-----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, BlWQ/Cph6snWf6wyyVaWZZK9ln5aAFEMVYMB9P0f2ZZaF09VaQksnydYHuNsp3Xk BztDuR5BJ/CJfBsexXtRFw== 0000893220-98-001669.txt : 19981105 0000893220-98-001669.hdr.sgml : 19981105 ACCESSION NUMBER: 0000893220-98-001669 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 26 FILED AS OF DATE: 19981104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERCOM COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001067837 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 231701044 STATE OF INCORPORATION: PA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-61381 FILM NUMBER: 98737399 BUSINESS ADDRESS: STREET 1: 401 CITY AVENUE STREET 2: SUITE 409 CITY: BALA CYNWYD STATE: PA ZIP: 19004 BUSINESS PHONE: 6106605610 MAIL ADDRESS: STREET 1: 401 CITY AVENUE STREET 2: SUITE 409 CITY: BALA CYNWYD STATE: PA ZIP: 19004 S-1/A 1 AMENDMENT # 1 TO FORM S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1998 REGISTRATION NO. 333-61381 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ ENTERCOM COMMUNICATIONS CORP. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) PENNSYLVANIA 4832 23-1701044 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
401 CITY AVENUE, SUITE 409 BALA CYNWYD, PENNSYLVANIA 19004 (610) 660-5610 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ JOSEPH M. FIELD CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER ENTERCOM COMMUNICATIONS CORP. 401 CITY AVENUE, SUITE 409 BALA CYNWYD, PENNSYLVANIA 19004 (610) 660-5610 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: JAMES W. MCKENZIE, JR., ESQ. JOHN C. DONLEVIE, ESQ. JEREMY W. DICKENS, ESQ. MORGAN, LEWIS & BOCKIUS LLP EXECUTIVE VICE PRESIDENT WEIL, GOTSHAL & MANGES LLP 2000 ONE LOGAN SQUARE AND GENERAL COUNSEL 100 CRESCENT COURT, SUITE 1300 PHILADELPHIA, PENNSYLVANIA 19103 ENTERCOM COMMUNICATIONS CORP. DALLAS, TEXAS 75201 (215) 963-5000 401 CITY AVENUE, SUITE 409 (214) 746-7700 BALA CYNWYD, PENNSYLVANIA 19004 (610) 660-5610
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO 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 on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] - --------------- If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] - --------------- If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] - --------------- If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS 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 , 1998 Shares [ENTERCOM LOGO] Entercom Communications Corp. CLASS A COMMON STOCK ($.01 par value) ------------------ Of the shares of Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), of Entercom Communications Corp., a Pennsylvania corporation (the "Company" or "Entercom"), offered hereby, shares are being sold by the Company and shares are being sold by the Selling Shareholder named herein under "Principal and Selling Shareholders" (the "Offering"). The Company will not receive any of the proceeds from the shares of Class A Common Stock sold by the Selling Shareholder. Prior to the Offering, there has been no public market for the Class A Common Stock. It is anticipated that the initial public offering price per share will be between $ and $ per share. For information relating to the factors to be considered in determining the initial public offering price to the public, see "Underwriting." The Company's authorized common stock consists of Class A Common Stock, Class B Common Stock, par value $.01 per share ("Class B Common Stock"), and Class C Common Stock, par value $.01 per share ("Class C Common Stock" and, together with the Class A Common Stock and the Class B Common Stock, the "Common Stock"). The rights of each share of Common Stock are essentially identical other than with respect to voting rights. The Class A Common Stock entitles the holders thereof to one vote per share, the Class B Common Stock entitles the holders thereof to ten votes per share subject to certain exceptions and the Class C Common Stock has no voting rights, except as otherwise required by law. Upon completion of the Offering (assuming no exercise of the over-allotment option), (i) the holders of Class A Common Stock will have approximately % of the total voting power of the outstanding Common Stock, (ii) Joseph M. Field, the Company's Chairman of the Board and Chief Executive Officer, and David J. Field, the Company's President, Chief Operating Officer and Chief Financial Officer, will beneficially own all the outstanding shares of Class B Common Stock, representing approximately % of the total voting power of the outstanding Common Stock and (iii) the Selling Shareholder, which is an affiliate of Chase Capital Partners, will own % of the outstanding Class A Common Stock, representing approximately % of the total voting power of the outstanding Common Stock. See "Recapitalization, Chase Conversion and Former S Corporation Status." Subject to any necessary approval of the Federal Communications Commission (the "FCC"), the Class B Common Stock and the Class C Common Stock are convertible in whole or in part at any time into Class A Common Stock on a share-for-share basis. See "Description of Capital Stock." Application will be made to list the Class A Common Stock on the New York Stock Exchange. FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE CLASS A COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE 13 HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITING PROCEEDS TO PRICE TO DISCOUNTS AND PROCEEDS TO SELLING PUBLIC COMMISSIONS COMPANY(1) SHAREHOLDER -------- ------------- ----------- ----------- Per Share............................................ $ $ $ $ Total(2)............................................. $ $ $ $
- --------------- (1) Before deduction of expenses, all of which are payable by the Company, estimated at $ . (2) The Company and the Selling Shareholder have granted to the Underwriters an option, exercisable by Credit Suisse First Boston Corporation for 30 days from the date of this Prospectus, to purchase a maximum of additional shares of Class A Common Stock from the Company and additional outstanding shares of Class A Common Stock from the Selling Shareholder at the Price to Public less underwriting discounts and commissions to cover over-allotments, if any. If the option is exercised in full, the total Price to Public will be $ , Underwriting Discounts and Commissions will be $ , Proceeds to Company will be $ and Proceeds to Selling Shareholder will be $ . See "Underwriting." The shares of Class A Common Stock are offered by the several Underwriters when, as and if delivered to and accepted by the Underwriters and subject to their right to reject orders in whole or in part. It is expected that the shares will be ready for delivery on or about , 1998 against payment in immediately available funds. Credit Suisse First Boston BT Alex. Brown Goldman, Sachs & Co. Morgan Stanley Dean Witter Prospectus dated , 1998 3 [INSIDE COVER ART] CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." ------------------ 4 CERTAIN DEFINITIONS Unless otherwise indicated herein, (i) market ranking by radio advertising revenue, market radio advertising revenue, market revenue share and the number of viable radio stations per market have been obtained from Duncan's Radio Market Guide (1998 ed.) ("Duncan's"); (ii) the Company's revenue rank in the radio broadcasting industry is derived from Duncan's, as adjusted to reflect the CBS Transactions (as defined) and assumes the completion of all other announced mergers in the radio broadcasting industry, (iii) all audience share data and audience rankings, except where specifically stated to the contrary, have been derived from surveys of persons, listening Monday through Sunday, 6 a.m. to 12 midnight, in the indicated demographic, as reported by 1998 Spring Arbitron, Radio Market Reports, The Arbitron Company (copyright 1998) ("Arbitron") and (iv) all data regarding radio stations assumes the completion of the Completed Transactions and the CBS Transactions and the acquisition of KSLM-AM. Duncan's defines "viable stations" as stations which are active and viable competitors for advertising dollars in their market. The Company calculates "same station" growth by (i) comparing the performance of stations operated by the Company throughout a relevant quarter to the performance of those same stations (whether or not operated by the Company) in the prior year's corresponding quarter, excluding the effect of barter revenues and expenses and discontinued operations and (ii) averaging such growth rates for the period presented. Unless otherwise indicated herein, (i) "broadcast cash flow" consists of operating income before depreciation, amortization, net expenses (income) of any time brokerage agreement (a "TBA") and corporate expenses, (ii) "EBITDA before net TBA expenses (income)" consists of operating income before depreciation, amortization and net TBA expenses (income), (iii) "pro forma income before extraordinary items" consists of the Company's income before extraordinary items as adjusted to reflect the Company's income during the relevant periods as if the Company had been a corporation subject to taxation under Subchapter C (a "C Corporation") of the Internal Revenue Code of 1986, as amended (the "Code"), assuming an effective tax rate of 38% per annum, instead of a corporation subject to Subchapter S of the Code (an "S Corporation"), such taxes hereinafter referred to as "pro forma income taxes" and (iv) "after-tax cash flow" consists of pro forma income before extraordinary items minus net gain on sale of assets (net of tax) and plus depreciation, amortization, and the deferred tax provision (or minus the deferred tax benefit). Although broadcast cash flow, EBITDA before net TBA expenses (income) and after-tax cash flow are not measures of performance or liquidity calculated in accordance with generally accepted accounting principles ("GAAP"), management believes that these measures are useful to an investor in evaluating the Company because they are widely used in the broadcast industry to measure a radio company's operating performance. Nevertheless, none of these measures should be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. Moreover, because these measures are not calculated in accordance with GAAP, they are not necessarily comparable to similarly titled measures employed by other companies. Unless otherwise indicated, pro forma results of operations for the year ended September 30, 1997 and for the nine months ended June 30, 1997 and 1998 give effect to the following transactions as if each had occurred on October 1, 1996: - the Recapitalization of the Company, effecting a for one stock split and the exchange of the Company's prior common stock for Class A Common Stock and Class B Common Stock as described on page 20, - the Completed Transactions described on page 24, - the CBS Transactions described on page 24, - the S Corporation Distribution described on page 20, - the Chase Conversion described on page 20, and - the Offering and the application of the net proceeds to the Company as described in "Use of Proceeds." 2 5 Pro forma balance sheet data as of June 30, 1998 give effect to any such events not yet consummated on that date as if each had occurred on that date. The Completed Transactions, the First Boston Transaction, the acquisition of KSLM-AM and the Tampa Transaction will be completed prior to the Offering, while the Recapitalization and the Chase Conversion will be completed concurrent with the Offering. The S Corporation Distribution will be declared concurrent with the Offering but paid subsequent to the Offering. The Second Boston Transaction will be completed subsequent to the Offering. The Recapitalization, the S Corporation Distribution and the Chase Conversion are contingent upon the consummation of the Offering, while the Completed Transactions, the acquisition of KSLM-AM and the CBS Transactions will occur whether the Offering is consummated or not. 3 6 PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. THE COMPANY Entercom, founded in 1968, is the sixth largest radio broadcasting company in the United States, based on pro forma 1997 gross revenues. The Company owns and operates 41 stations, 25 FM and 16 AM, in eight markets, including five of the country's top 30 radio advertising markets. The Company has built the largest radio station clusters, based on gross revenues, in Seattle and Kansas City, and one of the three largest clusters in Boston, Portland, Sacramento and Rochester. On a pro forma basis, the Company had net revenues of $165.1 million, operating income of $25.6 million and net income of $5.4 million for the twelve months ended June 30, 1998. In addition, pro forma broadcast cash flow (as defined in "Certain Definitions") during the same period was $49.5 million. The Company's net revenues and broadcast cash flow have grown significantly on both a total and same-station basis. Over the past three fiscal years ending September 30, net revenues grew at a compound annual rate of 75.1% from an actual $29.1 million in fiscal 1994 to a pro forma $156.3 million in fiscal 1997. Broadcast cash flow grew at a compound annual rate of 81.8% from an actual $7.6 million in fiscal 1994 to a pro forma $45.8 million in fiscal 1997. During this same period the Company's same station net revenues and broadcast cash flow grew at average annual rates of 15.3% and 38.1%, respectively. In addition, the Company's after-tax cash flow grew at a compound annual rate of 94.0% during these three fiscal years. The Company has built a highly consolidated portfolio of radio stations concentrated primarily in top 30 markets with above average growth characteristics. The Company generated 93.5% of its pro forma fiscal 1997 net revenues from the five top 30 markets in which it operates. Radio advertising revenues in these five markets have grown at an average annual rate of 10.8% from 1993 to 1997, which exceeded the average annual growth rate of both the aggregate radio industry and the top 30 markets. Furthermore, the Company generated 97.6% of its pro forma fiscal 1997 net revenues from superduopolies, which the Company defines as clusters of four or more stations in one market. Management believes that Entercom's superduopolies enable the Company to (i) amass greater resources to penetrate and capture additional local radio advertising revenues, (ii) consolidate administrative, engineering and management functions to reduce costs and (iii) be more flexible in adjusting formats to serve changing listener needs. In addition, the Company believes that superduopolies enhance its stations' ability to compete for advertising and promotional dollars with other media, including television and newspaper. The following table sets forth certain information about the markets in which the Company operates:
1993-1997 1997 1997 RADIO MARKET COMPANY'S STATIONS COMPANY RADIO MARKET AVERAGE ------------------- MARKET MARKET(1) REVENUE RANK(2) REVENUE GROWTH(2) FM AM TOTAL REVENUE SHARE(2) - --------- --------------- ----------------- -- -- ----- ---------------- Boston................ 10 13.7% 2 3 5 19.4%(3) Seattle(4)............ 13 10.5 5(4) 3 8(4) 40.4(4) Portland.............. 21 11.8 4 3 7 25.8 Sacramento............ 28 6.7 4 1 5 20.9 Kansas City........... 29 11.3 3 3 6 33.8 --- --- -- Top 30 Markets...... 18 13 31 Rochester............. 55 8.1 3 1 4 21.7 Gainesville/Ocala..... 124 6.5 2 0 2 23.8 Longview/Kelso........ n/a n/a 2 2 4 n/a --- --- -- All Markets......... 25 16 41
- --------------- (1) The Company's stations are in some instances licensed to communities other than the named principal community for the market. (2) Source: Duncan's. (3) Does not include the revenues of WWTM-AM, which competes in the adjacent Worcester market. (4) The Company also sells substantially all the advertising time of a sixth FM station under a joint sales agreement and the revenue from such sales are included in the Company's Market Revenue Share. 4 7 ACQUISITION STRATEGY The Company, through a disciplined acquisition strategy, seeks to (i) build market leading clusters of stations principally in large growth markets and (ii) acquire underdeveloped properties that offer the potential for significant improvements in revenues and broadcast cash flow through the application of the Company's operational, administrative and/or engineering expertise. As part of its strategy, the Company has strategically redeployed its asset base by swapping relatively mature stations in markets where the Company believed it would be difficult to build leading station clusters in exchange for underperforming stations in other markets that management believed offered stronger growth and clustering opportunities. For example, in 1997 the Company exchanged one station in Houston plus $5 million for three stations in Seattle and four stations in Kansas City. The Seattle acquisitions solidified the Company's position as the leading radio operator in that market while the four stations acquired in Kansas City enabled the Company to enter a new large market with a significant presence. The Company has a track record of structuring acquisitions in creative ways, including being a pioneer of multi-party station swaps. Since October 1, 1996, the Company, in 18 transactions, has acquired or agreed to acquire 36 radio stations and has divested or agreed to divest, for strategic reasons, nine radio stations. As a result of these transactions, the Company has divested its stand-alone stations while establishing the largest clusters in Seattle and Kansas City and building superduopolies in Boston, Portland, Sacramento and Rochester. The Company believes that its proven record of consummating creative transactions with many of the leading radio broadcast companies positions it well to continue to participate in the consolidation occurring in its industry. OPERATING STRATEGY The principal components of the Company's operating strategy are set forth below. - DEVELOP MARKET LEADING STATION CLUSTERS. The Company has built one of the three leading clusters in each of its eight markets. To enhance its competitive position, the Company strategically aligns its stations within each market to optimize their performance, both individually and collectively. The Company seeks to maximize the ratings, revenue and broadcast cash flow of its radio stations by tailoring their programming to optimize aggregate audience delivery. - ENHANCE OPERATIONS OF NEWLY ACQUIRED UNDERPERFORMING STATIONS. The Company has built a long-term track record of acquiring and developing underperforming stations enabling the Company to achieve superior same-station revenue and broadcast cash flow growth over the past several years. The Company's current portfolio includes a significant number of recently acquired stations which management believes are underdeveloped. Among the 31 stations which the Company acquired or commenced operations under TBAs since January 1, 1997, 14 operated with broadcast cash flow margins below 20%, 11 with margins between 20% and 40% and six with margins over 40% during calendar 1997. By comparison, among the nine stations which the Company owned or operated prior to 1997, two operated with margins under 20%, one between 20% and 40% and six over 40% during calendar 1997. - BUILD STRONGLY-BRANDED FRANCHISES. The Company analyzes market research and competitive factors to identify the format opportunity, music selection and rotation, presentation and other key programming attributes that it believes will best position each station to develop a distinctive identity and to strengthen the stations' local "brand" or "franchise" value. The Company believes that this will enable it to maximize audience share and consequently, its revenues and broadcast cash flow. - LEVERAGE STATION CLUSTERS TO CAPTURE GREATER SHARE OF ADVERTISING REVENUE. The Company believes radio will continue to gain revenue share from other media by capitalizing on its enhanced competitive platform. As a result of deregulation in the radio broadcasting industry, operators can now create radio station clusters that have the critical mass of audience reach and marketing resources necessary to pursue incremental advertising and promotional revenues more aggressively. The Company has begun to capitalize on this opportunity by developing specialized teams in Seattle, Portland, Sacramento and 5 8 Kansas City to work with non-traditional radio advertisers to create and develop marketing programs and solutions. - MAXIMIZE TECHNICAL CAPABILITIES. The Company seeks to operate stations with the strongest signals in their respective markets. In addition, the Company, on various occasions, has identified opportunities to acquire and upgrade low-powered or out-of-market stations and transform them into competitive signals, thus increasing their value significantly. - RECRUIT, DEVELOP, MOTIVATE AND RETAIN SUPERIOR EMPLOYEES. The Company believes that station operators differentiate themselves from their peers primarily through their ability to recruit, develop, motivate and retain superior management, programming and sales talent. Accordingly, the Company strives to establish a compelling corporate structure which is attractive to high performers. COMPLETED AND CBS TRANSACTIONS Since October 1, 1996, the Company, in 18 transactions, has acquired or agreed to acquire 36 radio stations and, for strategic reasons, has divested or agreed to divest, nine radio stations. These transactions consist of the Completed Transactions, the CBS Transactions and the acquisition of KSLM-AM. See "Completed Transactions" for a complete list of the Completed Transactions. In August 1998, the Company entered into three agreements with CBS Radio, Inc. ("CBS") under which it will: (i) purchase WRKO-AM and WEEI-AM in Boston for $82.0 million in cash (the "First Boston Transaction"); (ii) sell WLLD-FM and WYUU-FM in Tampa for $75.0 million in cash (the "Tampa Transaction"); and (iii) purchase WAAF-AM and WEGQ-FM in Boston and WWTM-AM in Worchester for $58.0 million in cash (the "Second Boston Transaction" and, together with the First Boston Transaction, the "Boston Transactions"). Collectively, the Tampa Transaction and the Boston Transactions are referred to as the "CBS Transactions." The Boston Transactions will enable the Company to establish a strong Boston presence with a 19.4% market share. The Company anticipates closing the First Boston Transaction and the Tampa Transaction prior to the consummation of the Offering. The Company anticipates that the Second Boston Transaction will close within one year. The Company began operating the Boston stations and CBS began operating the Tampa stations under time brokerage agreements in September 1998. See "CBS Transactions." RISK FACTORS Prospective purchasers of Class A Common Stock should consider carefully all of the information set forth in this Prospectus and, in particular, should evaluate the specific factors set forth under the caption "Risk Factors" beginning on page 13 of this Prospectus. These factors include, among other things: (i) the highly competitive nature of the radio broadcasting industry; (ii) the Company's dependence upon its Seattle radio stations; (iii) management's continued control over the Company's operations; (iv) the risks associated with the Company's acquisition strategy; and (v) the Company's vulnerability to changes in federal legislation or FCC regulatory policy. 6 9 THE OFFERING Class A Common Stock offered hereby....... shares by the Company(1) shares by the Selling Shareholder --------- shares of Class A Common Stock ========= Common Stock to be outstanding after the Offering................................ shares of Class A Common Stock(1)(2) shares of Class B Common Stock --------- shares of Common Stock =========
Voting Rights................. The Class A Common Stock and the Class B Common Stock vote together as a single class on all matters submitted to a vote of shareholders. Each share of Class A Common Stock is entitled to one vote and each share of Class B Common Stock is entitled to ten votes, except (i) any share of Class B Common Stock not voted by either Joseph M. Field or David J. Field, in their own right or by proxy, is entitled to only one vote, (ii) the holders of Class A Common Stock, voting as a separate class, are entitled to elect two directors (the "Class A Directors"), (iii) with respect to any proposed "going private" transaction (as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), each share of Class A Common Stock and Class B Common Stock shall be entitled to one vote and (iv) as otherwise required by law. The Class C Common Stock has no voting rights except as otherwise required by law. Upon completion of the Offering, the holders of the Class A Common Stock will have approximately % of the total voting power of the outstanding Common Stock, and the Class B Common Stock will be held solely by Joseph M. Field and David J. Field, who will have approximately % of the total voting power of the outstanding Common Stock. See "Risk Factors -- Control of the Company," "Description of Capital Stock" and "Principal and Selling Shareholders." Other Rights.................. Each class of Common Stock has the same rights to dividends and distributions upon liquidation. Subject to prior FCC approval in certain circumstances, shares of Class B Common Stock and Class C Common Stock are convertible in whole or in part at any time into shares of Class A Common Stock on a share-for-share basis. Shares of Class B Common Stock automatically convert into shares of Class A Common Stock on a share-for-share basis upon a transfer to any person other than Joseph M. Field, David J. Field or a Field Shareholder (as defined). Any shares of Class A Common Stock owned by a Regulated Entity (as defined) may be converted at the option of the holder into shares of Class C Common Stock on a share-for-share basis. See "Description of Capital Stock." - --------------- (1) Excludes shares of Class A Common Stock issuable pursuant to the Underwriters' over-allotment option. (2) Includes shares of Class A Common Stock issued in the Chase Conversion. Excludes shares of Class A Common Stock currently issuable upon exercise of the outstanding stock options issued under the Company's 1998 Equity Compensation Plan (as defined) at a weighted average exercise price of $ per share. See "Management -- 1998 Equity Compensation Plan." 7 10 Dividend Policy............... The Company intends to retain future earnings for use in the Company's business and does not anticipate declaring or paying any cash or stock dividends on shares of its Common Stock in the foreseeable future. In addition, the Company's ability to declare dividends is restricted under the Credit Facility (as defined). Use of Proceeds............... To repay revolving indebtedness of the Company. See "Use of Proceeds." Proposed NYSE Ticker Symbol... "ETM" 8 11 SUMMARY HISTORICAL FINANCIAL DATA The following table presents summary historical financial data of the Company for the periods indicated. The following financial information should be read in conjunction with the Consolidated Financial Statements of the Company and the related notes included elsewhere in this Prospectus. The comparability of the historical financial data reflected herein has been significantly impacted by acquisitions and dispositions. The information presented below is qualified in its entirety by, and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Unaudited Pro Forma Financial Information," and, in each case, the related notes included elsewhere in this Prospectus.
