive Plan dated as of June 28, 1996, any option agreements with Wilson on or prior June 28, 1996 and any option grants pursuant to a Deschutes Option Exchange Agreement made as of December 31, 1996. "ENDEAVOUR" has the meaning set forth in the preamble to this Agreement. "ENDEAVOUR CO-INVESTORS" has the meaning set forth in the preamble to this Agreement. "ENDEAVOUR DIRECTOR" has the meaning set forth in Section 2.1(b)(v) hereof. "ENDEAVOUR STOCK" means (i) Series E Preferred Stock held by Endeavour or by the Endeavour Co-Investors on the date of this Agreement, (ii) Class A Common Stock issued or issuable upon conversion of any Series E Preferred Stock described in clause (i) above, (iii) Equity Securities of the Company issued or issuable with respect to any Equity Securities referred to in clauses (i) or (ii) above or this clause (iii) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting Endeavour Stock, such securities shall continue to constitute Endeavour Stock in the hands of any permitted transferee thereof, but will cease to constitute Endeavour Stock when they have been disposed of in a Public Sale. "ENDEAVOUR UNDERLYING COMMON STOCK" means all Endeavour Stock which is Class A Common Stock. For purposes of this Agreement, any Person who holds any Endeavour Stock which is not Class A Common Stock will be deemed to be the Holder of the Class A Common Stock obtainable upon the conversion, exercise or exchange to the fullest extent possible of such Endeavour Stock (including the conversion, exercise or exchange of all other Endeavour Stock directly or indirectly obtainable upon any such conversion, exercise or exchange), without regard to any restriction or limitation on any such conversion, exercise or exchange. "EQUITY SECURITIES" of any Person means (i) any capital stock, partnership, membership, joint venture or other ownership or equity interest, participation or securities (whether voting or non-voting, whether preferred, common or otherwise, and including any stock 4 5 appreciation, contingent interest or similar right) and (ii) any option, warrant, security or other right (including debt securities) directly or indirectly convertible into or exercisable or exchangeable for, or otherwise directly or indirectly to acquire, any stock, interest, participation or security described in clause (i) above. "EXECUTIVE DIRECTORS" has the meaning set forth in Section 2.1(b)(iv) hereof. "FACILITY A NOTE" shall have the meaning assigned to such term in the Securities Purchase and Exchange Agreement. "FINOVA" has the meaning set forth in the preamble to this Agreement. "FINOVA CREDIT AGREEMENT" means the Loan Agreement dated as of October 9, 1996 among Citadel, certain other Borrowers referred to therein, NationsBank of Texas, N.A., The First National Bank of Boston, Union Bank, The Bank of New York and FINOVA Capital Corporation, a Delaware corporation, in its individual capacity and as agent for all lenders, as amended by First Amendment to Loan Instruments dated as of December 31, 1996 and Second Amendment to Loan Instruments dated as of February 14, 1997, and as the same may be further amended, supplemented or modified in a manner which is not prohibited by this Agreement or the Securities Purchase and Exchange Agreement. "INVESTOR" and "INVESTORS" have the meanings set forth in the preamble to this Agreement. "INVESTOR STOCK" means (i) Series A Preferred Stock held by BFC on the date hereof after giving effect to the "Redemptions" and the "Reclassification" (as those terms are defined in the Securities Purchase and Exchange Agreement), (ii) Class A Common Stock issued or issuable upon the conversion of any Series A Preferred Stock described in clause (i) above, (iii) Series B Preferred Stock held by Oppenheimer on the date of this Agreement after giving effect to such Redemptions and such Reclassification, (iv) Class A Common Stock issued or issuable upon the conversion of any Series B Preferred Stock described in clause (iii) above, (v) Series E Preferred Stock held by Endeavour or by the Endeavour Co-Investors on the date of this Agreement, (vi) Class A Common Stock issued or issuable upon conversion of any Series E Preferred Stock described in clause (v) above, (vii) the Shares (as that term is defined in the Securities Purchase and Exchange Agreement), (viii) Common Stock issued or issuable upon the conversion of any such Share, (ix) Common Stock issued or issuable upon the conversion or exchange of any Common Stock described in clause (viii) above or this clause (ix), (x) Facility A Notes Conversion Stock (as that term is defined in the Securities Purchase and Exchange Agreement), and (xi) Equity Securities issued or issuable with respect to any Equity Securities referred to in any of clauses (i) through (x) above or this clause (xi) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting Investor Stock, such securities shall continue to constitute Investor Stock in the hands of any permitted transferee thereof, but will cease to constitute Investor Stock when they have been disposed of in a Public Sale. 5 6 "LRW" has the meaning set forth in the preamble to this Agreement. "1996 EQUITY INCENTIVE PLAN" means the Company's 1996 Equity Incentive Plan. "OPPENHEIMER" has the meaning set forth in the preamble to this Agreement. "PERSON" means any individual, corporation, association, limited liability company, partnership, governmental agency or entity or any other entity. "PREFERRED STOCK" means, collectively, the Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, and any other preferred stock authorized by the Company pursuant to the terms of the Certificate of Incorporation (including pursuant to any "Certificate of Designation" referred to therein). "PROCESS AGENT" has the meaning set forth in Section 6.13 hereof. "PUBLIC SALE" means any sale of Stockholder Shares (i) to the public pursuant to a public offering registered under the Securities Act or (ii) following a Qualified Public Offering, to the public pursuant to the provisions of Rule 144 under the Securities Act (or any similar provision then in force). "QUALIFIED PUBLIC OFFERING" means the closing of the issuance and sale of Common Stock in an underwritten public offering which is registered pursuant to the Securities Act and which results in the receipt by the Company of cash proceeds of at least $25,000,000 (net of applicable commissions, discounts and expenses). A "QUALIFIED STATION ACQUISITION" means (a) the Tele-Media Acquisition, (b) the Sabre Communications Acquisition, or (c) any other direct or indirect acquisition by the Company or any Subsidiary of all or substantially all of the assets of any radio station by means of a transaction of a type described in clause (b)(i) or (b)(ii) of Section 11 of the Securities Purchase and Exchange Agreement, or any arrangement by the Company or any Subsidiary of a type described in clause (b)(iii) of Section 11 of the Securities Purchase and Exchange Agreement with respect to any radio station, which is consummated after March 17, 1997, so long as (i) the aggregate fair value of the consideration payable by the Company and the Subsidiaries in connection with such transaction and all related transactions of any such type with any single Person or two or more affiliated Persons is not greater than $30,000,000, (ii) if such aggregate fair value is greater than $10,000,000, then the amount of such aggregate fair value is not greater than the product of 12 multiplied by the net operating cash flow of the radio station in 6 7 question (together with the net operating cash flow of all radio stations which are the subject of such transaction or any related transaction of any such type with any single Person or two or more affiliated Persons , and in each case giving pro forma effect to all cost and expense reductions or increases reasonably expected to be realized following such acquisition, to the extent such pro forma adjustments are approved by holders of a majority of the Series D Preferred Stock) for the twelve full calendar months ending prior to the date upon which the Company or the Subsidiary in question entered into a definitive agreement to consummate such transaction, and (iii) such transaction or series of related transactions is consummated solely with the proceeds of Indebtedness which the Company or any Subsidiary incurs in a manner which does not require a Consent pursuant to clause (f) above and cash on hand. For purposes of this definition, the "net operating cash flow" of any radio station for any period will have the same meaning with respect to such radio station as Operating Cash Flow (as that term is defined in the Stockholders Agreement) has with respect to the Company for any period. No holder of Series D Preferred Stock will unreasonably withhold the approval of pro forma adjustments described in the preceding paragraph. A "QUALIFIED STATION DISPOSITION" means any sale, conveyance, lease, exchange or other disposition by the Company or any Subsidiary (in each case, a "DISPOSITION TRANSACTION") of any assets of any broadcast radio station, or the equity securities of any Subsidiary which owns only the assets of one or more broadcast radio stations, which were the subject of a Qualified Station Acquisition, so long as the fair value of the consideration received by the Company and its Subsidiaries (other than any Subsidiary the equity securities of which are being so disposed of), net of related fees, taxes and expenses, is not less than the fair value of the consideration furnished by the Company and/or its Subsidiaries with respect to such radio station in the Acquisition Transaction for such radio station, plus the amount of fees and expenses incurred by the Company and the Subsidiaries in connection with such Qualified Station Acquisition. For purposes of this definition, if more than one radio station is acquired or disposed of by the Company or any Subsidiary in any Qualified Station Acquisition or Disposition Transaction or in any series of related Qualified Station Acquisitions or Disposition Transactions, then, for purposes of this definition, the consideration paid or received by the Company and the Subsidiaries in such transaction(s), and the fees and expenses incurred by them in connection with such transaction(s), shall be deemed to have been paid, received or incurred by them pro rata, in proportion to the respective fair values of such radio stations at the time of such transaction(s). For purposes of this definition, the fair value of any consideration will be based upon any independent appraisal thereof performed in connection with the transaction in question; if no such appraisal has been performed, the same will be based on any reasonable allocation made by the parties thereto, if their interests with respect to such allocation are adverse; and if no such appraisal or allocation is performed, then such fair value will be the amount determined by the Company and approved by the holders of a majority of the Series D Preferred Stock. No holder of Series D Preferred Stock will unreasonably withhold any approval described in the preceding sentence. "SABRE COMMUNICATIONS ACQUISITION" means the acquisition by a Subsidiary of the Company of all of the then-outstanding capital stock and other equity securities of Sabre 7 8 Communications, Inc. ("Sabre") for aggregate consideration consisting solely of shares of a series of the Company's preferred stock (the shares being so issued being the "Sabre Shares"), so long as: (a) Sabre and/or one or more of its Subsidiaries then owns and operates radio stations WHTO FM and WZXR FM (each, Williamsport, Pennsylvania), WRQK FM (Canton, Ohio), WPIG FM and WHDL AM (each, Olean, New York), and WNKI FM, WPGI AM and WQIX AM (each, Elmira, New York), and operates under local marketing or similar arrangements and has options to acquire radio stations WILQ FM, WLYC FM and WLYC AM (each, Williamsport, Pennsylvania) and WCXR FM (Lewisburg, Pennsylvania); (b) the Sabre Shares are issued in a quantity and have terms such that the Sabre Shares are convertible into not more than 275,000 shares of Class A Common Stock (subject to antidilution adjustments which are comparable to those applicable to the Series E Preferred Stock) and the aggregate initial liquidation value of the Sabre Shares is not greater than $5,500,000; (c) the terms and conditions relating to the Sabre Shares and their issuance, including rights granted to the holders thereof by contract or otherwise, are not less favorable to the Company, its Subsidiaries and its other stockholders than the terms and conditions relating to the issuance of Class E Common Stock pursuant to the Merger Agreement; (d) the sum of the consolidated indebtedness for borrowed money of Sabre and its Subsidiaries, the aggregate amount of any deferred purchase price payable by them in connection with any radio station acquisition and the aggregate exercise price payable in connection with the exercise of the options described in clause (a) above (whether or not any such option has been exercised) at the time of such acquisition does not exceed $11,300,000; and (e) such acquisition has been approved by the prior vote or written consent of a majority of the members of the Board. "SABRE COMMUNICATIONS FINANCING" means the issuance of the Sabre Shares as described in the definition of the term "Sabre Communications Acquisition." "SABRE SHARES" has the meaning set forth in the definition of the term "Sabre Communications Acquisition." "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SECURITIES PURCHASE AND EXCHANGE AGREEMENT" has the meaning set forth in the recitals to this Agreement. "SERIES A PREFERRED STOCK" shall mean the voting Series A Convertible Preferred Stock of the Company, par value $.001 per share. 8 9 "SERIES B PREFERRED STOCK" shall mean the voting Series B Convertible Preferred Stock of the Company, par value $.001 per share. "SERIES C PREFERRED STOCK" shall mean the voting Series C Convertible Preferred Stock of the Company, par value $.001 per share. "SERIES D PREFERRED STOCK" shall mean the nonvoting Series D Convertible Preferred Stock of the Company, par value $.001 per share. "SERIES E PREFERRED STOCK" shall mean the voting Series E Convertible Preferred Stock of the Company, par value $.001 per share. "STOCKHOLDER" and "STOCKHOLDERS" have the meaning set forth in the preamble to this Agreement. "STOCKHOLDER SHARES" means (i) Investor Stock described in clauses (i) through (x) of the definition of the term "Investor Stock," (ii) Common Stock held by Wilson on the date hereof, (iii) options or other rights to acquire Common Stock issued prior to, on or after the date of this Agreement to Wilson, (iv) Common Stock issued or issuable upon the exercise of any option or other right described in clause (iii) above, and (v) Equity Securities issued or issuable with respect to any Equity Securities referred to in any of clauses (i) through (iv) above or this clause (v) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation, reorganization or otherwise. As to any particular securities constituting Stockholder Shares, such securities will continue to constitute Stockholder Shares in the hands of any permitted transferee thereof, but will cease to constitute Stockholder Shares when they have been disposed of in a Public Sale. "SUB BOARD" has the meaning set forth in Section 2.1(c) hereof. "SUBSIDIARY" means, with respect to any Person, any corporation, partnership, association, limited liability company or other business entity of which (a) if a corporation, a majority of the total voting power of Equity Securities 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, or (b) if a partnership, association or other business entity, a majority of the partnership or other Equity Securities thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this Agreement, a Person or Persons will be deemed to have a majority ownership interest in a partnership, association or other business entity if such Person or Persons are allocated a majority of partnership, association or other business entity gains or losses or control the managing director or general partner of such partnership, association or other business entity. 9 10 "TELE-MEDIA ACQUISITION" means the purchase and sale of shares of capital stock proposed to be consummated by the Company and/or its Subsidiaries on material terms and conditions which are not less favorable to the Company and its Subsidiaries than those set forth in the draft (dated March 13, 1997) of the Agreement of Purchase and Sale proposed to be entered into among the Company, Citadel, Tele-Media Broadcasting Company, Tele-Media Broadcasting Company of Centre Region, Tele-Media Broadcasting Holding Corporation and the shareholders of the latter three corporations, so long as such purchase and sale is consummated on or prior to February 28, 1998. "TELE-MEDIA FINANCING" means transactions necessary for the Company and its Subsidiaries to obtain the funds necessary to pay the purchase price and expenses to be incurred by them in connection with the Tele-Media Acquisition, by means of the issuance of approximately $100,000,000 in face amount of Senior Subordinated Notes, and approximately $100,000,000 in face amount of Exchangeable Preferred Stock, of the Company, as such financing transactions are more particularly described in the Citadel Communications Corporation Presentation to the Board of Directors dated February 14, 1997 prepared by Prudential Securities, so long as such financing transactions are consummated on or prior to February 28, 1998. "TRANSFER" means to sell, transfer, assign, pledge, hypothecate or otherwise dispose of, in any manner whatsoever. "UNDERLYING COMMON STOCK" means all Stockholder Shares which are Class A Common Stock. For purposes of this Agreement, any Person who holds any Stockholder Shares which are not Class A Common Stock will be deemed to be the Holder of the Class A Common Stock obtainable upon the conversion, exercise or exchange to the fullest extent possible of such Stockholder Shares (including the conversion, exercise or exchange of all other Stockholder Shares directly or indirectly obtainable upon any such conversion, exercise or exchange), without regard to any restriction or limitation on any such conversion, exercise or exchange; provided that no Holder of any Facility A Note, on or prior to the Maturity Date (as that term is defined in such Facility A Note) of such Facility A Note, shall be deemed to be the Holder of any such Class A Common Stock by reason of holding such Facility A Note. "VOTING TRUST" has the meaning set forth in the preamble to this Agreement. "VOTING TRUST AGREEMENT" has the meaning set forth in the preamble to this Agreement. "VOTING TRUST DIRECTORS" has the meaning set forth in Section 2.1(b)(i) hereof. "VOTING TRUSTEE" has the meaning set forth in the preamble to this Agreement. "VOTING TRUST STOCK" means (i) Shares (as that term is defined in the Securities Purchase and Exchange Agreement) issued to ABRY or ABRY/CIP pursuant to the Securities Purchase and Exchange Agreement or directly or indirectly upon the conversion or exchange of any 10 11 such Share, (ii) Common Stock issued or issuable upon the conversion of any such Share, (iii) Common Stock issued or issuable upon the conversion or exchange of any Common Stock described in clause (ii) above or this clause (iii), (iv) Facility A Notes Conversion Stock (as that term is defined in the Securities Purchase and Exchange Agreement) directly or indirectly resulting from the conversion of any Facility A Note issued to ABRY or ABRY/CIP pursuant to the Securities Purchase and Exchange Agreement, and (v) Equity Securities issued or issuable with respect to any Equity Securities referred to in any of clauses (i) through (iv) above or this clause (v) by way of any stock dividend or stock split, or in connection with a combination or exchange of shares, recapitalization, merger, consolidation reorganization or otherwise. As to any particular securities constituting Voting Trust Stock, such securities shall continue to constitute Voting Trust Stock in the hands of any permitted transferee thereof, but will cease to constitute Voting Trust Stock when they have been disposed of in a Public Sale. "VOTING TRUST UNDERLYING COMMON STOCK" means all Voting Trust Stock which is Class A Common Stock. For purposes of this Agreement, any Person who holds any Voting Trust Stock which is not Class A Common Stock will be deemed to be the Holder of the Class A Common Stock obtainable upon the conversion, exercise or exchange to the fullest extent possible of such Voting Trust Stock (including the conversion, exercise or exchange of all other Voting Trust Stock directly or indirectly obtainable upon any such conversion, exercise or exchange), without regard to any restriction or limitation on any such conversion, exercise or exchange; provided that no Holder of any Facility A Note, on or prior to the Maturity Date (as that term is defined in such Facility A Note) of such Facility A Note, shall be deemed to be the Holder of any such Class A Common Stock by reason of holding such Facility A Note. "WILSON" has the meaning set forth in the preamble to this Agreement. "YUDKOFF" has the meaning set forth in Section 2.1(b)(ii) hereof. 2. BOARD OF DIRECTORS. 2.1 BOARD COMPOSITION. From and after the date of this Agreement and until the provisions of this Section 2 cease to be effective, each Stockholder will vote all of such Stockholder's Stockholder Shares and any other voting securities of the Company over which such Stockholder has voting control and will take all other necessary or desirable actions within such Stockholders control ((x) whether in such Stockholder's capacity as a voting trustee, stockholder, director, member of a board committee or officer of the Company or otherwise, and including attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings, and (y) but excluding conversion of shares or exercise of options or warrants), and the Company will take all necessary and desirable actions within its control (including calling special meetings of the Board or any Sub Board or the stockholders of the Company or any Subsidiary), so that: (a) the authorized number of directors comprising the Board will be established at eight (8) directors; 11 12 (b) the following persons shall be elected to the Board: (i) three representatives designated by the holders of a majority of the Voting Trust Underlying Common Stock (collectively, the "Voting Trust Directors"), none of whom at any time shall be an Affiliate of ABRY or ABRY/CIP (and by his execution and delivery of this Agreement, the Voting Trustee hereby designates himself, J. Walter Corcoran and Harlan Levy as the initial Voting Trust Directors); (ii) [RESERVED.] (iii) one representative designated by the holders of a majority of the BFC Underlying Common Stock (the "BFC Director"), who initially shall be Scott Smith; (iv) three representatives designated by LRW (collectively, the "Executive Directors"), one of whom shall be LRW, one of whom initially shall be Michael Ahearn, and the other of whom initially shall be Mark Leavitt; and (v) one representative designated by the holders of a majority of the Endeavour Underlying Common Stock (the "Endeavour Director"), who initially shall be John von Schlegell; (c) the composition of the board of directors of each of the Company's Subsidiaries (a "Sub Board") will be the same as that of the Board; (d) any committees of the Board or a Sub Board will be created only upon the approval of not less than three-quarters of the members of the Board; (e) the Company shall have a Compensation Committee and it will consist of three Board members, comprised of (i) one designee from among the Voting Trust Directors, (ii) the BFC Director, and (iii) one of the Executive Directors (other than LRW), and the initial Compensation Committee shall consist of Christopher Hall (Chairman), Scott Smith and Mark Leavitt; (f) the removal from the Board or a Sub Board (with or without cause) of any representative designated pursuant to Section 2.1(b)(i), 2.1(b)(iii), 2.1(b)(iv) or 2.1(b)(v) will be at the written request of the Person(s) entitled to designate directors under each such respective provision, but only upon such written request and under no other circumstances; (g) in the event that any representative designated pursuant to Section 2.1(b)(i), 2.1(b)(iii), 2.1(b)(iv), or 2.1(b)(v) for any reason ceases to serve as a member of the Board or a Sub Board during his or her term of office, the resulting vacancy on the Board or the Sub Board will be filled by a representative designated by the Person(s) and in the manner described in such respective Section; 12 13 (h) for so long as LRW is employed by the Company he shall have the rights set forth in Sections 2.1(b)(iv); provided, that if at any time LRW should cease to own at least 5% of the Stockholder Shares then outstanding, then LRW shall continue to be an Executive Director, but shall automatically lose the right set forth in Section 2.1(b)(iv) to designate the two Executive Directors other than himself; (i) if LRW ceases to be employed by the Company at any time, he shall cease to have the rights set forth in Sections 2.1(b)(iv); provided, that for so long as he holds equal to or greater than 5% of the Stockholder Shares then outstanding, he shall be entitled to remain an Executive Director; and (j) the election of individuals to fill any directorships described in Section 2.1(b)(iv) which LRW is not entitled to designate by reason of Section 2.1(h) or (i) thereafter will be accomplished in accordance with the Company's or the applicable Subsidiary's bylaws and applicable law. 2.2 MEETINGS, EXPENSES. The Company will pay the reasonable out-of- pocket expenses incurred by each director in connection with attending the meetings of the Board, any Sub Board and any committee thereof. The Board and each Sub Board shall meet at least four times a year and shall meet once within each 120-day period. 2.3 TERMINATION OF RIGHTS. The rights and obligations of a Stockholder or group of Stockholders under this Section 2 will terminate upon consummation of a Qualified Public Offering. In addition, the provisions of this Section 2 shall terminate automatically and be of no further force and effect upon the fifteenth anniversary of the date hereof, unless extended in accordance with the General Corporation Law of the State of Nevada. 2.4 FAILURE TO DESIGNATE OR REPLACE. If any party fails to timely designate or replace a representative to fill a directorship pursuant to the terms of this Section 2, the election of an individual to such directorship will be accomplished in accordance with the Company's or the applicable Subsidiary's bylaws and applicable law. 3. ACTIONS REQUIRING SUPERMAJORITY APPROVAL. Other than any Qualified Acquisition Transaction or Qualified Disposition Transaction (as to which only the prior vote or written consent of a majority of the members of the Board shall be required by reason of this Agreement), without the prior vote or written consent of not less than three-quarters of the members of the Board the Company shall not take and shall not permit any Subsidiary to take any of the following actions: (A) TRANSFERS: DISPOSITIONS. Other than pursuant to Section 6 of the Stockholder Agreement, sell, option, convey, lease (as lessor), exchange or otherwise dispose of or transfer in any fiscal year, any portion of or any interest in any property of the Company or any Subsidiary in the aggregate having a fair market value of more than (i) $1,000,000, unless the same 13 14 has been approved by the prior vote or written consent of a majority of the members of the board, or (ii) $5,000,000, whether or not such majority approval has been obtained; (B) MERGERS: ACQUISITIONS. Directly or indirectly, by operation of law or otherwise, merge with, consolidate with, acquire, directly or indirectly, all or any substantial portion of the assets, Equity Securities or business of any Person or any radio station, or otherwise combine with any Person (in each case other than the Company or any wholly owned Subsidiary of the Company); (C) INVESTMENTS. Purchase or otherwise directly or indirectly acquire, hold or invest in the Equity Securities of any other Person (other than any wholly owned Subsidiary of the Company), or make any loan to, or enter into any arrangement for the purpose of directly or indirectly providing funds or credit to, or make any other investment, whether by way of capital contribution, time deposit or otherwise, in, through or with any Person (other than any wholly owned Subsidiary of the Company); (D) JOINT VENTURES: CONTRACTS. Enter into any joint venture agreement, or enter into local marketing, time brokerage or similar arrangement if such arrangement is entered into in connection with the grant of an option to purchase or agreement to purchase the station that is the subject of such arrangement; (E) BANKRUPTCY. Make, execute or deliver on behalf of the Company or any Subsidiary an assignment for the benefit of creditors' or cause the Company, any Subsidiary or any part thereof or interest therein to be subject to the authority of any trustee, custodian or receiver or to be subject to any proceeding for bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, relief of debtors, dissolution or liquidation, or similar proceedings with respect to the Company or any Subsidiary; (F) ISSUANCE OR REPURCHASE OF EQUITY SECURITIES. Except for any issuance described in any of clauses (ii) through (vi) of Section 2.4 of the Stockholders Agreement or any issuance as part of the Tele-Media Financing or the Sabre Communications Financing (either of which shall require only the prior vote or written consent of a majority of the members of the Board by reason of this Agreement), any issuance upon the conversion, exercise or exchange in accordance with its terms of any Equity Security issued in accordance with this Section 3(f), the grant of any option pursuant to the 1996 Equity Incentive Plan or any other stock option plan which is approved by not less than three-quarters of the members of the Board after the date hereof, or any repurchase pursuant to any of Sections 3, 4 and 5 of the Stockholders Agreement, (i) authorize, issue or enter into any agreement, stock option, incentive, compensation or other plan or arrangement providing for the issuance (contingent or otherwise) of any Equity Securities, whether for cash or for non-cash consideration (provided that this clause (i) will not apply to any issuance of Equity Securities of any Subsidiary of the Company to the Company or any wholly owned Subsidiary of the Company), 14 15 (ii) redeem, repurchase or otherwise retire any of the Company's Equity Securities, other than (A) the Class A Common Stock owned by certain members of management of the Company or any Subsidiary (other than Wilson) upon the termination of the employment thereof (which such repurchases shall not in the aggregate exceed $500,000 in an amount during any twelve-month period) or (B) any payment in respect of any Facility A Note, or (iii) with respect to the Company, make any dividend, distribution or other stockholder expenditures with respect to any Equity Securities or apply any of its assets to the purchase, redemption or other retirement of, or set apart any sum or any non-cash consideration for the payment of, or make any other distributions or reduction or capital or otherwise in respect of any of its Equity Securities or in respect of any Facility A Note; provided, that this clause (iii) shall not apply to any Subsidiary; (G) TRANSACTIONS WITH AFFILIATES. (i) Employ or contract with Wilson or any Investor or any Affiliate of Wilson or any Investor, other than as contemplated in the Employment and Incentive Agreements, (ii) modify, amend, accelerate, cancel or grant any waivers under any Employment and Incentive Agreements, or (iii) employ or contract with any Affiliate other than (A) renewal of the Airplane Lease on or after December 31, 2001, on the terms in effect as of June 28, 1996, (B) employment or compensation arrangements entered into in the ordinary course of business with Persons other than Wilson on terms which are comparable to the terms of the employment of employees of the Company and its Subsidiaries having similar duties or (C) customary banking arrangements with Bank of America Illinois, an Illinois banking corporation, or any of its Affiliates; however, with respect to clauses (i) through (iii) above, transactions with Wilson or any Affiliate of Wilson shall require the approval of five (5) of seven (7) members of the Board or any Sub Board (with Wilson recusing himself from such vote); (H) AMENDMENT OF CERTIFICATE OF INCORPORATION: BYLAWS. Except as contemplated by Section 4(g) of the Securities Purchase and Exchange Agreement, make any amendment to the certificate or articles of incorporation or the bylaws of the Company or any of its Subsidiaries, or file any resolution of the Board or the board of directors of any Subsidiary designating or amending the terms of any Additional Preferred Stock; (I) PUBLIC OFFERINGS. Issue, sell or offer to sell any of the securities of the Company or any Subsidiary in a public offering that is registered under the Securities Act; (J) INDEBTEDNESS: AMENDMENT OF DEBT DOCUMENTS. (i) Create, incur, issue, assume, become liable with respect to, or extend that maturity of, or permit any Subsidiary to create, incur, issue, assume, become liable with respect to, or extend the maturity of any Indebtedness for Borrowed Money (as defined in the Securities Purchase and Exchange Agreement) except: 15 16 A. up to $150,000,000 in principal amount of Indebtedness for Borrowed Money outstanding at any time and incurred pursuant to the FINOVA Credit Agreement (or pursuant to a replacement facility entered into in connection with the Tele-Media Acquisition (i) which permits all or a portion of the amounts of prior borrowings which have been repaid to be reborrowed to pay the purchase price and expenses associated with radio station acquisitions, (ii) which otherwise has terms and conditions not less favorable to the Company and its Subsidiaries than the terms and conditions of the FINOVA Credit Agreement, and (iii) the establishment of which is approved by the prior vote or written consent of a majority of the members of the Board) and any notes issued pursuant thereto, and all Indebtedness for Borrowed Money outstanding as of the date hereof and disclosed on Schedule 6 to the Securities Purchase and Exchange Agreement; B. the Facility A Notes; C. Indebtedness for Borrowed Money incurred as part of the Tele-Media Financing or the Sabre Communications Financing; D. Other Indebtedness for Borrowed Money which does not exceed $3,000,000 in principal amount outstanding at any time and the incurrence of which is approved by the prior vote or written consent of a majority of the members of the Board; and E. any Indebtedness for Borrowed Money pursuant to a Permitted Senior Substitution (as defined in the Securities Purchase and Exchange Agreement); and the Company will not extend the maturity of any Indebtedness for Borrowed Money described in clause (A) or (C) above without the prior vote or written consent of not less than three-quarters of the members of the Board; or (ii) amend, supplement, modify or waive any term or provision of the FINOVA Credit Agreement the Facility A Notes or any other agreement or arrangement relating to Indebtedness for Borrowed Money (other than (A) to add any wholly-owned Subsidiary of the Company as a party thereto or as an additional guarantor of the Indebtedness for Borrowed Money thereunder, (B) to identify, refer to or reflect any Person, radio station or assets acquired, or to effect any required deletion so that such agreement or arrangement no longer identifies, refers to or reflects any Person, radio station or assets disposed of, in any Qualified Station Acquisition or Qualified Station Disposition, (C) to amend Exhibit 1E to the FINOVA Credit Agreement to remove Peggy Koenig, Royce Yudkoff and Jay Grossman and to refer to the members of the Board the expenses of whom are reimbursed by the Company, each Observer, the Voting Trustee and the Back-Up Trustees (as that term is defined in the Voting Trust Agreement), or (D) to modify the exhibits to the FINOVA Credit Agreement to reflect the addition of liabilities and expenses undertaken in connection with any Qualified Station Acquisition, to the extent such liabilities and expenses in the aggregate are not material to the acquired station(s) in question (provided that, in the case of any amendment, supplement, modification or waiver described in clause (B), (C) or (D) above, the same has been approved by the prior vote or written consent of a majority of the members of the Board)); or 16 17 (K) AGREEMENT; COMMITMENT. Agree or commit to take any action which, by reason of any of clauses (a) through (j) above, requires the vote or written consent of not less than three-quarters of the members of the Board. 4. CONFLICTING AGREEMENTS. Each Stockholder represents that such Stockholder has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement, and no holder of Stockholder Shares will grant any proxy or become party to any voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement. 5. LEGEND. Each certificate for Stockholder Shares will be imprinted with a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE THIRD AMENDED AND RESTATED VOTING AGREEMENT DATED AS OF MARCH 17, 1997, AS AMENDED AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH TERMS AND CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH VOTING AGREEMENT WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST. The legend forth set forth above shall be removed from the certificates evidencing shares which cease to be Stockholder Shares upon (a) the date on which such Stockholder Share has been transferred in a Public Sale, (b) the fifteenth anniversary of the date of this Agreement (unless extended in accordance with the General Corporation Law of Nevada), or (c) the consummation of a Qualified Public Offering. 6. TRANSFERS. Prior to Transferring any Stockholder Shares (other than in a Public Sale), to any Person, the transferring Stockholder shall cause the prospective transferee to execute and deliver to the Company and the other Stockholders a counterpart of this Agreement. Any Transfer or attempted Transfer of any Stockholder Shares in violation of any provision of this Agreement will be void, and the Company will not record such Transfer on its books or treat any purported transferee of such Stockholder Shares as the owner of such shares for any purpose. 17 18 7. MISCELLANEOUS. 7.1 REMEDIES. Each holder of Stockholder Shares will have all rights and remedies set forth in this Agreement, the Certificate of Incorporation and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any Stockholder may in his, her or its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief in order to enforce or prevent any violation of the provisions of this Agreement. 7.2 CONSENT TO AMENDMENTS. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement will be effective against the Company or any holder of Stockholder Shares unless such modification, amendment or waiver is approved in writing by the Company, the beneficial owners (meaning ABRY and ABRY/CIP, in the case of Voting Trust Stock which is held in the Voting Trust) of a majority of the Voting Trust Underlying Common Stock, the holders of a majority of the BFC Underlying Common Stock, the holders of a majority of the Endeavour Underlying Common Stock and LRW, respectively. The failure of any party to enforce any of the provisions of this Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. 7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. In addition, and whether or not any express assignment has been made, the provisions of this Agreement which are for any Stockholder's benefit as a purchaser or holder of Stockholder Shares are also for the benefit of, enforceable by, and binding upon, any subsequent holder of such Stockholder Shares. 7.4 ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, this document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, including the Voting Agreement dated October 1, 1993 and the Amended and Restated Voting Agreement dated as of June 28, 1996 and the Voting Agreement (as defined herein), which may have related to the subject matter hereof in any way. 7.5 SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such 18 19 provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 7.6 COUNTERPARTS. This Agreement may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. 7.7 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 7.8 NOTICES. Notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, one business day after the date when sent to the recipient by reputable express courier service (charges prepaid) or five business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Stockholders and to the Company at the addresses indicated below: If to the Company: Citadel Communications Corporation 140 South Ash Avenue Tempe, Arizona 85281 Attention: Donna Hefner and Lawrence R. Wilson 1015 Eastman Drive Bigfork, Montana 59911 With a copy (which will not constitute notice) to: Osborn Maledon, P.A. 2929 North Central Suite 2100 Phoenix, Arizona 85012 Attention: Michelle M. Matiski, Esq. 19 20 If to the Voting Trustee: Christopher Hall, Esq. Piliero, Goldstein, Jenkins & Hall 292 Madison Avenue New York, New York 10017-6307 With a copy (which shall not constitute notice) to: Kirkland & Ellis Citicorp Center 153 East 53rd Street New York, New York 10022-4675 Attention: John L. Kuehn, Esq. If to any other Stockholder: To the respective address set forth on Schedule A to the Stockholders Agreement, as amended from time to time, including copies as indicated in Schedule A to the Stockholders Agreement or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. 7.9 NO OTHER THIRD-PARTY BENEFICIARIES. This Agreement will not confer any rights or remedies upon any Person other than the Company, the Stockholders, ABRY, ABRY/CIP and their respective successors and permitted assigns. 7.10 CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local, or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement is intended by the parties to be by way of example rather than limitation. 7.12 GOVERNING LAW. THE GENERAL CORPORATION LAW OF THE STATE OF NEVADA WILL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF NEVADA. 7.13 SUBMISSION TO JURISDICTION. Each of the parties to this Agreement submits to the jurisdiction of any state or federal court sitting in Boston, Massachusetts, Chicago, 20 21 Illinois, Nevada or Arizona in any action or proceeding arising out of or relating to this Agreement, agrees that all claims in respect of the action or proceeding may be heard and determined in any such court, and agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each of the parties to this Agreement waives any defense of inconvenient forum to be maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. Each party to this Agreement appoints CT Corporation System (the "Process Agent"), with addresses of 208 South LaSalle Street, Chicago, Illinois 60604, One East First Street, Reno, Nevada, Suite 1601, 3225 North Central Avenue, Phoenix, Arizona 85012, and 2 Oliver Street, Boston, Massachusetts 02109, as its agent to receive on its behalf service of copies of the summons and complaint and any other process that might be served in the action or proceeding. Any party to this Agreement may make service on any other party by sending or delivering a copy of the process (a) to the party to be served at the address and in the manner provided for the giving of notices in Section 7.8 or (b) to the party to be served in care of the Process Agent at the address and in the manner provided for the giving of notices in Section 7.8. Nothing in this Section, however, will affect the right of any party to serve legal process in any other manner permitted by law. Each party agrees that a final judgment in any action or proceeding so brought will be conclusive and may be enforced by suit on the judgment or in any other manner provided by law. 7.14 FCC MATTERS. Notwithstanding any provision contained herein to the contrary, no party hereto may exercise any of its rights or remedies hereunder, or take any actions permitted hereby, if prior thereto the Company receives a written opinion from its nationally recognized FCC counsel that after consultation with the staff of the Federal Communications Commission ("FCC") such exercise or action will violate the Communication Act of 1934 or the rules, regulations, or policies promulgated thereunder. IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. [SIGNATURES APPEAR ON THE FOLLOWING PAGES] 21 22 [SIGNATURE PAGE FOR THIRD AMENDED] AND RESTATED VOTING AGREEMENT] CITADEL COMMUNICATIONS CORPORATION By /s/ Lawrence R. Wilson ------------------------------------- Its President --------------------------------- /s/ Lawrence R. Wilson ------------------------------------------ Lawrence R. Wilson /s/ Claire Wilson ------------------------------------------ Claire Wilson /s/ Christopher P. Hall ------------------------------------------ Christopher Hall, as Trustee pursuant to the Voting Trust Agreement referred to above 22 23 [SIGNATURE PAGE FOR THIRD AMENDED] AND RESTATED VOTING AGREEMENT] BAKER, FENTRESS & COMPANY By /s/ Scott E. Smith ------------------------------------- Its Executive Vice President --------------------------------- OPPENHEIMER & CO., INC. By /s/ Rob Blum ------------------------------------- Its Assistant Secretary --------------------------------- FINOVA CAPITAL CORPORATION By /s/ Matthew M. Grey ------------------------------------- Its Group Vice President --------------------------------- 23 24 [SIGNATURE PAGE FOR THIRD AMENDED] AND RESTATED VOTING AGREEMENT] ENDEAVOUR: THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP By DVS Management, Inc. Its General Partner By /s/ John von Schlegell ---------------------------------- Its Managing Partner ----------------------------- ENDEAVOUR CO-INVESTORS: /s/ Joseph P. Tennant ------------------------------------------ Joseph P. Tennant THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94 By: /s/ Richard M. Schafbuch ---------------------------------- Richard M. Schafbuch, Trustee By: /s/ Susan P. Schafbuch ---------------------------------- Susan P. Schafbuch, Trustee BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP By /s/ Stephen E. Babson ------------------------------------- Its General Partner --------------------------------- /s/ Tal Johnson ------------------------------------------ Tal Johnson /s/ Edward T. Hardy ------------------------------------------ Edward T. Hardy /s/ Ralph W. McKee ------------------------------------------ Ralph W. McKee 24 25 Acknowledged: ABRY BROADCAST PARTNERS II, L.P. By ABRY CAPITAL, L.P. Its General partner By ABRY HOLDINGS, INC. Its General Partner By /s/ Royce Yudkoff ------------------------------------------ Its President ----------------------------------------- ABRY/CITADEL INVESTMENT PARTNERS, L.P. By ABRY CAPITAL, L.P. Its General partner By ABRY HOLDINGS, INC. Its General Partner By /s/ Royce Yudkoff ------------------------------------------ Its President ----------------------------------------- 25 EX-10.16 28 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.16 FIRST AMENDMENT TO THIRD AMENDED AND RESTATED VOTING AGREEMENT This FIRST AMENDMENT TO THIRD AMENDED AND RESTATED VOTING AGREEMENT is dated as of June __, 1997 (the "Amendment"), and is entered into by and among CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation (the "Company"), ABRY BROADCAST PARTNERS II, L.P., a Delaware limited partnership ("ABRY"), BAKER FENTRESS & COMPANY, a Delaware corporation ("BFC"), FINOVA CAPITAL CORPORATION, a Delaware corporation ("FINOVA"), OPPENHEIMER & CO., INC., a Delaware corporation ("Oppenheimer"), THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP, an Oregon limited partnership ("Endeavour"), JOSEPH P. TENNANT, THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94, BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP, an Oregon limited partnership; TAL JOHNSON, EDWARD T. HARDY, and RALPH W. MCKEE (collectively, the "Endeavour Co-Investors") and LAWRENCE R. WILSON ("LRW") and CLAIRE WILSON. RECITALS A. As of March 17, 1997, the parties to this Amendment and certain other persons entered into a Third Amended and Restated Voting Agreement (the "Voting Agreement"). Each capitalized term which is used and not otherwise defined in this Amendment and which is defined in the Voting Agreement has the meaning which the Voting Agreement assigns to that term. B. In connection with the anticipated offering and issuance by the Company's wholly-owned subsidiary, Citadel Broadcasting Company, of certain exchangeable preferred stock, the parties to this Amendment have agreed to make certain changes to the terms of the Voting Agreement. ACCORDINGLY, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Amendment agree as follows: 1. AMENDMENTS. 1.1 Section 1 of the Voting Agreement is amended by adding thereto the following defined terms and accompanying definitions: "Citadel Broadcasting" means Citadel Broadcasting Company, a Nevada corporation. "Exchangeable Preferred Stock" means certain exchangeable preferred stock of Citadel Broadcasting, as described in a certain "re-herring" Offering Memorandum dated June 11, 1997. 2 1.2 Section 2.1(c) of the Voting Agreement is hereby amended and restated in its entirety as follows: (c) the composition of the board of directors of each of the Company's subsidiaries (a "Sub Board") will be the same as that of the Board provided that, in addition to the individuals who are then members of the Board, from time to time as may be required by the articles or certificate of incorporation of Citadel Broadcasting the members of the board of directors of Citadel Broadcasting will also include up to two individuals elected by the holders of Exchangeable Preferred Stock as provided in such articles or certificate of incorporation); 2. EFFECTIVENESS; CERTIFICATIONS. This Amendment shall be effective when it has been executed and delivered by each of the Company, ABRY, BFC, Endeavour and LRW. As a material inducement to each of the other parties hereto to execute and deliver this Amendment: (a) ABRY certifies that it is the beneficial owner of a majority of the Voting Trust Underlying Common Stock; (b) BFC certifies that it is the holder of a majority of the BFC Underlying Common Stock; and (c) Endeavour certifies that it is the holder of majority of the Endeavour Underlying Common Stock. 3. CHOICE OF LAW. The General Corporation Law of the State of Nevada will govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Amendment will be governed by the internal law, and not the law of conflicts, of the State of Illinois. 4. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have caused this First Amendment to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. [SIGNATURES APPEAR ON FOLLOWING PAGES] -2- 3 [SIGNATURE PAGE FOR FIRST AMENDMENT TO THIRD AMENDED AND RESTATED VOTING AGREEMENT] CITADEL COMMUNICATIONS CORPORATION By /s/ Lawrence R. Wilson ----------------------- Its President ---------------------- /s/Lawrence R. Wilson ----------------------- Lawrence R. Wilson /s/ Claire Wilson ----------------------- Claire Wilson /s/ Christopher P. Hall ----------------------- Christopher Hall, as Trustee pursuant to the Voting Trust Agreement referred to above -3- 4 [SIGNATURE PAGE FOR FIRST AMENDMENT TO THIRD AMENDED AND RESTATED VOTING AGREEMENT] BAKER, FENTRESS & COMPANY By /s/ Scott E. Smith -------------------------- Its Executive Vice President ------------------------- OPPENHEIMER & CO., INC. By /s/ Matthew Maryles -------------------------- Its Managing Director ------------------------- FINOVA CAPITAL CORPORATION By /s/ Matthew M. Grey -------------------------- Its Group Vice President ------------------------- -4- 5 [SIGNATURE PAGE FOR FIRST AMENDMENT TO THIRD AMENDED AND RESTATED VOTING AGREEMENT] ENDEAVOUR: THE ENDEAVOUR CAPITAL FUND LIMITED PARTNERSHIP By DVS Management, Inc., Its General Partner By /s/ John E. von Schlegell ----------------------------- Its President ---------------------------- ENDEAVOUR CO-INVESTORS: * -------------------------------- Joseph P. Tennant THE SCHAFBUCH FAMILY TRUST u/a/d 2-15-94 By: * -------------------------------- Richard M. Schafbuch, Trustee By: * -------------------------------- Susan P. Schafbuch, Trustee BABSON CAPITAL PARTNERS LIMITED PARTNERSHIP By * -------------------------------- Its ____________________________ * -------------------------------- Tal Johnson * -------------------------------- Edward T. Hardy * -------------------------------- Ralph W. McKee * By: /s/ John E. von Schlegell --------------------------- Name: John E. von Schlegell for DVS Management, Inc. for The Endeavour Capital Fund Limited Partnership Attorney-In-Fact -5- EX-10.18 29 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.18 AMENDED AND RESTATED LOAN AGREEMENT AMONG CITADEL BROADCASTING COMPANY AND CITADEL LICENSE, INC. AND LENDERS DATED JULY 3, 1997 2 TABLE OF CONTENTS
Page No. -------- PRELIMINARY STATEMENT.................................................................................. 1 ARTICLE I.............................................................................................. 1 DEFINITIONS AND DETERMINATIONS......................................................................... 1 1.1 Definitions.......................................................................... 1 1.2 Time Periods......................................................................... 28 1.3 Accounting Terms and Determinations.................................................. 28 1.4 References........................................................................... 29 1.5 Borrowers' Knowledge................................................................. 29 1.6 Benefit of Lenders................................................................... 29 ARTICLE II............................................................................................. 29 LOANS AND TERMS OF PAYMENT............................................................................. 29 2.1 Existing Loans; Outstanding L/C Guaranty Obligations................................. 29 2.2 Additional Loans; Issuance of L/C Guaranties......................................... 29 2.2.1 Obligation of Lenders....................................................... 29 2.2.2 Obligations of Borrowers.................................................... 30 2.3 Conditions to Additional Loans; L/C Guaranties....................................... 30 2.4 Procedures for Additional Loans and Issuance of L/C Guaranties....................... 31 2.4.1 Making Additional Loans Other Than in Connection With L/C Guaranties.................................................................. 31 2.4.2 L/C Guaranties.............................................................. 31 2.4.3 Additional Loans in Connection with L/C Guaranties.......................... 31 2.5 Interest; Default Rate, Late Charges, Loan Fees and Agent's Fees............ 32 2.5.1 Interest.................................................................... 32 2.5.2 Late Charges................................................................ 33 2.5.3 Amendment Fee............................................................... 33 2.5.4 Agent's Fee................................................................. 33 2.5.5 Unused Commitment Fee....................................................... 33 2.5.6 Letter of Credit Fees....................................................... 34 2.5.7 Computation of Interest, Unused Commitment Fees and Letter of Credit Fees................................................................. 34 2.6 LIBOR Loans.......................................................................... 34 2.6.1 Election by Borrowers....................................................... 34 2.6.2 LIBOR Limitations........................................................... 35
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Page No. -------- 2.6.3 Eurodollar Deposits Unavailable or Interest Rate Unascertainable............................................................. 35 2.6.4 Tax and Other Laws.......................................................... 35 2.6.5 Changes in Law Rendering LIBOR Loans Unlawful............................... 35 2.6.6 Indemnity................................................................... 36 2.6.7 Option to Replace Affected Lender........................................... 36 2.7 Reductions of Commitments, Principal Payments............................... 36 2.7.1 Mandatory Reductions of Commitments and Principal Payments.................. 36 2.7.2 Other Mandatory Reductions of Commitments; Prepayments of the Loans....................................................................... 36 2.8 Voluntary Reductions in Commitments and Prepayments; Prepayment Premiums............................................................................. 37 2.8.1 Voluntary Reduction of Commitments.......................................... 37 2.8.2 Voluntary Prepayments....................................................... 37 2.8.3 Premiums.................................................................... 38 2.9 Payment at Maturity.................................................................. 38 2.10 Letter of Credit Fund................................................................ 38 2.11 Payments after Event of Default...................................................... 38 2.12 Method and Distribution of Payments.................................................. 38 2.12.1 Method of Payment; Good Funds............................................... 38 2.12.2 Distribution of Payments.................................................... 38 2.12.3 Distributions by Agent to Lenders........................................... 39 ARTICLE III............................................................................................ 39 SECURITY; GUARANTY..................................................................................... 39 3.1 Security............................................................................. 39 3.2 Guaranty............................................................................. 39 ARTICLE IV............................................................................................. 39 CONDITIONS OF CLOSINGS; ACQUISITIONS; TELE-MEDIA MERGER................................................ 39 4.1 Closing.............................................................................. 39 4.1.1 Representations and Warranties.............................................. 39 4.1.2 Consummation of Mergers; Tele-Media Acquisition............................. 39 4.1.3 Delivery of Documents....................................................... 40 4.1.4 Performance; No Default..................................................... 41 4.1.5 Opinions of Counsel......................................................... 41 4.1.6 Approval of Instruments and Security Interests.............................. 41 4.1.7 Security Interests.......................................................... 42 4.1.8 FCC Licenses................................................................ 42 4.1.9 LMA Agreements.............................................................. 42
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Page No. -------- 4.1.10 Financial Statements, Reports and Projections............................... 42 4.1.11 Material Adverse Change..................................................... 42 4.1.12 Use of Assets............................................................... 42 4.1.13 Broker Fees................................................................. 42 4.1.14 Insurance................................................................... 43 4.1.15 Payment of Amendment Fee and Other Fees..................................... 43 4.2 Tele-Media Merger.................................................................... 43 4.2.1 Consummation of Tele-Media Merger........................................... 43 4.2.2 Delivery of Documents....................................................... 43 4.2.3 Opinions of Counsel......................................................... 44 4.2.4 Security Interests.......................................................... 44 4.2.5 Insurance................................................................... 44 4.3. Acquisitions......................................................................... 44 4.3.1 Consummation of Acquisitions................................................ 44 4.3.2 Delivery of Documents....................................................... 45 4.3.3 Financial Statements, Reports and Projections............................... 45 4.3.4 Compliance with Applicable Ratio............................................ 45 4.3.5 Opinions of Counsel......................................................... 45 4.3.6 FCC Licenses................................................................ 45 4.3.7 Security Interest........................................................... 46 4.3.8 Environmental Audit......................................................... 46 4.3.9 Insurance; Survey........................................................... 46 4.3.10 Engineer's Certificate...................................................... 46 4.3.11 Payment of Fees............................................................. 46 4.3.12 Representations and Warranties.............................................. 46 4.3.13 Performance; No Default..................................................... 46 4.4 Landlord's Consent................................................................... 47 ARTICLE V.............................................................................................. 47 REPRESENTATIONS AND WARRANTIES......................................................................... 47 5.1 Corporate Existence and Power........................................................ 47 5.2 Corporate Authority.................................................................. 47 5.3 Capital Stock, Senior Subordinated Notes and Related Matters......................... 47 5.3.1 Capitalization of Borrowers................................................. 47 5.3.2 Restrictions................................................................ 47 5.4 Binding Agreements................................................................... 48 5.5 Business, Property and Licenses of Borrower.......................................... 48 5.5.1 Business and Property....................................................... 48 5.5.2 FCC Licenses................................................................ 48 5.5.3 LMA Agreements.............................................................. 48 5.5.4 Operating Agreements........................................................ 48
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Page No. -------- 5.5.5 Business Locations.......................................................... 49 5.5.6 Real Property; Leases....................................................... 49 5.5.7 Operation and Maintenance of Equipment...................................... 49 5.6 Title to Property; Liens............................................................. 49 5.7 Projections and Financial Statements................................................. 49 5.7.1 Financial Statements........................................................ 49 5.7.2 Projections................................................................. 50 5.8 Litigation........................................................................... 50 5.9 Defaults in Other Agreements; Consents; Conflicting Agreements....................... 50 5.10 Taxes................................................................................ 51 5.11 Compliance with Applicable Laws...................................................... 51 5.12 Patents, Trademarks and Franchises................................................... 51 5.13 FCC Matters.......................................................................... 51 5.14 Environmental Matters................................................................ 52 5.15 Application of Certain Laws and Regulations.......................................... 52 5.15.1 Investment Company Act...................................................... 52 5.15.2 Holding Company Act......................................................... 52 5.15.3 Foreign or Enemy Status..................................................... 52 5.15.4 Regulations as to Borrowing................................................. 52 5.16 Margin Regulations................................................................... 52 5.17 Other Indebtedness................................................................... 53 5.18 No Misrepresentation................................................................. 53 5.19 Employee Benefit Plans............................................................... 53 5.19.1 No Other Plans.............................................................. 53 5.19.2 ERISA and Code Compliance and Liability..................................... 53 5.19.3 Funding..................................................................... 53 5.19.4 Prohibited Transactions and Payments........................................ 54 5.19.5 No Termination Event........................................................ 54 5.19.6 ERISA Litigation............................................................ 54 5.20 Employee Matters..................................................................... 54 5.20.1 Collective Bargaining Agreements; Grievances................................ 54 5.20.2 Claims Relating to Employment............................................... 54 5.21 Burdensome Obligations............................................................... 54 5.22 Insurance............................................................................ 55 5.23 Representation as to Acquisition Instruments......................................... 55 ARTICLE VI............................................................................................. 55 AFFIRMATIVE COVENANTS.................................................................................. 55 6.1 Legal Existence; Good Standing....................................................... 55 6.2 Inspection........................................................................... 55 6.3 Financial Statements and Other Information........................................... 56
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Page No. -------- 6.3.1 Monthly Statements.......................................................... 56 6.3.2 Quarterly Statements........................................................ 56 6.3.3 Annual Statements........................................................... 57 6.3.4 Officer's Certificates...................................................... 57 6.3.5 Accountants' Certificate.................................................... 58 6.3.6 Audit Reports............................................................... 58 6.3.7 Business Plans.............................................................. 58 6.3.8 Notice of Defaults; Loss.................................................... 58 6.3.9 Notice of Suits, Adverse Events............................................. 58 6.3.10 Reports to Shareholders, Creditors and Governmental Bodies...................................................................... 59 6.3.11 ERISA Notices and Requests.................................................. 59 6.3.12 Rating Books................................................................ 60 6.3.13 Other Information........................................................... 60 6.4 Reports to Governmental Bodies and Other Persons..................................... 60 6.5 Maintenance of Licenses and Other Agreements......................................... 61 6.6 Insurance............................................................................ 61 6.6.1 Key Man Life Insurance...................................................... 61 6.6.2 Business Insurance.......................................................... 61 6.6.3 Business Insurance, Claims and Proceeds..................................... 61 6.6.4 Flood Insurance............................................................. 62 6.7 Future Leases........................................................................ 62 6.8 Future Acquisitions of Real Property................................................. 62 6.9 Environmental Audit.................................................................. 62 6.10 Environmental Matters................................................................ 62 6.10.1 Compliance.................................................................. 62 6.10.2 Certification............................................................... 63 6.11 Interest Hedge Contract.............................................................. 63 6.12 Compliance with Laws................................................................. 63 6.13 Taxes and Claims..................................................................... 63 6.14 Maintenance of Properties............................................................ 63 ARTICLE VII............................................................................................ 63 NEGATIVE COVENANTS..................................................................................... 63 7.1 Borrowing............................................................................ 64 7.2 Liens................................................................................ 64 7.3 Merger and Acquisition............................................................... 64 7.4 Contingent Liabilities............................................................... 64 7.5 Distributions........................................................................ 64 7.6 Limitation of Corporate Overhead and Capital Expenditures............................ 64 7.6.1 Corporate Overhead.......................................................... 64
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Page No. -------- 7.6.2 Capital Expenditures........................................................ 65 7.7 Payments of Indebtedness for Borrowed Money.......................................... 65 7.8 Obligations as Lessee Under Operating Leases......................................... 65 7.9 Investments.......................................................................... 65 7.10 Fundamental Business Changes; Limitations on Non-Operating Companies..................................................................................... 65 7.11 Sale or Transfer of Assets........................................................... 66 7.12 Amendment of Instruments............................................................. 66 7.13 Acquisition of Additional Properties................................................. 66 7.14 Issuance of Capital Stock; Debt Securities........................................... 66 7.15 Transactions with Affiliates......................................................... 66 7.16 Compliance with ERISA................................................................ 66 7.17 LMA Agreements....................................................................... 67 7.18 Business Locations................................................................... 67 7.19 Maximum Leverage Test................................................................ 67 7.20 Senior Debt Leverage................................................................. 68 7.21 Minimum Interest Coverage............................................................ 68 7.22 Minimum Fixed Charges................................................................ 68 ARTICLE VIII........................................................................................... 68 DEFAULT AND REMEDIES................................................................................... 68 8.1 Events of Default.................................................................... 68 8.1.1 Default in Payment.......................................................... 69 8.1.2 Breach of Covenants......................................................... 69 8.1.3 Breach of Warranty.......................................................... 69 8.1.4 Default Under Other Indebtedness for Borrowed Money......................... 69 8.1.5 Bankruptcy.................................................................. 69 8.1.6 Judgments................................................................... 70 8.1.7 Impairment of Licenses; Other Agreements.................................... 70 8.1.8 Collateral.................................................................. 70 8.1.9 Interruption of Operations.................................................. 70 8.1.10 Plans....................................................................... 71 8.1.11 Change in Control; Cessation of Wilson's Activities......................... 71 8.1.12 Guaranty.................................................................... 71 8.2 Acceleration of Borrower's Obligations............................................... 71 8.3 Rescission of Acceleration........................................................... 72 8.4 Remedies on Default.................................................................. 72 8.4.1 Remedies upon Acceleration.................................................. 72 (a) Enforcement of Security Interests........................................... 72 (b) Other Remedies.............................................................. 72 8.4.2 Blockage Notice............................................................. 72
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Page No. -------- 8.5 Application of Funds................................................................. 72 8.5.1 Expenses.................................................................... 72 8.5.2 Existing Prepayment Premium................................................. 72 8.5.3 Borrowers' Obligations...................................................... 73 8.5.4 Surplus..................................................................... 73 8.6 Performance of Borrower's Obligations................................................ 73 8.7 Right of Setoff...................................................................... 73 ARTICLE IX............................................................................................. 73 THE AGENT.............................................................................................. 73 9.1 Appointment.......................................................................... 73 9.2 Delegation of Duties................................................................. 74 9.3 Nature of Duties; Independent Credit Investigation................................... 74 9.4 Instructions from Lenders............................................................ 74 9.5 Exculpatory Provisions............................................................... 74 9.6 Reimbursement and Indemnification by Lenders of the Agent............................ 75 9.7 Reliance by Agent.................................................................... 75 9.8 Notice of Default.................................................................... 75 9.9 Release of Collateral................................................................ 75 9.10 Lenders in Their Individual Capacities............................................... 75 9.11 Holders of Notes..................................................................... 76 9.12 Successor Agent...................................................................... 76 9.13 Delivery of Information.............................................................. 76 9.14 Beneficiaries........................................................................ 76 ARTICLE X.............................................................................................. 77 LOAN ASSIGNMENT AND PARTICIPATION...................................................................... 77 10.1 Assignment to Other Lenders.......................................................... 77 10.1.1 Assignment.................................................................. 77 10.1.2 Effect of Assignment........................................................ 77 10.1.3 Register.................................................................... 77 10.1.4 Substitution of Notes....................................................... 77 10.2 Participations....................................................................... 78 ARTICLE XI............................................................................................. 78 CLOSING................................................................................................ 78 ARTICLE XII............................................................................................ 78
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Page No. -------- EXPENSES AND INDEMNITY................................................................................. 78 12.1 Attorney's Fees and Other Fees and Expenses.......................................... 78 12.1.1 Fees and Expenses for Preparation of Loan Instruments....................... 78 12.1.2 Fees and Expenses in Enforcement of Rights or Defense of Loan Instruments..................................................................... 79 12.2 Indemnity............................................................................ 79 12.2.1 Brokerage Fees.............................................................. 79 12.2.2 General..................................................................... 79 12.2.3 Operation of Collateral; Joint Venturers.................................... 79 12.2.4 Environmental Indemnity..................................................... 79 ARTICLE XIII........................................................................................... 80 MISCELLANEOUS.......................................................................................... 80 13.1 Notices.............................................................................. 80 13.2 Survival of Loan Agreement; Indemnities.............................................. 81 13.3 Further Assurance.................................................................... 82 13.4 Taxes and Fees....................................................................... 82 13.5 Severability......................................................................... 82 13.6 Waivers and Amendments............................................................... 82 13.7 Joint and Several Liability.......................................................... 82 13.8 Captions............................................................................. 83 13.9 Successors and Assigns............................................................... 83 13.10 Remedies Cumulative.................................................................. 83 13.11 Entire Agreement; Conflict........................................................... 83 13.12 APPLICABLE LAW....................................................................... 83 13.13 JURISDICTION AND VENUE............................................................... 83 13.14 WAIVER OF RIGHT TO JURY TRIAL........................................................ 84 13.15 TIME OF ESSENCE...................................................................... 84 13.16 Estoppel Certificate................................................................. 84 13.17 Consequential Damages................................................................ 85 13.18 Counterparts......................................................................... 85 13.19 No Fiduciary Relationship............................................................ 85 13.20 Notice of Breach by Agent and Lenders................................................ 85 13.21 Confidentiality...................................................................... 85 13.22 Governmental Approval................................................................ 85
viii 10 AMENDED AND RESTATED LOAN AGREEMENT AMENDED AND RESTATED LOAN AGREEMENT, dated as of July 3, 1997, among CITADEL BROADCASTING COMPANY, CITADEL LICENSE, INC. and FINOVA CAPITAL CORPORATION, a Delaware corporation ("FINOVA"), in its individual capacity and as agent for all Lenders (this and all other capitalized terms used herein are defined in Section 1.1 below) and the other Lenders which are parties hereto. PRELIMINARY STATEMENT: A. The Original Borrowers and FINOVA, in its individual capacity and as Agent for all Lenders, entered into a Loan Agreement dated as of October 9, 1996, which agreement was amended by amendments dated as of December 31, 1996, February 14, 1997, April 10, 1997 and May 30, 1997 (collectively, the "Original Loan Agreement"). B. Borrowers have requested Lenders' consent to, inter alia, (i) the DAC Merger, the DLI Merger, the Tele-Media Acquisition and the Tele-Media Merger, (ii) the issuance of the Senior Subordinated Notes and the Exchangeable Preferred Stock, (iii) the consolidation of the Term Loan and Revolving Loan into a revolving loan and (iv) the modification of certain of the covenants and other provisions of the Original Loan Agreement. C. Lenders are willing to grant such consent subject to the terms and conditions set forth herein. NOW THEREFORE, the Original Loan Agreement is amended and restated in its entirety as follows: ARTICLE I DEFINITIONS AND DETERMINATIONS 1.1 Definitions. As used in this Loan Agreement and in the other Loan Instruments, unless otherwise expressly indicated herein or therein, the following terms shall have the following meanings (such meanings to be applicable equally to both the singular and plural forms of the terms defined): Accountants: KPMG Peat Marwick or any other independent certified public accounting firm selected by Borrowers and reasonably satisfactory to Required Lenders. Accounting Changes: as defined in Section 1.3. 11 Accounts Decrease: for any period, the excess of the Eligible Accounts at the beginning of such period over the Eligible Accounts at the end of such period. Accounts Increase: for any period, the excess of Eligible Accounts at the end of such period over the Eligible Accounts at the beginning of such period. Acquisition: an Asset Acquisition or an Equity Acquisition. Acquisition Closing. the consummation of a Permitted Acquisition. Acquisition Closing Date: the date of a Permitted Acquisition Closing. Acquisition Instruments: the purchase agreement and all other documents executed in connection with a Permitted Acquisition. Acquisition Loan Instruments: collectively, the following documents to be executed and delivered in connection with a Permitted Acquisition: (i) any amendments to the Loan Instruments and any Mortgages, Security Agreements, UCC Financing Statements and other agreements required by Agent to (A) reflect the effect of such Acquisition and (B) grant to Agent a perfected Lien, subject only to Permitted Prior Liens, upon all Property acquired by CBC upon the consummation (x) of such Acquisition, if such acquisition is an Asset Acquisition or (y) the Acquisition Merger, if such Acquisition is an Equity Acquisition, and (z) to the extent permitted by applicable law, the FCC Licenses (and the proceeds thereof) transferred to CLI in connection with such Acquisition; (ii) Assignment of Acquisition Instruments; (iii) a Landlord's Consent executed by each Landlord under each Lease assumed or executed by CBC in connection with such Acquisition; (iv) a Seller's Consent with respect to such Acquisition if such consent is required to the applicable Assignment of Acquisition Instruments; and (v) such other instruments, documents, certificates, consents, waivers, and opinions as Agent may reasonably require in connection with such Acquisition. Acquisition Merger: as defined in subsection 4.3.1. Additional Closing: the disbursement of an Additional Loan. 2 12 Additional Closing Date: the date of an Additional Closing. Additional Loan: a loan made by Lenders to Borrowers on any Additional Closing Date. Adjusted Leverage Ratio: as of the end of any month the ratio of the Adjusted Total Debt as of such date to Adjusted Operating Cash Flow for the 12-month period ending on such date. Adjusted Operating Cash Flow: for any twelve-month period or Four-Quarter Period, as applicable, the Operating Cash Flow of CBC for such period, (i) plus the sum of the following: (A) if a Permitted Acquisition has been made during such period, the Operating Cash Flow of each Station or Related Business which has been acquired by CBC pursuant to such Acquisition, either directly or as a result of an Acquisition Merger, from the beginning of such period until the date such Acquisition or Acquisition Merger was consummated; (B) when determining whether a proposed Acquisition will be a Permitted Acquisition the Operating Cash Flow for such period of the Station or Related Business to be acquired, whether directly or as a result of an Acquisition Merger, as determined to the satisfaction of the Required Lenders based on financial and other information submitted to Agent by Borrowers; and (C) such adjustments to the Operating Cash Flow of CBC and such Station or Related Business for such period as the Required Lenders reasonably deem appropriate, based on information furnished to Agent by Borrowers, to take into account reductions or increases in expenses for said period which would have been effected if such Acquisition had been consummated at the beginning of such period. (ii) minus the sum of the following: (A) with respect to any Permitted Disposition made within such period, the Operating Cash Flow of the Station or Related Business which is the subject of such Disposition from the beginning of such period until the date of the consummation of such Disposition; and 3 13 (B) when determining whether a proposed Disposition will be a Permitted Disposition the Operating Cash Flow for such period of the Station or Related Business which is the subject of such proposed Disposition. In calculating the Adjusted Operating Cash Flow for any period from January 1, 1997 to the Closing Date the Operating Cash Flow of DAC for such period shall be included. Adjusted Total Debt: as of any applicable date, the Total Debt as of such date (i) plus, when determining whether a proposed Acquisition shall be a Permitted Acquisition or whether Borrowers are entitled to a disbursement of an Additional Loan requested by Borrowers (A) the amount of the Additional Loan requested by Borrowers and (B) in case of a proposed Acquisition, the amount of Indebtedness for Borrowed Money to be assumed by Borrowers in connection with such Acquisition or Acquisition Merger, as applicable, and (ii) minus, when determining whether a proposed Disposition shall be a Permitted Disposition, the Principal Balance to be repaid from the proceeds of such Disposition. Adjusted Total Leverage Ratio: as of the end of any month the ratio of the Adjusted Total Debt as of such date to the Adjusted Operating Cash Flow for the twelve-month period ending on such date. Affiliate: any Person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with another Person. The term "control" means 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 equity interests, by contract or otherwise. For the purposes hereof, any Person which owns or controls, directly or indirectly, 10% or more of the securities or equity interests, as applicable, whether voting or non-voting, of any other Person shall be deemed to "control" such Person. Agent: FINOVA, as agent for the Lenders. Agent's Fee: as defined in subsection 2.5.4. Amended and Restated Assignment of Leases: the Amended and Restated Assignment of Leases executed by CBC in the form of EXHIBIT 1A. Amended and Restated Contribution Agreement: the Amended and Restated Contribution Agreement between the Borrowers in the form of EXHIBIT 1B. Amended and Restated Guaranty: the Amended and Restated Guaranty executed by Guarantor in the form of EXHIBIT 1C. 4 14 Amended and Restated Security Agreement (CBC): the Amended and Restated Security Agreement executed by CBC in the form of EXHIBIT 1D. Amended and Restated Security Agreement (CLI): the Amended and Restated Security Agreement executed by CLI in the form of EXHIBIT 1E. Amended and Restated Stock Pledge Agreement (CBC Common Stock): the Amended and Restated Stock Pledge Agreement executed by Guarantor (CBC Common Stock) in the form of EXHIBIT 1F. Amended and Restated Trademark Security Agreement: the Amended and Restated Trademark Security Agreement executed by CBC in the form of EXHIBIT 1G. Amended and Restated Use Agreement: the Amended and Restated Use Agreement among Borrowers and Tele-Media in form and substance reasonably acceptable to Agent. Amendment Fee: as defined in subsection 2.5.3. Applicable Margin: as defined in subsection 2.5.1. Applicable Ratio: on the last day of any month during the period set forth below the ratio set forth opposite such period:
Each Month During Period Ratio ------------------------ ----- Closing Date through November 1997 6.75 December 1997 through May 1998 6.5 June 1998 through November 1998 6.25 December 1998 through May 1999 6.0 June 1999 through November 1999 5.75 December 1999 through May 2000 5.5 June 2000 through November 2000 5.25 December 2000 through May 2001 5.0 June 2001 through November 2001 4.75 December 2001 through May 2002 4.5 June 2002 through November 2002 4.25 December 2002 through June 2003 4.0