NINE MONTHS ENDED FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30, ----------------------------------- ------------------------ 1995 1996 1997 1997 1998 -------- -------- ----------- ----------- --------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING DATA: Net revenues.............................. $ 35,893 $ 48,675 $ 93,862 $ 64,540 $ 92,086 Station operating expenses................ 24,061 31,659 61,280 41,757 61,617 Depreciation and amortization............. 2,225 2,960 7,685 3,874 8,959 Corporate general and administrative expenses................................ 2,535 2,872 3,249 2,259 3,042 Net TBA expenses (income)................. 603 (879) (476) (476) 2,273 Operating income.......................... 6,469 12,063 22,124 17,126 16,195 Interest expense.......................... 1,992 5,196 11,388 8,454 9,175 Gain on sale of assets.................... 228 119 197,097 197,097 8,791 Income before income taxes and extraordinary items..................... 4,805 7,053 206,329 204,189 16,036 Pro forma income taxes(1)................. 1,826 2,680 78,405 77,592 6,094 Pro forma income before extraordinary items(1)................................ 2,979 4,373 127,924 126,597 9,942 Pro forma earnings per share before extraordinary items(1)(2)............... Pro forma weighted average common shares outstanding(2).......................... BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents................. $ 1,564 $ 5,292 $ 3,626 $ 6,094 Intangibles and other assets.............. 29,548 119,269 300,029 428,542 Total assets.............................. 52,209 150,575 364,743 513,445 Long-term debt, including current portion................................. 46,554 136,642 144,427 280,633 Total shareholders' equity................ 828 5,079 208,089 219,175 OTHER DATA: Broadcast cash flow(3).................... $ 11,832 $ 17,016 $ 32,582 22,783 30,469 Broadcast cash flow margin(4)............. 33.0% 35.0% 34.7% 35.3% 33.1% EBITDA before net TBA expenses (income)(5)............................. $ 9,297 $ 14,144 $ 29,333 20,524 27,427 After-tax cash flow(6).................... 4,172 7,923 14,947 9,194 14,040 Cash flows related to: Operating activities.................... 1,182 12,773 8,859 (1,518) 16,629 Investing activities.................... (28,636) (96,502) (13,695) (6,950) (146,545) Financing activities.................... 27,505 87,457 3,170 5,482 132,384
- --------------- (1) Throughout the periods presented, the Company had elected to be taxed under Subchapter S of the Code, and comparable provisions of certain state tax laws. The amounts shown reflect pro forma provisions for state and federal income taxes (at an assumed combined rate of 38% per annum) as if the Company had been taxed under Subchapter C of the Code throughout the periods presented. The Company intends to revoke its election to be taxed as an S Corporation immediately prior to the consummation of the Offering. (2) Reflects the effect of the for one stock split to be effected as part of the Recapitalization. 9 12 (3) Broadcast cash flow consists of operating income before depreciation, amortization, net TBA expenses (income) and corporate expenses. Although broadcast cash flow is not a measure of performance or liquidity 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 measure a radio company's operating performance. Nevertheless, it should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. Moreover, because broadcast cash flow is not a measure calculated in accordance with GAAP, this measure is not necessarily comparable to similarly titled measures employed by other companies. (4) Broadcast cash flow margin represents broadcast cash flow as a percentage of net revenue. (5) EBITDA before net TBA expenses (income) consists of operating income before depreciation, amortization and net TBA expenses (income). Although EBITDA before net TBA expenses (income) is not a measure of performance or liquidity 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 measure a radio company's operating performance. Nevertheless, it should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. Moreover, because EBITDA before net TBA expenses (income) is not a measure calculated in accordance with GAAP, this measure is not necessarily comparable to similarly titled measures employed by other companies. (6) After-tax cash flow consists of pro forma income before extraordinary items minus net gain on sale of assets (net of tax) and plus depreciation, amortization, and the deferred tax provision (or minus the deferred tax benefit). Although after-tax cash flow is not a measure of performance or liquidity 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 measure a radio company's operating performance. Nevertheless, it should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. Moreover, because after-tax cash flow is not a measure calculated in accordance with GAAP, this measure is not necessarily comparable to similarly titled measures employed by other companies. 10 13 SUMMARY PRO FORMA FINANCIAL DATA The following table presents summary historical and pro forma financial data of the Company for the periods indicated. The pro forma operating and other data reflect adjustments to the summary historical data of the Company to illustrate the effects of the Recapitalization, the Completed and CBS Transactions, the S Corporation Distribution, the Chase Conversion, the Offering and the application of the net proceeds therefrom as described in "Use of Proceeds" as if each had occurred on October 1, 1996. The pro forma balance sheet data as of June 30, 1998 give effect to any such events not yet consummated on that date as if each 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 Consolidated Financial Statements, the Unaudited Pro Forma Financial Information and, in each case, the related notes included elsewhere in this Prospectus.
FISCAL YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1997 JUNE 30, 1997 JUNE 30, 1998 ---------------------- ----------------------- ---------------------- HISTORICAL PRO FORMA HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ----------- --------- ---------- --------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING DATA: Net revenues........................... $ 93,862 $156,305 $ 64,540 $114,164 $ 92,086 $123,001 Station operating expenses............. 61,280 110,523 41,757 80,791 61,617 85,869 Depreciation and amortization.......... 7,685 18,751 3,874 12,710 8,959 13,941 Corporate general and administrative expenses............................. 3,249 2,895 2,259 2,013 3,042 3,104 Net TBA expenses (income).............. (476) (476) 2,273 Operating income....................... 22,124 24,136 17,126 18,650 16,195 20,087 Interest expense....................... 11,388 15,010 8,454 11,258 9,175 11,258 Gain on sale of assets................. 197,097 205,565 197,097 205,585 8,791 291 Income before income taxes and extraordinary items.................. 206,329 214,945 204,189 213,139 16,036 9,280 Pro forma income taxes(1).............. 78,405 81,679 77,592 80,992 6,094 3,527 Pro forma income before extraordinary items(1)............................. 127,924 133,266 126,597 132,147 9,942 5,753 Pro forma earnings per share before extraordinary items(1)(2)............ $ $ $ $ $ $ Pro forma weighted average common shares outstanding(2)................ BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents................................................................ $ 6,094 $ 5,984 Intangibles and other assets............................................................. 428,542 564,058 Total assets............................................................................. 513,445 654,126 Long-term debt, including current portion................................................ 280,633 217,616 Total shareholders' equity............................................................... 219,175 341,523
11 14
FISCAL YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1997 JUNE 30, 1997 JUNE 30, 1998 ---------------------- ----------------------- ---------------------- HISTORICAL PRO FORMA HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ----------- --------- ---------- --------- (UNAUDITED) (IN THOUSANDS) OTHER DATA: Broadcast cash flow(3)................. $ 32,582 $ 45,782 $ 22,783 $ 33,373 $ 30,469 $ 37,132 Broadcast cash flow margin(4).......... 34.7% 29.3% 35.3% 29.2% 33.1% 30.2% EBITDA before net TBA expenses (income)(5).......................... $ 29,333 $ 42,887 $ 20,524 $ 31,360 $ 27,427 $ 34,028 After-tax cash flow(6)................. 14,947 9,194 14,040 Cash flows related to: Operating activities................. 8,859 17,902 (1,518) 5,695 16,629 15,299 Investing activities................. (13,695) (221,994) (6,950) (215,249) (146,545) (2,876) Financing activities................. 3,170 202,316 5,482 206,458 132,384 (9,955)
- --------------- (1) Throughout the periods presented, the Company had elected to be taxed under Subchapter S of the Code, and comparable provisions of certain state tax laws. The amounts shown reflect pro forma provisions for state and federal income taxes (at an assumed combined rate of 38% per annum) as if the Company had been taxed under Subchapter C of the Code throughout the periods presented. The Company intends to revoke its election to be taxed as an S Corporation immediately prior to the consummation of the Offering. (2) Reflects the effect of the for one stock split to be effected as part of the Recapitalization. (3) Broadcast cash flow consists of operating income before depreciation, amortization, net TBA expenses (income) and corporate expenses. Although broadcast cash flow is not a measure of performance or liquidity 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 measure a radio company's operating performance. Nevertheless, it should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. Moreover, because broadcast cash flow is not a measure calculated in accordance with GAAP, this measure is not necessarily comparable to similarly titled measures employed by other companies. (4) Broadcast cash flow margin represents broadcast cash flow as a percentage of net revenue. (5) EBITDA before net TBA expenses (income) consists of operating income before depreciation, amortization and net TBA expenses (income). Although EBITDA before net TBA expenses (income) is not a measure of performance or liquidity 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 measure a radio company's operating performance. Nevertheless, it should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. Moreover, because EBITDA before net TBA expenses (income) is not a measure calculated in accordance with GAAP, this measure is not necessarily comparable to similarly titled measures employed by other companies. (6) After-tax cash flow consists of pro forma income before extraordinary items minus net gain on sale of assets (net of tax) and plus depreciation, amortization and the deferred tax provision (or minus the deferred tax benefit). Although after-tax cash flow is not a measure of performance or liquidity 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 measure a radio company's operating performance. Nevertheless, it should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. Moreover, because after-tax cash flow is not a measure calculated in accordance with GAAP, this measure is not necessarily comparable to similarly titled measures employed by other companies. 12 15 RISK FACTORS This Prospectus contains forward-looking statements. The words "anticipate," "believe," "expect," "plan," "intend," "estimate," "project," "foresee," "will," "could," "may" and similar expressions are intended to identify such forward-looking statements. Such statements reflect the Company's current views with respect to future events and financial performance and involve risks and uncertainties, including without limitation the risks described in "Risk Factors." Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. Investors should consider carefully the following risk factors, in addition to the other information contained in this Prospectus, before purchasing the shares of Class A Common Stock offered hereby. COMPETITION Radio broadcasting is a highly competitive business. The Company's radio stations compete for audiences and advertising revenues within their respective markets directly with other radio stations, as well as with other media, such as newspapers, magazines, television, outdoor advertising and direct mail. Audience ratings and market shares are subject to change, and any adverse change in a particular market could have a material adverse effect on the revenue of stations located in that market. While the Company already competes in some of its markets with other stations with similar programming formats, if another radio station in a market were to convert its programming format to a format similar to one of the Company's stations, if a new station were to adopt a comparable format or if an existing competitor were to strengthen its operations, the Company's stations could suffer a reduction in ratings and/or advertising revenue and could incur increased promotional and other expenses. Other radio broadcasting companies may enter into the markets in which the Company operates or may operate in the future. Such companies may be larger and have more financial resources than the Company. Although the Company believes that substantially all of its radio stations are positioned to compete effectively in their respective markets, there can be no assurance that any such station will be able to maintain or increase its current audience ratings and advertising revenues. BUSINESS RISKS Future operations are further subject to many business risks which could have a material adverse effect on the Company. These variables include the following: economic conditions, both generally and relative to the radio broadcasting industry; shifts in population and other demographics; the level of competition for advertising dollars with other radio stations, television stations and other entertainment and communications media; fluctuations in operating costs; technological changes and innovations; changes in labor conditions; and changes in governmental regulations and policies and actions of federal regulatory bodies, including the United States Department of Justice ("DOJ"), the Federal Trade Commission (the "FTC") and the FCC. Given the inherent unpredictability of these variables, the Company cannot, with any degree of certainty, predict what effect, if any, these variables will have on future operations. NEW TECHNOLOGIES Radio broadcasting is subject to competition from new media technology that are being developed or introduced, including, without limitation, the delivery of audio programming by cable television systems, digital audio radio services ("DARS"), the Internet, satellite, television, personal communications services ("PCS") and the possible authorization by the FCC of a new service of microbroadcasting (low powered, limited coverage radio stations). DARS plans to deliver by satellite to nationwide audiences multi-channel, multi-format digital radio services with sound quality equivalent to compact discs. The Company cannot predict the effect, if any, that any such new technology may have on the radio broadcasting industry or the Company. See "Business -- Competition; Changes in Broadcasting Industry." IMPORTANCE OF SEATTLE RADIO STATIONS In the fiscal year ended September 30, 1997, the Company's eight radio stations in Seattle and the activities of the Company pursuant to a joint sales agreement ("JSA") for a ninth radio station generated 13 16 approximately 49.2% of the Company's net revenues and 54.6% of the Company's broadcast cash flow. On a pro forma basis after giving effect to the Completed and CBS Transactions, the Seattle radio stations would have generated approximately 34.9% of the Company's net revenues and 39.5% of the Company's broadcast cash flow in the fiscal year ended September 30, 1997. A significant decline in net revenues and broadcast cash flow from the Company's stations in this market, 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. In addition, given the relatively high percentage of the Company's total revenue and broadcast cash flow derived from the Seattle area, adverse events or conditions that affect the Seattle economy could have a more adverse effect on the profitability of the Company than if the Company's operations were more geographically diverse. RISKS OF ACQUISITION STRATEGY The Company pursues growth, in part, through the acquisition of individual radio stations and groups of radio stations. Consummation of future acquisitions is subject to various conditions, including the FCC and other regulatory approval, and intense scrutiny under federal and state antitrust laws. The Company cannot predict whether it will be successful in identifying future acquisition opportunities, consummating such acquisitions or what the consequences of any acquisitions will be. Accordingly, no assurances can be given that any pending or future acquisitions (including the CBS Transactions) will be consummated or that, if completed, they will be successful. The Company's acquisition strategy involves numerous risks, including increasing debt service requirements, 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 on the nature, size and timing of future acquisitions, the Company may be required to raise additional financing necessary to consummate the future acquisitions. There can be no assurance that such financing will be permitted under the agreements that govern the outstanding indebtedness of the Company or any other loan agreements or indebtedness to which the Company may become a party. Moreover, there can be no assurance that such additional financing will be available to the Company on terms acceptable to its management. Radio broadcasting is a rapidly consolidating industry, with many companies seeking to consummate acquisitions and increase their market share. In this environment, the Company competes and will continue to compete with many other buyers for the acquisition of radio stations. Some of those competitors may be able to outbid the Company for acquisitions because they have greater financial resources. As a result of these and other factors, there can be no assurance that future acquisitions will be available on attractive terms. The Company's failure to implement its acquisition strategy as a result of the factors described above, or for any reasons, could have a material adverse effect on the value of the Class A Common Stock or the Company's operations as a whole. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." CONTROL OF THE COMPANY Upon completion of the Offering, the purchasers of the Class A Common Stock offered hereby will own approximately % of the outstanding Class A Common Stock, representing approximately % of the total voting power of the outstanding Common Stock ( % of the outstanding Class A Common Stock, representing % of the total voting power if the Underwriters' over-allotment option is exercised in full). Upon completion of the Offering, Joseph M. Field, the Company's Chairman of the Board and Chief Executive Officer and David J. Field, the Company's President, Chief Operating Officer and Chief Financial Officer, will beneficially own all of the outstanding Class B Common Stock, representing approximately % of the total voting power of the outstanding Common Stock ( % of the total voting power if the Underwriters' over-allotment option is exercised in full). Shares of Class B Common Stock are transferable only to Field Shareholders, and upon any other transfer they convert automatically into shares of Class A Common Stock on a share-for-share basis. Shares of Class B Common Stock shall be entitled to ten votes only when they are voted by Joseph M. Field or David J. Field, subject to certain exceptions where they are entitled to one vote. Joseph M. Field will be able to control the vote on all matters submitted to the vote of 14 17 shareholders and therefore, will be able to direct the management and policies of the Company, except with respect to those matters where the shares of Class B Common Stock are only entitled to one vote and those matters requiring a class vote under the provisions of the Company's Articles of Incorporation, bylaws or applicable law, including, without limitation, the election of the two Class A directors. In addition, without the approval of Joseph M. Field, the Company will be unable to consummate transactions involving an actual or potential change of control of the Company, including transactions in which the holders of Class A Common Stock might otherwise receive a premium for their shares over then current market prices. See "Principal and Selling Shareholders," and "Description of Capital Stock." ABILITY TO INCUR SUBSTANTIAL INDEBTEDNESS The Company has the ability to incur indebtedness that is substantial in relation to its shareholders' equity. As of June 30, 1998, on a pro forma basis after giving effect to the Offering, the Company had approximately $217.6 million in long-term indebtedness (less current portions) and shareholders' equity of approximately $341.5 million. However, under the Credit Facility, the Company can increase its long-term indebtedness up to $350 million, subject to compliance with certain financial ratios. See "Capitalization," and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." If the Company were to incur a substantial amount of indebtedness under the Credit Facility, it could have several important consequences to the holders of Class A Common Stock, including, but not limited to, the following: (i) a substantial portion of the Company's cash flow from operations could be dedicated to debt service and would not be available for other purposes, including for funding future expansion and ongoing capital expenditures; (ii) the Company's ability to obtain additional financing for working capital, capital expenditures, acquisitions and general corporate or other purposes could be impaired; (iii) the Company's leveraged position and the covenants contained in the Credit Facility could limit the Company's ability to compete, expand and make capital improvements; (iv) the Company's level of indebtedness could make it more vulnerable to economic downturns, limit its ability to withstand competitive pressures and reduce its flexibility in responding to changing business and economic conditions and (v) certain restrictive covenants contained in the Credit Facility could limit the ability of the Company to pay dividends and make other distributions to its shareholders. EFFECT OF RESTRICTIVE COVENANTS The Credit Facility contains certain covenants that restrict, among other things, the ability of the Company to incur additional indebtedness, derive over 60% of its aggregate broadcast cash flow from any one market, acquire radio stations that are not located in either one of the top 75 markets or in a market in which the Company has existing operations, incur capital expenditures, invest in non-related industries, pay dividends or make certain other restricted payments, incur liens, 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 the assets of the Company. In addition, all of the assets and the stock of the Company's subsidiaries are pledged to secure the debt under the Credit Facility. The Credit Facility requires that the Company maintain specified financial ratios; the ability of the Company to meet these financial ratios can be affected by events beyond its control and there can be no assurance that the Company will meet those ratios. A breach of any of these covenants could result in a default under the Credit Facility. Upon an event of 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. If the Company were unable to repay those amounts, the lenders thereunder could proceed against the collateral granted to them to secure that indebtedness. Any such event of default, therefore, could have a material adverse effect on the Company. Even if the Company is able to comply with the restrictive covenants contained in the Credit Facility, such covenants could limit the Company's ability to capitalize on opportunities that would otherwise be advantageous. In addition, the Credit Facility, in certain circumstances, requires that the Company apply excess cash flow from operations, net proceeds from asset sales, net equity proceeds and insurance proceeds to reduce permanently the amount available under the Credit Facility. 15 18 Pursuant to the terms of the Credit Facility, the Offering would constitute an event requiring a permanent reduction in the principal amount of the Credit Facility. The Company has received a waiver of this provision with respect to the Offering. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources," and "Description of Capital Stock." RADIO BROADCASTING INDUSTRY AND ECONOMIC CONDITIONS The profitability of the Company's radio stations is subject to various factors that influence the radio broadcasting industry as a whole. The Company's radio stations may be affected by numerous factors, including changes in audience tastes, competition from other radio stations and other communications and entertainment media, priorities of advertisers, new laws, governmental regulations and policies, changes in broadcast technical requirements, technological changes and proposals to eliminate the tax deductibility of expenses incurred by advertisers. The Company cannot predict which, if any, of these or other factors might have a significant impact on the radio broadcasting industry in the future, nor can it predict what impact, if any, the occurrence of these or other events might have on the Company's operations. Generally, advertising tends to decline during economic recession or downturn. Consequently, the Company's advertising revenue is likely to be adversely affected by a recession or downturn in the United States economy, the economy of an individual geographic market in which the Company owns or operates radio stations or other events or circumstances that adversely affect advertising activity. See "-- Importance of Seattle Radio Stations." GOVERNMENTAL REGULATION OF BROADCASTING INDUSTRY The radio broadcasting industry is subject to extensive federal regulation by the FCC under the Communications Act of 1934, as amended (the "Communications Act"), 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. In addition, the Communications Act and FCC rules impose limitations on alien ownership and voting of the capital stock of, and participation in the affairs of, the Company. The Company's business is 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 license 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. The non-renewal, or renewal with substantial conditions or modifications, of one or more of the Company's licenses could have a material adverse effect on 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. As a result of the passage of the Telecommunications Act of 1996 (the "Telecom Act"), radio broadcasting companies were permitted to increase their ownership of stations within a single radio market from a maximum of four to a maximum of between five and eight stations, depending on market size. The Telecom 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 Telecom Act. Compliance with the FCC's multiple ownership rules may cause the Company and other radio broadcasters to forego acquisition opportunities that they might otherwise wish to pursue. Compliance with these rules by third parties may also have a significant impact on the Company by, for example, precluding the consummation of swap transactions that would cause such third parties to violate multiple ownership limitations. The consummation of radio broadcasting acquisitions requires prior approval of the FCC with respect to the transfer of control or assignment of the broadcast licenses of the acquired stations. There can be no assurance that the FCC will approve future or pending acquisitions or dispositions by the Company or will not impose conditions or qualifications in connection with such acquisitions or dispositions (including the CBS Transactions) by the Company. As a result of the recent consolidation of ownership in the radio broadcast industry, the DOJ has been giving closer scrutiny to acquisitions in the industry. The DOJ has stated publicly that it has established certain revenue and audience share concentration benchmarks with respect to radio station acquisitions, above which a transaction may receive additional antitrust scrutiny. However, to date, the DOJ has also investigated 16 19 transactions that do not meet or exceed these benchmarks and has cleared transactions that do exceed the benchmarks. The FCC is also reviewing applications for transfers and assignment of licenses in instances where a proposed transaction would result in a high degree of revenue concentration. Although the Company has not encountered any problems in receiving clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and does not believe that its acquisition strategy as a whole will be adversely affected in any material respect by antitrust review or by divestitures that the Company may have to make as a result of antitrust review, there can be no assurance that this will continue to be the case. The number of radio stations the Company may acquire in any market under FCC rules may also vary depending upon whether the interests in other radio stations or certain other media properties of certain persons or entities affiliated with the Company are attributable to those persons or entities under FCC rules. 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. 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 who have the right to vote 5% or more of the Company's voting stock are generally attributable to the Company. If any such attributable broadcast interests overlap with the Company's directly-held radio broadcast interests in the Company's markets, such interests are combined with the Company's interests in such markets when determining compliance with the multiple ownership limitations. In addition, under the FCC's "one-to-a-market" rule, a party may not have attributable interests in radio stations and a television station in the same market unless a waiver is granted by the FCC. Although the Company's current officers, directors and shareholders who have the right to vote 5% or more of the Company's voting stock do not have attributable broadcast interests limiting the number of radio stations that the Company may acquire or own, there can be no assurance that such persons will not in the future hold such attributable interests. The FCC's attribution and ownership rules are currently under review and changes in those rules could affect the ability of the Company to acquire stations in certain markets in the future. See "Business -- Federal Regulation of Radio Broadcasting -- Proposed and Recent Changes." Applications of, or changes to, the FCC policies described above could cause the Company to lose valuable broadcasting licenses or force the Company to divest profitable radio stations or abandon plans to acquire new, potentially profitable radio stations. Any such occurrences could adversely affect the Company's operations and consequently, the value of the Class A Common Stock. DEPENDENCE ON KEY PERSONNEL The Company's business depends upon the continued efforts, abilities and expertise of its executive officers and other key executives, including Joseph M. Field, its Chairman of the Board and Chief Executive Officer; David J. Field, its President, Chief Operating Officer and Chief Financial Officer; and John C. Donlevie, Esq., its Executive Vice President and General Counsel. The Company believes that the loss of any of these individuals could have a material adverse effect on the Company. See "Management." SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS Upon completion of the Offering, the Company will have shares of Class A Common Stock and shares of Class B Common Stock issued and outstanding. Of these shares, the shares of Class A Common Stock sold in the Offering ( shares if the Underwriters' over-allotment option is exercised in full) will be freely transferable without restriction under the Securities Act by persons other than "affiliates" of the Company within the meaning of Rule 144 promulgated under the Securities Act ("Rule 144"). The remaining shares of Class A Common Stock and all shares of Class B Common Stock were issued in reliance on exemptions from the registration requirements of the Securities Act, and those shares are "restricted" securities under Rule 144. The number of such "restricted" shares of Common Stock available for sale in the public market is limited by restrictions under the Securities Act and lock-up agreements under which all of the holders of such shares have agreed not to sell or otherwise dispose of their shares for a period of 180 days after the date of this Prospectus (the "Lock-Up Period") without the prior written consent of Credit Suisse First Boston 17 20 Corporation. Because of these restrictions, on the date of this Prospectus, no shares other than those offered hereby will be eligible for sale. Upon expiration of the Lock-Up Period, all of the restricted securities will be eligible for sale in the public market, subject to compliance with the manner-of-sale, volume and other limitations of Rule 144. Notwithstanding the foregoing, the Company executed a Registration Rights Agreement, dated as of May 21, 1996, with Chase Capital (the "Registration Rights Agreement") which grants Chase Capital the right to require the Company, subject to certain limitations, to effect up to two "demand" registrations under the Securities Act for the sale of Chase Capital's shares of Common Stock. In connection with the Offering, however, Chase Capital has entered into a lock-up agreement, under which it has agreed not to sell or otherwise dispose of its shares or demand registration of such shares during the Lock-Up Period. Future sales of substantial amounts of Class A Common Stock, or the perception that such sales could occur, may affect the market price of the Class A Common Stock prevailing from time to time. See "Shares Eligible for Future Sale" and "Underwriting." DILUTION Persons purchasing shares of Class A Common Stock in the Offering will incur immediate dilution in the pro forma net tangible book value per share of Class A Common Stock of approximately $ per share. In addition, the exercise of vested stock options, if any, would result in further dilution. This dilution is calculated based on an assumed initial public offering price of $ per share (the midpoint of the estimated offering range). Dilution for this purpose represents the difference between the per share initial public offering price of the Class A Common Stock and the pro forma net tangible book value per share of Class A Common Stock after giving effect to the Recapitalization, the Completed and CBS Transactions, the S Corporation Distribution, the Chase Conversion, the consummation of the Offering and the application of the net proceeds therefrom. See "Dilution." BENEFITS TO EXISTING SHAREHOLDERS AND AFFILIATES In connection with the Offering and associated termination of the Company's S Corporation status, the existing shareholders of the Company will receive an aggregate cash distribution of approximately $86.0 million, consisting of $15.8 million which is estimated to be the amount of the taxes due by the Company's S Corporation shareholders on the income of the Company through the Revocation Date (as defined) (including the taxes on the income from the Tampa Transaction) net of prior distributions to such shareholders for such taxes and $70.2 million which is the estimated amount of the Company's remaining taxed but undistributed income through the Revocation Date (including the income from the Tampa Transaction). In addition, an affiliate of Chase Capital, the Selling Shareholder in the Offering, will receive aggregate net proceeds of approximately $ from the sale of shares of Class A Common Stock therein, constituting approximately % of the shares of Class A Common Stock beneficially owned by Chase Capital following the Chase Conversion. A general partner of Chase Capital, Michael R. Hannon, is also a director of the Company. See "Recapitalization, Chase Conversion and Former S Corporation Status" and "Principal and Selling Shareholders." NO PRIOR PUBLIC MARKET Prior to the Offering, there has been no public market for the Class A Common Stock and there can be no assurance that an active public market will develop or be sustained after the Offering or that the initial public offering price will correspond to the price at which the Class A Common Stock will trade in the public market subsequent to the Offering. The initial public offering price for the Class A Common Stock will be determined by negotiations among the Company and the representatives of the Underwriters based upon the consideration of certain factors set forth herein under "Underwriting." Market conditions in the radio broadcasting industry, the Company's future operating results and fluctuations in the stock market generally may have an adverse impact on the market price of the Class A Common Stock. 18 21 CERTAIN ANTITAKEOVER PROVISIONS Certain provisions of Pennsylvania law could also make more difficult a merger, tender offer or proxy contest involving the Company, even if such events could be beneficial to the interests of the shareholders. Such provisions could limit the price that certain investors might be willing to pay in the future for shares of the Company's Class A Common Stock. See "Description of Capital Stock -- Certain Provisions of the Amended and Restated Articles of Incorporation and Amended and Restated Bylaws of the Company." IMPACT OF YEAR 2000 ISSUES The Company relies, directly and indirectly, on information technology systems to operate its digital radio stations, provide its radio stations with up-to-date news and perform a variety of administrative services including accounting, financial reporting, advertiser spot scheduling, payroll and invoicing. The Company also uses non-information technology systems, such as microchips, for dating and other automated functions. Information and non-information technology systems that do not properly recognize and process date sensitive information when the year changes to "2000" or "00" could generate erroneous data or cause such systems to fail ("Year 2000 Issues"). As a result, Year 2000 Issues could have a material adverse effect on the operations of the Company. In order to minimize the risk of Year 2000 related losses, the Company is conducting a comprehensive assessment of its Year 2000 Issues. However, there can be no assurance that the Company will resolve its Year 2000 Issues prior to the year 2000, or that the cost of remedying any Year 2000 Issues will not have a material adverse effect on the Company's business. Furthermore, there can be no assurance that the systems of other companies with which the Company's systems interact will be timely converted and, if not timely converted, would not have a material adverse effect on the Company's business. See "Management Discussion and Analysis of Financial Condition and Results of Operation -- Impact of Year 2000 Issues." 19 22 USE OF PROCEEDS The net proceeds to the Company from the sale of the shares of Class A Common Stock offered by it after deducting underwriting discounts and other offering expenses, all of which are payable by the Company, are estimated to be approximately $186 million (approximately $ million if the Underwriters' over-allotment option is exercised in full), assuming an initial public offering price of $ per share. The net proceeds of the Offering will be used to repay revolving indebtedness of the Company. On November , 1998, the Company had revolving indebtedness outstanding of approximately $ million; approximately $77.0 million of such indebtedness was incurred in connection with the First Boston Transaction and the remainder was incurred to fund the Sinclair Transaction, other acquisitions and general corporate purposes. Following the Offering, the Company will fund the Second Boston Transaction and a portion of the S Corporation Distribution with revolving indebtedness under the Credit Facility. As of June 30, 1998, on a pro forma basis, the Company had approximately $217.6 million of indebtedness outstanding under the Credit Facility. The final maturity date for the Credit Facility is February 13, 2006. Interest on any outstanding principal accrues at a rate based, at the Company's election, on either LIBOR plus a spread which ranges from 0.5% to 2.125%, or on KeyBank N.A.'s base rate, plus a spread of up to 0.875%, in either case, depending on the Company's total outstanding indebtedness. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." RECAPITALIZATION, CHASE CONVERSION AND FORMER S CORPORATION STATUS Prior to the consummation of the Offering, the Company will engage in a Recapitalization that will result in the Company having Class A Common Stock, Class B Common Stock, Class C Common Stock and Preferred Stock authorized, and Class A Common Stock and Class B Common Stock issued and outstanding. Prior to the Offering, the Company was an S Corporation with voting and non-voting Prior Common Stock authorized and issued. In connection with the Recapitalization, (i) the Company will effect a for one stock split of the outstanding shares of Prior Common Stock, (ii) each share of Prior Common Stock held by Joseph M. Field, the Company's Chairman of the Board and Chief Executive Officer, and David J. Field, the Company's President, Chief Operating Officer and Chief Financial Officer, will be exchanged for one share of Class B Common Stock, (iii) each share of Prior Common Stock held by all other shareholders will be exchanged for one share of Class A Common Stock and (iv) the Company will revoke its S Corporation status. Chase Capital currently owns the 7% Subordinated Convertible Note. Chase Capital, a global private equity organization with approximately $5 billion under management, is an affiliate of The Chase Manhattan Corporation. Chase Capital has substantial investment experience in the radio broadcasting sector, including having co-founded American Radio Systems, Inc. in 1993, and currently has approximately 20% of its portfolio committed to the media and telecommunications industry. A general partner of Chase Capital serves on the Company's Board of Directors. Chase Capital has agreed with the Underwriters and the Company that immediately prior to the Offering it will convert the 7% Subordinated Convertible Note into Class A Common Stock. Upon the Chase Conversion, Chase Capital will receive shares of Class A Common Stock. After giving effect to the Offering, including Chase Capital's sale of shares of Class A Common Stock therein, Chase Capital will beneficially own approximately % of the Company's Class A Common Stock, representing % of the total voting power of the Company's outstanding Common Stock (approximately % of the Company's Class A Common Stock, representing % of the total voting power of the Company's outstanding Common Stock, if the over-allotment option is exercised in full). The Company has been an S Corporation subject to taxation under Subchapter S of the Code since October 1, 1987. As a result, the net income of the Company, for federal and certain state and local tax purposes, has been reported by and taxed directly to the Company's shareholders, rather than to the Company. In connection with the Recapitalization and shortly before the consummation of the Offering, the Company will file a notice with the Internal Revenue Service revoking its S Corporation status as of a date preceding the Offering (the "Revocation Date"). 20 23 In connection with the revocation of the Company's S Corporation status and prior to the Offering, the Company intends to declare a dividend payable to its existing shareholders approximately within six (6) months after the Offering. This dividend distribution will be comprised of (i) $ million, which is estimated to be the taxes due by the Company's existing S Corporation shareholders on the income of the Company through the Revocation Date (including the taxes on the income from the Tampa Transaction), net of prior distributions to the shareholders for such taxes and (ii) $ million, which is the estimated amount of the Company's remaining taxed but undistributed income through the Revocation Date (including the income from the Tampa Transaction) (collectively, the "S Corporation Distribution"). From this S Corporation Distribution, such existing shareholders will fund their pending tax liability attributable to the Company's S Corporation income through the Revocation Date. As of June 30, 1998, on a pro forma basis, the amount of the S Corporation Distribution would have been approximately $15.8 million for taxes due by such existing shareholders on the income of the Company through the Revocation Date (including the income from the Tampa Transaction) and $70.2 million for income, net of taxes, on the remaining taxed but undistributed income of the Company through the Revocation Date (including the income from the Tampa Transaction). The S Corporation Distribution will be funded from the net proceeds of the Tampa Transaction and borrowings under the Credit Facility. After the amount of the S Corporation Distribution is determined by the Company, the amounts distributed will not be adjusted to reflect any difference between actual and estimated amounts; provided however, if the Company subsequently realizes an economic benefit in connection with a reassessment of the Company's tax returns which results in an increase in the tax liability of its S Corporation shareholders, then the Company shall reimburse those shareholders pursuant to an indemnification agreement to the extent of such economic benefit. See "Risk Factors -- Benefits to Existing Shareholders and Affiliates." In addition, as a result of the revocation of its S Corporation status, the Company will record a net deferred income tax liability and corresponding income tax expense (the "Deferred Tax Liability"), effective upon the Revocation Date. The amount of the Deferred Tax Liability would have been approximately $78.8 million if the Revocation Date had been June 30, 1998, but the actual amount will be adjusted to reflect the Company's actual financial position at the Revocation Date. DIVIDEND POLICY The Company does not anticipate paying cash dividends on its Common Stock in the foreseeable future because it intends to retain its earnings, if any, to finance the expansion of its business and for general corporate purposes. Any payment of future dividends will be at the discretion of the Board of Directors and will depend upon, among other factors, the Company's earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends, including, without limitation, the provisions of the Credit Facility that limit the Company's ability to pay dividends and other considerations that the Board of Directors deems relevant. 21 24 DILUTION Dilution is the amount by which the initial public offering price paid by the purchasers of the shares of Class A Common Stock will exceed the net tangible book value per share of Common Stock after the Offering. The net tangible book value per share of Common Stock is determined by subtracting the total liabilities of the Company from the total book value of the tangible assets of the Company and dividing the difference by the number of shares of Common Stock deemed to be outstanding on the date as of which such book value is determined. At June 30, 1998, on a pro forma basis to reflect the Recapitalization, the Completed and CBS Transactions, the S Corporation Distribution and the Chase Conversion, the Company had a net tangible book value (deficit) of approximately $ or $ per share (excluding intangible book value of $ per share). After giving effect to the sale by the Company of shares of Class A Common Stock offered hereby at an assumed initial public offering price of $ per share (the mid-point of the range set forth on the cover page of this Prospectus), and the application of the estimated net proceeds therefrom, the pro forma net tangible book value (deficit) of the Company as of June 30, 1998 would have been approximately $ or $ per share. This represents an immediate increase in such net tangible book value of $ per share to existing shareholders and an immediate dilution to new investors of $ per share. The following table illustrates this per share dilution: Assumed initial public offering price per share............. $ Net tangible book value per share after the Recapitalization....................................... $ Decrease in net tangible book value from the Chase Conversion, revocation of S Corporation status and S Corporation Distribution............................... Decrease in net tangible book value per share resulting from Completed Transactions after June 30, 1998 and the CBS Transactions....................................... Increase in net tangible book value per share resulting from the Offering...................................... ------- Pro forma net tangible book value per share................. ------- Dilution per share to new investors(1)...................... $ =======
- --------------- (1) Determined by subtracting the pro forma as adjusted net tangible book value per share after the Offering from the assumed initial public offering price per share. If the Underwriters' over-allotment option is exercised in full, the increase in net tangible book value per share resulting from the Offering, pro forma net tangible book value per share after the Offering, and dilution per share to new investors would be $ , $ and $ , respectively. The following table sets forth at June 30, 1998 after giving effect to the Recapitalization, the Chase Conversion, the S Corporation Distribution and the sale of the Class A Common Stock offered by the Company in the Offering: (i) the number of shares of Class A Common Stock purchased by existing shareholders from the Company and the total consideration and the average price per share paid to the Company for such shares; (ii) the number of shares received by Chase Capital in connection with the Chase Conversion and the total consideration and the price per share paid by it for such shares; (iii) the number of shares of Class A Common Stock purchased by new investors in the Offering from the Company and the total consideration and the price per share paid by them for such shares; and (iv) the percentage of shares purchased from the Company by existing shareholders, Chase Capital and the new investors and the percentages of consideration paid to the Company for such shares by existing shareholders and new investors.
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE -------------------- -------------------- PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE -------- -------- -------- -------- --------- Existing shareholders (1)................. % $ % $ Chase Capital............................. New investors............................. -------- -------- -------- -------- Total........................... % $ % ======== ======== ======== ========
- --------------- (1) Does not include shares of Common Stock equal to % of the shares of Class A Common Stock outstanding from time to time that are reserved for issuance under the Company's 1998 Equity Compensation Plan, of which options to purchase shares of Class A Common Stock are issued and outstanding. See "Management -- 1998 Equity Compensation Plan" and "Principal and Selling Shareholders." 22 25 CAPITALIZATION The following table sets forth as of June 30, 1998, in each case after adjustment for the Recapitalization, (i) the historical capitalization of the Company, (ii) the unaudited pro forma capitalization of the Company after giving effect to the Completed Transactions not yet consummated on that date and the CBS Transactions and (iii) the unaudited pro forma capitalization of the Company after giving effect to the foregoing events and the S Corporation Distribution, the Chase Conversion, the Offering and the application of the estimated net proceeds therefrom as described in "Use of Proceeds." This table should be read in conjunction with the Company's Consolidated Financial Statements and the Unaudited Pro Forma Financial Information and the notes thereto included elsewhere in this Prospectus.
AS OF JUNE 30, 1998 ----------------------------------------------- PRO FORMA AS ADJUSTED FOR THE COMPLETED AND CBS TRANSACTIONS, THE S CORPORATION PRO FORMA FOR DISTRIBUTION, THE COMPLETED THE CHASE AND CBS CONVERSION AND ACTUAL TRANSACTIONS THE OFFERING(1) -------- -------------- ----------------- (IN THOUSANDS) Cash and cash equivalents: $ 6,094 $ 5,984 $ 5,984 ======== ======== ======== Short-term debt and current portion of long-term debt............................................. $ 9 $ 9 $ 9 Long-term debt, less current portion: Credit Facility.................................. 251,500 317,350 217,331 7% Subordinated Convertible Note................. 28,848 28,848 Other............................................ 276 276 276 -------- -------- -------- Total long-term debt..................... 280,624 346,474 217,607 Shareholders' equity: Preferred Stock, $.01 par value per share, 25,000,000 shares authorized, no shares issued and outstanding............................... Class A Common Stock, $.01 par value per share, 200,000,000 shares authorized, shares issued and outstanding actual and pro forma, shares issued and outstanding pro forma as adjusted...................................... 2 2 Class B Common Stock, $.01 par value per share, 75,000,000 shares authorized, shares issued and outstanding actual and pro forma, shares issued and outstanding pro forma as adjusted................................... 4 4 Class C Common Stock, $.01 par value per share, 50,000,000 shares authorized, no shares issued and outstanding............................... Additional paid-in capital....................... 710 710 341,523 Retained earnings................................ 218,459 287,329 -------- -------- -------- Total shareholders' equity............... 219,175 288,045 341,523 -------- -------- -------- Total capitalization................ $499,808 $634,528 $559,139 ======== ======== ========
- --------------- (1) Does not include shares of Common Stock equal to 10% of the shares of Class A Common Stock outstanding from time to time that are reserved for issuance under the Company's 1998 Equity Compensation Plan, of which options to purchase shares of Class A Common Stock are issued and outstanding. See "Management -- 1998 Equity Compensation Plan." 23 26 CBS TRANSACTIONS In August 1998, the Company entered into three agreements with CBS, the CBS Transactions, pursuant to which it will (i) purchase WRKO-AM and WEEI-AM in Boston for $82.0 million in cash, (ii) sell WLLD-FM and WYUU-FM in Tampa for $75.0 million in cash and (iii) purchase WAAF-FM and WEGQ-FM in Boston and WWTM-AM in Worchester for $58.0 million. Subject to satisfaction of necessary conditions to closing, the Company currently anticipates that the First Boston Transaction and the Tampa Transaction will close prior to the consummation of the Offering, and that the Second Boston Transaction will close within one year. As each of the three agreements with CBS has separate conditions to closing and none of the transactions is conditioned on the closing of the other two, there can be no certainty concerning when or whether each of the transactions will close or the order in which they will close. The Company began operating the Boston stations and CBS began operating the Tampa stations under time brokerage agreements in September 1998. Upon completion of the Boston Transactions, the Company will have a strong presence in the Boston market with a 19.4% market share. COMPLETED TRANSACTIONS In March 1997, the Company acquired three stations in Seattle, KIRO-AM/FM and KNWX-AM, and four stations in Kansas City, KCMO-AM/FM, KYYS-FM (formerly KLTH-FM) and KMBZ-AM, from Bonneville International Corp. ("Bonneville") in exchange for KLDE-FM in Houston plus $5 million (the "Bonneville Transaction"). The three Seattle stations and a JSA for KING-FM in Seattle complemented the Company's pre-existing holdings of five stations in Seattle, provided the Company with the maximum permissible ownership in that market and solidified the Company as the leading radio operator in Seattle. In addition, the Bonneville Transaction enabled the Company to enter the Kansas City market with a four-station cluster. In April 1997, the Company acquired KLYK-FM and KEDO-AM in Longview/Kelso, Washington from Rodney J. Etherton ("Etherton") for $1.8 million (the "Etherton Transaction"). Longview/Kelso is a market located north of Portland, Oregon, which management considers to be of strategic importance because of its influence over the potential upgrade of certain Portland stations. In May 1997, the Company acquired KLOU-FM in St. Louis plus $39.7 million from Group W Broadcasting, Inc. ("Group W") in exchange for KITS-FM in San Francisco (the "Group W Transaction"). In May 1997, the Company acquired KISW-FM in Seattle plus $32.5 million in exchange for WDSY-FM and WJJJ-FM (formerly WNRQ-FM) in Pittsburgh in a three-way transaction (the "Nationwide-Secret Transaction") with Nationwide Communications, Inc. ("Nationwide") and Secret Communications L.P. ("Secret"). Prior thereto, in June 1996, the Company began operating and selling radio advertising time on KISW-FM pursuant to a TBA. This acquisition added a third rock station to the Company's Seattle cluster. In June 1997, the Company acquired KRXQ-FM and KSEG-FM in Sacramento from Citicasters Inc. ("Citicasters") for $45 million (the "Citicasters Transaction") and KDND-FM (formerly KXOA-FM) in Sacramento from American Radio Systems Corporation ("ARS") for $27.2 million (the "ARS-KXOA Transaction"). Prior thereto, in January 1997, the Company began operating and selling radio advertising time on all three stations pursuant to TBAs. By purchasing three stations, the Company gained a substantial share of the Sacramento market and established a platform for further acquisitions. In October 1997, the Company exchanged the broadcast frequency and transmission facilities of its Kansas City station, KCMO-AM, for those of Kanza Inc.'s ("Kanza") Kansas City station, WHB-AM (the "Kanza Transaction"). Each party retained its call letters, formats and studio facilities. The signal swap allowed the Company to enhance the 24-hour metro signal of KCMO-AM by providing nighttime and winter drive time coverage of Johnson County, Kansas, in the affluent and growing southwestern section of Kansas City. 24 27 In November 1997, the Company acquired KSSJ-FM (formerly KBYA-FM) in Sacramento from Susquehanna Radio Corp ("Susquehanna") for $15.9 million (the "Susquehanna Transaction"). KSSJ-FM was not on-the-air when the Company announced the acquisition but became operational in December 1997. In January 1998, the Company acquired WDAF-AM and KUDL-FM in Kansas City plus $7 million from ARS in exchange for the Company's sole station in St. Louis, KLOU-FM (the "ARS-Kansas City Transaction"). As a result of this transaction, the Company became the leading radio station operator in Kansas City. In January 1998, the Company acquired KCTC-AM in Sacramento from ARS for $4 million (the "ARS-KCTC Transaction") in order to make it possible, under FCC ownership rules, for the Company to acquire a fifth FM station in that market. In May 1998, the Company acquired WSKY-FM (formerly WRRX-FM) in the Gainesville/Ocala market from Gator Broadcasting, Inc. ("Gator") for $2.0 million, plus an additional payment of up to $1.0 million payable once the authorized upgrade of the station from a Class A license to a Class C-2 license becomes final (the "Gator Transaction"). The Company believes that this second Gainesville station will permit it to solidify its leadership position in the Gainesville/Ocala market. In May 1998, the Company sold its rights to participate in a FCC licensing procedure in the Vancouver, Washington radio market to Jacor for $10.0 million (the "Vancouver Transaction"). In May 1998, the Company acquired KBAM-AM and KRQT-FM in the Longview/Kelso market from Armak Broadcasters, Inc. ("Armak") for $1.0 million to bolster the Company's competitive position in that market (the "Armak Transaction"). In June 1998, the Company acquired three stations, KRSK-FM (formerly KKRH-FM), KKSN-FM and KKSN-AM in Portland, and four stations, WBEE-FM, WBBF-FM (formerly WKLX-FM), WEZO-AM (formerly WBBF-AM) and WQRV-FM in Rochester, from Sinclair Broadcasting Group ("Sinclair") for $126.5 million (the "Sinclair Transaction"). Prior thereto, in March 1998, the Company began operating and selling the radio advertising time of these stations under TBAs. The Portland stations significantly enhanced the Company's position in that market by increasing the number of the Company's stations to six and its market share to approximately 25.8%. The acquisition of the Rochester stations enabled the Company to enter that market with a 21.7% market share. In September 1998, the Company exchanged the broadcast frequency and transmission facilities of KRXQ-FM, a Class B-1 station in Sacramento, plus $3.8 million with ARS for the broadcast frequency and transmission facilities of KRAK-FM, a full Class B station in that market (the "Sacramento Frequency Exchange"). Each station retained its call letters, formats and studio facilities. In September 1998, the Company acquired from Capital Broadcasting, Inc. the assets and rental leases used in connection with the operation of a tower facility serving the Kansas City market for $2.1 million (the "Kansas City Tower Transaction"). The Bonneville Transaction, the Etherton Transaction, the Group W Transaction, the Nationwide-Secret Transaction, the Citicasters Transaction, the ARS-KXOA Transaction, the Kanza Transaction, the Susquehanna Transaction, the ARS-Kansas City Transaction, the ARS-KCTC Transaction, the Gator Transaction, the Vancouver Transaction, the Armak Transaction, the Sinclair Transaction, the Sacramento Frequency Exchange and the Kansas City Tower Transaction are referred to collectively as the "Completed Transactions." In addition to the foregoing Completed Transactions, it is anticipated that in November 1998, the Company will acquire from Willamette Broadcasting Co. KSLM-AM, serving the Salem, Oregon portion of the Portland radio market for $0.6 million. The purchase of this radio station is not included in the definition of "Completed Transactions" or in the pro forma financial statements as the effect would be immaterial. 25 28 UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma financial information (the "Pro Forma Financial Information") is based on the audited historical financial statements of the Company and the related notes included elsewhere in this Prospectus and the unaudited historical financial information of Bonneville, Etherton, Group W, Nationwide, Secret, Citicasters, ARS, Susquehanna, Armak, Gator, Sinclair, Capital and CBS. The pro forma statement of income for the year ended September 30, 1997 and for the nine months ended June 30, 1997 and 1998 have been prepared to illustrate the effects of the Recapitalization, the Completed and CBS Transactions, the S Corporation Distribution, the Chase Conversion, the Offering and the application of the net proceeds thereof as described in "Use of Proceeds" as if each had occurred on October 1, 1996. The pro forma balance sheet data as of June 30, 1998 give effect to any such events not yet consummated on that date as if each had occurred on that date. The Pro Forma Financial Information and accompanying notes should be read in conjunction with the consolidated financial statements and other financial information included elsewhere herein pertaining to the Company, including "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Pro Forma Financial Information is not necessarily indicative of either future results of operations or the results that might have been achieved if such transactions had been completed on the indicated dates. The Pro Forma Financial Information has been prepared as if the Credit Facility was entered into on October 1, 1996 at the terms currently in effect. Additionally, it has been assumed that the Company's conversion from an S Corporation to a C Corporation became effective on October 1, 1996. All acquisitions given effect in the Pro Forma Financial Information are accounted for using the purchase method of accounting. The aggregate purchase price of each transaction is allocated to the tangible and intangible assets acquired and liabilities assumed based on their respective fair values. The allocation of the aggregate purchase price reflected in the Pro Forma Financial Information is preliminary for transactions to be closed subsequent to June 30, 1998. The final allocation of the purchase price is contingent upon the receipt of final appraisals of the acquired assets and the revision of other estimates. Management does not expect such allocations to differ materially from the preliminary allocation. 26 29 ENTERCOM COMMUNICATIONS CORP. UNAUDITED PRO FORMA STATEMENT OF INCOME FOR THE YEAR ENDED SEPTEMBER 30, 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
ADJUSTMENTS PRO FORMA ADJUSTMENTS FOR COMPLETED FOR THE FOR THE THE OFFERING, AND CBS COMPLETED COMPLETED THE S CORPORATION THE TRANSACTIONS AND CBS AND CBS DISTRIBUTION AND COMPANY COMBINED(A) TRANSACTIONS TRANSACTIONS CHASE CONVERSION TOTAL PRO FORMA -------- ------------ ------------ ------------ ----------------- ---------------- Net revenues.................. $ 93,862 $62,443 $156,305 $156,305 Station operating expenses.... 60,024 52,533 $ (2,034)(B) 110,523 110,523 Depreciation and amortization................ 7,685 9,192 1,874(C) 18,751 18,751 Corporate general and administrative expenses..... 3,249 (354) 2,895 2,895 Net TBA expenses (income)..... (476) 3,054 (2,578)(D) Other operating expenses...... 1,256 (1,256) -------- ------- -------- -------- -------- -------- Operating income (loss)..... 22,124 (726) 2,738 24,136 24,136 Interest expense.............. 11,388 41 15,317(E) 26,746 $(11,736)(F) 15,010 Gain on sale of assets........ 197,097 8,468 205,565 205,565 Other (income) expense........ 1,504 228 1,732 (1,986)(G) (254) -------- ------- -------- -------- -------- -------- Income before income taxes and extraordinary items... 206,329 7,473 (12,579) 201,223 13,722 214,945 Income taxes.................. 489 489 489 -------- ------- -------- -------- -------- -------- Income before extraordinary items....................... $205,840 $ 7,473 $(12,579) $200,734 $ 13,722 $214,456 ======== ======= ======== ======== ======== ======== Income before income taxes and extraordinary items......... $206,329 $ 7,473 $(12,579) $201,223 $ 13,722 $214,945 Pro forma income taxes(H)..... 78,405 2,840 (4,780) 76,465 5,214 81,679 -------- ------- -------- -------- -------- -------- Pro forma income before extraordinary items......... $127,924 $ 4,633 $ (7,799) $124,758 $ 8,508 $133,266 ======== ======= ======== ======== ======== ======== Pro forma earnings per share before extraordinary items....................... Shares used to compute pro forma earnings per share....