Asset Acquisition: an acquisition of Station Assets and the related FCC Licenses or of Related Business Assets. Assignee: any Person to which a Loan Assignment is made in compliance with the provisions of subsection 10.1.1. 5 15 Assignment and Acceptance: an Assignment and Acceptance Agreement to be executed in connection with each Loan Assignment in the form of EXHIBIT 1H. Assignment of Acquisition Instruments: an Assignment of Acquisition Instruments to be executed in connection with each Permitted Acquisition in the form of EXHIBIT 1I. Assignment of Interest Hedge Contract: the Assignment of Interest Hedge Contract executed by the Original Borrowers pursuant to the Original Loan Agreement. Assignment of Key Man Life Insurance: the Assignment of the Key Man Life Insurance executed by CBC pursuant to the Original Loan Agreement. Bankruptcy Code: the United States Bankruptcy Code and any successor statute thereto, and the rules and regulations issued thereunder, as in effect from time to time. Base Rate: the per annum rate of interest announced or published publicly from time to time by Citibank, N.A. in New York, New York as its corporate base (or equivalent) rate of interest, which rate shall change automatically without notice and simultaneously with each change in such corporate base rate. The Base Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer by Citibank, N.A. in New York, New York. Base Rate Portion: the Principal Balance other than the portion thereof consisting of LIBOR Loans. Basic Financial Statements: as defined in subsection 6.3.3. Borrower: either of the Borrowers. Borrowers: CBC and CLI. Borrowers' Obligations: (i) any and all Indebtedness due or to become due, whether contingent or otherwise, now existing or hereafter arising, of Borrowers to Lenders and/or Agent pursuant to the terms of this Loan Agreement or any other Loan Instrument, including the Existing Prepayment Premium and (ii) the performance of the covenants of Borrowers contained in the Loan Instruments. Broadcast Market: Each of the Stations or group of the CBC Stations of a Borrower serving a specific geographical area or market as set forth in EXHIBIT 1J. Broadcasting Business: the business of owning and/or operating (i) a Station, including the operation of a Station pursuant to an LMA, (ii) the sale of advertising time for a Station pursuant to a JSA, (iii) a Related Business and (iv) related ancillary activities. 6 16 Business Day: (i) except as provided in clause (ii), any day other than a Saturday, Sunday or other day on which banks in Chicago, Illinois, are required or authorized to close, and (ii) with respect to all notices, determinations, fundings and payments in connection with a LIBOR Loan, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the applicable interbank eurodollar market. Business Insurance: such property, casualty, business interruption and other insurance, other than the Key Man Life Insurance and flood insurance, as Agent from time to time reasonably requires CBC to maintain. Capital Expenditures: collectively, payments that are made or liabilities that are incurred by CBC and DAC (but as to DAC only for the period from January 1, 1997 through the Closing Date), other than for a Permitted Acquisition, for the lease, purchase, improvement, construction or use of any Property, the value or cost of which under GAAP is required to be capitalized and appear on such Person's balance sheet in the category of property, plant or equipment, without regard to the manner in which such payments or the instruments pursuant to which they are made are characterized by such Person or any other Person. Except for the purpose of determining Excess Cash Flow, a Capital Expenditure shall be deemed to be made as of the time the Property which is the subject thereof is put into service by such Person. Capitalized Lease: any lease of Property, the obligations for the rental of which are required to be capitalized in accordance with GAAP. Cash Equivalents: collectively, the aggregate of each CBC's (i) cash on hand or in any bank or trust company, and checks on hand and in transit, (ii) monies on deposit in any money market account, and (iii) treasury bills, certificates of deposit, commercial paper and readily marketable securities at current market value having, in each instance, a maturity of not more than 180 days. CBC: Citadel Broadcasting Company. CBC Common Stock: all of the issued and outstanding common stock of CBC and all warrants, options and other equity interests issued and outstanding with respect thereto. CBC Stations: each of the Stations listed on EXHIBIT 1K. Chief Financial Officer: the treasurer of CBC or any other Person designated by CBC as its chief financial officer. Certificate of Designation: the Certificate of Designation filed on or prior to the Closing Date by CBC with the Secretary of State of Nevada with respect to the Exchangeable Preferred Stock. 7 17 CLI Capital Stock: all of the issued and outstanding capital stock, warrants, options and other equity interests of CLI. Closing: this Loan Agreement being deemed to becoming effective pursuant to Section 4.1. Closing Certificate: a Closing Certificate signed by the President of each Borrower in form and substance reasonably acceptable to Agent. Closing Date: July 3, 1997. Code: the Internal Revenue Code of 1986, as amended, and any successor statute thereto, and the rules and regulations issued thereunder, as in effect from time to time. Collateral: (i) all existing and after-acquired Property of Borrowers, including without limitation (A) all existing and after-acquired accounts, equipment, general intangibles, (B) the Key Man Life Insurance and (C) the Real Estate, (ii) the CBC Common Stock, (iii) the CLI Capital Stock, (iv) the Tele-Media Capital Stock and (v) all proceeds of the foregoing. Commitment: shall mean, as to any Lender, the amount initially set forth opposite its name in the column labeled "Commitment" on Schedule I, less any reductions made pursuant to Sections 2.7 and subsection 2.8.1, as adjusted from time to time to reflect any Assignment and Acceptances. Commitments: at any time, the aggregate of each Lender's Commitment. Communications Act: the Communications Act of 1934 and the rules and regulations issued thereunder, as amended and in effect from time to time. Compliance Certificate: a Compliance Certificate executed by the Chief Financial Officer in the form of EXHIBIT 1L. Corporate Overhead: during any period, the aggregate of all compensation, traveling, entertainment, automobile and airplane expenses of the Persons listed on EXHIBIT 1M incurred by the Obligors and all other costs and expenses incurred by the Obligors which are not allocable or are not incurred directly in the operation of any of the CBC Stations, Related Businesses, any JSA Station or any LMA Station, including, but not limited to any legal expenses and auditing fees, minus the revenues received by the Obligors from users of the trade name "Cat Country," but excluding the IPO Expenses. DAC: Deschutes River Broadcasting, Inc., a Nevada corporation. DAC Leases: each Lease described as a "DAC Lease" in EXHIBIT 1S. 8 18 DAC Merger: the merger of DAC into CBC with CBC being the surviving corporation. DAC Merger Instruments: the articles of merger and all other documents executed and/or filed in connection with the DAC Merger. DAC Real Estate: each parcel of Real Estate described as "DAC Real Estate" in EXHIBIT 1X. Debt Service: during any period, all payments by Borrowers during such period of principal, interest, loan fees and other charges made with respect to Indebtedness for Borrowed Money, which payments are required or permitted to be made pursuant to this Loan Agreement and are due and payable during such period, but excluding payments made pursuant to subsection 2.7.2. Default Rate: with respect to (i) the Base Rate Portion and all of the other of Borrowers' Obligations other than LIBOR Loans, a per annum rate equal to the Base Rate in effect from time to time plus the Applicable Margin plus 2.0% per annum and (ii) each LIBOR Loan, a per annum rate equal to the LIBOR Rate applicable thereto plus the Applicable Margin plus 2.0% per annum. Default Rate Period: a period of time commencing on the date that an Event of Default has occurred and ending on the date that such Event of Default is cured or waived. Disposition: any sale, lease, assignment, transfer or other disposition of any Property by Borrowers of Station Assets and the related FCC Licenses or Related Business Assets. DLI: Deschutes License, Inc., a Nevada corporation. DLI Licenses: the FCC Licenses issued to DLI with respect to the Stations operated by DAC immediately prior to the DLI Merger. DLI Merger: the merger of DLI into CLI with CLI being the surviving corporation. DLI Merger Instruments: the articles of merger and all other documents executed in connection with the DLI Merger. Eligible Accounts: at any given time, the aggregate of the face amount of the accounts receivable of CBC, exclusive of any accounts receivable over 60 days past due, net of applicable reserves and Trade Out Transactions. 9 19 Employee Benefit Plan: any employee benefit plan within the meaning of Section 3(3) of ERISA which (i) is maintained for employees of any Obligor or any ERISA Affiliate, or (ii) has at any time within the preceding six years been maintained for the employees of any Obligor or any current or former ERISA Affiliate. Engineer: an engineer or engineers selected by CBC and acceptable to Agent. Environmental Audit: (i) a Phase I audit report with respect to a parcel of real estate and such other studies and reports as Agent reasonably deems necessary after review of the results of said Phase I audit, including, if reasonably required by Agent, soil and ground water tests, each such report and study to be in form and content and issued by Persons reasonably acceptable to Agent and (ii) a letter from each Person issuing each such report or study entitling Lenders to rely thereon. Environmental Certificate: the Environmental Certificate executed by CBC in form and substance acceptable to Agent. Environmental Compliance Certificate: an Environmental Compliance Certificate executed by CBC in form and substance acceptable to Agent. Environmental Laws: any and all federal, state and local laws that relate to or impose liability or standards of conduct concerning public or occupational health and safety or protection of the environment, as now or hereafter in effect and as have been or hereafter may be amended including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 USC Section 9601 et seq.), the Hazardous Materials Transportation Act (42 U.S.C. Section 1802 et seq.), the Resources Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the Clean Air Act (42 U.S.C. Section 7901 et seq.), the National Environmental Policy Act (42 U.S.C. Section 4231, et seq.), the Refuse Act (33 U.S.C. Section 407, et seq.), the Safe Drinking Water Act (42 U.S.C. Section 300(f) et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), and all rules, regulations, codes, ordinances and guidance documents promulgated or published thereunder, and the provisions of any licenses, permits, orders and decrees issued pursuant to any of the foregoing. Equity Acquisition: an acquisition of the capital stock or other equity interest of the Person or Persons which own Station Assets and the related FCC Licenses or Related Business Assets. ERISA: the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, and the rules and regulations issued thereunder, as in effect from time to time. 10 20 ERISA Affiliate: any Person who is a member of a group which is under common control with any Obligor, who together with any Obligor is treated as a single employer within the meaning of Section 414(b),(c), and (m) of the Code. Eurocurrency Reserve Requirements: for any day as applied to a LIBOR Loan, the aggregate (without duplication) of the rates (expressed as a decimal rounded upward to the nearest 1/100th of 1%) as determined by Agent of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System of the United States or other Governmental Body, or any successor thereto, having jurisdiction with respect thereto) prescribed for Eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of the Federal Reserve System. Event of Default: any of the Events of Default set forth in Section 8.1. Excess Cash Flow: (i) for any period, the aggregate for such period of the (A) Operating Cash Flow of CBC and (B) Accounts Decrease, (ii) minus, the aggregate of the following for such period: (w) Debt Service, (x) amounts actually paid for Capital Expenditures permitted to be incurred pursuant to this Loan Agreement, whether or not under the definition "Capital Expenditures" such Capital Expenditures were deemed to be made during such period, but excluding amounts paid from the proceeds of Permitted Senior Indebtedness, (y) the Accounts Increase, and (z) distributions for Corporate Overhead, subject to the limitations set forth in subsection 7.6.1 and (iii) plus, for the year 1997, the Operating Cash Flow of DAC for the period from January 1, 1997 to the Closing Date. Excess Interest: as defined in subsection 2.5.1(d). Exchange Indenture: the Indenture dated as of July 1, 1997 among Borrowers and The Bank of New York, as trustee, relating to the Exchangeable Debentures. Exchangeable Debentures: the Exchangeable Debentures due 2009 issued in exchange for Exchangeable Preferred Stock. Exchangeable Debenture Indebtedness: the Indebtedness evidenced by the Exchangeable Debentures. Exchangeable Preferred Stock: the Series A Exchangeable Preferred Stock issued by CBC on the Closing Date, any exchangeable preferred stock issued in exchange therefor pursuant to the Preferred Stock Registration Rights Agreement, and any exchangeable preferred stock issued by CBC as dividends in accordance with the Certificate of Designation. 11 21 Exchangeable Preferred Stock Instruments: collectively, the Certificate of Designation, the Preferred Stock Registration Rights Agreement, the Exchange Indenture and the form of each of the Exchangeable Preferred Stock and Exchange Debentures to be issued by CBC, and the forms of the Exchangeable Preferred Stock certificates and Exchangeable Debentures. Existing Loan Instruments: collectively, the (i) Existing Mortgages, (ii) Existing UCC Financing Statements, (iii) Assignment of Interest Hedge Contract, (iv) Assignment of Key Man Life Insurance, (v) Stock Pledge Agreement (CLI Capital Stock) and (vi) Existing Assignments of Acquisition Instruments. Existing Assignments of Acquisition Instruments: the Assignments of Acquisition Instruments described in EXHIBIT 1N. Existing Mortgages: the Mortgages described in EXHIBIT 1O. Existing Prepayment Premium: the Prepayment Premium (as defined in the Loan Agreement dated as of May 12, 1994 between CBC and FINOVA) owed by CBC to FINOVA on the Original Closing Date in the amount of $909,312, which was deemed to be fully earned on such date and which shall be reduced on the last day of each quarter until the quarter immediately preceding the quarter in which Borrowers' Obligations are paid in full and the Commitments are terminated by an amount equal to (i) 56.7% multiplied by the Principal Balance as of the last day of the applicable quarter, the product of which is multiplied by (ii) .0625% Existing UCC Financing Statements: the UCC Financing Statements filed pursuant to the Original Loan Agreement. FCC: the Federal Communications Commission or any Governmental Body succeeding to its functions. FCC Licenses: the Licenses issued by the FCC. Fixed Charges: for any period, the sum for such period of (i) Interest Expense, (ii) taxes paid, (iii) the amount actually paid during such period for Capital Expenditures, whether or not under the definition of "Capital Expenditures" such Capital Expenditure were deemed to be made during such period and (iv) principal payments on the Loans required pursuant to subsections 2.7.1 and 2.8.1. Four-Quarter Period: the four quarters ending on the date indicated. Funding Date: the date of disbursement of an Additional Loan. 12 22 GAAP: generally accepted accounting principles as in effect from time to time, which shall include but shall not be limited to the official interpretations thereof by the Financial Accounting Standards Board or any successor thereto. Good Funds: United States Dollars available in Federal funds to Agent at or before 12:00 P.M., Chicago time, on a Business Day. Governmental Body: any foreign, federal, state, municipal or other government, or any department, commission, board, bureau, agency, public authority or instrumentality thereof or any court or arbitrator. Guarantor: Citadel Communications Corporation, a Nevada corporation. Guarantor's Obligations: any and all Indebtedness, due or to become due, now existing or howsoever arising of Guarantor to Lenders pursuant to the Amended and Restated Guaranty. Hazardous Materials: any hazardous, toxic, dangerous or other waste, substance or material defined as such in, regulated by or for purposes of any Environmental Law. Incipient Default: any event or condition which, with the giving of notice or the lapse of time, or both, would become an Event of Default. Indebtedness: all liabilities, obligations and reserves, contingent or otherwise, which, in accordance with GAAP, would be reflected as a liability on a balance sheet or would be required to be disclosed in a financial statement, including, without duplication: (i) Indebtedness for Borrowed Money, (ii) obligations secured by any Lien upon Property, except to the extent such obligation exceeds the value of the Property which is subject to such Lien and is a non-recourse obligation, (iii) the Reimbursement Obligation, (iv) guaranties, letters of credit and other contingent obligations, and (v) liabilities in respect of unfunded vested benefits under any Pension Plan or in respect of withdrawal liabilities incurred under ERISA by CBC or any ERISA Affiliate to any Multiemployer Plan. Indebtedness for Borrowed Money: without duplication, all Indebtedness (i) in respect of money borrowed, (ii) evidenced by a note, debenture or other like written obligation to pay money (including, without limitation, all of Borrowers' Obligations, the Senior Subordinated Indebtedness, the Exchangeable Debenture Indebtedness, and Permitted Senior Indebtedness), (iii) in respect of rent or hire of Property under Capitalized Leases or for the deferred purchase price of Property, (iv) in respect of obligations under conditional sales or other title retention agreements, and (v) all guaranties of any or all of the foregoing. Initial Loan Instruments: collectively, the following documents: 13 23 (i) Loan Agreement; (ii) Notes; (iii) Amended and Restated Assignment of Leases; (iv) Assignment of Acquisition Instruments with respect to Tele-Media Acquisition and Seller's Consent; (v) Amended and Restated Security Agreement (CBC); (vi) Amended and Restated Security Agreement (CLI); (vii) Amended and Restated Trademark Security Agreement; (viii) a Mortgage on each parcel of DAC Real Estate; (ix) Amended and Restated Guaranty; (x) Amended and Restated Stock Pledge Agreement (CBC Common Stock); (xi) Stock Pledge Agreement (Tele-Media Capital Stock); (xii) UCC Financing Statements to cover the Property (other than real estate) acquired by CBC pursuant to the DAC Merger and the Property (other than real estate) to be acquired by CBC upon the consummation of the Tele-Media Merger; (xiii) Closing Certificate; (xiv) Solvency Certificate; (xv) Environmental Certificate; (xvi) Amended and Restated Contribution Agreement; and (xvii) such other instruments and documents as Agent or Lenders may require. Instruments: collectively, the (i) Loan Instruments, (ii) Amended and Restated Use Agreement, (iii) Senior Subordinated Debt Documents, (iv) Exchangeable Preferred Stock Instruments, (v) DAC Merger Instruments, (vi) DLI Merger Instruments, (vii) Tele-Media Acquisition Instruments and (viii) Tele-Media Merger Instruments. 14 24 Interest Expense: (i) for any period, the interest accrued during such period on the Indebtedness for Borrowed Money of Borrowers, excluding the Existing Prepayment Premium and (ii) in calculating Interest Expense for any period from January 1, 1997 to the Closing Date, the interest on any Indebtedness for Borrower Money of DAC shall, without duplication, be included. Interest Hedge Contract: an interest rate swap agreement between Union Bank of California, N.A. and CBC dated December 12, 1996. Interest Period: a period (i) commencing (A) on the applicable Funding Date, if Borrowers prior thereto have elected pursuant to subsection 2.6.1 to have all or a portion of the Loans to be disbursed on such date bear interest from such date at a LIBOR Rate, (B) with respect to the conversion of all or a portion of the Base Rate Portion to a LIBOR Loan, on the Business Day specified by Borrowers in the applicable LIBOR Election Notice and (C) with respect to the continuation as a LIBOR Loan of all or a portion of a then existing LIBOR Loan after the expiration of the Interest Period applicable to such existing LIBOR Loan, on the day after the last day of the Interest Period applicable to such existing LIBOR Loan, and (ii) ending 30, 90 or 180 days thereafter, as selected by Borrower in its LIBOR Election Notice; provided, however: (1) if any Interest Period otherwise would end on a day that is not a Business Day, such Interest Period shall end on the next succeeding Business Day, unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; and (2) any Interest Period that otherwise would extend beyond the latest possible Maturity Date shall end on such date. Interest Rate Determination Date: the date for determining a LIBOR Rate, which date shall be two Business Days prior to the date of commencement of the applicable Interest Period. IPO: the unconsummated 1996 initial public offering of the securities of Guarantor. IPO Expenses: all legal and accounting expenses and all other costs and expenses directly incurred in connection with the IPO in the amount of $780,327. Issuer: the Lender which issues a Permitted Letter of Credit. Joint Sales Agreement: an agreement in which (i) two or more licensees of Stations join to market air time or (ii) a licensee of a Station sells air time to a broker. 15 25 JSA Agreements: the Joint Sales Agreements described on EXHIBIT 1P. JSA Stations: the Stations listed on EXHIBIT 1Q. Key Man Life Insurance: the life insurance on the life of Wilson required pursuant to subsection 6.6.1. KUBL Adjustment: the addition to Operating Cash Flow of $58,887 for June, 1996 and deduction from Operating Cash Flow of $63,157 for July, 1996, $58,337 for August, 1996, $63,550 for September, 1996 and $33,473 for October, 1996. Landlord: each lessor under each Lease. Landlord's Consent: a consent from each Landlord in form and substance reasonably satisfactory to Agent. L/C Expiration Date: the earlier of (i) September 30, 2002 or (ii) the date on which the payment of Borrowers' Obligations are accelerated. L/C Guaranty: a guaranty in the form of EXHIBIT 1R pursuant to which each Lender, in proportion to its Ratable Share, guarantees the obligations of Borrowers to an Issuer. L/C Guaranty Obligations: the obligations of Lenders pursuant to L/C Guaranties. L/C Issuance Date: the date as of which the applicable L/C Guaranty is to be delivered to the Issuer, as set forth in the applicable notice referred to in subsection 2.3(d). Leases: the leases of real property described in EXHIBIT 1S. Leasehold Property: any real estate which is the subject of a Lease under which CBC is the lessee. Lender Addition Agreement: an agreement executed by a Lender and an Assignee pursuant to which a Loan Assignment is made. Lenders: the financial institutions named on Schedule I and each Assignee thereof. Letter of Credit Fee: as defined in subsection 2.5.6. Letter of Credit Fund: as defined in Section 2.10. LIBOR Election Notice: a notice by Borrowers to Agent to have a portion of the Principal Balance bear interest at a LIBOR Rate, in the form of EXHIBIT 1T. 16 26 LIBOR Loan: each portion of the Principal Balance which bears interest determined by reference to a LIBOR Rate. LIBOR Rate: for each Interest Period, a rate of interest equal to (i) the rate per annum determined by Agent by dividing (the resulting quotient rounded upward to the nearest 1/16 of 1% per annum) (i) the rate of interest determined by Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the average of the London interbank offered rates set forth on the "LIBO" page of the Bloomberg Service (or an appropriate successor), or if Bloomberg Service or its successor ceases to provide such quotes, a comparable replacement determined by Agent on the Interest Rate Determination Date for an amount comparable to the requested LIBOR Loan and having a maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Requirements. The LIBOR Rate may also be expressed by the following formula: Average of London interbank offered rates on LIBO page of Bloomberg Service or appropriate successor ----------------------------------------- LIBOR Rate = 1.00 - Eurocurrency Reserve Requirements The LIBOR Rate shall be adjusted with respect to any LIBOR Loan outstanding on the effective date of any change in the Eurocurrency Reserve Requirements as of such effective date. Agent shall give prompt notice to Borrowers of the LIBOR Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error. Licenses: all licenses, permits, consents, approvals and authority issued by any Governmental Body which authorize a Person to operate a Station. Lien: any mortgage, pledge, assignment, lien, charge, encumbrance or security interest of any kind, or the interest of a vendor or lessor under any conditional sale agreement, Capitalized Lease or other title retention agreement. LMA: a local marketing arrangement, sale agreement, time brokerage agreement, management agreement or similar arrangement pursuant to which a Person, subject to customary preemption rights and other limitations (i) obtains the right to sell at least a majority of the advertising inventory of a radio station of which another Person is the licensee, (ii) obtains the right to exhibit programming and sell advertising time during a majority of the air time of a Station or (iii) manages the selling operations of a Station with respect to at least a majority of the advertising inventory of such Station. LMA Agreements: each LMA described on EXHIBIT 1U. LMA Stations: the Stations described on EXHIBIT 1V. 17 27 Loan Agreement: this Amended and Restated Loan Agreement and any amendments or supplements hereto. Loan Assignment: as defined in subsection 10.1.1. Loan Fees: collectively, the Agent's Fee, the Amendment Fee, the Unused Commitment Fee and the Letter of Credit Fees. Loan Instruments: collectively, the (i) Initial Loan Instruments (ii) the Existing Loan Instruments, (iii) the Tele-Media Loan Instruments and (iv) all Additional Loan Instruments. Loan Year: a period of time from the Original Closing Date or any anniversary of the Original Closing Date to the immediately succeeding anniversary of the Original Closing Date. Loans: the Revolving Loans and the Term Loan which shall be consolidated into a revolving loan on the Closing Date and the Additional Loans. Market Cash Flow: for any Broadcast Market for any period: (i) the revenues of the Stations of CBC in such Broadcast Market for such period, exclusive of revenues from Trade Out Transactions, minus (ii) the expenses of operating such Stations for such period, exclusive of (A) expenses incurred in connection with Trade Out Transactions, (B) Corporate Overhead, (C) Debt Service, (D) non-cash compensation to employees of Borrowers and (E) depreciation and other non-cash charges. Material Adverse Effect: (i) a material adverse effect upon the business, operations, Property, prospects, profits or condition (financial or otherwise) of the Obligors, taken as a whole, or (ii) a material impairment of the ability of any such Person to perform its material obligations under any Loan Instrument to which it is a party or of Agent or any Lender to enforce or collect any of Borrowers' Obligations or Guarantor's Obligations. Maturity Date: the earlier of (i) September 30, 2003 or (ii) the date on which the payment of Borrowers' Obligations are accelerated. Maximum Rate: as defined in subsection 2.5.1(d). Mortgage: a mortgage or deed of trust to be executed by CBC in favor of Agent upon each parcel of Real Estate owned by CBC, in form and substance reasonably acceptable to Agent. Multiemployer Plan: any multiemployer plan as defined pursuant to Section 3(37) of ERISA to which any Obligor or any ERISA Affiliate makes, or accrues an obligation 18 28 to make contributions, or has made, or been obligated to make, contributions within the preceding six years. Net Fee: As defined in subsection 2.5.6. Net Sale Proceeds: the proceeds of any Permitted Disposition less (i) the reasonable costs and expenses of any such Permitted Disposition and (ii) such taxes as the Required Lenders reasonably determine will be actually paid by the Obligors as a result of such Permitted Disposition. Notes: the promissory notes executed by Borrowers payable to the order of each Lender, dated as of the Closing Date, in the amount of such Lender's Loan Commitment, in form attached as EXHIBIT 1W, and any notes issued in substitution thereof pursuant to subsection 10.1.4. Note Indenture: the Indenture dated as of July 1, 1997 among Borrowers and The Bank of New York, as trustee, relating to the issuance of the Senior Subordinated Notes. Notes Registration Rights Agreement: the Registration Rights Agreement entered into on or prior to the Closing Date among Borrowers and the initial purchasers of the Subordinated Notes. Obligor: any of the Obligors. Obligors: collectively, the Borrowers and Guarantor. Operating Agreement: any tower site lease, tower license, office lease, studio lease, equipment lease, network affiliation agreement, programming agreement, time brokerage agreement or other similar agreement relating to the operation of a Station. Operating Cash Flow: for any period, the net income of a CBC, a Station or a Related Business, as applicable, for such period: (i) plus the sum of the following (without duplication), to the extent deducted in determining such net income for such period: (A) losses from sales, transactions, exchanges and other dispositions of Property not in the ordinary course of business; (B) interest, fees or other charges paid or accrued on Indebtedness, including, without limitation, interest on Capitalized Leases that is imputed in accordance with GAAP; (C) depreciation and amortization; 19 29 (D) income taxes which are accrued but not paid during such period; (E) non-cash expenses incurred in connection with Trade Out Transactions; (F) for the year 1996, the KUBL Adjustment and the IPO Expenses; (G) extraordinary and non-recurring losses not in the ordinary course of business; (H) casualty losses; and (I) any other non-cash item deducted in determining such net income; (ii) minus the sum of the following (without duplication), to the extent included in determining such net income for such period: (A) revenue received in connection with Trade Out Transactions; (B) proceeds of any insurance, other than business interruption insurance; and (C) gains from sales, transactions, exchanges and other dispositions of Property not in the ordinary course of business. Operating Lease: any lease which, under GAAP, is not required to be capitalized. Original Borrowers: CBC, DAC, CLI and DLI. Original Closing Date: October 9, 1996. Original Loan Agreement: as defined in the Preliminary Statement. Participant: any Person to which a Lender sells or assigns a Participation. Participation: a sale or an assignment by a Lender of a participating interest in (i) any portion of such Lender's interest in Borrowers' Obligations and (ii) any of such Lender's other rights under any of the Loan Instruments. Participation Agreement: an agreement executed by a Lender and a Participant pursuant to Section 10.2. 20 30 PBGC: the Pension Benefit Guaranty Corporation or any Governmental Body succeeding to the functions thereof. Pension Plan: any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Part 3 of Title I of ERISA, Title IV of ERISA, or Section 412 of the Code and which (i) is maintained for employees of any Obligor or any ERISA Affiliate, or (ii) has at any time within the preceding six years been maintained for the employees of any Obligor or any of their current or former ERISA Affiliates. Permitted Acquisitions: an Acquisition (i) after the consummation of which the Adjusted Leverage Ratio will not exceed the Applicable Ratio as calculated as of the last day of the most recent month preceding the closing date of such Acquisition for which Borrowers have delivered to Lenders the financial statements and other information reasonably necessary to enable Lenders to make such calculation, provided that such delivery shall occur not less than 30 days prior to such closing date, (ii) if such Acquisition is of a Related Business, the aggregate purchase price for such Acquisition and any prior Acquisitions of Related Business Assets shall not exceed $5,000,000, (iii) if such Acquisition is of one or more Stations, either directly or as a result of an Acquisition Merger, such Acquisition or Acquisition Merger would not result in more than 25% of the aggregate of the Operating Cash Flow of CBC Stations to thereafter be derived from Small Markets, as determined by Agent in its reasonable discretion and (iv) if the conditions of Section 4.3 are satisfied. Permitted Dispositions: a Disposition after the consummation of which the Adjusted Leverage Ratio calculated as of the last day of the second month preceding the date of the projected closing of such Disposition would not exceed the Applicable Ratio on such date. Permitted Letter of Credit: An irrevocable stand-by letter of credit (i) issued by an Issuer for the account of Borrowers, after Borrowers have satisfied the requirements of Section 2.3 for the issuance of an L/C Guaranty with respect thereto and subject to the limitations of Section 2.2, (ii) to be used solely to secure the obligations of Borrowers pursuant to agreements entered into by Borrowers with respect to a proposed Acquisition or for such other purposes as shall be approved by Agent and (iii) expiring no later than one year after the applicable L/C Issuance Date. Permitted Liens: any of the following Liens: (i) the Security Interests; (ii) the Permitted Senior Indebtedness Liens; (iii) Liens for taxes or assessments and similar charges, which either are (A) not delinquent or (B) being contested diligently and in good faith by 21 31 appropriate proceedings, and as to which CBC has set aside reserves on its books which are required by GAAP; (iv) statutory Liens, such as mechanic's, material-man's, warehouseman's, carrier's or other like Liens, incurred in good faith in the ordinary course of business, provided that the underlying obligations relating to such Liens are paid in the ordinary course of business, or are being contested diligently and in good faith by appropriate proceedings and as to which CBC has set aside reserves on its books required by GAAP, or the payment of which obligations are otherwise secured in a manner satisfactory to Required Lenders; (v) zoning ordinances, easements, licenses, reservations, provisions, covenants, conditions, waivers or restrictions on the use of Property and other title exceptions, in each case, that are reasonably acceptable to Required Lenders; (vi) Liens in respect of appeal bonds, judgments or awards with respect to which no Event of Default would exist pursuant to subsection 8.1.6; (vii) Liens to secure payment of insurance premiums (A) to be paid in accordance with applicable laws in the ordinary course of business relating to payment of worker's compensation, or (B) that are required for the participation in any fund in connection with worker's compensation, unemployment insurance, old-age pensions or other social security programs; (viii) Liens to secure Indebtedness (other than Indebtedness for Borrowed Money) not in excess of $500,000 at any one time; (ix) banker's Liens in respect to deposit accounts; (x) statutory landlords' Liens and rights of tenants under leases and subleases granted by CBC to others, in each case not interfering in any material respect with the business of CBC and arising in the ordinary course of business; (xi) deposits to secure the performance of bids, trade contracts, government contracts, operating leases, statutory obligations, surety and appeal bonds, performance and return-of-money bonds or to secure liabilities to insurance carriers under insurance or self-insurance arrangements and other obligations of a like nature, so long as, in each case with respect to this clause (xi), such Liens do not secure obligations constituting Indebtedness and are incurred in the ordinary course of business; and 22 32 (xii) Liens of any seller which is a party to a proposed Acquisition by CBC with respect to any escrow deposits to be maintained in connection with such proposed Acquisition. Permitted Prior Liens: the following: (i) the Permitted Senior Indebtedness Liens; (ii) the Permitted Liens described in clauses (iii) and (iv) of such definition that are accorded priority to the Security Interests by law; and (iii) the Permitted Liens described in clauses (vi), (vii), (viii), (x), (xi) and (xii) of such definition, subject to the limitations set forth therein. Permitted Senior Indebtedness: Indebtedness, other than Borrowers' Obligations, incurred to purchase tangible personal property or Indebtedness incurred to lease tangible personal property pursuant to Capitalized Leases, provided that (i) the amount of such Indebtedness at any time outstanding shall not exceed $750,000 and (ii) no Event of Default will exist after giving effect to the incurrence of any such Indebtedness. Permitted Senior Indebtedness Liens: Liens that secure Permitted Senior Indebtedness, provided that (i) such Liens attach only to the Property so purchased or leased and (ii) Agent is granted a perfected Lien upon such Property, subject only to Permitted Prior Liens. Person: any individual, firm, corporation, limited liability company or partnership, business enterprise, trust, association, joint venture, partnership, Governmental Body or other entity, whether acting in an individual, fiduciary or other capacity. Preferred Stock Registration Rights Agreement: the Preferred Stock Registration Rights Agreement entered into on or prior to the Closing Date among the Borrowers and the initial purchasers of the Exchangeable Preferred Stock. Principal Balance: the unpaid principal balance of the Loans or any specified portion thereof outstanding from time to time. Prohibited Amendment. any proposed amendment after the Closing Date to the Exchangeable Preferred Stock Instruments, the Senior Subordinated Debt Instruments or the articles of incorporation of either Borrower which adversely affects the Lenders, including: (i) As to the Exchangeable Preferred Stock Instruments, any amendment which: 23 33 (A) changes the voting rights or the conditions under which such rights may be exercised by the holders of the Exchangeable Preferred Stock; (B) increases the dividend or any other payment payable to such holders, increases the rate of interest or the amount of any other payment payable with respect to the Exchangeable Debentures, or accelerates the time of payment of any such dividend, interest or other payment; (C) has the effect of making the covenants and restrictions set forth in the Exchangeable Preferred Stock Instruments more restrictive; (D) has the effect of increasing the remedies of the holders of the Exchangeable Preferred Stock or the Exchangeable Debentures upon the occurrence of an event of default under the Exchangeable Preferred Stock Instruments; or (E) alters the provisions regarding subordination or notice to the Agent of acceleration set forth therein; (ii) As to the Senior Subordinated Debt Instruments, any amendment which: (A) increases the rate of interest or the amount of any other payment payable with respect to the Senior Subordinated Notes or accelerates the time of any such payment; (B) has the effect of making the covenants and restrictions set forth in the Senior Subordinated Instruments more restrictive; (C) has the effect of increasing the remedies of the holders of the Senior Subordinated Notes or the trustee under the Notes Indenture upon the occurrence of an event of default under the Senior Subordinated Debt Instruments; or (D) alters the provisions regarding subordination or notice to the Agent of acceleration set forth therein. Property: all types of real, personal or mixed property and all types of tangible or intangible property. Qualified Depository: a member bank of the Federal Reserve System having a combined capital and surplus of at least $100,000,000. 24 34 Ratable Share: at any time the proportion that a Lender's Commitment bears to the total Commitments of all Lenders at such time. Real Estate: the real property owned by CBC described on EXHIBIT 1X. Register: as defined in subsection 10.1.3. Reimbursement Obligation: as defined in subsection 2.2.2. Related Business: any business ancillary to the ownership or operation of a Station or any business in which the majority of the revenues are derived from the sale of advertising. Related Business Assets: all Property used in the operation of a Related Business. Required Lenders: at any time, two or more Lenders who hold not less than 66-2/3% of the Ratable Shares of all Lenders. Remaining Excess Cash Flow: for any period, any Excess Cash Flow remaining after any payment due for such period pursuant to subsection 2.7.2(a) is paid to Agent. Revolving Loan: as defined in the Original Loan Agreement. SEC: the Securities and Exchange Commission and any Governmental Body succeeding to any of its functions. Securities Act: the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the SEC promulgated thereunder, as in effect from time to time. Security Interests: the Liens in the Collateral granted to Agent pursuant to the Loan Instruments. Seller's Consent: a consent to an Assignment of Acquisition Instruments, in form and substance reasonably satisfactory to Agent, to be executed by the Seller of the Property which is the subject of a Permitted Acquisition. Seller Debt: the unsecured Indebtedness in the original principal amount of $160,000 assumed by CBC in connection with the Tele-Media Merger. Senior Subordinated Debt Instruments: collectively, the Note Indenture, the Notes Registration Rights Agreement, the form of the Senior Subordinated Notes to be issued by CBC. 25 35 Senior Subordinated Indebtedness: the Indebtedness in the principal amount of $101,000,000 evidenced by the Senior Subordinated Notes. Senior Subordinated Notes: the Senior Subordinate Notes due 2007 in the aggregate principal amount of $ issued by CBC on the Closing Date and the senior subordinated notes issued in exchange therefor pursuant to the Notes Registration Rights Agreement. Small Markets: Areas of "Dominant Influence" of size 150 or smaller as determined in accordance with criteria established by The Arbitron Company. Solvency Certificate: a Solvency Certificate executed by the Chief Financial Officer in form and substance reasonably acceptable to Agent. Stated Rate: as defined in subsection 2.5.1(d). Station: a radio station operated to transmit over the airwaves radio signals within a geographic area for the purpose of providing commercial broadcasting radio programming. Station Assets: all Property, other than the FCC Licenses, used in operation of a Station. Stock Pledge Agreement (CLI Capital Stock): the Stock Pledge Agreement dated October 9, 1996 executed by CBC relating to the CLI Capital Stock. Stock Pledge Agreement (Tele-Media Capital Stock): the Stock Pledge Agreement executed by CBC in form and substance satisfactory to Agent relating to the Tele-Media Capital Stock. Tele-Media: Tele-Media Broadcasting Company, a Delaware corporation. Tele-Media Acquisition: the Acquisition by CBC of all of the Tele-Media Capital Stock pursuant to the Tele-Media Acquisition Instruments following the (i) merger of Tele-Media Broadcasting Holding Corporation and Tele-Media Broadcasting Company of Centre Region into Tele-Media, (ii) dissolution and liquidation of all Subsidiary Partnerships (as defined in the Tele-Media Acquisition Instruments) and (iii) acquisition by Tele-Media of the Tele-Media Property. Tele-Media Acquisition Instruments: the Agreement of Purchase and Sale dated March 28, 1997 among Tele-Media, Tele-Media Broadcasting Company of Centre Region, Tele-Media Broadcasting Holding Company, Robert E. Tudek, Everett I. Mundy and Borrowers and documents executed pursuant thereto. 26 36 Tele-Media Capital Stock: all of the issued and outstanding capital stock, warrants, options and other equity interests of Tele-Media. Tele-Media Leases: each Lease described in EXHIBIT 1Y. Tele-Media Licenses: the FCC Licenses used to operate the Tele-Media Stations. Tele-Media Loan Instruments: the documents to be executed and delivered by CBC to Agent pursuant to Section 4.2. Tele-Media Merger: the merger of Tele-Media into CBC with CBC being the surviving corporation. Tele-Media Merger Instruments: the articles of merger and all other documents executed and/or filed in connection with the Tele-Media Merger. Tele-Media Property: all of the Purchased Assets, except the Excluded Asset Schedule (each as defined in the Tele-Media Acquisition Instruments) and the Tele-Media Licenses. Tele-Media Real Estate: each parcel of Real Estate described in EXHIBIT 1Z(i). Tele-Media Stations: the Stations described in EXHIBIT 1Z(ii). Term Loan: as defined in the Original Loan Agreement. Termination Event: (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder; or (ii) the withdrawal of any Obligor or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2); or (iii) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA; or (iv) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan by the PBGC; or (v) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (vi) the partial or complete withdrawal of any Obligor or any ERISA Affiliate from a Multiemployer Plan; or (vii) the imposition of a lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (viii) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA; or (ix) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA. 27 37 Total Debt: at any time, the aggregate (i) principal amount of the Indebtedness for Borrowed Money of Borrowers and (ii) the outstanding L/C Guaranty Obligations. Total Leverage Ratio: the ratio of the Total Debt as of the last day of any quarter to the Adjusted Operating Cash Flow for the Four-Quarter Period ending on such day. Trade Out Transaction: an exchange of advertising time for non-cash consideration, such as goods, services or program material. UCC Financing Statements: Uniform Commercial Code financing statements as defined in the Uniform Commercial Code. Unused Commitment Fee: as defined in subsection 2.5.5. Wilson: Lawrence R. Wilson Window Period: with respect to each Permitted Disposition, a period of 180 days following the date of receipt by Lenders of the Net Sale Proceeds thereof. 1.2 TIME PERIODS. In this Loan Agreement and the other Loan Instruments, in the computation of periods of time from a specified date to a later specified date, (i) the word "from" means "from and including," (ii) the words "to" and "until" each mean "to, but excluding" and (iii) the words "through," "end of" and "expiration" each mean "through and including." Unless otherwise specified, all references in this Loan Agreement and the other Loan Instruments to (i) a "month" shall be deemed to refer to a calendar month, (ii) a "quarter" shall be deemed to refer to a calendar quarter and (iii) a "year" shall be deemed to refer to a calendar year. 1.3 ACCOUNTING TERMS AND DETERMINATIONS. All accounting terms not specifically defined herein shall be construed, all accounting determinations and all computations hereunder shall be made and all financial statements required to be delivered pursuant hereto shall be prepared in accordance with GAAP as in effect at the time of such interpretation, determination or preparation, as applicable. In the event that any Accounting Changes (as hereinafter defined) occur and such changes result in a change in the method of calculation of financial covenants, standards or terms contained in this Loan Agreement, then Borrowers and Agent agree to enter into negotiations to amend such provisions of this Loan Agreement so as to reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of Borrowers shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such amendments are agreed upon, all determination shall be based upon GAAP prior to such Accounting Changes. For purposes hereof, "Accounting Changes" shall mean (i) changes in generally accepted accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or any successor thereto) or other 28 38 appropriate authoritative body and (ii) changes in accounting principles as approved by the Accountants. 1.4 REFERENCES. All references in this Loan Agreement to "Article," "Section," "subsection," "subparagraph," "clause" or "Exhibit," unless otherwise indicated, shall be deemed to refer to an Article, Section, subsection, subparagraph, clause or Exhibit, as applicable, of this Loan Agreement. 1.5 BORROWERS' KNOWLEDGE. Any statements, representations or warranties that are based upon the best knowledge of a Borrower or an officer thereof shall be deemed to have been made after due inquiry by such Borrower or such officer, as applicable, with respect to the matter in question. 1.6 BENEFIT OF LENDERS. All Liens granted to Agent and all payments made to Agent pursuant to the Loan Instruments, except payments made of the Agent's Fee and the Existing Prepayment Premium, shall be deemed to be granted and made, as applicable, for the benefit of the Lenders. ARTICLE II LOANS AND TERMS OF PAYMENT 2.1 EXISTING LOANS; OUTSTANDING L/C GUARANTY OBLIGATIONS. On the Closing Date (i) the Revolving Loan and Term Loan shall be consolidated into the Loans and Borrowers shall make a principal payment to Agent of $39,000,000, thereby reducing the Principal Balance to $50,584,043 and (ii) the aggregate of the outstanding L/C Guaranty Obligations is $1,500,000. 2.2 ADDITIONAL LOANS; ISSUANCE OF L/C GUARANTIES. 2.2.1 OBLIGATION OF LENDERS. Subject to the conditions set forth in Section 2.3, each Lender severally agrees to make Additional Loans to Borrowers and to issue L/C Guaranties in behalf of Borrowers from time to time on or after the Closing Date to the Maturity Date, in the case of Additional Loans, and to the L/C Expiration Date, in the case of L/C Guaranties (i) except Additional Loans shall be made pursuant to subsection 2.4.3 after the Maturity Date (by acceleration) to pay L/C Guaranty Obligations incurred pursuant to L/C Guaranties issued prior to the L/C Expiration Date and (ii) provided at no time shall the aggregate amount of (A) such Lender's Loans and L/C Guaranties exceed such Lender's Commitment and the L/C Obligations of all Lenders exceed $5,000,000. The failure of any Lender to perform its obligations hereunder or under any other Loan Instrument shall not affect the obligations of Borrowers under this Loan Agreement or any other Loan Instrument nor shall any other Lender or Agent be liable for the failure of such Lender to perform its obligations hereunder or under such other Loan Instrument. 29 39 2.2.2 OBLIGATIONS OF BORROWERS. Borrowers hereby agree to protect, indemnify and save each Lender harmless from and against any and all claims, demands, liabilities, damages, costs and expenses (including reasonable attorneys fees) such Lender may incur or be subject to as a consequence, direct or indirect, of the issuance of any L/C Guaranty (the "Reimbursement Obligation"). 2.3 CONDITIONS TO ADDITIONAL LOANS; L/C GUARANTIES. The obligation of each Lender to make any Additional Loan or issue an L/C Guaranty shall be subject to the satisfaction of each of the following conditions: (a) no Event of Default shall exist after giving effect to the disbursement of such Additional Loan or the issuance of such L/C Guaranty; (b) each Additional Loan shall be in a minimum amount of $2,000,000 and integral multiples of $500,000 in excess of that amount; (c) if an Additional Loan is requested, Agent shall have received a Notice of Borrowing/Disbursement Request from Borrowers in the form of EXHIBIT 2.3(c) with respect to each requested advance no later than 12:00 p.m., Chicago time, at least two Business Days in advance of the proposed Funding Date with respect to such advance, which Funding Date shall be on a Business Day; (d) if Lenders are requested to issue an L/C Guaranty, Agent shall have received a Notice of Issuance of L/C Guaranties from Borrowers in the form of EXHIBIT 2.3(d) with respect to each such request not later than 12:00 noon Chicago time at least three Business Days in advance of the proposed L/C Issuance Date, which L/C Issuance Date shall be a Business Day. (e) if the proceeds of the Additional Loan are to be used to consummate an Acquisition, the terms and conditions of Section 4.3 shall have been satisfied; (f) the Adjusted Total Leverage Ratio shall not exceed the Applicable Ratio as calculated as of the last day of the most recent month preceding the applicable Funding Date or L/C Issuance Date for which Borrowers have delivered to Lenders the financial statements and other information reasonably necessary to enable Lenders to make such calculation, provided that such delivery shall occur not less than 15 days prior to such Funding Date or L/C Issuance Date, as applicable; (g) on the applicable Funding Date or L/C Issuance Date the representations and warranties of each Obligor set forth in the Loan Instruments to which such Obligor is a party shall be true and correct when made and at and as of the time of such Funding Date or L/C Issuance Date, except to the extent that such representations and warranties expressly relate to an earlier date; 30 40 (h) the terms and conditions of Section 4.2 shall have been satisfied; and (i) a certificate executed by the Chief Financial Officer that the Borrowers are not prohibited by the Senior Subordinated Debt Instruments from incurring the Indebtedness in connection with such Additional Loan or L/C Guaranty, as applicable. 2.4 PROCEDURES FOR ADDITIONAL LOANS AND ISSUANCE OF L/C GUARANTIES. 2.4.1 MAKING ADDITIONAL LOANS OTHER THAN IN CONNECTION WITH L/C GUARANTIES. Promptly after receipt by Agent of a request from Borrowers for an Additional Loan, if the applicable conditions of Section 2.3 have been satisfied, subject to the limitations set forth in subsection 2.2.1, Agent shall notify each Lender of Agent's receipt of such request and the satisfaction of such conditions, specifying: (i) the proposed Funding Date, (ii) the amount of such Additional Loan and the applicable Interest Period, if any, and (iii) the apportionment among Lenders of such Additional Loan. Each Lender shall remit its Ratable Share of such Additional Loan in Good Funds to Agent by 10:00 a.m., Chicago time, on the Funding Date and Agent shall thereupon remit the funds received by Agent to or at the direction of Borrowers. 2.4.2 L/C GUARANTIES. Promptly after receipt by Agent of a request from Borrowers for the issuance of an L/C Guaranty, if the applicable conditions set forth in Section 2.3 have been satisfied, subject to the limitations set forth in subsection 2.2.1, Agent shall notify each Lender of Agent's receipt of such request and the satisfaction of such conditions, specifying (i) the proposed L/C Issuance Date, (ii) the amount of such L/C Guaranty, and (iii) the apportionment among Lenders of the obligations under such L/C Guaranty in accordance with their Ratable Shares. Each Lender shall execute such L/C Guaranty and deliver such L/C Guaranty to Agent in Chicago, not later than 11:00 a.m. Chicago time, one Business Day preceding the applicable L/C Issuance Date and Agent shall thereupon deliver such L/C Guaranty to the applicable Issuer. 2.4.3 ADDITIONAL LOANS IN CONNECTION WITH L/C GUARANTIES. Promptly after receipt by Agent from an Issuer of any demand for payment of any L/C Guaranty Agent shall notify each Lender of such demand, specifying (i) the proposed Funding Date, (ii) the apportionment among Lenders of the L/C Guaranty Obligations with respect to such L/C Guaranty and (iii) the Interest Period, if any, applicable to the Additional Loan to be made by Lenders to satisfy such L/C Guaranty Obligations. Each Lender shall remit its Ratable Share of such L/C Guaranty Obligations in Good Funds to Agent by 10:00 a.m. Chicago time on the Funding Date and each such Lender shall be deemed to have made an Additional Loan to Borrowers on such date in the amount remitted. Agent shall on the Funding Date remit the funds received by Agent to the applicable Issuer in payment of such L/C Guaranty Obligations. 31 41 2.5 INTEREST; DEFAULT RATE, LATE CHARGES, LOAN FEES AND AGENT'S FEES. 2.5.1 INTEREST. (A) INTEREST RATE. Except as provided in subparagraph (c) below, the Base Rate Portion shall bear interest at the Base Rate in effect from time to time plus the Applicable Margin and each LIBOR Loan shall bear interest at the applicable LIBOR Rate plus the Applicable Margin. As used in this Loan Agreement, the term "Applicable Margin" shall be determined on the first day of each quarter and shall mean with respect to the Base Rate Portion and each LIBOR Loan the percentage set forth opposite the applicable Total Leverage Ratio as calculated as of the last day of the second quarter preceding such quarter:
Total Base Rate LIBOR Loan Leverage Applicable Applicable Ratio Margin Margin -------- ---------- ---------- greater than 1.75% 2.75% or equal to 5.5 greater than or equal to 5.0 1.50% 2.50% but less than 5.5 greater than or equal to 4.5 1.00% 2.00% but less than 5.0 less than 4.5 0.50% 1.50%
(B) INTEREST PAYMENTS. Interest shall be payable quarterly in arrears on the last Business Day of each quarter commencing with the third quarter of 1997. (C) DEFAULT RATE. During a Default Rate Period, Borrowers' Obligations shall bear interest at the applicable Default Rate. (D) MAXIMUM INTEREST. Notwithstanding any provision to the contrary contained herein or in any other Loan Instrument, Lenders shall not collect a rate of interest on any obligation or liability due and owing by Borrowers to Lenders in excess of the maximum contract rate of interest permitted by applicable law ("Excess Interest"). Lenders and Borrowers agree that the interest laws of the State of Arizona govern the relationship among them, but in the event of a final 32 42 adjudication to the contrary, Borrowers shall be obligated to pay, nunc pro tunc, to Lenders only such interest as then shall be permitted by the laws of the state found to govern the contract relationship among Lenders and Borrower. If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Loan Agreement or any other Loan Instrument, then in such event (i) no Obligor shall be obligated to pay such Excess Interest, (ii) any Excess Interest collected by Lenders shall be, at Lenders' option, (A) applied to the Principal Balance or to accrued and unpaid interest not in excess of the maximum rate permitted by applicable law or (B) refunded to the payor thereof, (iii) the interest rates provided for herein (collectively, the "Stated Rate") shall be automatically reduced to the maximum rate allowed from time to time under applicable law (the "Maximum Rate") and this Loan Agreement and the other Loan Instruments, as applicable, shall be deemed to have been, and shall be, modified to reflect such reduction, and (iv) neither any Borrower nor any other Obligor shall have any action against Lenders for any damages arising out of the payment or collection of such Excess Interest; provided, however, that if at any time thereafter the Stated Rate is less than the Maximum Rate, Borrowers shall, to the extent permitted by law, continue to pay interest at the Maximum Rate until such time as the total interest received by Lenders is equal to the total interest which Lenders would have received had the Stated Rate been (but for the operation of this provision) the interest rate payable. Thereafter, the interest rate payable shall be the Stated Rate unless and until the Stated Rate again exceeds the Maximum Rate, in which event the provisions contained in this subsection 2.5.1(d) shall again apply. 2.5.2 LATE CHARGES. If a payment of principal or interest to be made pursuant to this Loan Agreement becomes past due for a period in excess of five days, Borrowers shall pay on demand to Agent a late charge of 2% of the amount of such overdue payment. 2.5.3 AMENDMENT FEE. Borrowers shall pay to Agent on the Closing Date a fee of $100,000 (the "Amendment Fee"), which shall be deemed to be fully earned upon the Closing. 2.5.4 AGENT'S FEE. Borrowers agree to pay to Agent for its own benefit a fee (the "Agent's Fee") of $50,000 for each Loan Year or any portion thereof elapsing during the period from the Closing Date through the Maturity Date. The Agent's Fee shall be deemed fully earned by Agent on the first Business Day of each Loan Year. 2.5.5 UNUSED COMMITMENT FEE. Borrowers shall pay to Agent a fee (the "Unused Commitment Fee") on the last Business Day of each quarter, commencing with the third quarter of 1997, in an amount equal to the product of the (i) (A) average outstanding Commitments for the preceding quarter, minus (B) the average of the 33 43 outstanding Principal Balance of the Loans during such preceding quarter, multiplied by (ii) 0.125%; provided, however, that such percentage shall be reduced to 0.09375% for a quarter if the Total Leverage Ratio calculated as of the last day of quarter preceding such quarter was less than 4.5. 2.5.6 LETTER OF CREDIT FEES. Borrowers shall pay a fee to each Issuer of 1.25% of the amount from time to time outstanding of each Permitted Letter of Credit issued by such Issuer (the "Letter of Credit Fee"). Letter of Credit Fees shall be payable to the applicable Issuer quarterly in arrears on the last Business Day of each quarter. The Issuer shall retain 10% of each such payment as compensation for its issuance of the applicable Permitted Letter of Credit and shall remit the balance of such payment (the "Net Fee") to Agent for distribution to Lenders pursuant to subsection 2.12.2. 2.5.7 COMPUTATION OF INTEREST, UNUSED COMMITMENT FEES AND LETTER OF CREDIT FEES. Interest, the Unused Commitment Fee and Letter of Credit Fees shall be computed on the basis of a year consisting of 360 days and charged for the actual number of days during the period for which interest or such fees are being charged. In computing interest, the Funding Date shall be included and the date of payment shall be excluded. 2.6 LIBOR LOANS. 2.6.1 ELECTION BY BORROWERS. Subject to the provisions of subsection 2.6.2 and provided no Event of Default then exists, Borrowers from time to time may elect to have all or a portion of the Principal Balance bear or continue to bear interest at a LIBOR Rate, such election to be exercised by delivery of a LIBOR Election Notice to Agent c/o Andrew J. Pluta, FINOVA Capital Corporation, 311 S. Wacker Drive, Chicago, Illinois 60606, Telecopy No. (312) 322-3533, by facsimile transmission not less than three Business Days prior to the commencement of the applicable Interest Period. Agent shall promptly thereafter send a copy of such notice to each Lender. Agent shall determine (which determination shall, absent manifest error, be presumptively correct) the LIBOR Rate applicable to the relevant LIBOR Loan on the applicable Interest Rate Determination Date and promptly shall give notice thereof to Borrowers. Agent and Lenders shall have the right without further confirmation to assume that any LIBOR Election Notice received by Agent has been given by a person duly authorized to act on behalf of Borrowers. Upon the expiration of an Interest Period the applicable LIBOR Loan shall be converted to and become part of the Base Rate Portion unless such LIBOR Loan has been continued as a LIBOR Loan in accordance with this subsection 2.6.1. If Borrowers deliver a LIBOR Election Notice to Agent and thereafter withdraw such election before it becomes effective, Borrowers shall reimburse Lenders on demand for the amount of any loss, cost and/or expense incurred by Lenders as a result of Lenders' reliance on such notice, including without limitation, any loss, cost or expense resulting from Lenders' contractual obligations in connection with the applicable Dollar deposits. 34 44 2.6.2 LIBOR LIMITATIONS. Each LIBOR Loan shall be in the amount of not less than $25,000,000 or in integral multiples of $1,000,000 in excess thereof. At no time shall more than six LIBOR Loans be in effect. 2.6.3 EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE. If, prior to the commencement of any Interest Period, the Required Lenders determine that Dollar deposits of the relevant amount for the relevant Interest Period are not available in the London Interbank Market or the rate at which such Dollar deposits are being offered will not adequately and fairly reflect the cost to the Lenders of maintaining a LIBOR Rate for such Interest Period, or that by reason of circumstances affecting such market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate applicable to such Interest Period, Agent promptly shall give notice of such determination to Borrowers and Lenders and any LIBOR Election Notice previously given by Borrowers which has not yet become effective shall be deemed to be cancelled. 2.6.4 TAX AND OTHER LAWS. In the event that by reason of any law, regulation or requirement or interpretation thereof by any Governmental Body, or the imposition of any requirement of any such Governmental Body, whether or not having the force of law, including the imposition of any reserve and/or special deposit requirement (other than reserves included in the Eurocurrency Reserve Requirements), any Lender shall be subjected to any tax, levy, impost, charge, fee, duty, deduction or withholding of any kind whatsoever (other than any tax imposed upon the total net income of such Lender) and if any such measures or any other similar measure shall result in an increase in the cost to any Lender of maintaining its share of any LIBOR Loan or in a reduction in the amount of principal or interest receivable by any Lender in respect thereof, then Borrowers shall pay to the affected Lender within 10 days after receipt of a notice from such Lender (which notice shall be accompanied by a statement in reasonable detail setting forth the basis for the calculation thereof, which calculation, in the absence of demonstrable error, shall be conclusive and binding and a copy of such notice concurrently therewith shall be delivered to Agent), an amount equal to such increased cost or reduced amount. At any time after receipt of such notice, Borrowers may convert all LIBOR Loans to the Base Rate Portion, and such conversion shall be effective three Business Days after the Agent has received notice from Borrowers of such conversion. 2.6.5 CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL. If at any time any law, treaty or regulation, or any interpretation thereof by any Governmental Body shall make it unlawful for any Lender to fund or maintain its share of any LIBOR Loan with monies obtained in the London Interbank Market, such Lender, upon the occurrence of such event, shall notify Borrower thereof (and a copy of such notice concurrently shall be delivered to Agent) and thereupon the (i) right of Borrowers to make any LIBOR Election shall be suspended for the duration of such illegality and (ii) if required by such law, regulation or interpretation, on such date as shall be specified in such notice all Interest Periods then in effect with respect to the affected Lender shall be terminated, and 35 45 thereafter all LIBOR Loans with respect to the affected Lender shall be deemed converted to the Base Rate Portion. 2.6.6 INDEMNITY. In addition to any other payments payable by Borrowers to Lenders pursuant to the Loan Instruments, Borrowers shall indemnify and reimburse each Lender on demand for any loss or expense which such Lender may sustain as a consequence of any prepayment of any LIBOR Loan prior to the expiration of the Interest Period applicable thereto and/or any failure by Borrowers to (i) make any payment when due of any amount payable with respect to any LIBOR Loan or (ii) borrow the amount set forth in any LIBOR Election Notice on the date specified therefor. 2.6.7 OPTION TO REPLACE AFFECTED LENDER. Within 15 days after receipt by Borrowers of notice from Agent or any Lender for payment of additional costs as provided in subsection 2.6.4 or for suspension pursuant to subsection 2.6.5 of Borrowers' right to have all or a portion of the Principal Balance bear interest with reference to a LIBOR Rate, Borrowers may, at their option, notify Agent and the Lender giving such notice of their intention to obtain, at Borrowers' expense, a replacement Lender for the Lender giving such notice, which replacement Lender shall be reasonably satisfactory to Agent and Borrowers. In the event Borrowers obtain such replacement Lender within 90 days following notice of their intention to do so, the Lender giving such notice shall sell and assign its Commitments to such replacement Lender, provided that Borrowers reimburse the Lender giving such notice for the increased costs for which it is entitled to reimbursement under this Loan Agreement through the date of such sale and assignment. 2.7 REDUCTIONS OF COMMITMENTS, PRINCIPAL PAYMENTS. 2.7.1 MANDATORY REDUCTIONS OF COMMITMENTS AND PRINCIPAL PAYMENTS. The Commitments shall be permanently reduced on the last Business Day of each quarter commencing with the last quarter of the year 1997 in accordance with EXHIBIT 2.7.1. On each such Business Day, Borrowers shall pay to the Agent, for application to the Principal Balance, the amount, if any, by which the aggregate of the Principal Balance and the L/C Guaranty Obligations outstanding exceeds the Commitments, as reduced on such Business Day. 2.7.2 OTHER MANDATORY REDUCTIONS OF COMMITMENTS; PREPAYMENTS OF THE LOANS. In addition to the permanent reductions in the Commitments pursuant to subsection 2.7.1, Borrowers shall make the following payments to Agent which shall be applied to the Principal Balance and permanently reduce the Commitments. (a) EXCESS CASH FLOW PAYMENTS. For each year commencing with the year 1997 with respect to which the Total Leverage Ratio as of the end of such year is 4.5 or greater, Borrowers shall pay to Agent an amount equal to the 36 46 lesser of (i) (A) if the Total Leverage Ratio as of the end of such year exceeds 5.5, then 66-2/3% of the Excess Cash Flow for such year and (B) if the Total Leverage Ratio as of the end of such year is 4.5 or greater, but less than or equal to 5.5, then 50% of the Excess Cash Flow for such year, or (ii) an amount by which the Cash Equivalents as of the last day of March following such year exceeds $5,000,000. Each such payment shall be made within 30 days after the date that Borrowers are required to deliver to Lenders the financial statements for such year pursuant to subsection 6.3.3. Each Borrower agrees that it will not take any actions primarily intended to decrease the amount payable under this subsection 2.7.2(a) in anticipation of the calculation referred to herein. (b) PROCEEDS OF KEY MAN LIFE INSURANCE. Proceeds of Key Man Life Insurance. (c) NET SALE PROCEEDS. Net Sale Proceeds, but only to the extent that such Net Sale Proceeds exceed the aggregate of the Additional Loans made for Permitted Acquisitions during the Window Period applicable to the Permitted Disposition from which such Net Sale Proceeds arose. 2.8 VOLUNTARY REDUCTIONS IN COMMITMENTS AND PREPAYMENTS; PREPAYMENT PREMIUMS. 2.8.1 VOLUNTARY REDUCTION OF COMMITMENTS. Borrowers may permanently reduce the Commitments at any time and from time to time, in whole or in part, by notice to Agent accompanied by payment to Agent of an amount equal to the excess, if any, of the aggregate of the Principal Balance and the L/C Guaranty Obligations at the time of such notice over the Commitments at such time, after giving effect to the applicable reduction. Each reduction shall be in an amount not less than $5,000,000 or multiples of $1,000,000 in excess thereof. 2.8.2 VOLUNTARY PREPAYMENTS. Borrowers may prepay (i) all or any portion of the Base Rate Portion of the Loans at any time and (ii) all of any Loan which is a LIBOR Loan on the last day of the Interest Period applicable thereto, in each case without premium or penalty, but in each case subject to the following conditions: (a) NOTICE OF PREPAYMENT; NUMBER AND AMOUNT OF PREPAYMENTS. Not less than 10 days prior to the date upon which Borrowers desire to make any voluntary prepayment of the Loans, Borrowers shall deliver to Lenders notice of their intention to prepay, which notice shall state the prepayment date, the amount of the Principal Balance to be prepaid. The amount of any partial prepayment of the Principal Balance shall be not less than $5,000,000 or multiples of $1,000,000 in excess thereof. A prepayment of the Principal Balance shall not be made more frequently than once each month. If Borrowers 37 47 deliver to Lenders a notice of prepayment and fail to make such prepayment, such notice shall be deemed to be revoked and Borrowers shall reimburse Lenders on demand in the amount of any loss, cost and/or expense incurred by Lenders as a result of Lenders' reliance on such notice, including without limitation, any loss, cost or expense resulting from Lenders' contractual obligations in connection with the reinvestment of the amount indicated in such notice of prepayment. (b) ADDITIONAL PAYMENTS. Concurrently with any prepayment in full of the Principal Balance pursuant to this subsection 2.8.2, Borrowers shall pay to Agent all of the other of Borrowers' Obligations. 2.8.3 PREMIUMS. No prepayment premium or other charge shall be payable with respect to any payments or prepayments of Borrowers' Obligations, except (i) as provided in subsection 2.6.6 and (ii) the Existing Prepayment Premium. 2.9 PAYMENT AT MATURITY. All of Borrower's Obligations not previously paid shall be due and payable on the Maturity Date. 2.10 LETTER OF CREDIT FUND. To the extent that any payment of Borrowers' Obligations includes payment of the Reimbursement Obligation with respect to L/C Guaranty Obligations outstanding on the date of such payment, Agent shall deposit in a segregated interest bearing account selected by and under the control of Agent an amount equal to such payment of such Reimbursement Obligation (the "Letter of Credit Fund"). The Letter of Credit Fund shall be used to make any payments required to be made to any Issuer with respect to such L/C Guaranty Obligations. Any funds remaining on deposit in the Letter of Credit Fund, including earnings thereon, shall be remitted to Borrower after all of such L/C Guaranty Obligations have been satisfied. 2.11 PAYMENTS AFTER EVENT OF DEFAULT. All payments received by Lenders during the existence of an Event of Default shall be applied in accordance with Section 8.5. 2.12 METHOD AND DISTRIBUTION OF PAYMENTS. 2.12.1 METHOD OF PAYMENT; GOOD FUNDS. All payments to be made pursuant to the Loan Instruments by Borrowers shall be made by wire transfer of Good Funds on or prior to the date due to the account of Agent, for the ratable benefit of Lenders, at Citibank, N.A., 399 Park Avenue, New York, New York, ABA 021000089, Credit: FINOVA Capital Corporation, Credit Account No. 40680477, Reference Citadel No. 20995, or to such other account as Agent shall notify Borrowers. 2.12.2 DISTRIBUTION OF PAYMENTS. All payments received by Agent of the Agent's Fee and the Existing Prepayment Premium shall be retained by FINOVA. All 38 48 other payments with respect to Borrowers' Obligations shall be allocated among the Lenders in accordance with their respective Ratable Shares. 2.12.3 DISTRIBUTIONS BY AGENT TO LENDERS. All payments which are received by Agent which are to be distributed to Lenders and which constitute Good Funds on or prior to 12:00 p.m. Chicago time on any date shall be distributed by Agent to Lenders on the same date in immediately available funds. ARTICLE III SECURITY; GUARANTY 3.1 SECURITY. Borrowers' Obligations shall be secured by a Lien upon all of the Collateral, which at all times shall be superior and prior to all other Liens, except Permitted Prior Liens. 3.2 GUARANTY. Payment and performance of Borrowers' Obligations shall be guaranteed by Guarantor in accordance with the terms of the Guaranty. ARTICLE IV CONDITIONS OF CLOSINGS; ACQUISITIONS; TELE-MEDIA MERGER 4.1 CLOSING. This Loan Agreement shall not be deemed to be effective until all of the following conditions are satisfied in a manner satisfactory to Lenders: 4.1.1 REPRESENTATIONS AND WARRANTIES. On the Closing Date the representations and warranties of each Obligor set forth in the Loan Instruments to which such Obligor is a party shall be true and correct when made and at and as of the time of the Closing, except to the extent that such representations and warranties expressly relate to an earlier date. 4.1.2 CONSUMMATION OF MERGERS; TELE-MEDIA ACQUISITION. Agent shall have received evidence of the following: (a) DAC MERGER. the consummation of the DAC Merger and the acquisition by CBC as a result thereof of good and marketable title to all Property of DAC, free and clear of all Liens and Indebtedness, except Permitted Liens and current trade indebtedness incurred in the normal course of business; 39 49 (b) DLI MERGER. the consummation of the DLI Merger and the acquisition by CLI as a result thereof of all FCC Licenses held by DLI prior to the DLI Merger, free and clear of all liens, except Permitted Liens; (c) TELE-MEDIA ACQUISITION. the consummation of the Tele-Media Acquisition and the payment of the Bond Pay-Off Amount and FINOVA Pay-Off Amount (each as defined in the Tele-Media Acquisition Instruments); (d) SENIOR SUBORDINATED NOTES. the execution of the Senior Subordinated Debt Instruments, the issuance of the Senior Subordinated Notes and the receipt by CBC of the proceeds of such sale, which shall not be less than $100,000,000, less applicable fees and expenses; (e) EXCHANGEABLE PREFERRED STOCK. the execution of the Exchangeable Preferred Stock Instruments, the sale of the Exchangeable Preferred Stock and the receipt by CBC of the proceeds of such sale, which shall not be less than $100,000,000, less applicable fees and expenses. 4.1.3 DELIVERY OF DOCUMENTS. The following shall have been delivered to Agent, each duly authorized and executed, where applicable: (a) the Initial Loan Instruments; (b) signature and incumbency certificates for each Obligor; (c) a certificate of good standing or similar certification for each Obligor from the respective states in which each such Person is organized and from all states in which the laws thereof require any such Person to be licensed and/or qualified to do business, in each case dated not more than 10 days prior to the Closing Date; (d) certified copies of the corporate charter and by-laws for each Obligor, together with all effective and proposed amendments thereto; (e) certified copies of resolutions adopted by the board of directors of each Obligor authorizing the execution and delivery of the Instruments to which such Person is a party and the consummation of the transactions contemplated therein; (f) certified or executed original copies of each of the following, the terms and conditions of all of which shall be satisfactory to Agent: (i) Tele-Media Acquisition Instruments; 40 50 (ii) DAC Merger Instruments; (iii) DLI Merger Instruments; (iv) all of the following, except to the extent previously delivered to Agent: (A) all instruments and documents evidencing Permitted Senior Indebtedness; (B) JSA Agreements; (C) LMA Agreements; (D) Leases; (v) Amended and Restated Contribution Agreement; (vi) Amended and Restated Use Agreement; (vii) such other instruments, documents, certificates, consents, waivers and opinions as Agent may reasonably request; and (viii) certificates representing all of the Tele-Media Capital Stock and executed stock powers in form acceptable to Agent. 4.1.4 PERFORMANCE; NO DEFAULT. Each Obligor shall have performed and complied with all agreements and conditions contained in the Initial Loan Instruments to be performed by or complied with by such Person prior to or at the Closing, and no Event of Default or Incipient Default shall then exist or result from the making of the Initial Loan. 4.1.5 OPINIONS OF COUNSEL. Agent shall have received opinions dated the Closing Date from (i) Osborn Maledon and Eckert Seamans Cherin & Mellott, counsel to Obligors, (ii) Hartman & Armstrong, Ltd., Nevada special counsel to Obligors, (iii) Reed, Smith, Shaw & McClay, FCC counsel to each Borrower, and (iv) Adler, Pollack & Sheehans in each case addressed to Agent for the benefit of Lenders, and in such form and covering such matters as Agent may reasonably require. 4.1.6 APPROVAL OF INSTRUMENTS AND SECURITY INTERESTS. Agent shall have received evidence that the approval or consent shall have been obtained from all Governmental Bodies, including, without limitation, the FCC, and all other Persons whose approval or consent is required to enable Obligors to (i) enter into and perform 41 51 their respective obligations under the Instruments to which each such Person is a party and (ii) grant Agent the Security Interests. 4.1.7 SECURITY INTERESTS. All filings of UCC Financing Statements, all recordings of Mortgages and all other filings and actions necessary to perfect and maintain the Security Interests as first, valid and perfected Liens in the Property covered thereby, subject only to Permitted Prior Liens, shall have been filed or taken and Agent shall have received such Uniform Commercial Code and other Lien searches as it deems necessary to confirm the foregoing. 4.1.8 FCC LICENSES. Agent shall have received (i) evidence that the FCC Licenses described in Exhibit 5.52 constitute all FCC Licenses which are necessary to enable CBC to conduct its Broadcasting Business with respect to the CBC Stations, (ii) such FCC Licenses are in full force and effect as of the Closing Date, (iii) no event has occurred that could result in the termination, revocation or non-renewal of any such FCC License and (iv) the FCC has approved the transfer to CLI of the DLI Licenses and the Tele-Media Licenses and no objection has been filed to such approval. 4.1.9 LMA AGREEMENTS. Agent shall have received evidence that (i) all of the LMA Agreements are in full force and effect, and (ii) the approval or consent shall have been obtained from all Governmental Bodies, including, without limitation, the FCC, and all other Persons whose approval or consent is required to enable CBC to perform its obligations and receive the benefits of such LMA Agreements. 4.1.10 FINANCIAL STATEMENTS, REPORTS AND PROJECTIONS. Lenders shall have received the financial statements and reports described in EXHIBIT 5.7.1 and the projections described in EXHIBIT 5.7.2. 4.1.11 MATERIAL ADVERSE CHANGE. No event shall have occurred since May 31, 1997, which has had or reasonably could be expected to have a Material Adverse Effect. 4.1.12 USE OF ASSETS. Agent shall be satisfied that each Borrower at all times shall be entitled to the use and quiet enjoyment of all Property necessary for the continued ownership and operation of its business, including, without limitation, the use of equipment, fixtures, FCC Licenses, offices and means of ingress and egress thereto, and any easements or rights-of-way necessary to reach any equipment or other items necessary for the operation of such business. 4.1.13 BROKER FEES. If the services of a broker or other agent have been used in connection with the Loans, all fees owed to such broker or agent shall have been paid by Borrowers and Agent shall have received evidence of such payment. 42 52 4.1.14 INSURANCE. (A) TITLE POLICIES. Agent shall have received an ALTA mortgagee's policy of title insurance (ALTA Revised 1987 Form or such other form acceptable to Agent) in favor of Agent with respect to each parcel of DAC Real Estate, issued by a title company or companies and in an amount satisfactory to Agent, showing that CBC is the owner of such parcel, and has good and marketable title thereto and insuring that the Mortgage covering such parcel constitutes a valid Lien on such parcel, subject only to Permitted Prior Liens and other matters approved by Agent, each such policy to be in such form and containing such endorsements as may be required by Agent. (B) PREMIUMS. Agent shall have received evidence that all premiums with respect to such title policies have been paid by Borrowers. (C) OTHER INSURANCE. Prior to the Closing Date, Borrowers shall have delivered to Agent evidence satisfactory to Agent (i) of flood insurance, in form and substance satisfactory to Agent, with respect to each parcel of Real Estate, other than a parcel as to which Borrowers have supplied to Agent evidence that such parcel is not in a flood hazard area, (ii) that all insurance coverage required pursuant to Section 6.6 is in full force and effect and all premiums then due thereon have been paid in full and (iii) an original or certified copy of each policy of insurance. 4.1.15 PAYMENT OF AMENDMENT FEE AND OTHER FEES. Borrowers shall have paid the Amendment Fee and all fees and expenses described in subsection 12.1.1 incurred in connection with the transactions contemplated by this Loan Agreement. 4.2 TELE-MEDIA MERGER. The Borrowers shall satisfy each of the following conditions on or before July 18, 1997 in a manner satisfactory to Agent: 4.2.1 CONSUMMATION OF TELE-MEDIA MERGER. Agent shall have received (i) evidence of the consummation of the Tele-Media Merger and the acquisition by CBC as a result thereof of good and marketable title to all of the Tele-Media Property, free and clear of all Liens and Indebtedness, except Assumed Obligations (as defined in the Tele-Media Acquisition Instruments) and (ii) certified copies of the Tele-Media Merger Instruments. 4.2.2 DELIVERY OF DOCUMENTS. The following shall have been delivered to Agent, each duly authorized and executed: (a) a duly executed Mortgage on each parcel of Tele-Media Real Estate; and 43 53 (b) any amendments to the Loan Instruments required by Agent to reflect the effect of the Tele-Media Merger. 4.2.3 OPINIONS OF COUNSEL. Agent shall have received such opinions of counsel for Borrowers, in such form and covering such matters as Agent may reasonably require, relating to the Tele-Media Merger and the Liens granted by CBC on the Tele-Media Property, in each case addressed to Agent for the benefit of Lenders. 4.2.4 SECURITY INTERESTS. All filings of UCC financing statements, all recordings of the Mortgages and all other filings and actions necessary to perfect and maintain the Security Interests granted to Agent on the Tele-Media Property as first, valid and perfected liens, subject only to Permitted Prior Liens, shall have been filed or taken, and Agent shall have received such Uniform Commercial Code and other lien searches as it deems necessary to confirm the foregoing. 4.2.5 INSURANCE. Borrowers shall have delivered to Agent such title and other insurance and such evidence with respect to each parcel of Tele-Media Real Estate as is required pursuant to subsection 4.1.14 with respect to the Real Estate owned by CBC at the time of Closing. 4.3. ACQUISITIONS. The right of any Borrower to make an Acquisition (other than the Tele-Media Acquisition), whether or not the proceeds of an Additional Loan are used to consummate such Acquisition, shall be subject to the satisfaction of all of the following conditions in a manner satisfactory to the Required Lenders: 4.3.1 CONSUMMATION OF ACQUISITIONS. Prior to or concurrently with each Acquisition Closing, Agent shall have received evidence that (i) such Acquisition is in accordance with the terms of the applicable Acquisition Instruments, (ii) if such Acquisition is an Asset Acquisition, CBC will acquire concurrently with the Acquisition Closing good and marketable title to all of the Station Assets, or Related Business Assets which are being purchased pursuant to such Acquisition Instruments, except the applicable FCC Licenses which shall be transferred to CLI simultaneously with the Acquisition Closing, free and clear of all Liens and Indebtedness except Permitted Liens and Indebtedness which CBC has agreed to assume or take subject to pursuant to such Acquisition Instruments, subject to the limitations set forth in Sections 7.1, 7.2 and 7.4, (iii) if such Acquisition is an Equity Acquisition, (A) the Property owned by the Person which owns the capital stock or equity interests which are the subject of such Acquisition shall be free and clear of all Liens and Indebtedness, except such Liens and Indebtedness as CBC has agreed to assume or take subject to pursuant to such Acquisition Instruments, subject to the limitations set forth in Sections 7.1, 7.2 and 7.4 (B) the Required Lenders shall be reasonably satisfied that adequate provision has been made to protect CBC against the assumption of material undisclosed liabilities, (C) simultaneously with the Acquisition Closing such Person is merged into CBC with CBC being the surviving entity (an "Acquisition Merger") and (D) simultaneously with the consummation of such 44 54 Acquisition the applicable FCC Licenses shall be transferred to CLI and (iv) any consent, authorization or approval which is required from any Governmental Body or other Person as a condition to the consummation of such Acquisition, the failure to obtain which would prevent the applicable Borrower from operating the Station or Related Business which is the subject of such Acquisition, has been obtained. 4.3.2 DELIVERY OF DOCUMENTS. The following shall have been delivered to Agent, each duly authorized and executed where applicable: (a) the Acquisition Loan Instruments; (b) such certificates of incumbency, good-standing and corporate resolutions as Agent may reasonably require in connection with such Acquisition; (c) certified or executed original copies of each of the following, the terms and conditions of all of which shall be reasonably satisfactory to Agent: (i) the applicable Acquisition Instruments; and (ii) the Leases assumed or entered into by CBC in connection with such Acquisition; and (d) such other instruments, documents, certificates, consents, waivers and opinions as Agent may reasonably require. 4.3.3 FINANCIAL STATEMENTS, REPORTS AND PROJECTIONS. Agent shall have received such financial statements, reports and projections with respect to the operation of the business which is the subject of the Acquisition as Agent may reasonably require. 4.3.4 COMPLIANCE WITH APPLICABLE RATIO. After giving effect to such Acquisition, the Adjusted Leverage Ratio shall not exceed the Applicable Ratio as calculated as of the most recent month preceding the Acquisition Closing Date for which Borrowers have delivered to Lenders the financial statements and other information reasonably necessary to enable Lenders to make such calculation, provided that such delivery shall occur not less than 15 days prior to such date of closing. 4.3.5 OPINIONS OF COUNSEL. Agent shall have received such opinions of counsel as Agent may reasonably require in connection with such Acquisition and the Liens to be granted to Agent upon the Property acquired in connection therewith. 4.3.6 FCC LICENSES. Agent shall have received (i) certified copies of all FCC licenses issued with respect to the operation of each Station to be acquired in connection with such Acquisition or the Acquisition Merger, (ii) evidence that upon the Acquisition Closing CLI will be the licensee of all such FCC Licenses and that the approval by the 45 55 FCC of the transfer of such Licenses to CLI has become final and non-appealable, (iii) evidence that CBC is authorized to make use of such FCC licenses pursuant to the Amended and Restated Use Agreement and any amendment to such agreement necessary to effect the foregoing, (iv) such FCC Licenses are all licenses which are necessary to enable CBC to conduct its Broadcasting Business with respect to each such Station, (v) such FCC Licenses are in full force and effect as of the Acquisition Closing Date, and (vi) no event has occurred that could result in the termination, revocation or non-renewal of any such license. 4.3.7 SECURITY INTEREST. Agent shall have received evidence that it has or will acquire upon the Acquisition Closing Date a perfected first lien on all of the Property which is the subject of such Acquisition or the Acquisition Merger, as applicable, subject only to Permitted Prior Liens. 4.3.8 ENVIRONMENTAL AUDIT. Agent shall have received an Environmental Audit with respect to any real estate which is being acquired by CBC pursuant to such Acquisition or Acquisition Merger and, at the request of Agent, any real estate which is the subject of a Lease which is being assumed or entered into by CBC in connection with such Acquisition or Acquisition Merger. 4.3.9 INSURANCE; SURVEY. Borrowers shall deliver to Agent (i) such title and other insurance with respect to each parcel of real estate being acquired in connection with such Acquisition as is required pursuant to subsection 4.1.14 with respect to the Real Estate owned by CBC at the time of the Closing and (ii) a recent survey of each such parcel in sufficient detail to permit the elimination of survey exceptions to each title policy. 4.3.10 ENGINEER'S CERTIFICATE. There shall have been delivered to Agent a Certificate of an Engineer for each Station being acquired in connection with such Acquisition or Acquisition Merger. 4.3.11 PAYMENT OF FEES. Borrowers shall have paid all fees and expenses described in subsection 12.1.1 incurred in connection with such Acquisition and any Additional Loan made in connection therewith. 4.3.12 REPRESENTATIONS AND WARRANTIES. On each Acquisition Closing Date the representations and warranties of each Obligor set forth in the Loan Instruments to which such Obligor is a party shall be true and correct when made and at and as of the time of the Acquisition Closing, except to the extent that such representations and warranties expressly relate to an earlier date. 4.3.13 PERFORMANCE; NO DEFAULT. Each Obligor shall have performed and complied with all agreements and conditions contained in the Loan Instruments to be performed by or complied with by such Person prior to or at the applicable Acquisition 46 56 Closing, and no Event of Default or Incipient Default shall exist after giving effect to such Acquisition and, if applicable, the related Acquisition Merger. 4.4 LANDLORD'S CONSENT. Except to the extent previously delivered to Agent, Borrowers shall use their best efforts to obtain and deliver to Agent within 60 days after the Closing Date a Landlords' Consent with respect to each Lease and each Tele-Media Lease. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrowers represent and warrant to Lenders as follows: 5.1 CORPORATE EXISTENCE AND POWER. Each Borrower is a corporation duly formed, validly existing and in good standing under the laws of the State of Nevada, has all requisite power and authority to own its Property and to carry on its business as now conducted and as proposed to be conducted following the Closing Date, and is in good standing and authorized to do business in each jurisdiction in which the failure so to qualify would have a Material Adverse Effect, including in any event each jurisdiction in which any Station or LMA Station of such Borrower is operated. 5.2 CORPORATE AUTHORITY. Each Borrower has full power and authority to enter into, execute, deliver and carry out the terms of the Instruments to which it is a party and to incur the obligations provided for therein, all of which have been duly authorized by all proper and necessary action and are not prohibited by the organizational instruments of such Borrower. 5.3 CAPITAL STOCK, SENIOR SUBORDINATED NOTES AND RELATED MATTERS. 5.3.1 CAPITALIZATION OF BORROWERS. There is set forth in EXHIBIT 5.3.1 a complete description of the capitalization of each Borrower, after giving effect to the issuance of the Exchangeable Preferred Stock. All of the capital stock of each Borrower is validly issued, fully paid and non-assessable, and all of such capital stock and the Senior Subordinated Notes have been issued and sold in compliance with all applicable federal and state laws, rules and regulations, including, without limitation, all so-called "Blue-Sky" laws. All of the CBC Common Stock is owned beneficially and of record by Guarantor and all of the CLI Capital Stock is owned beneficially and of record by CBC, in each case free and clear of all Liens except the Security Interests. 5.3.2 RESTRICTIONS. Except for the applicable Instruments, neither Borrower (i) is a party to or has knowledge of any agreements restricting the transfer of its capital stock, (ii) has issued any rights which can be convertible into or exchangeable or exercisable for any of its capital stock or debt securities, or any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the 47 57 issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any of its capital stock or any securities convertible into or exchangeable or exercisable for any of its capital stock or debt securities and (iii) is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its capital stock, convertible rights or options or debt securities. Except as provided in the applicable Instruments, no Borrower is required to file, and no Borrower has filed, pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, a registration statement relating to any class of debt or equity securities. 5.4 BINDING AGREEMENTS. This Loan Agreement and the other Loan Instruments, when executed and delivered, will constitute the valid and legally binding obligations of each Obligor to the extent such Obligor is a party thereto, enforceable against each Obligor in accordance with their respective terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect affecting the enforcement of creditors' rights generally and (ii) equitable principles (whether or not any action to enforce such document is brought at law or in equity). 5.5 BUSINESS, PROPERTY AND LICENSES OF BORROWER. 5.5.1 BUSINESS AND PROPERTY. CBC is, or upon the Closing will be, the owner of all Property and will have the right, pursuant to the Amended and Restated Use Agreement, to make use of all FCC Licenses necessary to conduct the operations of each of CBC's Stations and to perform its obligations pursuant to the LMA Agreements. CBC does not engage or propose to engage in any business or activity other than the Broadcasting Business or Related Businesses and CLI does not engage or propose to engage in any business or activity other than being the licensee under FCC Licenses. 5.5.2 FCC LICENSES. There is set forth in EXHIBIT 5.5.2 a description of all FCC Licenses which have been issued or assigned to CLI and which are being used by CBC. All of such FCC Licenses are in full force and effect and have been duly issued in the name of, or validly assigned to CLI and no default or breach exists thereunder. 5.5.3 LMA AGREEMENTS. The LMA Agreements are in full force and effect and no default or breach exists under any such agreement. The approval or consent has been obtained from all Governmental Bodies, including, without limitation, the FCC, and all other Persons whose approval or consent is required to enable the applicable Borrower to perform its obligations and receive the benefits of the LMA Agreements. 5.5.4 OPERATING AGREEMENTS. All Operating Agreements are in full force and effect and no event has occurred which could result in the cancellation or termination of any such Operating Agreement which, if cancelled or terminated, would have a Material Adverse Effect, or the imposition thereunder of any liability upon any Borrower which could reasonably be expected to have a Material Adverse Effect. 