See accompanying notes to pro forma financial information. 27 30 ENTERCOM COMMUNICATIONS CORP. UNAUDITED PRO FORMA STATEMENT OF INCOME FOR THE NINE MONTHS ENDED JUNE 30, 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
ADJUSTMENTS FOR ADJUSTMENTS PRO FORMA THE OFFERING, THE COMPLETED FOR THE FOR THE S CORPORATION AND CBS COMPLETED COMPLETED DISTRIBUTION THE TRANSACTIONS AND CBS AND CBS AND CHASE COMPANY COMBINED(I) TRANSACTIONS TRANSACTIONS CONVERSION TOTAL PRO FORMA -------- ------------ ------------ ------------ ----------------- ---------------- Net revenues.................... $ 64,540 $49,624 $114,164 $114,164 Station operating expenses...... 40,554 41,999 $(1,762)(B) 80,791 80,791 Depreciation and amortization... 3,874 7,155 1,681(C) 12,710 12,710 Corporate general and administrative expenses....... 2,259 (246) 2,013 2,013 Net TBA expenses (income)....... (476) 2,814 (2,338)(D) Other operating expenses........ 1,203 (1,203) -------- ------- ------- -------- ------- -------- Operating income (loss)....... 17,126 (895) 2,419 18,650 18,650 Interest expense................ 8,454 17 11,589(J) 20,060 $(8,802)(K) 11,258 Gain on sale of assets.......... 197,097 8,488 205,585 205,585 Other (income) expense.......... 1,580 228 1,808 (1,970)(G) (162) -------- ------- ------- -------- ------- -------- Income before income taxes and extraordinary items......... 204,189 7,348 (9,170) 202,367 10,772 213,139 Income taxes.................... 261 261 261 -------- ------- ------- -------- ------- -------- Income before extraordinary items......................... $203,928 $ 7,348 $(9,170) $202,106 $10,772 $212,878 ======== ======= ======= ======== ======= ======== Income before income taxes and extraordinary items........... $204,189 $ 7,348 $(9,170) $202,367 $10,772 $213,139 Pro forma income taxes(H)....... 77,592 2,792 (3,485) 76,899 4,093 80,992 -------- ------- ------- -------- ------- -------- Pro forma income before extraordinary items........... $126,597 $ 4,556 $(5,685) $125,468 $ 6,679 $132,147 ======== ======= ======= ======== ======= ======== Pro forma earnings per share before extraordinary items.... Shares used to compute pro forma earnings per share............
See accompanying notes to pro forma financial information. 28 31 ENTERCOM COMMUNICATIONS CORP. UNAUDITED PRO FORMA STATEMENT OF INCOME FOR THE NINE MONTHS ENDED JUNE 30, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
ADJUSTMENTS FOR THE OFFERING, ADJUSTMENTS PRO FORMA THE COMPLETED FOR THE FOR THE S CORPORATION AND CBS COMPLETED COMPLETED DISTRIBUTION THE TRANSACTIONS AND CBS AND CBS AND THE CHASE COMPANY COMBINED(L) TRANSACTIONS TRANSACTIONS CONVERSION TOTAL PRO FORMA ------- ------------ ------------ ------------ --------------- --------------- Net revenues.................. $92,086 $30,915 $123,001 $123,001 Station operating expenses.... 61,487 27,361 $ (2,979)(B) 85,869 85,869 Depreciation and amortization................ 8,959 5,896 (914)(C) 13,941 13,941 Corporate general and administrative expenses..... 3,042 62 3,104 3,104 Net TBA expenses.............. 2,273 (2,273)(D) Other operating expenses...... 130 (130) ------- ------- -------- -------- ------- -------- Operating income (loss)..... 16,195 (2,274) 6,166 20,087 20,087 Interest expense.............. 9,175 14 10,965(M) 20,154 $(8,896)(P) 11,258 Gain (loss) on sale of assets...................... 8,791 (8) 8(N) 291 291 (8,500)(O) Other (income) expense........ (225) 147 (78) (82)(G) (160) ------- ------- -------- -------- ------- -------- Income (loss) before income taxes and extraordinary items..................... 16,036 (2,443) (13,291) 302 8,978 9,280 Income taxes.................. 172 172 172 ------- ------- -------- -------- ------- -------- Income (loss) before extraordinary items......... $15,864 $(2,443) $(13,291) $ 130 $ 8,978 $ 9,108 ======= ======= ======== ======== ======= ======== Income (loss) before income taxes and extraordinary items....................... $16,036 $(2,443) $(13,291) $ 302 $ 8,978 $ 9,280 Pro forma income taxes(H)..... 6,094 (928) 5,051 115 3,412 3,527 ------- ------- -------- -------- ------- -------- Pro forma income (loss) before extraordinary items......... $ 9,942 $(1,515) $ (8,240) $ 187 $ 5,566 $ 5,753 ======= ======= ======== ======== ======= ======== Pro forma earnings per share before extraordinary items....................... Shares used to compute pro forma earnings per share....
See accompanying notes to pro forma financial information. 29 32 ENTERCOM COMMUNICATIONS CORP. UNAUDITED PRO FORMA BALANCE SHEET AS OF JUNE 30, 1998 (IN THOUSANDS)
ADJUSTMENTS PRO FORMA ADJUSTMENTS FOR COMPLETED FOR THE FOR THE THE OFFERING, AND CBS COMPLETED COMPLETED THE S CORPORATION THE TRANSACTIONS AND CBS AND CBS DISTRIBUTION AND COMPANY COMBINED(Q) TRANSACTIONS TRANSACTIONS CHASE CONVERSION TOTAL PRO FORMA -------- ------------ ------------ ------------ ----------------- ---------------- ASSETS Current Assets: Cash and cash equivalents.... $ 6,094 $ (110) $ --(R) $ 5,984 $ 5,984 Accounts receivable, net..... 30,469 8,353 (9,276)(R) 29,546 29,546 Prepaid expenses and other... 2,797 836 (893)(R) 2,740 $ 2,207(W) 4,947 -------- ------- -------- -------- --------- -------- Total current assets....... 39,360 9,079 (10,169) 38,270 2,207 40,477 Property and equipment, net.... 45,543 7,899 (3,851)(S) 49,591 49,591 Intangible and other assets, net.......................... 428,542 35,403 101,083(S) 565,028 (970)(X) 564,058 -------- ------- -------- -------- --------- -------- Total Assets............... $513,445 $52,381 $ 87,063 $652,889 $ 1,237 $654,126 ======== ======= ======== ======== ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and other accrued expenses........... $ 11,443 $ 2,708 $ (2,984)(R) $ 16,167 $ 16,167 5,000(T) Current portion of long-term debt....................... 9 35 (35)(R) 9 9 -------- ------- -------- -------- --------- -------- Total current liabilities.............. 11,452 2,743 1,981 16,176 16,176 Long-term debt, less current portion...................... 280,624 5,850 140,000(U) 346,474 $(186,000)(Y) 217,607 (75,000)(V) (28,848)(X) (5,000)(T) 70,159(Z) 15,822(AA) Other long-term liabilities.... 2,194 -- --(R) 2,194 78,820(W) 78,820 (2,194)(AB) -------- ------- -------- -------- --------- -------- Total liabilities.......... 294,270 8,593 61,981 364,844 (52,241) 312,603 Shareholders' Equity: Common Stock -- Nonvoting.... 2 2 2 Common Stock -- Voting....... 4 4 4 Additional Paid in Capital... 710 710 340,807(AD) 341,517 Retained Earnings............ 218,459 43,788 (49,918)(R) 287,329 (76,613)(W) 0 75,000(V) 186,000(Y) 27,878(X) (70,159)(Z) (15,822)(AA) 2,194(AB) (340,807)(AD) Total Shareholders' Equity................... 219,175 43,788 25,082 288,045 53,478 341,523 -------- ------- -------- -------- --------- -------- Total liabilities and shareholders' equity..... $513,445 $52,381 $ 87,063 $652,889 $ 1,237 $654,126 ======== ======= ======== ======== ========= ========
See accompanying notes to pro forma financial information. 30 33 NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS) (A) The schedule below gives effect to the Completed and CBS Transactions for the period from October 1, 1996 through September 30, 1997. COMPLETED AND CBS TRANSACTIONS COMBINED
COMPLETED TRANSACTIONS --------------------------------------------------------------------------- HISTORICAL OTHER HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS SINCLAIR(1) ARS(2) BONNEVILLE(3) CITICASTERS(4) COMBINED(5) ------------ ---------- -------------- --------------- ------------ Net revenues......... $16,423 $8,330 $12,665 $1,781 $(10,350) Station operating expenses............ 8,763 7,015 12,398 1,369 (5,664) Depreciation and amortization........ 2,328 1,135 1,478 926 571 Corporate general and administrative expenses............ (11) Net TBA expenses..... 2,669 Other operating expenses............ (1,256) ------- ------ ------- ------ -------- Operating income (loss)............ 5,332 180 (1,211) (514) (6,659) Interest expense..... Gain (loss) on sale of assets........... 8,500 Other expense........ 228 ------- ------ ------- ------ -------- Income (loss) before income tax expense........... 5,332 180 (1,211) (514) 1,613 Income taxes......... ------- ------ ------- ------ -------- Net income (loss)... $ 5,332 $ 180 $(1,211) $ (514) $ 1,613 ======= ====== ======= ====== ======== CBS TRANSACTIONS ----------------------- COMPLETED AND CBS HISTORICAL HISTORICAL TRANSACTIONS BOSTON (6) TAMPA (7) COMBINED(8) ---------- ---------- ------------ Net revenues......... $38,375 $(4,781) $62,443 Station operating expenses............ 32,309 (3,657) 52,533 Depreciation and amortization........ 2,985 (231) 9,192 Corporate general and administrative expenses............ (364) 21 (354) Net TBA expenses..... 385 3,054 Other operating expenses............ (1,256) ------- ------- ------- Operating income (loss)............ 3,060 (914) (726) Interest expense..... 41 41 Gain (loss) on sale of assets........... (20) (12) 8,468 Other expense........ 228 ------- ------- ------- Income (loss) before income tax expense........... 2,999 (926) 7,473 Income taxes......... ------- ------- ------- Net income (loss)... $ 2,999 $ (926) $ 7,473 ======= ======= =======
- --------------- (1) The column represents the results of operations of KKSN-AM/FM and KRSK-FM (formerly KKRH-FM) in Portland and WBBF-FM (formerly WKLX-FM), WBEE-FM, WQRV-FM and WEZO-AM (formerly WBBF-AM) in Rochester from October 1, 1996 through September 30, 1997, prior to the date of the Sinclair Transaction. (2) The column represents the results of operations of KDND-FM (formerly KXOA-FM) in Sacramento from October 1, 1996 through December 31, 1996, prior to the date of the TBA with ARS, and of WDAF-AM and KUDL-FM in Kansas City, and KCTC-AM in Sacramento from October 1, 1996 through September 30, 1997, prior to the dates of the ARS-Kansas City Transaction and the ARS-KCTC Transaction, respectively. (3) The column represents the results of operations of KIRO-AM/FM and KNWX-AM in Seattle and KCMO-AM/FM, KYYS-FM (formerly KLTH-FM) and KMBZ-AM in Kansas City from October 1, 1996 through February 28, 1997, prior to the date of the TBA with Bonneville. (4) The column represents the results of operations of KSEG-FM and KRXQ-FM in Sacramento from October 1, 1996 through December 31, 1996, prior to the date of the TBA with Citicasters. (5) The column represents the historical results of operations for the following transactions which were consummated prior to the date of the Offering: (i) the acquisitions of WSKY-FM (formerly WRRX-FM) in Gainesville, KSSJ-FM (formerly KBYA-FM) in Sacramento and KBAM-AM, KRQT-FM, KEDO-AM, and KLYK-FM in Longview/Kelso, (ii) the disposition of KITS-FM in San Francisco, KLDE-FM in Houston, KLOU-FM in St. Louis, KEGE-AM in Minneapolis and 31 34 NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED) WDSY-FM and WJJJ-FM (formerly WNRQ-FM) in Pittsburgh, (iii) the Kansas City Tower Transaction, (iv) the Sacramento Frequency Exchange and (v) the Vancouver Transaction. (6) The column represents the results of operations of WEEI-AM, WRKO-AM, WEGQ-FM and WAAF-FM in Boston and WWTM-AM in Worcester from October 1, 1996 through September 30, 1997, prior to the date of the Boston Transactions. (7) The column represents the results of operations of WYUU-FM and WLLD-FM in Tampa from October 1, 1996 through September 30, 1997, prior to the date of the Tampa Transaction. (8) All stations acquired in the Completed and CBS Transactions have December 31 year ends. Amounts derived for these transactions for the year ended September 30, 1997 were computed by: (1) adding fourth quarter 1996 results to December 31, 1997 results, and (2) subtracting 1997 fourth quarter results. (B) The adjustment reflects the estimated amortization of the liability assumed for certain loss contracts acquired in the transaction. (C) This adjustment represents the change in depreciation arising from an increase in property, equipment, FCC licenses and intangibles, offset by a decrease in those assets, as a result of the various acquisitions and dispositions described herein, as well as establishing the estimated useful lives of the acquired assets. Under the Company's normal accounting policies, property and equipment are depreciated over periods of five to twenty years, and intangibles are amortized over forty years. (D) The adjustment reflects the TBA expenses (income) received or paid related to the operations of the stations under TBAs while pending the consummation of purchase or sale of the Completed Transactions. (E) The adjustment reflects interest expense under the current Credit Facility, based on the rate of 7.86%, and the 7% Subordinated Convertible Note as if the Completed and CBS Transactions were completed on October 1, 1996, net of the historical interest expense. The calculation of interest expense assumes an outstanding indebtedness under the Credit Facility of $317,350 (consisting of $251,500 of previously incurred indebtedness, plus the $135,000 in additional indebtedness incurred to fund the Boston Transaction, less the $75,000 reduction in indebtedness following the application of proceeds from the sale of WYUU-FM and WLLD-FM in Tampa, plus the $5,850 in indebtedness assumed as a result of the Kansas City Tower and Sacramento Frequency Exchange). A change in interest rates of 1/8% will increase or decrease interest expense by $408. Credit Facility............................................. $ 24,932 7% Subordinated Convertible Note............................ 1,794 Other Indebtedness.......................................... 20 -------- Pro forma interest expense................................ 26,746 Historical interest expense................................. (11,429) -------- Net adjustment............................................ $ 15,317 ========
(F) The adjustment reflects (i) the interest expense savings resulting from the use of proceeds from the Offering, (ii) the Chase Conversion and (iii) an $86,000 increase in outstanding indebtedness as a result of the S Corporation Distribution, all net of pro forma interest expense as adjusted for the Completed and CBS Transactions (see Note (E)). The remaining indebtedness incurs assumed interest expense at a rate of 6.90%, based on the current terms of the Credit Facility. The calculation of interest expense assumes an outstanding indebtedness under the Credit Facility of $217,350 (consisting of $317,350 of indebtedness outstanding after the Completed and CBS Transactions, plus the $86,000 of additional indebtedness outstanding after the S Corporation Distribution, and less the $186,000 of indebtedness which will be repaid with the proceeds from the Offering). The net adjustment figure includes $5,934 of 32 35 NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED) interest on the $86,000 indebtedness incurred to fund the S Corporation Distribution. A change in interest rates of 1/8% will increase or decrease interest expense by $259. Credit Facility............................................. $ 15,010 7% Subordinated Convertible Note............................ 0 -------- Pro forma interest expense................................ 15,010 Pro forma interest expense as adjusted for the Completed and CBS Transactions.......................................... (26,746) -------- Net adjustment............................................ $(11,736) ========
(G) The adjustment reflects the elimination of the income attributable to a 1% limited partnership interest held by an affiliate of the Company, ECI Investors Corporation ("Investors"), as a result of the contribution of the stock of such affiliate to the Company, which will occur immediately prior to the Offering. (H) The adjustment reflects the income tax expense (benefit) related to the income (loss) that would have been generated by the Company during the pro forma period based on the assumption that the conversion from an S Corporation to a C Corporation occurred on October 1, 1996. A combined federal and state income tax rate of 38% was used for this calculation. (I) The schedule below gives effect to the Completed and CBS Transactions for the period from October 1, 1996 through June 30, 1997. COMPLETED AND CBS TRANSACTIONS COMBINED
COMPLETED TRANSACTIONS ---------------------------------------------------------------------------- HISTORICAL OTHER HISTORICAL HISTORICAL HISTORICAL HISTORICAL TRANSACTIONS SINCLAIR(1) ARS(2) BONNEVILLE(3) CITICASTERS(4) COMBINED(5) ------------ ---------- -------------- --------------- ------------- Net revenues.................. $12,397 $6,605 $12,665 $1,781 $(9,422) Station operating expenses.... 6,628 5,446 12,398 1,369 (5,095) Depreciation and amortization................ 1,317 970 1,478 926 655 Corporate general and administrative expenses..... Net TBA expenses (income)..... 2,669 Other operating expenses...... (1,203) ------- ------ ------- ------ ------- Operating income (loss)....... 4,452 189 (1,211) (514) (6,448) Interest expense.............. Gain (loss) on sale of assets...................... 8,500 Other expense................. 228 ------- ------ ------- ------ ------- Income (loss) before income tax expense................. 4,452 189 (1,211) (514) 1,824 Income taxes.................. ------- ------ ------- ------ ------- Net income (loss)............. $ 4,452 $ 189 $(1,211) $ (514) $ 1,824 ======= ====== ======= ====== ======= CBS TRANSACTIONS ----------------------- COMPLETED AND CBS HISTORICAL HISTORICAL TRANSACTIONS BOSTON(6) TAMPA(7) COMBINED(8) ---------- ---------- ------------ Net revenues.................. $29,281 $(3,683) $49,624 Station operating expenses.... 23,972 (2,719) 41,999 Depreciation and amortization................ 1,956 (147) 7,155 Corporate general and administrative expenses..... (246) (246) Net TBA expenses (income)..... 145 2,814 Other operating expenses...... (1,203) ------- ------- ------- Operating income (loss)....... 3,454 (817) (895) Interest expense.............. 17 17 Gain (loss) on sale of assets...................... (12) 8,488 Other expense................. 228 ------- ------- ------- Income (loss) before income tax expense................. 3,437 (829) 7,348 Income taxes.................. ------- ------- ------- Net income (loss)............. $ 3,437 $ (829) $ 7,348 ======= ======= =======
-------------------- (1) The column represents the results of operations of KKSN-AM/FM and KRSK-FM (formerly KKRH-FM) in Portland and WBBF-FM (formerly WKLX-FM), WBEE-FM, WQRV-FM and WEZO-AM (formerly WBBF-AM) in Rochester from October 1, 1996 through June 30, 1997, prior to the date of the Sinclair Transaction. (2) The column represents the results of operations of KDND-FM (formerly KXOA-FM) in Sacramento from October 1, 1996 through December 31, 1996, prior to the date of the TBA with ARS, and of WDAF-AM and KUDL-FM in Kansas City, and KCTC-AM in Sacramento from October 1, 1996 through June 30, 1997, prior to the dates of the ARS-Kansas City Transaction and the ARS-KCTC Transaction, respectively. 33 36 NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED) (3) The column represents the results of operations of KIRO-AM/FM and KNWX-AM in Seattle and KCMO-AM/FM, KYYS-FM (formerly KLTH-FM), and KMBZ-AM in Kansas City from October 1, 1996 through February 28, 1997, prior to the date of the TBA with Bonneville. (4) The column represents the results of operations of KSEG-FM and KRXQ-FM in Sacramento from October 1, 1996 through December 31, 1996, prior to the date of the TBA with Citicasters. (5) The column represents the historical results of operations for the following transactions which were consummated prior to the date of the Offering: (i) the acquisitions of WSKY-FM (formerly WRRX-FM) in Gainesville, KSSJ-FM (formerly KBYA-FM) in Sacramento and KBAM-AM, KRQT-FM, KEDO-AM, and KLYK-FM in Longview/Kelso, (ii) the dispositions of KITS-FM in San Francisco, KLDE-FM in Houston, KLOU-FM in St. Louis, KEGE-AM in Minneapolis and WDSY-FM and WJJJ-FM (formerly WNRQ-FM) in Pittsburgh, (iii) the Kansas City Tower Transaction, (iv) the Sacramento Frequency Exchange and (v) the Vancouver Transaction. (6) The column represents the results of operations of WEEI-AM, WRKO-AM, WEGQ-FM, and WAAF-FM in Boston and WWTM-AM in Worcester from October 1, 1996 through June 30, 1997, prior to the date of the Boston Transactions. (7) The column represents the results of operations of WYUU-FM and WLLD-FM in Tampa from October 1, 1996 through June 30, 1997, prior to the date of the Tampa Transaction. (8) All stations acquired in the Completed and CBS Transactions have December 31 year ends. Amounts derived for these transactions for the nine month period ended June 30, 1997 were computed by adding fourth quarter 1996 results to interim period results for the first and second quarters of 1997. (J) The adjustment reflects interest expense under the current Credit Facility, based on the rate of 7.86%, and 7% Subordinated Convertible Note as if the Completed and CBS Transactions were completed on October 1, 1996, net of the historical interest expense. The calculation of interest expense assumes an outstanding indebtedness under the Credit Facility of $317,350 (consisting of $251,500 of previously incurred indebtedness, plus the $135,000 in additional indebtedness incurred to fund the Boston Transactions, less the $75,000 reduction in indebtedness following the application of proceeds from the sale of WYUU-FM and WLLD-FM in Tampa, plus the $5,850 in indebtedness assumed as a result of the Kansas City Tower and Sacramento Frequency Exchange).A change in interest rates of 1/8% will increase or decrease interest expense by $306. Credit Facility............................................. $18,699 7% Subordinated Convertible Note............................ 1,346 Other indebtedness.......................................... 15 ------- Pro forma interest expense................................ 20,060 Historical interest expense................................. (8,471) ------- Net adjustment............................................ $11,589 =======
(K) The adjustment reflects (i) the interest expense savings resulting from the use of proceeds from the Offering, (ii) the Chase Conversion and (iii) an $86,000 increase in outstanding indebtedness as a result of the S Corporation Distribution, all net of pro forma interest expense as adjusted for the Completed and CBS Transactions (see Note (J)). The remaining indebtedness incurs assumed interest expense at a rate of 6.90%, based on the current terms of the Credit Facility. The net adjustment figure includes $2,967 of interest on the $86,000 indebtedness incurred to fund the S Corporation Distribution. 34 37 NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED) Credit Facility............................................. $ 11,258 7% Subordinated Convertible Note............................ 0 -------- Pro forma interest expense................................ 11,258 Pro forma interest expense as adjusted for the Completed and CBS Transactions.......................................... (20,060) -------- Net adjustment............................................ $ (8,802) ========
(L) The schedule below gives effect to the Completed and CBS Transactions for the period from October 1, 1997 through June 30, 1998. COMPLETED AND CBS TRANSACTIONS COMBINED
COMPLETED TRANSACTIONS CBS TRANSACTIONS --------------------------------------- ----------------------- HISTORICAL COMPLETED OTHER AND CBS HISTORICAL HISTORICAL TRANSACTIONS HISTORICAL HISTORICAL TRANSACTIONS SINCLAIR(1) ARS(2) COMBINED(3) BOSTON(4) TAMPA(5) COMBINED(6) ----------- ---------- ------------ ---------- ---------- ------------ Net revenues...................... $ 6,460 $1,847 $ (762) $27,038 $(3,668) $30,915 Station operating expenses........ 3,498 1,554 (202) 25,193 (2,682) 27,361 Depreciation and amortization..... 4,316 165 466 1,164 (215) 5,896 Corporate general and administrative expenses......... 62 62 Net TBA expenses (income)......... Other operating expenses.......... (130) (130) ------- ------ ------- ------- ------- ------- Operating income (loss)......... (1,354) 128 (896) 619 (771) (2,274) Interest expense.................. 14 14 Gain (loss) on sale of assets..... (8) (8) Other expense..................... 147 147 ------- ------ ------- ------- ------- ------- Income (loss) before income tax expense....................... (1,354) 128 (1,043) 597 (771) (2,443) Income taxes...................... ------- ------ ------- ------- ------- ------- Net income (loss)............... $(1,354) $ 128 $(1,043) $ 597 $ (771) $(2,443) ======= ====== ======= ======= ======= =======
- --------------- (1) The column represents the results of operations of KKSN-AM/FM and KRSK-FM (formerly KKRH-FM) in Portland and WBBF-FM (formerly WKLX-FM), WBEE-FM, WQRV-FM and WEZO-AM (formerly WBBF-AM) in Rochester from October 1, 1997 through February 28, 1998, the date the Company began operating the stations under TBAs. (2) The column represents the results of operations of WDAF-AM and KUDL-FM in Kansas City and KCTC-AM in Sacramento from October 1, 1997 through December 31, 1997, prior to the dates of the ARS-Kansas City Transaction and the ARS-KCTC Transaction, respectively. (3) The column represents the historical results of operations for the following transactions which were consummated prior to the date of the Offering: (i) the acquisitions of WSKY-FM (formerly WRRX-FM) in Gainesville, KSSJ-FM (formerly KBYA-FM) in Sacramento and KBAM-AM and KRQT-FM in Longview/Kelso, (ii) the disposition of KLOU-FM in St. Louis, (iii) the Kansas City Tower Transaction, and (iv) the Sacramento Frequency Exchange. (4) The column represents the results of operations of WEEI-AM, WRKO-AM, WEGQ-FM and WAAF-FM in Boston and WWTM-AM in Worcester from October 1, 1997 through June 30, 1998, prior to the date of the Boston Transactions. (5) The column represents the results of operations of WYUU-FM and WLLD-FM in Tampa from October 1, 1997 through June 30, 1998, prior to the date of the Tampa Transaction. 35 38 NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED) (6) All stations acquired in the Completed and CBS Transactions have December 31 year ends. Amounts derived for these transactions for the nine month period ended June 30, 1998 were computed by adding fourth quarter 1997 results to interim period results for the first and second quarters of 1998. (M) The adjustment reflects interest expense under the current Credit Facility, based on the rate of 7.86%, and 7% Subordinated Convertible Note as if the Completed and CBS Transactions were completed on October 1, 1996, net of the historical interest expense. The calculation of interest expense assumes an outstanding indebtedness under the Credit Facility of $17,350 (consisting of $251,500 of previously incurred indebtedness, plus the $135,000 in additional indebtedness incurred to fund the Boston Transaction, less the $75,000 reduction in indebtedness following the application of proceeds from the sale of WYUU-FM and WLLD-FM in Tampa, plus the $5,850 in indebtedness assumed as a result of the Kansas City Tower and Sacramento Frequency Exchange). A change in interest rates of 1/8% will increase or decrease interest expense by $306. Credit Facility............................................. $18,699 7% Subordinated Convertible Note............................ 1,440 Other indebtedness.......................................... 15 ------- Pro forma interest expense................................ 20,154 Historical interest expense................................. (9,189) ------- Net adjustment............................................ $10,965 =======
(N) The adjustment represents the elimination of the historical gain on asset sale recorded by CBS. (O) The adjustment reflects the elimination of the gain on the sale of the Vancouver license rights. For purposes of the pro forma presentation, the sale is deemed to have occurred on October 1, 1996. Accordingly, the gain on the sale is reflected on the pro forma statements of income for the year ended September 30, 1997 and for the nine months ended June 30, 1997. (P) The adjustment reflects (i) the interest expense savings resulting from the use of proceeds from the Offering, (ii) the Chase Conversion and (iii) an $86,000 increase in outstanding indebtedness as a result of the S Corporation Distribution, all net of pro forma interest expense as adjusted for the Completed and CBS Transactions (see Note (M)). The remaining indebtedness incurs assumed interest expense at a rate of 6.90%, based on the current terms of the Credit Facility. The net adjustment figure includes $2,967 of interest on the $86,000 indebtedness incurred to fund the S Corporation Distribution. Credit Facility............................................. $ 11,258 7% Subordinated Convertible Note............................ 0 -------- Pro forma interest expense................................ 11,258 Pro forma interest expense as adjusted for the Completed and CBS Transactions.......................................... (20,154) -------- Net adjustment............................................ $ (8,896) ========
(Q) The column represents the combined balance sheets as of June 30, 1998 of those Completed Transactions not yet consummated on that date and the CBS Transactions as if all such transactions were consummated on that date. 36 39 NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED) COMPLETED AND CBS TRANSACTIONS COMBINED
COMPLETED TRANSACTIONS ------------ HISTORICAL CBS TRANSACTIONS OTHER ----------------------- COMPLETED AND TRANSACTIONS HISTORICAL HISTORICAL CBS TRANSACTIONS COMBINED(1) BOSTON(2) TAMPA(3) COMBINED ------------ ---------- ---------- ---------------- ASSETS Current Assets: Cash................................. $ $ (110) $ (110) Accounts receivable, net............. 9,276 (923) 8,353 Prepaid expenses and other........... $ 893 (57) 836 ------ ------- ------- ------- Total current assets.............. 10,169 (1,090) 9,079 Property and equipment, net.......... 269 10,381 (2,751) 7,899 Intangible and other assets, net..... 5,581 32,387 (2,565) 35,403 ------ ------- ------- ------- Total assets................. $5,850 $52,937 $(6,406) $52,381 ====== ======= ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and other accrued liabilities....................... $ 2,984 $ (276) $ 2,708 Long-term debt, current portion...... 35 35 ------ ------- ------- ------- Total current liabilities......... 3,019 (276) 2,743 Long-term debt, less current portion........................... $5,850 5,850 Other long-term liabilities.......... -- ------ ------- ------- ------- Total liabilities................. 5,850 3,019 (276) 8,593 Shareholders' equity................. 0 49,918 (6,130) 43,788 ------ ------- ------- ------- Total liabilities and shareholders' equity....... $5,850 $52,937 $(6,406) $52,381 ====== ======= ======= =======
- --------------- (1) The column reflects the combined balance sheets of the following transactions consummated subsequent to June 30, 1998, but prior to the Offering: (i) the Kansas City Tower Transaction and (ii) the Sacramento Frequency Exchange. (2) The column represents the combined balance sheet of WEEI-AM, WRKO-AM, WEGQ-FM, WAAF-FM in Boston and WWTM-AM in Worcester as the CBS Transactions will be consummated subsequent to June 30, 1998. (3) The column represents the combined balance sheet of WYUU-FM and WLLD-FM in Tampa as the Tampa Transaction will be consummated subsequent to June 30, 1998. (R) The adjustment represents the elimination of the historical CBS balance as this amount will not be acquired or assumed by the Company, as the case may be, in the asset purchase agreement. 37 40 NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED) (S) The adjustment reflects the estimated allocation of the purchase price of the Boston Transactions to the assets acquired resulting in adjustments to the property and equipment and intangibles and other assets to their estimated fair values associated with the acquisition as follows:
ESTIMATED ALLOCATION OF CARRYING PURCHASE PRICE VALUE ADJUSTMENTS -------------- -------- ----------- Property and equipment, net................... $ 6,530 $10,381 $ (3,851) Intangible and other assets, net FCC Licenses................................ 133,240 32,387 100,853 Other Intangibles........................... 230 -- 230 -------- ------- -------- Total intangible and other assets........... 133,470 32,387 101,083 -------- ------- -------- Total purchase price................ $140,000 $42,768 $ 97,232 ======== ======= ========
Intangible and other assets are amortized over a period of 40 years. (T) The adjustment reflects the amount to be received from CBS to offset prospective losses from certain contracts acquired in the CBS Transactions. (U) The adjustment reflects the increase in debt necessary to fund the Boston Transactions. (V) The adjustment reflects the proceeds received for WYUU-FM and WLLD-FM in the Tampa Transaction. (W) The adjustment represents the recording of the current deferred tax assets and the deferred tax liabilities related to the conversion from an S Corporation to a C Corporation. (X) The adjustment reflects the Chase Conversion. (Y) The adjustment reflects assumed proceeds to the Company of $186 million from the Offering, net of estimated fees and expenses. (Z) The adjustment reflects the portion of the S Corporation Distribution related to the estimated amount of the Company's taxed but undistributed income through the Revocation Date (including the income from the Tampa Transaction). (AA) The adjustment reflects the portion of the S Corporation Distribution which is estimated to be the taxes due by existing S Corporation shareholders as a result of the income of the Company through the Revocation Date (including the income from the Tampa Transaction) net of prior distributions to such shareholders for such taxes. (AB) The adjustment reflects the effect of the contribution of the stock of ECI Investors Corporation, which will occur immediately prior to the Offering. 38 41 SELECTED HISTORICAL FINANCIAL DATA The operating and other data in the following table have been derived from audited financial statements of the Company for the years ended September 30, 1995, 1996 and 1997 and for the nine months ended June 30, 1998 and the unaudited financial statements of the Company for the nine months ended June 30, 1997, all of which are included elsewhere in this Prospectus, and from audited financial statements for the years ended September 30, 1993 and 1994. The selected balance sheet data in the following table have been derived from audited financial statements of the Company as of September 30, 1996 and 1997 and June 30, 1998, all of which are included elsewhere in this Prospectus, and from audited financial statements of the Company as of September 30, 1993, 1994 and 1995. In management's opinion, the unaudited financial statements from which such data have been derived include all adjustments (consisting only of normal, recurring adjustments) necessary to present fairly, in all material respects, the results of operations and financial condition of the Company as of and for the periods presented. The comparability of the historical financial data reflected herein has been significantly impacted by acquisitions and dispositions. The information presented below is qualified in its entirety by, and should be read in conjunction with the "Audited Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the "Unaudited Pro Forma Financial Information," and, in each case, the related notes included elsewhere in this Prospectus.