48 58 5.5.5 BUSINESS LOCATIONS. There is set forth in EXHIBIT 5.5.5 the location of each Borrower's chief executive office, the locations of all of such Borrower's Property, the places where such Borrower's books and records are kept, and the locations of all transmitters, antennae, studios and offices used in the operation of each of the CBC Stations or Related Businesses. 5.5.6 REAL PROPERTY; LEASES. There is set forth in EXHIBIT 1X a complete and accurate description of the Real Estate owned by CBC. There is set forth in EXHIBIT 1S a list of all Leases under which CBC is lessee. Each Lease is in full force and effect, there has been no material default in the performance of any of its terms or conditions by CBC, or, to the best knowledge of CBC, any other party thereto, and no claims of default have been asserted with respect thereto. The present and contemplated use of the Real Estate and the Leasehold Property is in compliance with all applicable zoning ordinances and regulations and other laws and regulations, except for any noncompliance which would not have a Material Adverse Effect. 5.5.7 OPERATION AND MAINTENANCE OF EQUIPMENT. To the best of Borrowers' knowledge, no Person owning or operating any equipment necessary for the operation of any of Borrowers' Stations or any LMA Station has used, operated or maintained the same in a manner which now or hereafter could result in the cancellation or termination of the right of CBC to use or make use of the same or which could result in any material liability of CBC for damages in connection therewith. All of the equipment and other tangible personal property which is now owned or which will be owned by CBC is or will be, upon the acquisition thereof, in good operating condition and repair (subject to normal wear and tear considering the age thereof) and has while owned or operated by CBC, been used, operated and maintained in substantial compliance with all applicable laws, rules and regulations. 5.6 TITLE TO PROPERTY; LIENS. CBC has (i) good and marketable title to all of its Property, except the portion thereof consisting of a leasehold estate and (ii) a valid leasehold estate in each portion of its Property which consists of a leasehold estate, except for any defects in title which would not have a Material Adverse Effect. Upon the proper filing with the appropriate Governmental Bodies of the Mortgages and appropriate UCC Financing Statements, the applicable Loan Instruments will create valid and perfected first Liens on the Property described therein, subject only to Permitted Prior Liens. 5.7 PROJECTIONS AND FINANCIAL STATEMENTS. 5.7.1 FINANCIAL STATEMENTS. The financial statements and reports of CBC and, for the period beginning January 1, 1997, DAC described in EXHIBIT 5.7.1 present fairly in all material respects the results of operations of such Person for the periods covered thereby and the financial condition of each such Person as of the dates indicated therein. Borrowers have no reason to believe that the financial statements described in EXHIBIT 5.7.1 with respect to Snider Corporation, Snider Broadcasting Corporation and 49 59 Subsidiary, CDB Broadcasting Corporation, the Tele-Media Stations and the DAC Stations prior to January 1, 1997, do not present fairly in all material respects the results of operations of such Stations for the periods covered thereby and the financial condition of such Stations as of the dates indicated therein. All of the foregoing financial statements pertaining to the Borrowers and, to the best knowledge of Borrowers, the financial statements with respect to the Tele-Media Stations, have been prepared in conformity with GAAP, except in the case of the unaudited statements for the absence of footnotes and normal year-end adjustments. Since May 31, 1997, there has been no change which has had a Material Adverse Effect as compared with the state of affairs on such date. Borrowers also have delivered to Agent a pro-forma balance sheet as of the Closing Date. Such pro-forma balance sheet, which assumes the consummation of the transactions contemplated by the Instruments, presents fairly in all material respects the anticipated financial condition of Borrowers as of the Closing Date. 5.7.2 PROJECTIONS. The projections described in EXHIBIT 5.7.2 of the future operations of CBC represent the best estimates of Borrowers as of the Closing Date of CBC's future financial performance. 5.8 LITIGATION. There is set forth in EXHIBIT 5.8 a description of all actions and suits, arbitration proceedings and claims pending or, to the best knowledge of Borrowers, threatened against any Borrower or maintained by either Borrower at law or in equity or before any Governmental Body. None of the matters set forth in such EXHIBIT 5.8, if adversely determined, could reasonably be expected to have a Material Adverse Effect. 5.9 DEFAULTS IN OTHER AGREEMENTS; CONSENTS; CONFLICTING AGREEMENTS. No Borrower is in default under any agreement to which such Borrower is a party or by which it or any of its Property is bound, the effect of which default could have a Material Adverse Effect. No authorization, consent, approval or other action by, and no notice to or filing with, any Governmental Body or any other Person which has not already been obtained, taken or filed, as applicable, is required (i) for the due execution, delivery or performance by any Borrower of any of the Instruments to which such Borrower is a party, (ii) the consummation of the Tele-Media Acquisition or (iii) as a condition to the validity or enforceability of any of the Instruments to which any Borrower is a party or any of the transactions contemplated thereby or the priority of the Security Interests, except for (A) certain filings to establish and perfect the Security Interests and (B) filing of certain of the Loan Instruments with the FCC. No provision of any material mortgage, indenture, contract, agreement, statute, rule, regulation, judgment, decree or order binding on either Borrower or affecting the Property of either Borrower conflicts with, or requires any consent which has not already been obtained under, or would in any way prevent the execution, delivery or performance of the terms of any of the Instruments or affect the validity or priority of the Security Interests. The execution, delivery or performance of the terms of the Instruments will not constitute a default under, or result in the creation or imposition of, or obligation to create, any Lien upon the Property of either Borrower pursuant to the terms of any such material mortgage, indenture, contract or agreement. 50 60 5.10 TAXES. Borrowers have filed all tax returns required to be filed, and have paid, or made adequate provision for the payment of, all taxes shown to be due and payable on such returns or in any assessments made against either Borrower, and no tax liens have been filed and, to the best knowledge of Borrowers, no claims are being asserted in respect of such taxes which are required by GAAP to be reflected in the financial statements of either Borrower and are not so reflected therein. The charges, accruals and reserves on the books of each Borrower with respect to all federal, state, local and other taxes are considered by the management of Borrowers to be adequate, and Borrowers do not know of any unpaid assessment which is or might be due and payable against either Borrower or any of its Property, except such assessments as are being contested in good faith and by appropriate proceedings diligently conducted, and for which adequate reserves have been set aside in accordance with GAAP. None of the tax returns of any Obligor are under any audit, which could result in any determination of any tax liability which could reasonably be expected to have a Material Adverse Effect. 5.11 COMPLIANCE WITH APPLICABLE LAWS. Neither Borrower is in default in respect of any judgment, order, writ, injunction, decree or decision of any Governmental Body, which default could reasonably be expected to have a Material Adverse Effect. Each Borrower is in compliance in all material respects with all applicable statutes and regulations, including, without limitation, the Communications Act, all Environmental Laws, ERISA, ADA and all laws and regulations relating to unfair labor practices, equal employment opportunity and employee safety, of all Governmental Bodies, a violation of which would have a Material Adverse Effect. No material condemnation, eminent domain or expropriation has been commenced or, to the best knowledge of Borrowers, threatened against the Property which Borrowers will own upon the Closing. 5.12 PATENTS, TRADEMARKS AND FRANCHISES. CBC owns, possesses or has a right to use all patents, trademarks, service marks, tradenames, copyrights, franchises and rights with respect thereto, including the patents, trademarks, service marks, tradenames, copyrights, franchises and rights described in EXHIBIT 5.12, necessary for the conduct of its Broadcasting Business, without any known conflict with the rights of others and, in each case, free of any Liens, except for any defects in title, conflicts with rights of others and Liens which would not have a Material Adverse Effect. 5.13 FCC MATTERS. Borrowers (i) have duly and timely filed all reports and other filings which are required to be filed under the Communications Act or any other applicable law, rule or regulation of any Governmental Body, the non-filing of which would have a Material Adverse Effect, and (ii) are in compliance with all such laws, rules and regulations, the noncompliance with which could reasonably be expected to have a Material Adverse Effect. All information provided by or on behalf of either Borrower in any material filing with the FCC was, at the time of filing, true, complete and correct in all material respects when made, and the FCC has been notified of any substantial or significant changes in such information as may be required in accordance with applicable laws, rules and regulations. 51 61 5.14 ENVIRONMENTAL MATTERS. Except as set forth in EXHIBIT 5.14, CBC is in compliance with all applicable Environmental Laws, and no portion of any of the Real Estate or any of the Leasehold Property subject to Leases has been used as a land fill. None of the items set forth in EXHIBIT 5.14 could reasonably be expected to have a Material Adverse Effect. CBC shall not cause or permit to be, and, to the best of CBC's knowledge, there currently are not, any known Hazardous Materials generated, manufactured, released, stored, buried or deposited over, beneath, in or on (or used in the construction and/or renovation of), transported to or from, the Real Estate or Leasehold Property in violation of applicable Environmental Laws. 5.15 APPLICATION OF CERTAIN LAWS AND REGULATIONS. No Obligor or any Affiliate of any Obligor is: 5.15.1 INVESTMENT COMPANY ACT. An "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 5.15.2 HOLDING COMPANY ACT. A "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. 5.15.3 FOREIGN OR ENEMY STATUS. (i) An "enemy" or an "ally of an enemy" within the meaning of Section 2 of the Trading with the Enemy Act, (ii) a "national" of a foreign country designated in Executive Order No. 8389, as amended, or of any "designated enemy country" as defined in Executive Order No. 9095, as amended, of the President of the United States of America, in each case within the meaning of such Executive Orders, as amended, or of any regulation issued thereunder, (iii) a "national of any designated foreign country" within the meaning of the Foreign Assets Control Regulations or of the Cuban Assets Control Regulations of the United States of America (Code of Federal Regulations, Title 31, Chapter V, Part 515, Subpart B, as amended), or (iv) an alien or a representative of any alien or foreign government within the meaning of Section 310 of Title 47 of the United States Code. 5.15.4 REGULATIONS AS TO BORROWING. Subject to any statute or regulation which regulates the incurrence of any Indebtedness for Borrowed Money, including, without limitation, statutes or regulations relative to common or interstate carriers or to the sale of electricity, gas, steam, water, telephone, telegraph or other public utility services. 5.16 MARGIN REGULATIONS. None of the transactions contemplated by this Loan Agreement or any of the other Loan Instruments, including the use of the proceeds of the Loans, will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including, without limitation, Regulations 52 62 G, T, U and X, and Borrower does not own or intend to carry or purchase any "margin security" within the meaning of such Regulation U or G. 5.17 OTHER INDEBTEDNESS. Upon the Closing there will be no Indebtedness for Borrowed Money, except (i) Borrowers' Obligations, (ii) Permitted Senior Indebtedness, (iii) Senior Subordinated Indebtedness and (iv) Seller Debt. 5.18 NO MISREPRESENTATION. Neither this Loan Agreement nor any other Loan Instrument, certificate, information or report furnished or to be furnished by or on behalf of any Obligor to any Lender or Agent in connection with any of the transactions contemplated hereby or thereby, contains or will contain a misstatement of material fact, or omits or will omit to state a material fact required to be stated in order to make the statements contained herein or therein, taken as a whole, not misleading in the light of the circumstances under which such statements were made. There is no fact, other than information known to the public generally, known to or reasonably foreseen by either Borrower after diligent inquiry, that would be expected to have a Material Adverse Effect that has not expressly been disclosed to Lenders in writing. 5.19 EMPLOYEE BENEFIT PLANS. 5.19.1 NO OTHER PLANS. No Obligor or any ERISA Affiliate maintains or contributes to, or has any obligation under, any Employee Benefit Plan other than those identified on EXHIBIT 5.19.1 Borrowers have provided Agent accurate and complete copies of all contracts, agreements and documents described on EXHIBIT 5.19.1. 5.19.2 ERISA AND CODE COMPLIANCE AND LIABILITY. Each Obligor and each ERISA Affiliate is in compliance with all applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans except where failure to comply would not result in a material liability to any Obligor and except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 401(a) of the Code. No material liability has been incurred by any Obligor or ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan. 5.19.3 FUNDING. No Pension Plan has been terminated, nor has any accumulated funding deficiency (as defined in Section 412 of the Code) been insured (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the IRS been received or requested with respect to any Pension Plan, nor has any Obligor or any ERISA Affiliate failed to make any contributions or to pay any amounts due and owing as required by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension Plan prior to the due dates of such contributions 53 63 under Section 412 of the Code or Section 302 of ERISA, nor has there been any event requiring any disclosure under Section 4041(c)(3)(C), 4063(a) or 4068 of ERISA with respect to any Pension Plan. 5.19.4 PROHIBITED TRANSACTIONS AND PAYMENTS. No Obligor nor any ERISA Affiliate has: (i) engaged in a nonexempt "prohibited transaction" as such term is defined in Section 406 of ERISA or Section 4975 of the Code; (ii) incurred any liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid; (iii) failed to make a required contribution or payment to a Multiemployer Plan; or (iv) failed to make a required installment or other required payment under Section 412 of the Code. 5.19.5 NO TERMINATION EVENT. No Termination Event has occurred or is reasonably expected to occur. 5.19.6 ERISA LITIGATION. No material proceeding, claim, lawsuit and/or investigation is existing or, to the best knowledge of Borrowers, threatened concerning or involving any (i) employee welfare benefit plan (as defined in Section 3(1) of ERISA) currently maintained or contributed to by any Obligor, or any ERISA Affiliate, (ii) Pension Plan or (iii) Multiemployer Plan. 5.20 EMPLOYEE MATTERS. 5.20.1 COLLECTIVE BARGAINING AGREEMENTS; GRIEVANCES. (i) None of the employees of CBC is subject to any collective bargaining agreement, (ii) no petition for certification or union election is pending with respect to the employees of CBC and no union or collective bargaining unit has sought such certification or recognition with respect to the employees of CBC and (iii) there are no strikes, slowdowns, work stoppages, unfair labor practice complaints, grievances, arbitration proceedings or controversies pending or, to the best knowledge of Borrowers, threatened against CBC by any of its employees, other than employee grievances or controversies arising in the ordinary course of business that would not in the aggregate be expected to have a Material Adverse Effect. 5.20.2 CLAIMS RELATING TO EMPLOYMENT. Except as set forth on EXHIBIT 5.20.2, neither CBC nor, to Borrowers' best knowledge, any shareholder or employee of any CBC is subject to any employment agreement or non-competition agreement with any former employer or any other Person which agreement would have a Material Adverse Effect due to (i) any information which CBC would be prohibited from using under the terms of such agreement or (ii) any legal considerations relating to unfair competition, trade secrets or proprietary information. 5.21 BURDENSOME OBLIGATIONS. After giving effect to the transactions contemplated by the Instruments, (i) neither Borrower (A) will be a party to or be bound by any franchise, 54 64 agreement, deed, lease or other instrument, or be subject to any restriction, which is so unusual or burdensome so as to cause, in the foreseeable future, a Material Adverse Effect and (B) intends to incur, or believes that it will incur, debts beyond its ability to pay such debts as they become due, and (ii) Borrowers (A) own and will own Property, the fair saleable value of which is (I) greater than the total amount of their liabilities (including contingent liabilities) and (II) greater than the amount that will be required to pay the probable liabilities of its then existing debts as they become absolute and matured, and (B) have and will have capital that is not unreasonably small in relation to their businesses as presently conducted and as proposed to be conducted. Borrowers do not presently anticipate that future expenditures needed to meet the provisions of federal or state statutes, orders, rules or regulations will be so burdensome so as to have a Material Adverse Effect. 5.22 INSURANCE. No notice of cancellation has been received with respect to any insurance policies required pursuant to Section 4.1.15 and Borrowers are in material compliance with all conditions contained in such policies. 5.23 REPRESENTATION AS TO ACQUISITION INSTRUMENTS. To the best knowledge of Borrowers, the representations and warranties made by the seller pursuant to the Tele-Media Acquisition Instruments are true and correct as of the Closing Date and no defaults exist thereunder. ARTICLE VI AFFIRMATIVE COVENANTS Until all of Borrowers' Obligations are paid and performed in full and all of the Commitments have been terminated, except as provided in Section 6.11, each Borrower agrees that it will: 6.1 LEGAL EXISTENCE; GOOD STANDING. Maintain its existence and its good standing in the jurisdiction of its formation and maintain its qualification in each jurisdiction in which the failure so to qualify would have a Material Adverse Effect, and in any event in each jurisdiction in which any one Station or Related Business is owned or operated by CBC. 6.2 INSPECTION. Permit representatives of each Lender to (i) visit its offices, (ii) examine its books and records and Accountants' reports relating thereto, (iii) make copies or extracts therefrom, (iv) discuss its affairs with its employees, (v) examine and inspect its Property and (vi) meet and discuss its affairs with the Accountants, and such Accountants, as a condition to their retention by such Borrower, are hereby irrevocably authorized by such Borrower to fully discuss and disclose all such affairs with each Lender. The representatives of each Lender shall conduct the activities described in this Section 6.2 at reasonable times and upon reasonable notice, provided, however, if an Event of Default or Incipient Default exists, such activities may be conducted at any time without notice. 55 65 6.3 FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain a standard system of accounting in accordance with GAAP and furnish to each Lender: 6.3.1 MONTHLY STATEMENTS. As soon as available and in any event within 30 days after the close of each month: (a) the consolidated balance sheet of Obligors and the consolidating balance sheet of each Borrower as of the end of such month, (b) the consolidated statements of operations of Obligors, the consolidated statements of Operating Cash Flow of Borrowers, the statement of Excess Cash Flow, and the consolidating statements of operations and Cash Flow for each Borrower for such month and for the period from the beginning of the then current year to the end of such month, setting forth in each case in comparative form the corresponding figures for the corresponding period in the preceding year, (c) a statement of the Adjusted Operating Cash Flow for such month and for the period from the beginning of the then current year to the end of such month, and (d) a statement of the Market Cash Flow for each Broadcast Market for such month and for the period from the beginning of the then current year to the end of such month, and showing a comparison with the budget for such period, all in reasonable detail, containing such information as any Lender reasonably may require, and certified by the Chief Financial Officer as complete and correct, subject to normal year-end adjustments. 6.3.2 QUARTERLY STATEMENTS. As soon as available and in any event within 45 days after the close of each quarter of each year: (a) the consolidated balance sheet of Obligors and the consolidating balance sheet of each Borrower as of the end of such quarter, (b) the consolidated statements of operations of Obligors, the consolidated statements of Operating Cash Flow of Borrowers, the statement of Excess Cash Flow, and the consolidating statements of operations and Operating Cash Flow for each Borrower for such quarter and for the period from the beginning of the then current year to the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period in the preceding year, and showing a comparison with the budget for such period, 56 66 (c) a statement of the Adjusted Operating Cash Flow of Borrowers for such quarter and for the immediately preceding three quarters, and (d) a statement of the Market Cash Flow for each Broadcast Market for such quarter and for the period from the beginning of the then current year to the end of such quarter, all in reasonable detail, containing such information as any Lender reasonably may require, and certified by the Chief Financial Officer as complete and correct, subject to normal year-end adjustments. 6.3.3 ANNUAL STATEMENTS. As soon as available and in any event within 120 days after the close of each year: (a) the consolidated balance sheet of Borrowers as of the end of such year, the statements of operations, cash flows, stockholders' equity of Borrowers, the consolidating balance sheet of each Borrower as of the end of such year, the consolidating statements of operations, cash flows and stockholders' equity for each Borrower for such year (collectively, the "Basic Financial Statements"), the statements of Excess Cash Flow and of the consolidated and consolidating Operating Cash Flow for Borrowers for such year, setting forth in each case in comparative form the corresponding figures for the preceding year, (b) a statement of the Market Cash Flow for each Broadcast Market for such year, in each case certified by the Chief Financial Officer as complete and correct, and showing a comparison with the budget for such period, (c) an opinion of the Accountants which shall accompany the Basic Financial Statements, which opinion shall be unqualified as to going concern and scope of audit, stating that (i) the examination by the Accountants in connection with such Basic Financial Statements has been made in accordance with generally accepted auditing standards, (ii) such Basic Financial Statements have been prepared in conformity with GAAP and in a manner consistent with prior periods, and (iii) such Basic Financial Statements fairly present in all material respects the financial position and results of operations of the Borrowers, and (d) a letter from the Accountants stating that the statements of Operating Cash Flow, Market Cash Flow and Excess Cash Flow were computed in accordance with the requirements of this Loan Agreement. 6.3.4 OFFICER'S CERTIFICATES. The financial statements described in subsections 6.3.1, 6.3.2 and 6.3.3 shall be accompanied by a Compliance Certificate signed by the Chief Financial Officer. 57 67 6.3.5 ACCOUNTANTS' CERTIFICATE. Simultaneously with the delivery of the certified Basic Financial Statements required by subsection 6.3.3, copies of a certificate of the Accountants stating that (i) they have checked the computations delivered by Borrowers in compliance with subsection 6.3.3, and (ii) in making the examination necessary for their audit of the Basic Financial Statements of Borrowers for such year nothing came to their attention of a financial or accounting nature that caused them to believe that (A) either Borrower was not in compliance with the terms, covenants, provisions or conditions of any of the Loan Instruments or (B) there shall have occurred any condition or event which would constitute an Event of Default, or, if so, specifying in such certificate all such instances of non-compliance and the nature and status thereof. 6.3.6 AUDIT REPORTS. Promptly upon receipt thereof, a copy of each report, other than the reports referred to in subsection 6.3.3, including any so-called "Management Letter" or similar report, submitted to Obligors by the Accountants in connection with any annual, interim or special audit made by the Accountants of the books of any Obligor. 6.3.7 BUSINESS PLANS. Not later than 30 days before the end of each year, a business plan for the following year setting forth in reasonable detail the projected operations budget of each Broadcast Market for such year and such other information as any Lender may reasonably request, for such following year. 6.3.8 NOTICE OF DEFAULTS; LOSS. Prompt written notice if: (i) any Indebtedness for Borrowed Money of either Borrower is declared or shall become due and payable prior to its declared or stated maturity, or called and not paid when due, (ii) an event has occurred that enables the holder of any note, or other evidence of such Indebtedness for Borrowed Money of either Borrower to declare such Indebtedness for Borrowed Money due and payable prior to its stated maturity, (iii) there shall occur and be continuing an Incipient Default or Event of Default, accompanied by a statement of the Chief Financial Officer setting forth what action Borrowers propose to take in respect thereof, or (iv) any event shall occur which could reasonably be expected to have a Material Adverse Effect, including the amount or the estimated amount of any loss or depreciation or adverse effect. 6.3.9 NOTICE OF SUITS, ADVERSE EVENTS. Prompt written notice of: (i) any citation, summons, subpoena, order to show cause or other order naming either Borrower a party to any proceeding before any Governmental Body which could reasonably be expected to have a Material Adverse Effect and include with such notice a copy of such citation, summons, subpoena, order to show cause or other order, (ii) any lapse or other termination of any license, permit, franchise, agreement or other authorization issued to either Borrower by any Governmental Body or any other Person, the result of which could reasonably be expected to have a Material Adverse Effect, (iii) any refusal by any Governmental Body or any other Person to renew or extend any such license, permit, franchise, agreement or other authorization and (iv) any dispute between either Borrower 58 68 and any Governmental Body or any other Person, which lapse, termination, refusal or dispute referred to in clauses (ii) and (iii) above or in this clause (iv) could reasonably be expected to have a Material Adverse Effect. 6.3.10 REPORTS TO SHAREHOLDERS, CREDITORS AND GOVERNMENTAL BODIES. (a) Promptly upon becoming available, copies of all financial statements, reports, notices and other statements sent or made available generally by any Obligor to its shareholders, of all regular and periodic reports and all registration statements and prospectuses filed by any Obligor with any securities exchange or with the SEC, and of all statements generally made available by any Obligor or others concerning material developments in CBC's Broadcasting Business. (b) Promptly upon becoming available, copies of any periodic or special reports filed by any Obligor with any Governmental Body or Person, if such reports indicate any material change in the business, operations, affairs or condition of such Obligor, or if copies thereof are requested by any Lender, and copies of any material notices and other communications from any Governmental Body or Person which specifically relate to any Obligor. 6.3.11 ERISA NOTICES AND REQUESTS. (a) With reasonable promptness, and in any event within 30 days after occurrence of any of the following, Borrowers will give notice of and/or deliver to Agent copies of: (i) the establishment of any new Employee Benefit Plan, Pension Plan or Multiemployer Plan; (ii) the commencement of contributions to any Employee Benefit Plan, Pension Plan or Multiemployer Plan to which any Obligor or any of its ERISA Affiliates was not previously contributing or any increase in the benefits of any existing Employee Benefit Plan, Pension Plan or Multi-employer Plan; (iii) each funding waiver request filed with respect to any Employee Benefit Plan and all communications received or sent by any Obligor or any ERISA Affiliate with respect to such request; and (iv) the failure of any Obligor or ERISA Affiliate to make a required installment or payment under Section 302 of ERISA or Section 412 of the Code by the due date. (b) Promptly and in any event within 10 days of becoming aware of the occurrence of or forthcoming occurrence of any (i) Termination Event or (ii) "prohibited transaction", as such term is defined in Section 406 of ERISA or Section 4975 of the Code, in connection with any Pension Plan or any trust created thereunder, Borrowers will deliver to Agent a notice specifying the nature thereof, what action the applicable Obligor has taken, is taking or proposes to take with respect thereto and, when known, any action taken or 59 69 threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto. (c) With reasonable promptness but in any event within 10 days after the occurrence of any of the following, Borrowers will deliver to Agent copies of: (i) any favorable or unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code; (ii) all notices received by any Obligor or any ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan; (iii) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by any Obligor or any ERISA Affiliate with the Internal Revenue Service with respect to each Pension Plan; and (iv) all notices received by any Obligor or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA. Borrowers will notify Agent in writing within two Business Days of any Obligor or any ERISA Affiliate that has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA. 6.3.12 RATING BOOKS. Promptly upon receipt thereof and upon request therefor by any Lender, copies of all station rating books to the extent permitted by applicable law and the agreements with the publishers thereof. 6.3.13 OTHER INFORMATION. (a) Immediate notice of any material change in, or termination of, the employment of Wilson or the Chief Financial Officer, any change in the location of any Property of either Borrower which is material to or necessary for the continued operation of CBC's Broadcasting Business, including without limitation any change in the location of any transmitting tower, any change in the name of either Borrower and any sale or purchase of Property outside the regular course of business of either Borrower other than the sales described in Section 7.11(i). (b) Promptly upon request therefor, such other information and reports relating to the past, present or future financial condition, operations, plans and projections of Borrowers as any Lender may reasonably request from time to time. 6.4 REPORTS TO GOVERNMENTAL BODIES AND OTHER PERSONS. Timely file all material reports, applications, documents, instruments and information required to be filed pursuant to all rules, regulations or requests of any Governmental Body or other Person having jurisdiction over the operation of the business of CBC, including, but not limited to, such of the Loan 60 70 Instruments as are required to be filed with any such Governmental Body or other Person pursuant to applicable rules and regulations promulgated by such Governmental Body or other Person. 6.5 MAINTENANCE OF LICENSES AND OTHER AGREEMENTS. Maintain in full force and effect at all times, and apply in a timely manner for renewal of, all Licenses, trademarks, tradenames and agreements necessary for the operation of CBC's Broadcasting Business, the loss of any of which would have a Material Adverse Effect, and deliver to Agent (i) at least 30 days' prior written notice of the proposed amendment of any FCC License, and (ii) (A) evidence of the filing of any application for renewal of any FCC Licenses not less than the earlier of (x) 60 days prior to the expiration of such FCC License or (y) the last day such application may be filed in accordance with applicable law and (B) copies of any petition filed to deny any such renewal application promptly after receipt thereof by either Borrower. 6.6 INSURANCE. 6.6.1 KEY MAN LIFE INSURANCE. Maintain in full force and effect at all times policies of insurance in such form and issued by such insurers as shall be reasonably acceptable to Agent, insuring the life of Wilson in the amount of $5,000,000 and deliver to Agent, from time to time as Agent may reasonably request, evidence of compliance with this subsection 6.6.1. 6.6.2 BUSINESS INSURANCE. Maintain in full force and effect at all times Business Insurance as required by the insurance letter, a copy of which is attached hereto as EXHIBIT 6.6.2, all of which shall be written by insurers and in amounts and forms reasonably satisfactory to Agent and otherwise comply with the terms of such insurance letter, and deliver to Agent, from time to time as Agent may reasonably request, evidence of compliance with this subsection 6.6.2. 6.6.3 BUSINESS INSURANCE, CLAIMS AND PROCEEDS. Borrowers hereby directs all insurers under all policies of Business Insurance to pay all proceeds payable thereunder directly to Agent and Borrowers hereby authorizes Agent to collect all such proceeds, subject to Borrowers' rights as described below in this Section 6.6.3 to receive certain proceeds. Borrowers irrevocably appoints Agent (and all officers, employees or agents designated by Agent) as Borrowers' true and lawful attorney and agent in fact for the purpose of and with power to make, settle and adjust claims under such policies of insurance, endorse the name of any Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance, and to make all determinations and decisions with respect to such policies of insurance. Borrowers acknowledge that such appointment as attorney and agent in fact is a power, coupled with an interest, and therefore is irrevocable. Borrowers shall notify Agent and Lenders promptly of any loss, damage, destruction or other casualty to the Collateral in excess of $250,000. If the proceeds of a casualty do not exceed $500,000 and no Event of Default exists, at the option of Borrowers, such proceeds shall be paid to Borrowers and 61 71 either (i) applied to repair or replace the Property which is the subject of such casualty or (ii) applied to the payment of the Principal Balance. If the proceeds of a casualty exceed $500,000 or an Event of Default exists, at the option of the Required Lenders, such proceeds shall be (i) applied to the payment of Borrowers' Obligations in such manner as the Required Lenders determine. In the event the proceeds are to be applied to the repair or replacement of Collateral, the Collateral shall be repaired or replaced so as to be of at least equal value and substantially the same character as prior to such loss, damage, destruction or other casualty. If at the election of the Required Lenders proceeds of a casualty are not applied to the repair or replacement of the applicable Collateral, Borrowers shall not be obligated to repair or replace such Collateral. 6.6.4 FLOOD INSURANCE. Maintain in full force and effect at all times any flood insurance required to be provided pursuant to Article IV and deliver to Agent, from time to time as Agent may reasonably request, evidence of compliance with this subsection 6.6.4. 6.7 FUTURE LEASES. Except if delivered pursuant to Article IV, deliver to Agent, concurrently with the execution by CBC, as lessee, of any lease pertaining to real property, (i) an executed copy thereof, (ii) at the option of Agent, either a leasehold mortgage upon or a collateral assignment of such lease in favor of Agent, in either case in a form reasonably acceptable to Agent, and (iii) a Landlord's Consent from the Landlord under such lease. 6.8 FUTURE ACQUISITIONS OF REAL PROPERTY. Except if delivered pursuant to Article IV, deliver to Agent concurrently with the (i) execution by CBC of any contract relating to the purchase by CBC of real property, an executed copy of such contract and (ii) closing of the purchase of such real property, (A) a first mortgage or deed of trust in favor of Agent on such real property, in form and content reasonably satisfactory to Agent, (B) a lender's policy of title insurance, in such form and amount and containing such endorsements as shall be reasonably satisfactory to Agent, and (C) such other documents and assurances with respect to such real property as Agent may reasonably require. 6.9 ENVIRONMENTAL AUDIT. At the request of Agent deliver to Agent an Environmental Audit with respect to any real property leased or acquired by CBC referred to in Sections 6.7 and 6.8. 6.10 ENVIRONMENTAL MATTERS. 6.10.1 COMPLIANCE. At all times comply with, and be responsible for, its obligations under all Environmental Laws applicable to the Real Estate, the Leasehold Property and any other Property owned by CBC or used by CBC in the operation of its Broadcasting Business or any Related Business. At their sole cost and expense, Borrowers shall (i) comply in all respects with (A) any notice of any violation or administrative or judicial complaint or order having been filed against CBC, any portion of the Real Estate, any Leasehold Property or any other Property owned by CBC or used 62 72 by CBC in the operation of its Broadcasting Business or any Related Business alleging violations of any law, ordinance and/or regulation requiring CBC to take any action in connection with the release, transportation and/or clean-up of any Hazardous Materials, and (B) any notice from any Governmental Body or any other Person alleging that CBC is or may be liable for costs associated with a response or clean-up of any Hazardous Materials or any damages resulting from such release or transportation, or (ii) diligently contest in good faith by appropriate proceedings any demands set forth in such notices, provided (A) reserves in an amount required by GAAP to pay the costs associated with complying with any such notice are established by CBC and (B) no Lien would or will attach to the Property which is the subject of any such notice as a result of any compliance by CBC which is delayed during any such contest. Promptly upon receipt of any notice described in the foregoing clause (i), CBC shall deliver a copy thereof to Agent. 6.10.2 CERTIFICATION. Deliver to Agent, not later than January 1 of each year, an Environmental Compliance Certificate. 6.11 INTEREST HEDGE CONTRACT. Maintain an Interest Hedge Contract in full force and effect during the term thereof. 6.12 COMPLIANCE WITH LAWS. Comply with all federal, state and local laws, ordinances, requirements and regulations and all judgments, orders, injunctions and decrees applicable to either Borrower and its operations, the failure to comply with which would have a Material Adverse Effect. 6.13 TAXES AND CLAIMS. Pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any Property belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a Lien (other than a Permitted Lien) upon its Property, provided that Borrowers shall not be required to pay any such amount if the same is being contested diligently and in good faith by appropriate proceedings and as to which the applicable Borrower has set aside reserves on its books in an amount required by GAAP. 6.14 MAINTENANCE OF PROPERTIES. Maintain all of its Properties necessary in the operation of CBC's Broadcasting Business in good working order and condition. ARTICLE VII NEGATIVE COVENANTS Until all of Borrowers' Obligations are paid and performed in full and all of the Commitments have been terminated, neither Borrower shall: 63 73 7.1 BORROWING. Create, incur, assume or suffer to exist or permit Tele-Media to create, incur, assume or suffer to exist any liability for Indebtedness for Borrowed Money, except (i) Borrowers' Obligations, (ii) Permitted Senior Indebtedness, (iii) Senior Subordinated Indebtedness, (iv) Indebtedness pursuant to the Interest Hedge Contract, (v) Seller Debt, (vi) unsecured Indebtedness assumed by CBC in connection with a Permitted Acquisition or Acquisition Merger in an aggregate amount not to exceed at any time $1,000,000, (vii) Indebtedness evidenced by the Exchangeable Debentures, provided Exchangeable Debentures shall not be issued unless no Event of Default will exist, after giving effect to such issuance and assuming such issuance occurred on the last day of the most recent month for which there has been delivered to Agent the financial statements required pursuant to subsection 6.3.1. 7.2 LIENS. Create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, except Permitted Liens. 7.3 MERGER AND ACQUISITION. Consolidate with or merge with or into any Person, or make any Acquisition, except (i) a Permitted Acquisition, (ii) the DAC Merger, (iii) the DLI Merger, (iv) the Tele-Media Merger or (v) an Acquisition Merger. 7.4 CONTINGENT LIABILITIES. Assume, guarantee, endorse, contingently agree to purchase, become liable in respect of any letter of credit, or otherwise become liable upon the obligation of any Person, except (i) liabilities arising from the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business (ii) obligations assumed pursuant to a Permitted Acquisition, subject to reasonable limitations imposed by the Required Lenders and (iii) obligations with respect to Permitted Letters of Credit. 7.5 DISTRIBUTIONS. Make any dividends, distributions or other shareholder expenditures with respect to its capital stock or apply any of its Property to the purchase, redemption or other retirement of, or set apart any sum for the payment of, or make any other distribution by reduction of capital or otherwise in respect of, any of its capital stock, except (i) distributions necessary to pay Corporate Overhead, subject to the limitations set forth in subsection 7.6.1, (ii) dividends on the Exchangeable Preferred Stock by the issuance of new Exchangeable Preferred Stock and (iii) so long as no Event of Default will exist after giving effect thereto, cash dividends on the Exchangeable Preferred Stock (A) in any year in an amount which, together with any cash payments of interest in such year on Exchangeable Debentures, do not exceed the Remaining Excess Cash Flow for the preceding year and (B) commencing in January, 2003, so long as after giving effect to such payments CBC shall have Cash Equivalents of not less than $5,000,000. 7.6 LIMITATION OF CORPORATE OVERHEAD AND CAPITAL EXPENDITURES. 7.6.1 CORPORATE OVERHEAD. Make expenditures or incur obligations for Corporate Overhead which in the aggregate for all Obligors are in excess of the amounts set forth in EXHIBIT 7.6.1. 64 74 7.6.2 CAPITAL EXPENDITURES. Make Capital Expenditures which in the aggregate for all Borrowers are in excess of the amounts set forth in EXHIBIT 7.6.2. 7.7 PAYMENTS OF INDEBTEDNESS FOR BORROWED MONEY. Make any (i) voluntary or optional prepayment of any Indebtedness for Borrowed Money other than Borrowers' Obligations and the Indebtedness in the principal amount of $12,817,000 and interest thereon owing by CBC to guarantor, (ii) payment of interest on the Senior Subordinated Notes (A) so long as Borrowers are in default in the payment of interest, principal or any Loan Fees under this Loan Agreement or (B) during any Payment Blockage Period (as defined in the Note Indenture), (iii) payment of principal on the Senior Subordinated Notes, (iv) payment on the Exchangeable Debentures, except cash payments of interest may be made on such Exchangeable Debentures if (A) no Event of Default will exist after giving effect to such payments and (B) the amount of such payments and the cash dividends on the Exchangeable Preferred Stock do not in the aggregate exceed in any year the Remaining Excess Cash Flow for the preceding year. 7.8 OBLIGATIONS AS LESSEE UNDER OPERATING LEASES. Enter into any arrangement as lessee of Property under any Operating Lease if the aggregate rentals for all such Operating Leases for Borrowers during any year would exceed the applicable amount set forth in EXHIBIT 7.8. 7.9 INVESTMENTS. At any time purchase or otherwise acquire, hold or invest in the capital stock of, or any other interest in, any Person, or make any loan or advance to, or enter into any arrangement for the purpose of providing funds or credit to, or make any other investment, whether by way of capital contribution or otherwise, in or with any Person, including, without limitation, any Affiliate, except (i) investments in direct obligations of, or instruments unconditionally guaranteed by, the United States of America or in certificates of deposit issued by a Qualified Depository, (ii) investments in commercial or finance paper which, at the time of investment, is rated "A," or better by Moody's Investors Service, Inc., or Standard & Poor's Corporation, respectively, or at the equivalent rate by any of their respective successors, (iii) any interests in any money market account maintained, at the time of investment, with a Qualified Depository, the investments of which, at the time of investment, are restricted to the types specified in clause (i) above, (iv) Permitted Acquisitions, (v) loans from one Operating Company to another Operating Company, (vi) loans to employees of Borrowers or Parent in an aggregate amount not to exceed $50,000 for all Obligors outstanding at any time and (vii) the formation and capitalization of Permitted Subsidiaries. All investments permitted pursuant to clauses (i), (ii) and (iii) of this Section 7.9 shall have a maturity not exceeding one year. 7.10 FUNDAMENTAL BUSINESS CHANGES; LIMITATIONS ON NON-OPERATING COMPANIES. Permit (i) any Operating Company to materially change the nature of its business or engage in any business other than the Broadcasting Business and Related Businesses or (ii) any Non-Operating Company to (A) engage in any business other than being the licensee of FCC Licenses or (B) incur any Indebtedness except Borrowers' Obligations. 65 75 7.11 SALE OR TRANSFER OF ASSETS. Sell, lease, assign, transfer or otherwise dispose of any Property (other than in the ordinary course of business) except for (i) the sale or disposition of (A) Property which is not material to or necessary for the continued operation of CBC's Broadcasting Business and (B) obsolete or unusable items of equipment which promptly are replaced with new items of equipment of like function and comparable value to the unusable items of equipment when the same were new or not obsolete or unusable, provided such replacement items of equipment shall become subject to the Security Interests and (ii) Permitted Dispositions. 7.12 AMENDMENT OF INSTRUMENTS; ARTICLES OF INCORPORATION. Enter into any Prohibited Amendment. 7.13 ACQUISITION OF ADDITIONAL PROPERTIES. Enter into an agreement with respect to a proposed Acquisition unless such agreement provides that the only remedy against the Borrower entering into such agreement in the event of default by CBC thereunder is liquidated damages in an amount not to exceed 10% of the purchase price, or acquire any additional Property except (i) such Property as necessary to or useful in the operation of its business, provided such acquisitions shall be subject to the conditions and limitations set forth in this Loan Agreement and (ii) such acquisitions of Property as are permitted pursuant to Section 7.3 or 7.9. 7.14 ISSUANCE OF CAPITAL STOCK; DEBT SECURITIES. Issue or permit to be issued any additional capital stock or any interests convertible into or exercisable for any such additional capital stock or any debt securities. 7.15 TRANSACTIONS WITH AFFILIATES. Sell, lease, assign, transfer or otherwise dispose of any Property to any Affiliate of any Obligor, render or receive services or purchase assets from any such Affiliate, or otherwise enter into any contractual relationship with any Affiliate of any Obligor, except as set forth in EXHIBIT 7.15. 7.16 COMPLIANCE WITH ERISA. (i) permit the occurrence of any Termination Event which would result in a liability to any Obligor or ERISA Affiliate in excess of $100,000; (ii) permit the present value of all benefit liabilities under all Pension Plans to exceed the current value of the assets of such Pension Plans allocable to such benefit liabilities by more than $100,000; (iii) permit any accumulated funding deficiency in excess of $100,000 (as defined in Section 302 of ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or not waived; (iv) fail to make any contribution or payment to any Multiemployer Plan which any Obligor or ERISA Affiliate may be required to make under any agreement 66 76 relating to such Multiemployer Plan, or any law pertaining thereto which results in or is likely to result in a liability in excess of $100,000; (v) engage, or permit any Obligor or ERISA Affiliate to engage, in any "prohibited transaction" as such term is defined in Section 406 of ERISA or Section 4975 of the Code for which a civil penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975 of the Code in excess of $100,000 is imposed; (vi) permit the establishment of any Employee Benefit Plan providing post-retirement welfare benefits or establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to any Obligor or ERISA Affiliate or increase the obligation of any Obligor or ERISA Affiliate to a Multiemployer Plan which liability or increase, individually or together with all similar liabilities and increases, is material to any Obligor or ERISA Affiliate; or (vii) fail, or permit any Obligor or ERISA Affiliate to fail to establish, maintain and operate each Employee Benefit Plan in compliance in all material respects with ERISA, the Code and all other applicable laws and regulations and interpretations thereof. 7.17 LMA AGREEMENTS. Enter into, renew or extend an LMA, except (i) the LMA Agreements, (ii) an LMA to operate a Station in a then existing Broadcast Market, (iii) an LMA to operate a Station in other than a then existing Broadcast Market, but only if Borrowers have demonstrated to the reasonable satisfaction of the Required Lenders that Borrowers would not suffer operating losses as a result of the operation of the Station or Stations which are the subject of such agreement. 7.18 BUSINESS LOCATIONS. Change the location of its chief executive office, any of its Property or any studio, transmitter, antennae, or offices used in the operation of any of the CBC Stations, or the place where its books and records are kept unless (i) Agent shall have received at least 30 days' prior written notice thereof, (ii) Borrowers shall have complied with all applicable laws, rules and regulations and shall have received all required consents and approvals from any Governmental Body, including, without limitation, the FCC, (iii) Agent shall have received satisfactory evidence that such change could not reasonably be expected to affect adversely the operations or business prospects of Borrowers and (iv) Borrowers shall have executed and delivered to Agent any documents Agent may reasonably require in order to maintain the validity and priority of the Security Interests. 7.19 MAXIMUM LEVERAGE TEST. Permit the ratio of Total Debt as of the last day of any month to the Adjusted Operating Cash Flow for the 12-month period ending as of the last day of such month to be greater than the Applicable Ratio on such date. 67 77 7.20 SENIOR DEBT LEVERAGE. Permit the ratio of the Principal Balance as of the last day of any month to the Adjusted Operating Cash Flow for the 12-month period ending on such date to be greater than the ratios set forth below:
Each Month During Period Ratio ------------------------ ----- Closing Date - November, 1997 5.25 December, 1997 - May, 1998 5.00 June, 1998 - November, 1998 4.75 December, 1998 - May, 1999 4.50 June, 1999 - November, 1999 4.25 December, 1999 - May, 2000 4.00 June, 2000 - November, 2000 3.75 December, 2000 - May 2001 3.50 June, 2001 - November, 2001 3.25 December, 2001 - May, 2002 3.00 June, 2002 - November, 2002 2.75 December, 2002 - June, 2003 2.50
7.21 MINIMUM INTEREST COVERAGE. Permit the ratio of consolidated Operating Cash Flow of Borrowers for any Four-Quarter Period ending as of the end of any quarter set forth below to Interest Expense and cash dividends on the Exchangeable Preferred Stock for such Four-Quarter Period to be less than the ratio set forth opposite such period:
Four Quarter Period Ending Ratio -------------------------- ----- September, 1997, December, 1997 1.75 March, 1998, June, 1998, 2.00 September, 1998, December, 1998 March, 1999 and each quarter 2.25 thereafter
7.22 MINIMUM FIXED CHARGES. Permit the ratio of the consolidated Operating Cash Flow of Borrowers for any Four-Quarter Period to Fixed Charges for such Four-Quarter Period to be less than 1.1 to 1. ARTICLE VIII DEFAULT AND REMEDIES 8.1 EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an Event of Default under the Loan Instruments: 68 78 8.1.1 DEFAULT IN PAYMENT. If Borrowers shall fail to pay all or any portion of the Principal Balance when the same becomes due and payable or any other of the Borrowers' Obligations within five days after the same become due and payable. 8.1.2 BREACH OF COVENANTS. (a) If Borrowers shall fail to observe or perform any covenant or agreement made by Borrowers contained in Section 4.2, 6.1, 6.2, 6.6, 6.10, 6.11 or in Article VII; (b) If any Obligor shall fail to observe or perform any covenant or agreement (other than those referred to in subparagraph (a) above or specifically addressed elsewhere in this Section 8.1) made by such Person in any of the Loan Instruments to which such Person is a party, and such failure shall continue for a period of 30 days after written notice of such failure is given by Agent. 8.1.3 BREACH OF WARRANTY. If any representation or warranty made by or on behalf of any Obligor in or pursuant to any of the Loan Instruments or in any instrument or document furnished in compliance with the Loan Instruments shall prove to be false or misleading in any material respect on the date as of which made. 8.1.4 DEFAULT UNDER OTHER INDEBTEDNESS FOR BORROWED MONEY. If (i) either Borrower at any time shall be in default (as principal or guarantor or other surety) in the payment of any principal of or premium or interest on any Indebtedness for Borrowed Money (other than Borrowers' Obligations) beyond the grace period, if any, applicable thereto and the aggregate amount of such payments then in default beyond such grace period shall exceed $250,000 or (ii) any default shall occur in respect of any issue of Indebtedness for Borrowed Money of either Borrower (other than Borrowers' Obligations) outstanding in a principal amount of at least $250,000, or in respect of any agreement or instrument relating to any such issue of Indebtedness for Borrowed Money, and such default shall continue beyond the grace period, if any, applicable thereto. 8.1.5 BANKRUPTCY. (a) If Guarantor or either Borrower shall (i) generally not be paying its debts as they become due, (ii) file, or consent, by answer or otherwise, to the filing against it of a petition for relief or reorganization or arrangement or any other petition in bankruptcy or insolvency under the laws of any jurisdiction, (iii) make an assignment for the benefit of creditors, (iv) consent to the appointment of a custodian, receiver, trustee or other officer with similar powers for it or for any substantial part of its Property, or (v) be adjudicated insolvent. (b) If any Governmental Body of competent jurisdiction shall enter an order appointing, without consent of the applicable Borrower or Guarantor, a 69 79 custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of such Person's Property, or if an order for relief shall be entered in any case or proceeding for liquidation or reorganization or otherwise to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of either Borrower or Guarantor or if any petition for any such relief shall be filed against any such Person and such petition shall not be dismissed or stayed within 60 days. 8.1.6 JUDGMENTS. If there shall exist final judgments or awards against any Obligor which shall have been outstanding for a period of 60 days or more from the date of the entry thereof and shall not have been discharged in full or stayed pending appeal, if (i) any such judgment or award not covered by insurance exceeds $50,000 or (ii) the aggregate amount of all such judgments and awards against Obligors not covered by insurance exceeds $500,000. 8.1.7 IMPAIRMENT OF LICENSES; OTHER AGREEMENTS. If (i) any Governmental Body shall (A) revoke, terminate, suspend or adversely modify any License of either Borrower, the continuation of which is material to the continuation of the Broadcasting Business of CBC, or (B) schedule or conduct a hearing on the renewal of any FCC License necessary for the continuation of such Broadcasting Business or (ii) there shall exist any violation or default in the performance of, or a material failure to comply with any agreement, or condition or term of any FCC License, which violation, default or failure could reasonably be expected to have a Material Adverse Effect, or (iii) any agreement which is necessary to the operation of such Broadcasting Business shall be revoked or terminated and not replaced by a substitute acceptable to the Required Lenders within 30 days after the date of such revocation or termination, and such revocation or termination and non-replacement could reasonably be expected to have a Material Adverse Effect. 8.1.8 COLLATERAL. If any material portion of the Collateral shall be seized or taken by a Governmental Body or Person, or Borrowers shall fail to maintain or cause to be maintained the Security Interests and priority of the Loan Instruments as against any Person, or the title and rights of any Obligor to any material portion of the Collateral shall have become the subject matter of litigation which could reasonably be expected to result in impairment or loss of the security provided by the Loan Instruments. 8.1.9 INTERRUPTION OF OPERATIONS. If the on-the-air broadcasting operations of CBC Stations in two or more markets shall cease completely at any time for more than 72 hours during any period of 10 consecutive days, unless (i) the broadcasting operations of all or substantially all of the radio stations in the relevant market also are interrupted for a like period of time or (ii) Borrowers shall be receiving during such period proceeds of business interruption insurance sufficient to assure that the per diem consolidated Operating Cash Flow of CBC during such period is at least equal to the average per diem consolidated Operating Cash Flow of CBC preceding the initial date of interruption; 70 80 provided, however, that, notwithstanding the provisions of clause (ii) to the contrary, an Event of Default shall be deemed to occur hereunder if the default described in of this subsection 8.1.9 continues for a period of 120 hours during any period of 20 consecutive days. 8.1.10 PLANS. If an event or condition specified in subsection 6.3.10 hereof shall occur or exist with respect to any Pension Plan or Multiemployer Plan and, as a result of such event or condition, together with all other such events or conditions, either Borrower or any ERISA Affiliate shall incur, or in the opinion of the Required Lenders be reasonably likely to incur, a liability to a Pension Plan or Multiemployer Plan or the PBGC (or any of them) which, in the reasonable judgment of the Required Lenders, would have a Material Adverse Effect. 8.1.11 CHANGE IN CONTROL; CESSATION OF WILSON'S ACTIVITIES. If at any time (i) Guarantor shall cease to own or control all of the CBC Common Stock, (ii) CBC shall cease to own or control all of the capital stock of CLI, (iii) any Person or Affiliate of such Person, other than ABRY Broadcast Partners II, a Delaware limited partnership, and Wilson or their respective Affiliates, own capital stock possessing more than 35% of the voting power of all voting stock of Guarantor, (iv) Wilson shall die, become permanently disabled or cease, for a period in excess of 60 days, to devote his full business time to the operation of CBC's Broadcasting Business, unless Wilson is replaced by a person reasonably acceptable to the Required Lenders within 90 days after such death, disability or cessation or (v) a Change of Control (as defined in the Senior Subordinated Debt Instruments and the Exchangeable Preferred Stock Instruments) shall occur. 8.1.12 GUARANTY. If (i) the Guaranty shall cease to be in full force and effect, (ii) Guarantor shall deny or disaffirm its obligations thereunder or (iii) Guarantor shall fail to make any payment thereunder when due. 8.2 ACCELERATION OF BORROWER'S OBLIGATIONS. Upon the occurrence of: (a) any Event of Default described in clauses (ii), (iii), (iv) and (v) of subsection 8.1.5(a) or in 8.1.5(b), the Commitments shall automatically terminate and all of Borrowers' Obligations at that time outstanding automatically shall mature and become due, and (b) any other Event of Default, upon the written request of the Required Lenders, and by delivery of written notice to Borrowers from the Agent (unless such Event of Default shall have been waived in writing or remedied), all Commitments shall terminate and all of Borrowers' Obligations shall become immediately due and payable, whereupon all Commitments shall immediately terminate and Borrowers' Obligations immediately shall mature and become due and payable, 71 81 all without presentment, demand, protest or notice (other than notice of the declaration referred to in clause (b) above), all of which hereby are waived. 8.3 RESCISSION OF ACCELERATION. After acceleration of the maturity of Borrowers' Obligations, if all interest, principal and other amounts which are then due (other than by reason of acceleration) are paid and all Events of Default then existing are waived in accordance with Section 13.6, the Lenders may elect in their sole discretion to rescind the acceleration. 8.4 REMEDIES ON DEFAULT. 8.4.1 REMEDIES UPON ACCELERATION. If Borrowers' Obligations have been accelerated pursuant to Section 8.2, upon the written request and at the direction of the Required Lenders the Agent may: (a) ENFORCEMENT OF SECURITY INTERESTS. Enforce its rights and remedies under the Loan Instruments in accordance with their respective terms. (b) OTHER REMEDIES. Enforce any of the rights or remedies accorded to Lenders and/or Agent at equity or law, by virtue of statute or otherwise. 8.4.2 BLOCKAGE NOTICE. Upon the occurrence and during the existence of an Event of Default, other than a default in the payment of principal, interest or any Loan Fees, whether or not Borrowers' Obligations have been accelerated pursuant to Section 8.2, upon the written request and the direction of the Required Lenders, the Agent shall, subject to the limitations set forth in the Note Indenture, send a Blockage Notice (as defined in the Note Indenture) to the trustee under the Note Indenture and the Borrowers imposing a Payment Blockage Period (as defined in the Indenture). 8.5 APPLICATION OF FUNDS. At any time an Event of Default exists, any funds received by Lenders or Agent pursuant to the exercise of any rights accorded to Lenders and/or Agent pursuant to, or by the operation of any of the terms of, any of the Loan Instruments, including, without limitation, insurance proceeds, condemnation proceeds or proceeds from the sale of Collateral, shall be applied to Borrowers' Obligations in the following order of priority: 8.5.1 EXPENSES. First, to the payment of (i) all fees and expenses actually incurred, including, without limitation, court costs, fees of appraisers, title charges, costs of maintaining and preserving the Collateral, costs of sale, and all other costs incurred by Agent and Lenders, in exercising any rights accorded to such Persons pursuant to the Loan Instruments or by applicable law, including, without limitation, reasonable attorney's fees, and (ii) all Liens superior to the Liens of Agent except such superior Liens subject to which any sale of the Collateral may have been made. 8.5.2 EXISTING PREPAYMENT PREMIUM. Next, to FINOVA in payment of the Existing Prepayment Premium. 72 82 8.5.3 BORROWERS' OBLIGATIONS. Next, to the Lenders in proportion to their respective Ratable Shares of the remaining portion of Borrowers' Obligations. 8.5.4 SURPLUS. Any surplus, to the Person or Persons entitled thereto. 8.6 PERFORMANCE OF BORROWER'S OBLIGATIONS. If Borrowers fail to (i) maintain in force and pay for any insurance policy or bond which Borrowers are required to provide pursuant to any of the Loan Instruments, (ii) keep the Collateral free from all Liens except for Permitted Liens, (iii) pay when due all taxes, levies and assessments on or in respect of the Collateral, except as otherwise permitted pursuant to the terms hereof, (iv) make all payments and perform all acts on the part of Borrowers to be paid or performed in the manner required by the terms hereof and by the terms of the other Loan Instruments with respect to any of the Collateral, including, without limitation, all expenses of protecting, storing, warehousing, insuring, handling and maintaining the Collateral, (v) keep fully and perform promptly any other of the obligations of Borrowers hereunder or under any of the other Loan Instruments, and (vi) keep fully and perform promptly the obligations of Borrowers with respect to any issue of Indebtedness for Borrowed Money secured by a Permitted Prior Lien, then Agent may (but shall not be required to) procure and pay for such insurance policy or bond, place such Collateral in good repair and operating condition, pay, contest or settle such Liens or taxes or any judgments based thereon or otherwise make good any other aforesaid failure of Borrowers. Borrowers shall reimburse Agent immediately upon demand for all sums paid or advanced on behalf of Borrowers for any such purpose, together with costs and expenses (including reasonable attorney's fees) paid or incurred by Agent in connection therewith and interest on all sums advanced from the date of advancement until repaid to Agent at the Default Rate. All such sums advanced by Agent, with interest thereon, immediately upon advancement thereof, shall be deemed to be part of Borrowers' Obligations. 8.7 RIGHT OF SETOFF. In addition to and not in limitation of all rights of offset that any Lender may have under applicable law, upon the occurrence of any Event of Default, and whether or not any Lender has made any demand or the Borrowers' Obligations have matured, each Lender shall have the right to appropriate and apply to the payment of Borrowers' Obligations all deposits and other obligations then or thereafter owing by such Lender to any Borrower. Each Lender exercising such rights shall notify the Agent thereof and any amount received as a result of the exercise of such rights shall be shared by the Lenders in accordance with their Ratable Shares. ARTICLE IX THE AGENT 9.1 APPOINTMENT. Each Lender hereby irrevocably appoints and authorizes FINOVA to act as Agent for such Lender under this Loan Agreement and to execute and deliver or accept the other Loan Instruments on behalf of such Lender. Each Lender hereby irrevocably 73 83 authorizes, and each holder of any Note by the acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take such action on its behalf under the provisions of this Loan Agreement and the other Loan Instruments and any other instruments and agreements referred to herein and therein, and to exercise such powers and to perform such duties hereunder as are specifically delegated to or required of the Agent by the terms of this Loan Agreement, together with such powers as are reasonably incidental thereto. FINOVA agrees to act as the Agent on behalf of the Lenders to the extent provided in this Loan Agreement. 9.2 DELEGATION OF DUTIES. The Agent may perform any of its respective duties hereunder by or through agents or employees and shall be entitled to engage and pay for the advice or services of any attorneys, accountants or other experts concerning all matters pertaining to its duties hereunder and to rely upon any advice so obtained. 9.3 NATURE OF DUTIES; INDEPENDENT CREDIT INVESTIGATION. The Agent shall have no duties or responsibilities except those expressly set forth in this Loan Agreement and no implied covenants, functions, responsibilities, duties, obligations, or liabilities shall be read into this Loan Agreement or otherwise exist. The duties of the Agent shall be mechanical and administrative in nature. Agent shall not have by reason of this Loan Agreement a fiduciary or trust relationship in respect of any Lender, and nothing in this Loan Agreement express or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Loan Agreement except as expressly set forth herein. Each Lender expressly acknowledges that (i) the Agent has not made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of any of the Obligors shall be deemed to constitute any representation or warranty by the Agent to any Lender and (ii) it has made and will continue to make, without reliance upon the Agent, its own independent investigation of the financial condition and affairs and its own appraisal of the creditworthiness of each of the Obligors and the condition and value of the Collateral in connection with this Loan Agreement and the making of the Loans. 9.4 INSTRUCTIONS FROM LENDERS. The Agent shall have the right to request instructions from the Required Lenders by notice to each of the Lenders. If the Agent shall request instructions from the Lenders with respect to any act or action (including the failure to act) in connection with this Loan Agreement, the Agent shall be entitled to refrain from such act or taking such action unless and until the Agent shall have received instructions from the Required Lenders, and the Agent shall not incur liability to any Person by reason of so refraining. No Lender shall have any right of action against the Agent as a result of the Agent acting or refraining from acting in accordance with the instructions of the Required Lenders. 9.5 EXCULPATORY PROVISIONS. None of the Agent or any of its respective directors, officers, employees, agents, attorneys or Affiliates shall (i) be liable to any Lender for any action taken or omitted to be taken by it or them pursuant to any Loan Instruments unless caused by it or its respective directors, officers, employees, agents, attorneys or Affiliates own gross negligence or willful misconduct, (ii) be responsible in any manner to any of the Lenders for the effectiveness, enforceability, genuineness, validity or due execution of this Loan Agreement 74 84 or any other Loan Instruments or for any recital, representation, warranty, document, certificate, report or statement herein or made or furnished under or in connection with this Loan Agreement or any other Loan Instruments, or (iii) be under any obligation to any of the Lenders to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions hereof or thereof on the part of the Obligors, the financial condition of the Obligors, or the existence or possible existence of any Event of Default or Incipient Default. 9.6 REIMBURSEMENT AND INDEMNIFICATION BY LENDERS OF THE AGENT. Each Lender agrees to reimburse and indemnify the Agent (to the extent not reimbursed by Borrowers and without limiting the obligation of Borrowers to do so) in proportion to its Ratable Share from and against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent in its capacity as such, in any way relating to or arising out of this Loan Agreement or any other Loan Instruments or any action taken or omitted by the Agent hereunder or thereunder, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. 9.7 RELIANCE BY AGENT. The Agent shall be entitled to rely upon any writing, telegram, telex or teletype message, resolution, notice, consent, certificate, letter, statement, order or other document or conversation by telephone or otherwise believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon the advice and opinions of counsel and other professional advisers selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense (other than a liability or expense relating to gross negligence or willful misconduct) which may be incurred by it by reason of taking or continuing to take any such action. 9.8 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Incipient Default or Event of Default unless the Agent has received written notice from a Lender or the Borrowers referring to this Loan Agreement, describing such Incipient Default or Event of Default and stating that such notice is a "notice of default." 9.9 RELEASE OF COLLATERAL. The Lenders hereby authorize the Agent to release any Lien granted to Agent upon any Collateral upon (i) termination of the Commitments and payment and satisfaction of all of Borrowers' Obligations or (ii) the request of Borrowers if such release is required pursuant to the terms of any of the Loan Instruments. 9.10 LENDERS IN THEIR INDIVIDUAL CAPACITIES. With respect to the Commitments and the Loans made by it, the Agent shall have the same rights and powers as any other Lender and may exercise the same as thought it were not the Agent, and the term "Lenders" shall, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates and each of the Lenders and their respective Affiliates may, without liability to account, except as prohibited herein, make loans to, accept deposits from, discount drafts for, 75 85 act as trustee under indentures of, and generally engage in any kind of banking or trust business with, the Obligors and their Affiliates as though such Lender were not a Lender hereunder. 9.11 HOLDERS OF NOTES. The Agent may deem and treat any payee of any Note as the owner hereof for all purposes unless and until the Agent receives an Assignment and Acceptance with respect thereto. Any request, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor. 9.12 SUCCESSOR AGENT. The Agent may resign at any time by giving not less than 30 days' prior written notice to the Borrowers and the other Lenders and the Agent may be removed at any time with or without cause by the Required Lenders. The Required Lenders shall have the right to appoint a successor Agent with the consent of Borrowers, which consent shall not be unreasonably withheld. If a successor Agent is not appointed within 30 days following the Agent's notice of its resignation or its removal, the Agent shall appoint a successor agent who shall serve as Agent until such time as the Required Lenders appoint a successor Agent. Upon its appointment, such successor Agent shall succeed to the rights, powers and duties of the Agent and the term "Agent" shall mean such successor effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After the resignation of any Agent, the provisions of this Article IX shall inure to the benefit of such former Agent and such former Agent shall not by reason of such resignation be deemed to be released from liability for any actions taken or not taken by it while it was the Agent. 9.13 DELIVERY OF INFORMATION. The Agent shall not be required to deliver to any Lender originals or copies of any documents, instruments, reports, notices, communications or other information received by the Agent from the Obligors or any other Person under or in connection with any Loan Instruments except (i) as specifically provided in the Loan Instruments or (ii) as specifically requested from time to time in writing by any Lender with respect to a specific document, instrument, notice or other written communication received by and in the possession of the Agent at the time of receipt of such request and then only in accordance with such specific request. 9.14 BENEFICIARIES. Except as expressly provided in this Loan Agreement, the provisions of this Article IX are solely for the benefit of the Agent and the Lenders, and the Obligors shall not have any rights to rely on or enforce any of the provisions hereof. In performing its functions and duties under this Loan Agreement, the Agent shall act solely as agent of the 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 any of the Obligors. 76 86 ARTICLE X LOAN ASSIGNMENT AND PARTICIPATION 10.1 ASSIGNMENT TO OTHER LENDERS. 10.1.1 ASSIGNMENT. Each Lender may assign to one of its affiliates and may, with the written consent of Borrowers which shall not be unreasonably withheld, assign to one or more other financial institutions all or any portion of its Commitment and its rights and obligations under this Loan Agreement with respect thereto (a "Loan Assignment"), provided, however, that (i) each Loan Assignment shall be of a constant, and not a varying, percentage of all rights and obligations of such Lender under this Loan Agreement, (ii) the amount of the Commitment of the assigning Lender being assigned pursuant to each such Loan Assignment shall not be less than the lesser of $5,000,000 or the remaining amount of such Lender's Commitment and shall be in integral multiples of $1,000,000 in excess thereof, and (iii) the parties to each such Loan Assignment shall execute and deliver to the Agent an Assignment and Acceptance, together with any Note or Notes subject to such assignment. 10.1.2 EFFECT OF ASSIGNMENT. Upon the execution, delivery, acceptance and recording of an Assignment and Acceptance (i) the Assignee thereunder shall be a party to this Loan Agreement and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (ii) the Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Loan Agreement. 10.1.3 REGISTER. The Agent shall maintain a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names, addresses, and Commitments of the Lenders (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. 10.1.4 SUBSTITUTION OF NOTES. Simultaneously with the delivery by Agent to Borrowers of any Note which is the subject of a Loan Assignment which is marked "canceled," Borrowers shall execute and deliver to Agent for delivery to (i) the applicable Assignee, a Note payable to the order of such Assignee in an amount equal to the amount assigned to such Assignee, and (ii) the assigning Lender, a Note payable to the order of such Lender in an amount equal to the amount retained by such Lender, each such Note to be substantially in the form of the canceled Note. 77 87 10.2 PARTICIPATIONS. Each Lender shall have the right to sell Participations in all or any portion of its rights and obligations under this Loan Agreement. In the event of the sale of a Participation, the obligations of the Lender selling such a Participation shall remain unchanged, such Lender shall remain solely responsible to the other parties to this Loan Agreement for the performance thereof, such Lender shall remain the holder of any Note which previously has been delivered to Lender pursuant to the terms of this Loan Agreement, and Borrowers shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Loan Agreement. ARTICLE XI CLOSING The Closing Date shall be such date as the parties shall determine, and the Closing shall take place on such date, provided all conditions for the Closing as set forth in this Loan Agreement have been satisfied or otherwise waived by the Lenders. The Closing shall occur at such place as the parties hereto shall agree. Unless the Closing occurs on or before July 31, 1997, this Loan Agreement shall terminate and be of no further force or effect and, except for any obligation of Borrowers to Agent and Lenders pursuant to Article XII, none of the parties hereto shall have any further obligation to any other party. ARTICLE XII EXPENSES AND INDEMNITY 12.1 ATTORNEY'S FEES AND OTHER FEES AND EXPENSES. Whether or not any of the transactions contemplated by this Loan Agreement shall be consummated, Borrowers agree to pay to Agent and Lenders on demand all expenses incurred by Agent and Lenders in connection with the transactions contemplated hereby and in connection with any amendments, modifications or waivers (whether or not the same become effective) under or in respect of any of the Loan Instruments, including, without limitation: 12.1.1 FEES AND EXPENSES FOR PREPARATION OF LOAN INSTRUMENTS. All expenses and disbursements (including, without limitation, charges for required mortgagee's title insurance, lien searches, reproduction of documents, long distance telephone calls, overnight express carriers, appraisal fees, recording charges and environmental audit fees) and reasonable attorney's fees actually incurred by Agent and Lenders in connection with the (i) preparation, review and negotiation of the Loan Instruments or any amendments, modifications or waivers thereto or any documents delivered pursuant thereto and (ii) administration of the Loans. 78 88 12.1.2 FEES AND EXPENSES IN ENFORCEMENT OF RIGHTS OR DEFENSE OF LOAN INSTRUMENTS. Any expenses or other costs, including reasonable attorney's fees and expert witness fees, actually incurred by Agent and Lenders in connection with the enforcement or collection against any Obligor of any provision of any of the Loan Instruments, and in connection with or arising out of any litigation, investigation or proceeding instituted by any Governmental Body or any other Person with respect to any of the Loan Instruments, whether or not suit is instituted, including, but not limited to, such costs or expenses arising from the enforcement or collection against any Obligor of any provision of any of the Loan Instruments in workout or restructuring or in any state or federal bankruptcy or reorganization proceeding. 12.2 INDEMNITY. Borrowers agree to indemnify and save Agent and Lenders harmless of and from the following: 12.2.1 BROKERAGE FEES. The fees, if any, of brokers and finders engaged by Borrowers. 12.2.2 GENERAL. Any loss, cost, liability, damage or expense (including reasonable attorney's fees and expenses) incurred by Agent and Lenders in investigating, preparing for, defending against, providing evidence, producing documents or taking other action in respect of any commenced or threatened litigation, administrative proceeding, suit instituted by any Person or investigation under any law, including any federal securities law, the Bankruptcy Code, any relevant state corporate statute or any other securities law, bankruptcy law or law affecting creditors generally of any jurisdiction, or any regulation pertaining to any of the foregoing, or at common law or otherwise, relating, directly or indirectly, to the transactions contemplated by or referred to in, or any other matter related to, the Loan Instruments, whether or not Agent or any Lender is a party to such litigation, proceeding or suit, or is subject to such investigation. 12.2.3 OPERATION OF COLLATERAL; JOINT VENTURERS. Any loss, cost, liability, damage or expense (including reasonable attorney's fees and expenses) incurred in connection with the ownership, operation or maintenance of the Collateral, the construction of Agent or any Lender and Borrowers as having the relationship of joint venturers or partners or the determination that Agent or any Lender has acted as agent for any Borrower. 12.2.4 ENVIRONMENTAL INDEMNITY. Any and all claims, losses, damages, response costs, clean-up costs and expenses suffered and/or incurred at any time by Agent and any Lender arising out of or in any way relating to the existence at any time of any Hazardous Materials in, on, under, at, transported to or from, or used in the construction and/or renovation of, any of the Real Property or Leasehold Property, or otherwise with respect to any Environmental Law, and/or the failure of either Borrower to perform its obligations and covenants hereunder with respect to environmental matters, including, but not limited to: (i) claims of any Persons for damages, penalties, response 79 89 costs, clean-up costs, injunctive or other relief, (ii) costs of removal and restoration, including fees of attorneys and experts, and costs of reporting the existence of Hazardous Materials to any Governmental Body, and (iii) any expenses or obligations, including attorney's fees and expert witness fees, incurred at, before and after any trial or other proceeding before any Governmental Body or appeal therefrom whether or not taxable as costs, including, without limitation, witness fees, deposition costs, copying and telephone charges and other expenses, all of which shall be paid by Borrowers to Agent or such Lender, when incurred by Agent or such Lender. ARTICLE XIII MISCELLANEOUS 13.1 NOTICES. All notices and communications under this Loan Agreement shall be in writing and shall be (i) delivered in person, (ii) sent by telecopy, or (iii) mailed, postage prepaid, either by registered or certified mail, return receipt requested, or by overnight express carrier, addressed in each case as follows: To Borrowers: c/o Citadel Broadcasting Company 140 South Ash Avenue Tempe, Arizona 85281 Attention: Donna L. Heffner Chief Financial Officer Telecopy No.: (602) 731-5229 Copy (which shall Osborn Maledon not constitute 2929 North Central Avenue notice hereunder) to: Suite 2100 Phoenix, Arizona 85012 Attention: Michelle M. Matiski, Esq. Telecopy No.: (602) 640-6060 and Eckert Seamans Cherin & Mellott 600 Grant Street 42nd Floor Pittsburgh, Pennsylvania 15219 Attention: Bryan D. Rosenberger, Esq. Telecopy No.: (412) 566-6099 80 90 To Agent: FINOVA Capital Corporation 311 South Wacker Drive Suite 4400 Chicago, Illinois 60606 Attention: Matthew M. Breyne Group Vice President Telecopy No.: (312) 322-3530 Copy (which shall not FINOVA Capital Corporation constitute notice 1850 N. Central Avenue hereunder) to: Phoenix, Arizona 85002-2209 Attention: Vice President, Law Telecopy No.: (602) 207-5036 Copy (which shall not Katten Muchin & Zavis constitute notice 525 West Monroe Street, Suite 1600 hereunder) to: Chicago, Illinois 60661 Attention: Maurice Jacobs, Esq. Telecopy No.: (312) 902-1061 To Any Other Lender: Its address indicated on the signature page hereto, an Assignment and Acceptance or a notice to the other parties hereto. or to any other address or telecopy number, as to any of the parties hereto, as such party shall designate in a written notice to the other parties hereto. All notices sent pursuant to the terms of this Section 13.1 shall be deemed received (i) if personally delivered, then on the Business Day of delivery, (ii) if sent by telecopy before 2:00 p.m. Chicago time, on the day sent if a Business Day or if such day is not a Business Day or if sent after 2:00 p.m. Chicago time, then on the next Business Day, (iii) if sent by overnight, express carrier, on the next Business Day immediately following the day sent, or (iv) if sent by registered or certified mail, on the earlier of the fifth Business Day following the day sent or when actually received. Any notice by telecopy shall be followed by delivery on the next Business Day by overnight, express carrier or by hand. 13.2 SURVIVAL OF LOAN AGREEMENT; INDEMNITIES. All covenants, agreements, representations and warranties made in this Loan Agreement and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loans and the execution and delivery to Lenders of the Notes and of all other Loan Instruments, and shall continue in full force and effect so long as any of Borrowers' Obligations remain outstanding, unperformed or unpaid. Notwithstanding the repayment of all amounts due under the Loan Instruments, the cancellation of the Notes and the release and/or cancellation of any and all of the Loan Instruments or the foreclosure of any Liens on the Collateral, the obligations of Borrowers to indemnify Agent and Lenders with respect to the expenses, damages, losses, costs and liabilities described in 81 91 Section 12.2 shall survive until all applicable statute of limitations periods with respect to actions which may be brought against Agent or any Lender have run. 13.3 FURTHER ASSURANCE. From time to time, Borrowers shall execute and deliver to Agent and Lenders such additional documents as Agent or such Lenders reasonably may require to carry out the purposes of the Loan Instruments and to protect the rights of the Agent and Lenders thereunder, including, without limitation, using their best efforts in the event any Collateral is to be sold to secure the approval by any Governmental Body of any application required by such Governmental Body in connection with such sale, and not take any action inconsistent with such sale or the purposes of the Loan Instruments. 13.4 TAXES AND FEES. Should any tax (other than taxes based upon the net income of any Lender), recording or filing fees become payable in respect of any of the Loan Instruments, or any amendment, modification or supplement thereof, Borrowers agree to pay the same on demand, together with any interest or penalties thereon attributable to any delay by Borrowers in meeting any Lender's demand, and agrees to hold Lenders harmless with respect thereto. 13.5 SEVERABILITY. In the event that any provision of this Loan Agreement is deemed to be invalid by reason of the operation of any law, including, but not limited to, any of the rules and regulations and policies of the FCC, or by reason of the interpretation placed thereon by any court or the FCC or any other Governmental Body, as applicable, this Loan Agreement shall be construed as not containing such provision and the invalidity of such provision shall not affect the validity of any other provisions hereof, and any and all other provisions hereof which otherwise are lawful and valid shall remain in full force and effect. 13.6 WAIVERS AND AMENDMENTS. No delay on the part of Agent or any Lender in exercising any right, power or privilege hereunder shall operate as a waiver thereof, and no single or partial exercise of any right, power or privilege hereunder shall preclude other or further exercise thereof, or be deemed to establish a custom or course of dealing or performance between the parties hereto, or preclude the exercise of any other right, power or privilege. No modification or waiver of any provision of any of the Loan Instruments shall be effective unless in writing and signed by the Required Lenders or the Agent on their behalf, except that the written consent of all the Lenders is required to (i) increase the Commitments; (ii) reduce the principal of or interest on any Note or any Loan Fee; (iii) postpone any date fixed for any payment of principal on or interest on any Note or any fee due hereunder; (iv) amend or waive this Section 13.6, Section 13.9 or the definition of "Required Lenders"; (v) release Guarantor from its obligations under the Guaranty; or (vi) release any liens upon the Collateral, except such release upon the sale of any Collateral in a Permitted Disposition, as permitted by clause (i) of Section 7.11 and as otherwise expressly provided in this Loan Agreement. 13.7 JOINT AND SEVERAL LIABILITY. The obligations of the Borrowers are joint and several. 82 92 13.8 CAPTIONS. The headings in this Loan Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. 13.9 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, subject to the limitations set forth in Article X. Borrowers may not assign any of their rights or obligations hereunder without the consent of all Lenders 13.10 REMEDIES CUMULATIVE. All rights and remedies of Agent and Lenders pursuant to this Loan Agreement, any other Loan Instruments or otherwise, shall be cumulative and non-exclusive, and may be exercised singularly or concurrently. Neither Agent nor any Lender shall be required to prosecute collection, enforcement or other remedies against any Obligor before proceeding against any other Obligor or to enforce or resort to any security, liens, collateral or other rights of Agent or Lenders. One or more successive actions may be brought against Obligors, either in the same action or in separate actions, as often as Lenders deem advisable, until all of Borrowers' Obligations are paid and performed in full. 13.11 ENTIRE AGREEMENT; CONFLICT. This Loan Agreement and the other Loan Instruments executed prior or pursuant hereto constitute the entire agreement among the parties hereto with respect to the transactions contemplated hereby or thereby and supersede any prior agreements, whether written or oral, relating to the subject matter hereof. In the event of a conflict between the terms and conditions set forth herein and the terms and conditions set forth in any other Loan Instrument, the terms and conditions set forth herein shall govern. 13.12 APPLICABLE LAW. THE LOAN INSTRUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS AND DECISIONS OF THE STATE OF ARIZONA. FOR PURPOSES OF THIS SECTION 13.12, THE LOAN INSTRUMENTS SHALL BE DEEMED TO BE PERFORMED AND MADE IN THE STATE OF ARIZONA. 13.13 JURISDICTION AND VENUE. BORROWERS HEREBY AGREE THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY ANY BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THE LOAN INSTRUMENTS SHALL BE LITIGATED IN THE SUPERIOR COURT OF MARICOPA COUNTY, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA OR, IF AGENT OR ANY LENDER INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH AGENT OR SUCH LENDER SHALL INITIATE OR TO WHICH AGENT OR SUCH LENDER SHALL REMOVE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. BORROWERS HEREBY EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY AGENT OR ANY LENDER IN OR REMOVED BY AGENT OR ANY LENDER TO ANY OF SUCH COURTS, AND HEREBY AGREE THAT PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN MAY BE SERVED IN THE MANNER 83 93 PROVIDED FOR NOTICES HEREIN, AND AGREE THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWERS AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO SECTION 13.1. BORROWERS WAIVE ANY CLAIM THAT MARICOPA COUNTY, ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE. TO THE EXTENT PROVIDED BY LAW, SHOULD ANY BORROWER, AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF, SUCH BORROWER SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED BY THE COURT AGAINST SUCH BORROWER AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR BORROWERS SET FORTH IN THIS SECTION 13.13 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT BY AGENT OR ANY LENDER OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING BY AGENT OR ANY LENDER OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND BORROWERS HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION. 13.14 WAIVER OF RIGHT TO JURY TRIAL. AGENT, LENDERS AND BORROWERS ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN INSTRUMENTS OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY. 13.15 TIME OF ESSENCE. TIME IS OF THE ESSENCE FOR THE PERFORMANCE BY BORROWERS OF THE OBLIGATIONS SET FORTH IN THIS LOAN AGREEMENT AND THE OTHER LOAN INSTRUMENTS. 13.16 ESTOPPEL CERTIFICATE. Within 15 days after Agent requests Borrowers to do so, Borrowers will execute and deliver to Agent or such Lender as Agent may direct a statement certifying (i) that this Loan Agreement is in full force and effect and has not been modified except as described in such statement, (ii) the date to which interest on the Notes has been paid, (iii) the Principal Balance, (iv) whether or not to its knowledge an Event of Default has occurred and is continuing, and, if so, specifying in reasonable detail each such Event of Default of which it has knowledge, (v) whether to its knowledge it has any defense, setoff or counterclaim to the payment of the Note in accordance with its terms, and, if so, specifying each defense, setoff or counterclaim of which it has knowledge in reasonable detail (including where applicable the amount thereof), and (vi) as to any other matter reasonably requested by Agent. 84 94 13.17 CONSEQUENTIAL DAMAGES. Neither Agent nor any Lender nor any agent or attorney of Agent or such Lender shall be liable to Borrowers for consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Borrowers' Obligations. 13.18 COUNTERPARTS. This Loan Agreement may be executed by the parties hereto in several counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute one and the same agreement. 13.19 NO FIDUCIARY RELATIONSHIP. No provision in this Loan Agreement or in any other Loan Instrument, and no course of dealing among the parties hereto, shall be deemed to create any fiduciary duty by Agent or any Lender to Borrowers. 13.20 NOTICE OF BREACH BY AGENT AND LENDERS. Borrowers agree to give Agent and each Lender written notice of (i) any action or inaction by Agent or any Lender or any agent or attorney of Agent or such Lender in connection with the Loan Instruments that may be actionable against Agent or such Lender or any agent or attorney of Agent or such Lender or (ii) any defense to the payment of Borrowers' Obligations for any reason, including, but not limited to, commission of a tort or violation of any contractual duty implied by law. 13.21 CONFIDENTIALITY. Except as provided for in the Loan Instruments and except as necessary to enable Lender to realize upon Borrowers' Obligations and except as necessary in connection with the administration or enforcement of Agent's and Lenders' rights under the Loan Instruments, neither Agent nor any Lender shall disclose any information relative to the Broadcasting Business or Related Business of any Borrower designated by such Borrower as confidential to any Person without the prior written consent of such Borrower, except that Agent and Lenders may disclose any such information (i) in connection with any proposed Loan Assignment or Participation as long as Agent and Lenders require each of the Persons to whom such information is disclosed to keep it confidential in accordance with this Section 13.21, (ii) which otherwise is in the public domain, (iii) to the extent required by applicable law or any rule, regulation, decree, order or injunction of any Governmental Body or (iv) which is obtained by Agent or any Lender from a third party not known to Agent or any Lender to be under an obligation of confidentiality to Borrowers. 13.22 GOVERNMENTAL APPROVAL. Notwithstanding anything to the contrary contained herein or in any other Loan Instrument, no party hereto shall take any action that would constitute or result in the transfer or assignment of any FCC license, or other license, permit or authority issued by any Governmental Body, or a transfer of control over any such license, permit or authorization, if such assignment or transfer would require the prior approval of and/or notice to any Governmental Body, without such party first having notified such Governmental Body of any such assignment or transfer and, if required, obtaining the approval of such Governmental Body therefor. [remainder of page intentionally blank] 85 95 IN WITNESS WHEREOF, this Loan Agreement has been executed and delivered by each of the parties hereto by a duly authorized officer of each such party on the date first set forth above. CITADEL BROADCASTING COMPANY, a Nevada corporation, and CITADEL LICENSE, INC., a Nevada corporation By: /s/ Lawrence R. Wilson ------------------------------------ Lawrence R. Wilson President of each corporation FINOVA CAPITAL CORPORATION, a Delaware corporation, individually and as Agent By: /s/ Matthew M. Breyne ------------------------------------ Matthew M. Breyne Group Vice President BANKBOSTON, N.A. By: /s/ M. S. Denomme ------------------------------------ Name: Mark S. Denomme ------------------------------ Title: Director ----------------------------- NATIONSBANK OF TEXAS, N.A. By: /s/ Roselyn Reid ------------------------------------ Name: Roselyn Reid ------------------------------ Title: Vice President ----------------------------- (Signatures continued on next page) 86 96 (Signatures continued from previous page) THE BANK OF NEW YORK By: /s/ Geoffrey Brooks --------------------------------- Name: Geoffrey C. Brooks --------------------------- Title: Vice President -------------------------- UNION BANK OF CALIFORNIA, N.A. By: /s/ Bryan G. Peterman --------------------------------- Name: Bryan G. Peterman --------------------------- Title: Vice President -------------------------- 87 EX-10.19 30 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.19 AGREEMENT OF PURCHASE AND SALE By and Among TELE-MEDIA BROADCASTING COMPANY, TELE-MEDIA BROADCASTING COMPANY OF CENTRE REGION, TELE-MEDIA BROADCASTING HOLDING CORPORATION, and THE SHAREHOLDERS OF TELE-MEDIA BROADCASTING COMPANY, OF TELE-MEDIA BROADCASTING COMPANY OF CENTRE REGION, AND OF TELE-MEDIA BROADCASTING HOLDING CORPORATION, and CITADEL BROADCASTING COMPANY and CITADEL COMMUNICATIONS CORPORATION Dated as of March 17, 1997 but executed, delivered and effective as of March 28, 1997 2 TABLE OF CONTENTS
PAGE SECTION 1.......................................................................................................-2- DEFINITIONS............................................................................................-2- 1996 Cash Flow................................................................................-2- Accounts Receivable...........................................................................-3- Acquisition Agreements........................................................................-3- Acquisition Debt..............................................................................-3- Acquisitions..................................................................................-3- Acquisition Purchase Price....................................................................-3- Act...........................................................................................-3- Additional Radio Stations.....................................................................-3- Affiliate.....................................................................................-4- Ancillary FCC Applications....................................................................-4- Ancillary FCC Grants of Consent...............................................................-4- Assigned Contracts............................................................................-4- Assumed Obligations...........................................................................-4- Audited Financial Statements..................................................................-4- Bonds.........................................................................................-4- Bond Payoff Amount............................................................................-4- Bond Payoff Agreement.........................................................................-4- Business .....................................................................................-4- Centre Pledge.................................................................................-5- Centre Shares.................................................................................-5- Closing.......................................................................................-5- Closing Date..................................................................................-5- Code..........................................................................................-5- Covenant......................................................................................-5- Effective Time................................................................................-5- Environmental Claims..........................................................................-5- Environmental Conditions......................................................................-5- Environmental Laws............................................................................-5- Environmental Noncompliance...................................................................-6- Escrow Agent..................................................................................-6- Escrow Agreement..............................................................................-6- Escrow Deposit................................................................................-6- Existing Radio Stations.......................................................................-6- Existing Financing Documents..................................................................-6- Expiration Date...............................................................................-6- FCC...........................................................................................-7- FCC Application...............................................................................-7- FCC Grant of Consent..........................................................................-7- FCC Licenses..................................................................................-7- Final Distribution............................................................................-7- Final Order...................................................................................-7- Finova........................................................................................-7- Finova Payoff Amount..........................................................................-7- Finova Payoff Letter..........................................................................-7- Finova Prepayment Penalty.....................................................................-7- GAAP..........................................................................................-8- Governmental Authority........................................................................-8- Guaranteed Receivables........................................................................-8-
3 Hazardous Materials...........................................................................-8- Holding Shares................................................................................-8- HSR Act.......................................................................................-8- HSR Filing....................................................................................-8- Indebtedness for Borrowed Money...............................................................-8- Intellectual Property.........................................................................-9- Knowledge of Purchaser........................................................................-9- Knowledge of Sellers..........................................................................-9- Lien..........................................................................................-9- Litigation....................................................................................-9- Metro Area....................................................................................-9- Non-Refundable Payment........................................................................-9- Obligations...................................................................................-9- Option Termination...........................................................................-10- Options......................................................................................-10- Other Acquisition Costs......................................................................-10- Owned Real Property..........................................................................-10- Permitted Exceptions.........................................................................-10- Person.......................................................................................-10- Personal Property............................................................................-10- Providence Payment...........................................................................-11- Purchased Assets.............................................................................-11- Purchased Radio Stations.....................................................................-11- Purchased Real Estate........................................................................-11- Quick Assets.................................................................................-11- Real Property Leases.........................................................................-11- Release Documents............................................................................-11- Reorganization...............................................................................-11- Restated Certificate of Incorporation of TMBC................................................-11- Sellers' FCC Problem.........................................................................-11- Senior Credit Agreement......................................................................-12- Senior Debt..................................................................................-12- Shares.......................................................................................-12- Station......................................................................................-12- Subsidiary Partnerships......................................................................-12- Supplemental Financial Statements............................................................-12- Taxes........................................................................................-12- TMBC Shares..................................................................................-13- Trade Agreements.............................................................................-13- Trade Liabilities............................................................................-13- Trade Receivables............................................................................-13- Trade Schedule...............................................................................-13- Warrant Agreement............................................................................-13- Warrants.....................................................................................-13- SECTION 2......................................................................................................-13- PURCHASE AND SALE OF THE SHARES; RELATED MATTERS......................................................-13- 2.1 Purchase and Sale of the Shares..........................................................-13- 2.2 Purchase Price and Payment...............................................................-13- 2.3 Purchased Radio Stations.................................................................-14- 2.4 Assumed Obligations......................................................................-16- 2.5 Real Property............................................................................-16- Title to Real Property..............................................................-16- Environmental Reports...............................................................-16-
4 2.6 Covenant Not to Compete..................................................................-17- 2.7 Final Distribution.......................................................................-17- 2.8 Non-Refundable Payment...................................................................-17- 2.9 Escrow Deposit...........................................................................-18- SECTION 3......................................................................................................-18- REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE SELLERS...........................................................-18- 3.1 Organization and Qualification...........................................................-18- 3.2 Authority................................................................................-19- 3.3 No Legal Bar; Conflicts..................................................................-19- 3.4 Capitalization...........................................................................-20- 3.5 Financial Statements.....................................................................-20- 3.6 Absence of Certain Changes...............................................................-21- 3.7 Taxes....................................................................................-22- 3.8 Asset Schedule...........................................................................-23- 3.9 Title to and Condition of Property.......................................................-23- Title...............................................................................-23- Condition...........................................................................-23- Insurance...........................................................................-23- Sufficiency of Assets...............................................................-24- Purchased Real Estate...............................................................-24- 3.10 Accounts Receivable.....................................................................-25- 3.11 Contractual and Other Obligations.......................................................-25- 3.12 Existing Financing Documents; Senior Credit Agreement...................................-26- 3.13 Compensation............................................................................-26- 3.14 Employee Benefit Plans..................................................................-27- 3.15 Labor Relations.........................................................................-29- 3.16 Increases in Compensation or Benefits...................................................-29- 3.17 Insurance...............................................................................-30- 3.18 Litigation; Disputes....................................................................-30- 3.19 Environmental...........................................................................-30- 3.20 Permits; Compliance with Applicable Law.................................................-31- General.............................................................................-31- Permits.............................................................................-31- 3.21 Intellectual Property...................................................................-32- 3.22 Books and Records.......................................................................-33- 3.23 Trade Schedule..........................................................................-33- 3.24 Acts to be Performed....................................................................-33- 3.25 Other Agreements........................................................................-33- 3.26 Disclosure..............................................................................-33- SECTION 4......................................................................................................-33- REPRESENTATIONS AND WARRANTIES OF THE SELLERS.........................................................-33- 4.1 Authority................................................................................-33- 4.2 Ownership of the Shares, Etc.............................................................-34- 4.3 No Legal Bar; Conflicts..................................................................-34- 4.4 Option Agreement.........................................................................-34- 4.5 Other Agreements.........................................................................-34- 4.6 Disclosure...............................................................................-34- SECTION 5......................................................................................................-35- REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.......................................................-35-
5 5.1 Organization and Qualification...........................................................-35- 5.2 Authority................................................................................-35- 5.3 No Legal Bar; Conflicts..................................................................-35- 5.4 Purchaser's FCC Qualifications...........................................................-36- 5.5 Bond Payoff Agreement....................................................................-36- 5.6 Disclosure...............................................................................-36- SECTION 6......................................................................................................-36- AFFIRMATIVE COVENANTS OF THE COMPANIES AND THE SELLERS................................................-36- 6.1 Certain Transactions.....................................................................-36- 6.2 Senior Credit Agreement..................................................................-37- 6.3 Payment of Obligations...................................................................-37- 6.4 Access...................................................................................-37- 6.5 Operations in the Regular Course.........................................................-37- 6.6 Maintenance..............................................................................-38- 6.7 Preservation of Organization.............................................................-38- 6.8 Accounts Receivable......................................................................-38- 6.9 Books and Records........................................................................-38- 6.10 Employees...............................................................................-38- 6.11 Compliance with FCC.....................................................................-39- 6.12 Taxes...................................................................................-39- 6.13 Consents; Estoppel Certificates.........................................................-39- 6.14 Supplemental Financial Statements.......................................................-39- 6.15 Obligations with Respect to ............................................................-40- 6.16 Delivery of Acquisition Documents.......................................................-40- 6.17 Delivery of Other Agreements............................................................-40- 6.18 Further Information.....................................................................-40- 6.19 Notice..................................................................................-40- 6.20 Employee Benefits.......................................................................-41- SECTION 7......................................................................................................-41- NEGATIVE COVENANTS OF THE COMPANIES AND THE SELLERS...................................................-41- 7.1 Sales, Transfers and Liens...............................................................-41- 7.2 Assumed Obligations......................................................................-41- 7.3 Breaches; Defaults.......................................................................-41- 7.4 Indebtedness for Borrowed Money; Obligations.............................................-42- 7.5 Loans; Advances..........................................................................-42- 7.6 [Intentionally Omitted]..................................................................-42- 7.7 Dividends; Distributions.................................................................-42- 7.8 Salary Increases.........................................................................-42- 7.9 Nonsolicitation..........................................................................-42- SECTION 8......................................................................................................-42- ADDITIONAL COVENANTS OF THE PARTIES...................................................................-42- 8.1 Trade....................................................................................-42- 8.2 Accounts Receivable......................................................................-43- 8.3 Providence Payment Proceeds..............................................................-44- 8.4 Application for Transfer of Control......................................................-44- 8.5 Adjustments at Closing...................................................................-45- 8.6 Brokerage................................................................................-46- 8.7 Risk of Loss.............................................................................-46- 8.8 Actions With FCC.........................................................................-46- 8.9 Purchaser's Financing....................................................................-47- 8.10 Cooperation.............................................................................-47-
6 8.11 Dismissal of Litigation.................................................................-47- 8.12 HSR Filing..............................................................................-47- 8.13 Name Changes............................................................................-47- 8.14 Agreement Not to Employ.................................................................-48- 8.16 Bond Payoff Agreement...................................................................-48- 8.17 Public Announcements....................................................................-48- 8.18 Notice of Breaches......................................................................-48- 8.19 Assignments.............................................................................-48- 8.20 Finova Prepayment.......................................................................-48- 8.21 Control.................................................................................-48- 8.22 Purchaser's Employee Benefit Plans......................................................-48- SECTION 9......................................................................................................-49- THE CLOSING...........................................................................................-49- 9.1 Closing Date.............................................................................-49- 9.2 Closing Documents........................................................................-49- 9.3 Extension of Closing Date................................................................-50- SECTION 10.....................................................................................................-50- CONDITIONS TO THE SELLERS' OBLIGATIONS TO CLOSE.......................................................-50- 10.1 Opinion of the Purchaser's Counsel......................................................-50- 10.2 Representations and Warranties..........................................................-51- 10.3 No Litigation...........................................................................-51- 10.4 Other Certificates......................................................................-51- 10.5 Corporate Action........................................................................-52- 10.6 Acts to be Performed....................................................................-52- 10.7 FCC Grant of Consent....................................................................-52- 10.8 HSR Clearance...........................................................................-52- 10.9 Sellers' Representations and Warranties.................................................-52- SECTION 11.....................................................................................................-52- CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE.....................................................-52- 11.1 Opinion of the Companies' and the Sellers' Counsel......................................-52- 11.2 Representations, Warranties and Covenants...............................................-55- 11.3 No Litigation...........................................................................-55- 11.4 Other Certificates......................................................................-55- 11.5 Corporate Action........................................................................-56- 11.6 Acts to Performed.......................................................................-56- 11.7 No Material Loss........................................................................-56- 11.8 Filings, Consents, Approvals and Estoppel Certificates..................................-56- 11.9 FCC Grant of Consent....................................................................-56- 11.10 Senior Credit Agreement................................................................-56- 11.11 Certain Transactions...................................................................-56- 11.12 Sale of All TMBC Shares................................................................-56- 11.13 HSR Clearance..........................................................................-56- SECTION 12.....................................................................................................-57- INDEMNIFICATION.......................................................................................-57- 12.1 Indemnification by the Sellers..........................................................-57- 12.2 Indemnification by the Purchaser........................................................-57- 12.3 Procedure for Indemnification...........................................................-57- 12.4 Limitation Period.......................................................................-58-
7 12.5 Basket..................................................................................-58- SECTION 13.....................................................................................................-59- TERMINATION, EXPIRATION, REPUDIATION; REMEDIES........................................................-59- 13.1 Termination.............................................................................-59- 13.2 Specific Performance....................................................................-60- 13.3 Disputes Regarding Termination..........................................................-60- 13.4 Limitation of the Purchaser's and Citadel's Liability...............................................................................-60- 13.5 Limitation of the Seller's and the Companies' Liability...............................................................................-61- SECTION 14.....................................................................................................-61- GENERAL .............................................................................................-61- 14.1 Governing Law...........................................................................-61- 14.2 Dispute Resolution; Consent to Jurisdiction and Venue...............................................................................-61- 14.3 Notices.................................................................................-61- 14.4 Entire Agreement........................................................................-62- 14.5 Headings................................................................................-62- 14.6 Schedules; Exhibits.....................................................................-62- 14.7 Expenses................................................................................-62- 14.8 Amendment...............................................................................-63- 14.9 Waiver..................................................................................-63- 14.10 Assignment.............................................................................-63- 14.11 Prior Control..........................................................................-63- 14.12 Legal Representation...................................................................-63- 14.13 Counterparts...........................................................................-63-
8 AGREEMENT OF PURCHASE AND SALE THIS AGREEMENT OF PURCHASE AND SALE ("Agreement"), dated as of the 17th day of March, 1997, but executed, delivered and effective as of the 28th day of March, 1997, by and among (i) TELE-MEDIA BROADCASTING COMPANY, a Delaware corporation ("TMBC"), TELE-MEDIA BROADCASTING COMPANY OF CENTRE REGION, a Delaware corporation ("Centre"), and TELE-MEDIA BROADCASTING HOLDING CORPORATION, a [Delaware] corporation ("Holding") (each a "Company" and collectively, the "Companies"); (ii) ROBERT E. TUDEK and EVERETT I. MUNDY (each a "Seller" and collectively, the "Sellers"); and (iii) CITADEL BROADCASTING COMPANY, a Nevada corporation (the "Purchaser"), and CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation ("Citadel"). PREAMBLE: WHEREAS, each of the Companies, directly or through various subsidiaries, is the licensee of and owns and operates pursuant to FCC Licenses the Existing Radio Stations; and WHEREAS, the Sellers are the holders of an aggregate of 15,000 shares of voting common stock, $0.01 par value per share, which constitute all of the issued and outstanding shares of capital stock of TMBC (the "TMBC Shares"); and WHEREAS, the Sellers are the holders of an aggregate of 1,000 shares of voting common stock, $0.10 par value per share, which constitute all of the issued and outstanding shares of capital stock of Centre (the "Centre Shares"); and WHEREAS, the Sellers are the holders of an aggregate of 1,000 shares of voting common stock, $1.00 par value per share, which constitute all of the issued and outstanding shares of capital stock of Holding (the "Holding Shares"); and WHEREAS, on or before the Effective Time, all of the Options shall be terminated, TMBC, Holding and Centre shall be merged so that TMBC will be the survivor, and as a result thereof, upon the Closing, the TMBC Shares will constitute all of the outstanding equity securities of the Companies; and WHEREAS, subject to the terms and conditions hereinafter set forth, the Sellers desire to sell to the Purchaser, and the Purchaser desires to acquire from the Sellers, for the consideration hereinafter provided, the TMBC Shares. NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 9 SECTION 1 DEFINITIONS The following terms when used in this Agreement shall have the meanings assigned to them below: "1996 Cash Flow" means for the fiscal year ended December 31, 1996, the net income of the Existing Radio Stations for such period: (i) plus the sum of the following, to the extent deducted in determining such net income for such period: (A) losses from sales, transactions, exchanges and other dispositions of Property not in the ordinary course of business; (B) interest, fees or other charges paid or accrued on Indebtedness for Borrowed Money, including, without limitation, interest on capitalized leases that is imputed in accordance with GAAP; (C) depreciation and amortization of assets; (D) income taxes; (E) the costs and expenses of the Litigation; (F) expenses incurred in connection with Trade Agreements; (G) management fees and general corporate overhead; and (H) payments made pursuant to the Non-Competition and Consultation Agreement dated as of August 1, 1996 by and between Tele-Media Broadcasting Company of State College and Doris Clark; (ii) minus the sum of the following, to the extent included in determining such net income for such period: (A) gains from sales, transactions, exchanges and other dispositions of -2- 10 property not in the ordinary course of business; (B) proceeds of any insurance; and (C) revenue received in connection with Trade Agreements. "Accounts Receivable" means the accounts receivable of each of the Companies and/or the Subsidiary Partnerships, other than the Trade Receivables and the Providence Payment. "Acquisition Agreements" means and includes that certain undated Asset Purchase Agreement by and between Tele-Media Broadcasting of Quincy Limited Partnership and Magnum Broadcasting, Inc.; that certain proposed Asset Purchase Agreement by and between Tele-Media Broadcasting Company and Music Broadcasting, Inc. relating to WVAM-AM and WPRR-FM; that certain Asset Purchase Agreement dated August 1, 1996 by and between Tele-Media Broadcasting Company and 4M Broadcasting, Inc.; and that certain undated Asset Purchase Agreement by and between Tele-Media Broadcasting Company and WARM Broadcasting Company, Inc. "Acquisition Debt" means the principal amount of Indebtedness for Borrowed Money advanced to the Companies or any of the Subsidiary Partnerships after the date hereof and used by them to pay the Acquisition Purchase Price, or any portion thereof, for an Acquisition, associated working capital and other costs incurred for Acquisitions. "Acquisitions" means the purchase by the Companies or one or more of the Subsidiary Partnerships of the Additional Radio Stations pursuant to the Acquisition Agreements. The term "Acquisition" refers to any of the Acquisitions, as required by the context. "Acquisition Purchase Price" means the total cash purchase price paid by the Companies and/or the Subsidiary Partnerships for the Acquisitions pursuant to the Acquisition Agreements, including any partial payments or deposits made by the Companies to the sellers of any of the Additional Radio Stations. "Act" means the Communications Act of 1934, as amended from time to time. "Additional Radio Stations" means, to the extent to be purchased or already purchased by a Company or one of its Affiliates before the Closing, radio stations WPRR-FM and WVAM-AM, each licensed to Altoona, Pennsylvania; radio station WARM-AM licensed to Scranton, Pennsylvania; radio station WKQV-AM licensed to Pittston, Pennsylvania; radio station WKQV-FM licensed to -3- 11 Olyphant, Pennsylvania; radio station WBHT-FM licensed to Mountain-Top, Pennsylvania; radio station WMGS-FM licensed to Wilkes-Barre, Pennsylvania; radio stations WAZL-FM and WZMT-FM, each licensed to Hazleton, Pennsylvania; and radio station WBRJ-FM licensed to Mt. Sterling, Illinois. "Affiliate" (a) of any Person means any other Person that directly or indirectly controls, is controlled by, or is under direct or indirect common control with, such first Person and (b) of a Company includes any Affiliate as defined in clause (a) above and, in addition, to the extent not otherwise deemed an Affiliate by clause (a) above, each of the Subsidiary Partnerships. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controls," "controlled by," and "under direct or indirect control with") as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "Ancillary FCC Applications" has the meaning given thereto in Section 8.4. "Ancillary FCC Grants of Consent" has the meaning given thereto in Section 8.4. "Assigned Contracts" has the meaning given thereto in Section 2.3(d). "Assumed Obligations" has the meaning given thereto in Section 2.4. "Audited Financial Statements" has the meaning given thereto in Section 6.14. "Bonds" means the Senior Discount Notes due June 15, 2004 in the face amount at maturity of $47,811,000.00 issued by TMBC pursuant to Purchase Agreement dated as of June 9, 1994, as amended on June 15, 1995, December 15, 1995 and June 15, 1996 (the "Bond Purchase Agreement"). "Bond Payoff Amount" means the aggregate amount due pursuant to the Bond Payoff Agreement. "Bond Payoff Agreement" means the agreement by and between Purchaser and the holders of the Bonds and Warrants setting forth the amounts necessary to extinguish all obligations to the holders of the Bonds and Warrants from the Sellers, the Companies and the Subsidiary Partnerships. "Business" has the meaning given thereto in Section 3.1. -4- 12 "Centre Pledge" means the Stock Pledge and Security Agreement between the Sellers and STS Broadcasting, Inc. dated June 30, 1995. "Centre Shares" has the meaning given thereto in the Preamble. "Closing" means the consummation of the transactions contemplated herein in accordance with the provisions of Section 9. "Closing Date" has the meaning given thereto in Section 9.1. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Covenant" has the meaning given thereto in Section 2.6. "Effective Time" means at 11:59 p.m., Eastern Time, on the Closing Date. "Environmental Claims" means and includes, without limitation: claims, demands, suits, causes of action for personal injury or lost use of property, or consequential damages to the extent any of the foregoing arise directly or indirectly out of Environmental Conditions; actual or threatened damages to natural resources; claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, response or remedial actions under CERCLA, RCRA, or other Environmental Laws; a requirement to implement "corrective action" pursuant to any order or permit issued pursuant to RCRA; claims for restitution, contribution or equitable indemnity from third parties or any governmental agency; fines, penalties, Liens against property; claims for injunctive relief or other orders or notices of violation from Governmental Authorities; and, with regard to any present or former employees, exposure to or injury from Environmental Conditions. "Environmental Conditions" means conditions of the environment, including the ocean, natural resources (including flora and fauna), soil, surface water, ground water, any present or potential drinking water supply, subsurface strata or the ambient air, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping or threatened release of Hazardous Materials by the Companies. With respect to claims by employees, Environmental Conditions also includes the exposure of Persons to Hazardous Materials within work places on any real estate owned or occupied by the Companies and/or the Subsidiary Partnerships. "Environmental Laws" has the meaning given thereto in the definition of Hazardous Materials. -5- 13 "Environmental Noncompliance" means (a) the release or threatened release as a result of the activities of the Companies or any of the Subsidiary Partnerships of any Hazardous Materials into the environment, any storm drain, sewer, septic system or publicly owned treatment works, in violation of any effluent or emission limitations, standards or other criteria or guidelines established by any federal, state or local law, regulation, rule, ordinance, plan or order; and (b) any facility operations, procedures, designs, etc. which do not conform to the statutory or regulatory requirements of the CAA, the CWA, the TSCA, the RCRA or any other Environmental Laws intended to protect public health, welfare and the environment. "Escrow Agent" means PNC Bank, National Association. "Escrow Agreement" means that certain Escrow Agreement dated as of the date hereof among the Purchaser, the Sellers and the Escrow Agent. "Escrow Deposit" has the meaning given thereto in Section 2.9. "Existing Radio Stations" means radio stations WLKW-AM, WWLI-FM and WPRO-FM, each licensed to Providence, Rhode Island; radio station WPRO-AM licensed to East Providence, Rhode Island; radio station WRKZ-FM licensed to Hershey, Pennsylvania; radio stations WEST-AM and WLEV-FM, each licensed to Easton, Pennsylvania; radio station WQKK-FM licensed to Ebensburg, Pennsylvania; radio station WGLU-FM licensed to Johnstown, Pennsylvania; radio station WQWK-FM licensed to University Park, Pennsylvania; radio station WIKN-FM licensed to Port Matilda, Pennsylvania; radio station WRSC-AM licensed to State College, Pennsylvania; radio station WBLF-AM licensed to Bellefonte, Pennsylvania; radio stations WQCY-FM, WTAD-AM and WMOS-FM, each licensed to Quincy, Illinois; and radio stations WQXA-AM and WQXA-FM, each licensed to York, Pennsylvania. "Existing Financing Documents" means, collectively, the (a) Bond Purchase Agreement, (b) Bonds, (c) Warrants, (d) Indenture dated as of June 9, 1994 between TMBC and Bank of Montreal Trust Company, (e) Warrant Agreement dated June 9, 1994 between TMBC and the "Purchasers" defined therein (the "Warrant Agreement"), (f) Registration Rights Agreement dated as of June 9, 1994 by TMBC for the benefit of the holders of the Bonds, (g) Registration Agreement dated as of June 9, 1994 for the benefit of the holders of the Warrants, (h) Participation Agreement dated June 9, 1994 among TMBC, the holders of the Bonds and the Sellers, and (i) all other agreements, certificates, exhibits, schedules and other written instruments executed or delivered by any of the parties to any of the agreements described in clauses (a)-(h) above in connection with any of the transactions contemplated thereby. "Expiration Date" means November 15, 1997. -6- 14 "FCC" means the Federal Communications Commission. "FCC Application" has the meaning given thereto in Section 8.4. "FCC Grant of Consent" has the meaning given thereto in Section 8.4. "FCC Licenses" means, with respect to a Station, the main station license issued by the FCC for such Station, together with each of the other consents, rights, licenses, permits and other authorizations issued by the FCC and held by either of the Companies or a Subsidiary Partnership in connection with, or pertaining to, the conduct of the business and operation of such Station, together with any renewals and extensions thereof and any applications therefor pending on the Closing Date, and any and all applications made by the Companies for such consents, rights, licenses, permits and other authorizations. "Final Distribution" has the meaning given thereto in Section 2.7. "Final Order" means a written action or order issued by the FCC or its staff setting forth the FCC Grant of Consent (or a denial thereof) for purposes of Section 8.4, (a) which action or order has not been vacated, reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with respect to which action or order (i) no timely requests have been filed and are pending for administrative or judicial review, rehearing, reconsideration, appeal or stay, and the time period for filing any such requests and for the FCC to set aside the action on its own motion under the provisions of the Act or the FCC Rules has expired, or (ii) in the event of review, reconsideration or appeal, the time for further review, reconsideration or appeal under the Act or rules promulgated under the Act has expired. "Finova" means FINOVA Capital Corporation. "Finova Payoff Amount" means the aggregate amount of indebtedness, including principal, interest and prepayment penalties, due under the Senior Credit Agreement as of the Closing Date. "Finova Payoff Letter" has the meaning given thereto in Section 6.2. "Finova Prepayment Penalty" means the amount due to Finova as a prepayment penalty under the Senior Credit Agreement as a result of the payment of the Finova Payoff Amount on the Closing Date, as set forth in the Finova Payoff Letter. -7- 15 "GAAP" means generally accepted accounting principles in effect in the United States of America from time to time applied on a consistent basis during the periods involved. "Governmental Authority" means any government, whether federal, state or local, or any other political subdivision thereof, or any agency, tribunal or instrumentality of any such governmental or political subdivision, or any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guaranteed Receivables" has the meaning given thereto in Section 3.10. "Hazardous Materials" means hazardous wastes, hazardous substances, hazardous constituents, toxic substances or related materials, whether solids, liquids or gases, including but not limited to substances defined as "PCBs," "hazardous wastes," "hazardous substances," "toxic substances," "pollutants," "contaminants," "radioactive materials," "petroleum," or other similar designations in, or otherwise subject to regulation under, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 9601 et seq.; the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 et seq. or any similar state law; and in the plans, rules, regulations or ordinances adopted, or other criteria and guidelines promulgated pursuant to the preceding laws or other similar laws, regulations, rules or ordinances now in effect (collectively, the "Environmental Laws"); and any other substances, constituents or wastes subject to environmental regulations under any applicable federal, state or local law, regulation or ordinance. "Holding Shares" has the meaning given thereto in the Preamble. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended from time to time. "HSR Filing" has the meaning given thereto in Section 8.12. "Indebtedness for Borrowed Money" means (a) all indebtedness of any Company or any Subsidiary Partnership in respect of money borrowed (including, without limitation, indebtedness which represents the unpaid amount of the purchase price of any property), (b) all indebtedness of any Company or any Subsidiary Partnership evidenced by a promissory note, bond or similar written obligation to pay money, (c) all indebtedness guaranteed by a -8- 16 Company or any Subsidiary Partnership or for which a Company or any Subsidiary Partnership is contingently liable, including, without limitation, guaranties in the form of an agreement to repurchase or reimburse, and any commitment by which any such Person assures a creditor against loss, including contingent reimbursement obligations with respect to letters of credit and (d) all monetary obligations of a Company or any Subsidiary Partnership under a lease or similar arrangement, which obligations are appropriately classified and accounted for as capital obligations on a balance sheet of such Person under GAAP. "Intellectual Property" has the meaning given thereto in Section 2.3(e). "Knowledge of Purchaser" as used herein with respect to Purchaser means the actual knowledge of Lawrence R. Wilson, Donna Heffner, Stuart R. Stanek and/or R. Stephen Campbell. "Knowledge of Sellers" as used herein with respect to the Sellers, the Companies, and the Subsidiary Partnerships means the actual knowledge of Robert E. Tudek, Everett I. Mundy, Ira D. Rosenblatt, Scott E. Cody and/or Allen Jacobson. "Lien" means any mortgage, pledge, hypothecation, assignment, encumbrance, easement, transfer restriction, lien (statutory or otherwise) or security agreement of any kind or nature whatsoever. "Litigation" means the action captioned Citadel Communications Corp. v. Tele-Media Broadcasting Co., Robert E. Tudek, Everett I. Mundy, Scott Cody and Ira Rosenblatt pending before the United States District Court for the Middle District of Pennsylvania at Action No. 4:CV-95-1870. "Metro Area" shall have the meaning given to that term by Arbitron. "Non-Refundable Payment" has the meaning given thereto in Section 2.8. "Obligations" means, without duplication, all (a) Indebtedness for Borrowed Money, (b) accounts payable, accrued liabilities and other liabilities and obligations of the type normally required by GAAP to be reflected on a balance sheet, (c) commitments by which a Company or any Subsidiary Partnership assures a creditor against loss, including the face amount of all letters of credit and, without duplication, all drafts drawn thereunder, (d) obligations guaranteed in any manner by a Company or any Subsidiary Partnership, (e) obligations under capitalized leases in respect of which obligations a Company or any Subsidiary Partnership is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person assures a creditor against loss, (f) obligations under acceptance -9- 17 facilities, (g) obligations secured by a Lien on property of a Company or any Subsidiary Partnership, (h) obligations under interest rate or currency exchange or swap agreements, (i) unsatisfied obligations for "withdrawal liability" to a "multiemployer plan" as such terms are defined under ERISA, (j) indebtedness issued or obligation incurred in substitution or exchange for any Obligations, (k) costs or expenses incurred by a Company or any Subsidiary Partnership of any nature, whether or not currently payable and (l) other liabilities or obligations of a Company or any Subsidiary Partnership, absolute or contingent, known or unknown, whether or not normally required by GAAP to be reflected on a balance sheet. "Option Termination" means the termination of all of the Options and the termination of the Option Agreement and all other agreements, certificates, exhibits, schedules, and other written instruments executed or delivered in connection with any of the transactions contemplated by the Option Agreement. "Options" means those certain options to purchase shares of Common Stock pursuant to Amended and Restated Option Agreement dated as of September 30, 1992 and amended and restated in its entirety as of June 9, 1994 (the "Option Agreement"), by and among the Sellers and Alta Subordinated Debt Partners, II, L.P., Customs House Partners, Fleet Mezzanine Capital, Inc., Fleet Mezzanine Partners and Brinson Trust Company, as Trustee of Institutional Venture Capital Fund II (each, together with any other "Holders" as defined in the Option Agreement, an "Option Holder"). "Other Acquisition Costs" means the actual out-of-pocket costs paid to third parties by the Companies or the Subsidiary Partnerships for expenses incurred by the Companies in connection with the Acquisitions, including but not limited to the fees of its outside legal counsel and fees paid to Finova for the financing for the Acquisitions, all with supporting documentation reasonably satisfactory to the Purchaser. "Owned Real Property" has the meaning given thereto in Section 2.3(b). "Permitted Exceptions" has the meaning given thereto in Section 2.5(a). "Person" means an individual, corporation, partnership, joint venture, joint stock company, association, trust, business trust, unincorporated organization, Governmental Authority, or any other entity of whatever nature. "Personal Property" has the meaning given thereto in Section 2.3(a). -10- 18 "Providence Payment" means any and all amounts which may become payable to Tele-Media Broadcasting Company of Providence Limited Partnership from Marlin Broadcasting, Inc. pursuant to those certain Agreements dated October 1, 1996 between Tele-Media Broadcasting Company of Providence Limited Partnership and Marlin Broadcasting, Inc. "Purchased Assets" has the meaning given thereto in Section 2.3. "Purchased Radio Stations" means the Existing Radio Stations and the Additional Radio Stations. "Purchased Real Estate" has the meaning given thereto in Section 2.3(c). "Quick Assets" means the cash, securities and other cash equivalents of the Companies and the Subsidiary Partnerships and the Accounts Receivable except for the Guaranteed Receivables, the Trade Receivables and the Providence Payment. "Real Property Leases" has the meaning given thereto in Section 2.3(c). "Release Documents" has the meaning given thereto in Section 6.2. "Reorganization" means a reorganization pursuant to which the Companies are merged so that TMBC is the survivor and each of the Subsidiary Partnerships thereby are dissolved and liquidated under applicable law, on terms and conditions set forth in a written plan and agreement provided to the Purchaser prior to effecting the Reorganization, without causing the Companies or any of the Subsidiary Partnerships to recognize gain or loss for federal or state income taxes purposes as a result thereof and without imposition of any Obligations (other than Obligations of the Companies and the Subsidiary Partnerships in existence prior to the Reorganization) which would be binding upon the Companies from and after the Effective Time on the Closing Date such that upon the effectiveness of the Reorganization TMBC will be the licensee and the owner and operator pursuant to the FCC Licenses of each of the Existing Radio Stations and to the extent acquired, the Additional Radio Stations. "Restated Certificate of Incorporation of TMBC" means the Restated Certificate of Incorporation of TMBC filed in the office of the State of Delaware, Secretary of State, Division of Corporations on June 9, 1994. "Sellers' FCC Problem" means any action, inaction, status or condition of the Sellers, any Company, any Subsidiary Partnership or any of the Stations now or hereafter owned by a Company or any -11- 19 Subsidiary Partnership, or the assertion of any charges or claims other than by the Purchaser against any of the foregoing Persons or Stations, the result of which is to delay, postpone, cause the FCC to set for hearing, or cause the denial of, the FCC Approval of any or the Ancillary FCC Approvals. "Senior Credit Agreement" means the Amended and Restated Loan Agreement dated as of February 26, 1997 between Finova and the Subsidiary Partnerships. "Senior Debt" means the aggregate principal amount of indebtedness, including accrued and unpaid interest, of any or all of the Companies and the Subsidiary Partnerships outstanding pursuant to the Senior Credit Agreement. "Shares" means the TMBC Shares, the Centre Shares and the Holding Shares. "Station" means any one of the Purchased Radio Stations. "Subsidiary Partnerships" means and includes Tele-Media Broadcasting Company of Hershey Limited Partnership, a Pennsylvania limited partnership; Tele-Media Broadcasting Company of Lehigh Valley Limited Partnership, a Pennsylvania limited partnership; Tele-Media Broadcasting Company of Providence Limited Partnership, a Rhode Island limited partnership; Tele-Media Broadcasting of Quincy Limited Partnership, an Illinois limited partnership; Tele-Media Broadcasting Company of State College Limited Partnership, a Pennsylvania limited partnership; Tele-Media Broadcasting Company of America Limited Partnership, a Rhode Island limited partnership; Tele-Media Broadcasting Company of Johnstown/Altoona Limited Partnership, a Pennsylvania limited partnership; Tele-Media Broadcasting Company of Cambria County Limited Partnership, a Pennsylvania limited partnership; Tele-Media Broadcasting Company of York Limited Partnership, a Pennsylvania limited partnership; Tele-Media Broadcasting Operating Company Limited Partnership, a Delaware limited partnership; Tele-Media Broadcasting Company of Wilkes-Barre/Scranton Limited Partnership, a Pennsylvania limited partnership and proposed licensee of radio stations WARM-AM, WKQV-AM, WKQV-FM, WBHT-FM and WMGS-FM. The term "Subsidiary Partnership" refers to any of the Subsidiary Partnerships, as the context requires. "Supplemental Financial Statements" has the meaning given thereto in Section 6.14. "Taxes" means all taxes, charges, fees, levies, or other assessments, including income, gross receipts, excise, property, sales, transfer, license, payroll, and franchise taxes, any taxes required by law to be withheld and any taxes payable as a result of the consummation of the transactions contemplated by this Agreement, which taxes are imposed by any Governmental Authority; -12- 20 and such term shall include any interest, penalties, or additions to taxes attributable to such assessments. "TMBC Shares" has the meaning given thereto in the Preamble. "Trade Agreements" means those agreements entered into by the Companies or any of the Subsidiary Partnerships (and with respect to any Additional Radio Station, those agreements assumed by the Companies or the Subsidiary Partnerships pursuant to the appropriate Acquisition Agreement) for the sale of advertising time on any of the Purchased Radio Stations for consideration other than cash. "Trade Liabilities" means the aggregate liability of the Companies and the Subsidiary Partnerships as of the Closing for unperformed time under the Trade Agreements. "Trade Receivables" means the value of the goods and services to be received by the Companies and the Subsidiary Partnerships after the Closing under the Trade Agreements, valued pursuant to Section 8.1. "Trade Schedule" has the meaning given thereto in Section 8.1. "Warrant Agreement" means the Warrant Agreement dated as of June 9, 1994 between TMBC and the holders of the Warrants. "Warrants" means those 1,000 warrants to purchase an aggregate of 10,000 shares of non-voting common stock of TMBC issued by TMBC pursuant to the Warrant Agreement. SECTION 2 PURCHASE AND SALE OF THE SHARES; RELATED MATTERS 2.1 Purchase and Sale of the Shares. Subject to the terms and conditions of this Agreement, and on the basis of the representations, warranties, covenants and agreements herein contained, at the Closing, the Sellers agree to sell, assign and convey to the Purchaser, and the Purchaser agrees to purchase, acquire and accept from the Sellers, all of the TMBC Shares. 2.2 Purchase Price and Payment. (a) Subject to adjustment as provided in Section 8.5, the aggregate purchase price for the TMBC Shares is equal to (i) the product of 11 times 1996 Cash Flow; plus (ii) the Acquisition Purchase Price paid by the Companies prior to the Closing; plus (iii) the lesser of $1,200,000 or the sum of (A) one-half of the Finova Prepayment Penalty and (B) the Other Acquisition Costs; plus (iv) the amount by which the Bond Payoff Amount exceeds $37,221,000; minus (v) $1,000,000; minus (vi) the aggregate amount -13- 21 of Indebtedness for Borrowed Money of the Companies and the Subsidiary Partnerships as of the Effective Time on the Closing Date which is not satisfied and paid off as of the Closing. (b) At the Closing, the Purchaser shall deposit in immediately available funds the cash portion of the aggregate purchase price net of (i) the Non-Refundable Payment and (ii) the Escrow Deposit, only if it has been delivered to the Sellers pursuant to Section 9.3, into an attorney escrow account maintained by Pietragallo, Bosick and Gordon, Sellers' counsel, and shall deliver the non-cash portion of the aggregate purchase price, if any, pursuant to the Bond Payoff Agreement to Pietragallo, Bosick and Gordon. Immediately thereafter, the Sellers shall commence and consummate the Reorganization, the Sellers and the Purchaser shall make the deliveries set forth in Section 9.2 and the purchase price shall be distributed on behalf of the Purchaser with respect to subparagraphs (ii) and (v) and the Sellers as follows: (i) the Finova Payoff Amount to Finova; (ii) the Bond Payoff Amount to the holders of the Bonds and the Warrants; (iii) the aggregate amount due the Option Holders in respect of the Options; (iv) to the extent not already paid off and satisfied, the aggregate amount due the holders of the Centre Pledge in respect thereof; (v) the aggregate amount of Indebtedness for Borrowed Money of the Companies and the Subsidiary Partnerships which is to be satisfied and paid off as of the Closing to the obligees on such Indebtedness for Borrowed Money; and (v) the balance to each of the Sellers in the proportion or percentage set forth opposite each Seller's name on Schedule 2.2 annexed hereto. 2.3 Purchased Radio Stations. Following consummation of the Acquisitions (to the extent consummated before the Closing) and the Reorganization, each in accordance with Section 6.1, and after giving effect to the Final Distribution described in Section 2.7, TMBC will not have any Subsidiary Partnerships or other subsidiaries other than the Sellers, and as of the Closing TMBC will own directly the following assets, and no others, subject only to additions or deletions made in the ordinary course of business which are permitted by the remaining provisions of this Agreement -14- 22 (the "Purchased Assets") but excluding those certain items of tangible personal property described on Schedule 2.3X annexed hereto (the "Excluded Asset Schedule"): (a) All the tangible personal property, improvements and fixtures of every kind or nature used or useful in the operation of the Purchased Radio Stations in the ordinary course of business (the "Personal Property"), including, without limitation, the personal property described on Schedule 2.3 annexed hereto (the "Asset Schedule"); (b) The real property described on the Asset Schedule as being owned by any Company or any of the Subsidiary Partnerships, and any real property purchased by any Company or any of the Subsidiary Partnerships pursuant to any of the Acquisitions (the "Owned Real Property"); (c) The leasehold interests pursuant to the real property leases described on the Asset Schedule and any additional leasehold interests acquired by any Company or any of the Subsidiary Partnerships pursuant to any of the Acquisition Agreements (the "Real Property Leases" and collectively with the Owned Real Property, the "Purchased Real Estate"); (d) All of the right, title and interest of any Company or any of the Subsidiary Partnerships in and to those contracts, leases, licenses, memberships, agencies, permits and agreements, other than the Real Property Leases, to which (i) any Company or any of the Subsidiary Partnerships presently is a party or an assignee of a party, which are described on the Asset Schedule, or (ii) any Company or any of the Subsidiary Partnerships becomes a party or an assignee of a party pursuant to any of the Acquisition Agreements (the "Assigned Contracts"); (e) The call letters of the Purchased Radio Stations and all of the copyrights, trademarks, trade names and other similar rights, including applications and registrations therefor, used or useful in the past or present operation of the Purchased Radio Stations in which any Company or any of the Subsidiary Partnerships has any right, title or interest (or with respect to each of the Additional Radio Stations will, upon consummation of the Acquisition thereof, have any right, title or interest) including, without limitation, those items listed on the Asset Schedule but excluding any right to use, possess, control or otherwise obtain value from the name "Tele-Media" (collectively, the "Intellectual Property"); (f) The Guaranteed Receivables; (g) The Trade Receivables existing as of the Closing; -15- 23 (h) All of the right, title and interest of any Company or any of the Subsidiary Partnerships in and to the Providence Payment, all as set forth in Section 8.3; (i) The FCC Licenses of the Purchased Radio Stations, a complete list of which is included on the Asset Schedule; (j) All financial and corporate records of each Company or any of the Subsidiary Partnerships, and all books, records and accounts relating to the operation of the Purchased Radio Stations, subject in each case to the right of the Sellers to make and retain photocopies thereof for the Sellers' personal use and reference and to obtain access to such books, records and accounts in accordance with the provisions of Section 8.10; (k) As of the date hereof, all other assets owned by each Company or any Subsidiary Partnership which are used and useful in, and in the case of any Affiliate other than the Subsidiary Partnerships which are used in, connection with the operation of any of the Purchased Radio Stations as of the date hereof, real and personal, tangible and intangible, but excluding any documents relating to the Litigation; and (l) All other assets acquired by any Company or any of their Affiliates pursuant to the Acquisitions. 2.4 Assumed Obligations. Following consummation of the Acquisitions and the Reorganization, each in accordance with Section 6.1, no Company and none of the Subsidiary Partnerships will, as of the Effective Time on the Closing Date, have any Obligations except (a) amounts due under the Bonds (which amounts will be paid at the Closing as provided in Section 2.2(b)), (b) amounts due under the Senior Credit Agreement (which amounts will be paid at the Closing as provided in Section 2.2(b)), (c) the Trade Liabilities and (d) those additional liabilities and obligations specifically identified on Schedule 2.4 annexed hereto. The liabilities described in clauses (c) and (d) above are collectively referred to herein as the "Assumed Obligations." 2.5 Real Property. (a) Title to Real Property. As of the Closing, title to the Owned Real Property shall be vested in fee simple in TMBC and each parcel of Owned Real Property shall be in conformity with the representations and warranties contained in Section 3.9(e) and shall be subject only to those title exceptions expressly set forth in the Asset Schedule (the "Permitted Exceptions") subject to the recording of the appropriate documents. (b) Environmental Reports. Sellers and the Companies have provided to the Purchaser copies of any and all written analyses, evaluations, reports, surveys and similar writings in the -16- 24 possession of the Companies or any of their Affiliates, including, without limitation, any "Phase I," "Phase II" or "Phase III" reports and any environmental reports delivered by either Company or any of their Affiliates to Finova pursuant to the Senior Credit Agreement, relating to the Environmental Conditions of any of the Purchased Real Estate, all as described on Schedule 2.5 annexed hereto (the "Environmental Reports Schedule"). 2.6 Covenant Not to Compete. At the Closing, each of the Sellers shall execute a Covenant Not to Compete in the form annexed hereto as Exhibit 2.6 (the "Covenant") pursuant to which each Seller shall agree that neither he nor any of his Affiliates (excluding Scott Cody and Ira C. Rosenblatt) shall operate a radio station licensed to the Metro Area in which any of the Purchased Radio Stations is licensed for a period of two years immediately following the Closing. 2.7 Final Distribution. Subject to the provisions of Section 8.2 with regard to the post-Closing collection of the Accounts Receivable, the Companies shall distribute to the Sellers, on the Closing Date and immediately prior to the Closing, the Quick Assets of the Companies existing as of such time after the payment by the Companies, on or before the Effective Time on the Closing Date, of (a) all of the Obligations of the Companies and the Subsidiary Partnerships existing as of the Closing excepting only the Assumed Obligations and the obligations to be satisfied pursuant to Section 2.2(b) (including pay-off of the Options), and (b) without limiting the generality of clause (a) above, (i) all payments, costs, expenses and other amounts required for the consummation by the Companies of the Acquisitions, Option Termination and Reorganization and (ii) the payment by the Companies of all of the costs and expenses incurred by or on behalf of any Company or any of the Subsidiary Partnerships or the Sellers in connection with the performance by any Company or the Sellers of any of their obligations under this Agreement (the "Final Distribution"). Prior to making the Final Distribution, the Companies shall provide the Purchaser with a written statement thereof setting forth in reasonable detail the manner in which the Final Distribution has been determined and each of the foregoing payments has been taken into account. In order to expedite delivery of the Final Distribution to the Sellers, the parties shall cooperate in transferring the bank accounts of the Companies and the Subsidiary Partnerships to the Sellers. 2.8 Non-Refundable Payment. Contemporaneously with the execution of this Agreement, the Purchaser has paid the Sellers $500,000 in immediately available funds. Promptly, but in no event later than two (2) business days, after the Sellers submit the FCC Application to the FCC, all as set forth in Section 8.4, the Purchaser shall pay the Sellers $250,000. Promptly, but in no event later than two (2) business days, after the Sellers submit the filings required of the Sellers pursuant to the HSR Act, all as -17- 25 set forth in Section 8.12, the Purchaser shall pay the Sellers $250,000. Each of the above-described payments (collectively, the "Non-Refundable Payments") will be fully earned by the Sellers as of, in the case of the first payment, when the Sellers execute and deliver this Agreement, in the case of the second payment, when the Sellers execute and submit the FCC Application, and in the case of the third payment, when the Sellers execute and submit the filings required of them pursuant to the HSR Act. The Non-Refundable Payments are not refundable by the Sellers to the Purchaser under any circumstances. 2.9 Escrow Deposit. Contemporaneously with the execution of this Agreement, the Purchaser has deposited an irrevocable letter of credit in the amount of $2,000,000 (the "Escrow Deposit") with the Escrow Agent. The Escrow Agent shall hold and distribute the Escrow Deposit in accordance with the terms of the Escrow Agreement. In the event this Agreement is terminated, the Escrow Deposit shall be distributed pursuant to the terms of Section 13.1. SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE SELLERS In connection with the purchase and sale of the TMBC Shares hereunder, and in order to induce the Purchaser to enter into and consummate the transactions contemplated by this Agreement, the Companies and the Sellers hereby jointly and severally represent and warrant to the Purchaser, as of the date hereof and as of the Closing Date (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times), that, with respect to the Existing Stations, and with respect to the Additional Radio Stations solely from and after the date of purchase of any such Additional Radio Station, except as set forth in Schedule 3.0 annexed hereto (the "Sellers' Disclosure Schedule"): 3.1 Organization and Qualification. The Companies are duly organized, validly existing and in good standing under the laws of the State of Delaware and have full corporate power and authority to own their respective assets and properties and to conduct the business in which they are now engaged (the business in which the Companies are now engaged and the business in which the Companies will as of the Closing be engaged are referred to in this Agreement, collectively, as the "Business"). Each of the Companies is in good standing in each other jurisdiction wherein the failure to so qualify would have a material adverse effect on the Business or the properties of such Company. Each Subsidiary Partnership is duly organized, validly existing and in good standing under the laws of its state of formation and has full power and authority to own its assets and property and to conduct the business in which it -18- 26 is now engaged. Each Subsidiary Partnership is in good standing in each of the jurisdictions wherein the failure to so qualify would have a material adverse effect on the Business or the properties of such Subsidiary Partnership. Except for the Sellers and the Subsidiary Partnerships, the Companies do not have any Affiliates or any other subsidiaries or own any capital stock or other proprietary interest, directly or indirectly, in any other corporation, association, trust, partnership, joint venture or other entity with an interest in any of the Purchased Radio Stations and do not have any agreement with any Person to acquire any such capital stock or other proprietary interest. The beneficial ownership of each Subsidiary Partnership is fully and accurately disclosed on the Sellers' Disclosure Schedule. As of the Effective Time, each of the Subsidiary Partnerships will have been dissolved and liquidated in accordance with applicable law, without further liability or obligation on the part of the Companies and no Person will have any interest, absolute or contingent, vested or unvested, in any of the Existing Radio Stations and to the extent acquired, the Additional Radio Stations, or the assets thereof except the interest of the Sellers pursuant to the ownership of the TMBC Shares, the interest of the warrant holders pursuant to the Warrants and the interest of the lender under the Senior Credit Agreement by virtue of the Lien securing the Senior Debt. Each of the Companies has full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own its properties and to conduct the Business. The copies of the Restated Certificate of Incorporation of TMBC, the Certificate of Incorporation of Centre as amended, the Certificate of Incorporation of Holding, and the Bylaws of the Companies including all amendments thereto and restatements thereof have been delivered to the Purchaser and are true, complete and correct. The copies of the partnership agreements and the certificates of limited partnership of each of the Subsidiary Partnerships have been delivered to the Purchaser and are true, complete and correct. 3.2 Authority. The execution and delivery of this Agreement by each Company, the performance by each Company of its covenants and agreements hereunder and the consummation by each Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action. This Agreement has been duly authorized, executed and delivered by each Seller. This Agreement constitutes the valid and legally binding agreement of each Company and each Seller, enforceable against each Company and each Seller in accordance with its terms. 3.3 No Legal Bar; Conflicts. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Restated Certificate of Incorporation of TMBC, the Certificate of Incorporation of Centre, as amended, the Certificate of Incorporation of Holding, or the Bylaws of any Company, or any -19- 27 law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which any Seller or Company or any of the Subsidiary Partnerships is a party or by which any Seller or Company or any of the Subsidiary Partnerships or any of the assets of any Seller or Company or any of the Subsidiary Partnerships is bound. Except for the FCC Approval, filing and expiration of the applicable waiting period under the HSR Act and the consents disclosed on the Sellers' Disclosure Schedule, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 3.4 Capitalization. The authorized capital stock of TMBC consists of 35,000 shares of common stock, of which 25,000 shares are shares of voting common stock and 10,000 shares are shares of non-voting common stock of which 15,000 share of voting stock are issued and outstanding. The authorized capital stock of Centre consists of 1,000 shares of common stock, all of which are voting common stock. 1,000 shares of common stock constitute all of the outstanding shares of capital stock of Centre. The authorized capital stock of Holding consists of 1,000 shares of common stock. 1,000 shares of common stock constitute all of the outstanding shares of capital stock of Holding. All of the Shares have been duly and validly authorized and issued and are fully paid and non-assessable and are owned beneficially and of record by the Sellers. Except for the Warrants (which will be terminated at the Closing as provided in Section 2.2(b)(ii)) and the Options (which will be terminated before or contemporaneously with the Closing in accordance with Section 6.1), there are no outstanding subscriptions, warrants, options, calls, commitments or other equity securities, or rights or agreements with respect to any of the foregoing, to which the Companies or the Sellers are bound relating to the issuance, sale or redemption of the Shares or any other shares of capital stock or other securities of the Companies and no other Persons (other than the holders of the Warrants and the Options pursuant to the provisions thereof) other than the Sellers have any interest, absolute or contingent, vested or unvested, in the capital stock of the Companies. No shares of capital stock or other securities of the Companies are reserved for any purpose (other than for issuance upon exercise of the Options and the Warrants). 3.5 Financial Statements. The Companies and the Sellers have delivered to the Purchaser the following financial statements: (a) -20- 28 the audited consolidated balance sheets of TMBC as of December 31, 1995 and the related consolidated statements of income and cash flows for the period then ended; (b) the audited consolidated balance sheets of TMBC as of December 31, 1994 and the related consolidated statements of income and cash flows for the period then ended; (c) the audited consolidated balance sheets of TMBC as of December 31, 1993 and the related consolidated statements of income and cash flows for the period then ended; and (d) the unaudited consolidated balance sheets of TMBC as of December 31, 1996 (the "Latest Balance Sheets") and the related consolidated statements of income for the twelve-month period then ended. Each of the foregoing financial statements (including in all cases the notes thereto, if any) (i) is (and with respect to the Supplemental Financial Statements will upon delivery thereof by TMBC to the Purchaser be) accurate and complete in all material respects, (ii) is (and with respect to the Supplemental Financial Statements will upon delivery thereof by the Companies to the Purchaser be) consistent with the books and records of the Companies and their Affiliates (which, in turn, are accurate and complete in all material respects), and (iii) presents (and with respect to the Supplemental Financial Statements will upon delivery thereof by the Companies to the Purchaser present) fairly the consolidated balance sheets and results of operations of TMBC and its subsidiaries, in accordance with GAAP, consistently applied, as of the dates and for the periods set forth therein, subject in the case of the unaudited financial statements to the lack of footnote disclosure and changes resulting from normal year-end audit adjustments (none of which would, alone or in the aggregate, be materially adverse to the financial condition, operating results, assets, operations or business prospects of TMBC taken as a whole). 3.6 Absence of Certain Changes. Subsequent to December 31, 1996, there has not been any (a) material adverse change in the condition of any Company or any of the Subsidiary Partnerships, financial or otherwise, or in the results of operations, assets, liabilities or business of any Company or any of the Subsidiary Partnerships; (b) damage or destruction, whether or not insured, materially affecting the business operations of any Company or any of the Subsidiary Partnerships; (c) labor dispute (meaning a grievance or protest by more than two employees acting in concert with other employees regarding conditions or terms of employment) or threatened labor dispute involving any of the employees of any Company or any of the Subsidiary Partnerships; (d) actual or threatened dispute pertaining to any Company or any of the Subsidiary Partnerships with the suppliers of any Company or any of the Subsidiary Partnerships which may materially affect the business of such Company or Subsidiary Partnership; (e) change in the methods or procedures of any Company or any of the Subsidiary Partnerships for billing or collection of customer accounts or recording of customer accounts receivable or reserves for doubtful accounts; (f) except for operational changes encompassed by the provisions of Sections 6, 7 and 8, other material change in the -21- 29 customary methods of operations of any Company or any of the Subsidiary Partnerships; (g) except in the ordinary course of business or to the extent not material to the Business or financial condition of any Company or any of the Subsidiary Partnerships, Accounts Receivable written off as uncollectable or reserve for any Accounts Receivable established, sale or transfer of any tangible or intangible asset used or useful in the operation of any of the Purchased Radio Stations, mortgage, pledge or imposition of any Lien on any such asset, lease of real property, machinery, equipment or building with respect to any of the Purchased Radio Stations entered into or modification, amendment or cancellation of any of its existing leases relating to any of the Purchased Radio Stations, or cancellation of any debt or claim; (h) except for the Final Distribution to be made on the Closing Date in accordance with Section 2.7 and as otherwise set forth on the Sellers' Disclosure Schedule, declaration or payment of any dividend or any other distribution in respect of the capital stock or other securities or equity interests of any Company or any of the Subsidiary Partnerships, or, directly or indirectly, any purchase, redemption, issuance, or other acquisition or disposition by any Company or any of the Subsidiary Partnerships of any shares of capital stock or other securities or equity interests or grant of any option or making of any commitment relating to its authorized shares of capital stock or equity interests; (i) payment or discharge of any outstanding Obligations (except in the ordinary course of business); (j) except for the incurrence of Acquisition Debt, incurrence of any Indebtedness for Borrowed Money; or (k) liability or obligation (contingent or otherwise) incurred under agreements or otherwise, except current liabilities entered into or incurred in the ordinary course of business consistent with past practices. 3.7 Taxes. Each Company and each of the Subsidiary Partnerships has filed or caused to be filed on a timely basis all federal, state, local and other tax returns, reports and declarations required to be filed by it and each Company and each of the Subsidiary Partnerships has paid all Taxes which each is required to pay (including, but not limited to, income, franchise, sales, use, unemployment, withholding, social security and workers' compensation taxes and estimated income and franchise tax payments, and penalties and fines) due and payable with respect to the periods covered by such returns, reports or declarations and all subsequent periods up to and including the Closing Date, including any Taxes relating to or resulting from the Reorganization, or pursuant to any assessment received by it in connection with such returns, reports or declarations. All returns, reports and declarations filed by or on behalf of each Company and each of the Subsidiary Partnerships are true, complete and correct in all material respects. No deficiency in payment of any Taxes for any period has been asserted by any taxing authority which remains unsettled at the date hereof, no written inquiries have been received by any Company or any of the Subsidiary Partnerships from -22- 30 any taxing authority with respect to possible claims for taxes or assessments, and there is no basis for any additional claims or assessments for Taxes. Since the date of the Latest Balance Sheets, no Company and none of the Subsidiary Partnerships has incurred any liability for Taxes other than in the ordinary course of business and all Taxes attributable to any Company or any of the Subsidiary Partnerships or their respective income, operations or properties accruing through the Closing shall have been paid in full by the Companies and the Subsidiary Partnerships prior to the Closing (or reflected as a proration pursuant to Section 8.5), regardless of whether such Taxes otherwise would have been then due and payable. No tax returns of any Company or any of the Subsidiary Partnerships have ever been audited. No Company and none of the Subsidiary Partnerships has agreed to the extension of the statute of limitations with respect to any tax return. There are no assessments relating to any Company's past tax returns or any Subsidiary tax return pending or threatened. The Companies and each of the Subsidiary Partnerships have delivered to the Purchaser copies of the federal and state income (or franchise) tax returns filed by the Companies for the last three years. 3.8 Asset Schedule. The Asset Schedule includes a complete and accurate (a) listing of all of the Personal Property; (b) description of all Assigned Contracts, none of which requires any consent of third parties in connection with the transactions contemplated hereby except as indicated in the Seller's Disclosure Schedule; (c) description of all of the Intellectual Property; and (d) listing of all of the FCC Licenses of the Existing Radio Stations, and to the extent acquired, the Additional Radio Stations, all of the foregoing of which will, as of the Closing, be owned and held directly by the TMBC. 3.9 Title to and Condition of Property. (a) Title. TMBC will as of the Effective Time have good, marketable and exclusive title to and undisputed possession of all of the real and tangible personal property and improvements included in the Purchased Assets. The Purchased Assets will, as of the Closing, be free and clear of all Liens, subject only to the Assumed Obligations, the Liens in favor of Finova under the Senior Credit Agreement securing the Senior Debt (all of which shall be released at or immediately after the Closing) and the Permitted Exceptions. The Companies will not, as of the Closing, own any assets other than the Purchased Assets. (b) Condition. The Personal Property is as-is, where-is and in such condition and state of repair so that the Existing Radio Stations can operate consistent with past practices. (c) Insurance. The Owned Real Property and Personal Property included among the Purchased Assets are and will be insured through the Closing Date in the amounts and pursuant to the -23- 31 coverages contained in the existing policies of insurance set forth in Sellers' Disclosure Schedule. (d) Sufficiency of Assets. The Purchased Assets include all of the assets, in sufficient nature, condition and quantity, to permit the Purchaser to operate the Existing Radio Stations and to the extent acquired, the Additional Radio Stations, immediately upon the Closing in the ordinary course of business and consistent with the past practices of the Companies and the Subsidiary Partnerships at the Existing Radio Stations. Neither the Companies nor any of their Affiliates has, since December 31, 1996, removed any material item of Personal Property from any of the Purchased Radio Stations other than removals in the ordinary course of business which were not done in contemplation of the transactions contemplated hereby. (e) Purchased Real Estate. (i) The Asset Schedule contains an accurate description of the location of the Purchased Real Estate, the type of facility located on such Purchased Real Estate and whether such Purchased Real Estate is owned or leased. TMBC will as of the Effective Time have good title to the Purchased Real Estate, in fee simple in the case of Owned Real Property, and a valid leasehold interest in the case of the Real Property Leases, subject, with respect to the Owned Real Property and as of the Closing, only to the Permitted Exceptions. (ii) The Purchased Real Estate (A) is not subject to any covenant or restriction preventing or limiting in any material respect the consummation of the transactions contemplated hereby, except for any consent listed on the Asset Schedule required of the landlords under the Real Property Leases and (B) will at the Effective Time be held by TMBC free and clear of all Liens except, as to the Owned Real Property, the Permitted Exceptions. (iii) The use for which the Owned Real Property and the property leased by the Companies or any of the Subsidiary Partnerships pursuant to the Real Property Leases is zoned, permits the use thereof for the business of each of the Purchased Radio Stations consistent with past practices. The use and occupancy of the Purchased Real Estate by the Companies and the Subsidiary Partnerships are in compliance in all material respects with all regulations, codes, ordinances and statutes applicable to the Companies and their Affiliates and neither the Companies nor their Affiliates has received any notice asserting any material violation of sanitation laws and regulations, occupational safety and health regulations, and electrical codes. (iv) There are no condemnation proceedings or eminent domain proceedings of any kind pending or, to the Knowledge of Sellers, threatened against the Owned Real Property. -24- 32 (v) All of the Owned Real Property is occupied under a valid and current certificate of occupancy or similar permit. There are no facts that would prevent the Owned Real Property, or to the Knowledge of Sellers, the property leased by the Companies and/or the Subsidiary Partnerships pursuant to the Real Property Leases, from being occupied and used by the Purchaser or TMBC after the Closing Date in the same manner as immediately prior to the Closing. (vi) There is not under any Real Property Lease any default by the Companies or any of the Subsidiary Partnerships thereunder or any condition that with notice or the passage of time or both would constitute such a default, and neither the Companies nor the Subsidiary Partnerships has received notice asserting the existence of any such default or condition. (vii) Each Real Property Lease is valid and binding and in full force and effect, and except as disclosed on the Asset Schedule, has not been amended or otherwise modified. (viii) The Purchased Real Estate constitutes all of the real property which is owned by the Companies or any of the Subsidiary Partnerships and includes all of the real property in which the Companies or any of the Subsidiary Partnerships has a leasehold interest or other interest or right (whether as lessor or lessee) and which is or will prior to the Closing be used in the operation of any of the Existing Radio Stations and to the extent acquired, the Additional Radio Stations. 3.10 Accounts Receivable. The accounts receivable of the Companies and the Subsidiary Partnerships, other than the Trade Receivables (the "Accounts Receivable"), are bona fide, valid accounts receivable and are not subject to any actions or, to the Knowledge of Sellers, claims, defenses or set-offs of any nature. An aggregate amount of not less than $2,000,000 of Accounts Receivable are fully collectible within 120 days immediately following the Closing in accordance with the Companies' standard invoicing practices and without resort to any collection procedures (the "Guaranteed Receivables"). Neither the Companies nor any of the Subsidiary Partnerships shall have engaged in any practices prior to the Closing to accelerate or delay the collection of any of the Accounts Receivable and all invoicing and collection efforts with respect to the Accounts Receivable shall have been consistent with past practices in the ordinary course of business. 