NINE MONTHS ENDED FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30, ------------------------------------------------- ---------------------- 1993 1994 1995 1996 1997 1997 1998 ------- ------- ------- -------- -------- ----------- -------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING DATA: Net revenues.................... $30,065 $29,137 $35,893 $ 48,675 $ 93,862 $ 64,540 $ 92,086 Station operating expenses...... 22,478 21,520 24,061 31,659 61,280 41,757 61,617 Depreciation and amortization... 2,182 2,248 2,225 2,960 7,685 3,874 8,959 Corporate general and administrative expenses....... 2,015 2,300 2,535 2,872 3,249 2,259 3,042 Net TBA expenses (income)....... 603 (879) (476) (476) 2,273 Operating income................ 3,390 3,069 6,469 12,063 22,124 17,126 16,195 Interest expense................ 1,740 1,648 1,992 5,196 11,388 8,454 9,175 Gain on sale of assets.......... 22 20,545 228 119 197,097 197,097 8,791 Income before income taxes and extraordinary items........... 1,657 21,531 4,805 7,053 206,329 204,189 16,036 Pro forma income taxes(1)....... 630 8,182 1,826 2,680 78,405 77,592 6,094 Pro forma income before extraordinary items(1)........ 1,027 13,349 2,979 4,373 127,924 126,597 9,942 Pro forma earnings per share before extraordinary items(1)(2)................... Pro forma weighted average common shares outstanding(2)................ BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents....... $ 938 $ 1,513 $ 1,564 $ 5,292 $ 3,626 $ 6,094 Intangibles and other assets.... 8,986 5,552 29,548 119,269 300,029 428,542 Total assets.................... 24,879 19,368 52,209 150,575 364,743 513,445 Long-term debt, including current portion............... 19,250 15,250 46,554 136,642 144,427 280,633 Total shareholders' equity...... 2,057 427 828 5,079 208,089 219,175
39 42
NINE MONTHS ENDED FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30, --------------------------------------------------- ----------------------- 1993 1994 1995 1996 1997 1997 1998 ------- -------- -------- -------- -------- ----------- --------- (UNAUDITED) (IN THOUSANDS) OTHER DATA: Broadcast cash flow(3).......... $ 7,587 $ 7,617 $ 11,832 $ 17,016 $ 32,582 $22,783 $ 30,469 Broadcast cash flow margin(4)... 25.2% 26.1% 33.0% 35.0% 34.7% 35.3% 33.1% EBITDA before net TBA expenses (income)(5)................... $ 5,572 $ 5,317 $ 9,297 $ 14,144 $ 29,333 $20,524 $ 27,427 After-tax cash flow(6).......... 2,591 2,047 4,172 7,923 14,947 9,194 14,040 Cash flows related to: Operating activities.......... 3,461 3,950 1,182 12,773 8,859 (1,518) 16,629 Investing activities.......... (5,352) 23,787 (28,636) (96,502) (13,695) (6,950) (146,545) Financing activities.......... 1,599 (27,161) 27,505 87,457 3,170 5,482 132,384
- --------------- (1) Throughout the periods presented, the Company had elected to be taxed under Subchapter S of the Code, and comparable provisions of certain state tax laws. The amounts shown reflect pro forma provisions for state and federal income taxes (at an assumed combined rate of 38% per annum) as if the Company had been taxed under Subchapter C of the Code throughout the periods presented. The Company intends to revoke its election to be taxed as an S Corporation immediately prior to the consummation of the Offering. (2) Reflects the effect of the for one stock split to be effected as part of the Recapitalization. (3) Broadcast cash flow consists of operating income before depreciation, amortization, net TBA expense (income) and corporate expenses. Although broadcast cash flow is not a measure of performance or liquidity 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 measure a radio company's operating performance. Nevertheless, it should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. Moreover, because broadcast cash flow is not a measure calculated in accordance with GAAP, this measure is not necessarily comparable to similarly titled measures employed by other companies. (4) Broadcast cash flow margin represents broadcast cash flow as a percentage of net revenue. (5) EBITDA before net TBA expenses (income) consists of operating income before depreciation, amortization and net TBA expense (income). Although EBITDA before net TBA expenses (income) is not a measure of performance or liquidity 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 measure a radio company's operating performance. Nevertheless, it should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. Moreover, because EBITDA before net TBA expenses (income) is not a measure calculated in accordance with GAAP, this measure is not necessarily comparable to similarly titled measures employed by other companies. (6) After-tax cash flow consists of pro forma income before extraordinary items minus net gain on sale of assets (net of tax) and plus depreciation, amortization, and the deferred tax provision (or minus the deferred tax benefit). Although after-tax cash flow is not a measure of performance or liquidity 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 measure a radio company's operating performance. Nevertheless, it should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. Moreover, because after-tax cash flow is not a measure calculated in accordance with GAAP, this measure is not necessarily comparable to similarly titled measures employed by other companies. 40 43 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements and related notes thereto of the Company included elsewhere in this Prospectus. Periodically, the Company may make statements about trends, future plans and the Company's prospects. Actual results may differ materially from those described in such forward looking statements based on the risks and uncertainties facing the Company, including but not limited to, the following: business conditions, competition and growth in the radio broadcasting industry and the general economy; changes in interest rates; the failure or inability to renew one or more of the Company's broadcasting licenses; and the factors described in "Risk Factors." Historically, the Company has operated with an October 1st to September 30th fiscal year. All references herein, with the exception of specific references to calendar year periods, are based on the Company's fiscal year. A radio broadcasting company's revenues are derived primarily from the sale of broadcasting time to local and national advertisers. Those revenues are largely determined by the advertising rates that a radio station is able to charge and the number of advertisements that can be broadcast without jeopardizing listener levels. Advertising rates are primarily based on three factors: (i) a station's audience share in the demographic groups targeted by advertisers, as measured principally by quarterly reports issued by Arbitron; (ii) the number of radio stations in the market competing for the same demographic groups; and (iii) the supply of and demand for radio advertising time. In 1997, 73.6% of the Company's revenues were generated from local advertising (which is sold primarily by each individual local radio station's sales staff), and 22.8% were generated from national spot advertising (which is sold by independent advertising sales representatives). The balance of 1997 revenues were generated principally by network advertising and rental income from tower sites. Revenues recognized under a TBA or JSA for stations operated by the Company prior to acquiring the stations are included in net revenues, while operating expenses associated with these stations are reflected in station operating expenses. Consequently, there is no difference in the method of revenue and operating expense recognition between a station operated by the Company under a TBA or JSA and a station owned and operated by the Company. Several factors may adversely affect a radio broadcasting company's performance in any given period. In the radio broadcasting industry, seasonal revenue fluctuations are common and are due primarily to variations in advertising expenditures by local and national advertisers. Typically, revenues are lowest in the first calendar quarter of the year. The Company generally incurs advertising and promotional expenses to increase "listenership" and Arbitron ratings. However, since Arbitron reports ratings quarterly, any increased ratings and therefore increased advertising revenues tend to lag behind the incurrence of such advertising and promotional spending. In the broadcasting industry, radio stations often utilize trade (or barter) agreements to reduce expenses by exchanging advertising time for goods or services. The Company, in order to maximize cash revenue from its spot inventory, minimizes its use of trade agreements and during the past five years has held barter revenues under 2.0% of the Company's gross revenues and barter related broadcast cash flow under 0.4% of the Company's broadcast cash flow. In the following analysis, management discusses broadcast cash flow and EBITDA before net TBA expenses (income). Broadcast cash flow consists of operating income before depreciation, amortization, net TBA expenses (income) and corporate expenses. EBITDA before net TBA expenses (income) consists of operating income before depreciation, amortization and net TBA expenses (income). In part due to the non-capital intensive nature of the radio broadcasting industry and the high level of non-cash depreciation and amortization expense, broadcast cash flow and EBITDA before net TBA expenses (income) are frequently 41 44 used as bases for evaluating radio broadcasting businesses, although the Company's measures of broadcast cash flow and EBITDA before net TBA expenses (income) may not be comparable to similarly titled measures of other companies. Neither broadcast cash flow nor EBITDA before net TBA expenses (income) purports to represent net income, operating income or net cash provided by operating activities, as those terms are defined under GAAP, and they should not be considered in isolation or as a substitute for such measurements. The Company calculates "same station" growth by (i) comparing the performance of stations operated by the Company throughout a relevant quarter to the performance of those same stations (whether or not operated by the Company) in the prior year's corresponding quarter, excluding the effect of barter revenues and expenses and discontinued operations and (ii) averaging such growth rates for the period presented. "Same station broadcast cash flow margin" is the broadcast cash flow margin of the stations included in the Company's same station calculations. For purposes of the following discussion, pro forma net income before extraordinary items represents historical net income before extraordinary items adjusted as if the Company were treated as a C Corporation during all relevant periods at an effective tax rate of 38%. Because of the Company's significant acquisition and divestiture activities in 1997, Entercom's actual 1997 results of operation do not reflect a full year of operations of the Company's current portfolio of radio stations. Therefore, the Company's pro forma 1997 results of operation differ materially from its actual 1997 results. In addition, due to acquisition and divestiture activities, the Company's pro forma results of operation for the first nine months of 1998 differ materially from its actual results for the first nine months of 1998. Entercom's actual results for the first nine months of 1998 do not reflect a full nine months of operations of the Company's current portfolio of radio stations; however, the actual results include a partial year of operating results for a station in St. Louis which the Company has since divested. In fiscal 1997, the Company's pro forma net revenues were $156.3 million and pro forma broadcast cash flow was $45.8 million. For the nine months ended June 30, 1998, pro forma net revenues were $123.0 million and pro forma broadcast cash flow was $37.1 million. Pro forma broadcast cash flow margin was 30.2% for the nine months ended June 30, 1998. RESULTS OF OPERATIONS Nine Months Ended June 30, 1998 Compared to Nine Months Ended June 30, 1997 Net Revenues. Net revenues increased 42.7% to $92.0 million for the nine months ended June 30, 1998 from $64.5 million for the nine months ended June 30, 1997. Of the increase, $10.5 million is attributable to stations acquired during this period, offset by $0.3 million for stations divested during the same period. On a same station basis, net revenues for the period increased 15.4% to $89.9 million in 1998 from $77.9 million in 1997, largely due to stronger selling efforts and radio advertising market growth. Same station revenue growth was led by substantial increases in Seattle, Kansas City and Portland. Station Operating Expenses. Station operating expenses increased 47.6% to $61.6 million for the nine months ended June 30, 1998 from $41.8 million for the nine months ended June 30, 1997. Of the increase, $7.0 million is attributable to stations acquired during this period, offset by $0.3 million for stations divested during the same period. On a same station basis, station operating expenses increased 9.2% to $60.0 million for the nine months ended June 30, 1998 from $54.8 million for the nine months ended June 30, 1997. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased 34.7% to $3.0 million for the nine months ended June 30, 1998 from $2.3 million for the nine months ended June 30, 1997. This increase was primarily due to the higher administrative expenses associated with supporting the Company's growth. Depreciation and Amortization. Depreciation and amortization increased 131.3% to $9.0 million for the nine months ended June 30, 1998 from $3.9 million for the nine months ended June 30, 1997. This increase was primarily attributable to the Company's acquisitions during 1997 and 1998. Interest Expense. Interest expense increased 8.5% to $9.2 million for the nine months ended June 30, 1998, from $8.5 million for the nine months ended June 30, 1997. This increase was primarily due to indebtedness incurred in connection with the Company's acquisitions. 42 45 Pro Forma Income Before Extraordinary Items. Pro forma income before extraordinary items reflects the Company's historical income before extraordinary items, as adjusted to reflect state and federal income taxes as if the Company had been taxed under Subchapter C of the Code at an effective rate of 38% throughout the nine month periods ended June 30, 1998 and 1997, respectively. As a result of the factors described above, pro forma income before extraordinary items for the nine months ended June 30, 1998 was $9.9 million, including a gain of $5.5 million, net of taxes, on the sale of assets. This compares to pro forma income before extraordinary items of $126.6 million for the nine months ended June 30, 1997, which included a prior year gain of $122.2 million, net of taxes, on the sale of assets. The decrease in gain on the sale of assets is primarily attributable to the Company's disposition of stations in the Houston, San Francisco and Pittsburgh radio markets during the nine month period ended June 30, 1997. The Company used the proceeds from these dispositions to acquire stations in markets where it believed there was greater potential for establishing clusters. The Company does not expect such significant gains on the sale of assets to continue in the future. Broadcast Cash Flow. As a result of the factors described above, broadcast cash flow increased 33.7% to $30.5 million for the nine months ended June 30, 1998 from $22.8 million for the nine months ended June 30, 1997. On a same station basis, broadcast cash flow increased 30.1% to $30.0 million for the nine months ended June 30, 1998 from $23.1 million for the nine months ended June 30, 1997. The Company's broadcast cash flow margin (defined as broadcast cash flow as a percentage of net revenues) declined to 33.1% for the nine months ended June 30, 1998 from 35.3% for the nine months ended June 30, 1997. This decline was primarily attributable to the Company's 1997 exchange of relatively mature stations in San Francisco and Houston, which operated at higher broadcast cash flow margins but were located in markets where management believed there were limited growth and clustering opportunities, for less developed properties in Seattle, Kansas City and Sacramento, which collectively operated with lower broadcast cash flow margins but offered stronger growth and clustering opportunities. On a same station basis, the Company's broadcast cash flow margin increased to 33.4% for the nine months ended June 30, 1998 from 29.7% for the nine months ended June 30, 1997. EBITDA Before Net TBA Expenses (Income). As a result of the factors described above, EBITDA before net TBA expenses (income) increased 33.6% to $27.4 million for the nine months ended June 30, 1998, from $20.5 million for the nine months ended June 30, 1997. Fiscal Year Ended September 30, 1997 Compared to Fiscal Year Ended September 30, 1996 Net Revenues. Net revenues increased 92.8% to $93.9 million for the year ended September 30, 1997 from $48.7 million for the year ended September 30, 1996. Of the increase, $32.3 million is attributable to stations acquired during this period, offset by $8.8 million for stations divested during the same period. On a same station basis, net revenues increased 14.2% to $86.6 million for the year ended September 30, 1997 from $75.8 million for the year ended September 30, 1996. Same station revenue growth was led by substantial increases in Seattle, Kansas City, Portland, Houston and St. Louis. Station Operating Expense. Station operating expenses increased 93.6% to $61.3 million for the year ended September 30, 1997 from $31.7 million for the year ended September 30, 1996. Of the increase, $16.3 million is attributable to stations acquired during this period, offset by $4.7 million for stations divested during the same period. On a same station basis, station operating expenses decreased 0.4% to $55.0 million for the year ended September 30, 1997 from $55.2 million for the year ended September 30, 1996. This decrease was attributable to cost savings measures implemented by the Company in connection with its acquisitions. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased 13.1% to $3.2 million for the year ended September 30, 1997 from $2.9 million for the year ended September 30, 1996. This increase was primarily due to higher administrative expenses associated with supporting the Company's growth. Depreciation and Amortization. Depreciation and amortization increased 159.6% to $7.7 million for the year ended September 30, 1997 from $3.0 million for the year ended September 30, 1996. This increase was 43 46 primarily attributable to the Company's 1996 and 1997 acquisitions and was partially offset by the net effect of stations sold during the same period. Interest Expense. Interest expense increased 119.2% to $11.4 million for the year ended September 30, 1997 from $5.2 million for the year ended September 30, 1996. This increase was primarily due to indebtedness incurred in connection with the Company's acquisitions. Pro Forma Income Before Extraordinary Items. Pro forma income before extraordinary items reflects the Company's historical income before extraordinary items, as adjusted to reflect state and federal income taxes as if the Company had been taxed under Subchapter C of the Code at an effective rate of 38% throughout the fiscal years ended September 30, 1997 and 1996, respectively. As a result of the factors described above, pro forma income before extraordinary items for the year ended September 30, 1997 was $127.9 million, including a $122.2 million gain, net of taxes, on the sale of assets. This compares to pro forma income before extraordinary items of $4.4 million for the year ended September 30, 1996, which includes a gain of $0.1 million, net of taxes, on the sale of assets. The increase in gain on the sale of assets is primarily attributable to the Company's disposition of stations in the Houston, San Francisco and Pittsburgh radio markets during the year ended September 30, 1997. The Company used the proceeds from these dispositions to acquire stations in markets where it believed there was greater potential for establishing clusters. The Company does not expect such significant gains on the sale of assets to continue in the future. Broadcast Cash Flow. As a result of the factors described above, broadcast cash flow increased 91.5% to $32.6 million for the year ended September 30, 1997 from $17.0 million for the year ended September 30, 1996. On a same station basis, broadcast cash flow increased 53.3% to $31.6 million for the year ended September 30, 1997 from $20.6 million for the year ended September 30, 1996. Broadcast cash flow margin declined to 34.7% for fiscal 1997 from 35.0% for fiscal 1996. This decline was primarily attributable to the Company's exchange in fiscal 1997 of relatively mature stations in San Francisco and Houston, which operated at higher broadcast cash flow margins but were located in markets where management believed there were limited growth and clustering opportunities, for less developed properties in Seattle, Kansas City and Sacramento, which collectively operated with lower broadcast cash flow margins, but offered stronger growth and clustering opportunities. On a same station basis, broadcast cash flow margins increased to 36.5% for the year ended September 30, 1997 from 27.2% for the year ended September 30, 1996. EBITDA Before Net TBA Expenses (Income). As a result of the factors described above, EBITDA before net TBA expenses (income) increased 107.4% to $29.3 million for the year ended September 30, 1997, from $14.1 million for the year ended September 30, 1996. Fiscal Year Ended September 30, 1996 Compared to Fiscal Year Ended September 30, 1995 Net Revenues. Net revenues increased 35.6% to $48.7 million for the year ended September 30, 1996 from $35.9 million for the year ended September 30, 1995. Of the increase, $5.0 million is attributable to stations acquired during this period, offset by $1.2 million for stations divested during the same period. On a same station basis, net revenues increased 15.3% to $44.7 million for the year ended September 30, 1996 from $38.8 million for the year ended September 30, 1995. Same station revenue growth was led by substantial increases in Portland, Tampa, Houston, Seattle and San Francisco. Station Operating Expenses. Station operating expenses increased 31.6% to $31.7 million for the year ended September 30, 1996 from $24.1 million for the year ended September 30, 1995. Of the increase, $2.2 million is attributable to stations acquired during this period, offset by $0.9 million for stations divested during the same period. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased 13.3% to $2.9 million for the year ended September 30, 1996 from $2.5 million for the year ended September 30, 1995. This increase was primarily due to higher administrative expenses associated with supporting the Company's growth. 44 47 Depreciation and Amortization. Depreciation and amortization increased 33.0% to $3.0 million for the year ended September 30, 1996 from $2.2 million for the year ended September 30, 1995. This increase was primarily attributable to the Company's 1995 and 1996 acquisitions. Interest Expense. Interest expense increased 160.8% to $5.2 million for the year ended September 30, 1996 from $2.0 million for the year ended September 30, 1995. The increase was primarily due to indebtedness incurred in connection with the Company's acquisitions. Pro Forma Income Before Extraordinary Items. Pro forma income before extraordinary items reflects the Company's historical income before extraordinary items, as adjusted to reflect state and federal income taxes as if the Company had been taxed under Subchapter C of the Code at an effective rate of 38% throughout the fiscal years ended September 30, 1996 and 1995, respectively. As a result of the factors described above, pro forma income before extraordinary items for the year ended September 30, 1996 was $4.4 million, including a gain of $0.1 million, net of taxes, on the sale of assets. This compares to pro forma income before extraordinary items of $3.0 million for the year ended September 30, 1995, which did not include any gains on the sale of assets. Broadcast Cash Flow. As a result of the factors described above, broadcast cash flow increased 43.8% to $17.0 million for the year ended September 30, 1996 from $11.8 million for the year ended September 30, 1995. On a same station basis, broadcast cash flow increased 27.2% to $15.4 million for the year ended September 30, 1996 from $12.1 million for the year ended September 30, 1995. Broadcast cash flow margin increased from 33.0% for the year ended 1995 to 35.0% for the year ended 1996. Same station broadcast cash flow margin rose from 31.3% to 34.5%. EBITDA Before Net TBA Expenses (Income). As a result of the factors described above, EBITDA before net TBA expenses (income) increased 52.1% to $14.1 million for the year ended September 30, 1996, from $9.3 million for the year ended September 30, 1995. LIQUIDITY AND CAPITAL RESOURCES The Company has used a significant portion of its capital resources to consummate acquisitions. These acquisitions were or will be funded from one or a combination of the following sources: (i) the Credit Facility (described below), (ii) the 7% Subordinated Convertible Note (described below), (iii) the swapping of Company owned radio stations in qualified Section 1031 transactions and (iv) internally-generated cash flow. Net proceeds from the Offering will be used to repay a portion of the Company's outstanding indebtedness under the Credit Facility. See "Use of Proceeds." Net cash flows from operating activities were $8.9 million, $12.8 million and $1.2 million for the twelve months ended September 30, 1997, 1996 and 1995, respectively, and $16.6 million and $(1.5) million for the nine months ended June 30, 1998 and 1997, respectively. Changes in the Company's net cash flow from operating activities are primarily a result of changes in advertising revenues and station operating expenses which are affected by the acquisition and dispositions of stations during those periods. Net cash flows used in investing activities were $13.7 million, $96.5 million and $28.6 million for the twelve months ended September 30, 1997, 1996 and 1995, respectively, and $146.5 million and $6.9 million for the nine months ended June 30, 1998 and 1997, respectively. Net cash flows from financing activities were $3.2 million, $87.5 million and $27.5 million for the twelve months ended September 30, 1997, 1996 and 1995, respectively, and $132.4 million and $5.5 million for the nine months ended June 30, 1998 and 1997, respectively. These cash flows reflect the acquisitions consummated in the relevant periods and the related borrowings. In addition to debt service, the Company's principal liquidity requirements will be for working capital and general corporate purposes, including capital expenditures, and, if appropriate opportunities arise, acquisitions of additional radio stations. [For fiscal 1998, management anticipates that maintenance capital expenditures will be approximately $1.0 million while total capital expenditures will be approximately $11.0 million, including approximately $6.7 million for one-time expenditures associated with studio consolidations related to the Company's acquisition activity and $1.5 million for one-time expenditures for signal upgrades.] For 45 48 calendar 1999, management anticipates maintenance capital expenditures to be between $1.0 million and $1.5 million and total capital expenditures to be between $3.5 million and $5.0 million. Management believes that cash from operating activities, together with available revolving credit borrowings under the Credit Facility, should be sufficient to permit the Company to meet its financial obligations and fund its operations. The Company may require additional financing for future acquisitions, if any, and there can be no assurance that it would be able to obtain such financing on terms considered to be favorable by management. The Company entered into a Loan Agreement, dated as of February 13, 1998 as amended October 8, 1998, with several banks, including Key Corporate Capital, Inc. and Bank of America NT&SA for a $350 million revolving credit facility (the "Credit Facility"), subject to compliance with certain financial ratios. The Credit Facility was established to: (i) refinance existing indebtedness of the Company, (ii) provide working capital and (iii) fund corporate acquisitions. At the Company's election, interest on any outstanding principal accrues at a rate based on either LIBOR plus a spread which ranges from 0.5% to 2.125% or on KeyBank N.A.'s base rate plus a spread of up to 0.875%, depending on the Company's leverage ratio. Although the Company may borrow, repay and reborrow under the Credit Facility, the aggregate maximum amount that the Company can have outstanding at any one time is reduced throughout the term of the Credit Facility. The final maturity date for the Credit Facility is February 13, 2006. As of June 30, 1998, on a pro forma basis after giving effect to the Offering, the Company had approximately $217.6 million of borrowings outstanding under the Credit Facility. As of November , 1998, the Company had approximately $[ ] million of borrowings outstanding under the Credit Facility. The Credit Facility prohibits the Company from maintaining a total leverage ratio (defined as the ratio of the Company's total debt to operating cash flow) greater than 7.0 to 1.0, at any time through March 31, 1999. In addition, the Credit Facility prohibits the Company from maintaining a senior leverage ratio (defined as the ratio of the principal amount outstanding under the Credit Facility to operating cash flow) greater than 6.5 to 1.0, at any time through March 31, 1999. Currently, the Company is in compliance with the total and senior leverage ratio obligations imposed by the Credit Facility. The Credit Facility also requires the Company to (i) maintain a fixed charge coverage ratio (defined as the ratio of operating cash flow to the sum of the Company's debt service, capital expenditures, taxes and capital distributions, over any four quarter period) greater than 1.05 to 1.00 and (ii) maintain an interest coverage ratio (defined as the ratio of operating cash flow to interest expense over any four quarter period) greater than 2.0 to 1.0. Currently, the Company is in compliance with each of these financial ratio obligations imposed by the Credit Facility. The Company entered into the Chase Agreement with Chase Capital on May 21, 1996 pursuant to which the Company issued the 7% Subordinated Convertible Note in the original principal amount of $25 million. Interest accrues on the 7% Subordinated Convertible Note at a rate of seven percent. However, payment of interest is deferred until May 21, 2003. As of June 30, 1998, the total amount of principal and interest owed by the Company under the Chase Agreement was $[ ] million. Chase Capital has agreed with the Underwriters and the Company that, immediately prior to the Offering, it will convert the 7% Subordinated Convertible Note into Class A Common Stock. Upon the Chase Conversion, Chase Capital will receive shares of Class A Common Stock. After giving effect to the Offering, including Chase Capital's sale of shares of Class A Common Stock therein, Chase Capital will beneficially own approximately % of the Company's Class A Common Stock, representing % of the total voting power of the Company's outstanding Common Stock (approximately % of the Company's Class A Common Stock, representing % of the total voting power of the Company's outstanding Common Stock, if the over-allotment option is exercised in full). See "Principal and Selling Shareholders" and "Risk Factors -- Benefits to Existing Shareholders and Affiliates." The Credit Facility requires the Company to protect itself from interest rate fluctuations through the use of derivative rate hedging instruments. As a result, the Company has entered into various convertible rate cap and interest rate swap transactions with various banks (the "Rate Hedging Transactions") designed to mitigate the Company's exposure to significantly higher floating interest rates. In the future, the Company expects to continue executing Rate Hedging Transactions only to the extent required under the Credit Facility 46 49 and does not anticipate holding derivative securities for speculative or investment purposes. The following table sets forth certain information regarding the Rate Hedging Transactions which the Company had entered into as of June 30, 1998.
UNRECOGNIZED GAINS (LOSSES) AS OF --------------------------------- SEPTEMBER 30, JUNE 30, CONVERTIBLE CAP SWAP --------------------- --------- NOTIONAL AMOUNT INTEREST RATE INTEREST RATE 1996 1997 1998 - --------------- --------------- ------------- --------- --------- --------- $20 million 6.77% $(208,000) $(351,000) $(399,000) $25 million* 6.72% 5.89% (117,000) (212,000) (301,000) $25 million 7.50% 6.05% 15,000 (101,000) (230,000) $15 million 5.61% -- -- 164,000 $14 million 5.86% -- -- (33,000) $30 million 5.77% -- -- (303,000)
* This cap was converted by the bank into an interest rate swap effective October 29, 1998. No gains or losses have been recognized by the Company during the periods indicated. RECENT PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133 entitled "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as "derivatives") and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Management has not yet determined what effect, if any, this statement will have on the Company. IMPACT OF YEAR 2000 ISSUES The Company relies, directly and indirectly, on information technology systems to operate its digital radio stations, provide its radio stations with up-to-date news and perform a variety of administrative services including accounting, financial reporting, advertiser spot scheduling, payroll and invoicing. Most of these information technology systems, such as Marketron, Columbine, Ultipro, Solomon and Novell, are standard commercial software products used both throughout the radio broadcasting industry and in other industries. The Company also uses non-information technology systems, such as microchips for dating and other automated functions. All of these technology systems could potentially be affected by Year 2000 Issues. In order to minimize the risk of Year 2000 related losses, the Company is conducting a comprehensive assessment of its Year 2000 Issues. This assessment consists of (i) an analysis of all of the information and non-information technology systems that the Company uses, including the circulation of Year 2000 compliance questionnaires to the chief engineers of each of the Company's stations, requiring them to evaluate their respective station's preparedness for Year 2000 Issues and (ii) an inquiry as to the Year 2000 status of third parties material to the Company's operations, including the transmission of letters to all key service providers requesting written confirmation of their Year 2000 readiness. Although the Company is still in the process of assessment, the Company has received confirmation from each supplier that provides or manufactured a material information or non-information technology system used by the Company that such system is either Year 2000 compliant or that such supplier will, within a short period of time, provide software aides, supplements or replacements that will make such system Year 2000 compliant. 47 50 Due to (i) the results of the Company's assessment and to the preventive measures being taken, (ii) the relatively small degree to which the radio broadcasting industry, as compared to other industries, depends on technology systems, (iii) the fact that most of the Company's automated administrative services can, if needed, be performed manually, and (iv) the fact that the Company's radio stations are equipped to operate without the use of technology systems, management has concluded that Year 2000 Issues will not have a material adverse effect on the Company's operations, results of operations or financial condition. Furthermore, since the Company relies mostly on technology systems used industrywide, management believes that even if its opinions regarding the Company's Year 2000 Issues prove incorrect, the Company would be exposed to no greater Year 2000 related risks than those which other radio broadcasting companies will face. 48 51 BUSINESS OVERVIEW Entercom, founded in 1968, is the sixth largest radio broadcasting company in the United States, based on pro forma 1997 gross revenues. The Company owns and operates 41 stations, 25 FM and 16 AM, in eight markets, including five of the country's top 30 radio advertising markets. The Company has built the largest radio station clusters, based on gross revenues, in Seattle and Kansas City, and one of the three largest clusters in Boston, Portland, Sacramento and Rochester. On a pro forma basis, the Company had net revenues of $165.1 million, operating income of $25.6 million and net income of $5.4 million for the twelve months ended June 30, 1998. In addition, pro forma broadcast cash flow during the same period was $49.5 million. The Company's net revenues and broadcast cash flow have grown significantly on both a total and same-station basis. Over the past three fiscal years ending September 30, net revenues grew at a compound annual rate of 75.1% from an actual $29.1 million in fiscal 1994 to a pro forma $156.3 million in fiscal 1997. Broadcast cash flow grew at a compound annual rate of 81.8% from an actual $7.6 million in fiscal 1994 to a pro forma $45.8 million in fiscal 1997. During this same period, the Company's same station net revenues and broadcast cash flow grew at average annual rates of 15.3% and 38.1%, respectively. In addition, the Company's after-tax cash flow grew at a compound annual rate of 94.0% during these three fiscal years. CORPORATE HISTORY Throughout its 30 year history of operations, Entercom has experienced sustained growth by adapting its acquisition and operating strategies to capitalize on changes occurring in the radio broadcasting industry. Entercom's Chairman of the Board and Chief Executive Officer, Joseph M. Field, founded the Company in 1968 on the conviction that FM broadcasting, then in its infancy, would surpass AM broadcasting as the leading aural medium. The Company's strategy from inception through the 1970's was to acquire FM stations in the top 20 radio advertising markets at a fraction of prevailing prices for AM stations and to operate those stations economically and profitably by utilizing niche formats not being offered by major AM stations. The Company continued this strategy until FM's technical superiority and the availability of inexpensive AM/FM receivers drove FM's penetration of the radio advertising market to critical mass and FM stations began to compete successfully with the dominant AM stations of the time for control of mass market audiences. In addition, Entercom pursued a strategy of purchasing technically underdeveloped FM stations and upgrading them so that they could become competitive stations in their markets. The Company adjusted its strategic plan in the mid-1980's. With FM at critical mass, the Company began a deliberate multi-year effort to enhance its operations at both the corporate and station levels to compete for greater shares of audience and advertising dollars in its markets. With the advent of the duopoly rules in 1992 (permitting expansion of ownership in a market from one to two stations in each radio medium), Entercom began to "double up" in its markets. Since the passage of the Telecom Act, which permitted ownership of up to eight radio stations in most major markets, the Company has pursued a creative acquisition and development strategy pursuant to which it has swapped stand-alone FM stations in various markets to build market leading clusters in large growth markets where the Company could develop a significant presence. ACQUISITION STRATEGY The Company, through a disciplined acquisition strategy, seeks to (i) build market leading clusters of stations principally in large growth markets and (ii) acquire underdeveloped properties that offer the potential for significant improvements in revenues and broadcast cash flow through the application of the Company's operational, administrative and/or engineering expertise. As part of its strategy, the Company has strategically redeployed its asset base by swapping relatively mature stations in markets where the Company believed it would be difficult to build leading station clusters in exchange for underperforming stations in other markets that management believed offered stronger growth and clustering opportunities. For example, in 1997 the Company exchanged one station in Houston plus $5 million for three stations in Seattle and four stations in 49 52 Kansas City. The Seattle acquisitions solidified the Company's position as the leading radio operator in that market while the four stations acquired in Kansas City enabled the Company to enter a new large market with a significant presence. The Company has a track record of structuring acquisitions in creative ways, including being a pioneer of multi-party station swaps. Since October 1, 1996, the Company, in 18 transactions, has acquired or agreed to acquire 36 radio stations and has divested or agreed to divest, for strategic reasons, nine radio stations. The Company has been involved in transactions with many of the leading radio broadcast companies or their predecessors, including CBS Radio, Viacom Inc., American Radio Systems Corporation, Citicasters Inc., Jacor Communications, Inc., Sinclair Broadcast Group, Inc., Bonneville International Corp. and Susquehanna Radio Corp. As a result of these transactions, the Company has divested its stand-alone stations while establishing the largest clusters in Seattle and Kansas City and building superduopolies in Boston, Portland, Sacramento and Rochester. The Company believes that its proven record of consummating creative transactions with many of the leading radio broadcast companies positions it well to continue to participate in the consolidation occurring in its industry. OPERATING STRATEGY The principal components of the Company's operating strategy are set forth below. - DEVELOP MARKET LEADING STATION CLUSTERS. The Company has built one of the three leading clusters in each of its eight markets. To enhance its competitive position, the Company strategically aligns its stations within each market to optimize their performance, both individually and collectively. The Company seeks to maximize the ratings, revenue and broadcast cash flow of its radio stations by tailoring their programming to optimize aggregate audience delivery. For example, in Kansas City, Entercom acquired two stations that had been engaged in a lengthy battle in the Adult Contemporary format. Largely as a result of that competition, these stations were the 10(th) and 12(th) ranked stations among Adults 25-54 in the market. Shortly after acquiring the stations, the Company reformatted one of the stations to an Album Oriented Rock format. As a result of this strategy, the stations now rank 1(st) in Women 25-54 and Men 25-54, respectively. - ENHANCE OPERATIONS OF NEWLY ACQUIRED UNDERPERFORMING STATIONS. The Company has built a long-term track record of acquiring and developing underperforming stations. This has enabled the Company to achieve superior same-station revenue and broadcast cash flow growth over the past several years. The Company utilizes a variety of techniques to develop underachieving properties, including: strategic market research and analysis; management enhancements; expenditure reductions; facility consolidations; technical upgrades; programming and marketing enhancements; and improved sales training and techniques. The Company's current portfolio includes a significant number of recently acquired stations which management believes are underdeveloped. Among the 31 stations which the Company acquired or commenced operations under TBAs since January 1, 1997, 14 operated with broadcast cash flow margins below 20%, 11 with margins between 20% and 40% and six with margins over 40% during calendar 1997. By comparison, among the nine stations which the Company owned or operated prior to 1997, two operated with margins under 20%, one between 20% and 40% and six over 40% during calendar 1997. - BUILD STRONGLY-BRANDED FRANCHISES. The Company analyzes market research and competitive factors to identify the format opportunity, music selection and rotation, presentation and other key programming attributes that it believes will best position each station to maximize its audience share and, consequently, its revenues and broadcast cash flow. The Company's stations pursue a variety of programming and marketing initiatives designed to develop a distinctive identity and to strengthen the stations' local "brand" or "franchise" value. For example, the Company's "endfest(TM)" festival in Seattle attracts 20,000 listeners to a day-long festival with live music and other attractions, solidifying KNDD's ("The End(TM)") brand image in Seattle. The Company has also been on the leading edge of several national programming trends during the past decade including Modern Rock, Young Adult Country and Adult Album Alternative. 50 53 - LEVERAGE STATION CLUSTERS TO CAPTURE GREATER SHARE OF ADVERTISING REVENUE. The Company believes radio will continue to gain revenue share from other media by capitalizing on its enhanced competitive platform. As a result of deregulation in the radio broadcasting industry, operators can now create radio station clusters that have the critical mass of audience reach and marketing resources necessary to pursue incremental advertising and promotional revenues more aggressively. The Company has begun to capitalize on this opportunity by developing specialized teams in Seattle, Portland, Sacramento and Kansas City to work with non-traditional radio advertisers to create and develop marketing programs and solutions. - MAXIMIZE TECHNICAL CAPABILITIES. The Company seeks to operate stations with the strongest signals in their respective markets. In addition, the Company, on various occasions, has identified opportunities to acquire and upgrade low-powered or out-of-market stations and transform them into competitive signals, thus increasing their value significantly. For example, the Company recently agreed to sell its two Tampa FM stations, which it had purchased for an aggregate of $4.9 million, for $75 million after upgrading their respective license classes. In addition, the Company upgraded the FCC license class of KMTT-FM in Seattle, KNRK-FM in Portland and, KRXQ-FM in Sacramento. Today each of these stations has a competitive signal in its respective market. - RECRUIT, DEVELOP, MOTIVATE AND RETAIN SUPERIOR EMPLOYEES. The Company believes that station operators differentiate themselves from their peers primarily through their ability to recruit, develop, motivate and retain superior management, programming, and sales talent. Accordingly, the Company strives to establish a creative and collegial working environment in which talented employees are able to thrive. The Company encourages its stations to build strong community bonds through local and company-wide community service programs, which facilitate strong local business relationships and provide employees with opportunities for enhanced job fulfillment. The Company offers competitive pay packages with performance-based incentives for its key employees. In addition, the Company provides employees with opportunities for personal growth and advancement through extensive training, seminars and other educational programs. STATION PORTFOLIO The Company has built a highly consolidated portfolio of radio stations concentrated primarily in top 30 markets with above average growth characteristics. The Company generated 93.5% of its pro forma fiscal 1997 net revenues from the five top 30 markets in which it operates. Radio advertising revenues in these five markets have grown at an average annual rate of 10.8% from 1993 to 1997, which exceeded the average annual growth rate of both the aggregate radio industry and top 30 markets. Furthermore, the Company generated 97.6% of its pro forma fiscal 1997 net revenues from superduopolies, which the Company defines as clusters of four or more stations in one market. Management believes that Entercom's superduopolies enable the Company to (i) amass greater resources to penetrate and capture additional local radio advertising revenues, (ii) consolidate administrative, engineering and management functions to reduce costs and (iii) be more flexible in adjusting formats to serve changing listener needs. In addition, the Company believes that superduopolies enhance its stations' ability to compete for advertising and promotional dollars with other media, including television and newspaper. 51 54 The following table sets forth certain information about the markets in which the Company operates:
1993-1997 1997 1997 RADIO MARKET COMPANY'S STATIONS COMPANY RADIO MARKET AVERAGE ------------------- MARKET MARKET(1) REVENUE RANK(2) REVENUE GROWTH(2) FM AM TOTAL REVENUE SHARE(2) - --------- ---------------- ------------------ --- --- ----- ---------------- Boston................. 10 13.7% 2 3 5 19.4%(3) Seattle(4)............. 13 10.5 5(4) 3 8(4) 40.4(4) Portland............... 21 11.8 4 3 7 25.8 Sacramento............. 28 6.7 4 1 5 20.9 Kansas City............ 29 11.3 3 3 6 33.8 -- -- -- Top 30 Markets....... 18 13 31 Rochester.............. 55 8.1 3 1 4 21.7 Gainesville/Ocala...... 124 6.5 2 0 2 23.8 Longview/Kelso......... n/a n/a 2 2 4 n/a -- -- -- All Markets.......... 25 16 41
- --------------- (1) The Company's stations are in some instances licensed to communities other than the named principal community for the market. (2) Source: Duncan's. (3) Does not include the revenues of WWTM-AM, which competes in the adjacent Worcester market. (4) The Company also sells substantially all the advertising time of a sixth FM station under a joint sales agreement and the revenue from such sales are included in the Company's Market Revenue Share. The following is a general description of each of the Company's stations and the markets served by those stations. The Audience Share and Audience Rank in Target Demographic figures are shown as reported by Arbitron, and the 1997 Radio Market Revenue Rank for each market figure is shown as reported by Duncan's. BOSTON 1997 Radio Market Revenue Rank: 10
AUDIENCE SHARE AUDIENCE RANK TARGET IN TARGET IN TARGET STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC - -------------------- ------------ -------------- ------------ -------------- ------------- WEEI-AM Sports Talk pending Men 25-54 7.1 2 WRKO-AM Talk pending Adults 25-54 3.6 11 Men 25-54 4.4 7(tie) WAAF-FM Active Rock pending Men 18-34 11.7 1 WEGQ-FM Classic Hits pending Adults 25-54 3.3 13 WWTM-AM(1) Sports Talk pending Men 25-54 n/a n/a
- --------------- (1) Station competes in the adjacent community of Worcester, Massachusetts and simulcasts virtually all of the programming of WEEI-AM. Market Overview Boston is the tenth largest radio market in the United States based on 1997 radio advertising revenue. Radio advertising revenues in the Boston market have grown from approximately $115.6 million in 1992 to approximately $219.0 million in 1997 at a compound annual rate of 13.7%. Market radio advertising revenue in 1997 grew 12.9% over 1996 revenue. There are currently 20 viable stations in the Boston market, according to Duncan's. Boston Stations The Company will own and operate five stations, 2 FM and 3 AM, in Boston, including one AM station in the adjacent Worcester market, upon consummation of the CBS Transactions. The Company's cluster is the second largest in Boston with a 19.4% market revenue share. Of the Company's five Boston stations, one ranks first and another ranks second for their respective target demographic audiences. 52 55 The Entercom cluster in Boston features two of the market's three major AM stations. WEEI-AM, Boston's all-sports station, is the flagship for the radio networks of the Boston Red Sox, Boston Celtics and Boston College's football and basketball teams. The station also features a highly rated line-up of talk show hosts which has enabled WEEI-AM to rank consistently as one of the leaders among Men 25-54. WRKO-AM is Boston's principal talk station, featuring major nationally syndicated and local personalities such as Dr. Laura and Howie Carr, whose afternoon show is syndicated by WRKO-AM to several other stations throughout New England. The Company will also own and operate two FM rock stations in the Boston market, WAAF-FM and WEGQ-FM. WAAF-FM, a heritage rock station, features an Active Rock format that appeals to the Men 18-34 demographic. WEGQ-FM is a Classic Hits station featuring music from the 70's and 80's that is targeted to Adults 25-54. SEATTLE 1997 Radio Market Revenue Rank: 13
AUDIENCE SHARE AUDIENCE RANK TARGET IN TARGET IN TARGET STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC - -------------------- ---------------- -------------- ------------ -------------- ------------- KBSG-AM/FM Oldies August 1996 Adults 25-54 6.4 1 KIRO-AM News/Talk/Sports March 1997 Adults 25-54 5.9 2 Men 25-54 7.3 2 KIRO-FM Talk March 1997 Adults 25-54 2.3 19 KISW-FM Active Rock May 1997(1) Men 18-34 11.6 1(tie) Men 25-54 6.1 3 KMTT-FM Adult Rock 1973 Adults 25-54 3.3 13 KNWX-AM News/Business March 1997 Adults 25-54 0.5 26(tie) KNDD-FM Modern Rock August 1996 Men 18-34 7.2 4 Adults 18-34 6.4 5
- --------------- (1) TBA commenced June 1996 Market Overview Seattle is the thirteenth largest radio market in the United States based on 1997 radio advertising revenue. Radio advertising revenues in the Seattle market have grown from approximately $91.9 million in 1992 to approximately $150.5 million in 1997 at a compound annual rate of 10.5%. Market radio advertising revenue in 1997 grew 13.8% over 1996 revenue. There are currently 22 viable stations in the Seattle market, according to Duncan's. Seattle Stations The Company owns and operates eight stations, 5 FM and 3 AM, in Seattle, and sells advertising on a sixth FM station pursuant to a joint sales agreement. The nine station group is the market's largest radio cluster with a 40.4% market revenue share according to Duncan's. Of the Company's eight Seattle stations, two rank first and an additional two rank in the top five for their respective target demographic audiences. A cornerstone of Entercom's Seattle cluster is KIRO-AM, the market's leading radio news and information source. KIRO Newsradio 710 AM broadcasts up-to-the-minute news and popular local talk-shows and serves as the flagship station for the Seattle Mariners and the Seattle Seahawks radio networks. In the last eight Arbitron quarterly reports, the station has ranked first among Adults 25-54 five times and first among Men 25-54 four times. The Company recently negotiated a five-year extension through the 2002 season of its exclusive radio broadcasting rights agreement with the Seattle Mariners. The Company's agreement with the Seattle Seahawks runs through the 1999 season. Complementing KIRO-AM, the Company owns and operates KNWX-AM, a business-oriented news radio station, and KIRO-FM, Seattle's only FM talk station. In addition, the Company owns and operates three of the four major rock stations in the Seattle market including KNDD-FM ("The End(TM)"), KMTT-FM ("The Mountain(R)") and KISW-FM. The Company has 53 56 refined the programming of each of these rock stations so that each station targets a distinct segment of the Adults 18-54 market. As a result, the Company's rock stations rank first and fifth with Men 18-34. The Company's Seattle cluster also includes KBSG-AM/FM, Seattle's only Oldies station, which has ranked first or second among Adults 25-54 in eleven of the last twelve Arbitron quarterly reports. In connection with the Bonneville Transaction in March 1997, the Company assumed the obligations of Bonneville under a JSA pursuant to which it sells all the commercial air time for KING-FM, Seattle's only classical radio station. On July 1, 1997 the Company and Classic Radio, Inc. extended the JSA through June 2002. PORTLAND 1997 Radio Market Revenue Rank: 21
AUDIENCE SHARE AUDIENCE RANK STATION TARGET IN TARGET IN TARGET CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC - ------------ ---------------------- ----------------- ----------- -------------- ------------- KFXX-AM Sports Talk August 1995(1) Men 25-54 4.1 11 KGON-FM Classic Rock August 1995(1) Men 25-54 10.2 1 Adults 7.3 3 25-54 KKSN-AM Nostalgia June 1998(2) Adults 1.6 15(tie) 35-64 KKSN-FM Oldies June 1998(2) Adults 7.6 3 25-54 KNRK-FM Modern Rock August 1995(1) Men 18-34 6.6 4 Adults 6.2 5(tie) 18-34 KRSK-FM Hot Adult Contemporary June 1998(2) Women 18-49 n/a(3) n/a(3) KSLM-AM Sports Talk November 1998(4) Men 25-54 n/a(4) n/a(4)
- --------------- (1) TBA commenced April 1995. (2) TBA commenced March 1998. (3) KRSK-FM recently changed its format. Accordingly, prior Arbitron ratings are not meaningful. (4) KSLM-AM is licensed to Salem, Oregon within the Portland market and will simulcast KFXX-AM programming. The Salem market is not surveyed by Arbitron. Market Overview Portland is the twenty-first largest radio market in the United States based on 1997 radio advertising revenue. Radio advertising revenues in the Portland market have grown from approximately $52.5 million in 1992 to approximately $91.8 million in 1997 at a compound annual rate of 11.8%. Market radio advertising revenue in 1997 grew 6.3% over 1996 revenue. There are currently 18.5 viable stations in the Portland market, according to Duncan's. Portland Stations The Company owns and operates seven stations, 4 FM and 3 AM, in the Portland market. The Company's seven-station cluster is one of the three largest clusters in the market with a 25.8% market revenue share. Of the Company's seven stations, one ranks first and an additional two rank in the top five stations for their respective demographic audiences. The Company entered the Portland market in 1995, as a result of an internal study that identified Portland as the Company's primary target market for expansion. In 1995, the Company acquired three stations in Portland, including KGON-FM, the market's Classic Rock station. The Company recently increased the size of its Portland cluster by acquiring three additional stations, including KKSN-FM, the market's only Oldies station and KKSN-AM, the market's only Nostalgia station. The Company also acquired KKRH-FM, a Classic Hits station, which competed directly with KGON-FM. In June 1998, the Company changed KKRH-FM's format to Hot Adult Contemporary to pursue a different demographic target, Women 18-49 and changed its call letters to KRSK-FM. The Company also owns and operates KFXX-AM, an all-sports station. KFXX-AM is an affiliate of the Seattle Mariners radio network and carries popular local and nationally-syndicated programming. To increase the nighttime strength and coverage of KFXX-AM's signal, the Company recently exchanged the broadcast 54 57 frequency and technical facilities of KFXX-AM with those of KKSN-AM and agreed to acquire KSLM-AM in Salem, Oregon to expand the coverage of KFXX-AM to the south through a simulcast of its programming. SACRAMENTO 1997 Radio Market Revenue Rank: 28
AUDIENCE SHARE AUDIENCE RANK TARGET IN TARGET IN TARGET STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC - -------------------- -------------- ---------------- ------------ -------------- ------------- KCTC-AM Nostalgia January 1998 Adults 35-64 1.4 18 KRXQ-FM Active Rock June 1997(1) Men 18-34 10.0 1(tie) Adults 18-34 7.5 2 KSEG-FM Classic Rock June 1997(1) Men 25-54 7.2 2 KSSJ-FM Smooth Jazz November 1997 Adults 25-54 4.5 10 KDND-FM Contemporary June 1997(1) Women 18-34 n/a(2) n/a(2) Hit Radio
- --------------- (1) TBA commenced January 1997. (2) KDND-FM (formerly KXOA-FM) recently changed its format. Accordingly, prior Arbitron ratings are not meaningful. Market Overview Sacramento is the twenty-eighth largest radio market in the United States based on 1997 radio advertising revenue. Radio advertising revenues in the Sacramento market have grown from approximately $54.4 million in 1992 to approximately $75 million in 1997 at a compound annual rate of 6.7%. Market radio advertising revenue in 1997 grew 5.0% over 1996 revenue. There are currently 17 viable stations in the Sacramento radio market, according to Duncan's. Sacramento Stations The Company owns and operates five stations, 4 FM and 1 AM, in Sacramento. The five-station group is one of the three largest clusters in the market with a 20.9% market revenue share. Of the Company's five stations, one ranks first and an additional station ranks in the top five in their respective target demographic audiences. Two of the Company's FM stations, KSEG-FM and KDND-FM (formerly KXOA-FM), have been direct competitors. In July 1998, the Company changed KDND-FM's format from Classic Hits to Contemporary Hit Radio to pursue a different demographic target, Women 18-34. Management believes that KSEG-FM, Sacramento's exclusive Classic Rock station, should benefit from this format change. KRXQ-FM, an Active Rock station, has been the market's consistent leader among Men 18-34 and a leading competitor among Adults 18-34 as well. The Company recently completed a frequency exchange with ARS, through which KRXQ-FM has upgraded its current class B1 facility at 93.7 FM to a full class B signal at 98.5 FM, which has expanded KRXQ-FM's signal coverage, and therefore, its competitive position. KSSJ-FM (formerly KBYA-FM) commenced operations from a new tower site in December 1997 with a Smooth Jazz format. 55 58 KANSAS CITY 1997 Radio Market Revenue Rank: 29