3.11 Contractual and Other Obligations. Set forth in the Asset Schedule are a list and brief description of all (a) Real Property Leases to which any Company or any of the Subsidiary Partnerships is a party; (b) all contracts, agreements (including local marketing agreements and joint sales agreements), licenses, leases, arrangements (written or oral) used or useful in the present or future operation of any of the Purchased Radio Stations -25- 33 to which any Company or any of the Subsidiary Partnerships is a party or by which the Company or any of the Subsidiary Partnerships or any of the assets of the Company or any of the Subsidiary Partnerships are bound (including, in the case of loan agreements, a description of the amounts of any outstanding borrowings thereunder and the collateral, if any, for such borrowings); (c) uncompleted orders for the purchase by any Company or any of the Subsidiary Partnerships of materials, supplies, equipment and services for the requirements of the Purchased Radio Stations existing as of the date hereof and with respect to which the remaining obligation of any Company or any of the Subsidiary Partnerships is in excess of $10,000; and (d) contingent contractual obligations and liabilities of any Company or any of the Subsidiary Partnerships existing as of the date hereof (all of the foregoing being hereinafter referred to as the "Contracts"). No Company, none of the Subsidiary Partnerships and to the Knowledge of Sellers, no other party to any of the Contracts is in material default in the performance of any covenant or condition under any Contract and no claim of such a default has been made and no event has occurred which with the giving of notice or the lapse of time would constitute such a default under any covenant or condition under any Contract. No Company and none of the Subsidiary Partnerships is a party to any Contract which would terminate or be materially adversely affected by the consummation of the transactions contemplated by this Agreement. All of the Contracts shall be in full force and effect at the Closing. Originals or true, correct and complete copies of all of the Contracts included within the Purchased Assets have been provided to the Purchaser as of the date hereof. 3.12 Existing Financing Documents; Senior Credit Agreement. True and correct copies of each of the Existing Financing Documents and Senior Credit Agreement will be delivered by the Sellers and the Companies to the Purchaser on or before April 30, 1997. 3.13 Compensation. Set forth in the Sellers' Disclosure Schedule is a list of (a) all agreements between any Company or any of the Subsidiary Partnerships and their employees or other Persons providing services for them with regard to compensation, whether individually or collectively, except oral agreements terminable by any Company or any of the Subsidiary Partnerships on not more than 30 days' notice without penalty, and (b) all employees of any Company or any of the Subsidiary Partnerships or other Persons providing services for them entitled to receive annual compensation in excess of $15,000 and their respective positions and salaries. The transactions contemplated by this Agreement will not result in any liability for severance pay to any such employee or other Person. Neither Company nor any of the Subsidiary Partnerships has informed any such employee or other Person that such Person will receive any increase in compensation or benefits or any ownership interest in any Company or any of the Subsidiary Partnerships or the Business other than increases in salary which are consistent -26- 34 with past practices in the ordinary course of business and, to the extent applicable to Persons subject to any agreement described in clause (a) above, consistent with such agreement. The Sellers shall have the right to pay one-time bonuses from their own accounts as they determine to employees to maintain employee morale and interest through the Closing Date. 3.14 Employee Benefit Plans. The Company maintains and sponsors the employee welfare benefit plans, as described under Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended, or "ERISA" (hereinafter referred to as "Welfare Plans") described in the Seller's Disclosure Schedule for the benefit of the employees of the Companies and the Subsidiary Partnerships. In addition, the Companies and the Subsidiary Partnerships make contributions on behalf of their employees to the employee pension plan benefit plan (as described under ERISA Section 3(2)(A)) (hereinafter referred to as the "Pension Plan") which is sponsored, maintained, and administered by Tele-Media Corporation of Delaware. The Welfare Plans have been maintained and operated in compliance with the material requirements of ERISA and the Code, and each "fiduciary" (within the meaning of ERISA Section 3(21)(A)) of the Welfare Plans has carried out its duties in compliance with the material requirements of ERISA. To the Knowledge of Sellers, the Pension Plan has been maintained and operated in compliance with the material requirements of ERISA and the Code, and each "fiduciary" (within the meaning of ERISA Section 3(21)(A)) of the Pension Plan has carried out its duties in compliance with the material requirements of ERISA. The Companies have furnished to the Purchaser copies of all Welfare Plans and the Pension Plan and all financial statements, actuarial reports and annual reports and returns filed with the Internal Revenue Service with respect to the Welfare Plans for a period of three years prior to the date hereof. With respect to the Welfare Plans, such financial statements and actuarial reports and annual reports and returns are true and correct in all material respects, and none of the actuarial assumptions underlying such documents have changed since the respective dates thereof. In addition: (a) To the extent the Pension Plan has received a favorable determination letter from the Internal Revenue Service as to its qualification under Section 401(a) of the Code, it will be provided to the Purchaser when and if available; (b) Except as described above and listed in the Seller's Disclosure Schedule, no Company and none of the Subsidiary Partnerships sponsor, have an obligation to make contributions to or have an obligation to make payment under (i) any other welfare benefit plan, as described under Section 3(1) of ERISA, (ii) any other tax-qualified retirement plan and trust which is intended to meet the requirements of Code Section 401 and 501, respectively, or -27- 35 (iii) any other non-qualified plan program or arrangement, including, without limitation, any individual employment contract, deferred compensation agreement, or severance arrangement; (c) No Company and none of the Subsidiary Partnerships (including any entity that within the past five years would be considered a member of the same controlled group under ERISA and Section 414 of the Code with any Company, or any Affiliate) have or have had an obligation to contribute to a multi-employer plan (within the meaning of ERISA Section 3(37)(A)) or maintain, contribute to or have maintained or contributed to a defined benefit plan (within the meaning of ERISA Section 3(35) that is subject to Title IV of ERISA; (d) To the Knowledge of Sellers, no "prohibited transaction" (within the meaning of Section 406 of ERISA or Section 4975(c) of the Code) has occurred with respect to any Welfare Plan or Pension Plan; (e) No provisions of any Welfare Plan, and no act or omission of any Company, in any way limits, impairs, modifies or otherwise affects the right of any Company or any of the Subsidiary Partnerships or the Purchaser unilaterally to amend or terminate any Welfare Plan after the Closing, subject to the requirements of applicable law; (f) Except for employee elective deferrals under Code Section 401(k), there are no contributions which are or hereafter will be required to have been made to trusts in connection with any Pension Plan that would constitute a "defined contribution plan" (within the meaning of Section 3(34) of ERISA), with respect to services rendered by employees of the Companies or any of the Subsidiary Partnerships prior to the Closing Date; (g) Except as described in the Seller's Disclosure Schedule, other than claims in the ordinary course for benefits with respect to the Welfare and Pension Plans, there are no actions, suits or claims (including claims for income taxes, interest, penalties, fines or excise taxes with respect thereto) pending with respect to the Welfare or Pension Plan or any circumstances which might give rise to any such action, suit or claim (including claims for income taxes, interest, penalties, fines or excise taxes with respect thereto); (h) Except as described in the Seller's Disclosure Schedule, all reports, returns and similar documents with respect to the Welfare Plans required to be filed with any governmental agency have so been filed and, to the Knowledge of Sellers, all reports, returns and similar documents with respect to the Pension Plan required to be filed with any governmental agency have so been filed; -28- 36 (i) No Company and none of the Subsidiary Partnerships or Affiliates has incurred any liability to the Pension Benefit Guaranty Corporation; (j) No Company and none of the Subsidiary Partnerships has any obligation to provide health or other welfare benefits to former, retired or terminated employees, except as specifically required under Section 4980B of the Code. The Companies and the Subsidiary Partnerships have substantially complied with the notice and continuation requirements of Section 4980B of the Code and the regulations thereunder. 3.15 Labor Relations. There have been no material violations of any Federal, state or local statutes, laws, ordinances, rules, regulations, orders or directives with respect to the employment of individuals by, or the employment practices or work conditions of, any Company or any of the Subsidiary Partnerships, or the terms and conditions of employment, wages (including overtime compensation) and hours. No Company and none of the Subsidiary Partnerships is engaged in any unfair labor practice or other unlawful employment practice and there are no charges of unfair labor practices or other employee related complaints pending or threatened against any Company or any of the Subsidiary Partnerships before the National Labor Relations Board, the Equal Employment Opportunity Commission, the Occupational Safety and Health Review Commission, the Department of Labor or any other Governmental Authority. There is no strike, picketing, slowdown or work stoppage or organizational attempt pending, threatened against or involving any Company or any of the Subsidiary Partnerships. No issue with respect to union representation is pending or threatened with respect to the employees of any Company or any of the Subsidiary Partnerships. 3.16 Increases in Compensation or Benefits. Subsequent to December 31, 1996 and other than in the ordinary course of business consistent with past practices, there have been no increases in the compensation payable or to become payable to any of the employees of any Company or any of their Affiliates or paid or provided for any awards, bonuses, stock options, loans, profit-sharing, pension, retirement or welfare plans or similar or other payments or arrangements for or on behalf of such employees in each case other than (a) pursuant to currently existing plans or arrangements set forth in the Sellers' Disclosure Schedule, (b) as was required from time to time by governmental legislation affecting wages, or (c) as paid or agreed to be paid by Sellers from their own accounts as permitted by the last sentence of Section 3.13. The vacation policy of the Companies and their Affiliates is set forth in the Sellers' Disclosure Schedule. No such employee is entitled to vacation time in excess of three weeks during the current calendar year and no such employee has any accrued vacation time with respect to any period prior to twelve months before the Closing except as set forth in the Sellers' Disclosure Schedule. -29- 37 3.17 Insurance. The Companies and the Subsidiary Partnerships maintain insurance policies covering all of their properties and assets, each of which is summarized in the Sellers' Disclosure Schedule. Such policies are in full force and effect and all premiums due thereon have been paid in full. The Companies and the Subsidiary Partnerships have complied in all material respects with the provisions of such policies. There are no notices of any pending or threatened termination or premium increases with respect to any of such policies. To the Knowledge of Sellers, there has been no casualty loss or occurrence which may give rise to any claim of any kind not covered by insurance, there has been no casualty occurrence which may give rise to any claim of any kind not covered by insurance, and no third party has filed any claim against any Company or any of the Subsidiary Partnerships for personal injury or property damage of a kind for which liability insurance is generally available which is not fully insured, subject only to the standard deductible. None of the Companies' insurance policies will terminate or be adversely affected by the consummation of the transactions contemplated by this Agreement. 3.18 Litigation; Disputes. There are no claims, disputes, actions, suits, investigations or proceedings pending or threatened against or affecting any Company or any of the Subsidiary Partnerships or any of their respective properties or assets, and, to the Knowledge of the Sellers, there is no basis for any such claim, dispute, action, suit, investigation or proceeding. No Company and no Seller has knowledge of any default under any such action, suit or proceeding. No Company and no Subsidiary Partnership is in default in respect of any judgment, order, writ, injunction or decree of any Governmental Authority. 3.19 Environmental. To the Knowledge of Sellers, with respect to the Existing Radio Stations and, from and after the purchase of each, the Additional Radio Stations, (a) There are no conditions, facilities, procedures or any other facts or circumstances that constitute Environmental Noncompliance on any of the Purchased Real Estate. (b) Except as set forth in the reports listed on Schedule 2.5, there is not constructed, placed, deposited, stored, disposed of, nor located on the Purchased Real Estate, any asbestos in any form. (c) No structure, improvements, equipment, fixtures, activities or facilities located on the Purchased Real Estate uses Hazardous Materials except those customarily used in the course of the Business; provided, however, that such Hazardous Materials have been used in compliance with applicable Environmental Laws. (d) There have been no releases or threatened releases of Hazardous Materials into the environment, or which otherwise -30- 38 contribute to Environmental Conditions arising from the activities of the Companies or the Subsidiary Partnerships, or to the knowledge of the Companies and the Sellers arising from any other activities, except to the extent that such releases or threatened releases do not constitute a condition of Environmental Noncompliance relating to the Purchased Real Estate. (e) There are no underground storage tanks, or underground piping associated with tanks, used for the management of Hazardous Materials at the Purchased Real Estate and there are no abandoned underground storage tanks at the Purchased Real Estate which have not been either abandoned in place or removed in accordance with the applicable environmental law. (f) No Company and none of the Subsidiary Partnerships is subject to any Environmental Claims with respect to the Existing Radio Stations nor have any such Environmental Claims been threatened. No Company and no Seller is aware of any basis for any such Environmental Claims. (g) The Companies and the Subsidiary Partnerships have completed all environmental analyses, evaluations, investigations, reports, remedial actions and other actions required under the Senior Credit Agreement or by the lender thereunder. 3.20 Permits; Compliance with Applicable Law. (a) General. In respect of all statutes, ordinances, regulations, orders, judgments and decrees of any Governmental Authority applicable to any Company or any Subsidiary Partnership or to the Business or the assets and properties of the Companies and the Subsidiary Partnerships as to which a default or failure to comply might result in any material adverse change in the condition, financial or otherwise, assets or properties of the Companies or the Business: (i) no Company and none of the Subsidiary Partnerships is in default; (ii) each of them has complied therewith; (iii) to the Knowledge of Sellers, there is no basis for assertion of any violation of the foregoing or for any claim for compensation or damages or otherwise arising out of any violation of the foregoing; and (iv) no Company and no Seller has received any notification of any asserted present or past failure to comply with any of the foregoing which has not been satisfactorily responded to in the time period required thereunder. (b) Permits. Set forth in the Sellers' Disclosure Schedule is a complete and accurate list of all FCC Licenses applicable to the Purchased Radio Stations. Set forth in the Sellers' Disclosure Schedule is a complete and accurate list of all other permits, licenses, approvals, franchises, notices and authorizations issued by any Governmental Authorities (collectively, the "Permits"), held by any Company or any of the -31- 39 Subsidiary Partnerships and applicable to the Existing Radio Stations. To the Knowledge of Sellers, the Purchased Radio Stations are operating in accordance with the Act and their FCC Licenses and are in material compliance with the Act and the rules and regulations of the FCC. The Permits set forth in the Sellers' Disclosure Schedule are all the Permits required for the conduct of the Business of the Existing Radio Stations. All of the Permits set forth in the Sellers' Disclosure Schedule are in full force and effect, and no Company and none of the Subsidiary Partnerships has engaged in any activity which would cause or permit revocation or suspension of any such Permit, and to the Knowledge of Sellers no action or proceeding looking to or contemplating the revocation or suspension of any such Permit is pending or threatened. To the Knowledge of Sellers, there are no existing defaults or events of default or events or state of facts which with notice or lapse of time or both would constitute a default by any Company or any of the Subsidiary Partnerships under any such Permit. To the Knowledge of Sellers, there is no default or claimed or purported or alleged default or state of facts which with notice or lapse of time or both would constitute a default on the part of any party in the performance of any obligation to be performed or paid by any party under any Permit set forth in the Sellers' Disclosure Schedule. Except for the FCC Approval and as set forth in the Sellers' Disclosure Schedule, the consummation of the transactions contemplated hereby will in no way affect the continuation, validity or effectiveness of the Permits set forth in the Sellers' Disclosure Schedule or require the consent of any Person. Except as set forth in the Sellers' Disclosure Schedule, no Company and none of the Subsidiary Partnerships is required to be licensed by, or is subject to the regulation of, any Governmental Authority by reason of the Business. 3.21 Intellectual Property. To the Knowledge of Sellers, the use of the Intellectual Property in connection with the operation of the Existing Radio Stations and in a manner consistent with past practices does not infringe upon the proprietary rights of any other Person. The Purchaser will, upon consummation of the Agreement, possess adequate rights, licenses and other authority to use the Intellectual Property as necessary to operate the Existing Radio Stations as now operated, without infringement or unlawful or improper use of any of the Intellectual Property. No director, officer or employee of any Company or any of the Subsidiary Partnerships has any interest in any of the Intellectual Property, all of which will, as of the Closing, be free and clear of any Lien. To the Knowledge of Sellers, there is no infringement by any Person upon the Sellers' rights with respect to the Intellectual Property. No Company and none of the Subsidiary Partnerships has granted any outstanding licenses or other rights to any of the call letters, copyrights, trademarks, trade names or other similar rights with regard to any of the Intellectual Property. This Section does not apply in any manner to the name "Tele-Media". -32- 40 3.22 Books and Records. The books of account of the Companies and the Subsidiary Partnerships fairly and accurately reflect their respective income, expenses, assets and liabilities and have been maintained in accordance with good business practices. All of such books and records, to the extent included within the Purchased Assets, will be located on the Closing Date on the business premises of TMBC. 3.23 Trade Schedule. The Trade Schedule will, as of the Closing, accurately set forth all of the Trade Liabilities and Trade Receivables existing as of the Closing. The Trade Receivables disclosed on the Trade Schedule will be accurately valued in the manner described in Section 8.1. 3.24 Acts to be Performed. As of the Closing, each of the covenants, acts and undertakings of the Sellers and the Companies to be performed on or before the Closing Date pursuant to the terms of this Agreement shall have been duly performed by the Sellers and the Companies. 3.25 Other Agreements. Each of the Acquisition Agreements and the Option Agreement is in full force and effect and enforceable against each of the parties thereto in accordance with the provisions thereof. None of the Acquisition Agreements or the Option Agreement has been amended, modified or otherwise altered in any material respect and true and correct copies of each of the Acquisition Agreements and the Option Agreement have been delivered by the Sellers and the Companies to the Purchaser. 3.26 Disclosure. To the Knowledge of Sellers, no representation or warranty made under this Section 3 and none of the information furnished by the Companies or any of the Sellers set forth herein or in the schedules or exhibits hereto contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading. SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE SELLERS Each of the Sellers jointly and severally represents and warrants to the Purchaser, as of the date hereof and as of the Closing Date, that, except as set forth in the Sellers' Disclosure Schedule: 4.1 Authority. Such Seller has the full power, authority and legal right to execute and deliver this Agreement and to perform such Seller's covenants and agreements hereunder, and this Agreement constitutes a valid and legally binding obligation of such Seller, enforceable against such Seller in accordance with its terms. -33- 41 4.2 Ownership of the Shares, Etc. Other than the Lien pursuant to the Option Agreement and the Lien pursuant to the Centre Pledge, both of which will be terminated before or contemporaneously with the Closing, the Sellers own all of the Shares, free and clear of any Lien, and have the legal right to sell and transfer the Shares to the Purchaser. Upon transfer of the TMBC Shares to the Purchaser hereunder, the Purchaser will acquire good and marketable title to the TMBC Shares, free and clear of any Lien. Upon acquisition of the TMBC Shares hereunder, the Purchaser will own all rights and ownership interests in the capital stock of the Companies. 4.3 No Legal Bar; Conflicts. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any statute, ordinance, regulation, order, judgment or decree of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under or result in the termination of or the creation of any Lien pursuant to the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which either Seller is a party or by which such Seller or any of either Seller's assets is bound. 4.4 Option Agreement. Neither of the Sellers is in breach of or default under any provision of the Option Agreement or any other agreements, certificates, exhibits, schedules or other written instruments executed or delivered in connection with any of the transactions contemplated by the Option Agreement, nor has any event occurred that, with the passage of time or the giving of notice, would constitute a breach of or default under any provision of any of the foregoing. Before or contemporaneously with the Closing, each of the Options, the Option Agreement, and the other agreements, certificates, exhibits, schedules and other written instruments executed or delivered in connection with the Option Agreement shall have been terminated, without any further obligation on the part of the Sellers, the Companies or any other Person. 4.5 Other Agreements. Each of the Acquisition Agreements, the Centre Pledge and the Option Agreement is in full force and effect and enforceable against each of the parties thereto in accordance with the provisions thereof. None of the Acquisition Agreements, the Centre Pledge or the Option Agreement has been amended, modified or otherwise altered in any material respect and true and correct copies of each of the Acquisition Agreements, the Centre Pledge and the Option Agreement have been delivered by the Sellers and the Companies to the Purchaser. 4.6 Disclosure. No representation or warranty made under this Section 4 and none of the information furnished by either of the Sellers set forth herein or in the schedules or exhibits hereto -34- 42 contains any untrue statements of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading. SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER In connection with the purchase and sale of the Shares hereunder, and in order to induce the Companies and the Sellers to enter into and consummate the transactions contemplated by this Agreement, the Purchaser hereby represents and warrants to the Companies and the Sellers as of the date hereof and as of the Closing Date (except for representations and warranties expressly and specifically relating to a time or times other than the date hereof or thereof, which shall be made as of the specified time or times), that, except as set forth in Schedule 5.0 (the "Purchaser's Disclosure Schedule"): 5.1 Organization and Qualification. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and has full corporate power and authority to own its assets and properties, conduct its business and acquire the Shares. The Purchaser is in good standing in each other jurisdiction wherein the failure so to qualify would have a material adverse effect on the business or properties of the Purchaser. The Purchaser has full power, authority and legal right and all necessary approvals, permits, licenses and authorizations to own its properties and to conduct its business. 5.2 Authority. The execution and delivery of this Agreement by the Purchaser, the performance by the Purchaser of its covenants and agreements hereunder and the consummation by the Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and legally binding agreement of the Purchaser, enforceable against the Purchaser in accordance with its terms. 5.3 No Legal Bar; Conflicts. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Certificate of Incorporation or Bylaws of the Purchaser or any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or violates or will violate, or conflicts with or will conflict with, or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which the Purchaser is a party or by which the Purchaser or any of the assets of the Purchaser is bound. Except for the FCC Approval, filing and -35- 43 expiration of the applicable working period under the HSR Act, and the consents disclosed on the Purchaser's Disclosure Schedule, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of the Purchaser in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 5.4 Purchaser's FCC Qualifications. To the Knowledge of Purchaser, Purchaser is fully qualified to hold the FCC Licenses and there is no reason why anyone would oppose the FCC Application or why the FCC Grant of Consent would not issue. 5.5 Bond Payoff Agreement. The Bond Payoff Agreement is in full force and effect and enforceable against each of the parties thereto in accordance with the provisions thereof. The Bond Payoff Agreement has not been amended, modified or otherwise altered in any material respect and attached to the Purchaser's Disclosure Schedule is a true, complete and correct copy thereof. 5.6 Disclosure. No representation or warranty made under this Section 5 and none of the information furnished by the Purchaser set forth herein or in the schedules or exhibits hereto contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading. SECTION 6 AFFIRMATIVE COVENANTS OF THE COMPANIES AND THE SELLERS The Companies and the Sellers jointly and severally covenant and agree with the Purchaser to: 6.1 Certain Transactions. (a) Consummate the Option Termination, each of the Acquisitions pursuant to the written agreements provided to date to the Purchaser, and the Reorganization pursuant to written agreements provided in advance in writing to the Purchaser, (b) if the Companies elect to enter into an appropriate agreement, consummate the acquisition of WPRR-FM and WVAM-FM for not more than $2,700,000 pursuant to a written agreement containing terms and conditions consistent with those used by the Sellers and the Companies for similar acquisitions and reasonably acceptable to the Purchaser, (c) to the extent that the Purchaser consummates any of the Acquisitions, do so in accordance with the provisions of the appropriate Acquisition Agreement, (d) refrain from making any amendment, modification or other alteration to any of the agreements described in clauses (a), (b) and (c) above, (e) strictly enforce the provisions of each of the agreements described in clauses (a), (b) and (c) above, and (f) consummate each of the Acquisitions (to the extent consummated before the Closing) and Reorganization without the imposition upon -36- 44 any Company or any of the Subsidiary Partnerships of any Taxes or of any Obligations (other than Obligations of the Companies and the Subsidiary Partnerships in existence prior to the Reorganization) which would be binding upon the Companies from and after the Closing. 6.2 Senior Credit Agreement. Obtain, at least five business days prior to the Closing Date, a letter from Finova (the "Finova Payoff Letter") setting forth the Finova Payoff Amount. In the Finova Payoff Letter, Finova shall agree that, upon its receipt of the Finova Payoff Amount (a) no additional amounts shall be due under the Senior Credit Agreement, (b) the Senior Credit Agreement and all related documents entered into in connection therewith shall be terminated, and (c) Finova shall deliver all UCC-3 termination statements, mortgage satisfactions, releases and other documents necessary to terminate its security interest in the Purchased Assets and the Companies and their Affiliates (collectively, the "Release Documents"). 6.3 Payment of Obligations. Pay and otherwise fully discharge all Obligations of the Companies and the Subsidiary Partnerships on a timely basis, and in any event pay and otherwise fully discharge, on or before the Closing, any and all Obligations of the Company and the Subsidiary Partnerships existing as of the Closing except the Assumed Obligations and amounts to be paid pursuant to Section 2.2(b). 6.4 Access. Pursuant to the Due Diligence and Cooperation Outline attached hereto as Schedule 6.4, the parties agree to, afford the Purchaser and its authorized representatives reasonable access during normal business hours to each of the Purchased Radio Stations (including the Additional Radio Stations to the extent owned by the Companies or any of their Affiliates) and such Stations' employees, and permit the Purchaser and its authorized representatives to examine all operations, equipment, properties and other assets, logs, books, relevant records, contracts and documents of the Companies and the Subsidiary Partnerships pertinent to such Stations. The Purchaser and the Companies shall cooperate in good faith in arranging schedules for Station visits and in efforts to minimize interference with the normal business and operations of such Stations. 6.5 Operations in the Regular Course. Until the Closing, (a) operate the Existing Radio Stations and carry on its related business including the joint sales agreements and the local marketing agreements in the ordinary course, refrain from entering into any material agreements with respect to such Stations except in the ordinary course, maintain normal staffing, sales efforts, managerial, promotion and programming efforts on a basis at least equivalent to the manner in which such Stations have been operated during the last 12 months, and make advertising, promotional and marketing expenditures for such Stations in nature and amount at -37- 45 least equivalent to the manner in which such expenditures have been made during the last 12 months; (b) to the extent acquired, operate the Additional Radio Stations without making any material changes in the operations of such Stations, including implementing any overall or general format changes or entering into any individual contract obligation exceeding $50,000 per year, or $150,000 per year in the aggregate as to all such contract obligations for the period from the date hereof until July 31, 1997, and if the Closing shall not have occurred by July 31, 1997, $250,000 per year in the aggregate for the period from the date hereof to the date of Closing, without the prior written consent of the Purchaser, such consent not to be unreasonably withheld; (c) exercise reasonable efforts to cause existing management personnel to continue to supervise and manage the operations of the Stations; (d) exercise reasonable efforts to maintain the integrity and reputation of the Stations; (e) refrain from making any additions, alterations or other changes to any broadcast equipment of the Stations in excess of $10,000 per item without the prior written consent of the Purchaser; and (f) exercise reasonable efforts to ensure that the representations and warranties set forth in Section 3 are true and correct as of the Closing Date as if then made. 6.6 Maintenance. Maintain and repair the Purchased Assets through the Closing Date in a manner consistent with the maintenance and repair practices which historically have been utilized at the Existing Radio Stations. 6.7 Preservation of Organization. Exercise hereafter reasonable efforts to preserve the business organization of the Purchased Radio Stations intact, and preserve for the Purchaser the present relationships with employees, suppliers, advertisers and customers and others having business relationships with such Stations. 6.8 Accounts Receivable. Maintain the Accounts Receivable in accordance with the representations and warranties set forth in Section 3.10. 6.9 Books and Records. Maintain the books and records of the Companies and their Affiliates in accordance with good business practices, on a basis consistent with past practices, and make available to the Purchaser the books, records, tax returns, leases, contracts and other documents or agreements material to the Purchased Radio Stations (including the Additional Radio Stations to the extent owned by the Companies or their Affiliates) as the Purchaser, its counsel, accountants or other authorized representatives may from time to time reasonably request. 6.10 Employees. Pay as and when the same shall become due and payable any amounts owed by any Company or any of the Subsidiary Partnerships to their respective employees who have performed services up to the time of Closing, whether fixed or accrued, for -38- 46 wages, vacation pay, sick pay, severance pay, employee benefits, damages and otherwise. 6.11 Compliance with FCC. Materially comply with the FCC Licenses applicable to the Existing Radio Stations and, to the extent acquired, any Additional Radio Station with the provisions of the Act, the rules, regulations and policies of the FCC, and with all other laws, ordinances, regulations, rules and orders of any Governmental Authority applicable to the Companies and the Subsidiary Partnerships or to any of the Existing Radio Stations consistent with past practices. 6.12 Taxes. File all Federal, state and municipal tax returns, reports and declarations required to be filed by the Sellers, any Company or any of the Subsidiary Partnerships as and when such returns are due, and satisfy all Taxes related thereto, and pay in full as and when due all Taxes attributable to the Sellers, any Company or any of the Subsidiary Partnerships, or their respective income, operations or properties, accruing through the Closing unless contested in good faith. 6.13 Consents; Estoppel Certificates. Exercise reasonable efforts to obtain, prior to the Closing, (a) the consent and approval of any third parties whose consent or approval is materially necessary in connection with the consummation of the transactions contemplated hereby, including, without limitation, those consents and approvals set forth on the Sellers' Disclosure Schedule and (b) estoppel certificates in form and substance reasonably acceptable to the Purchaser from those parties to the Assumed Obligations for which estoppel certificates are customarily requested. 6.14 Supplemental Financial Statements. Provide the Purchaser with (a) copies of the unaudited income statements and balance sheets applicable to the Purchased Radio Stations for the month of January 1997 no later than March 31, 1997; (b) copies of the unaudited income statements and balance sheets applicable to the Purchased Radio Stations for the month of February 1997, using their best efforts by April 4, 1997 (but realistically believed to be by April 10, 1997), but in no event later than April 15, 1997; (c) copies of the monthly unaudited income statements and balance sheets applicable to the Purchased Radio Stations (including the Additional Radio Stations to the extent owned by the Companies or their Affiliates) which are prepared from and after the date hereof until Closing in the ordinary course of business, promptly upon their becoming available to the Companies or any of their Affiliates but in no event later than 30 days after the end of the applicable month and (d) audited consolidated balance sheets dated as of December 31, 1996 and as of December 31, 1995 and the related statements of income and cash flow for the periods then ended and for the period ended December 31, 1994 for the Companies (the "Audited Financial Statements") no event later than April 15, 1997 -39- 47 (the Audited Financial Statement and collectively with the financial statement described in clauses (a), (b) and (c) the "Supplemental Financial Statements"). Such Supplemental Financial Statements shall be subject to the representations and warranties set forth in Section 3.5. 6.15 Obligations with Respect to Subsidiary Partnerships. Cause each of the Subsidiary Partnerships to take such actions and to refrain from taking such actions as may be necessary or appropriate in order to cause the Companies and the Sellers to be in compliance with each of the representations, warranties, covenants and agreements applicable to them under this Agreement (the Companies and the Sellers hereby representing and warranting to, and agreeing with, the Purchaser that the Companies do now and shall at all times prior to the Closing maintain sufficient authority and control over the Subsidiary Partnerships to comply with this Section 6.15). 6.16 Delivery of Acquisition Documents. Promptly upon consummation of any Acquisition and as soon as such documents are received by the Companies, deliver to the Purchaser a copy of the appropriate Acquisition Agreement together with any and all additional agreements, documents and other written instruments executed or delivered by the parties to the Acquisition in connection with such Acquisition Agreement or the consummation of the transactions contemplated thereby. 6.17 Delivery of Other Agreements. Promptly upon consummation of the Option Termination and the Reorganization, deliver to the Purchaser a copy of any and all agreements, documents and other written instruments executed or delivered by the parties to such transactions in connection therewith or with the consummation of the transactions contemplated thereby. 6.18 Further Information. Furnish to the Purchaser prior to the Closing such financial (including tax), legal and other information with respect to the Companies and their Affiliates and the Purchased Radio Stations as the Purchaser or its authorized representatives may from time to time reasonably request except that the Sellers and the Companies shall not be required to furnish information with respect to the Additional Radio Stations which is not otherwise available to the Sellers, the Companies, or the Subsidiary Partnerships. 6.19 Notice. Promptly notify Purchaser in writing upon the occurrence or the nonoccurrence of any event which does then, or which upon the passing of time or the giving of notice would, constitute a material breach of or default under, or render untrue in any material respect, any agreement, covenant, representation or warranty of the Companies or the Sellers set forth in this Agreement. -40- 48 6.20 Employee Benefits. (a) Pay all claims incurred under any Welfare Plan prior to the Closing Date that have not been paid as of the Closing Date, (b) take any and all necessary action to terminate each Welfare Plan, effective as of the Effective Time, and (c) take any and all necessary action to terminate the Companies' and each Subsidiary Partnership's participation in the Pension Plan, effective as of the Effective Time. SECTION 7 NEGATIVE COVENANTS OF THE COMPANIES AND THE SELLERS From and after the date hereof and until the Closing, neither the Companies nor the Sellers shall take, or cause to be taken, or permit any of the Subsidiary Partnerships to take, without the prior written consent of Purchaser, such consent not to be unreasonably withheld, any of the following actions: 7.1 Sales, Transfers and Liens. Make any sale, transfer, assignment, conveyance, mortgage, hypothecation, encumbrance or other placement of any Lien on any of the Purchased Assets other than (a) the granting of security interests pursuant to the Senior Credit Agreement for the purpose of securing Acquisition Debt and (b) the replacement of immaterial items in the ordinary course of business consistent with past practices. 7.2 Assumed Obligations. Materially amend, terminate or renew any of the Assumed Obligations or obligations under the Bonds or the Senior Credit Agreement (including any renewal or termination resulting from the failure to provide, after the date hereof, timely notice of nonrenewal or termination as required by the terms of any of the Assumed Obligations or any of such obligations but excluding any amendment to the Senior Credit Agreement required in connection with the financing for any Acquisition) or the Acquisition Agreements without the Purchaser's prior approval; provided, however, that with respect to the contracts listed on Sellers' Disclosure Schedule 2.3(d), this provision shall apply to not more than twenty (20) contracts to be identified in writing by the Purchaser within twenty (20) days after the execution and delivery of this Agreement; provided further however, that this provision shall apply to the renewal of any Assumed Obligation on materially different terms. 7.3 Breaches; Defaults. Do any act or omit to do any act, or permit any act or omission to occur, that will cause a breach of any contract, commitment or obligation of it or them in any respect that would have a material adverse effect on the Purchased Assets or the business operations of the Existing Radio Stations as presently conducted and to the extent acquired, any Additional Radio Stations. -41- 49 7.4 Indebtedness for Borrowed Money; Obligations. Incur (a) any additional Indebtedness for Borrowed Money other than Acquisition Debt or (b) any other Obligations except in the ordinary course of business in a manner consistent with past practices or as contemplated by the Acquisitions, the Option Termination or the Reorganization. 7.5 Loans; Advances. Make any loans or advances, directly or indirectly, to any employees of any Company or any of its Affiliates, or to any relatives of any such Person. 7.6 [Intentionally Omitted] 7.7 Dividends; Distributions. Except for the Final Distribution and the distributions contemplated by the Option Termination, declare or pay any dividend or make any other distribution in respect of the capital stock or other securities of the Companies or, directly or indirectly, any purchase, redemption or other acquisition or disposition of any shares of the capital stock or any of the other securities of the Companies. 7.8 Salary Increases. Increase any salary, other payments, disbursement or distributions in any manner or form to any employees of any Company or any of the Subsidiary Partnerships other than increases in salary which are consistent with past practices in the ordinary course of business and, to the extent applicable to any Person subject to any agreement described in Section 3.13(a) consistent with such agreement. 7.9 Nonsolicitation. Directly or indirectly solicit or negotiate with any Person (other than a party hereto) or accept any proposal to acquire any Company or any of the Subsidiary Partnerships, any of the Purchased Radio Stations or any of the Shares. SECTION 8 ADDITIONAL COVENANTS OF THE PARTIES 8.1 Trade. To the extent that the aggregate liability of the Purchased Radio Stations as of the Closing for unperformed time under the Trade Agreements exceeds the value of the Trade Receivables to be received by the Purchased Radio Stations or the Companies after the Closing, the parties agree that the purchase price shall be reduced by the amount by which such Trade Liabilities exceed such Trade Receivables. For purposes of this Section 8.1, the value of the Trade Receivables as of the Closing shall be the fair market value thereof, as determined by the Companies in accordance with their normal, customary practices. -42- 50 The Companies and the Sellers shall deliver to the Purchaser at the Closing a schedule of Trade Liabilities and Trade Receivables existing as of the Closing and attributable to the Purchased Radio Stations (the "Trade Schedule"). Neither Company nor any of its Affiliates shall enter into any Trade Agreements with regard to the Purchased Radio Stations from the date hereof until the Closing except in the ordinary course of business. 8.2 Accounts Receivable. At the Closing, the Sellers shall deliver to the Purchaser a list (the "Accounts Receivable List") of the Accounts Receivable existing as of the Closing including amounts for run but as yet unbilled services (the "Unbilled A/R"). If, as of the Closing, the aggregate face amount of the Accounts Receivable (including the Unbilled A/R) disclosed on the Accounts Receivable List is less than $2,000,000, the purchase price and the Guaranteed Receivables shall each be reduced by the amount of such deficiency. During the period of 120 days following the Closing Date (the "Collection Period"), the Purchaser shall exercise, or cause the Companies to exercise, reasonable efforts to collect and receive the Accounts Receivable in accordance with the normal collection processes and procedures of the Purchaser, and all collected Accounts Receivable (including the Unbilled A/R) shall be applied first by the Purchaser toward the Guaranteed Receivables. Notwithstanding anything contained in the foregoing to the contrary, the Purchaser shall not be required to institute legal proceedings, retain counsel or retain collection agents or other third parties to enforce the collection of any Accounts Receivable (including the Unbilled A/R). Within 10 days after the end of the month in which the Closing occurs, the Purchaser will provide a report to the Sellers setting forth by Station, the order number, the invoice number, the invoice amount, the amount due the Purchaser and the amount due the Sellers, in such reasonable detail as to enable the Sellers to cross-reference the report to the Unbilled A/R. After the end of each month during the Collection Period, the Purchaser shall furnish the Sellers with an accounting of the collection of the Guaranteed Receivables. If, at the end of the Collection Period, the Purchaser has not collected the full amount of the Guaranteed Receivables, the Sellers shall thereupon pay the Purchaser, as a post-Closing adjustment to the purchase price, an amount equal to such deficit. From and after such time during the Collection Period as the Purchaser has collected the Guaranteed Receivables, the Purchaser shall act as agent for the Sellers during the remainder of the Collection Period and exercise reasonable efforts to collect the Accounts Receivable in accordance with the normal collection processes and procedures of the Purchaser. All of such Accounts Receivable (including the Unbilled A/R) in excess of the Guaranteed Receivables collected by the Purchaser during the Collection Period shall be collected by the Purchaser, as agent for the Sellers, and be remitted to the Sellers within seven days after the expiration of each calendar month within the Collection Period, except that the last remittance shall be made within seven days after the end of the calendar month -43- 51 during which the Collection Period ends. Upon expiration of the Collection Period and receipt by the Purchaser of any purchase price adjustment required by the provisions of this Section 8.2, the Purchaser shall turn back to the Sellers any uncollected Guaranteed Receivables and other Accounts Receivable. In any event, the Purchaser's responsibility and liability for the collection of the Accounts Receivable shall cease upon termination of the Collection Period and the Sellers shall be solely responsible for the collection of the balance of their Accounts Receivable. During the Collection Period, payments received from any account debtor shall, unless otherwise designated for application by the account debtor, be applied first to obligations of such account debtor incurred before the Effective Time (in the order in which they were incurred) and then to any obligations incurred by such account debtor after the Effective Time, until the amount of such Account Receivable (including any Unbilled A/R) has been paid in full. Any Accounts Receivable disputed by the account debtor immediately shall be turned back to the Sellers for resolution. The Purchaser shall furnish the Sellers with an accounting of the Accounts Receivable (including any Unbilled A/R) at the time it remits payment thereof to the Sellers, including such additional information which the Sellers reasonably request to enable the Sellers to identify, by invoice number, the Accounts Receivables and their status. For a period of 180 days after the expiration of the Collection Period, the Purchaser will remit within seven days after the close of each month any collections of Unbilled A/R along with an accounting of such collections. The parties acknowledge that this extended period is desirable because it would be impractical for the Purchaser to turn back to the Sellers any Unbilled A/R at the end of the Collection Period. After the final remittance at the end of the extended collection period, any uncollected Unbilled A/R shall become the property of the Purchaser and shall be in addition to the Guaranteed Receivables. 8.3 Providence Payment Proceeds. If the Sellers and/or any of the Companies and/or any of the Subsidiary Partnerships receive the Providence Payment prior to the Closing, then the Sellers shall cause the Companies to have immediately following the Closing, in addition to the Guaranteed Receivables, cash in the amount received by Sellers and/or the Companies in respect of the Providence Payment. In the event that the Sellers and/or the Companies have not received the Providence Payment at or prior to the Closing, then the Companies shall retain, in addition to the Guaranteed Receivables, all rights in and to the Providence Payment. 8.4 Application for Transfer of Control. Within four business days after execution and delivery of this Agreement, the Sellers and the Purchaser shall file applications (the "FCC Application") with the FCC to obtain the FCC's grant of consent to the transfer of control of the Companies from the Sellers to the Purchaser (the "FCC Grant of Consent"). Contemporaneously with the filing of the -44- 52 FCC Application, the Sellers and the Companies shall file all appropriate applications (the "Ancillary FCC Applications") with the FCC to approve the transfers contemplated by the Reorganization (the "Ancillary FCC Grants of Consent"). The parties agree that they shall prosecute the FCC Application, and the Sellers and the Companies agree that they shall prosecute (and shall cooperate with each other in the timely prosecution of) the Ancillary FCC Applications, in good faith and with due diligence, and within the time allowed therefor by the rules and regulations of the FCC. Each of the Sellers, the Companies and the Purchaser shall take all necessary actions on its part to obtain the FCC Grant of Consent and the Sellers and the Companies shall take all reasonably necessary actions on their part to obtain the Ancillary FCC Grants of Consent. The Purchaser shall advance the filing fee applicable to the FCC Application (excluding any fees attributable to the Ancillary FCC Applications or the radio stations covered thereby) and the Sellers shall reimburse the Purchaser for one-half of such filing fee promptly upon request of the Purchaser. All other costs and expenses incurred by each party in connection with the filing and prosecution of the FCC Application shall be paid by the party incurring the cost or expense. 8.5 Adjustments at Closing. Without duplication, the following items shall be prorated through and including the Closing Date, and the purchase price appropriately increased or decreased as a result thereof: (a) Amounts payable under the Real Property Leases and the Assigned Contracts; (b) Power and utility charges incurred in connection with the Purchased Radio Stations and with any Purchased Real Estate; (c) Real and personal property taxes pertaining to the Purchased Assets; (d) Salaries (including bonuses and commissions), accrued vacation pay, health insurance, FICA, FUTA, Medicare and other employee payroll costs due to or in respect of any employees of the Companies and the Subsidiary Partnerships who, in the Purchaser's discretion, continue in the employ of the Companies after the Closing; and (e) Other payments due under any of the Assumed Obligations, including but not limited to prepaid expenses and deposits. Proration of real and personal property taxes shall be based upon the most recent assessments available. Each of the parties shall duly cooperate with the other in making the foregoing prorations, adjustments and payments. If, for any reason beyond the reasonable control of the parties, information necessary to calculate the -45- 53 required prorations is unavailable before the Closing Date, such item shall be prorated after the Closing Date as soon as such information is available, and the Sellers and the Purchaser shall cooperate with each other in regard thereto and shall pay, each to the other, any amounts which may be owing as a result of such subsequent prorations. If, at any time after the Closing Date, errors are discovered in any prorations made pursuant to this Section 8.5, the Sellers and the Purchaser shall correct such errors and pay, each to the other, any sums owing as a result of such correction. All prorations to the extent feasible shall be made on the Closing Date. 8.6 Brokerage. The Sellers and the Companies, on one hand, and the Purchaser, on the other, represent and warrant to each other that no Person has provided services as a broker, agent or finder in this transaction. The Sellers and the Companies, on one hand, and the Purchaser, on the other, shall each indemnify and hold harmless the other for any and all claims or expenses, including reasonable attorneys' fees, asserted by any Person purporting to act on behalf of the respective indemnitor as a broker, agent or finder in connection with this transaction. 8.7 Risk of Loss. If (a) any loss or damage to any of the Purchased Assets occurs prior to the Closing which has a material adverse effect on any of the Existing Radio Stations or to the extent acquired, any of the Additional Radio Stations, and such loss or damage is not repaired, replaced or restored by the Sellers at their sole cost and expense to the same condition as existed before such loss or damage, or (b) any loss or damage occurs to any of the Purchased Assets before the Closing which prevents or will prevent broadcast transmission of any Existing Radio Station or to the extent acquired, any of the Additional Radio Stations, for more than 10 consecutive days, regardless of whether such loss or damage is repaired or restored, then, in either event, the Purchaser may in its sole discretion refuse to consummate the transactions contemplated under this Agreement and terminate its obligations under this Agreement. In the event that the Purchaser terminates its obligations under this Agreement pursuant to this Section, the Escrow Deposit shall be distributed as set forth in Section 13.1(f). 8.8 Actions With FCC. In the event any investigation, order to show cause, notice of violation, notice of apparent liability or a forfeiture, material complaint, petition to deny or informal objection is instituted or filed against any party hereto (whether in connection with the proceedings to approve the FCC Application or otherwise), such party shall promptly notify the other party hereto in writing of such occurrence and, subject to the right of either party to terminate this Agreement pursuant to Section 13, shall thereafter immediately take all reasonable measures to contest the same in good faith and seek the removal or favorable resolution of such action, order, notice or complaint. -46- 54 8.9 Purchaser's Financing. From and after the date hereof, the Purchaser and Citadel shall exercise diligent efforts to arrange financing to complete the transaction contemplated pursuant to this Agreement as expeditiously as possible, and in any event prior to the Closing. Notwithstanding the foregoing, the Sellers and the Purchaser acknowledge and agree that if Citadel and the Purchaser are unable to arrange the financing necessary to consummate the transaction contemplated hereunder, the Sellers shall be entitled as their sole and exclusive remedy to the Escrow Deposit. 8.10 Cooperation. During the seven-year period immediately following the Closing, the Purchaser shall cooperate with the Sellers in providing the Sellers all information reasonably requested and permitting the Sellers access to all records relating to the period of ownership of the Companies by the Sellers prior to the Closing. The cost and expense of copies of such information hereunder shall be borne by the Sellers. The Sellers, as a condition to being provided with access to information hereunder, shall, at the request of the Purchaser, execute a confidentiality agreement in form and substance acceptable to the Purchaser in its reasonable discretion. 8.11 Dismissal of Litigation. Contemporaneously with the execution and delivery of this Agreement, the parties hereto shall take all actions (including the making of all appropriate court filings) necessary to dismiss the Litigation with prejudice and to execute and deliver a mutual release relating to the Litigation in a mutually agreed upon form. 8.12 HSR Filing. Within 21 days after the execution and delivery of this Agreement, the parties hereto shall complete and submit any filing that may be required pursuant to the HSR Act (the "HSR Filing"). The parties hereto shall diligently take, or fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested, in order to comply with the requirements of the HSR Act. The parties hereto shall use their best efforts to resolve objections, if any, that may be asserted under the HSR Act or any other antitrust law in connection with the transactions contemplated hereby. The Purchaser shall pay any filing fee applicable to any HSR Filing. All other costs and expenses incurred by each party in connection with the filing and prosecution of any HSR Filing shall be paid by the party incurring the cost or expense. 8.13 Name Changes. Prior to the Closing, the parties shall cooperate to effectuate a change to the name of TMBC on or before the Closing and to take all actions reasonably necessary to eliminate the use of the name "Tele-Media" by TMBC as of the Closing Date. -47- 55 8.14 Agreement Not to Employ. In the event that the transactions contemplated by this Agreement are not consummated for any reason, neither Purchaser or any of its Affiliates will employ any person who was an employee of the Companies or any Subsidiary Partnership within six (6) months prior to the date of termination of this Agreement, for a period of one (1) year from the date of such termination. 8.15 Purchase of Bonds and Warrants. So long as this Agreement has not been terminated pursuant to Section 13, the Purchaser and its Affiliates shall not acquire the Bonds and/or the Warrants. 8.16 Bond Payoff Agreement. The Purchaser shall not amend or modify the Bond Payoff Agreement, and the Sellers and the Companies agree to execute and deliver at the Closing the mutual releases specified in the Bond Payoff Agreement. 8.17 Public Announcements. No public announcement concerning the subject matter of this Agreement shall be made by any party hereto without the prior approval of the other parties as to the content and timing of such announcement, which approval shall not be unreasonably withheld or conditioned. 8.18 Notice of Breaches. The Purchaser agrees to provide written notice to the Sellers reasonably promptly after any of Lawrence R. Wilson, Donna Heffner, Stuart R. Stanek and/or R. Stephen Campbell obtain knowledge of any fact or circumstance which may constitute a material breach by the Sellers and/or the Companies of any representation, warranty or covenant of this Agreement. Anything herein to the contrary notwithstanding, the providing of or the failure to provide any such notice shall not relieve the Sellers and/or the Companies from their obligations under this Agreement, nor shall the failure of the Sellers and the Companies to fulfill their obligations under this Agreement relieve the Purchaser of its obligations under this Section 8.18. 8.19 Assignments. The parties agree to cooperate to obtain any material third party consents and to execute and deliver any material assignments or agreements required to transfer rights and obligations under the Assumed Obligations and the Contracts. 8.20 Finova Prepayment. The Purchaser agrees to cooperate with the Sellers and the Companies in their request to obtain a reduction in the Finova Prepayment Penalty. 8.21 Control. The Purchaser agrees not to seek to control the Stations prior to the Closing. 8.22 Purchaser's Employee Benefit Plans. Any individual who becomes an employee of the Purchaser as a result of this transaction on the Closing Date, shall be eligible to participate -48- 56 in the employee benefit plans maintained for the Purchaser's other employees in accordance with the terms and conditions contained therein, as the same may be amended or modified from time to time. SECTION 9 THE CLOSING 9.1 Closing Date. Subject to Section 9.3, the Closing shall occur within 10 business days following the later of (a) the date that the FCC Grant of Consent has become a Final Order and (b) the date upon which the applicable waiting period under the HSR Act expires, on a date mutually selected by the Sellers and the Purchaser. The Closing shall begin at 9:00 a.m., local time, on the date of the Closing (the "Closing Date") at the offices of Pietragallo, Bosick & Gordon, One Oxford Centre, 38th Floor, Pittsburgh, Pennsylvania 15219, or at such other time and place as the parties may agree in writing. It is recognized that the Closing may require one or more days to complete the activities contemplated for Closing. 9.2 Closing Documents. At the Closing: (a) The Purchaser shall deliver the following: (i) the aggregate amount of the purchase price, in the form and as required by the provisions of this Agreement; and (ii) all certificates and other documents required to be delivered by the Purchaser to the Sellers pursuant to this Agreement or as a condition precedent to the Sellers' fulfillment of their obligations hereunder. (b) The Sellers shall deliver to the Purchaser the following: (i) certificates in negotiable form representing the TMBC Shares, each such certificate to be duly executed by the appropriate Seller and to be accompanied by any requisite stock transfer tax stamps; (ii) all certificates, consents (including any third party consents required as to the Assumed Obligations), estoppels and other documents otherwise required to be delivered by the Sellers pursuant to this Agreement or as a condition precedent to the Purchaser's fulfillment of its obligations hereunder (including the Release Documents); (iii) the duly executed Covenant; -49- 57 (iv) the Trade Schedule and the Accounts Receivable List; and (v) evidence reasonably satisfactory to the Purchaser that each of the Acquisitions (to the extent consummated before the Closing), Option Termination and Reorganization has been consummated in accordance with the provisions of this Agreement. 9.3 Extension of Closing Date. Notwithstanding any other provision contained herein to the contrary, the Purchaser may, in its sole discretion, at any time prior to the Closing Date otherwise required by Section 9.1, to the extent that the FCC Grant of Consent or the Ancillary FCC Grants of Consent have not been obtained because of a Sellers' FCC Problem, extend the Closing Date to a date sufficient for the Sellers and the Companies to remedy the Sellers' FCC Problem and for the FCC Grant of Consent and the Ancillary Grants of Consent to be obtained. Furthermore, once the FCC Approval, the Ancillary FCC Approvals and the approval under the HSR Act have been obtained, the Purchaser may, in its sole discretion, extend the Closing Date for a period not to exceed 60 days by giving written notice thereof to the Sellers and simultaneously giving written notice to the Escrow Agent authorizing the delivery to the Sellers of the Escrow Deposit which shall be credited against the purchase price in which case the Escrow Amount will be considered to have been fully earned and properly paid and will in no event be returned to the Escrow Agent or the Purchaser. Anything herein to the contrary notwithstanding, the Closing Date cannot be extended by Purchaser to a date later than the Expiration Date. SECTION 10 CONDITIONS TO THE SELLERS' OBLIGATIONS TO CLOSE The obligation of the Sellers to sell the Shares and otherwise consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, any or all of which may be waived by the Sellers in their sole discretion: 10.1 Opinion of the Purchaser's Counsel. The Sellers shall have received an opinion of Eckert Seamans Cherin & Mellott, LLC, counsel for the Purchaser, dated the Closing Date, in form and substance satisfactory to the Sellers, to the effect that: (a) The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. (b) This Agreement, together with all other documents and instruments required to be executed or delivered by the Purchaser in connection with the transactions contemplated hereby and thereby -50- 58 each has been duly authorized, executed and delivered by the Purchaser to the extent the Purchaser is a party thereto and constitutes a valid and legally binding obligation of the Purchaser to the extent the Purchaser is a party thereto, enforceable against the Purchaser in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (c) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the Certificate of Incorporation or Bylaws of the Purchaser or, to the knowledge of such counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel after due investigation, violates or will violate, or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under, or results or will result in the termination of or the creation or imposition of any Lien pursuant to, the terms of any contract, commitment, agreement, understanding or arrangement of any kind to which the Purchaser is a party or by which the Purchaser or any of the assets of the Purchaser is bound. Nothing contained in this Section 10.1 shall require an opinion by such counsel with respect to FCC matters. 10.2 Representations and Warranties. The representations and warranties of the Purchaser contained herein shall be true and correct in all material respects at and as of the Closing with the same effect as though all such representations and warranties were made at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified) and the Purchaser shall have delivered to the Sellers a certificate to that effect, dated the date of the Closing, signed by the President of the Purchaser. 10.3 No Litigation. No action, suit or proceeding against any of the Companies or any of the Sellers relating to the consummation of any of the transactions contemplated by this Agreement or any action by any Governmental Authority seeking to delay or enjoin any such transactions shall be pending or threatened. 10.4 Other Certificates. The Sellers shall have received such additional certificates, instruments and other documents, in form and substance satisfactory to the Sellers, as the Sellers shall have reasonably requested in connection with the transactions contemplated hereby. -51- 59 10.5 Corporate Action. All corporate action necessary to authorize the execution, delivery and performance by the Purchaser of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by the Purchaser, and the Purchaser shall have delivered to the Sellers certified copies of the resolutions of the Purchaser's board of directors authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of its officers and employees in carrying out the terms and provisions hereof. 10.6 Acts to be Performed. Each of the covenants, acts and undertakings of the Purchaser to be performed on or before the Closing Date pursuant to the terms hereof shall have been duly performed. 10.7 FCC Grant of Consent. The FCC Grant of Consent shall have been obtained. 10.8 HSR Clearance. All applicable waiting periods under the HSR Act shall have expired or been terminated. 10.9 Sellers' Representations and Warranties. The Sellers shall have received a certificate of the Purchaser setting forth, to the Knowledge of Purchaser, any fact or circumstance which may constitute a material breach by the Sellers and/or the Companies of any representation, warranty or covenant of this Agreement. SECTION 11 CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE The obligation of the Purchaser to purchase the Shares and otherwise consummate the transactions contemplated by this Agreement at the Closing is subject to the following conditions precedent, any or all of which may be waived by the Purchaser in its sole discretion: 11.1 Opinion of the Companies' and the Sellers' Counsel. The Purchaser shall have received an opinion of Pietragallo, Bosick & Gordon, counsel for the Companies, and the Sellers, dated the Closing Date, solely for the use of the Purchaser, in form and substance satisfactory to the Purchaser to the effect that: (a) Each Company is a corporation duly organized, validly existing and in good standing under the laws of the state in which it is organized. (b) Each Company is duly qualified and in good standing in each other jurisdiction wherein the failure so to qualify would have a material adverse effect on the Business or the properties of such Company. -52- 60 (c) Each Company has full corporate power and authority to own its assets and properties and to conduct the Business and has all necessary approvals, permits, licenses and authorizations to own its properties and to conduct the Business in the manner and in the locations presently owned and conducted. (d) This Agreement, together with all other documents and instruments required to be executed or delivered by the Companies or the Sellers in connection with the transactions contemplated hereby and thereby each has been duly authorized, executed and delivered by the Companies and duly executed and delivered by each of the Sellers, to the extent any of the foregoing is a party thereto, and constitutes a valid and legally binding obligation of each of the Companies and each of the Sellers to the extent they are a party thereto, enforceable against each of the Companies and each of the Sellers in accordance with their respective terms, except as such enforceability may limited by bankruptcy, insolvency or other laws affecting generally the enforceability of creditors' rights and by limitations on the availability of equitable remedies. (e) The authorized capital stock of TMBC consists of 35,000 shares of common stock, of which 25,000 shares are shares of voting common stock. The TMBC Shares constitute all of the outstanding shares and 10,000 are shares of non-voting common stock of capital stock in TMBC. All of the TMBC Shares have been duly and validly authorized and issued and are fully paid and non-assessable and are owned beneficially and of record by the Sellers. After consummation of the transactions contemplated by this Agreement, there are no outstanding subscriptions, warrants, options, calls, commitments or other equity securities, or rights or agreements with respect to any of the foregoing, to which TMBC or the Sellers are bound relating to the issuance, sale or redemption of the TMBC Shares or of any other shares of the capital stock or other securities of TMBC. No other Persons other than the Sellers have any interest, absolute or contingent, vested or unvested, in the capital stock of TMBC. No shares of capital stock or other securities of TMBC are reserved for any purpose. (f) The authorized capital stock of Centre consists of 1,000 shares of common stock, of which 1,000 shares are shares of voting common stock. The Centre Shares constitute all of the outstanding shares of capital stock in Centre. All of the Centre Shares have been duly and validly authorized and issued and are fully paid and non-assessable and are owned beneficially and of record by the Sellers. After consummation of the transactions contemplated by this Agreement, there are no outstanding subscriptions, warrants, options, calls, commitments or other equity securities, or rights or agreements with respect to any of the foregoing, to which Centre or the Sellers are bound relating to the issuance, sale or redemption of the Centre Shares or of any other shares of the capital stock or other securities of Centre. -53- 61 No other Persons other than the Sellers have any interest, absolute or contingent, vested or unvested, in the capital stock of Centre. No shares of capital stock or other securities of Centre are reserved for any purpose. (g) The authorized capital stock of Holding consists of 1,000 shares of common stock, of which 1,000 shares are shares of voting common stock. The Holding Shares constitute all of the outstanding shares of capital stock in Holding. All of the Holding Shares have been duly and validly authorized and issued and are fully paid and non-assessable and are owned beneficially and of record by the Sellers. After consummation of the transactions contemplated by this Agreement, there are no outstanding subscriptions, warrants, options, calls, commitments or other equity securities, or rights or agreements with respect to any of the foregoing, to which Holding or the Sellers are bound relating to the issuance, sale or redemption of the Holding Shares or of any other shares of the capital stock or other securities of Holding. No other Persons other than the Sellers have any interest, absolute or contingent, vested or unvested, in the capital stock of Centre. No shares of capital stock or other securities of Holding are reserved for any purpose. (h) To the knowledge of such counsel no Company has any subsidiaries except for the Subsidiary Partnerships or owns any capital stock or other proprietary interest, directly or indirectly, in any other corporation, association, trust, partnership, joint venture or other entity, and neither Company has any agreement with any Person to acquire any such capital stock or other proprietary interest. (i) At the Closing, the Purchaser will acquire title to the TMBC Shares, free and clear of any Lien. (j) The Option Termination has been duly consummated as set forth in the applicable provisions of this Agreement. (k) The Reorganization has been duly consummated in accordance with the applicable provisions of this Agreement. (l) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, violates or will violate any provision of the respective Certificate of Incorporation or Bylaws of the Companies or, to the knowledge of such counsel, any law, rule, regulation, writ, judgment, injunction, decree, determination, award or other order of any Governmental Authority, or, to the knowledge of such counsel violates or will violate or conflicts with or will conflict with or will result in any breach of any of the terms of, or constitutes or will constitute a default under or results in or will result in the termination of or the creation or imposition of any Lien pursuant to the terms of any contract, commitment, agreement, understanding -54- 62 or arrangement of any kind to which any of the Companies or any of the Sellers is a party or by which any of the Companies or any of the Sellers, or any of the assets of any of the Companies or any of the Sellers is bound. Except for the FCC Approval and the consents disclosed on the Sellers' Disclosure Schedule, to the knowledge of such counsel, no consents, approvals or authorizations of, or filings with, any Governmental Authority or any other Person are required on the part of the Sellers, the Companies or any of their Affiliates in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. (n) To the knowledge of such counsel and except as set forth on Sellers' Disclosure Schedule, there are no claims, disputes, actions, suits or proceedings pending or threatened against any of the Companies, any of the assets of the Companies or any of the Sellers. Nothing contained in this Section 11.1 shall require an opinion of such counsel with respect to FCC matters. 11.2 Representations, Warranties and Covenants. The representations and warranties of each of the Companies and each of the Sellers contained herein shall be true and correct in all material respects at and as of the Closing (except for representations and warranties expressly and specifically relating to a time or times other than the Closing, which shall be true and correct in all material respects at and as of the time or times specified) with the same effect as though all such representations and warranties were made at and as of the Closing and each of the Companies and each of the Sellers shall have complied in all material respects with all their respective covenants contained herein; and each of the Companies and each of the Sellers shall each have delivered to the Purchaser a certificate to that effect, dated the date of the Closing, signed by each of the Sellers, and in the case of the Companies, by the President of the Companies. 11.3 No Litigation. No action, suit or proceeding against any of the Companies, any of the Sellers or the Purchaser relating to the consummation of any of the transactions contemplated by this Agreement nor any action by any Governmental Authority seeking to delay or enjoin any such transactions shall be pending or threatened. 11.4 Other Certificates. The Purchaser shall have received a certificate as to the good standing of each Company in the State of Delaware and in each state where the Purchased Radio Stations are located, each as of a date not more than 20 days before the Closing, and such other certificates, instruments and other documents, in form and substance satisfactory to the Purchaser, as the Purchaser shall have reasonably requested in connection with the transactions contemplated hereby. -55- 63 11.5 Corporate Action. All corporate action necessary to authorize the execution, delivery and performance by the Companies of this Agreement and the transactions contemplated hereby shall have been duly and validly taken by the Companies, and the Sellers shall have delivered to the Purchaser certified copies of the resolutions of the board of directors of each of the Companies authorizing the execution and performance of this Agreement and authorizing or ratifying the acts of the officers and employees of each of the Companies carrying out the terms and provisions hereof. 11.6 Acts to Performed. Each of the covenants, acts and undertakings of the Companies and the Sellers to be performed on or before the Closing Date pursuant to the terms hereof shall have been duly performed. 11.7 No Material Loss. None of the conditions permitting the Purchaser to terminate the Agreement pursuant to Section 8.7 shall exist. 11.8 Filings, Consents, Approvals and Estoppel Certificates. All filings, consents, approvals and estoppel certificates required by the Purchaser pursuant to this Agreement or necessary to consummate the transactions contemplated under this Agreement shall have been obtained. 11.9 FCC Grant of Consent. The FCC Grant of Consent shall have been obtained and shall have become a Final Order. 11.10 Senior Credit Agreement. The Finova Payoff Letter shall have been delivered as provided in Section 6.2. 11.11 Certain Transactions. Each of the Acquisitions (to the extent consummated before the Closing) and substantially contemporaneously with the deposit of the purchase price with Pietragallo, Bosick & Gordon pursuant to Section 2.2(b) each of the Option Termination and the Reorganization shall have been effected or consummated, as the case may be, in accordance with the provisions of this Agreement. 11.12 Sale of All TMBC Shares. Both the Sellers shall simultaneously sell to the Purchaser all of their TMBC Shares in accordance with this Agreement. 11.13 HSR Clearance. All applicable waiting periods under the HSR Act shall have expired or been terminated. -56- 64 SECTION 12 INDEMNIFICATION 12.1 Indemnification by the Sellers. Subject to the limitations and procedures set forth in this Section 12, each of the Sellers shall, jointly and severally, indemnify and hold harmless the Purchaser and the Companies from and against all losses, claims, demands, damages, liabilities, obligations, costs and/or expenses, including, without limitation, reasonable fees and disbursements of counsel (hereinafter referred to collectively as "Damages"), which are sustained or incurred by the Purchaser or the Companies, to the extent that such Damages are sustained or incurred by reason of the breach of any of the obligations, covenants or provisions of, or the breach of any of the representations or warranties made by, either of the Sellers or the Companies herein. 12.2 Indemnification by the Purchaser. Subject to the limitations and procedures set forth in this Section 12, the Purchaser shall indemnify and hold harmless each of the Sellers from and against all losses, claims, demands, damages, liabilities, obligations, costs and/or expenses, including, without limitation, reasonable fees and disbursements of counsel (hereinafter referred to collectively as "Damages"), which are sustained or incurred by each such Seller, to the extent such Damages are sustained or incurred by such Seller by reason of the breach of any of the obligations, covenants or provisions of, or the breach of any of the representations or warranties made by, the Purchaser herein. 12.3 Procedure for Indemnification. In the event that any party hereto shall incur any Damages in respect of which indemnity may be sought by such party pursuant to this Section 12 or any other provision of this Agreement, the party indemnified hereunder (the "Indemnitee") shall notify the party providing indemnification (the "Indemnitor") promptly; in the case of third party claims, such notice shall in any event be given within 10 days of the filing or assertion of any claim against the Indemnitee stating the nature and basis of such claim; provided, however, that any delay or failure to notify any Indemnitor of any claim shall not relieve it from any liability except to the extent that the Indemnitor demonstrates that the defense of such action is materially prejudiced by such delay or failure to notify. In the case of third party claims, the Indemnitor shall, within 10 days of receipt of notice of such claim, notify the Indemnitee of its intention to assume the defense of such claim. If the Indemnitor shall assume the defense of the claim, the Indemnitor shall have the right and obligation (a) to conduct any proceedings or negotiations in connection therewith and necessary or appropriate to defend the Indemnitee, (b) to take all other required steps or proceedings to settle or defend any such claims, and (c) to employ counsel to contest any such claim or liability in the name of the Indemnitee -57- 65 or otherwise. If defendants in any action include the Indemnitee and the Indemnitor, and the Indemnitee shall have been advised by its counsel that there may be legal defenses available to the Indemnitee which are different from or in addition to those available to the Indemnitor, the Indemnitee shall have the right to employ its own counsel in such action, and, in such event, the fees and expenses of such counsel shall be borne by the Indemnitor. If the Indemnitor shall not assume the defense of any such claim or litigation resulting therefrom, the Indemnitee may defend against any such claim or litigation in such manner as it may deem appropriate and the Indemnitor may settle such claim or litigation on such terms as it may deem appropriate. If it shall be finally determined that the Indemnitor failed to assume the defense of any claim for which the Indemnitor is liable to the Indemnitee for Damages, then the expense of defending the claim shall be borne by the Indemnitor. Payment of Damages shall be made within 10 days of a final determination of a claim. A final determination of a disputed claim shall be (a) a judgment of any court determining the validity of disputed claim, if no appeal is pending from such judgment or if the time to appeal therefrom has elapsed, (b) an award of any arbitration determining the validity of such disputed claim, if there is not pending any motion to set aside such award or if the time within which to move to set such award aside has elapsed, (c) a written termination of the dispute with respect to such claim signed by all of the parties thereto, (d) a written acknowledgement of the Indemnitor that it no longer disputes the validity of such claim, or (e) such other evidence of final determination of a disputed claim as shall be acceptable to the parties. 12.4 Limitation Period. Except as hereinafter provided, no Person shall be entitled to indemnification pursuant to this Section 12 except with respect to claims made in accordance with the provisions of this Section 12 before the expiration of two years after the Closing Date (the "Limitation Period"). The Limitation Period shall not apply with respect to claims made by the Purchaser arising out of a breach by the Sellers or the Companies of any of the representations and warranties contained in Sections 3.4 and 3.7, or any of the covenants contained in Section 6.12. 12.5 Basket. Notwithstanding any provision herein to the contrary, no Person shall be entitled to indemnification pursuant to this Section 12 except and to the extent that the aggregate of all Damages to which such Person is entitled pursuant to this Section 12 exceeds $100,000 (the "Threshold") but only for that portion of any Damages in excess of the Threshold. The Threshold shall not apply with respect to claims arising out of a breach of any of the representation or warranties contained in Sections 3.4 and 3.7, or any of the covenants contained in Sections 6.12. Furthermore, the Threshold shall not diminish or offset the -58- 66 obligations of the parties to pay or deliver funds pursuant to Sections 8.1, 8.2 and 8.3. SECTION 13 TERMINATION, EXPIRATION, REPUDIATION; REMEDIES 13.1 Termination. The parties agree that this Agreement and the transactions contemplated hereby may be terminated prior to completion of the Closing as follows and that the consequences thereof, subject to Section 13.3, are as follows: (a) Termination by mutual written consent of the Purchaser and the Sellers, in which event the Escrow Deposit shall be distributed to the Sellers; (b) Termination by either the Purchaser or the Sellers if the Final Order and clearance under the HSR Act are not obtained for any reason on or before the Expiration Date, in which event $750,000 of the Escrow Deposit shall be distributed to the Sellers and the remainder of the Escrow Deposit shall revert to the Purchaser; (c) Termination by the Purchaser if it is unable to obtain the financing to consummate the transactions contemplated hereunder on or before the Expiration Date, in which event the Escrow Deposit shall be distributed to the Sellers; (d) If there has been a material breach by any of the Sellers or the Companies of any representation, warranty or covenant, or a material failure by the Sellers and/or the Companies to satisfy the conditions set forth in Section 11 which is not willful or intentional, the Purchaser shall elect, as its sole and exclusive remedy, either (i) to consummate the transactions contemplated hereunder pursuant to the terms of this Agreement (including the Purchaser's right to specific performance thereof as set forth in Section 13.2), including payment of the purchase price set forth in Section 2.2, and to pursue its rights of indemnification for Damages pursuant to Section 12 or (ii) to terminate this Agreement. If the Purchaser elects to so terminate, the Escrow Deposit shall revert to and be delivered to the Purchaser; (e) If there has been a material breach by any of the Sellers or the Companies of any representation, warranty or covenant or a material failure by the Sellers and/or the Companies to satisfy the conditions set forth in Section 11 which is willful or intentional, the Purchaser shall elect, as its sole and exclusive remedy, either (i) to consummate the transactions contemplated hereunder pursuant to the terms of this Agreement (including the Purchaser's right to specific performance thereof as set forth in Section 13.2), including payment of the purchase price -59- 67 set forth in Section 2.2, and to pursue its rights of indemnification for Damages pursuant to Section 12 or (ii) to terminate this Agreement. If the Purchaser elects to so terminate, the Escrow Deposit shall revert to and be delivered to the Purchaser. Furthermore, if the Purchaser elects to so terminate, the Sellers immediately shall pay Citadel liquidated damages in the amount of $250,000 as liquidated damages in respect of Citadel's dismissal of the Litigation; (f) Termination by the Purchaser if there has been a material adverse change in the condition of the Companies, financial or otherwise, or in the results of operations, assets, liabilities or business of the Companies, in which event $750,000 of the Escrow Deposit shall be distributed to the Sellers and the remainder of the Escrow Deposit shall revert to the Purchaser; and (g) Termination by the Sellers upon providing written notice to the Purchaser at any time after the Expiration Date if the Closing has not occurred and the Agreement has not been terminated for any of the reasons set forth in Section 13.1(a) through (f), in which event the Escrow Deposit shall be distributed to the Sellers. 13.2 Specific Performance. The parties recognize and agree that the Purchaser has relied on this Agreement and expended considerable effort and resources related to the transactions contemplated hereunder, that the rights and benefits conferred upon the Purchaser herein are unique, and that damages may not be adequate to compensate the Purchaser in the event the Sellers or the Companies improperly refuse to consummate the transactions contemplated hereunder. The parties hereto therefor agree that the Purchaser shall be entitled, at its option and in lieu of terminating this Agreement pursuant to Section 13.1, to have this Agreement specifically enforced pursuant to its terms, including payment of the purchase price set forth in Section 2.2, by a court of competent jurisdiction, and to pursue its rights of indemnification for Damages pursuant to Section 12. 13.3 Disputes Regarding Termination. If this Agreement is terminated and the parties do not agree upon the reason for such termination and the consequences thereof, they hereby agree to proceed in accordance with Section 14.2 and, that portion of the Escrow Deposit which otherwise would revert to or be delivered to the Purchaser pursuant to Section 13.1 shall remain in escrow with the Escrow Agent until the reason or basis for such termination is conclusively determined. 13.4 Limitation of the Purchaser's and Citadel's Liability. The Sellers and the Companies acknowledge and agree that the liability of both the Purchaser and Citadel for the failure of either or both of them to consummate the transactions contemplated -60- 68 pursuant to this Agreement shall be limited to the Escrow Deposit, as set forth in Section 13.1, and the Non-Refundable Payments. 13.5 Limitation of the Seller's and the Companies' Liability. The Purchaser acknowledges and agrees if the Purchaser terminates this Agreement and does not consummate the transactions contemplated under this Agreement or seek specific performance by the Sellers and/or the Companies of their obligations hereunder, that it shall not be entitled to assert a claim for damages against the Sellers and/or the Companies except for its right to liquidated damages as set forth in Section 13.1(e). SECTION 14 GENERAL 14.1 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts, of the Commonwealth of Pennsylvania. 14.2 Dispute Resolution; Consent to Jurisdiction and Venue. Each of the parties hereto acknowledges and agrees that any and all actions or proceedings arising out of or related to this Agreement shall be brought and maintained in the United States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County, Pennsylvania in accordance with the provisions of this Section. Each of the parties hereto acknowledges and agrees that they irrevocably submit and consent to the jurisdiction of the United States District Court for the Western District of Pennsylvania in any action or proceeding arising out of or related to this Agreement. In the event that any party hereto in good faith determines that subject matter jurisdiction is lacking in the United States District Court for the Western District of Pennsylvania, or if the United States District Court for the Western District of Pennsylvania determines that subject matter jurisdiction is lacking, then each of the parties hereto irrevocably submits and consents to the jurisdiction of the Court of Common Pleas of Allegheny County, Pennsylvania in any action or proceeding arising out of or related to this Agreement. Except as expressly stated herein, the parties hereto irrevocably waive the defenses of lack of personal jurisdiction, improper venue and inconvenient forum to the maintenance of such action or proceeding. 14.3 Notices. Any notices or other communications required or permitted hereunder shall be delivered personally or sent by registered or certified mail, postage prepaid, addressed as follows: -61- 69 To Purchaser: Citadel Broadcasting Company 1015 Eastman Drive Bigfork, Montana 59911 Attn: Lawrence R. Wilson With copy to: Eckert Seamans Cherin & Mellott, LLC 600 Grant Street, 42nd Floor Pittsburgh, Pennsylvania 15219 Attn: Timothy P. Ryan To Sellers or Mr. Robert E. Tudek the Companies: Mr. Everett I. Mundy 320 West College Avenue Pleasant Gap, PA 16823 Tele-Media Broadcasting Company 804 Jacksonville Road P. O. Box 39 Bellefonte, Pennsylvania 16823 Attn: Scott E. Cody With copy to: Pietragallo, Bosick & Gordon One Oxford Centre, 38th Floor Pittsburgh, Pennsylvania 15219 Attn: William Pietragallo, II Or such other addresses as shall be similarly furnished in writing by either party. Such notices or communications shall be deemed to have been given as of the date of personal delivery, or if mailed, the date the return receipt is signed. 14.4 Entire Agreement. This instrument supersedes all prior communications, understandings and agreements of or between the parties hereto with respect to the subject matter hereof and contains the entire agreement between the parties hereto with respect to the transactions contemplated herein. This Agreement may not be amended, modified or otherwise altered in any respect, and no waiver by any party hereto of any right or benefit hereunder shall be binding upon such party, unless in writing and duly executed by the party against whom such amendment, modification, alteration or waiver is sought to be enforced. 14.5 Headings. The headings of this Agreement are inserted for convenience only and shall not constitute a part hereof. 14.6 Schedules; Exhibits. All schedules and exhibits annexed hereto are hereby incorporated herein by this reference. 14.7 Expenses. Except as otherwise specified in this Agreement, all of the costs and expenses incurred by or on behalf of the Companies or any Subsidiary Partnerships, or the Sellers, in connection with the Litigation, the Acquisitions, Option -62- 70 Termination and Reorganization, and in otherwise negotiating, executing and performing this Agreement, shall, together with all of the other obligations of the Companies, other than the Assumed Obligations and the obligations to be paid pursuant to Section 2.2(b), be paid in full by the Companies or the Sellers on or before the Closing and prior to the Companies making the Final Distribution to the Sellers. The Purchaser shall bear its own costs and expenses incurred in connection with the negotiation, execution and performance of this Agreement and the performance by the Purchaser of the actions required of it hereunder. 14.8 Amendment. This Agreement may be amended, modified or superseded, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed on behalf of all of the parties hereto or, in the case of a waiver, by the party waiving compliance. 14.9 Waiver. The failure of any party at any time or times to require performance of any provision of this Agreement shall in no manner affect the right to enforce that provision or any other provision hereof at any time thereafter. 14.10 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, except as hereinafter provided in this Section 14.10, no party may assign any of its obligations hereunder. The Purchaser may assign its rights and obligations under this Agreement to any entity that is under common control with the Purchaser or controls or is controlled by the Purchaser, including, without limitation, any entity eligible to file a consolidated federal income tax return with the Purchaser, but any such assignment shall not relieve the Purchaser of its obligations hereunder. 14.11 Prior Control. Until the Closing, the Sellers shall maintain control of each of the Companies and the Subsidiary Partnerships. 14.12 Legal Representation. Each of the parties hereto acknowledges and agrees that any law firm serving as counsel to another party with respect to the transactions contemplated hereby shall be entitled to serve as legal counsel and to represent such party in any dispute involving the parties. No law firm shall be treated as being in a conflict situation with respect to its representation of a party hereunder by virtue of any dispute which may arise between or among the parties. 14.13 Counterparts. This Agreement may be executed in one or more counterparts, each of which together shall constitute a single instrument. [The remainder of this page left intentionally blank] -63- 71 IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date above first written. TELE-MEDIA BROADCASTING COMPANY By:__________________________________ Its:________________________ TELE-MEDIA BROADCASTING COMPANY OF CENTRE REGION By:__________________________________ Its:________________________ TELE-MEDIA BROADCASTING HOLDING CORPORATION By:__________________________________ Its:________________________ WITNESS: _____________________________ _________________________________________ Robert E. Tudek WITNESS: _____________________________ _________________________________________ Everett I. Mundy [Signatures continued on next page.] -64- 72 [Signatures continued from preceding page.] CITADEL BROADCASTING COMPANY By:_________________________________ Lawrence R. Wilson, President CITADEL COMMUNICATIONS CORPORATION By:_________________________________ Lawrence R. Wilson, President -65- 73 JOINDER TO AGREEMENT OF PURCHASE AND SALE AND NOW, this 28th day of March, 1997, CITADEL COMMUNICATIONS CORPORATION ("Citadel"), desiring to be legally bound, hereby acknowledges that the Sellers' willingness to enter into the Agreement of Purchase and Sale (the "Agreement") to which this joinder is attached and to sell the TMBC Shares to CITADEL BROADCASTING COMPANY for the purchase price and pursuant to the other terms and conditions set forth in the Agreement, constitutes adequate consideration for the joinder herein set forth and for Citadel's performance of the obligations of settling the Litigation and executing a joint and mutual release as set forth in the Agreement. Further Citadel acknowledges that the Sellers would not have entered into the Agreement but for Citadel's joinder and agreement to perform said obligations. CITADEL COMMUNICATIONS CORPORATION By:_______________________________ 74 SCHEDULES AND EXHIBITS TO AGREEMENT OF PURCHASE AND SALE Schedule 2.2 - Sellers' Percentages Schedule 2.3 - Asset Schedule Schedule 2.3X - Excluded Asset Schedule Schedule 2.4 - Assumed Obligations Schedule 2.5 - Environmental Reports Schedule Schedule 3.0 - Sellers' Disclosure Schedule Schedule 5.0 - Purchaser's Disclosure Schedule Schedule 6.4 - Due Diligence and Cooperation Exhibit 2.6 - Covenant Not to Compete EX-10.20 31 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.20 AGREEMENT NOT TO COMPETE THIS AGREEMENT NOT TO COMPETE ("Agreement") is made as of December 31, 1996, between DVS Management, Inc., an Oregon corporation ("DVS"), and Citadel Communications Corporation, a Nevada corporation ("Parent"). RECITALS: A. Parent, Deschutes River Broadcasting, Inc., an Oregon corporation ("Deschutes") and Citadel Acquisition Corporation, a Nevada corporation and wholly-owned subsidiary of Parent ("CAC") are parties to that certain Merger Agreement dated as of August 30, 1996 (the "Merger Agreement"), which provides for the merger of Deschutes with and into CAC. As of September 17, 1996, CAC changed its name to Deschutes License, Inc. ("DLI"), and as of December 18, 1996 DLI assigned its rights under the Merger Agreement to Deschutes Acquisition Corporation, a Nevada corporation and wholly-owned subsidiary of the Company ("DAC"). Unless otherwise defined in this Agreement, all capitalized terms shall have the meanings given them in the Merger Agreement. B. The Endeavour Capital Fund Limited Partnership, an Oregon limited partnership ("Endeavour") holds Deschutes Preferred Stock and Deschutes Warrants, and as a result of the Merger Agreement, Endeavour shall receive shares of Series E Preferred Stock of Parent. C. DVS is the general partner of Endeavour. D. To induce Parent to enter into the Merger Agreement, DVS has agreed to forego its rights to compete with Parent and its subsidiaries, on the terms and subject to the conditions set forth in this Agreement. ACCORDINGLY, for good and valuable consideration the receipt and sufficiency of which are acknowledged by Parent and DVS, the parties agree as follows: ARTICLE I NON-COMPETE COVENANTS 1.1 DVS covenants that for a period of two (2) years following the Closing Date, it shall not, without the prior written consent of Parent in each instance, which consent may be withheld by Parent in its sole and absolute discretion, directly or indirectly engage, advise, manage, operate, participate, invest in or assist (collective, "Compete"), as owner, part owner, lender, investor, shareholder, partner, director, officer, trustee, employee, agent or consultant, or in any other capacity, any AM or FM radio broadcast station or any company that owns or operates a radio station, in any geographic area or market served or competed in by one or more of the Citadel Stations or the 1 2 Deschutes Stations (all of such stations collectively, the "Stations", and all of such geographic areas and markets collectively, the "Territory"). 1.2 DVS acknowledges that it has or may have become acquainted with confidential or proprietary information relating to Parent and Deschutes, or the strategic operations and plans of Parent and Deschutes. DVS shall not, without the prior written consent of Parent, disclose or make use of any such confidential information except any information which (a) is now or hereafter becomes generally available to the public other than as a result of a disclosure by DVS, or (b) is required to be disclosed by law. 1.3 Each restriction or covenant contained in this Article I is severable from all other restrictions and covenants contained in this Article. In addition, if the time period, geographical area or market served specified, or any of the substantive provisions in this Article is adjudicated as unreasonable in any proceeding, then the time period shall be reduced by such number of months or years, the geographical area shall be reduced by the elimination of such portion thereof, or the substance shall be reduced in scope, or a combination of the foregoing, so that each such restriction or covenant may be enforced for such time period, in such geographical area and to the extent as is adjudicated to be reasonable. ARTICLE II PAYMENT As full consideration for DVS entering into this Agreement, Parent shall pay to DVS a total of Two Hundred Thousand Dollars ($200,000) in twenty-four (24) equal monthly installments of Eight Thousand Three Hundred and Thirty-Three Dollars and Thirty-Three Cents ($8,333.33) each, payable on the first day of each month for the twenty-four (24) months immediately following the Closing Date. ARTICLE III REMEDIES If a party defaults under this agreement, then Parent or DVS, as the case may be, shall be entitled to (a) injunctive relief, and such other relief including damages as may be provided at law or in equity; and (b) reimbursement for its reasonable attorney's fees and costs incurred thereby in an action at law or in equity. Without limiting the foregoing, each party acknowledges that any breach by it of this Agreement is likely to result in an injury of a nature which would justify the entry of an injunction and a temporary restraining order against it to restrain such breach, and it further agrees that Parent or DVS, as the case may be, shall be entitled, if it so elects, to institute and prosecute proceedings in any court of competent jurisdiction, either in law or in equity, to enforce the specific performance of the Agreement against the other party, or to enjoin the other party from activities in violation of this Agreement. 2 3 ARTICLE IV GENERAL PROVISIONS This Agreement constitutes the entire agreement between the parties relating to the subject matter hereof. This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon. This Agreement shall be binding upon and inure to the benefit of the parties, and their respective successors and assigns. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first set forth above. DVS MANAGEMENT, INC., an Oregon corporation By: /s/ John W. Dixon ------------------------------------- Name: John W. Dixon Title: Chairman CITADEL COMMUNICATIONS CORPORATION, a Nevada corporation By: /s/ Lawrence R. Wilson ------------------------------------- Lawrence R. Wilson, President 3 EX-10.21 32 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.21 CITADEL BROADCASTING COMPANY (a Nevada corporation) $100,000,000 10-1/4% Senior Subordinated Notes due 2007 1,000,000 Shares of 13-1/4% Series A Exchangeable Preferred Stock PURCHASE AGREEMENT June 30, 1997 PRUDENTIAL SECURITIES INCORPORATED NATIONSBANC CAPITAL MARKETS, INC. BANCBOSTON SECURITIES INC. c/o Prudential Securities Incorporated One New York Plaza New York, New York 10292 Dear Sirs: Citadel Broadcasting Company, a Nevada corporation (the "Company") and wholly-owned subsidiary of Citadel Communications Corporation ("Parent"), proposes, subject to the terms and conditions set forth herein, to issue and sell to Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities Inc. (each an "Initial Purchaser" and collectively the "Initial Purchasers") (i) $100,000,000 aggregate principal amount of its 10-1/4% Senior Subordinated Notes due 2007 (the "Notes") and (ii) 1,000,000 shares of 13-1/4% Series A Exchangeable Preferred Stock, liquidation preference $100 per share (including additional shares payable in lieu of cash dividends, the "Exchangeable Preferred Stock" and together with the Notes, the "Securities"). The Notes are to be issued pursuant to an indenture to be dated as of July 1, 1997 (the "Indenture") among the Company, Citadel License, Inc. (the "Subsidiary") and the Bank of New York, trustee (the "Trustee"), and the Exchangeable Preferred Stock is to be issued pursuant to a certificate of designation (the "Certificate of Designation") of the Company with respect to such stock. Subject to certain conditions, the Exchangeable Preferred Stock is exchangeable in whole, but not in part, at the option of the Company, for the Company's 13-1/4% Subordinated Exchange Debentures due 2009 (including additional securities payable in lieu of cash interest, the "Exchange Debentures") to be issued pursuant to an indenture to be dated as of July 1, 1997, (the "Exchange Indenture") among the Company, the Subsidiary and the Bank of New York, trustee (the "Debenture Trustee" and together with the Trustee, the "Trustees"). The Securities, the Indenture, the Certificate of Designation and the Exchange Indenture are more fully described in the Offering Memorandum (as hereinafter defined). Capitalized terms used herein and not otherwise defined herein have the respective meanings specified in the Offering Memorandum. The Securities will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "1933 Act"), in reliance on an exemption from the registration requirements of the 1933 Act. The Company has prepared a 2 preliminary offering memorandum, dated June 11, 1997 (such preliminary offering memorandum being hereinafter referred to as the "Preliminary Offering Memorandum"), and is preparing a final offering memorandum, dated June 30, 1997 (such final offering memorandum, in the form first furnished to the Initial Purchasers for use in connection with the offering of the Securities, being hereinafter referred to as the "Offering Memorandum"), each setting forth information regarding the Company and the Securities. The Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Securities by the Initial Purchasers in accordance with the terms hereof. The Company understands that the Initial Purchasers propose to make an offering of the Securities on the terms set forth in the Offering Memorandum, as soon as they deem advisable after this Agreement has been executed and delivered, (i) to persons in the United States whom the Initial Purchasers reasonably believe to be qualified institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A under the 1933 Act, as such rule may be amended from time to time ("Rule 144A"), in transactions under Rule 144A and (ii) to a limited number of other institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under Regulation D ("Regulation D") of the 1933 Act ("Accredited Investors")) in exempt private sales exempt from registration under the 1933 Act. The Initial Purchasers and other holders of Exchangeable Preferred Stock (including subsequent transferees) will be entitled to the benefits of a Registration Rights Agreement, in substantially the form attached hereto as Exhibit A, with such changes as shall be agreed to by the parties hereto (the "Preferred Stock Registration Rights Agreement"). In addition, the Initial Purchasers and other holders of Notes (including subsequent transferees) will be entitled to the benefits of a Registration Rights Agreement, in substantially the form attached hereto as Exhibit B, with such changes as shall be agreed to by the parties hereto (the "Notes Registration Rights Agreement" and together with the Preferred Stock Registration Rights Agreement, the "Registration Rights Agreements"). Pursuant to the Registration Rights Agreements, the Company and the Subsidiary will agree that the Company shall file with the Securities and Exchange Commission (the "Commission") under the circumstances set forth therein, either (i) a registration statement under the 1933 Act registering the New Notes and the New Preferred Stock (collectively, the "New Securities") to be offered in exchange for the Securities and use its best efforts to cause such registration statement to be declared effective or (ii) under certain circumstances set forth therein, a shelf registration statement pursuant to Rule 415 under the 1933 Act relating to the resale of the New Securities, and use its best efforts to cause such shelf registration statement to be declared effective. Concurrently with the sale of the Securities, the Company will enter into an amended and restated Credit Agreement (the "New Credit Facility"), to be dated as of July 3, 1997, among the Company, FINOVA Capital Corporation, as administrative agent and Lender thereunder, and other lending institution parties thereto, which will provide for loans up to $150,000,000 and will permit the issuance and sale of the Securities. In addition, as soon as practicable following the Closing, but subject to FCC approval in the case of all but -2- 3 the Tele-Media Acquisition, the Company expects to consummate its purchase of (i) all of the issued and outstanding capital stock of Tele-Media, which currently owns or operates 16 FM and 10 AM radio stations (the "Tele-Media Acquisition"), (ii) four radio stations which the Company currently operates under LMAs (the "In-Market Acquisitions"), (iii) two additional radio stations in Providence, Rhode Island (the "Providence Acquisition"), and (iv) an aggregate of five FM and two AM radio stations and one FM license in Little Rock, Arkansas (the "Little Rock Acquisition" and together with the Tele-Media Acquisition, the In-Market Acquisitions and the Providence Acquisition, the "Pending Acquisitions"). Section 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. (a) Each of the Company and Parent jointly and severally represents and warrants to, and agrees with, each of the Initial Purchasers that: (i) As of their respective dates and as of the time (the "Closing Time") of the Closing hereunder, (x) none of the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto includes or will include an untrue statement of a material fact or omits or will 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, (y) all reasonable inquiries have been made to ascertain such facts and to verify the accuracy of all such information and statements and (z) any opinions and intentions expressed in the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto with respect to the Company are honestly held and are based on reasonable assumptions; PROVIDED, HOWEVER, that the Company makes no representation or warranty as to statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Initial Purchasers expressly for use in the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto. (ii) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada with corporate power and authority under such laws to own, lease and operate its properties and conduct its business as now conducted and described in the Offering Memorandum; and the Company is duly qualified to transact business as a foreign corporation and is in good standing in each other jurisdiction in which it owns or leases property of a nature, or transacts business of a type, that would make such qualification necessary, except to the extent that the failure to so qualify or be in good standing would not have a material adverse effect on the business, results of operations, financial condition or properties of the Company and the Subsidiary (as defined below) taken as a whole (a "Material Adverse Effect"). (iii) The Company's only subsidiary (either direct or indirect) as of the date hereof is Citadel License, Inc. (the "Subsidiary"). The Subsidiary is duly incorporated and validly existing and in good standing under the laws of the State of Nevada, with corporate power and authority under such laws to own, lease and operate its properties and to conduct its business as now conducted and as described -3- 4 in the Offering Memorandum; and the Subsidiary is duly qualified to do business as a foreign corporation in good standing in each other jurisdiction in which it owns or leases property of a nature or transacts business of a type that would make such qualification necessary, except to the extent that the failure to be so qualified or in good standing would not have a Material Adverse Effect. (iv) The Company has a duly authorized, issued and outstanding capitalization as of the date hereof of 136,300 shares of common stock, par value $0.001 per share. All of the outstanding capital stock of the Company is owned directly by Parent, has been duly authorized and validly issued, is fully paid and nonassessable and was not issued in violation of any preemptive or similar rights (whether provided contractually or pursuant to any of its articles of incorporation, by-laws or other organizational documents) free and clear of all liens, encumbrances, equities and claims or restrictions on transferability or voting of such capital stock, except as set forth in the Offering Memorandum. All of the outstanding capital stock of the Subsidiary is owned directly by the Company, has been duly authorized and validly issued, is fully paid and nonassessable and was not issued in violation of any preemptive or similar rights (whether provided contractually or pursuant to any of its articles of incorporation, by-laws or other organizational documents) free and clear of all liens, encumbrances, equities and claims or restrictions on transferability or voting of such capital stock, except as set forth in the Offering Memorandum. Immediately after the filing of the Certificate of Designation, the Company will have a duly authorized capitalization of 136,300 shares of common stock, par value $0.001 per share, and 4,000,000 shares of preferred stock, no par value, of which 2,000,000 shares shall be designated 13-1/4% Series A Exchangeable Preferred Stock and 2,000,000 shares shall be designated 13-1/4% Series B Exchangeable Preferred Stock. (v) The execution and delivery of this Agreement have been duly authorized by each of the Company and Parent and this Agreement has been duly executed and delivered by each of them, and constitutes the valid and binding agreement of each of them, enforceable against each of them in accordance with its terms. (vi) The execution and delivery of the Registration Rights Agreements have been duly authorized by each of the Company and the Subsidiary and, on and as of the Closing Time, the Registration Rights Agreements will have been duly executed and delivered by the Company and the Subsidiary, and will be legal, valid and binding obligations of the Company and the Subsidiary, enforceable against them in accordance with their terms. (vii) The execution and delivery of the Indenture have been duly authorized by the Company and the Subsidiary, and, on and as of the Closing Time, the Indenture will have been duly executed and delivered by the Company and the Subsidiary, and when duly executed and delivered by the Company, the Subsidiary and the Trustee, will constitute a valid and binding obligation of the Company and the Subsidiary, enforceable against the Company and the Subsidiary in accordance with its terms. -4- 5 (viii) The issuance, execution and delivery of the Notes and the New Notes have been duly authorized by the Company. When executed, authenticated, issued and delivered in the manner provided for in the Indenture and sold and paid for as provided in this Agreement, the Notes will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms. The New Notes, when executed, authenticated, issued and delivered in exchange for the Notes, will constitute valid and binding obligations of the Company, entitled to the benefits of the Indenture, enforceable against the Company in accordance with the terms thereof. The Notes conform to the description thereof in the Offering Memorandum. (ix) The issuance and delivery of the Exchangeable Preferred Stock and the New Preferred Stock have been duly authorized by the Company. The filing of the Certificate of Designation relating to the Exchangeable Preferred Stock and the New Preferred Stock has been duly authorized and, when issued and delivered against payment therefor in accordance with the terms hereof or the Certificate of Designation, the Exchangeable Preferred Stock will be validly issued, fully paid and nonassessable and free of any preemptive or similar rights. As of the Closing, the Articles of Incorporation of the Company by virtue of the Certificate of Designation will set forth the rights, preferences and priorities of the Exchangeable Preferred Stock. The certificates for the Exchangeable Preferred Stock that are being sold by the Company are in due and proper form and the holders of such Exchangeable Preferred Stock will not be subject to personal liability by reason of being such holders. (x) The execution and delivery of the Exchange Indenture have been duly authorized by the Company and the Subsidiary, and, on and as of the Closing Time, the Exchange Indenture will have been duly executed and delivered by the Company and the Subsidiary, and when duly executed and delivered by the Company, the Subsidiary and the Debenture Trustee, will constitute a valid and binding obligation of the Company and the Subsidiary, enforceable against the Company and the Subsidiary in accordance with its terms. (xi) The Exchange Debentures have been duly authorized by the Company for issuance, subject to further action by the Board with respect to the due execution and delivery thereof. The Exchange Debentures, when executed by the Company and authenticated by the Debenture Trustee in accordance with the provisions of the Exchange Indenture and delivered upon the exchange of the Exchangeable Preferred Stock, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of the Company, entitled to the benefits of the Exchange Indenture and enforceable against the Company in accordance with their terms. (xii) The financial statements of the Company included in the -5- 6 Offering Memorandum, together with the related schedules and notes, present fairly (1) the financial position of the Company and the Subsidiary on a consolidated basis as of the dates indicated and (2) the results of operations and cash flows of the Company and the Subsidiary on a consolidated basis for the periods specified, subject, in the case of unaudited financial statements of the Company, to normal year-end adjustments which shall not be materially adverse to the business, results of operations, financial condition or properties of the Company and the Subsidiary, taken as a whole. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. The financial statement schedules of the Company, if any, included in the Offering Memorandum present fairly the information required to be stated therein. The selected financial data included in the Offering Memorandum present fairly the information shown therein and have been compiled on a basis consistent with that of the audited consolidated financial statements included in the Offering Memorandum. (xiii) KPMG Peat Marwick LLP ("KPMG"), which is reporting upon the audited financial statements and related notes of the Company and Deschutes (as defined below) included in the Offering Memorandum, is an independent public accountant with respect to the Company and its subsidiaries within the meaning of the 1933 Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder. (xiv) The financial statements of Deschutes River Broadcasting, Inc. and subsidiaries ("Deschutes") included in the Offering Memorandum, together with the related schedules and notes, present fairly (1) the financial position of Deschutes on a consolidated basis as of the dates indicated and (2) the results of operations, stockholders' equity and cash flows of Deschutes on a consolidated basis for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. The financial statement schedules of Deschutes, if any, included in the Offering Memorandum present fairly the information required to be stated therein. (xv) The financial statements of Tele-Media Broadcasting Company and its partnership interests ("Tele-Media") included in the Offering Memorandum, together with the related schedules and notes, present fairly (1) the financial position of Tele-Media on a consolidated basis as of the dates indicated and (2) the results of operations, deficiency in net assets and cash flows of Tele-Media on a consolidated basis for the periods specified, subject, in the case of unaudited financial statements of Tele-Media, to normal year-end adjustments which shall not be materially adverse to the condition (financial or otherwise), earnings, business affairs or business prospects of Tele-Media. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the period involved. The financial statement schedules of Tele-Media, if any, included in the Offering memorandum present fairly the information required to be stated therein. -6- 7 (xvi) Deloitte & Touche LLP, which is reporting upon the audited financial statements and related notes of Tele-Media included in the Offering Memorandum, is an independent public accountant with respect to Tele-Media within the meaning of the 1933 Act, the Exchange Act and the rules and regulations promulgated thereunder. (xvii) The financial statements of Snider Corporation ("Snider") included in the Offering Memorandum, together with the related schedules and notes, present fairly (1) the financial position of Snider as of the dates indicated and (2) the statements of income, stockholders' equity and cash flows of Snider for the periods specified, subject, in the case of unaudited financial statements, to normal year-end adjustments which shall not be materially adverse to the condition (financial or otherwise), earnings, business affairs or business prospects of Snider. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. The financial statement schedules of Snider, if any, included in the Offering Memorandum present fairly the information required to be stated therein. (xviii) Erwin & Company, which is reporting upon the audited financial statements and related notes of Snider and Snider Broadcasting (as defined below) included in the Offering Memorandum, is an independent public accountant with respect to Snider and Snider Broadcasting within the meaning of the 1933 Act, the Exchange Act and the rules and regulations of the Commission thereunder. (xix) The financial statements of Snider Broadcasting Corporation and Subsidiary and CDB Broadcasting Corporation (collectively "Snider Broadcasting") included in the Offering Memorandum, together with the related schedules and notes, present fairly (1) the financial position of Snider Broadcasting on a combined consolidated basis as of the dates indicated and (2) the results of operations, stockholders' deficit and cash flows of Snider Broadcasting on a combined consolidated basis for the periods specified, subject, in the case of unaudited financial statements of Snider Broadcasting, to normal year-end adjustments which shall not be materially adverse to the condition (financial or otherwise), earnings, business affairs or business prospects of Snider Broadcasting. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. The financial statement schedules of Snider Broadcasting, if any, included in the Offering Memorandum present fairly the information required to be stated therein. (xx) The pro forma condensed consolidated financial statements and other pro forma financial information (including the notes thereto) included in the Offering Memorandum (1) present fairly in all material respects the information shown therein; (2) have been prepared in accordance with the applicable requirements of Regulation S-X promulgated under the 1933 Act; (3) have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements; and (4) have been properly computed on the basis described -7- 8 therein. The assumptions used in the preparation of the pro forma financial statements and other pro forma condensed consolidated financial information included in the Offering Memorandum are reasonable and the adjustments used therein are reasonably appropriate to give effect to the transactions or circumstances referred to therein. (xxi) Except as disclosed in the Offering Memorandum, there is no action, suit or proceeding before or by any government, governmental instrumentality or court, domestic or foreign, now pending or, to the knowledge of the Company, threatened against the Company or the Subsidiary or any of their respective officers, in their capacity as such, that could result in a Material Adverse Effect, or that could adversely affect the consummation of the transactions contemplated in this Agreement or the Offering Memorandum; the aggregate of all pending legal or governmental proceedings that are not described in the Offering Memorandum to which the Company or the Subsidiary is a party or which affect any of their respective properties, including ordinary routine litigation incidental to the business of the Company or the Subsidiary, could not reasonably be expected to have a Material Adverse Effect. (xxii) Except as disclosed in the Offering Memorandum, to the Company's knowledge, there is no action, suit or proceeding before or by any government, governmental instrumentality or court, domestic or foreign, now pending or threatened against Tele-Media or any of its respective officers, in their capacity as such, that could result in a Material Adverse Effect, or that could adversely affect the consummation of the transactions contemplated in this Agreement or the Offering Memorandum; to the knowledge of the Company, the aggregate of all pending legal or governmental proceedings that are not described in the Offering Memorandum to which Tele-Media is a party or which affect any of its respective properties, including ordinary routine litigation incidental to the business of Tele-Media, could not reasonably be expected to have a Material Adverse Effect. (xxiii) No authorization, approval, consent or license of any government, governmental instrumentality or court, domestic or foreign (including, without limitation, the Federal Communications Commission (the "FCC") (other than under the 1933 Act and the rules and regulations thereunder with respect to the Registration Rights Agreements and the transactions contemplated thereunder and the securities or "blue sky" laws of the various states) is required for the valid authorization, issuance, sale and delivery of the Securities, for the execution, delivery or performance by the Company, Parent or the Subsidiary, as applicable, of this Agreement, the Registration Rights Agreements, the Indenture, the Exchange Indenture and the transactions and actions contemplated thereby (except as set forth in the last sentence of the fifth paragraph of this Agreement). In addition, no consent, approval, authorization or order of any court or governmental agency or body (except for such consents, approvals or authorizations as are required by the FCC or under the Hart-Scott-Rodino Antitrust Improvements Act of 1976) is required for the performance by the Company of the transactions contemplated by the Pending -8- 9 Acquisitions, and the Company has no reasonable basis to believe that the transactions contemplated by the Pending Acquisitions will not be consummated in accordance with their terms. (xxiv) Except as disclosed in the Offering Memorandum, the Company and the Subsidiary validly hold all material licenses, certificates, permits, consents, authorizations and approvals for the Existing Stations (as defined below) (collectively, "Licenses") from governmental authorities which are necessary to the conduct of their businesses and operations in the manner and to the full extent now operated or proposed to be operated as described in the Offering Memorandum; such Licenses were issued and are in full force and effect and no complaint, action, litigation or other proceeding has been instituted or is pending or, to the knowledge of the Company, is threatened which in any manner affects or questions the validity or effectiveness thereof; such Licenses contain no materially burdensome conditions or restrictions not customarily imposed by the FCC on radio stations of the same class and type; the operation of the radio stations identified in the table under "Existing Markets" in the Offering Memorandum under the caption "Business -- General" (collectively, the "Existing Stations") in the manner and to the full extent now operated or proposed to be operated as described in the Offering Memorandum, is in compliance with the Communications Act of 1934, as amended (the "Communications Act"), the Telecommunications Act of 1996, and all orders, rules, regulations, and policies of the FCC, except for such noncompliance as would not have a Material Adverse Effect; no event has occurred which permits (nor has an event occurred which with notice or lapse of time or both would permit) the revocation or termination of such Licenses or the imposition of any material adverse restriction or condition thereon or which might result in any other material impairment of the rights of the Company or the Subsidiary therein; the Company and the Subsidiary are in compliance with all statutes, orders, rules, and policies of the FCC relating to or affecting the broadcasting operations of any of the Existing Stations, except for such noncompliance as would not have a Material Adverse Effect. (xxv) To the Company's knowledge, (i) Tele-Media validly holds all material licenses, certificates, permits, consents, authorizations and approvals for the Existing Tele-Media Stations (as defined below) (collectively, "Tele-Media Licenses") from governmental authorities which are necessary to the operation of the Existing Tele-Media Stations (as defined below) in the manner and to the full extent now operated; such Licenses were issued and are in full force and effect and no complaint, action, litigation or other proceeding has been instituted or is pending or threatened which in any manner affects or questions the validity or effectiveness thereof; (ii) such Tele-Media Licenses contain no materially burdensome conditions or restrictions not customarily imposed by the FCC on radio stations of the same class and type; (iii) the operation of the radio stations identified in the table under "Tele-Media Markets" in the Offering Memorandum under the caption "Business -- General" (collectively, the "Existing Tele-Media Stations") in the manner and to the full extent now operated is in compliance with the Communications Act, the Telecommunications Act of 1996, and all orders, rules, regulations, and policies of the FCC, except for such -9- 10 noncompliance as would not have a Material Adverse Effect; (iv) no event has occurred which permits (nor has an event occurred which with notice or lapse of time or both would permit) the revocation or termination of the Tele-Media Licenses or the imposition of any material adverse restriction or condition thereon or which might result in any other material impairment of the rights of Tele-Media therein; and (v) Tele-Media is in compliance with all statutes, orders, rules, and policies of the FCC relating to or affecting the broadcasting operations of any of the Existing Tele-Media Stations, except for such noncompliance as would not have a Material Adverse Effect. (xxvi) Neither the Company nor the Subsidiary is in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which it is a party or by which it may be bound or to which any of its properties may be subject, except for such defaults that would not have a Material Adverse Effect. Each of (i) the execution and delivery by the Company, Parent and the Subsidiary, as applicable, of this Agreement, the Registration Rights Agreements, the Indenture and the Exchange Indenture, (ii) the issuance, sale and delivery of the Securities by the Company, (iii) the consummation by the Company, Parent and Subsidiary, as applicable, of the Pending Acquisitions, (iv) the compliance by the Company, Parent and the Subsidiary, as applicable, with the terms of this Agreement, the Registration Rights Agreements, the Indenture, the Certificate of Designation, the Exchange Indenture and (v) the transactions contemplated hereby and thereby, (A) have been duly authorized by all necessary corporate action on the part of the Company, Parent and the Subsidiary, as applicable, (B) do not and will not result in any violation of the charter or by-laws of the Parent, Company and the Subsidiary, as applicable and (C) except as would not have a Material Adverse Effect, do not and will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, Parent and the Subsidiary, as applicable under, (I) any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which the Company, Parent and the Subsidiary, as applicable, is a party or by which they may be bound or to which any of their respective properties may be subject or (II) any existing applicable law, rule, regulation, judgment, order or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company, Parent and the Subsidiary, as applicable, or any of their respective properties. (xxvii) Except as disclosed in the Offering Memorandum, and other than with respect to the Licenses and the Tele-Media Licenses, each of the Company and the Subsidiary and to the knowledge of the Company, Tele-Media, owns, possesses or has obtained all material governmental licenses, permits, certificates, consents, orders, approvals and other authorizations necessary to own or lease, as the case may be, and to operate its properties and to carry on its business as presently conducted, and neither the Company nor the Subsidiary has any reason to believe that any governmental agency or body is considering limiting, suspending or -10- 11 revoking any such approval, license, permit, certificate, franchise, authorization or right. (xxviii) Each of the Company and the Subsidiary has good and marketable title to all properties and assets described in the Offering Memorandum as owned by it, free and clear of all liens, charges, encumbrances or restrictions, except such as (A) are described in the Offering Memorandum or (B) are neither material in amount nor materially significant in relation to the business of the Company and the Subsidiary, considered as one enterprise; all of the leases and subleases material to the business of the Company and the Subsidiary, considered as one enterprise, and under which the Company or the Subsidiary holds properties described in the Offering Memorandum, are in full force and effect, and neither the Company nor the Subsidiary has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or the Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of such corporation to the continued possession of the leased or subleased premises under any such lease or sublease. (xxix) Each of the Company and the Subsidiary carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and is customary for companies engaged in similar businesses in similar industries. (xxx) Each of the Company and the Subsidiary owns or possesses adequate patents, patent licenses, trademarks, service marks and trade names necessary to carry on its business as presently conducted, and neither the Company nor the Subsidiary has received any notice of infringement of or conflict with asserted rights of others with respect to any patents, patent licenses, trademarks, service marks or trade names that in the aggregate, if the subject of an unfavorable decision, ruling or finding, could have a Material Adverse Effect. (xxxi) No material event of default exists under any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which the Company or the Subsidiary is a party or to which the Company or the Subsidiary is subject. (xxxii) There are no contracts or documents of a character that would be required to be described in the Offering Memorandum, if it were a prospectus filed as part of a registration statement on Form S-1 under the 1933 Act, that are not described as would be so required. All such contracts which are so described in the Offering Memorandum to which the Company or the Subsidiary is a party have been duly authorized, executed and delivered by the Company or the Subsidiary, constitute valid and binding agreements of the Company or the Subsidiary and are enforceable against the Company or the Subsidiary in accordance with the terms thereof. -11- 12 (xxxiii) To the best knowledge of the Company, no labor problem exists with its employees or with the employees of the Subsidiary or is imminent that could materially adversely affect the Company and the Subsidiary, considered as one enterprise, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of the Subsidiary's principal suppliers, contractors or customers that could have a Material Adverse Effect. (xxxiv) All United States federal income tax returns of the Company and the Subsidiary required by law to be filed have been filed and all United States federal income taxes which are due and payable have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided. The Company and the Subsidiary each has filed all other tax returns that are required to have been filed by it pursuant to applicable foreign, state, local or other law except insofar as the failure to file such returns would not have a Material Adverse Effect, and has paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company and the Subsidiary, except for such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. The charges, accruals and reserves on the books of the Company in respect of any income and corporation tax liability for any years not finally determined are adequate to meet any assessments or re-assessments for additional income tax for any years not finally determined, except to the extent of any inadequacy that would not have a Material Adverse Effect. (xxxv) Each of the Company and the Subsidiary maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiary have not made, and, to the knowledge of the Company, no employee or agent of the Company or the Subsidiary has made, any payment of the Company's funds or the Subsidiary's funds or received or retained any funds in violation of any applicable law, regulation or rule or that would be required to be disclosed in the Offering Memorandum if it were a prospectus filed as part of a registration statement on Form S-1 under the 1933 Act. (xxxvi) The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (A) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (B) Sections 412 or 4971 of the Internal Revenue Code of 1986, as -12- 13 amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (xxxvii) The Company has been advised that the Securities have been designated PORTAL securities in accordance with the rules and regulations of the National Association of Securities Dealers, Inc. ("NASD"). (xxxviii) None of the Company or any affiliate of the Company (as defined in Rule 501(b) under the 1933 Act) has directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the 1933 Act) of the Company that is of the same or similar class as the Securities (other than with respect to the Exchange Securities) in a manner that would require the registration of the Securities under the 1933 Act. (xxxix) None of the Company or any affiliate of the Company or any person acting on their behalf has (A) engaged, in connection with the offering of the Securities, in any form of general solicitation or general advertising (as those terms are used within the meaning of Regulation D) or (B) solicited offers for, or offered or sold, such Securities by means of any form of general solicitation or general advertising (as those terms are used in Regulation D under the 1933 Act) or in any manner involving a public offering within the meaning of Section 4(2) of the 1933 Act. (xxxx) The Company has not, directly or indirectly, (i) taken any action designed to cause or to result in, or that has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities or (ii) (A) sold (except pursuant to this Agreement), bid for, purchased, or paid anyone any compensation for soliciting purchases of, the Securities or (B) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company. (xxxxi) Assuming (A) the accuracy of the representations and warranties of the Initial Purchasers in Section 2 hereof and (B) the due performance by the Initial Purchasers of the covenants and agreements set forth in Section 2 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers under, or in connection with the initial resale of such Securities by the Initial Purchasers in accordance with, this Agreement to register the Securities under the 1933 Act or to qualify any indenture in respect of the Securities under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). -13- 14 (xxxxii) No relationship, direct or indirect, exists between or among the Company or the Subsidiary, on the one hand, and the directors, officers, securityholders, customers or suppliers of the Company or the Subsidiary, on the other hand, that is of a character that would be required to be described in the Offering Memorandum if it were a prospectus filed as part of a registration statement on Form S-1 under the 1933 Act, that is not described as would be so required. (xxxxiii) The Company is not an "investment company" or a company controlled by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended (the "1940 Act"). (xxxxiv) Neither the Company nor the Subsidiary, nor any director, officer, agent, employee or other person associated with or acting on behalf of the Company or the Subsidiary, has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (xxxxv) All offers and sales by the Company of the Company's securities which have taken place within the past three years were at all relevant times exempt from the registration requirements of the 1933 Act or duly registered under the 1933 Act, and were duly registered or the subject of an available exemption from the requirements of applicable state securities laws. (xxxxvi) Since the respective dates as of which information is given in the Offering Memorandum, except as otherwise stated therein or contemplated thereby, there has not been (A) any material adverse change in the condition (financial or otherwise), earnings, business affairs or business prospects of the Company and the Subsidiary, considered as one enterprise, whether or not arising in the ordinary course of business, (B) any transaction entered into by the Company or the Subsidiary, other than in the ordinary course of business, that is material to the Company and the Subsidiary, considered as one enterprise, or (C) any dividend or distribution of any kind declared, paid or made by the Company on its capital stock. (xxxxvii) Except as disclosed in the Offering Memorandum and except as would not individually or in the aggregate have a Material Adverse Effect, (A) the Company and the Subsidiary are each in compliance with all applicable Environmental Laws, (B) the Company and the Subsidiary have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or threatened Environmental Claims against the Company or the Subsidiary, and (D) there are no circumstances with respect to any property or operations of the Company or the Subsidiary that could reasonably be anticipated to form the basis of an Environmental Claim against the Company or the Subsidiary. -14- 15 For purposes of this Agreement, the following terms shall have the following meanings: "Environmental Law" means any United States (or other applicable jurisdiction's) federal, state, local or municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof including any judicial or administrative order, consent decree or judgment, relating to the environment, health, safety or any chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority. "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law. (xxxxvi) The statistical and market-related data included in the Offering Memorandum are based on or derived from sources which the Company believes to be reliable and accurate in all material respects or represents the Company's good faith estimates that are made on the basis of data derived from such sources. (xxxxvii) The Subsidiary Merger (as defined in the Offering Memorandum) has become effective under applicable law. (b) Any certificate signed by any officer of the Company or the Subsidiary and delivered to the Initial Purchasers or to counsel for the Initial Purchasers shall be deemed a representation and warranty by the Company to the Initial Purchasers as to the matters covered thereby. Section 2. Purchase, Sale and Resale of the Securities; Closing; Representations and Warranties of the Initial Purchasers. (a) 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 of the Initial Purchasers, severally and not jointly, and each of the Initial Purchasers, severally and not jointly, agrees to purchase from the Company (i) at a purchase price of 97.250% of the principal amount thereof, the principal amount of the Notes, and (ii) at a purchase price of $96.85 per share, the number of shares of Exchangeable Preferred Stock set forth opposite its name on Schedule I. (b) Payment of the purchase price for, and delivery of, the Securities shall be made at the offices of Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022, or at such other place as shall be agreed upon by the Company and you, at 10:00 A.M., New York time, on July 3, 1997, or at such other time not more than two business days thereafter as the Initial Purchasers and the Company shall agree (such date and time of payment and delivery being herein called the "Closing Time"). The Securities shall be in such denominations and registered in such names as you may request in writing at least two business days before the Closing Time. The Securities, which may be in temporary form, will be made available in New York City for examination and packaging by you not later than 10:00 A.M. on the last business day prior to the Closing Time. -15- 16 (c) At the Closing Time, payment shall be made to the Company in the aggregate amount of $194,100,000 immediately available funds payable to the order of the Company against delivery of the Securities to you and the Company shall promptly reimburse you for your costs in obtaining immediately available funds. (d) The Initial Purchasers have advised the Company that they propose to offer the Securities for sale, upon the terms and conditions set forth in this Agreement and in the Offering Memorandum. Each Initial Purchaser hereby represents and warrants to the Company that it is a Qualified Institutional Buyer as defined in Rule 144A and an "Accredited Investor" as defined in Rule 501 of Regulation D. Each Initial Purchaser agrees with the Company that it (i) has not solicited and will not solicit offers for, or offer or sell, the Securities by means of any form of general solicitation or general advertising or in any manner involving a public offering within the meaning of Section 4(2) of the 1933 Act and (ii) has solicited and will solicit offers for the Securities only from, and will offer, sell or deliver the Securities, as part of its initial offering, only to (A) persons whom it reasonably believes to be Qualified Institutional Buyers or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in a transaction under Rule 144A and (B) other institutional investors that it reasonably believes to be Accredited Investors or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to the relevant Initial Purchaser that each such account is an Accredited Investor; provided that, with respect to clause (B), each such transfer of Securities is effected by the delivery to such purchaser of Securities in definitive form and registered in its name (or its nominee's name) on the books maintained by the Trustee or the Transfer Agent, as the case may be. Section 3. Certain Covenants of the Company. The Company covenants and agrees with each of the Initial Purchasers as follows: (a) The Company will not at any time make any amendment or supplement to the Offering Memorandum of which the Initial Purchasers shall not have previously been advised and furnished a copy for a reasonable period of time prior to the proposed amendment or supplement and as to which the Initial Purchasers or their counsel shall reasonably object. (b) The Company will promptly deliver to the Initial Purchasers, without charge, during the period from the date hereof to the date of the completion of the distribution of the Securities by the Initial Purchasers, such number of copies of the Offering Memorandum, as it may then be amended or supplemented, or the Preliminary Offering Memorandum, as it may then be amended or supplemented, as the Initial Purchasers and their counsel may reasonably request. (c) If, at any time prior to completion of the distribution of the Securities by the Initial Purchasers, any event shall occur or condition exist as a result -16- 17 of which it is necessary, in the opinion of their counsel or counsel for the Company, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not 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 existing at the time it is delivered to a purchaser, not misleading or if, in the opinion of counsel to the Initial Purchasers or counsel for the Company, it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, the Company, at its own expense, will promptly prepare such amendment or supplement as may be necessary so that the statements in the Offering Memorandum as so amended or supplemented will not, in the light of the circumstances existing at the time it is delivered to a purchaser, be misleading or so that such Offering Memorandum as so amended or supplemented will comply with applicable law, as the case may be, and furnish the Initial Purchasers such number of copies as they may reasonably request. (d) The Company will endeavor, in cooperation with the Initial Purchasers, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions as the Initial Purchasers may designate and to maintain such qualifications in effect for as long as may be necessary to complete the resale of the Securities by the Initial Purchasers; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. The Company will file such statements and reports as may be required by the laws of each jurisdiction in which the Securities have been qualified as above provided. The Company will also supply the Initial Purchasers with such information as is necessary for the determination of the legality of the Securities for investment under the laws of such jurisdictions as the Initial Purchasers may request. (e) Except following the effectiveness of the Registration Statement, neither the Company nor any of its affiliates (as such term is defined in Rule 501(b) of Regulation D) will solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or general advertising (within the meaning of Rule 502(C) of Regulation D) or in any manner involving a public offering within the meaning of Section 4(2) of the 1933 Act. (f) Neither the Company nor any of its affiliates (as such term is defined in Rule 501(b) of the 1933 Act) will offer, sell or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the 1933 Act) the offering of which security could be integrated with the sale of the Securities in a manner that would require the registration of any of the Securities under the 1933 Act. (g) The Company will not be or become an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under the 1940 Act, and will not be or become a closed-end -17- 18 investment company required to be registered thereunder. (h) During the period from the Closing Time to the earlier of (i) two years after the Closing Time or (ii) the date of effectiveness of the Registration Statement, the Company will not, and will not permit any of its affiliates (as such term is defined in Rule 144 under the 1933 Act) to, resell any of the Securities that have been reacquired thereby, except for Securities purchased by the Company or any of its affiliates and resold in a transaction registered under the 1933 Act. (i) The Company will, so long as the Securities are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the 1933 Act, either (i) file reports and other information with the Commission under Section 13 or Section 15(d) of the 1934 Act, or (ii) in the event the Company is not subject to Section 13 or Section 15(d) of the 1934 Act, furnish to holders of the Securities and prospective purchasers of the Securities designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the 1933 Act to permit compliance with Rule 144A in connection with resale of the Securities. For a period of five years after the Closing Time, the Company will make available to the Initial Purchasers upon request copies of all such reports and information, together with such other documents, reports and information as shall be furnished by the Company to the holders of the Securities issued by it. (j) If requested by the Initial Purchasers, the Company will use its best efforts in cooperation with the Initial Purchasers to permit the Securities sold in transactions described in Section 2(d)(ii)(A) hereof to be eligible for clearance and settlement through The Depository Trust Company. (k) Each Security will bear the following legend until such legend shall no longer be necessary or advisable because such Security is no longer subject to the restrictions on transfer described therein: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE -18- 19 LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CITADEL BROADCASTING COMPANY ("THE COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE"), ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. (l) The Company will apply the net proceeds from the sale of the Securities as set forth in the Offering Memorandum under the heading "Use of Proceeds." (m) Prior to the Closing Time, the Company will not issue any press release or other communications directly or indirectly or hold any press conference with respect to the Company, the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Company, without the prior written consent of Prudential Securities Incorporated, unless in the judgment of the Company and its counsel, and after notification to the Initial Purchasers, such press release or communication is required by law. -19- 20 (n) During the period beginning from the date of the Offering Memorandum and continuing to and including the date 180 days after the date of the Offering Memorandum, the Company will not offer, sell, contract to sell or otherwise dispose of, without the prior written consent of the Initial Purchasers, any securities of the Company that are substantially similar to the New Securities, or any securities of the Company convertible or exchangeable into securities of the Company substantially similar to the New Securities; provided, however, the foregoing shall not apply to (i) notes or preferred stock issued in the Notes Exchange Offer or the Preferred Stock Exchange Offer; (ii) Exchangeable Preferred Stock or New Preferred Stock issued in lieu of cash dividends; or (iii) the Notes issued to the Bondholders. (o) Prior to the Closing Date, the Company will furnish to the Initial Purchasers, as soon as they have been prepared by or are available to the Company, a copy of any unaudited interim consolidated financial statements of the Company for any period subsequent to the period covered by the most recent financial statements appearing in the Offering Memorandum. Section 4. Payment of Expenses. (a) The Company will pay all costs and expenses incident to the performance of its obligations under this Agreement, whether or not the transactions contemplated herein are consummated or this Agreement is terminated pursuant to Section 9 hereof, including all costs and expenses incident to (i) the preparation and printing or other production of documents with respect to the transactions, including any costs of printing the Preliminary Offering Memorandum, the Offering Memorandum and any amendments or supplements thereto, the Indenture, the Certificate of Designation and the Exchange Indenture, this Agreement, the Registration Rights Agreements, and any blue sky memoranda, (ii) all arrangements relating to the delivery to the Initial Purchasers of copies of the foregoing documents, (iii) the fees and disbursements of the counsel, the accountants and any other experts or advisors retained by the Company, (iv) preparation, issuance and delivery to the Initial Purchasers of any certificates evidencing the Securities, including transfer agent's and registrar's fees, (v) the qualification of the Securities under state securities and blue sky laws in accordance with Section 3(d), in each case including filing fees and reasonable fees and disbursements of counsel for the Initial Purchasers relating thereto and in connection with the preparation of any "blue sky" or legal investment memoranda, (vi) the fees and disbursements of the Trustees, including the fees and disbursements of counsel for the Trustees, in connection with the Indenture, the Exchange Indenture and the Securities, (vii) any meetings with prospective investors in the Securities (other than as shall have been specifically approved by the Initial Purchasers to be paid for by the Initial Purchasers), (viii) any fees charged by investment rating agencies for the rating of Securities and (ix) the fees associated with any listing of the Securities on any securities exchange, including the cost of obtaining approval for the trading of the Securities through PORTAL. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth in Section 5 hereof is not satisfied, because this Agreement is terminated pursuant to Section 9 (a)(i) hereof or because of any failure, refusal or inability on the part of the Company to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder other than by reason of a default by any of the Initial Purchasers, the Company will reimburse the Initial -20- 21 Purchasers severally upon demand for all out-of-pocket expenses (including fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities. The Company shall not in any event be liable to any of the Initial Purchasers for the loss of anticipated profits from the transactions covered by this Agreement. (b) In addition to its obligations under Section 6(a) hereof, the Company agrees that, as an interim measure during the pendency of any claim, action, investigation, inquiry or other proceeding arising out of or based upon any loss, claim, damage or liability described in Section 6(a) hereof, it will reimburse the Initial Purchasers, and each of them, on a monthly basis against submission of invoices and such additional information as the Company reasonably may request for all reasonable legal or other expenses incurred in connection with investigating or defending any such claim, action, investigation, inquiry or other proceeding, notwithstanding the absence of a judicial determination as to the propriety and enforceability of the obligations of the Company to reimburse the Initial Purchasers for such expenses and the possibility that such payments might later be held to have been improper by a court of jurisdiction. To the extent that any portion, or all, of any such interim reimbursement payments are so held to have been improper, the Initial Purchasers receiving the same shall promptly return such amounts to the party or parties who have paid such amounts together with interest, compounded daily, determined on the basis of the prime rate (or other commercial lending rate for borrowers of the highest credit standing) announced from time to time by Bankers Trust Company (the "Prime Rate"). Any such interim reimbursement payments that are not made to the Initial Purchasers within 30 days of a request for reimbursement shall bear interest at the Prime Rate from the date of such request until the date paid. (c) In addition to their obligations under Section 6(a) hereof, the Initial Purchasers agree that, as an interim measure during the pendency of any claim, action, investigation, inquiry or other proceeding arising out of or based upon any loss, claim, damage or liability described in Section 6(b)(i) or 6(b)(ii) hereof, (in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by one or more of the Initial Purchasers specifically for use in the Preliminary Offering Memorandum, the Offering Memorandum and any amendments or supplements thereto), they will reimburse the Company on a monthly basis, against submission of invoices and such additional information as the Initial Purchasers reasonably may request, for all reasonable legal or other expenses incurred by the Company in connection with investigating or defending any such claim, action, investigation, inquiry or other proceeding, notwithstanding the absence of a judicial determination as to the propriety and enforceability of the Initial Purchasers' obligation to reimburse the Company for such expenses and the possibility that such payments might later be held to have been improper by a court of competent jurisdiction. To the extent that any portion, or all, of any such interim reimbursement payments are so held to have been improper, the Company shall promptly return such amounts to the Initial Purchasers together with interest, compounded daily, determined on the basis of the Prime Rate. Any such interim reimbursement payments that are not made to the Company within 30 days of a request for reimbursement shall bear -21- 22 interest at the Prime Rate from the date of such request until the date paid. (d) It is agreed that any controversy arising out of the operation of the interim reimbursement arrangements set forth in Sections 4 (b) and 4 (c) above, including the amounts of any requested reimbursement payments, the method of determining such amounts and the basis on which such amounts shall be apportioned among the indemnifying parties, shall be settled by arbitration conducted pursuant to the Code of Arbitration Procedure of the NASD. Any such arbitration must be commenced by service of a written demand for arbitration or a written notice of intention to arbitrate, therein electing the arbitration tribunal. If the party demanding arbitration does not make designation of an arbitration tribunal in such demand or notice, then the party responding to said demand or notice is authorized to do so. Any such arbitration will be limited to the interpretation and obligations of the parties under the interim reimbursement provisions contained in Sections 4(b) and 4(c) hereof and will not resolve the ultimate propriety or enforceability of the obligation to indemnify for expenses that is created by the provisions of Section 6 hereof. Section 5. Conditions of Initial Purchasers' Obligations. The obligation of each Initial Purchaser to purchase and pay for the Securities that it has severally agreed to purchase hereunder is subject to the accuracy of the representations and warranties of the Company contained herein and in certificates of any officer of the Company and the Subsidiary delivered pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder, and to the following further conditions: (a) At the Closing Time, each of the Initial Purchasers shall have received a signed opinion of Eckert Seamans Cherin & Mellott, LLC, counsel for the Company, dated as of the Closing Time, in substantially the form attached hereto as Exhibit C-1. Such opinion shall be to such further effect with respect to other legal matters relating to this Agreement and the sale of the Securities pursuant to this Agreement as counsel for the Initial Purchasers may reasonably request. (b) At the Closing Time, each of the Initial Purchasers shall have received a signed opinion of Reed Smith Shaw & McClay, FCC counsel to the Company, dated as of the Closing Time, in substantially the form attached hereto as Exhibit C-2. Such opinion shall be to such further effect with respect to other legal matters relating to this Agreement and the sale of the Securities pursuant to this Agreement as counsel for the Initial Purchasers may reasonably request. (c) At the Closing Time, each of the Initial Purchasers shall have received the favorable opinion of Schulte Roth & Zabel LLP, counsel for the Initial Purchasers, dated as of the Closing Time, to the effect that the opinions delivered pursuant to Sections 5(a) and 5(b) appear on their face to be appropriately responsive to the requirements of this Agreement except, specifying the same, to the extent waived by the Initial Purchasers, and with respect to the incorporation and legal existence of the Company, the Securities, this Agreement, the Indenture, the Exchange Indenture, the Registration Rights Agreements, the Offering Memorandum and such other related matters as the Initial Purchasers may require. -22- 23 (d) At the time that this Agreement is executed by the Company and at the Closing Date, each of the Initial Purchasers shall have received from KPMG, independent auditors for the Company, a letter, dated respectively as of the date of this Agreement and as of the Closing Time, in form and substance satisfactory to the Initial Purchasers, confirming that they are independent public accountants with respect to the Company within the meaning of the 1933 Act and the applicable published rules and regulations thereunder, and setting forth certain matters customarily included in accountants' "comfort letters," in form and substance satisfactory to the Initial Purchasers and counsel to the Initial Purchasers. (e) The Company shall have furnished to the Initial Purchasers a certificate, signed by the Chief Executive Officer and the principal financial officer of the Company, dated as of the Closing Time, to the effect that the signers of such certificate have examined the Offering Memorandum, any amendment or supplement to the Offering Memorandum, and this Agreement and that: (i) the representations and warranties of the Company in this Agreement are true and correct in all material respects on and as of the Closing Time with the same effect as if made at the Closing Time, the Offering Memorandum, as it may then be amended or supplemented, does 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 not misleading, and the Company has complied with all the agreements and satisfied all the conditions under this Agreement on its part to be performed or satisfied at or prior to the Closing Time; and (ii) since the respective dates as of which information is given in the Offering Memorandum (exclusive of any amendments or supplements thereto), neither the Company nor the Subsidiary has sustained any material loss or interference with its respective business or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, and there has not been any material adverse change, or any development involving a prospective material adverse change, in the business, results of operations, financial condition or properties of the Company and the Subsidiary, taken as a whole, except in each case as described in or contemplated by the Offering Memorandum (exclusive of any amendment or supplement thereto). As used in this subparagraph, the term "Offering Memorandum" means the Offering Memorandum in the form first used to confirm sales of the Securities. (f) The closing under the New Credit Facility shall have occurred on or prior to the Closing Date. -23- 24 (g) Subsequent to the execution and delivery of this Agreement and prior to the Closing Time, there shall not have been any downgrading, nor any notice given of any intended or potential downgrading or of a possible change that does not indicate the direction of the possible change, in the rating accorded the Securities, by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the 1933 Act. (h) Subsequent to the date hereof or, if earlier, the dates as of which information is given in the Offering Memorandum (exclusive of any amendment or supplement thereto), there shall not have been any change, or any development involving a prospective change, in or affecting the business or properties of the Company the effect of which is, in the sole judgment of the Initial Purchasers, so material and adverse as to make it impractical or inadvisable to proceed with the purchase and the delivery of the Securities as contemplated by the Offering Memorandum (exclusive of any amendment or supplement thereto). (i) On or before the Closing Time, the Securities shall have been designated for trading on PORTAL. (j) At the Closing Time, each of the Indenture and the Exchange Indenture shall have been fully executed and shall be in full force and effect. (k) At the Closing Time, the Certificate of Designation shall have been filed with the Secretary of the State of the State of Nevada and shall be in full force and effect. (l) At the Closing Time, the Registration Rights Agreements shall have been fully executed and be in full force and effect. (m) The issuance and sale of the Securities pursuant to this Agreement shall not be enjoined (temporarily or permanently) and no restraining order or other injunctive order shall have been issued or any action, suit or proceeding shall have been commenced with respect to this Agreement before any Court or governmental authority (including, without limitation, the FCC). (n) On or before the Closing Time, counsel for the Initial Purchasers shall have been furnished with all such documents, certificates and opinions as they may have reasonably requested from the Company. (o) The FCC grant of the pro forma assignment of the licenses of Tele-Media to the Subsidiary shall not have been modified or set aside. If any of the conditions specified in this Section 5 shall not have been fulfilled when and as required by this Agreement, this Agreement may be terminated by the Initial Purchasers on notice to the Company at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party, except as provided in Section 4. Notwithstanding any such termination, the provisions of Sections 4, 6, 7 and 14 shall remain in effect. -24- 25 Section 6. Indemnification and Contribution. (a) Each of the Company and Parent jointly and severally agrees to indemnify and hold harmless each Initial Purchaser and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which such Initial Purchaser or such controlling person may become subject under the 1933 Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement made by the Company in Section 1 of this Agreement, (ii) any untrue statement or alleged untrue statement of any material fact contained in (A) the Preliminary Offering Memorandum or the Offering Memorandum or any amendments or supplements thereto or (B) any application or other document, or any amendments or supplements thereto, executed by the Company or based upon written information furnished by or on behalf of the Company filed in any jurisdiction in order to qualify the Securities under the securities or blue sky laws thereof or filed with the Commission or any securities association or securities exchange (each an "Application"), or (iii) the omission or alleged omission to state in the Preliminary Offering Memorandum or the Offering Memorandum or any amendment or supplement thereto, or any Application a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse, as incurred, each Initial Purchaser and each such controlling person for any legal or other expenses reasonably incurred by such Initial Purchaser or such controlling person in connection with investigating, defending against or appearing as a third-party witness in connection with 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 alleged untrue statement or omission or alleged omission made in the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto or any Application in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser specifically for use therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have. The Company will not, without the prior written consent of the Initial Purchaser or Initial Purchasers purchasing, in the aggregate, more than fifty percent (50%) of the Securities, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not any such Initial Purchaser or any person who controls any such Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act is a party to such claim, action, suit or proceeding), unless such settlement, compromise or consent includes an unconditional release of all of the Initial Purchasers and such controlling persons from all liability arising out of such claim, action, suit or proceeding. -25- 26 (b) Each Initial Purchaser, severally and not jointly, will indemnify and hold harmless the Company, each of its directors, each of its executive officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities to which the Company, any such director, officer or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto or any Application or (ii) the omission or alleged omission to state therein a material fact required to be stated in the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or supplement thereto, or any Application or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser specifically for use therein; and, subject to the limitation set forth immediately preceding this clause, will reimburse, as incurred, any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending any such loss, claim, damage, liability or any action in respect thereof. This indemnity agreement will be in addition to any liability which any Initial Purchaser may otherwise have. The Initial Purchasers will not, without the prior written consent of the Parent or Company, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not Parent, the Company or any person who controls Parent or the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act is a party to such claim, action, suit or proceeding), unless such settlement, compromise or consent includes an unconditional release of all of the Parent, the Company and such controlling persons from all liability arising out of such claim, action, suit or proceeding. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party 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 party otherwise than under this Section 6. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel approved by such indemnified party (which approval will not be unreasonably withheld); provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be one or more legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the -26- 27 indemnifying party, the indemnifying party shall not have the right to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action (which approval will not be unreasonably withheld), the indemnifying party will not be liable to such indemnified party under this Section 6 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel, if any) in any one action or separate but substantially similar actions arising out of the same general allegations or circumstances, designated by the Initial Purchasers in the case of paragraph (a) of this Section 6, representing the indemnified parties under such paragraph (a) who are parties to such action or actions) or (ii) the indemnifying party does not promptly retain counsel approved by the indemnified party (which approval will not be unreasonably withheld), or (iii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. After such notice from the indemnifying party to such indemnified party, the indemnifying party will not be liable for the costs and expenses of any settlement of such action effected by such indemnified party without the written consent of the indemnifying party. (d) In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 6 is unavailable or insufficient, for any reason, to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of the Securities or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Initial Purchasers on the other shall be deemed to be in the same proportion as the total proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Initial Purchasers. The relative fault of the parties 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 Company or the Initial Purchasers, the parties' relative intents, knowledge, access to -27- 28 information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. The Company and the Initial Purchasers agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to above in this paragraph (d). Notwithstanding any other provision of this paragraph (d), no Initial Purchaser shall be obligated to make contributions hereunder that in the aggregate exceed the total offering price of the Securities purchased by such Initial Purchaser under this Agreement, less the aggregate amount of any damages that such Initial Purchaser has otherwise been required to pay in respect of the same or any substantially similar claim, and no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute hereunder are several in proportion to their respective underwriting obligations and not joint, and contributions among Initial Purchasers shall be governed by the provisions of the Prudential Securities Incorporated Master Agreement Among Underwriters. For purposes of this paragraph (d), each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Initial Purchaser, 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 Exchange Act, shall have the same rights to contribution as the Company. (e) The parties to this Agreement hereby acknowledge that they are sophisticated business persons who were represented by counsel during the negotiations regarding the provisions of this Agreement, including, without limitation, the provisions of Sections 4(b), 4(c) and 4(d) hereof and this Section 6, and are fully informed regarding said provisions. They further acknowledge that the provisions of Sections 4(b), 4(c) and 4(d) hereof and this Section 6 fairly allocate the risks in light of the ability of the parties to investigate the Company and its business in order to assure that adequate disclosure is made in the Offering Memorandum as required by the 1933 Act. Section 7. Survival. The respective representations, warranties, agreements, covenants, indemnities and other statements of the Company, its officers, and the several Initial Purchasers set forth in or made pursuant to this Agreement, respectively, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of the Company, any of its officers or directors, any Initial Purchaser or any person who controls the Company or the Initial Purchasers within the meaning of Section 15 of the 1933 Act or Section 20(a) of the Exchange Act and (ii) delivery of and payment for the Securities. The respective agreements, covenants, indemnities and other statements set forth in Sections 4, 6 and 14 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Agreement. Section 8. Default of Underwriters. If one of the Initial Purchasers defaults in its obligation to purchase Securities hereunder and the aggregate principal amount of such -28- 29 Securities that such defaulting Initial Purchaser agreed but failed to purchase is ten percent or less of the aggregate principal amount of Securities to be purchased by all of the Initial Purchasers at such time hereunder, the other Initial Purchasers may make arrangements satisfactory to the Initial Purchaser for the purchase of such Securities by other persons, but if no such arrangements are made by the Closing Time, the other Initial Purchasers shall be obligated to purchase the Securities that such defaulting Initial Purchaser agreed but failed to purchase. If one of the Initial Purchasers so defaults with respect to an aggregate principal amount of Securities that is more than ten percent of the aggregate principal amount of Securities to be purchased by all of the Initial Purchasers at such time hereunder, and if arrangements satisfactory to the Initial Purchaser are not made within 36 hours after such default for the purchase by other persons, of the Securities with respect to which such default occurs, this Agreement will terminate without liability on the part of any non-defaulting Initial Purchaser or the Company other than as provided in Section 7 hereof. In the event of any default by one of the Initial Purchasers as described in this Section 8, the Initial Purchasers shall have the right to postpone the Closing Time established as provided in Section 2 hereof for not more than seven business days in order that any necessary changes may be made in the arrangements or documents for the purchase and delivery of the Securities. As used in this Agreement, the term "Initial Purchaser" includes any person substituted for a Initial Purchaser under this Section 8. Nothing herein shall relieve any defaulting Initial Purchaser from liability for its default. Section 9. Termination of Agreement. (a) This agreement may be terminated with respect to the Securities in the sole discretion of the Initial Purchasers by notice to the Company given prior to the Closing Time, in the event that the Company shall have failed, refused or been unable to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder at or prior thereto or, if at or prior to the Closing Time, (i) the Company or the Subsidiary shall have, in the sole judgment of the Initial Purchasers, sustained any material loss or interference with its respective business or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding or there shall have been any material adverse change, or any development involving a prospective material adverse change (including without limitation a change in management or control of the Company), in the business, results of operations, financial condition or properties of the Company and the Subsidiary, taken as a whole, except in each case as described in or contemplated by the Offering Memorandum (exclusive of any amendment or supplement thereto); (ii) a banking moratorium shall have been declared by New York or United States authorities; or (iii) there shall have been (A) an outbreak or escalation of hostilities between the United States and any foreign power, (B) an outbreak or escalation of any other insurrection or armed conflict involving the United States or (C) any other calamity or crisis or material adverse change in general economic, political or financial conditions having an effect on the financial markets or the market for the -29- 30 Securities that, in the sole judgment of the Initial Purchasers, makes it impractical or inadvisable to proceed with the public offering or the delivery of the Securities as contemplated by the Registration Statement, as amended as of the date hereof. (b) If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party, except to the extent provided in Section 4. Notwithstanding any such termination, the provisions of Sections 6 and 7 shall remain in effect. Section 10. Information Supplied by the Initial Purchasers. The statements set forth in the fourth paragraph on page ii and the last paragraph under the heading "Plan of Distribution" in the Preliminary Offering Memorandum and the Offering Memorandum (to the extent such statements relate to the Initial Purchasers) constitute the only information furnished by the Initial Purchasers to the Company for the purposes of Sections 1(a)(i) and 6 hereof. The Initial Purchasers confirm that such statements (to such extent) are correct. Section 11. Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if delivered, mailed or transmitted by any standard form of telecommunication to the applicable party at the addresses indicated below: If to the Initial Purchasers: c/o Prudential Securities Incorporated One New York Plaza-18th Floor, New York, NY 10292-2018, attention: Peter Horan with copies to: Schulte Roth & Zabel LLP 900 Third Avenue New York, New York 10022 attention: Marc Weingarten If to the Company or Parent: Citadel Broadcasting Company 140 South Ash Street Tempe, AZ 85281 attention: Donna Heffner -30- 31 with copies to: Eckert Seamans Cherin & Mellott, LLC 600 Grant Street - 42nd Floor Pittsburgh, PA 15219 attention: Bryan D. Rosenberger Section 12. Parties. This Agreement is made solely for the benefit of the Initial Purchasers, the Company and, to the extent expressed, any person who controls the Company or any Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act, and the directors of the Company, its officers and their respective executors, administrators, successors and assigns and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include any purchaser, as such purchaser, from the Initial Purchasers of the Securities. No purchaser of Securities from any Initial Purchaser shall be deemed to be a successor by reason merely of such purchase. Section 13. Governing Law and Time. This Agreement shall be governed by the laws of the State of New York applicable to contracts made and to be performed entirely within such State. Specified times of the day refer to New York City time. Section 14. Counterparts. This Agreement may be executed in one or more counterparts and when a counterpart has been executed by each party, all such counterparts taken together shall constitute one and the same agreement. Section 15. Severability of Provisions. Any provision of this Agreement which 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 provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Section 16. Headings. The Section headings used or contained in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. 32 If the foregoing correctly sets forth our understanding, please sign and return to us a counterpart hereof, whereupon this instrument will become a binding agreement between the Company and the Initial Purchasers in accordance with its terms. Very truly yours, CITADEL BROADCASTING COMPANY By ---------------------------------- Name: Title: CITADEL COMMUNICATIONS CORPORATION By ---------------------------------- Name: Title: Confirmed and accepted as of the date first above written: PRUDENTIAL SECURITIES INCORPORATED By ---------------------------------------- Name: Title: NATIONSBANC CAPITAL MARKETS, INC. By ---------------------------------------- Name: Title: BANCBOSTON SECURITIES INC. By ---------------------------------------- Name: Title: 33 SCHEDULE I
Principal Amount Number of Shares of of Notes Exchangeable Preferred Initial Purchasers to be Purchased Stock to be Purchased ------------------ --------------- --------------------- Prudential Securities Incorporated $ 85,000,000 850,000 NationsBanc Capital Markets, Inc. $ 10,000,000 100,000 BancBoston Securities Inc. $ 5,000,000 50,000 Total $100,000,000 1,000,000
EX-10.22 33 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.22 NOTES REGISTRATION RIGHTS AGREEMENT THIS NOTES REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into as of July 3, 1997, among Citadel Broadcasting Company, a Nevada corporation (the "Company"), Citadel License, Inc. (the "Subsidiary") and Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities Inc. (collectively, the "Initial Purchasers"). This Agreement is made pursuant to the Purchase Agreement dated June 30, 1997 among the Company, Parent and the Initial Purchasers (the "Purchase Agreement"), which provides for, in relevant part, the sale by the Company to the Initial Purchasers of $100,000,000 aggregate principal amount of the Company's 10-1/4% Senior Subordinated Notes due 2007 (the "Notes"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, each of the Company and the Subsidiary has agreed to provide to the Initial Purchasers and their direct and indirect transferees and assigns the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder. "Closing Time" shall mean the Closing Time as defined in the Purchase Agreement. "Company" shall have the meaning set forth in the preamble of this Agreement and also includes the Company's successors. "Depositary" shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however, that any such depositary must have an address in the Borough of Manhattan, in the City of New York. "Holders" shall mean the Initial Purchasers, for so long as they own any Registrable Notes, and each of their successors, assigns and direct and indirect transferees who become registered owners of Registrable Notes under the Indenture. "Indenture" shall mean the Indenture relating to the Notes dated as of July 1, 1997 among the Company and the Bank of New York, a New York banking corporation and trust 2 company, trustee, as the same may be amended from time to time in accordance with the terms thereof. "Initial Purchasers" shall have the meaning set forth in the preamble of this Agreement. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Notes; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Company or any of its affiliates (as such term is defined in Rule 405 under the 1933 Act) (other than the Initial Purchasers or subsequent holders of Registrable Notes if such subsequent holders are deemed to be such affiliates solely by reason of their holding of such Registrable Notes) shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage or amount. "New Notes" shall mean 10-1/4% Senior Subordinated Notes due 2007 issued by the Company under the Indenture containing terms identical in all respects to the Notes (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Notes or, if no such interest has been paid, from July 3, 1997, (ii) the transfer restrictions thereon shall be eliminated and (iii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated) to be offered to Holders of Notes in exchange for New Notes pursuant to the Notes Exchange Offer. "Notes Exchange Offer" shall mean the exchange offer by the Company of Registrable Notes for New Notes pursuant to Section 2(a) hereof. "Notes Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof. "Notes Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Notes Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) of this Agreement which covers all of the then Registrable Notes on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to 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. "Person" shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. -2- 3 "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Notes covered by a Notes Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble of this Agreement. "Registrable Notes" shall mean the Notes; provided, however, that the Notes shall cease to be Registrable Notes when (i) a Registration Statement with respect to such Notes shall have been declared effective under the 1933 Act and such Notes shall have been disposed of pursuant to such Registration Statement, (ii) such Notes shall have been sold to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the 1933 Act, (iii) such Notes shall have ceased to be outstanding or (iv) such Notes have been exchanged for New Notes upon consummation of the Notes Exchange Offer. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company and the Subsidiary with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. ("NASD") registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state or other securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with state or other securities or blue sky qualification of any of the New Notes or Registrable Notes), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, certificates representing the New Notes and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Notes on any securities exchange or exchanges, (vi) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vii) the reasonable fees and disbursements of counsel for the Company and, in the case of a Notes Shelf Registration Statement, the reasonable fees and disbursements (including the expenses of preparing and distributing any underwriting or securities sales agreement) of one counsel (in addition to appropriate local counsel, if any) for the Holders (which counsel shall be selected in writing by the Majority Holders), (viii) the fees and expenses of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, (ix) the fees and expenses of a "qualified independent underwriter" as defined by Conduct Rule 2720 of the NASD (if required by the NASD rules) in connection with the offering of the Registrable Notes, (x) the fees and expenses of the trustee, including its counsel, and any escrow agent or custodian and (xi) any reasonable fees and disbursements of the underwriters customarily required to be paid by issuers or sellers of securities and the reasonable fees and expenses of any special experts retained by the Company in connection with any Registration Statement, but excluding underwriting discounts -3- 4 and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Notes by a Holder. "Registration Statement" shall mean any registration statement of the Company which covers any of the New Notes or Registrable Notes 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. "SEC" shall mean the Securities and Exchange Commission. "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof. "Subsidiary" shall have the meaning set forth in the preamble of this Agreement and also includes the Subsidiary's successors. "Trustee" shall mean the trustee with respect to the Notes under the Indenture. 2. Registration Under the 1933 Act. (a) Notes Exchange Offer Registration. To the extent not prohibited by any applicable law or applicable interpretation of the Staff of the SEC, the Company shall (A) file on or prior to the 90th calendar day following the date hereof a Notes Exchange Offer Registration Statement covering the offer by the Company to the Holders to exchange all of the Registrable Notes for New Notes, (B) use its best efforts to cause such Notes Exchange Offer Registration Statement to be declared effective by the SEC on or prior to the 180th calendar day following the date hereof, (C) use its best efforts to cause such Notes Exchange Offer Registration Statement to remain effective until the closing of the Notes Exchange Offer and (D) use its best efforts to consummate the Notes Exchange Offer on or prior to the 210th calendar day following the date hereof. The New Notes will be issued under the Indenture. Upon the effectiveness of the Notes Exchange Offer Registration Statement, the Company shall promptly commence the Notes Exchange Offer, it being the objective of such Notes Exchange Offer to enable each Holder (other than Notes Participating Brokers (as defined in Section 3(f) hereof)), eligible and electing to exchange Registrable Notes for New Notes (assuming that such Holder is not an affiliate of the Company within the meaning of Rule 405 under the 1933 Act, acquires the New Notes in the ordinary course of such Holder's business and has no arrangements or understandings with any Person to participate in the Notes Exchange Offer for the purpose of distributing the New Notes) to trade such New Notes from and after their receipt without any limitations or restrictions under the 1933 Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. In connection with the Notes Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Notes Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; -4- 5 (ii) keep the Notes Exchange Offer open for not less than 30 days and not more than 45 days after the date notice thereof is mailed to the Holders (or longer if required by applicable law); (iii) use the services of the Depositary for the Notes Exchange Offer with respect to Notes evidenced by global certificates; (iv) permit Holders to withdraw tendered Registrable Notes at any time prior to the close of business, New York City time, on the last business day on which the Notes Exchange Offer shall remain open, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Notes delivered for exchange, and a statement that such Holder is withdrawing his election to have such Notes exchanged; and (v) otherwise comply in all respects with all applicable laws relating to the Notes Exchange Offer. As soon as practicable after the close of the Notes Exchange Offer, the Company shall: (i) accept for exchange Registrable Notes duly tendered and not validly withdrawn pursuant to the Notes Exchange Offer in accordance with the terms of the Notes Exchange Offer Registration Statement and the letter of transmittal which is an exhibit thereto; (ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Notes so accepted for exchange by the Company; and (iii) cause the Trustee promptly to authenticate and deliver New Notes to each Holder of Registrable Notes equal in amount to the Registrable Notes of such Holder so accepted for exchange. Interest on each New Note will accrue from the last date on which interest was paid on the Registrable Notes surrendered in exchange therefor or, if no interest has been paid on the Registrable Notes, from July 3, 1997. The Notes Exchange Offer shall not be subject to any conditions, other than that the Notes Exchange Offer, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the Staff of the SEC. Each Holder of Registrable Notes (other than Notes Participating Brokers) who wishes to exchange such Registrable Notes for New Notes in the Notes Exchange Offer shall have represented that (i) any New Notes to be received by it were acquired in the ordinary course of business, (ii) at the time of the commencement of the Notes Exchange Offer it has no arrangement with any Person to participate in the distribution (within the meaning of the 1933 Act) of the New Notes, (iii) it is not an affiliate (as defined in Rule 405 under the 1933 Act) of the Company, or if it is an affiliate it will comply with the registration and prospectus delivery requirements of the 1933 Act to the extent applicable and (iv) it is not acting on behalf of any Person who could not make the representations in clauses (i) through (iii) above. The Company -5- 6 shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Notes Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Notes in the Notes Exchange Offer. (b) Shelf Registration. (i) If, because of any change in law or applicable interpretations thereof by the Staff of the SEC, the Company is not permitted to effect the Notes Exchange Offer as contemplated by Section 2(a) hereof, or (ii) if for any other reason the Notes Exchange Offer cannot be consummated within 210 days following the date hereof, or (iii) if any Holder (other than an Initial Purchaser) is not eligible to participate in the Notes Exchange Offer or (iv) upon the request of any Initial Purchaser (with respect to any Registrable Notes which it acquired directly from the Company) following the consummation of the Notes Exchange Offer if any such Initial Purchaser shall hold Registrable Notes which it acquired directly from the Company and if such Initial Purchaser is not permitted, in the reasonable opinion of counsel to such Initial Purchaser, pursuant to applicable law or applicable interpretation of the Staff of the SEC to participate in the Notes Exchange Offer, the Company shall, at its cost: (A) as promptly as practicable, and in any event within 90 days after the date on which such filing obligation arises, file with the SEC a Notes Shelf Registration Statement relating to the offer and sale of the then outstanding Registrable Notes by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders of such Registrable Notes and set forth in such Notes Shelf Registration Statement, and use its best efforts to cause such Notes Shelf Registration Statement to be declared effective by the SEC on or prior to 45 days after the date on which such filing occurs (or promptly in the event of a request by any Initial Purchaser pursuant to clause (iv) above). In the event that the Company is required to file a Notes Shelf Registration Statement upon the request of any Holder (other than an Initial Purchaser) not eligible to participate in the Notes Exchange Offer pursuant to clause (iii) above or upon the request of any Initial Purchaser pursuant to clause (iv) above, the Company shall file and have declared effective by the SEC both a Notes Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Notes and a Notes Shelf Registration Statement (which may be a combined Registration Statement with the Notes Exchange Offer Registration Statement) with respect to offers and sales of Registrable Notes held by such Holder or such Initial Purchaser after completion of the Notes Exchange Offer; (B) use its best efforts to keep the Notes Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years after its effective date (or one year from the date the Notes Shelf Registration Statement is declared effective if such Notes Shelf Registration Statement is filed upon the request of any Initial Purchaser pursuant to clause (iv) above) or such shorter period which will terminate when all of the Registrable Notes covered by the Notes Shelf Registration Statement have been sold pursuant to the Notes Shelf Registration Statement or all of the Registrable Notes become eligible for resale pursuant to Rule 144 under the 1933 Act without volume restrictions; and -6- 7 (C) notwithstanding any other provisions hereof, use its best efforts to ensure that (i) any Notes Shelf Registration Statement and any amendment thereto and any Prospectus forming a part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Notes Shelf Registration Statement and any amendment thereto does not, when it becomes effective, 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 not misleading and (iii) any Prospectus forming part of any Notes Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading. The Company further agrees, if necessary, to supplement or amend the Notes Shelf Registration Statement if reasonably requested by the Majority Holders with respect to information relating to the Holders and otherwise as required by Section 3(b) below, to use all reasonable efforts to cause any such amendment to become effective and such Shelf Registration to become usable as soon as practicable thereafter and to furnish to the Holders of Registrable Notes copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) Expenses. The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) and 2(b). Each Holder shall pay all expenses of its counsel other than as set forth in the preceding sentence, underwriting discounts and commissions (prior to the reduction thereof with respect to selling concessions, if any) and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Notes pursuant to the Notes Shelf Registration Statement. (d) Effective Registration Statement. (i) The Company will be deemed not to have used its best efforts to cause a Registration Statement to become, or to remain, effective during the requisite period if the Company voluntarily takes any action that would result in any such Registration Statement not being declared effective or in the Holders of Registrable Notes covered thereby not being able to exchange or offer and sell such Registrable Notes during that period unless (A) such action is required by applicable law or (B) such action is taken by the Company in good faith and for valid business reasons (but not including avoidance of the Company#s obligations hereunder), including a material corporate transaction, so long as the Company promptly complies with the requirements of Section 3(k) hereof, if applicable. (ii) A Notes Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Notes Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Notes pursuant to a Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement -7- 8 will be deemed not to have been effective during the period of such interference, until the offering of Registrable Notes pursuant to such Registration Statement may legally resume. (e) Increase in Interest Rate. In the event that either (i) the Notes Exchange Offer Registration Statement is not filed with the SEC on or prior to the 90th day following the date hereof, (ii) the Notes Exchange Offer is not consummated within 210 days following the date hereof or a Notes Shelf Registration Statement with respect to the Registrable Notes is not declared effective on or prior to the 210th day following the date hereof, or (iii) either (A) the Notes Exchange Offer Registration Statement ceases to be effective at any time prior to the time that the Notes Exchange Offer is consummated or (B) if applicable, the Notes Shelf Registration Statement has been declared effective and such Notes Shelf Registration Statement ceases to be effective at any time prior to the second anniversary of its effective date, the interest rate borne by the Notes shall be increased by one-quarter of one percent per annum following such 90-day period in the case of clause (i) above, following such 210-day period in the case of clause (ii) above, or immediately in the case of clause (iii) above, which rate will be increased by an additional one-quarter of one percent per annum for each 30-day period that any such additional interest continues to accrue in the case of clause (i) above or for each 90-day period that any such additional interest continues to accrue in the case of clauses (ii) and (iii) above; provided that the aggregate increase in such interest rate will in no event exceed one and one-half percent. Upon (w) the filing of the Notes Exchange Offer Registration Statement after the 90-day period described in clause (i) above, (x) consummation of the Notes Exchange Offer or the effectiveness of a Notes Shelf Registration Statement, as the case may be, after the 210-day period described in clause (ii) above, or (y) the effectiveness of the Notes Exchange Offer Registration Statement or the Notes Shelf Registration Statement following an event described in clause (iii) above, the interest rate borne by the Notes from the date of such filing, effectiveness or consummation, as the case may be, will be reduced to the original interest rate if the Company is otherwise in compliance with this paragraph; provided, however, that, if after any such reduction in interest rate, a different event specified in clauses (i), (ii) or (iii) above occurs, the interest rate will again be increased and thereafter reduced pursuant to the foregoing conditions. If the Company issues a notice that the Notes Shelf Registration Statement is unusable pending the announcement of a material corporate transaction or otherwise pursuant to Section 3(k) hereof, or such a notice is required under applicable securities laws to be issued by the Company, and the aggregate number of days in any consecutive twelve-month period for which all such notices are issued or required to be issued exceeds 30 days in the aggregate, then the interest rate borne by the Notes will be increased by one-quarter of one percent per annum following the date that such Notes Shelf Registration Statement ceases to be usable beyond the 30-day period permitted above, which rate shall be increased by an additional one-quarter of one percent per annum for each 90-day period that such additional interest continues to accrue; provided that the aggregate increase in such annual interest rate may in no event exceed one and one-half percent. Upon the Company declaring that the Notes Shelf Registration Statement is usable after the interest rate has been increased pursuant to the preceding sentence, the interest rate borne by the Notes will be reduced to the original interest rate if the Company is otherwise in compliance with this paragraph; provided, however, that if after any such reduction in interest rate the Notes Shelf Registration Statement again ceases to be usable beyond the period permitted above, the interest rate will again be increased and thereafter reduced pursuant to the foregoing provisions. -8- 9 (f) Specific Enforcement. Without limiting the remedies available to the Initial Purchasers and the Holders, each of the Company and the Subsidiary acknowledges that any failure by each of the Company and the Subsidiary to comply with its respective obligations under Sections 2(a) and 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 2(a) and 2(b) hereof. 3. Registration Procedures. In connection with the obligations of the Company and the Subsidiary with respect to the Registration Statements pursuant to Sections 2(a) and 2(b) hereof, the Company shall: (a) prepare and file with the SEC a Registration Statement, within the time period specified in Section 2, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Notes by the selling Holders thereof and (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith, and use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to (i) the Notes Exchange Offer Registration Statement as may be necessary under applicable law to keep such Notes Exchange Offer Registration Statement effective for the period required to comply with Section 2(a) (except to the extent the Company is unable to consummate the Notes Exchange Offer and the Company complies with Section 2(b), subject in all respects to Section 3(f) hereof), and (ii) the Notes Shelf Registration Statement as may be necessary under applicable law to keep such Notes Shelf Registration Statement effective for the period required pursuant to Section 2(b) hereof; cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the 1933 Act; and comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof; (c) in the case of a Shelf Registration, (i) notify each Holder of Registrable Registration Statement with respect to the Registrable Notes is being Notes, at least ten days prior to filing, that a Notes Shelf filed and advising such Holders that the distribution of Registrable Notes will be made in accordance with the method elected by the Majority Holders; and (ii) furnish to each Holder of Registrable Notes, to counsel for the Initial Purchasers, to counsel for the Holders and to each underwriter of an underwritten offering of Registrable Notes, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or -9- 10 supplement thereto and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits (including those incorporated by reference) in order to facilitate the public sale or other disposition of the Registrable Notes; and (iii) subject to the last paragraph of Section 3, hereby consent to the use of the Prospectus, including each preliminary Prospectus, or any amendment or supplement thereto by each of the selling Holders of Registrable Notes in connection with the offering and sale of the Registrable Notes covered by the Prospectus or any amendment or supplement thereto; (d) use its best efforts to register or qualify the Registrable Notes under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Notes covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Notes shall reasonably request by the time the applicable Registration Statement is declared effective by the SEC, to cooperate with the Holders in connection with any filings required to be made with the NASD, keep each such registration or qualification effective during the period such Registration Statement is required to be effective and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Notes owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d) or (ii) take any action which would subject it to general service of process or taxation in any such jurisdiction if it is not then so subject; (e) in the case of a Shelf Registration, notify each Holder of Registrable Notes and counsel for such Holders promptly and, if requested by such Holder or counsel, confirm such advice in writing promptly (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Notes covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to such offering cease to be true and correct in all material respects, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (vi) of the happening of any event or the discovery of any facts during the period a Notes Shelf Registration Statement is effective which makes any statement made in such Notes Shelf Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Notes Shelf Registration Statement or Prospectus in order to make -10- 11 the statements therein not misleading and (vii) of any determination by the Company that a post-effective amendment to a Registration Statement would be appropriate; (f) (A) in the case of the Notes Exchange Offer, (i) include in the Notes Exchange Offer Registration Statement a "Plan of Distribution" section covering the use of the Prospectus included in the Notes Exchange Offer Registration Statement by broker-dealers who have exchanged their Registrable Notes for New Notes for the resale of such New Notes, (ii) furnish to each broker-dealer who desires to participate in the Notes Exchange Offer, without charge, as many copies of each Prospectus included in the Notes Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such broker-dealer may reasonably request, (iii) include in the Notes Exchange Offer Registration Statement a statement that any broker- dealer who holds Registrable Notes acquired for its own account as a result of market- making activities or other trading activities (a "Notes Participating Broker"), and who receives New Notes for Registrable Notes pursuant to the Notes Exchange Offer, may be a statutory underwriter and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such New Notes, (iv) subject to the last paragraph of Section 3, hereby consent to the use of the Prospectus forming part of the Notes Exchange Offer Registration Statement or any amendment or supplement thereto, by any broker-dealer in connection with the sale or transfer of the New Notes covered by the Prospectus or any amendment or supplement thereto, and (v) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Notes Exchange Offer (x) the following provision: "If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Registrable Notes, it represents that the Registrable Notes to be exchanged for New Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such New Notes pursuant to the Notes Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the 1933 Act"; and (y) a statement to the effect that by a broker-dealer making the acknowledgment described in subclause (x) and by delivering a Prospectus in connection with the exchange of Registrable Notes, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act; and (B) to the extent any Notes Participating Broker participates in the Notes Exchange Offer, the Company shall use its best efforts to cause to be delivered at the request of an entity representing the Notes Participating Brokers (which entity shall be one of the Initial Purchasers, unless it elects not to act as such representative) only one, if any, "cold comfort" letter with respect to the Prospectus in the form existing on the last -11- 12 date for which exchanges are accepted pursuant to the Notes Exchange Offer and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (C) below; and (C) to the extent any Notes Participating Broker participates in the Notes Exchange Offer, the Company shall use its best efforts to maintain the effectiveness of the Notes Exchange Offer Registration Statement for a period of 120 days following the closing of the Notes Exchange Offer; and (D) the Company shall not be required to amend or supplement the Prospectus contained in the Notes Exchange Offer Registration Statement as would otherwise be contemplated by Section 3(b), or take any other action as a result of this Section 3(f), for a period exceeding 120 days after the last date for which exchanges are accepted pursuant to the Notes Exchange Offer (as such period may be extended by the Company) and Notes Participating Brokers shall not be authorized by the Company to, and shall not, deliver such Prospectus after such period in connection with resales contemplated by this Section 3; (g) (A) in the case of a Notes Exchange Offer, furnish counsel for the Initial Purchasers and (B) in the case of a Shelf Registration, furnish counsel for the Holders of Registrable Notes copies of any request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information; (h) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement as soon as practicable and provide immediate notice to each Holder of the withdrawal of any such order; (i) in the case of a Shelf Registration, furnish to each Holder of Registrable Notes, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (j) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Notes to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold and not bearing any restrictive legends; and cause such Registrable Notes to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least one business day prior to the closing of any sale of Registrable Notes; (k) in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Section 3(e)(vi) hereof, use its best efforts to prepare a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the -12- 13 Registrable Notes, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company agrees to notify each Holder to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and each Holder hereby agrees to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission. At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Company agrees promptly to notify each Holder of such determination and to furnish each Holder such numbers of copies of the Prospectus, as amended or supplemented, as such Holder may reasonably request; (l) obtain a CUSIP number for all New Notes, or Registrable Notes, as the case may be, not later than the effective date of a Registration Statement, and provide the Trustee with printed certificates for the New Notes or the Registrable Notes, as the case may be, in a form eligible for deposit with the Depositary; (m) (i) cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), in connection with the registration of the New Notes, or Registrable Notes, as the case may be, (ii) cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and (iii) execute, and use its best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner; (n) in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions (including those reasonably requested by the Majority Holders) in order to expedite or facilitate the disposition of such Registrable Notes and in such connection 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 the Holders of such Registrable Notes and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them; (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, and the holders of a majority in principal amount of the Registrable Notes being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings; -13- 14 (iii) obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the underwriters, if any, and will use best efforts to have such letters addressed to the selling Holders of Registrable Notes, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings; (iv) enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Registrable Notes, which agreement shall be in form, substance and scope customary for similar offerings; and (v) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings. The above shall be done at (i) the effectiveness of such Notes Shelf Registration Statement (and, if appropriate, each post-effective amendment thereto) and (ii) each closing under any underwriting or similar agreement as and to the extent required thereunder. In the case of any underwritten offering, the Company shall provide written notice to the Holders of all Registrable Notes of such underwritten offering at least 30 days prior to the filing of a prospectus supplement for such underwritten offering. Such notice shall (x) offer each such Holder the right to participate in such underwritten offering, (y) specify a date, which shall be no earlier than 10 days following the date of such notice, by which such Holder must inform the Company of its intent to participate in such underwritten offering and (z) include the instructions such Holder must follow in order to participate in such underwritten offering; (o) in the case of a Shelf Registration, make available for inspection by representatives of the Holders of the Registrable Notes and any underwriters participating in any disposition pursuant to a Notes Shelf Registration Statement and any counsel or accountant retained by such Holders or underwriters, at reasonable times and in a reasonable manner, all financial and other records, pertinent corporate documents and properties of the Company reasonably requested by any such Persons, and cause the respective officers, directors, employees, and any other agents of the Company to supply all information reasonably requested by any such representative, underwriter, special counsel or accountant in connection with such Notes Shelf 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 Federal securities laws in connection with the filing of such Notes Shelf Registration Statement or the use of any Prospectus), (iii) such -14- 15 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 not bound by a confidentiality agreement; provided, further, that the foregoing investigation shall be coordinated on behalf of the Holders by one representative designated by and on behalf of such Holders and any such confidential information shall be available from such representative to such Holders so long as any Holder agrees to be bound by such confidentiality agreement; (p) (i) a reasonable time prior to the filing of any Notes Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to a Notes Exchange Offer Registration Statement or amendment or supplement to a Prospectus, provide copies of such document to the Initial Purchasers, and make such changes in any such document prior to the filing thereof as any of the Initial Purchasers or their counsel may reasonably request; (ii) in the case of a Shelf Registration, a reasonable time prior to filing any Notes Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Notes Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Holders of Registrable Notes, to the Initial Purchasers, to counsel on behalf of the Holders and to the underwriter or underwriters of an underwritten offering of Registrable Notes, if any, and make such changes in any such document prior to the filing thereof as the Holders of Registrable Notes, the Initial Purchasers on behalf of such Holders, their counsel and any underwriter may reasonably request; and (iii) cause the representatives of the Company to be available for discussion of such document as shall be reasonably requested by the Holders of Registrable Notes, the Initial Purchasers on behalf of such Holders or any underwriter and shall not at any time make any filing of any such document of which such Holders, the Initial Purchasers on behalf of such Holders, their counsel or any underwriter shall not have previously been advised and furnished a copy or to which such Holders, the Initial Purchasers on behalf of such Holders, their counsel or any underwriter shall reasonably object, each of which actions in this clause (iii) by the Holders shall be coordinated by one representative for all the Holders at reasonable times and in a reasonable manner; (q) in the case of a Shelf Registration, use its best efforts to cause all Registrable Notes to be listed on any securities exchange on which similar debt securities issued by the Company are then listed if requested by the Majority Holders or by the underwriter or underwriters of an underwritten offering of Registrable Notes, if any; (r) in the case of a Shelf Registration, unless the rating in effect for the Notes applies to the New Notes and the Notes to be sold pursuant to a Shelf Registration, use its best efforts to cause the Registrable Notes to be rated with the appropriate rating agencies, if so requested by the Majority Holders or by the underwriter or underwriters of an underwritten offering of Registrable Notes, if any, unless the Registrable Notes are already so rated; -15- 16 (s) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder; and (t) cooperate and assist in any filings required to be made with the NASD. In the case of a Notes Shelf Registration Statement, the Company may (as a condition to such Holder's participation in the Shelf Registration) require each Holder of Registrable Notes to furnish to the Company such information regarding such Holder and the proposed distribution by such Holder of such Registrable Notes and make such representations, in each case, as the Company may from time to time reasonably request in writing. In the case of a Notes Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(ii)-(vi) hereof, such Holder will forthwith discontinue disposition of Registrable Notes pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at its expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Notes current at the time of receipt of such notice. If the Company shall give any such notice to suspend the disposition of Registrable Notes pursuant to a Notes Shelf Registration Statement as a result of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(vi) hereof, the Company shall be deemed to have used its best efforts to keep the Notes Shelf Registration Statement effective during such period of suspension provided that the Company shall use its best efforts to file and have declared effective (if an amendment) as soon as practicable an amendment or supplement to the Notes Shelf Registration Statement and shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. 4. Underwritten Registrations. If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Majority Holders of such Registrable Notes included in such offering and shall be reasonably acceptable to the Company. No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. -16- 17 5. Indemnification and Contribution. (a) Each of the Company and the Subsidiary agrees to indemnify and hold harmless each Holder and each Person, if any, who controls any Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any losses, claims, damages or liabilities, joint or several, to which such Holder or such controlling Person may become subject under the 1933 Act, the 1934 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in (A) any Registration Statement or Prospectus or any amendments or supplements thereto or (B) any application or other document, or any amendments or supplements thereto, executed by the Company or the Subsidiary or based upon written information furnished by or on behalf of the Company or the Subsidiary filed in any jurisdiction in order to qualify the Securities under the securities or blue sky laws thereof or filed with the SEC or any securities association or securities exchange (each an "Application") or (ii) the omission or alleged omission to state in any Registration Statement or Prospectus or any amendment or supplement thereto, or any Application a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse, as incurred, each Holder and each such controlling Person for any legal or other expenses reasonably incurred by such Holder or such controlling Person in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; provided, however, that the Company and the Subsidiary 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 alleged untrue statement or omission or alleged omission made in any Registration Statement or Prospectus or any amendment or supplement thereto or any Application in reliance upon and in conformity with written information relating to any Holder furnished to the Company by any Holder specifically for use therein. This indemnity agreement will be in addition to any liability which the Company and the Subsidiary may otherwise have. The Company will not, without the prior written consent of each Holder, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not any Holder or any Person who controls any such Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act is a party to such claim, action, suit or proceeding), unless such settlement, compromise or consent includes an unconditional release of all of such Holder and such controlling Persons from all liability arising out of such claim, action, suit or proceeding. (b) Each Holder, severally and not jointly, agrees to indemnify and hold harmless each of the Company and the Subsidiary, each of their respective directors, each of their respective executive officers and each Person, if any, who controls the Company or the Subsidiary within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any losses, claims, damages or liabilities to which the Company, the Subsidiary or any -17- 18 such director, officer or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement or Prospectus or any amendment or supplement thereto or any Application or (ii) the omission or alleged omission to state therein a material fact required to be stated in any Registration Statement or Prospectus or any amendment or supplement thereto, or any Application or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information relating to any Holder furnished to the Company by such Holder specifically for use therein; and, subject to the limitation set forth immediately preceding this clause, will reimburse, as incurred, any legal or other expenses reasonably incurred by the Company, the Subsidiary or any such director, officer or controlling Person in connection with investigating or defending any such loss, claim, damage, liability or any action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have. The Holders will not, without the prior written consent of the Company or the Subsidiary, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceedings in respect of which indemnification may be sought hereunder (whether or not the Company, the Subsidiary or any person who controls the Company or the Subsidiary within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act is a party to such claim, action, suit or proceeding), unless such settlement, compromise or consent includes an unconditional release of all of the Company, the Subsidiary and such controlling persons from all liability arising out of such claim, action, suit or proceeding. (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party 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 party otherwise than under this Section 5. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel approved by such indemnified party (which approval will not be unreasonably withheld); provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be one or more legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnifying party shall not have the right to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action (which approval will not be unreasonably withheld), the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, -18- 19 subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel, if any) in any one action or separate but substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances, designated by such Holder in the case of paragraph (a) of this Section 5, representing the indemnified parties under such paragraph (a) who are parties to such action or actions) or (ii) the indemnifying party does not promptly retain counsel approved by the indemnified party (which approval will not be unreasonably withheld) or (iii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. After such notice from the indemnifying party to such indemnified party, the indemnifying party will not be liable for the costs and expenses of any settlement of such action effected by such indemnified party without the written consent of the indemnifying party. (d) In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 5 is unavailable or insufficient, for any reason, to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of the Securities or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Subsidiary on the one hand and such Holder on the other shall be deemed to be in the same proportion as the total proceeds from the offering (before deducting expenses) received by the Company and the Subsidiary bear to the total underwriting discounts and commissions received by such Holder. The relative fault of the parties 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 Company or such Holder, the parties' relative intents, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. The Company and the Subsidiary, on the one hand, and each Holder agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to above in this paragraph (d). Notwithstanding any other provision of this paragraph (d), no Holder shall be obligated to make contributions hereunder that in the aggregate exceed the total offering price of the Securities purchased by such Holder, less the aggregate amount of any damages that such Holder has otherwise been required to pay in respect of the same or any substantially similar claim, and no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) -19- 20 of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each Person, if any, who controls a Holder 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 such Holder, and each director of the Company or the Subsidiary, each officer of the Company or the Subsidiary who signed the Registration Statement and each Person, if any, who controls the Company or the Subsidiary 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 and the Subsidiary. (e) The parties to this Agreement hereby acknowledge that they are sophisticated business Persons who were represented by counsel during the negotiations regarding the provisions of this Agreement, including, without limitation, the provisions of this Section 5, and are fully informed regarding said provisions. They further acknowledge that the provisions of this Section 5 fairly allocate the risks in light of the ability of the parties to investigate each of the Company and the Subsidiary and its business in order to assure that adequate disclosure is made in the Offering Memorandum as required by the 1933 Act. 6. Miscellaneous. (a) Rule 144 and Rule 144A. For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the Company covenants that it will file the reports required to be filed by it under Section 13(a) or 15(d) of the 1934 Act and the rules and regulations adopted by the SEC thereunder, that if it ceases to be so required to file such reports, it will upon the request of any Holder of Registrable Notes (i) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the 1933 Act, (ii) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933 Act and it will take such further action as any Holder of Registrable Notes may reasonably request, and (iii) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Notes without registration under the 1933 Act within the limitation of the exemptions provided by (x) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, (y) Rule 144A under the 1933 Act, as such Rule may be amended from time to time, or (z) any similar rules or regulations hereafter adopted by the SEC. Upon the request of any Holder of Registrable Notes, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. (b) No Inconsistent Agreements. Neither the Company nor the Subsidiary has entered into nor will the Company or the Subsidiary on or after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Notes 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 under any such agreements. (c) 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 unless the Company has -20- 21 obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Notes affected by such amendment, modification, supplement, waiver or departure; provided, however, that no amendment, modification, supplement or waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Notes unless consented to in writing by such Holder. (d) 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 (other than an Initial Purchaser), at the most current address set forth on the records of the Registrar under the Indenture, (ii) if to an Initial Purchaser, at the most current address given by such Initial Purchaser to the Company by means of a notice given in accordance with the provisions of this Section 6(d), which address initially is the address set forth in the Purchase Agreement; and (iii) if to the Company or the Subsidiary, initially at the Company's address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(d). 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, postage prepaid, if mailed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Notes in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Notes, in any manner, whether by operation of law or otherwise, such Registrable Notes shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Notes, 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, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (f) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and the Subsidiary, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. -21- 22 (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) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. -22- 23 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. CITADEL BROADCASTING COMPANY By: /s/ Lawrence R. Wilson -------------------------- Name: Lawrence R. Wilson Title: President CITADEL LICENSE, INC. By: /s/ Lawrence R. Wilson --------------------------- Name: Lawrence R. Wilson Title: President Confirmed and accepted as of the date first above written: PRUDENTIAL SECURITIES INCORPORATED By: /s/ Benjamin Shapiro ------------------------- Authorized Signatory NATIONSBANC CAPITAL MARKETS, INC. By: /s/ Stuart B. Gleichenhaus -------------------------- Authorized Signatory Stuart B. Gleichenhaus Managing Director BANCBOSTON SECURITIES INC. By: /s/ David Weinstein -------------------------- Authorized Signatory EX-10.23 34 CITADEL BROADCASTING CO. S-4 1 Exhibit 10.23 PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT THIS PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into as of July 3, 1997, among Citadel Broadcasting Company, a Nevada corporation (the "Company"), Citadel License, Inc. (the "Subsidiary") and Prudential Securities Incorporated, NationsBanc Capital Markets, Inc. and BancBoston Securities Inc. (collectively, the "Initial Purchasers"). This Agreement is made pursuant to the Purchase Agreement dated June 30, 1997 among the Company, Parent and the Initial Purchasers (the "Purchase Agreement"), which provides for, in relevant part, the sale by the Company to the Initial Purchasers of 1,000,000 shares of 13 1/4% Series A Exchangeable Preferred Stock, liquidation preference $100 per share (including additional shares payable in lieu of cash dividends, the "Exchangeable Preferred Stock"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, each of the Company and the Subsidiary has agreed to provide to the Initial Purchasers and their direct and indirect transferees and assigns the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the SEC promulgated thereunder. "Certificate of Designation" shall mean the Certificate of Designation of the Company relating to the Exchangeable Preferred Stock. "Closing Time" shall mean the Closing Time as defined in the Purchase Agreement. "Company" shall have the meaning set forth in the preamble of this Agreement and also includes the Company's successors. "Depositary" shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however, that any such depositary must have an address in the Borough of Manhattan, in the City of New York. 2 "Holders" shall mean the Initial Purchasers, for so long as they own any Registrable Preferred Stock, and each of their successors, assigns and direct and indirect transferees who become registered owners of Registrable Preferred Stock. "Initial Purchasers" shall have the meaning set forth in the preamble of this Agreement. "Majority Holders" shall mean the Holders of a majority of the outstanding Registrable Preferred Stock; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Preferred Stock is required hereunder, Registrable Preferred Stock held by the Company or any of its affiliates (as such term is defined in Rule 405 under the 1933 Act) (other than the Initial Purchasers or subsequent holders of Registrable Preferred Stock if such subsequent holders are deemed to be such affiliates solely by reason of their holding of such Registrable Preferred Stock) shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage or amount. "New Preferred Stock" shall mean 13-1/4% Series A Exchangeable Preferred Stock, no par value, issued by the Company under the Certificate of Designation containing terms identical in all respects to the Exchangeable Preferred Stock (except that (i) dividends thereon shall accumulate from the last dividend payment date or, if no such dividends have been paid, from July 3, 1997, (ii) the transfer restrictions thereon shall be eliminated and (iii) certain provisions relating to an increase in the stated dividend rate thereon shall be eliminated) to be offered to Holders of Exchangeable Preferred Stock in exchange for Exchangeable Preferred Stock pursuant to the Preferred Stock Exchange Offer. "Person" shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Preferred Stock Exchange Offer" shall mean the exchange offer by the Company of Registrable Preferred Stock for New Preferred Stock pursuant to Section 2(a) hereof. "Preferred Stock Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof. "Preferred Stock Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Preferred Stock Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) of this Agreement which covers all of the then Registrable Preferred Stock on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case 2 3 including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Preferred Stock covered by a Preferred Stock Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble of this Agreement. "Registrable Preferred Stock" shall mean the Exchangeable Preferred Stock; provided, however, that the Exchangeable Preferred Stock shall cease to be Registrable Preferred Stock when (i) a Registration Statement with respect to such Exchangeable Preferred Stock shall have been declared effective under the 1933 Act and such Exchangeable Preferred Stock shall have been disposed of pursuant to such Registration Statement, (ii) such Exchangeable Preferred Stock shall have been sold to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the 1933 Act, (iii) such Exchangeable Preferred Stock shall have ceased to be outstanding or (iv) such Exchangeable Preferred Stock has been exchanged for New Preferred Stock upon consummation of the Preferred Stock Exchange Offer. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company and the Subsidiary with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. ("NASD") registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state or other securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with state or other securities or blue sky qualification of any of the New Preferred Stock or Registrable Preferred Stock), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, certificates representing the New Preferred Stock and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Preferred Stock on any securities exchange or exchanges, (v) the reasonable fees and disbursements of counsel for the Company and, in the case of a Preferred Stock Shelf Registration Statement, the reasonable fees and disbursements (including the expenses of preparing and distributing any underwriting or securities sales agreement) of one counsel (in addition to appropriate local counsel, if any) for the Holders (which counsel shall be selected in writing by the Majority Holders), (vi) the fees and expenses of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, (vii) the fees and expenses of a "qualified independent underwriter" as defined by Conduct Rule 2720 of the NASD (if required 3 4 by the NASD rules) in connection with the offering of the Registrable Preferred Stock, (viii) the fees and expenses of the Transfer Agent (as defined below), including its counsel, and any escrow agent or custodian and (ix) any reasonable fees and disbursements of the underwriters customarily required to be paid by issuers or sellers of securities and the reasonable fees and expenses of any special experts retained by the Company in connection with any Registration Statement, but excluding underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Preferred Stock by a Holder. "Registration Statement" shall mean any registration statement of the Company which covers any of the New Preferred Stock or Registrable Preferred Stock 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. "SEC" shall mean the Securities and Exchange Commission. "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof. "Subsidiary" shall have the meaning set forth in the preamble of this Agreement and also includes the Subsidiary's successors. "Transfer Agent" shall mean the transfer agent with respect to the Exchangeable Preferred Stock. 2. Registration Under the 1933 Act. (a) Preferred Stock Exchange Offer Registration. To the extent not prohibited by any applicable law or applicable interpretation of the Staff of the SEC, the Company shall (A) file on or prior to the 90th calendar day following the date hereof a Preferred Stock Exchange Offer Registration Statement covering the offer by the Company to the Holders to exchange all of the Registrable Preferred Stock for New Preferred Stock, (B) use its best efforts to cause such Preferred Stock Exchange Offer Registration Statement to be declared effective by the SEC on or prior to the 180th calendar day following the date hereof, (C) use its best efforts to cause such Preferred Stock Exchange Offer Registration Statement to remain effective until the closing of the Preferred Stock Exchange Offer and (D) use its best efforts to consummate the Preferred Stock Exchange Offer on or prior to the 210th calendar day following the date hereof. The New Preferred Stock will be issued under the Certificate of Designation. Upon the effectiveness of the Preferred Stock Exchange Offer Registration Statement, the Company shall promptly commence the Preferred Stock Exchange Offer, it being the objective of such Preferred Stock Exchange Offer to enable each Holder (other than Preferred Stock Participating Brokers (as defined in Section 3(f) hereof)), eligible and electing to exchange Registrable Preferred Stock for New Preferred Stock (assuming that such Holder is not an affiliate of the Company within the meaning of Rule 405 under the 1933 Act, acquires the New Preferred Stock in the ordinary course of such Holder's business and has no arrangements or understandings with any Person to participate in the Preferred Stock Exchange Offer for the purpose of distributing the New Preferred Stock) to trade such New Preferred Stock from and after their receipt without any limitations or restrictions under the 1933 Act and without 4 5 material restrictions under the securities laws of a substantial proportion of the several states of the United States. In connection with the Preferred Stock Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Preferred Stock Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Preferred Stock Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date notice thereof is mailed to the Holders; (iii) use the services of the Depositary for the Preferred Stock Exchange Offer with respect to Exchangeable Preferred Stock evidenced by global certificates; (iv) permit Holders to withdraw tendered Registrable Preferred Stock at any time prior to the close of business, New York City time, on the last business day on which the Preferred Stock Exchange Offer shall remain open, by sending to the institution specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Preferred Stock delivered for exchange, and a statement that such Holder is withdrawing his election to have such Exchangeable Preferred Stock exchanged; and (v) otherwise comply in all respects with all applicable laws relating to the Preferred Stock Exchange Offer. As soon as practicable after the close of the Preferred Stock Exchange Offer, the Company shall: (i) accept for exchange Registrable Preferred Stock duly tendered and not validly withdrawn pursuant to the Preferred Stock Exchange Offer in accordance with the terms of the Preferred Stock Exchange Offer Registration Statement and the letter of transmittal which is an exhibit thereto; (ii) deliver, or cause to be delivered, to the Transfer Agent for cancellation all Registrable Preferred Stock so accepted for exchange by the Company; and (iii) cause the Transfer Agent promptly to deliver New Preferred Stock to each Holder of Registrable Preferred Stock equal in amount to the Registrable Preferred Stock of such Holder so accepted for exchange. Dividends on the New Preferred Stock will accumulate from the last dividend payment date on which dividends were distributed on the Registrable Preferred Stock surrendered in exchange therefor or, if no dividends have been distributed on the Registrable Preferred Stock, from July 3, 1997. The Preferred Stock Exchange Offer shall not be subject to any conditions, other than that the Preferred Stock Exchange Offer, or the making of any 5 6 exchange by a Holder, does not violate applicable law or any applicable interpretation of the Staff of the SEC. Each Holder of Registrable Preferred Stock (other than Preferred Stock Participating Brokers) who wishes to exchange such Registrable Preferred Stock for New Preferred Stock in the Preferred Stock Exchange Offer shall have represented that (i) any New Preferred Stock to be received by it were acquired in the ordinary course of business, (ii) at the time of the commencement of the Preferred Stock Exchange Offer it has no arrangement with any Person to participate in the distribution (within the meaning of the 1933 Act) of the New Preferred Stock, (iii) it is not an affiliate (as defined in Rule 405 under the 1933 Act) of the Company, or if it is an affiliate it will comply with the registration and prospectus delivery requirements of the 1933 Act to the extent applicable and (iv) it is not acting on behalf of any Person who could not make the representations in clauses (i) through (iii) above. The Company shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Preferred Stock Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Preferred Stock in the Preferred Stock Exchange Offer. (b) Shelf Registration. (i) If, because of any change in law or applicable interpretations thereof by the Staff of the SEC, the Company is not permitted to effect the Preferred Stock Exchange Offer as contemplated by Section 2(a) hereof, or (ii) if for any other reason the Preferred Stock Exchange Offer cannot be consummated within 210 days following the date hereof, or (iii) if any Holder (other than an Initial Purchaser) is not eligible to participate in the Preferred Stock Exchange Offer or (iv) upon the request of any Initial Purchaser (with respect to any Registrable Preferred Stock which it acquired directly from the Company) following the consummation of the Preferred Stock Exchange Offer if any such Initial Purchaser shall hold Registrable Preferred Stock which it acquired directly from the Company and if such Initial Purchaser is not permitted, in the reasonable opinion of counsel to such Initial Purchaser, pursuant to applicable law or applicable interpretation of the Staff of the SEC to participate in the Preferred Stock Exchange Offer, the Company shall, at its cost: (A) as promptly as practicable, and in any event within 90 days after the date on which such filing obligation arises, file with the SEC a Preferred Stock Shelf Registration Statement relating to the offer and sale of the then outstanding Registrable Preferred Stock by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders of such Registrable Preferred Stock and set forth in such Preferred Stock Shelf Registration Statement, and use its best efforts to cause such Preferred Stock Shelf Registration Statement to be declared effective by the SEC on or prior to 45 days after the date on which such filing occurs (or promptly in the event of a request by any Initial Purchaser pursuant to clause (iv) above). In the event that the Company is required to file a Preferred Stock Shelf Registration Statement upon the request of any Holder (other than an Initial Purchaser) not eligible to participate in the Preferred Stock Exchange Offer pursuant to clause (iii) above or upon the request of any Initial Purchaser pursuant to clause (iv) above, the Company shall file and have declared effective by the SEC both a Preferred Stock Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Preferred Stock and a Preferred Stock Shelf Registration Statement (which may be a combined Registration Statement 6 7 with the Preferred Stock Exchange Offer Registration Statement) with respect to offers and sales of Registrable Preferred Stock held by such Holder or such Initial Purchaser after completion of the Preferred Stock Exchange Offer; (B) use its best efforts to keep the Preferred Stock Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years after its effective date (or one year from the date the Preferred Stock Shelf Registration Statement is declared effective if such Preferred Stock Shelf Registration Statement is filed upon the request of any Initial Purchaser pursuant to clause (iv) above) or such shorter period which will terminate when all of the Registrable Preferred Stock covered by the Preferred Stock Shelf Registration Statement have been sold pursuant to the Preferred Stock Shelf Registration Statement or all of the Registrable Preferred Stock become eligible for resale pursuant to Rule 144 under the 1933 Act without volume restrictions; and (C) notwithstanding any other provisions hereof, use its best efforts to ensure that (i) any Preferred Stock Shelf Registration Statement and any amendment thereto and any Prospectus forming a part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Preferred Stock Shelf Registration Statement and any amendment thereto does not, when it becomes effective, 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 not misleading and (iii) any Prospectus forming part of any Preferred Stock Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading. The Company further agrees, if necessary, to supplement or amend the Preferred Stock Shelf Registration Statement if reasonably requested by the Majority Holders with respect to information relating to the Holders and otherwise as required by Section 3(b) below, to use all reasonable efforts to cause any such amendment to become effective and such Shelf Registration to become usable as soon as practicable thereafter and to furnish to the Holders of Registrable Preferred Stock copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) Expenses. The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) and 2(b). Each Holder shall pay all expenses of its counsel other than as set forth in the preceding sentence, underwriting discounts and commissions (prior to the reduction thereof with respect to selling concessions, if any) and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Preferred Stock pursuant to the Preferred Stock Shelf Registration Statement. (d) Effective Registration Statement. (i) The Company will be deemed not to have used its best efforts to cause a Registration Statement to become, or to remain, effective 7 8 during the requisite period if the Company voluntarily takes any action that would result in any such Registration Statement not being declared effective or in the Holders of Registrable Preferred Stock covered thereby not being able to exchange or offer and sell such Registrable Preferred Stock during that period unless (A) such action is required by applicable law or (B) such action is taken by the Company in good faith and for valid business reasons (but not including avoidance of the Company's obligations hereunder), including a material corporate transaction, so long as the Company promptly complies with the requirements of Section 3(k) hereof, if applicable. (ii) A Preferred Stock Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Preferred Stock Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Preferred Stock pursuant to a Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have been effective during the period of such interference, until the offering of Registrable Preferred Stock pursuant to such Registration Statement may legally resume. (e) Increase in Dividend Rate. In the event that either (i) the Preferred Stock Exchange Offer Registration Statement is not filed with the SEC on or prior to the 90th day following the date hereof, (ii) the Preferred Stock Exchange Offer is not consummated within 210 days following the date hereof or a Preferred Stock Shelf Registration Statement with respect to the Registrable Preferred Stock is not declared effective on or prior to the 210th day following the date hereof, or (iii) either (A) the Preferred Stock Exchange Offer Registration Statement ceases to be effective at any time prior to the time that the Preferred Stock Exchange Offer is consummated or (B) if applicable, the Preferred Stock Shelf Registration Statement has been declared effective and such Preferred Stock Shelf Registration Statement ceases to be effective at any time prior to the second anniversary of its effective date, the dividend rate borne by the Exchangeable Preferred Stock shall be increased by one-quarter of one percent per annum following such 90-day period in the case of clause (i) above, following such 210-day period in the case of clause (ii) above, or immediately in the case of clause (iii) above, which rate will be increased by an additional one-quarter of one percent per annum for each 30-day period that any such additional dividends continue to accumulate in the case of clause (i) above or for each 90-day period that any such additional dividends continue to accumulate in the case of clauses (ii) and (iii) above; provided that the aggregate increase in such dividend rate will in no event exceed one and one-half percent. Upon (w) the filing of the Preferred Stock Exchange Offer Registration Statement after the 90-day period described in clause (i) above, (x) consummation of the Preferred Stock Exchange Offer or the effectiveness of a Preferred Stock Shelf Registration Statement, as the case may be, after the 210-day period described in clause (ii) above, or (y) the effectiveness of the Preferred Stock Exchange Offer Registration Statement or the Preferred Stock Shelf Registration Statement following an event described in clause (iii) above, the dividend rate borne by the Exchangeable Preferred Stock from the date of such filing, effectiveness or consummation, as the case may be, will be reduced to the original dividend rate if the Company is otherwise in compliance with this paragraph; provided, however, that, if after 8 9 any such reduction in dividend rate, a different event specified in clauses (i), (ii) or (iii) above occurs, the dividend rate will again be increased and thereafter reduced pursuant to the foregoing conditions. If the Company issues a notice that the Preferred Stock Shelf Registration Statement is unusable pending the announcement of a material corporate transaction or otherwise pursuant to Section 3(k) hereof, or such a notice is required under applicable securities laws to be issued by the Company, and the aggregate number of days in any consecutive twelve-month period for which all such notices are issued or required to be issued exceeds 30 days in the aggregate, then the dividend rate borne by the Exchangeable Preferred Stock will be increased by one-quarter of one percent per annum following the date that such Preferred Stock Shelf Registration Statement ceases to be usable beyond the 30-day period permitted above, which rate shall be increased by an additional one-quarter of one percent per annum for each 90-day period that such additional dividends continue to accumulate; provided that the aggregate increase in such annual dividend rate may in no event exceed one and one-half percent. Upon the Company declaring that the Preferred Stock Shelf Registration Statement is usable after the dividend rate has been increased pursuant to the preceding sentence, the dividend rate borne by the Exchangeable Preferred Stock will be reduced to the original dividend rate if the Company is otherwise in compliance with this paragraph; provided, however, that if after any such reduction in dividend rate the Preferred Stock Shelf Registration Statement again ceases to be usable beyond the period permitted above, the dividend rate will again be increased and thereafter reduced pursuant to the foregoing provisions. (f) Specific Enforcement. Without limiting the remedies available to the Initial Purchasers and the Holders, each of the Company and the Subsidiary acknowledges that any failure by each of the Company and the Subsidiary to comply with its respective obligations under Sections 2(a) and 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 2(a) and 2(b) hereof. 3. Registration Procedures. In connection with the obligations of the Company and the Subsidiary with respect to the Registration Statements pursuant to Sections 2(a) and 2(b) hereof, the Company shall: (a) prepare and file with the SEC a Registration Statement, within the time period specified in Section 2, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Preferred Stock by the selling Holders thereof and (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith, and use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to (i) the Preferred Stock Exchange Offer Registration Statement as may be 9 10 necessary under applicable law to keep such Preferred Stock Exchange Offer Registration Statement effective for the period required to comply with Section 2(a) (except to the extent the Company is unable to consummate the Preferred Stock Exchange Offer and the Company complies with Section 2(b), subject in all respects to Section 3(f) hereof), and (ii) the Preferred Stock Shelf Registration Statement as may be necessary under applicable law to keep such Preferred Stock Shelf Registration Statement effective for the period required pursuant to Section 2(b) hereof; cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the 1933 Act; and comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof; (c) in the case of a Shelf Registration, (i) notify each Holder of Registrable Preferred Stock, at least ten days prior to filing, that a Preferred Stock Shelf Registration Statement with respect to the Registrable Preferred Stock is being filed and advising such Holders that the distribution of Registrable Preferred Stock will be made in accordance with the method elected by the Majority Holders; and (ii) furnish to each Holder of Registrable Preferred Stock, to counsel for the Initial Purchasers, to counsel for the Holders and to each underwriter of an underwritten offering of Registrable Preferred Stock, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits (including those incorporated by reference) in order to facilitate the public sale or other disposition of the Registrable Preferred Stock; and (iii) subject to the last paragraph of Section 3, hereby consent to the use of the Prospectus, including each preliminary Prospectus, or any amendment or supplement thereto by each of the selling Holders of Registrable Preferred Stock in connection with the offering and sale of the Registrable Preferred Stock covered by the Prospectus or any amendment or supplement thereto; (d) use its best efforts to register or qualify the Registrable Preferred Stock under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Preferred Stock covered by a Registration Statement and each underwriter of an underwritten offering of Registrable Preferred Stock shall reasonably request by the time the applicable Registration Statement is declared effective by the SEC, to cooperate with the Holders in connection with any filings required to be made with the NASD, keep each such registration or qualification effective during the period such Registration Statement is required to be effective and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Preferred Stock owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d) or (ii) take any action which 10 11 would subject it to general service of process or taxation in any such jurisdiction if it is not then so subject; (e) in the case of a Shelf Registration, notify each Holder of Registrable Preferred Stock and counsel for such Holders promptly and, if requested by such Holder or counsel, confirm such advice in writing promptly (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Preferred Stock covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to such offering cease to be true and correct in all material respects, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Preferred Stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (vi) of the happening of any event or the discovery of any facts during the period a Preferred Stock Shelf Registration Statement is effective which makes any statement made in such Preferred Stock Shelf Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Preferred Stock Shelf Registration Statement or Prospectus in order to make the statements therein not misleading and (vii) of any determination by the Company that a post-effective amendment to a Registration Statement would be appropriate; (f) (A) in the case of the Preferred Stock Exchange Offer, (i) include in the Preferred Stock Exchange Offer Registration Statement a "Plan of Distribution" section covering the use of the Prospectus included in the Preferred Stock Exchange Offer Registration Statement by broker-dealers who have exchanged their Registrable Preferred Stock for New Preferred Stock for the resale of such New Preferred Stock, (ii) furnish to each broker-dealer who desires to participate in the Preferred Stock Exchange Offer, without charge, as many copies of each Prospectus included in the Preferred Stock Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such broker-dealer may reasonably request, (iii) include in the Preferred Stock Exchange Offer Registration Statement a statement that any broker-dealer who holds Registrable Preferred Stock acquired for its own account as a result of market-making activities or other trading activities (a "Preferred Stock Participating Broker"), and who receives New Preferred Stock for Registrable Preferred Stock pursuant to the Preferred Stock Exchange Offer, may be a statutory underwriter and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such New Preferred Stock, (iv) subject to the last paragraph of Section 3, hereby consent to the use of the Prospectus forming part of the Preferred Stock Exchange Offer Registration Statement or any amendment or supplement thereto, by any broker- 11 12 dealer in connection with the sale or transfer of the New Preferred Stock covered by the Prospectus or any amendment or supplement thereto, and (v) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Preferred Stock Exchange Offer (x) the following provision: "If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Preferred Stock. If the undersigned is a broker-dealer that will receive New Preferred Stock for its own account in exchange for Registrable Preferred Stock, it represents that the Registrable Preferred Stock to be exchanged for New Preferred Stock was acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such New Preferred Stock pursuant to the Preferred Stock Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the 1933 Act"; and (y) a statement to the effect that by a broker-dealer making the acknowledgment described in subclause (x) and by delivering a Prospectus in connection with the exchange of Registrable Preferred Stock, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act; and (B) to the extent any Preferred Stock Participating Broker participates in the Preferred Stock Exchange Offer, the Company shall use its best efforts to cause to be delivered at the request of an entity representing the Preferred Stock Participating Brokers (which entity shall be one of the Initial Purchasers, unless it elects not to act as such representative) only one, if any, "cold comfort" letter with respect to the Prospectus in the form existing on the last date for which exchanges are accepted pursuant to the Preferred Stock Exchange Offer and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (C) below; and (C) to the extent any Preferred Stock Participating Broker participates in the Preferred Stock Exchange Offer, the Company shall use its best efforts to maintain the effectiveness of the Preferred Stock Exchange Offer Registration Statement for a period of 120 days following the closing of the Preferred Stock Exchange Offer; and (D) the Company shall not be required to amend or supplement the Prospectus contained in the Preferred Stock Exchange Offer Registration Statement as would otherwise be contemplated by Section 3(b), or take any other action as a result of this Section 3(f), for a period exceeding 120 days after the last date for which exchanges are accepted pursuant to the Preferred Stock Exchange Offer (as such period may be extended by the Company) and Preferred Stock Participating Brokers shall not be authorized by the Company to, and shall not, deliver such Prospectus after such period in connection with resales contemplated by this Section 3; 12 13 (g) (A) in the case of a Preferred Stock Exchange Offer, furnish counsel for the Initial Purchasers and (B) in the case of a Shelf Registration, furnish counsel for the Holders of Registrable Preferred Stock copies of any request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information; (h) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement as soon as practicable and provide immediate notice to each Holder of the withdrawal of any such order; (i) in the case of a Shelf Registration, furnish to each Holder of Registrable Preferred Stock, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (j) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Preferred Stock to facilitate the timely preparation and delivery of certificates representing Registrable Preferred Stock to be sold and not bearing any restrictive legends; and cause such Registrable Preferred Stock to be in such denominations (consistent with the provisions of the Certificate of Designation) and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least one business day prior to the closing of any sale of Registrable Preferred Stock; (k) in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Section 3(e)(vi) hereof, use its best efforts to prepare a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Preferred Stock, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company agrees to notify each Holder to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and each Holder hereby agrees to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission. At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Company agrees promptly to notify each Holder of such determination and to furnish each Holder such numbers of copies of the Prospectus, as amended or supplemented, as such Holder may reasonably request; (l) obtain a CUSIP number for all New Preferred Stock, or Registrable Preferred Stock, as the case may be, not later than the effective date of a Registration Statement, and provide the Transfer Agent with printed certificates for the New Preferred 13 14 Stock or the Registrable Preferred Stock, as the case may be, in a form eligible for deposit with the Depositary; (m) in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions (including those reasonably requested by the Majority Holders) in order to expedite or facilitate the disposition of such Registrable Preferred Stock and in such connection 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 the Holders of such Registrable Preferred Stock and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them; (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, and the holders of a majority in principal amount of the Registrable Preferred Stock being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings; (iii) obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the underwriters, if any, and will use best efforts to have such letters addressed to the selling Holders of Registrable Preferred Stock, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings; (iv) enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Registrable Preferred Stock, which agreement shall be in form, substance and scope customary for similar offerings; and (v) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings. The above shall be done at (i) the effectiveness of such Preferred Stock Shelf Registration Statement (and, if appropriate, each post-effective amendment thereto) and (ii) each closing under any underwriting or similar agreement as and to the extent required thereunder. In the case of any underwritten offering, the Company shall provide written notice to the Holders of all Registrable Preferred Stock of such underwritten offering at least 30 days prior to the filing of a prospectus supplement for such underwritten offering. Such notice shall (x) offer each such Holder the right to participate in such underwritten offering, (y) specify a date, which shall be no earlier than 10 days following the date of 14 15 such notice, by which such Holder must inform the Company of its intent to participate in such underwritten offering and (z) include the instructions such Holder must follow in order to participate in such underwritten offering; (n) in the case of a Shelf Registration, make available for inspection by representatives of the Holders of the Registrable Preferred Stock and any underwriters participating in any disposition pursuant to a Preferred Stock Shelf Registration Statement and any counsel or accountant retained by such Holders or underwriters, at reasonable times and in a reasonable manner, all financial and other records, pertinent corporate documents and properties of the Company reasonably requested by any such persons, and cause the respective officers, directors, employees, and any other agents of the Company to supply all information reasonably requested by any such representative, underwriter, special counsel or accountant in connection with such Preferred Stock Shelf 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 Federal securities laws in connection with the filing of such Preferred Stock Shelf 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 not bound by a confidentiality agreement; provided, further, that the foregoing investigation shall be coordinated on behalf of the Holders by one representative designated by and on behalf of such Holders and any such confidential information shall be available from such representative to such Holders so long as any Holder agrees to be bound by such confidentiality agreement; (o) (i) a reasonable time prior to the filing of any Preferred Stock Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to a Preferred Stock Exchange Offer Registration Statement or amendment or supplement to a Prospectus, provide copies of such document to the Initial Purchasers, and make such changes in any such document prior to the filing thereof as any of the Initial Purchasers or their counsel may reasonably request; (ii) in the case of a Shelf Registration, a reasonable time prior to filing any Preferred Stock Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Preferred Stock Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Holders of Registrable Preferred Stock, to the Initial Purchasers, to counsel on behalf of the Holders and to the underwriter or underwriters of an underwritten offering of Registrable Preferred Stock, if any, and make such changes in any such document prior to the filing thereof as the Holders of Registrable Preferred Stock, the Initial Purchasers on behalf of such Holders, their counsel and any underwriter may reasonably request; and (iii) cause the representatives of the Company to be 15 16 available for discussion of such document as shall be reasonably requested by the Holders of Registrable Preferred Stock, the Initial Purchasers on behalf of such Holders or any underwriter and shall not at any time make any filing of any such document of which such Holders, the Initial Purchasers on behalf of such Holders, their counsel or any underwriter shall not have previously been advised and furnished a copy or to which such Holders, the Initial Purchasers on behalf of such Holders, their counsel or any underwriter shall reasonably object, each of which actions in this clause (iii) by the Holders shall be coordinated by one representative for all the Holders at reasonable times and in a reasonable manner; (p) in the case of a Shelf Registration, use its best efforts to cause all Registrable Preferred Stock to be listed on any securities exchange on which similar equity securities issued by the Company are then listed if requested by the Majority Holders or by the underwriter or underwriters of an underwritten offering of Registrable Preferred Stock, if any; (q) in the case of a Shelf Registration, unless the rating in effect for the Exchangeable Preferred Stock applies to the New Preferred Stock and the Exchangeable Preferred Stock to be sold pursuant to a Shelf Registration, use its best efforts to cause the Registrable Preferred Stock to be rated with the appropriate rating agencies, if so requested by the Majority Holders or by the underwriter or underwriters of an underwritten offering of Registrable Preferred Stock, if any, unless the Registrable Preferred Stock are already so rated; (r) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder; and (s) cooperate and assist in any filings required to be made with the NASD. In the case of a Preferred Stock Shelf Registration Statement, the Company may (as a condition to such Holder's participation in the Shelf Registration) require each Holder of Registrable Preferred Stock to furnish to the Company such information regarding such Holder and the proposed distribution by such Holder of such Registrable Preferred Stock and make such representations, in each case, as the Company may from time to time reasonably request in writing. In the case of a Preferred Stock Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(ii)-(vi) hereof, such Holder will forthwith discontinue disposition of Registrable Preferred Stock pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at its expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Preferred 16 17 Stock current at the time of receipt of such notice. If the Company shall give any such notice to suspend the disposition of Registrable Preferred Stock pursuant to a Preferred Stock Shelf Registration Statement as a result of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(vi) hereof, the Company shall be deemed to have used its best efforts to keep the Preferred Stock Shelf Registration Statement effective during such period of suspension provided that the Company shall use its best efforts to file and have declared effective (if an amendment) as soon as practicable an amendment or supplement to the Preferred Stock Shelf Registration Statement and shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. 4. Underwritten Registrations. If any of the Registrable Preferred Stock covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Majority Holders of such Registrable Preferred Stock included in such offering and shall be reasonably acceptable to the Company. No Holder of Registrable Preferred Stock may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Preferred Stock on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 5. Indemnification and Contribution. (a) Each of the Company and the Subsidiary agrees to indemnify and hold harmless each Holder and each Person, if any, who controls any Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any losses, claims, damages or liabilities, joint or several, to which such Holder or such controlling Person may become subject under the 1933 Act, the 1934 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in (A) any Registration Statement or Prospectus or any amendments or supplements thereto or (B) any application or other document, or any amendments or supplements thereto, executed by the Company or the Subsidiary or based upon written information furnished by or on behalf of the Company or the Subsidiary filed in any jurisdiction in order to qualify the Securities under the securities or blue sky laws thereof or filed with the SEC or any securities association or securities exchange (each an "Application") or 17 18 (ii) the omission or alleged omission to state in any Registration Statement or Prospectus or any amendment or supplement thereto, or any Application a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse, as incurred, each Holder and each such controlling Person for any legal or other expenses reasonably incurred by such Holder or such controlling Person in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; provided, however, that the Company and the Subsidiary 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 alleged untrue statement or omission or alleged omission made in any Registration Statement or Prospectus or any amendment or supplement thereto or any Application in reliance upon and in conformity with written information relating to any Holder furnished to the Company by any Holder specifically for use therein. This indemnity agreement will be in addition to any liability which the Company and the Subsidiary may otherwise have. The Company will not, without the prior written consent of each Holder, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not any Holder or any Person who controls any such Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act is a party to such claim, action, suit or proceeding), unless such settlement, compromise or consent includes an unconditional release of all of such Holder and such controlling persons from all liability arising out of such claim, action, suit or proceeding. (b) Each Holder, severally and not jointly, agrees to indemnify and hold harmless each of the Company and the Subsidiary, each of their respective directors, each of their respective executive officers and each Person, if any, who controls the Company or the Subsidiary within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any losses, claims, damages or liabilities to which the Company, the Subsidiary, any such director, officer or controlling Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement or Prospectus or any amendment or supplement thereto or any Application or (ii) the omission or alleged omission to state therein a material fact required to be stated in any Registration Statement or Prospectus or any amendment or supplement thereto, or any Application or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information relating to any Holder furnished to the Company by any Holder specifically for use therein; and, subject to the limitation set forth immediately preceding this clause, will reimburse, as incurred, any legal or other expenses reasonably incurred by the Company, the Subsidiary or any such director, officer or controlling Person in connection with investigating or defending any such loss, claim, damage, liability or any action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have. The Holders will not, without the prior written consent of the Company or the Subsidiary, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or 18 19 proceeding in respect of which indemnification may be sought hereunder (whether or not the Company, the Subsidiary or any person who controls the Company or the Subsidiary within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act is a party to such claim, action, suit or proceeding), unless such settlement, compromise or consent includes an unconditional release of all of the Company, the Subsidiary and such controlling persons from all liability arising out of such claim, action, suit or proceeding. (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party 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 party otherwise than under this Section 5. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel approved by such indemnified party (which approval will not be unreasonably withheld); provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be one or more legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnifying party shall not have the right to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action (which approval will not be unreasonably withheld), the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel, if any) in any one action or separate but substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances, designated by such Holder in the case of paragraph (a) of this Section 5, representing the indemnified parties under such paragraph (a) who are parties to such action or actions) or (ii) the indemnifying party does not promptly retain counsel approved by the indemnified party (which approval will not be unreasonably withheld) or (iii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. After such notice from the indemnifying party to such indemnified party, the indemnifying party will not be liable for the costs and expenses of any settlement of such action effected by such indemnified party without the written consent of the indemnifying party. (d) In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 5 is unavailable or insufficient, for any reason, to hold 19 20 harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of the Securities or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Subsidiary on the one hand and such Holder on the other shall be deemed to be in the same proportion as the total proceeds from the offering (before deducting expenses) received by the Company and the Subsidiary bear to the total underwriting discounts and commissions received by such Holder. The relative fault of the parties 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 Company or such Holder, the parties' relative intents, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. The Company and the Subsidiary, on the one hand, and each Holder agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to above in this paragraph (d). Notwithstanding any other provision of this paragraph (d), no Holder shall be obligated to make contributions hereunder that in the aggregate exceed the total offering price of the Securities purchased by such Holder, less the aggregate amount of any damages that such Holder has otherwise been required to pay in respect of the same or any substantially similar claim, and no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each Person, if any, who controls a Holder 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 such Holder, and each director of the Company or the Subsidiary, each officer of the Company or the Subsidiary who signed the Registration Statement and each Person, if any, who controls the Company or the Subsidiary 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. (e) The parties to this Agreement hereby acknowledge that they are sophisticated business persons who were represented by counsel during the negotiations regarding the provisions of this Agreement, including, without limitation, the provisions of this Section 5, and are fully informed regarding said provisions. They further acknowledge that the provisions of this Section 5 fairly allocate the risks in light of the ability of the parties to investigate each of the Company and the Subsidiary and its business in order to assure that adequate disclosure is made in the Offering Memorandum as required by the 1933 Act. 20 21 6. Miscellaneous. (a) Rule 144 and Rule 144A. For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the Company covenants that it will file the reports required to be filed by it under Section 13(a) or 15(d) of the 1934 Act and the rules and regulations adopted by the SEC thereunder, that if it ceases to be so required to file such reports, it will upon the request of any Holder of Registrable Preferred Stock (i) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the 1933 Act, (ii) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933 Act and it will take such further action as any Holder of Registrable Preferred Stock may reasonably request, and (iii) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Preferred Stock without registration under the 1933 Act within the limitation of the exemptions provided by (x) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, (y) Rule 144A under the 1933 Act, as such Rule may be amended from time to time, or (z) any similar rules or regulations hereafter adopted by the SEC. Upon the request of any Holder of Registrable Preferred Stock, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. (b) No Inconsistent Agreements. Neither the Company nor the Subsidiary has entered into nor will the Company or the Subsidiary on or after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Preferred Stock 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 under any such agreements. (c) 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 unless the Company has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Preferred Stock affected by such amendment, modification, supplement, waiver or departure; provided, however, that no amendment, modification, supplement or waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Preferred Stock unless consented to in writing by such Holder. (d) 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 (other than an Initial Purchaser), at the most current address set forth on the records of the Transfer Agent, (ii) if to an Initial Purchaser, at the most current address given by such Initial Purchaser to the Company by means of a notice given in accordance with the provisions of this Section 6(d), which address initially is the address set forth in the Purchase Agreement and (iii) if to the Company or the Subsidiary, initially at the Company's address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(d). 21 22 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, postage prepaid, if mailed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Transfer Agent, at the address specified by the Company. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Preferred Stock in violation of the terms hereof or of the Purchase Agreement or the Certificate of Designation. If any transferee of any Holder shall acquire Registrable Preferred Stock, in any manner, whether by operation of law or otherwise, such Registrable Preferred Stock shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Preferred Stock, 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, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (f) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company and the Subsidiary, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (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) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 22 23 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. CITADEL BROADCASTING COMPANY By: /s/ Lawrence R. Wilson -------------------------- Name: Lawrence R. Wilson Title: President CITADEL LICENSE, INC. By: /s/ Lawrence R. Wilson -------------------------- Name: Lawrence R. Wilson Title: President Confirmed and accepted as of the date first above written: PRUDENTIAL SECURITIES INCORPORATED By: /s/ Benjamin Shapiro ------------------------------ Authorized Signatory NATIONSBANC CAPITAL MARKETS, INC. By: /s/ Stuart B. Gleichenhaus ------------------------------ Authorized Signatory Stuart B. Gleichenhaus Managing Director BANCBOSTON SECURITIES INC. By: /s/ David Weinstein ------------------------------ Authorized Signatory EX-21 35 CITADEL BROADCASTING CO. S-4 1 Exhibit 21 Subsidiary of Citadel Broadcasting Company Name State of Incorporation - ---- ---------------------- Citadel License, Inc. Nevada EX-23.2 36 CITADEL BROADCASTING CO. S-4 1 Exhibit 23.2 KPMG PEAT MARWICK LLP One Arizona Center Telephone 602 253 2000 Telefax 602 252 0011 400 E. Van Buren Street Suite 1100 Phoenix, AZ 85004 The Board of Directors Citadel Broadcasting Company We consent to the use of our report dated February 14, 1997, except as to note 21 which is as of September 29, 1997, on the consolidated balance sheet of Citadel Broadcasting Company and subsidiary as of December 31, 1995 and 1996 and the related consolidated statements of operations and cash flows for each of the years in the three-year period ended December 31, 1996 included herein and to the reference to our firm under the heading "Experts" in the registration statement. /s/ KPMG PEAT MARWICK LLP Phoenix, Arizona September 30, 1997 EX-23.3 37 CITADEL BROADCASTING CO. S-4 1 Exhibit 23.3 KPMG PEAT MARWICK LLP One Arizona Center Telephone 503-221-6500 Telefax 503-796-7650 Suite 2000 1211 Southwest 5th Avenue Portland, OR 97204 The Board of Directors Citadel Broadcasting Company We consent to the use of our report dated February 14, 1997 on the consolidated balance sheet of Deschutes River Broadcasting, Inc. and subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended included herein and to the reference to our firm under the heading "Experts" in the registration statement. /s/ KPMG PEAT MARWICK LLP ----------------------------------- Portland, Oregon September 30, 1997 EX-23.4 38 CITADEL BROADCASTING CO. S-4 1 Exhibit 23.4 KPMG PEAT MARWICK LLP One Arizona Center Telephone 602 253 2000 Telefax 602 252 0011 400 E. Van Buren Street Suite 1100 Phoenix, AZ 85004 The Board of Directors Citadel Broadcasting Company We consent to the use of our report dated September 29, 1997 on the balance sheet of Maranatha Broadcasting Company, Inc.'s Radio Broadcasting Division as of December 31, 1996 and the related statements of operations and division equity and cash flows for the year then ended included herein and to the reference to our firm under the heading "Experts" in the registration statement. /s/ KPMG PEAT MARWICK LLP Phoenix, Arizona September 30, 1997 EX-23.5 39 CITADEL BROADCASTING CO. S-4 1 Exhibit 23.5 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of Citadel Broadcasting Company on Form S-4 of our report dated March 28, 1997 relating to the consolidated financial statements of Tele-Media Broadcasting Company and its partnership interests, appearing in the Prospectus, which is part of this registration statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Deloitte & Touche, LLP Pittsburgh, Pennsylvania September 30, 1997 EX-23.6 40 CITADEL BROADCASTING CO. S-4 1 EXHIBIT 23.6 ERWIN & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 900 South Shackleford Suite 515 Three Financial Centre Little Rock, AR 72211 (501) 225-5441 (501) 225-6763 (FAX) The Board of Directors Citadel Broadcasting Company We consent to the use of our reports dated April 1, 1997 on the balance sheet of Snider Corporation as of December 31, 1996 and the related statements of income, stockholders' equity and cash flows for the year then ended and April 23, 1997 on the combined balance sheet of Snider Broadcasting Corporation and subsidiary and CDB Broadcasting Corporation as of December 31, 1996 and the related combined statements of operations, stockholders' deficit and cash flows for the year then ended included herein and to the reference to our firm under the heading "Experts" in the registration statement. /s/ ERWIN & COMPANY Little Rock, Arkansas September 30, 1997 EX-23.7 41 CITADEL BROADCASTING CO. S-4 1 Exhibit 23.7 BALUKOFF LINDSTROM & CO., P.A. Certified Public Accountants Wells Fargo Building 877 West Main Street, Suite 805 Boise, Idaho 83702 (208) 344-7150 FAX: (208) 344-7435 We consent to the use of our independent auditors' report on the combined financial statements of Pacific Northwest Broadcasting Corporation and Affiliates as of and for the year ended December 31, 1996 in the prospectus for the Form S-4 for Citadel Broadcasting Company and Citadel License, Inc. /s/ Balukoff, Lindstrom & Co., P.A. September 30, 1997 EX-23.8 42 CITADEL BROADCASTING CO. S-4 1 Exhibit 23.8 CONSENT OF TED L. SNIDER, SR. I consent to being named as about to become a director under the captions "Management," "Certain Transactions" and "Security Ownership of Certain Beneficial Owners" in the Registration Statement (Form S-4) of Citadel Broadcasting Company, the related Prospectus and any amendments thereto. Little Rock, Arkansas /s/ TED L. SNIDER, SR. September 29, 1997 ----------------------- Ted L. Snider, Sr. EX-25.1 43 CITADEL BROADCASTING CO. S-4 1 Exhibit 25.1 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) __ ---------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ---------------------- CITADEL BROADCASTING COMPANY (Exact name of obligor as specified in its charter) Nevada 86-0703641 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 1015 Eastman Drive Bigfork, Montana 59911 (Address of principal executive offices) (Zip code) ---------------------- 10 14% Series B Senior Subordinated Notes due 2007 (Title of the indenture securities) ================================================================================ 2 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. - -------------------------------------------------------------------------------- Name Address Superintendent of Banks of the State 2 Rector Street, New York, of New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. 16. LIST OF EXHIBITS. EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 3 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. -3- 4 SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 19th day of September, 1997. THE BANK OF NEW YORK By: /s/ MARY JANE MORRISSEY ----------------------- Name: MARY JANE MORRISSEY Title: VICE PRESIDENT -4- 5 EXHIBIT 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1997, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin .................. $ 8,249,820 Interest-bearing balances .......... 1,031,026 Securities: Held-to-maturity securities ........ 1,118,463 Available-for-sale securities ...... 3,005,838 Federal funds sold and Securities pur- chased under agreements to resell...... 3,100,281 Loans and lease financing receivables: Loans and leases, net of unearned income ............................. 32,895,077 LESS: Allowance for loan and lease losses ....................... 633,877 LESS: Allocated transfer risk reserve............................. 429 Loans and leases, net of unearned income, allowance, and reserve 32,260,771 Assets held in trading accounts ........ 1,715,214 Premises and fixed assets (including capitalized leases) .................. 684,704 Other real estate owned ................ 21,738 Investments in unconsolidated subsidiaries and associated companies ............................ 195,761 Customers' liability to this bank on acceptances outstanding .............. 1,152,899 Intangible assets ...................... 683,503 Other assets ........................... 1,526,113 ----------- Total assets ........................... $54,746,131 =========== LIABILITIES Deposits: In domestic offices .................. $25,614,961 Noninterest-bearing .................. 10,564,652 Interest-bearing ..................... 15,050,309 In foreign offices, Edge and Agreement subsidiaries, and IBFs ..... 15,103,615 Noninterest-bearing .................. 560,944 Interest-bearing ..................... 14,542,671 Federal funds purchased and Securities sold under agreements to repurchase. 2,093,286 Demand notes issued to the U.S. Treasury ........................... 239,354 Trading liabilities .................. 1,399,064 Other borrowed money: With remaining maturity of one year or less .......................... 2,075,092 With remaining maturity of more than one year ......................... 20,679 Bank's liability on acceptances exe- cuted and outstanding .............. 1,160,012 Subordinated notes and debentures .... 1,014,400 Other liabilities .................... 1,840,245 ----------- Total liabilities .................... 50,560,708 ----------- EQUITY CAPITAL Common stock ........................ 942,284 Surplus ............................. 731,319 Undivided profits and capital reserves .......................... 2,544,303 Net unrealized holding gains (losses) on available-for-sale securities ........................ ( 19,449) Cumulative foreign currency transla- tion adjustments .................. ( 13,034) ------------ Total equity capital ................ 4,185,423 ----------- Total liabilities and equity capital ........................... $54,746,131 ===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Alan R. Griffith ) J. Carter Bacot ) Directors Thomas A. Renyi ) EX-25.2 44 CITADEL BROADCASTING CO. S-4 1 Exhibit 25.2 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) __ ----------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ---------------------- CITADEL BROADCASTING COMPANY (Exact name of obligor as specified in its charter) Nevada 86-0703641 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 1015 Eastman Drive Bigfork, Montana 59911 (Address of principal executive offices) (Zip code) ---------------------- 13-1/4% Exchangeable Debentures due 2009 (Title of the indenture securities) ================================================================================ 2 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. - -------------------------------------------------------------------------------- Name Address Superintendent of Banks of the State 2 Rector Street, New York, of New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. 16. LIST OF EXHIBITS. EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 3 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. -3- 4 SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 19th day of September, 1997. THE BANK OF NEW YORK By: /s/ MARY JANE MORRISSEY -------------------------- Name: MARY JANE MORRISSEY Title: VICE PRESIDENT -4- 5 Exhibit 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1997, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin .................. $ 8,249,820 Interest-bearing balances .......... 1,031,026 Securities: Held-to-maturity securities ........ 1,118,463 Available-for-sale securities ...... 3,005,838 Federal funds sold and Securities pur- chased under agreements to resell...... 3,100,281 Loans and lease financing receivables: Loans and leases, net of unearned income ............................. 32,895,077 LESS: Allowance for loan and lease losses ....................... 633,877 LESS: Allocated transfer risk reserve............................. 429 Loans and leases, net of unearned income, allowance, and reserve 32,260,771 Assets held in trading accounts ........ 1,715,214 Premises and fixed assets (including capitalized leases) .................. 684,704 Other real estate owned ................ 21,738 Investments in unconsolidated subsidiaries and associated companies ............................ 195,761 Customers' liability to this bank on acceptances outstanding .............. 1,152,899 Intangible assets ...................... 683,503 Other assets ........................... 1,526,113 ----------- Total assets ........................... $54,746,131 =========== LIABILITIES Deposits: In domestic offices .................. $25,614,961 Noninterest-bearing ..................10,564,652 Interest-bearing .....................15,050,309 In foreign offices, Edge and Agreement subsidiaries, and IBFs ..... 15,103,615 Noninterest-bearing .................. 560,944 Interest-bearing ..................... 14,542,671 Federal funds purchased and Securities sold under agreements to repurchase. 2,093,286 Demand notes issued to the U.S. Treasury ........................... 239,354 Trading liabilities .................. 1,399,064 Other borrowed money: With remaining maturity of one year or less .......................... 2,075,092 With remaining maturity of more than one year ......................... 20,679 Bank's liability on acceptances exe- cuted and outstanding .............. 1,160,012 Subordinated notes and debentures .... 1,014,400 Other liabilities .................... 1,840,245 ----------- Total liabilities .................... 50,560,708 ----------- EQUITY CAPITAL Common stock ........................ 942,284 Surplus ............................. 731,319 Undivided profits and capital reserves .......................... 2,544,303 Net unrealized holding gains (losses) on available-for-sale securities ........................ ( 19,449) Cumulative foreign currency transla- tion adjustments .................. ( 13,034) ------------ Total equity capital ................ 4,185,423 ----------- Total liabilities and equity capital ........................... $54,746,131 ===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Alan R. Griffith ) J. Carter Bacot ) Directors Thomas A. Renyi ) EX-27 45 CITADEL BROADCASTING CO.
5 0001044404 CITADEL LICENSE, INC. YEAR DEC-31-1996 JAN-1-1996 DEC-31-1996 1,588,366 0 12,199,973 621,054 0 14,502,740 15,208,569 (5,933,155) 102,243,585 18,697,942 0 0 0 40 5,998,610 102,243,585 45,412,806 45,412,806 33,232,485 41,638,270 413,956 421,378 6,155,472 (1,966,980) 0 (1,966,980) 0 (1,769,000) 0 (3,735,980) (93) (93)
EX-99.1 46 CITADEL BROADCASTING CO. 1 Exhibit 99.1 FORM OF LETTER OF TRANSMITTAL TO TENDER FOR EXCHANGE 10-1/4% SENIOR SUBORDINATED NOTES DUE 2007 OF CITADEL BROADCASTING COMPANY PURSUANT TO THE PROSPECTUS DATED __________, 1997 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). - -------------------------------------------------------------------------------- PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS If you desire to accept the Exchange Offer, this Letter of Transmittal should be completed, signed and submitted as follows: THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: THE BANK OF NEW YORK (THE "EXCHANGE AGENT") For Information by Telephone: (212) 815-2742 By Registered or Certified Mail: By Hand or Overnight Delivery Service: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street (7 East) Corporate Trust Services Window New York, New York 10286 Ground Level Attention: Reorganization Section New York, New York 10286 Attention: Reorganization Section, 7 East By Facsimile Transmission: (212) 815-6339 (Facsimile Confirmation) (212) 815-2742 (ORIGINALS OF ALL DOCUMENTS SENT BY FACSIMILE SHOULD BE SENT PROMPTLY BY REGISTERED OR CERTIFIED MAIL, BY HAND, OR BY OVERNIGHT DELIVERY SERVICE.) 2 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned hereby acknowledges receipt of the Prospectus dated __________, 1997 (the "Prospectus") of Citadel Broadcasting Company, a Nevada corporation (the "Issuer"), and this Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Issuer's offer (the "Exchange Offer") to exchange its Series B 10-1/4% Senior Subordinated Notes due 2007 (the "Exchange Notes"), which have been registered under the Securities Act (as hereinafter defined) pursuant to a Registration Statement, for an equal principal amount of its outstanding 10-1/4% Senior Subordinated Notes due 2007 (the "Notes"), of which $101,000,000 aggregate principal amount is outstanding. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. The undersigned hereby tenders the Notes described in Box 1 below (the "Tendered Notes") pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal. The undersigned is the registered owner of all the Tendered Notes and the undersigned represents that it has received from each beneficial owner of the Tendered Notes ("Beneficial Owners") a duly completed and executed form of "Instruction to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" accompanying this Letter of Transmittal, instructing the undersigned to take the action described in this Letter of Transmittal. Subject to, and effective upon, the acceptance for exchange of the Tendered Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon the order of, the Issuer, all rights, title and interest in, to and under the Tendered Notes. Please issue the Exchange Notes exchanged for Tendered Notes in the Name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions" below (Box 3), please send or cause to be sent the certificates for the Exchange Notes (and accompanying documents, as appropriate) to the undersigned at the address shown below in Box 1. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned with respect to the Tendered Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver the Tendered Notes to the Issuer or cause ownership of the Tendered Notes to be transferred to, or upon the order of, the Issuer, on the books of the registrar for the Notes and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Issuer upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the undersigned is entitled upon acceptance by the Issuer of the Tendered Notes pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise exercise all rights of beneficial ownership of the Tendered Notes, all in accordance with the terms of the Exchange Offer. -2- 3 The undersigned understands that tenders of Notes pursuant to the procedures described under the caption "The Exchange Offer" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Issuer upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption "The Exchange Offer --Withdrawal of Tenders." All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any Beneficial Owner(s), and every obligation of the undersigned or any Beneficial Owners hereunder shall be binding upon the heirs, representatives, successors and assigns of the undersigned and such Beneficial Owner(s). The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, assign and transfer the Tendered Notes and that the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges, encumbrances and adverse claims when the Tendered Notes are acquired by the Issuer as contemplated herein. The undersigned and each Beneficial Owner will, upon request, execute and deliver any additional documents reasonably requested by the Issuer or the Exchange Agent as necessary or desirable to complete and give effect to the transactions contemplated hereby. The undersigned hereby represents and warrants that the information set forth in Box 2 is true and correct. By accepting the Exchange Offer, the undersigned hereby represents and warrants that (i) the Exchange Notes to be acquired by the undersigned and any Beneficial Owner(s) in connection with the Exchange Offer are being acquired by the undersigned and any Beneficial Owner(s) in the ordinary course of business of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each Beneficial Owner are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes, (iii) except as otherwise disclosed in writing herewith, neither the undersigned nor any Beneficial Owner is an "affiliate," as defined in Rule 405 under the Securities Act, of the Issuer or any of its subsidiaries and (iv) the undersigned and each Beneficial Owner acknowledge and agree that any person participating in the Exchange Offer with the intention or for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (together with the rules and regulations promulgated thereunder, the "Securities Act"), in connection with a secondary resale of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission (the "Commission") set forth in the no-action letters that are discussed in the section of the Prospectus entitled "The Exchange Offer." If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes, it represents that the Notes to be exchanged for the Exchange Notes -3- 4 were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes pursuant to the Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. By making the foregoing representation and by delivering a prospectus in connection with the exchange of Notes, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. _ CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH. _ CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE "Use of Guaranteed Delivery" BELOW (Box 4). _ CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE "Use of Book-Entry Transfer" BELOW (Box 5). _ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ____________________________ Address: _________________________ Number of Copies Requested: ______ PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THE BOXES BOX 1
- ------------------------------------------------------------------------------------------------------ DESCRIPTION OF NOTES TENDERED (ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY) - ------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED AGGREGATE NOTE HOLDER(S), EXACTLY AS NAME(S) CERTIFICATE PRINCIPAL AMOUNT AGGREGATE APPEAR(S) ON NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT (PLEASE FILL IN, IF BLANK) NOTES* CERTIFICATE(S) TENDERED** - ------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- TOTAL
-4- 5 - ------------------------------------------------------------------------------- * Need not be completed by persons tendering by book-entry transfer. ** The minimum permitted tender is $1,000 in principal amount of Notes. All other tenders must be in integral multiples of $1,000 of principal amount. However, a holder holding any Note in a denomination of other than an integral multiple of $1,000 may tender the principal amount of such Note that is not an integral multiple of $1,000 in addition to tendering in integral multiples of $1,000, the remaining principal amount, if any, of such Note. Unless otherwise indicated in this column, the principal amount of all Note Certificates identified in this Box 1 or delivered to the Exchange Agent herewith shall be deemed tendered. See Instruction 4. - -------------------------------------------------------------------------------- BOX 2 - ------------------------------------------------------------------------------- BENEFICIAL OWNER(S) - ------------------------------------------------------------------------------- STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- -5- 6 BOX 3 - -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7) TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE. Mail Exchange Note(s) and any untendered Notes to: Name(s): ______________________________________________________________________ (PLEASE PRINT) Address: ______________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (INCLUDE ZIP CODE) Tax Identification or Social Security No.: _______________________________________________________________________________ BOX 4 - -------------------------------------------------------------------------------- USE OF GUARANTEED DELIVERY (SEE INSTRUCTION 2) TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF GUARANTEED DELIVERY. Name(s) of Registered Holder(s): _____________________________________________________________________________ Date of Execution of Notice of Guaranteed Delivery: _________________________ Name of Institution which Guaranteed Delivery: ______________________________ -6- 7 BOX 5 - -------------------------------------------------------------------------------- USE OF BOOK-ENTRY TRANSFER (SEE INSTRUCTION 1) TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY TRANSFER. Name of Tendering Institution: ______________________________________________ Account Number: _____________________________________________________________ Transaction Code Number: ____________________________________________________ - -------------------------------------------------------------------------------- -7- 8 BOX 6 - ------------------------------------------------------------------------------------------------------------------------ TENDERING HOLDER SIGNATURE (SEE INSTRUCTIONS 1 AND 5) IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 - ------------------------------------------------------------------------------------------------------------------------ X ___________________________________ Signature Guarantee (IF REQUIRED BY INSTRUCTION 5) X ___________________________________ (SIGNATURE OF REGISTERED HOLDER(S) OR Authorized Signature AUTHORIZED SIGNATORY) X ________________________________ Note: The above lines must be signed by the Name: ____________________________ registered holder(s) of Notes as their name(s) (PLEASE PRINT) appear(s) on the Notes or by person(s) authorized to become registered holder(s) (evidence of which authorization must be Title: ___________________________ transmitted with this Letter of Transmittal). Name of Firm: ____________________ If signature is by a trustee, executor, (MUST BE AN ELIGIBLE INSTITUTION administrator, guardian, attorney-in-fact, AS DEFINED IN INSTRUCTION 2) officer, or other person acting in a fiduciary or representative capacity, such person must Address: _________________________ set forth his or her full title below. See _________________________ instruction 5. _________________________ (INCLUDE ZIP CODE) Name(s): ______________________________ Area Code and Telephone Number: Capacity: _____________________________ __________________________________ _____________________________ Dated: ___________________________ Street Address: _______________________ _____________________________ _____________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number: __________________________________________ Tax Identification or Social Security Number: ________________________________________________
-8- 9 SUBSTITUTE FORM W-9 - ----------------------------------------------------------------------------------------------------------------------------- PAYOR'S NAME: CITADEL BROADCASTING COMPANY - ----------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN _________________________________ THE BOX AT RIGHT AND CERTIFY BY Social security number FORM W-9 SIGNING AND DATING BELOW OR PLEASE FILL IN YOUR NAME AND ADDRESS BELOW. _________________________________ Employer identification number - ------------------------- NAME _________________________ ADDRESS (NUMBER AND STREET) _________________________ CITY, STATE AND ZIP CODE DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) PART 2--Certification--Under Penalties of Perjury, I certify that: PART 3 -- (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be Awaiting TIN _ issued to me) and (2) I am not subject to back-up withholding either because (a) I am exempt from back-up withholding or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to back-up withholding as a result of failure to report all interest PART 4 -- or dividends or (c) the IRS has notified me Exempt _ that I am no longer subject to back-up withholding. Certification Instructions--you must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to back-up withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to back-up withholding, you received another notification from the IRS stating that you are no longer subject to back-up withholding, do not cross out item (2). If you are exempt from backup withholding, check the box in Part 4 above. SIGNATURE _________________________________ DATE _______ , 1997 - ----------------------------------------------------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT HERETO. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within 60 days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. __________________________________________ ___________________________, 1997 Signature Date - -----------------------------------------------------------------------------------------------------------------------------
-9- 10 INSTRUCTIONS TO LETTER OF TRANSMITTAL FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. A properly completed and duly executed copy of this Letter of Transmittal, including Substitute Form W-9, and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein, and either certificates for Tendered Notes must be received by the Exchange Agent at its address set forth herein or such Tendered Notes must be transferred pursuant to the procedures for book-entry transfer described in the Prospectus under the caption "The Exchange Offer -- Procedures for Tendering" (and a confirmation of such transfer received by the Exchange Agent), in each case prior to 5:00 p.m., New York City time, on the Expiration Date. The method of delivery of certificates for Tendered Notes, this Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the tendering holder and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return-receipt requested, properly insured, is recommended. Instead of delivery by mail, it is recommended that the holder use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No Letter of Transmittal or Notes should be sent to the Issuer. Neither the Issuer nor the registrar is under any obligation to notify any tendering holder of the Issuer's acceptance of Tendered Notes prior to the closing of the Exchange Offer. 2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes but whose Notes are not immediately available, and who cannot deliver their Notes, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date must tender their Notes according to the guaranteed delivery procedures set forth below, including completion of Box 4. Pursuant to such procedures: (i) such tender must be made by or through a firm which is a member of a recognized Medallion Program approved by the Securities Transfer Association Inc. (an "Eligible Institution") and the Notice of Guaranteed Delivery must be signed by the holder; (ii) prior to the Expiration Date, the Exchange Agent must have received from the holder and the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of the Tendered Notes and the principal amount of Tendered Notes, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal together with the certificate(s) representing the Tendered Notes and any other required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter of Transmittal, as well as all other documents required by this Letter of Transmittal and the certificate(s) representing all Tendered Notes in proper form for transfer, must be received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. Any holder who wishes to tender Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery relating to such Notes prior to 5:00 p.m., New York City time, on the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any Letter of Transmittal form properly completed and executed by an eligible holder who attempted to use the guaranteed delivery process. 3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in whose name Tendered Notes are registered on the books of the registrar (or the legal representative or attorney-in-fact of such registered holder) may execute and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes who is not the registered holder must arrange promptly with the registered holder to execute and deliver this Letter of Transmittal on his or her behalf through the execution and -10- 11 delivery to the registered holder of the Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner form accompanying this Letter of Transmittal. 4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral multiples of $1,000 in principal amount; provided, however, that a holder holding any Note in a denomination of other than an integral multiple of $1,000 may tender the principal amount of such Note that is not an integral multiple of $1,000 in addition to tendering, in integral multiples of $1,000, the remaining principal amount, if any, of such Note. If less than the entire principal amount of Notes held by the holder is tendered, the tendering holder should fill in the principal amount tendered in the column labeled "Aggregate Principal Amount Tendered" of the box entitled "Description of Notes Tendered" (Box 1) above. The entire principal amount of Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Notes held by the holder is not tendered, then Notes for the principal amount of Notes not tendered and Exchange Notes issued in exchange for any Notes tendered and accepted will be sent to the holder at his or her registered address, unless a different address is provided in the appropriate box on this Letter of Transmittal, as soon as practicable following the Expiration Date. 5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Tendered Notes, the signature must correspond with the name(s) as written on the face of the Tendered Notes without alteration, enlargement or any change whatsoever. If any of the Tendered Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any Tendered Notes are held in different names, it will be necessary to complete, sign and submit as many separate copies of the Letter of Transmittal as there are different names in which Tendered Notes are held. If this Letter of Transmittal is signed by the registered holder(s) of Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued (and any untendered principal amount of Notes is to be reissued) in the name of the registered holder(s), then such registered holder(s) need not and should not endorse any Tendered Notes, nor provide a separate bond power. In any other case, such registered holder(s) must either properly endorse the Tendered Notes or transmit a properly completed bond power with this Letter of Transmittal, with the signature(s) on the endorsement or bond power guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed or accompanied by appropriate bond powers, in each case, signed as the name(s) of the registered holder(s) appear(s) on the Tendered Notes, with the signature(s) on the endorsement or bond power guaranteed by an Eligible Institution. If this Letter of Transmittal or any Tendered Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by the Issuer, evidence satisfactory to the Issuer of their authority to so act must be submitted with this Letter of Transmittal. Endorsements on Tendered Notes or signatures on bond powers required by this Instruction 5 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution unless the Tendered Notes are tendered (i) by a registered holder who has not completed the box set forth herein entitled "Special Delivery Instructions" (Box 3) or (ii) by an Eligible Institution. -11- 12 6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the applicable box (Box 3), the name and address to which the Exchange Notes and/or substitute Notes for principal amounts not tendered or not accepted for exchange are to be sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. 7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any, applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the transfer and exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or on any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of Transmittal. 8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the holder(s) of any Tendered Notes which are accepted for exchange must provide the Issuer (as payor) with its correct taxpayer identification number ("TIN"), which, in the case of a holder who is an individual, is her or her social security number. If the Issuer is not provided with the correct TIN, the holder may be subject to backup withholding and a $50 penalty imposed by the Internal Revenue Service. (If withholding results in an over-payment of taxes, a refund may be obtained.) Certain holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent backup withholding, each holder of Tendered Notes must provide such holder's correct TIN by completing the Substitute Form W-9 set forth herein, certifying that the TIN provided is correct (or that such holder is awaiting a TIN), and that (i) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of failure to report all interest or dividends or (ii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. The Issuer reserves the right in its sole discretion to take whatever steps are necessary to comply with the Issuer's obligation regarding backup withholding. 9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of Tendered Notes will be determined by the Issuer in its sole discretion, which determination will be final and binding. The Issuer reserves the right to reject any and all Notes not validly tendered or any Notes the Issuer's acceptance of which would, in the opinion of the Issuer or its counsel, be unlawful. The Issuer also reserves the right to waive any conditions of the Exchange Offer or defects or irregularities in tenders of Notes as to any ineligibility of any holder who seeks to tender Notes in the Exchange Offer. The interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) by the Issuer shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Notes must be cured within such time as the Issuer shall determine. Neither the Issuer, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. -12- 13 10. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend, waive or modify any of the conditions in the Exchange Offer in the case of any Tendered Notes. 11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or contingent tender of Notes or transmittal of this Letter of Transmittal will be accepted. 12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering holder whose Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instructions. 13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance and requests for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Exchange Agent at the address indicated herein. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer. 14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF NOTES. Subject to the terms and conditions of the Exchange Offer, the Issuer will accept for exchange all validly tendered Notes as soon as practicable after the Expiration Date and will issue Exchange Notes therefor as soon as practicable thereafter. For purposes of the Exchange Offer, the Issuer shall be deemed to have accepted tendered Notes when, as and if the Issuer has given written or oral notice (immediately followed in writing) thereof to the Exchange Agent. If any Tendered Notes are not exchanged pursuant to the Exchange Offer for any reason, such unexchanged Notes will be returned, without expense, to the undersigned at the address shown in Box 1 or at a different address as may be indicated herein under "Special Delivery Instructions" (Box 3). 15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures set forth in the Prospectus under the caption "The Exchange Offer." -13- 14 NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO 10-1/4% SENIOR SUBORDINATED NOTES DUE 2007 OF CITADEL BROADCASTING COMPANY PURSUANT TO THE PROSPECTUS DATED __________, 1997 This form must be used by a holder of 10-1/4% Senior Subordinated Notes due 2007 (the "Notes") of Citadel Broadcasting Company, a Nevada corporation (the "Company"), who wishes to tender Notes to the Exchange Agent pursuant to the guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed Delivery Procedures" of the Company's Prospectus dated __________, 1997 (the "Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any holder who wishes to tender Notes pursuant to such guaranteed delivery procedures must ensure that the Exchange Agent receives this Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange Offer. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus or the Letter of Transmittal. THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: THE BANK OF NEW YORK (THE "EXCHANGE AGENT") For Information by Telephone: (212) 815-2742 By Registered or Certified Mail: By Hand or Overnight Delivery Service: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street (7 East) Corporate Trust Services Window New York, New York 10286 Ground Level Attention: Reorganization Section New York, New York 10286 Attention: Reorganization Section, 7 East By Facsimile Transmission: (212) 815-6339 (Facsimile Confirmation) (212) 815-2742 -14- 15 (ORIGINALS OF ALL DOCUMENTS SENT BY FACSIMILE SHOULD BE SENT PROMPTLY BY REGISTERED OR CERTIFIED MAIL, BY HAND, OR BY OVERNIGHT DELIVERY SERVICE.) DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to the Company, upon the terms and subject to the conditions set forth in the Prospectus, and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal. The undersigned hereby tenders the Notes listed below:
- ------------------------------------------------------------------------------------------------------------------ CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PLEASE SIGN AND COMPLETE - -------------------------------------------------------------------------------- Signatures of Registered Holder(s) or Authorized Signatory: __________________________________ Date: _______________________, 1997 ________________________________________________________ Address: __________________________________ ________________________________________________________ ___________________________________________ Name(s) of Registered Holder(s): _______________________ Area Code and Telephone No. _______________ ________________________________________________________ ________________________________________________________ - ------------------------------------------------------------------------------------------------------------------------
-15- 16 - -------------------------------------------------------------------------------- This Notice of Guaranteed Delivery must be signed by the holder(s) exactly as their name(s) appear on certificates for Notes or on a security position listing as the owner of Notes, or by person(s) authorized to become holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. Please print name(s) and address(es) Name(s): _________________________________________________________________ __________________________________________________________________________ Capacity: ________________________________________________________________ Address(es): _____________________________________________________________ __________________________________________________________________________ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or is a commercial bank or trust company having an office or correspondent in the United States, or is otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof), together with the Notes tendered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Notes into the Exchange Agent's account at the Book-Entry Transfer Facility described in the Prospectus under the caption "The Exchange Offer --Guaranteed Delivery Procedures" and in the Letter of Transmittal) and any other required documents, all by 5:00 p.m., New York City time, on the fifth New York Stock Exchange trading day following the Expiration Date. Name of firm ________________________ __________________________________ (Authorized Signature) Address _____________________________ Name _____________________________ (Please Print) _________________________ Title __________________________ (Include Zip Code) Area Code and Tel. No. ______________ Dated ___________, 1997 -16- 17 INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY 1. Delivery of this Notice of Guaranteed Delivery. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and any other required documents to the Exchange Agent is at the election and sole risk of the holder, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return-receipt requested, properly insured, is recommended. As an alternative to delivery by mail, the holders may wish to consider using an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. For a description of the guaranteed delivery procedures, see Instruction 2 of the Letter of Transmittal. 2. Signatures on this Notice of Guaranteed Delivery. If this Notice of Guaranteed Delivery is signed by the registered holder(s) of the Notes referred to herein, the signature must correspond with the name(s) written on the face of the Notes without alteration, enlargement, or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of the Notes, the signature must correspond with the name shown on the security position listing as the owner of the Notes. If this Notice of Guaranteed Delivery is signed by a person other than the registered holder(s) of any Notes listed or a participant of the Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by appropriate bond powers, signed as the name of the registered holder(s) appears on the Notes or signed as the name of the participant is shown on the Book-Entry Transfer Facility's security position listing. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, or other person acting in a fiduciary or representative capacity, such person should so indicate when signing and submit with the Letter of Transmittal evidence satisfactory to the Company of such person's authority to so act. 3. Request for Assistance or Additional Copies. Questions and requests for assistance and requests for additional copies of the Prospectus or the Letter of Transmittal may be directed to the Exchange Agent at the address specified in the Prospectus. Holders may also contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. -17- 18 INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER OF CITADEL BROADCASTING COMPANY 10-1/4% SENIOR SUBORDINATED NOTES DUE 2007 To Registered Holder and/or Participant of the Book-Entry Transfer Facility: The undersigned hereby acknowledges receipt of the Prospectus dated __________, 1997 (the "Prospectus") of Citadel Broadcasting Company, a Nevada corporation (the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Company's offer (the "Exchange Offer"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus or the Letter of Transmittal. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to action to be taken by you relating to the Exchange Offer with respect to the 10-1/4% Senior Subordinated Notes due 2007 (the "Notes") held by you for the account of the undersigned. The aggregate face amount of the Notes held by you for the account of the undersigned is (FILL IN AMOUNT): $__________ of the 10-1/4% Senior Subordinated Notes due 2007. With respect to the Exchange Offer, the undersigned hereby instructs you (CHECK APPROPRIATE BOX): _ TO TENDER the following Notes held by you for the account of the undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY): $__________. _ NOT TO TENDER any Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations that (i) the undersigned's principal residence is in the state of (FILL IN STATE) ________________________, (ii) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (iii) the undersigned is not participating, does not participate, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes, (iv) the undersigned acknowledges that any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "Act"), in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission set forth in no-action letters that are discussed in the -18- 19 section of the Prospectus entitled "The Exchange Offer -- Resale of the Series B Notes," and (v) the undersigned is not an "affiliate," as defined in Rule 405 under the Act, of the Company or any of its subsidiaries; (b) to agree on behalf of the undersigned, as set forth in the Letter of Transmittal, and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of such Notes. - -------------------------------------------------------------------------------- SIGN HERE Name of beneficial owner(s): _____________________________________________ Signature(s): ____________________________________________________________ Name (please print): _____________________________________________________ Address: _________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Telephone number: ________________________________________________________ Taxpayer Identification or Social Security Number: _______________________ Date: ____________________________________________________________________ - -------------------------------------------------------------------------------- -19- EX-99.2 47 CITADEL BROADCASTING CO. 1 Exhibit 99.2 FORM OF LETTER OF TRANSMITTAL TO TENDER FOR EXCHANGE 13-1/4% SERIES A EXCHANGEABLE PREFERRED STOCK OF CITADEL BROADCASTING COMPANY PURSUANT TO THE PROSPECTUS DATED __________, 1997 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS If you desire to accept the Exchange Offer, this Letter of Transmittal should be completed, signed and submitted as follows: THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: THE BANK OF NEW YORK (THE "EXCHANGE AGENT") For Information by Telephone: (212) 815-2742 By Registered or Certified Mail: By Hand or Overnight Delivery Service: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street (7 East) Corporate Trust Services Window New York, New York 10286 Ground Level Attention: Reorganization Section New York, New York 10286 Attention: Reorganization Section, 7 East By Facsimile Transmission: (212) 815-6339 (Facsimile Confirmation) (212) 815-2742 (ORIGINALS OF ALL DOCUMENTS SENT BY FACSIMILE SHOULD BE SENT PROMPTLY BY REGISTERED OR CERTIFIED MAIL, BY HAND, OR BY OVERNIGHT DELIVERY SERVICE.) 2 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned hereby acknowledges receipt of the Prospectus dated __________, 1997 (the "Prospectus") of Citadel Broadcasting Company, a Nevada corporation (the "Issuer"), and this Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Issuer's offer (the "Exchange Offer") to exchange one share of its 13-1/4% Series B Exchangeable Preferred Stock (the "Exchange Shares"), which have been registered under the Securities Act (as hereinafter defined) pursuant to a Registration Statement, for each share outstanding of its 13-1/4% Series A Exchangeable Preferred Stock (the "Preferred Shares"), 1,000,000 shares of which are outstanding. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. The undersigned hereby tenders the Preferred Shares described in Box 1 below (the "Tendered Shares") pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal. The undersigned is the registered owner of all the Tendered Shares and the undersigned represents that it has received from each beneficial owner of the Tendered Shares ("Beneficial Owners") a duly completed and executed form of "Instruction to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" accompanying this Letter of Transmittal, instructing the undersigned to take the action described in this Letter of Transmittal. Subject to, and effective upon, the acceptance for exchange of the Tendered Shares, the undersigned hereby exchanges, assigns, and transfers to, or upon the order of, the Issuer, all rights, title and interest in, to and under the Tendered Shares. Please issue the Exchange Shares exchanged for Tendered Shares in the Name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions" below (Box 3), please send or cause to be sent the certificates for the Exchange Shares (and accompanying documents, as appropriate) to the undersigned at the address shown below in Box 1. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned with respect to the Tendered Shares, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver the Tendered Shares to the Issuer or cause ownership of the Tendered Shares to be transferred to, or upon the order of, the Issuer, on the books of the registrar for the Preferred Shares and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Issuer upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Shares to which the undersigned is entitled upon acceptance by the Issuer of the Tendered Shares pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise exercise all rights of beneficial ownership of the Tendered Shares, all in accordance with the terms of the Exchange Offer. -2- 3 The undersigned understands that tenders of Preferred Shares pursuant to the procedures described under the caption "The Exchange Offer" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Issuer upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of Tenders." All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any Beneficial Owner(s), and every obligation of the undersigned or any Beneficial Owners hereunder shall be binding upon the heirs, representatives, successors and assigns of the undersigned and such Beneficial Owner(s). The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, assign and transfer the Tendered Shares and that the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges, encumbrances and adverse claims when the Tendered Shares are acquired by the Issuer as contemplated herein. The undersigned and each Beneficial Owner will, upon request, execute and deliver any additional documents reasonably requested by the Issuer or the Exchange Agent as necessary or desirable to complete and give effect to the transactions contemplated hereby. The undersigned hereby represents and warrants that the information set forth in Box 2 is true and correct. By accepting the Exchange Offer, the undersigned hereby represents and warrants that (i) the Exchange Shares to be acquired by the undersigned and any Beneficial Owner(s) in connection with the Exchange Offer are being acquired by the undersigned and any Beneficial Owner(s) in the ordinary course of business of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each Beneficial Owner are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the Exchange Shares, (iii) except as otherwise disclosed in writing herewith, neither the undersigned nor any Beneficial Owner is an "affiliate," as defined in Rule 405 under the Securities Act, of the Issuer or any of its subsidiaries and (iv) the undersigned and each Beneficial Owner acknowledge and agree that any person participating in the Exchange Offer with the intention or for the purpose of distributing the Exchange Shares must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (together with the rules and regulations promulgated thereunder, the "Securities Act"), in connection with a secondary resale of the Exchange Shares acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission (the "Commission") set forth in the no-action letters that are discussed in the section of the Prospectus entitled "The Exchange Offer." If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Shares. If the undersigned is a broker-dealer that will receive Exchange Shares for its own account in exchange for Preferred Shares, it represents that the Preferred Shares to be exchanged for the -3- 4 Exchange Shares were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Shares pursuant to the Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. By making the foregoing representation and by delivering a prospectus in connection with the exchange of Preferred Shares, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. _ CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED HEREWITH. _ CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE "Use of Guaranteed Delivery" BELOW (Box 4). _ CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE "Use of Book-Entry Transfer" BELOW (Box 5). _ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ___________________________ Address: ________________________ Number of Copies Requested: _____ PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THE BOXES BOX 1 - -------------------------------------------------------------------------------- DESCRIPTION OF PREFERRED SHARES TENDERED (ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
NAME(S) AND ADDRESS(ES) OF REGISTERED NUMBER OF HOLDER(S), EXACTLY AS NAME(S) APPEAR(S) PREFERRED SHARES NUMBER OF ON CERTIFICATE(S) FOR PREFERRED SHARES CERTIFICATE REPRESENTED BY PREFERRED SHARES (Please fill in, if blank) NUMBER(S)* CERTIFICATE(S) TENDERED** - ----------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TOTAL
- -------------------------------------------------------------------------------- -4- 5 - -------------------------------------------------------------------------------- * Need not be completed by persons tendering by book-entry transfer. ** Unless otherwise indicated in this column, the number of Preferred Shares represented by all Certificates for Preferred Shares identified in this Box 1 or delivered to the Exchange Agent herewith shall be deemed tendered. See Instruction 4. BOX 2
- ------------------------------------------------------------------------------------------------------------------------ BENEFICIAL OWNER(S) - ------------------------------------------------------------------------------------------------------------------------ STATE OF PRINCIPAL RESIDENCE OF EACH NUMBER OF TENDERED SHARES HELD BENEFICIAL OWNER OF TENDERED SHARES FOR ACCOUNT OF BENEFICIAL OWNER - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------
BOX 3 - -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7) TO BE COMPLETED ONLY IF EXCHANGE SHARES EXCHANGED FOR PREFERRED SHARES AND UNTENDERED PREFERRED SHARES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE. Mail Exchange Shares and any untendered Preferred Shares to: Name(s): _________________________________________________________________________ (PLEASE PRINT) Address: _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ (INCLUDE ZIP CODE) Tax Identification or Social Security No.: _________________________________________________________________________ - -------------------------------------------------------------------------------- -5- 6 BOX 4 - -------------------------------------------------------------------------------- USE OF GUARANTEED DELIVERY (SEE INSTRUCTION 2) TO BE COMPLETED ONLY IF PREFERRED SHARES ARE BEING TENDERED BY MEANS OF A NOTICE OF GUARANTEED DELIVERY. Name(s) of Registered Holder(s): _____________________________________________________________________________ Date of Execution of Notice of Guaranteed Delivery: _________________________ Name of Institution which Guaranteed Delivery: ______________________________ - -------------------------------------------------------------------------------- BOX 5 - -------------------------------------------------------------------------------- USE OF BOOK-ENTRY TRANSFER (SEE INSTRUCTION 1) TO BE COMPLETED ONLY IF DELIVERY OF TENDERED SHARES IS TO BE MADE BY BOOK-ENTRY TRANSFER. Name of Tendering Institution: ______________________________________________ Account Number: _____________________________________________________________ Transaction Code Number: ____________________________________________________ - -------------------------------------------------------------------------------- -6- 7 BOX 6 - -------------------------------------------------------------------------------- TENDERING HOLDER SIGNATURE (SEE INSTRUCTIONS 1 AND 5) IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 - -------------------------------------------------------------------------------- X ___________________________________ Signature Guarantee (IF REQUIRED BY INSTRUCTION 5) X ___________________________________ (SIGNATURE OF REGISTERED HOLDER(S) OR Authorized Signature AUTHORIZED SIGNATORY) X ________________________________ Note: The above lines must be signed by the Name: ____________________________ registered holder(s) of Preferred Shares as (PLEASE PRINT) their name(s) appear(s) on the Certificate(s) for Preferred Shares or by person(s) authorized to become registered holder(s) (evidence of which authorization must be Title: ___________________________ transmitted with this Letter of Transmittal). Name of Firm: ____________________ If signature is by a trustee, executor, (MUST BE AN ELIGIBLE INSTITUTION administrator, guardian, attorney-in-fact, AS DEFINED IN INSTRUCTION 2) officer, or other person acting in a fiduciary or representative capacity, such person must Address: _________________________ set forth his or her full title below. See _________________________ instruction 5. _________________________ (INCLUDE ZIP CODE) Name(s): ______________________________ Area Code and Telephone Number: ______________________________ Capacity: _____________________________ __________________________________ _____________________________ Dated: ___________________________ Street Address: _______________________ _____________________________ _____________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number: _______________________________________ Tax Identification or Social Security Number: _____________________________________________
-7- 8 SUBSTITUTE FORM W-9 - ----------------------------------------------------------------------------------------------------------------------------- PAYOR'S NAME: CITADEL BROADCASTING COMPANY - ----------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN _________________________________ THE BOX AT RIGHT AND CERTIFY BY Social security number FORM W-9 SIGNING AND DATING BELOW OR PLEASE FILL IN YOUR NAME AND ADDRESS BELOW. _________________________________ Employer identification number - ------------------------- NAME _________________________ ADDRESS (NUMBER AND STREET) _________________________ CITY, STATE AND ZIP CODE DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) - ----------------------------------------------------------------------------------------------------------------------------- PART 2--Certification--Under Penalties of Perjury, I certify that: PART 3 -- (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be Awaiting TIN _ issued to me) and (2) I am not subject to back-up withholding either because (a) I am exempt from back-up withholding or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to back-up withholding as a result of failure to report all interest PART 4 -- or dividends or (c) the IRS has notified me Exempt _ that I am no longer subject to back-up withholding. Certification Instructions--you must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to back-up withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to back-up withholding, you received another notification from the IRS stating that you are no longer subject to back-up withholding, do not cross out item (2). If you are exempt from backup withholding, check the box in Part 4 above. SIGNATURE _________________________________ DATE ______, 1997
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT HERETO. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. - -------------------------------------------------------------------------------- YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within 60 days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. __________________________________________ ___________________________, 1997 Signature Date - -------------------------------------------------------------------------------- -8- 9 INSTRUCTIONS TO LETTER OF TRANSMITTAL FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PREFERRED SHARES. A properly completed and duly executed copy of this Letter of Transmittal, including Substitute Form W-9, and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein, and either certificates for Tendered Shares must be received by the Exchange Agent at its address set forth herein or such Tendered Shares must be transferred pursuant to the procedures for book-entry transfer described in the Prospectus under the caption "The Exchange Offer -- Procedures for Tendering" (and a confirmation of such transfer received by the Exchange Agent), in each case prior to 5:00 p.m., New York City time, on the Expiration Date. The method of delivery of certificates for Tendered Shares, this Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the tendering holder and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return-receipt requested, properly insured, is recommended. Instead of delivery by mail, it is recommended that the holder use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No Letter of Transmittal or Preferred Shares should be sent to the Issuer. Neither the Issuer nor the registrar is under any obligation to notify any tendering holder of the Issuer's acceptance of Tendered Shares prior to the closing of the Exchange Offer. 2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Preferred Shares but whose Preferred Shares are not immediately available, and who cannot deliver their Preferred Shares, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date must tender their Preferred Shares according to the guaranteed delivery procedures set forth below, including completion of Box 4. Pursuant to such procedures: (i) such tender must be made by or through a firm which is a member of a recognized Medallion Program approved by the Securities Transfer Association Inc. (an "Eligible Institution") and the Notice of Guaranteed Delivery must be signed by the holder; (ii) prior to the Expiration Date, the Exchange Agent must have received from the holder and the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of the Tendered Shares and number of Tendered Shares, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal together with the certificate(s) representing the Tendered Shares and any other required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter of Transmittal, as well as all other documents required by this Letter of Transmittal and the certificate(s) representing all Tendered Shares in proper form for transfer, must be received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. Any holder who wishes to tender Preferred Shares pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery relating to such Preferred Shares prior to 5:00 p.m., New York City time, on the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any Letter of Transmittal form properly completed and executed by an eligible holder who attempted to use the guaranteed delivery process. 3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in whose name Tendered Shares are registered on the books of the registrar (or the legal representative or attorney-in-fact of such registered holder) may execute and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Shares who is not the registered holder must arrange promptly with the registered -9- 10 holder to execute and deliver this Letter of Transmittal on his or her behalf through the execution and delivery to the registered holder of the Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner form accompanying this Letter of Transmittal. 4. PARTIAL TENDERS. If less than all Preferred Shares held by the holder are tendered, the tendering holder should fill in the number of Preferred Shares tendered in the column labeled "Number of Preferred Shares Tendered" of the box entitled "Description of Preferred Shares Tendered" (Box 1) above. All Preferred Shares delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If all Preferred Shares held by the holder are not tendered, then Preferred Shares for the Preferred Shares not tendered and Exchange Shares issued in exchange for any Preferred Shares tendered and accepted will be sent to the holder at his or her registered address, unless a different address is provided in the appropriate box on this Letter of Transmittal, as soon as practicable following the Expiration Date. 5. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Tendered Shares, the signature must correspond with the name(s) as written on the face of the certificate for the Tendered Shares without alteration, enlargement or any change whatsoever. If any of the Tendered Shares are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any Tendered Shares are held in different names, it will be necessary to complete, sign and submit as many separate copies of the Letter of Transmittal as there are different names in which Tendered Shares are held. If this Letter of Transmittal is signed by the registered holder(s) of Tendered Shares, and Exchange Shares issued in exchange therefor are to be issued (and any untendered Preferred Shares to be reissued) in the name of the registered holder(s), then such registered holder(s) need not and should not endorse any Tendered Shares, nor provide a separate stock power. In any other case, such registered holder(s) must either properly endorse the Tendered Shares or transmit a properly completed stock power with this Letter of Transmittal, with the signature(s) on the endorsement or stock power guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of any Tendered Shares, such Tendered Shares must be endorsed or accompanied by appropriate stock powers, in each case, signed as the name(s) of the registered holder(s) appear(s) on the Tendered Shares, with the signature(s) on the endorsement or stock power guaranteed by an Eligible Institution. If this Letter of Transmittal or any Tendered Shares or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by the Issuer, evidence satisfactory to the Issuer of their authority to so act must be submitted with this Letter of Transmittal. Endorsements on Tendered Shares or signatures on stock powers required by this Instruction 5 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution unless the Tendered Shares are tendered (i) by a registered holder who has not completed the box set forth herein entitled "Special Delivery Instructions" (Box 3) or (ii) by an Eligible Institution. 6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the applicable box (Box 3), the name and address to which the Exchange Shares and/or substitute Preferred Shares for -10- 11 Preferred Shares not tendered or not accepted for exchange are to be sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. 7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any, applicable to the exchange of Tendered Shares pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the transfer and exchange of Tendered Shares pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or on any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the Tendered Shares listed in this Letter of Transmittal. 8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the holder(s) of any Tendered Shares which are accepted for exchange must provide the Issuer (as payor) with its correct taxpayer identification number ("TIN"), which, in the case of a holder who is an individual, is her or her social security number. If the Issuer is not provided with the correct TIN, the holder may be subject to backup withholding and a $50 penalty imposed by the Internal Revenue Service. (If withholding results in an over-payment of taxes, a refund may be obtained.) Certain holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent backup withholding, each holder of Tendered Shares must provide such holder's correct TIN by completing the Substitute Form W-9 set forth herein, certifying that the TIN provided is correct (or that such holder is awaiting a TIN), and that (i) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of failure to report all interest or dividends or (ii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. The Issuer reserves the right in its sole discretion to take whatever steps are necessary to comply with the Issuer's obligation regarding backup withholding. 9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of Tendered Shares will be determined by the Issuer in its sole discretion, which determination will be final and binding. The Issuer reserves the right to reject any and all Preferred Shares not validly tendered or any Preferred Shares the Issuer's acceptance of which would, in the opinion of the Issuer or its counsel, be unlawful. The Issuer also reserves the right to waive any conditions of the Exchange Offer or defects or irregularities in tenders of Preferred Shares as to any ineligibility of any holder who seeks to tender Preferred Shares in the Exchange Offer. The interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) by the Issuer shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Preferred Shares must be cured within such time as the Issuer shall determine. Neither the Issuer, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Preferred Shares, nor shall any of them incur any liability for failure to give such notification. Tenders of Preferred Shares received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. -11- 12 10. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend, waive or modify any of the conditions in the Exchange Offer in the case of any Tendered Shares. 11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or contingent tender of Preferred Shares or transmittal of this Letter of Transmittal will be accepted. 12. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any tendering holder whose certificate(s) for Preferred Shares have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instructions. 13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance and requests for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Exchange Agent at the address indicated herein. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer. 14. ACCEPTANCE OF TENDERED SHARES AND ISSUANCE OF EXCHANGE SHARES; RETURN OF PREFERRED SHARES. Subject to the terms and conditions of the Exchange Offer, the Issuer will accept for exchange all validly tendered Preferred Shares as soon as practicable after the Expiration Date and will issue Exchange Shares therefor as soon as practicable thereafter. For purposes of the Exchange Offer, the Issuer shall be deemed to have accepted tendered Preferred Shares when, as and if the Issuer has given written or oral notice (immediately followed in writing) thereof to the Exchange Agent. If any Tendered Shares are not exchanged pursuant to the Exchange Offer for any reason, such unexchanged Preferred Shares will be returned, without expense, to the undersigned at the address shown in Box 1 or at a different address as may be indicated herein under "Special Delivery Instructions" (Box 3). 15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures set forth in the Prospectus under the caption "The Exchange Offer." -12- 13 NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO 13-1/4% SERIES A EXCHANGEABLE PREFERRED STOCK OF CITADEL BROADCASTING COMPANY PURSUANT TO THE PROSPECTUS DATED __________, 1997 This form must be used by a holder of 13-1/4% Series A Exchangeable Preferred Stock (the "Preferred Shares") of Citadel Broadcasting Company, a Nevada corporation (the "Company"), who wishes to tender Preferred Shares to the Exchange Agent pursuant to the guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed Delivery Procedures" of the Company's Prospectus dated __________, 1997 (the "Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any holder who wishes to tender Preferred Shares pursuant to such guaranteed delivery procedures must ensure that the Exchange Agent receives this Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange Offer. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus or the Letter of Transmittal. THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: THE BANK OF NEW YORK (THE "EXCHANGE AGENT") For Information by Telephone: (212) 815-2742 By Registered or Certified Mail: By Hand or Overnight Delivery Service: The Bank of New York The Bank of New York 101 Barclay Street 101 Barclay Street (7 East) Corporate Trust Services Window New York, New York 10286 Ground Level Attention: Reorganization Section New York, New York 10286 Attention: Reorganization Section, 7 East By Facsimile Transmission: (212) 815-6339 (Facsimile Confirmation) (212) 815-2742 -13- 14 (ORIGINALS OF ALL DOCUMENTS SENT BY FACSIMILE SHOULD BE SENT PROMPTLY BY REGISTERED OR CERTIFIED MAIL, BY HAND, OR BY OVERNIGHT DELIVERY SERVICE.) DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to the Company, upon the terms and subject to the conditions set forth in the Prospectus, and the related Letter of Transmittal, receipt of which is hereby acknowledged, the Preferred Shares set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal. The undersigned hereby tenders the Preferred Shares listed below:
- ------------------------------------------------------------------------------------------------------------------ CERTIFICATE NUMBER(S) (IF KNOWN OF NUMBER OF PREFERRED SHARES REPRESENTED NUMBER OF PREFERRED PREFERRED SHARES OR ACCOUNT NUMBER SHARES TENDERED AT THE BOOK-ENTRY FACILITY - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- PLEASE SIGN AND COMPLETE - --------------------------------------------------------------------------------
Signatures of Registered Holder(s) or Authorized Signatory: _________________________ Date: ________, 1997 _______________________________________________ Address: __________________________________ _______________________________________________ ___________________________________________ Name(s) of Registered Holder(s): ______________ Area Code and Telephone No. _______________ _______________________________________________ _______________________________________________
- -------------------------------------------------------------------------------- -14- 15 - -------------------------------------------------------------------------------- This Notice of Guaranteed Delivery must be signed by the holder(s) exactly as their name(s) appear on certificates for Preferred Shares or on a security position listing as the owner of Preferred Shares, or by person(s) authorized to become holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. Please print name(s) and address(es) Name(s): _________________________________________________________________ __________________________________________________________________________ Capacity: ________________________________________________________________ Address(es): _____________________________________________________________ __________________________________________________________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or is a commercial bank or trust company having an office or correspondent in the United States, or is otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof), together with the certificates for Preferred Shares tendered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Preferred Shares into the Exchange Agent's account at the Book-Entry Transfer Facility described in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures" and in the Letter of Transmittal) and any other required documents, all by 5:00 p.m., New York City time, on the fifth New York Stock Exchange trading day following the Expiration Date. Name of firm ________________________ ____________________________________ (Authorized Signature) Address _____________________________ Name _______________________________ (Please Print) _________________________ Title ______________________________ (Include Zip Code) Area Code and Tel. No. ______________ Dated ___________________, 1997 - -------------------------------------------------------------------------------- -15- 16 INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY 1. Delivery of this Notice of Guaranteed Delivery. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and any other required documents to the Exchange Agent is at the election and sole risk of the holder, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return-receipt requested, properly insured, is recommended. As an alternative to delivery by mail, the holders may wish to consider using an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. For a description of the guaranteed delivery procedures, see Instruction 2 of the Letter of Transmittal. 2. Signatures on this Notice of Guaranteed Delivery. If this Notice of Guaranteed Delivery is signed by the registered holder(s) of the Preferred Shares referred to herein, the signature must correspond with the name(s) written on the face of the certificate for the Preferred Shares without alteration, enlargement, or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of the Preferred Shares, the signature must correspond with the name shown on the security position listing as the owner of the Preferred Shares. If this Notice of Guaranteed Delivery is signed by a person other than the registered holder(s) of any Preferred Shares listed or a participant of the Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by appropriate stock powers, signed as the name of the registered holder(s) appears on the Preferred Shares or signed as the name of the participant is shown on the Book-Entry Transfer Facility's security position listing. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, or other person acting in a fiduciary or representative capacity, such person should so indicate when signing and submit with the Letter of Transmittal evidence satisfactory to the Company of such person's authority to so act. 3. Request for Assistance or Additional Copies. Questions and requests for assistance and requests for additional copies of the Prospectus or the Letter of Transmittal may be directed to the Exchange Agent at the address specified in the Prospectus. Holders may also contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. -16- 17 INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER OF CITADEL BROADCASTING COMPANY 13-1/4% SERIES A EXCHANGEABLE PREFERRED STOCK To Registered Holder and/or Participant of the Book-Entry Transfer Facility: The undersigned hereby acknowledges receipt of the Prospectus dated __________, 1997 (the "Prospectus") of Citadel Broadcasting Company, a Nevada corporation (the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Company's offer (the "Exchange Offer"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus or the Letter of Transmittal. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to action to be taken by you relating to the Exchange Offer with respect to the shares of 13-1/4% Series A Exchangeable Preferred Stock (the "Preferred Shares") held by you for the account of the undersigned. The number of Preferred Shares held by you for the account of the undersigned is (FILL IN NUMBER): __________ shares of the 13-1/4% Series A Exchangeable Preferred Stock. With respect to the Exchange Offer, the undersigned hereby instructs you (CHECK APPROPRIATE BOX): _ TO TENDER the following Preferred Shares held by you for the account of the undersigned (INSERT NUMBER OF PREFERRED SHARES TO BE TENDERED, IF ANY): ______________________ _ NOT TO TENDER any Preferred Shares held by you for the account of the undersigned. If the undersigned instructs you to tender the Preferred Shares held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations that (i) the undersigned's principal residence is in the state of (FILL IN STATE) ________________________, (ii) the undersigned is acquiring the Exchange Shares in the ordinary course of business of the undersigned, (iii) the undersigned is not participating, does not participate, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Shares, (iv) the undersigned acknowledges that any person participating in the Exchange Offer for the purpose of distributing the Exchange Shares must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "Act"), in connection with a secondary resale transaction of the -17- 18 Exchange Shares acquired by such person and cannot rely on the position of the staff of the Securities and Exchange Commission set forth in no-action letters that are discussed in the section of the Prospectus entitled "The Exchange Offer -- Resale of the Series B Preferred Shares," and (v) the undersigned is not an "affiliate," as defined in Rule 405 under the Act, of the Company or any of its subsidiaries; (b) to agree on behalf of the undersigned, as set forth in the Letter of Transmittal, and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of such Preferred Shares. - -------------------------------------------------------------------------------- SIGN HERE Name of beneficial owner(s): _______________________________________________ Signature(s): ______________________________________________________________ Name (please print): _______________________________________________________ Address: ___________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ Telephone number: __________________________________________________________ Taxpayer Identification or Social Security Number: _________________________ Date: ______________________________________________________________________ - -------------------------------------------------------------------------------- -18- -----END PRIVACY-ENHANCED MESSAGE-----