AUDIENCE SHARE AUDIENCE RANK TARGET IN TARGET IN TARGET STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC - -------------------- ------------------- ------------- ----------- -------------- ------------- KCMO-AM Talk March 1997 Adults 3.4 12 25-54 KCMO-FM Oldies March 1997 Adults 6.0 7(tie) 25-54 KMBZ-AM News/Talk/Sports March 1997 Men 25-54 5.7 5(tie) Adults 3.9 11 25-54 KUDL-FM Adult Contemporary January 1998 Women 25-54 10.6 1 Adults 7.0 4 25-54 KYYS-FM Album Oriented Rock March 1997 Adults 7.1 3 25-54 Men 25-54 9.6 1 WDAF-AM Country January 1998 Adults 2.9 14 25-54 6.6 5 Adults 35-64
Market Overview Kansas City is the twenty-ninth largest radio market in the United States based on 1997 radio advertising revenue. Radio advertising revenues in the Kansas City market have grown from approximately $42.0 million in 1992 to approximately $71.4 million in 1997 at a compound annual rate of 11.3%. Market radio advertising revenue in 1997 grew 7.5% over 1996 revenue. There are currently 16 viable stations in the Kansas City market, according to Duncan's. Kansas City Stations The Company owns and operates six stations, 3 FM and 3 AM, in the Kansas City market. The six-station group is the market's largest radio cluster with a 33.8% market revenue share. The Company's cluster includes three well-branded FM stations and the market's three strongest AM signals. Of the Company's six stations, two rank first and an additional two rank in the top five in their respective target demographic audiences. The Company's Kansas City FM stations illustrate the Company's ability to react to local market conditions and tailor its stations' programming to broaden their collective audience reach and, consequently, their revenue and broadcast cash flow potential. Prior to their recent acquisition by the Company, KYYS-FM (formerly KLTH-FM) and KUDL-FM had been engaged in a lengthy battle in the Adult Contemporary format. Largely as result of that competition, these stations were the 10th and 12th ranked adult stations in the market. Shortly after acquiring the stations, the Company took advantage of the opportunity created when a new operator dropped the format and call-letters of KYYS-FM, the Kansas City heritage rock station. To capitalize on this opportunity, the Company replaced the Adult Contemporary format on KLTH-FM with an Album Oriented Rock format, changed KLTH-FM's call letters to KYYS-FM and emerged as the heritage rock station in the market. As a result of this strategy, KUDL-FM and KYYS-FM rank 1st in Women 25-54 and Men 25-54, respectively. The Company's third FM station in Kansas City, KCMO-FM, is the market's exclusive Oldies station and targets the Adults 25-54 demographic. The cornerstone of the Company's Kansas City AM presence is KMBZ-AM, the market's news/talk/sports leader. In addition to featuring successful talk-shows such as the Rush Limbaugh Show, KMBZ-AM is the new flagship of the Kansas City Royals Radio Network and carries sports coverage of the University of Kansas and the University of Missouri. The Company's exclusive radio broadcasting rights agreement with the Kansas City Royals runs through the 2000 season. In addition, the Company owns and operates KCMO-AM, the market's leading Talk Radio station, and WDAF-AM, one of the most listened to AM Country stations in the United States. Traditionally known as the "voice of the heartland," WDAF-AM possesses the Kansas City radio market's best AM signal and a multi-decade heritage of Country music programming. 56 59 ROCHESTER 1997 Radio Market Revenue Rank: 55
AUDIENCE SHARE AUDIENCE RANK TARGET IN TARGET IN TARGET STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC - -------------------- ------------ ------------- ------------ -------------- ------------- WBBF-FM Oldies June 1998 (1) Adults 25-54 6.1 8 WBEE-FM Country June 1998 (1) Adults 25-54 10.3 1 WEZO-AM Nostalgia June 1998 (1) Adults 35-64 1.6 14 WQRV-FM Classic Hits June 1998 (1) Adults 25-54 3.4 11
- --------------- (1) TBA commenced March 1998. Market Overview Rochester, New York is the fifty-fifth largest radio market in the United States based on 1997 radio advertising revenue. Radio advertising revenues in the Rochester market have grown from approximately $23.5 million in 1992 to approximately $34.5 million in 1997 at a compound annual rate of 8.1%. Market radio advertising revenue in 1997 grew 6.8% over 1996 revenue. There are currently 13.5 viable stations in the Rochester market, according to Duncan's. Rochester Stations In June 1998, the Company acquired the four stations, 3 FM and 1 AM, comprising its Rochester cluster. The four-station group is one of the three largest clusters in the market with a 21.7% market revenue share. Of the Company's four stations, one ranks first in its target demographic. The Rochester market has only seven full-powered FM stations, of which the Company owns two. One is WBEE-FM which features Country music and is Rochester's leading station among Adults 25-54. The second is WBBF-FM (formerly WKLX-FM), Rochester's exclusive Oldies station. Prior to its acquisition by Entercom, WBBF-FM relied on nationally syndicated programing, without the benefit of locally-targeted music or personalities. Management believes that this approach limited the station's financial potential. The Company has recently modified the station's programming focusing on locally programmed music and live personalities, and utilizing significantly enhanced audience marketing and research. The Company's third FM station in Rochester is WQRV-FM, a Class A station that commenced operations in 1997 as a Classic Hits station. GAINESVILLE / OCALA 1997 Radio Market Revenue Rank: 124
AUDIENCE SHARE AUDIENCE RANK TARGET IN TARGET IN TARGET STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC - -------------------- ------------------ ------------- ----------- -------------- ------------- WKTK-FM Adult Contemporary November 1986 Women 25-54 11.1 2 Adults 11.2 2 25-54 WSKY-FM News Talk May 1998 Adults n/a(1) n/a(1) 25-54
- --------------- (1) WSKY-FM (formerly WRRX-FM) recently changed its format. Accordingly, prior Arbitron ratings are not meaningful. Market Overview Gainesville/Ocala is the 124th largest radio market in the United States based on 1997 radio advertising revenue. Radio advertising revenues in the Gainesville/Ocala market have grown from approximately $8.9 million in 1992 to approximately $12.2 million in 1997 at a compound annual rate of 6.5%. Market radio advertising revenue in 1997 grew 8.0% over 1996 revenue. There are currently 13 viable stations in the Gainesville/Ocala market, according to Duncan's. 57 60 Gainesville/Ocala Stations The Company owns and operates two FM stations in Gainesville/Ocala. With WKTK-FM and WSKY-FM (formerly WRRX-FM), the Company has a 23.8% market revenue share. Although the Gainesville/Ocala market's size is outside of the Company's target parameters, the acquisition presented the opportunity to acquire the dominant station in a fast growing area of the country. WKTK-FM broadcasts an Adult Contemporary format and has been a ratings leader in this northern Florida market for many years. In May 1998, the Company acquired WSKY-FM and management believes that Entercom can now begin capitalizing on the benefits of multiple station ownership in this market. LONGVIEW/KELSO 1997 Radio Market Revenue Rank: N/A
AUDIENCE SHARE AUDIENCE RANK TARGET IN TARGET IN TARGET STATION CALL LETTERS FORMAT DATE ACQUIRED DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC - -------------------- ------------------ ------------- ------------ -------------- ------------- KBAM-AM Country May 1998 Adults 25-54 n/a n/a KEDO-AM Oldies April 1997 Adults 25-54 n/a n/a KLYK-FM Adult Contemporary April 1997 Adults 25-54 n/a n/a KRQT-FM Classic Rock May 1998 Men 25-54 n/a n/a
Market Overview The Longview/Kelso market is located between the Seattle and Portland markets. The market is not surveyed by Arbitron or Duncan's. Longview/Kelso Stations The Company owns and operates four stations, 2 FM and 2 AM, in the Longview/Kelso market. These stations serve two important functions for the Company. First these stations, which the Company acquired at relatively low capital costs, are strategically significant because of their impact on the potential upgrade of certain Portland radio stations. Second, these stations also permit the Company to capitalize on some regional revenue and cost saving opportunities. COMPETITION; CHANGES IN BROADCASTING INDUSTRY 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 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. 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 and other advertising media in the market area. The Company attempts to improve its competitive position with promotional campaigns aimed at the demographic groups targeted by its stations and by sales efforts designed to attract advertisers. 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 local marketing agreements or joint sales agreements may in certain circumstances have lower operating costs and may be able to offer advertisers more attractive rates and services. Although the Company currently operates several multiple station groups and intends to pursue the creation of additional 58 61 multiple station groups, the Company's competitors in certain markets include operators of multiple stations or operators who already have entered into local marketing agreements or joint sales agreements. Despite the competitiveness within the radio broadcasting industry, some barriers to entry exist. The operation of a radio broadcast station requires a license from the FCC. The number of radio stations that can operate in a given market is limited by strict AM interference criteria and the availability of FM radio frequencies allotted by the FCC to communities in that market, as well as by the FCC's multiple ownership rules that regulate the number of stations serving the same area that may be owned and controlled by a single entity. See "-- Federal Regulation of Radio Broadcasting." The Company's stations also compete for audiences and advertising revenues within their respective markets directly with other radio stations, as well as with other media such as newspapers, magazines, cable television, outdoor advertising and direct mail. In addition, the radio broadcasting industry is subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems, DARS, the Internet, satellite, television and PCS. DARS plans to deliver by satellite to nationwide audiences, multi-channel, multi-format, digital radio services with sound quality equivalent to compact discs. The FCC is also considering proposals for the establishment of "microbroadcasting" stations, low-powered AM or FM stations that would be designed to serve small localized areas. The delivery of information or entertainment programming 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 discs. 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 adopted licensing and operating rules for DARS and in April 1997 awarded two licenses for this service. DARS may provide a medium for the delivery by satellite or terrestrial means of multiple new audio programming formats to local and/or national audiences. Digital technology also may be used in the future by terrestrial radio broadcast stations either on existing or alternate broadcasting frequencies, and the FCC has stated that it will consider making changes to its rules to permit AM and FM radio stations to offer digital sound following industry analysis of technical standards. In addition, the FCC has authorized an additional 100 kHz of bandwidth for the AM band and has allotted frequencies in this new band to certain existing AM station licensees that applied for migration to the expanded AM band, subject to the requirement that at the end of a transition period, those licensees 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 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. The Company employs a number of on-air personalities and generally enters into employment agreements with certain of these personalities to protect its interests in those relationships that it believes to be valuable. The loss of certain 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. FEDERAL REGULATION OF RADIO BROADCASTING The ownership, operation and sale of radio stations are subject to the jurisdiction of the FCC, which acts under authority granted by the Communications Act. Among other things, the FCC assigns frequency bands for broadcasting; determines the particular frequencies, locations and operating power of stations; issues, renews, revokes and modifies station licenses; determines whether to approve changes in ownership or control of station licenses; regulates equipment used by stations; and adopts and implements regulations and policies that directly affect the ownership, operation and employment practices of stations. The FCC has the power to impose penalties for violation of its rules or the Communications Act, including the imposition of monetary 59 62 forfeitures, the issuance of short-term licenses, the imposition of a condition on the renewal of a license, and the revocation of operating authority. The following is a brief summary of certain provisions of the Communications Act and of specific FCC regulations and policies. 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 radio stations. FCC Licenses. Radio stations operate pursuant to broadcasting licenses that are ordinarily granted by the FCC for maximum terms of eight years and are subject to renewal upon application to the FCC. The FCC licenses for the Company's stations are held by certain of the Company's subsidiaries. During certain periods when renewal applications are pending, petitions to deny license renewals can be filed by interested parties, including members of the public. Historically, the Company's management has not experienced any material difficulty in renewing any licenses for stations under its control. The FCC is required to hold hearings on a station's renewal application if a substantial or material question of fact exists as to whether (i) the station has served the public interest, convenience and necessity, (ii) there have been serious violations by the licensee of the Communications Act or the FCC rules thereunder or (iii) there have been other violations by the licensee of the Communications Act or the FCC rules thereunder that, taken together, constitute a pattern of abuse. Historically, FCC licenses have generally been renewed. The Company has no reason to believe that its licenses will not be renewed in the ordinary course, although there can be no assurance to that effect. The non-renewal of one or more of the Company's licenses could have a material adverse effect on the Company. The FCC classifies each AM and FM station. An AM station operates on either a clear channel, regional channel or local channel. A clear channel is one on which AM stations are assigned to serve wide areas. Clear channel AM stations are classified as either: Class A stations, which operate on an unlimited time basis and are designated to render primary and secondary service over an extended area; Class B stations, which operate on an unlimited time basis and are designed to render service only over a primary service area; or Class D stations, which operate either during daytime hours only, during limited times only or on an unlimited time basis with low nighttime power. A regional channel is one on which Class B and Class D AM stations may operate and serve primarily a principal center of population and the rural areas contiguous to it. A local channel is one on which AM stations operate on an unlimited time basis and serve primarily a community and the suburban and rural areas immediately contiguous thereto. Class C AM stations operate on a local channel and are designed to render service only over a primary service area that may be reduced as a consequence of interference. The minimum and maximum facilities requirements for an FM station are determined by its class. FM class designations depend, in part, upon the geographic zone in which the transmitter of the FM station is located. In general, commercial FM stations are classified as follows, in order of increasing power and antenna height: Class A, B1, C3, B, C2, C1 and C. The FCC is considering dividing Class C stations into two subclasses, Class C and Class C0. Stations would be categorized into one of the two classes depending on the antenna height of each station. 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, and the date on which each station's FCC license expires (a station may continue to operate beyond the expiration date if a timely filed license application is pending):
FCC HAAT POWER IN EXPIRATION DATE OF MARKET(1) STATION CLASS (IN METERS) FREQUENCY KILOWATTS(2) FCC LICENSE - --------- ------- ----- ----------- --------- ------------ ------------------ Boston WRKO-AM B * 680 KHZ 50 June 1, 2006 WEEI-AM B * 850 KHZ 50 June 1, 2006 WWTM-AM B * 1440 KHZ 5 June 1, 2006 WEGQ-FM B 179 98.7 MHZ 34.0 June 1, 2006 WAAF-FM B 250 107.3 MHZ 18.5 June 1, 2006
60 63
FCC HAAT POWER IN EXPIRATION DATE OF MARKET(1) STATION CLASS (IN METERS) FREQUENCY KILOWATTS(2) FCC LICENSE - --------- ------- ----- ----------- --------- ------------ ------------------ Seattle KIRO-AM A * 710 KHZ 50 February 1, 2006 KNWX-AM B * 770 KHZ 50-D February 1, 2006 5-N KBSG-AM B * 1210 KHZ 27.5-D February 1, 2006 10.0-N KBSG-FM C 729 97.3 MHZ 55 February 1, 2006 KISW-FM C 350 99.9 MHZ 100 February 1, 2006 KIRO-FM C 714 100.7 MHZ 58 February 1, 2006 KMTT-FM C 714 103.7 MHZ 58 February 1, 2006 KNDD-FM C 714 107.7 MHZ 58 February 1, 2006 Portland KFXX-AM B * 910 KHZ 5 February 1, 2006 KSLM-AM B * 1390 KHZ 5-D February 1, 2006 KKSN-AM B * 1520 KHZ 50-D February 1, 2006 15-N KGON-FM C 386 92.3 MHZ 100 February 1, 2006 KNRK-FM C2 259 94.7 MHZ 17 February 1, 2006 KKSN- FM C 386 97.1 MHZ 100 February 1, 2006 KRSK-FM C 561 105.1 MHZ 100 February 1, 2006 0.69-N Sacramento KCTC-AM B * 1320 KHZ 5 December 1, 2005 KSSJ-FM B1 99 94.7 MHZ 25 December 1, 2005 KSEG-FM B 152 96.9 MHZ 50 December 1, 2005 KRXQ-FM B 151 98.5 MHZ 50 December 1, 2005 KDND-FM B 123 107.9 MHZ 50 December 1, 2005 Kansas City WDAF-AM B * 610 KHZ 5 February 1, 2005 KCMO-AM B * 710 KHZ 10-D February 1, 2005 5-N KMBZ-AM B * 980 KHZ 5 February 1, 2005 KCMO-FM C 322 94.9 MHZ 100 February 1, 2005 KUDL-FM C 303 98.1 MHZ 100 February 1, 2005 KYYS-FM C 308 99.7 MHZ 100 February 1, 2005 Rochester WEZO-AM B * 950 KHZ 1 June 1, 2006 WBEE-FM B 152 92.5 MHZ 50 June 1, 2006 WQRV-FM A 119 93.3 MHZ 4 June 1, 2006 WBBF-FM B 172 98.9 MHZ 37 June 1, 2006 Gainesville/Ocala WSKY-FM(3) C2 289 97.3 MHZ 13.5 February 1, 2004 WKTK-FM C1 299 98.5 MHZ 100 February 1, 2004 Longview/Kelso KBAM-AM D * 1270 KHZ 5-D February 1, 2006 0.083-N KEDO-AM C * 1400 KHZ 1 February 1, 2006 KLYK-FM A 262 105.5 MHZ 0.7 February 1, 2006 KRQT-FM C3 528 107.7 MHZ 0.74 February 1, 2006
- --------------- * Not applicable for AM transmission facilities. (1) Metropolitan market served; city of license may differ. (2) Pursuant to FCC rules and regulations, many AM radio stations are licensed to operate at a reduced power during the nighttime broadcasting hours, which results in reducing the radio station's coverage during the nighttime hours of operation. Both power ratings are shown, where applicable. For FM stations, the effective radiated power is given. (3) Station is currently operating pursuant to Program Test Authority. 61 64 Ownership Matters. The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant such approval, the FCC considers a number of factors pertaining to the licensee, including compliance with the various rules limiting common ownership of media properties in a given market, the "character" of the licensee and those persons holding "attributable" interests therein, and compliance with the Communications Act's limitations on alien ownership as well as compliance with other FCC policies, including FCC equal employment opportunity requirements. The equal opportunity requirements have been declared unconstitutional by the U.S. Court of Appeals for the District of Columbia. See "-- Programming and Operation." A transfer of control of a corporation holding a broadcast license may occur in various ways. For example, a transfer of control occurs if an individual stockholder gains or loses "affirmative" or "negative" control of such corporation through issuance, redemption or conversion of stock. "Affirmative" control would consist of control of more than 50% of such corporation's outstanding voting power and "negative" control would consist of control of exactly 50% of such voting power. To obtain the FCC's prior consent to assign or transfer control of a broadcast license, appropriate applications must be filed with the FCC. If the application involves a "substantial change" in ownership or control, in that new individuals approved by the FCC propose to acquire "affirmative" or "negative" control, the application must be placed on public notice for a period of not less than 30 days during which petitions to deny or other objections against the application may be filed by interested parties, including members of the public. If the application does not involve a "substantial change" in ownership or control, it is a "pro forma" application. The "pro forma" application is nevertheless subject to having informal objections filed against it. If the FCC grants an assignment or transfer application, interested parties have not less than 30 days from public notice of the grant to seek reconsideration or review of that grant. Generally, parties that do not file initial petitions to deny or informal objections against the application face a high hurdle in seeking reconsideration or review of the grant. The FCC normally has approximately an additional ten days to set aside on its own motion any grant made by the FCC staff acting pursuant to delegated authority. When passing on an assignment or transfer application, the FCC is prohibited from considering whether the public interest might be served by an assignment or transfer of the broadcast license to any party other than the assignee or transferee specified in the application. In response to the Telecom Act, the FCC amended its multiple ownership rules to eliminate the national limits on the ownership of AM and FM stations. Additionally, it established new local ownership rules that use a sliding scale of permissible ownership, depending on market size. In radio markets with 45 or more commercial radio stations, a licensee may own up to eight stations, no more than five of which can be in a single radio service (i.e., no more than five AM or five FM). In radio markets with 30 to 44 commercial radio stations, a licensee may own up to seven stations, no more than four of which can be in a single radio service. In radio markets having 15 to 29 commercial radio stations, a licensee may own up to six radio stations, no more than four of which can be in a single radio service. Finally, in radio markets having 14 or fewer commercial radio stations, a licensee may own up to five radio stations, no more than three of which can be in the same service; provided that the licensee may not own more than one half of the total number of radio stations in the market. FCC ownership rules continue to permit an entity to own one FM and one AM station in a local market regardless of market size. In addition to the numerical limitations on ownership depending on market size, the FCC is considering adopting a policy that would review a proposed transaction if it would enable a single owner to attain a high degree of revenue concentration in a market. The FCC's "one-to-a-market" rule prohibits the common ownership, operation or control of a radio broadcast station and a television broadcast station serving the same geographic market (subject to a waiver of such prohibition if certain conditions are satisfied) and the common ownership, operation or control of a radio broadcast station and a daily newspaper serving the same geographic market. Under these rules, absent waivers, the Company would not be permitted to acquire any daily newspaper or television broadcast station (other than low-power television) in any geographic market in which it now owns radio broadcast properties. On October 1, 1996, the FCC commenced a proceeding to explore possible revisions of its policies concerning waiver of the newspaper/radio cross-ownership restrictions. The FCC generally applies its ownership limits to "attributable" interests held by an individual, corporation, partnership or other association. In the case of corporations holding, or through subsidiaries 62 65 controlling, broadcast licenses, the interests of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the corporation's voting stock (or 10% or more of such stock in the case of insurance companies, investment companies and bank trust departments that are passive investors) are generally attributable. If a single individual or entity controls more than 50% of a corporation's voting stock, that individual or entity is viewed as a single majority shareholder; in this case, the interests of other shareholders are not attributable unless the shareholders are also officers or directors of the corporation. The FCC is currently reviewing its attribution rules to determine whether changes in those rules are appropriate. In determining whether the Company is in compliance with the local ownership limits on AM and FM stations, the FCC will consider the Company's AM and FM holdings, as well as the attributable broadcast interests of the Company's officers, directors and attributable shareholders. Accordingly, the attributable broadcast interests of the Company's officers and directors described in the preceding paragraph will limit the number of radio stations the Company may acquire or own in any market in which such officers or directors hold or acquire attributable broadcast interests. In addition, the Company's officers and directors may from time to time hold various nonattributable interests in media properties, which, under certain circumstances, may also limit the number of radio stations the Company may acquire or own in a given market. Under its "cross-interest" policy, the FCC considers certain "meaningful" relationships among competing media outlets in the same market, even if the ownership rules do not specifically prohibit the relationship. Under the cross-interest policy, the FCC in certain instances may prohibit one party from holding an attributable interest in one media outlet and a substantial non-attributable economic interest in another media outlet in the same market. Under this policy, the FCC may consider significant equity interests combined with an attributable interest in a media outlet in the same market, joint ventures, and common key employees among competitors. The cross-interest policy does not necessarily prohibit all of these interests, but requires that the FCC consider whether, in a particular market, the "meaningful" relationships between competitors could have a significant adverse effect upon economic competition and program diversity. Heretofore, the FCC has not applied its cross-interest policy to TBAs and JSAs between broadcast stations. In its ongoing rulemaking proceeding concerning the attribution rules described below, the FCC has sought comment on, among other things, (i) whether the cross-interest policy should be applied only in smaller markets and (ii) whether non-equity financial relationships such as debt, when combined with multiple business interrelationships such as TBAs and JSAs, raise concerns under the cross-interest policy. The Communications Act prohibits the issuance of broadcast licenses to, or the holding of broadcast licenses by, any corporation of which more than 20% of the capital stock is owned of record or voted by non-U.S. citizens or their representatives or by a foreign government or a representative thereof, or by any corporation organized under the laws of a foreign country (collectively, "Aliens"). The Communications Act also authorizes the FCC, if the FCC determines that it would be in the public interest, to prohibit the issuance of a broadcast license to, or the holding of a broadcast license by, any corporation directly or indirectly controlled by any other corporation of which more than 25% of the capital stock is owned of record or voted by Aliens. The FCC staff has interpreted this provision to require a public interest finding in favor of such a grant or holding before a broadcast license may be granted to or held by any such corporation and has made such a finding only in limited circumstances generally involving licenses other than broadcast licenses. The FCC has issued interpretations of existing law (i) under which these restrictions in modified form apply to other forms of business organizations, including partnerships and (ii) indicating how alien interests in a company that are held directly through intermediate entities should be considered in determining whether that company is in compliance with these alien ownership restrictions. As a result of these provisions, the licenses granted to the radio station subsidiaries of the Company by the FCC could be revoked if, among other restrictions imposed by the FCC, more than 25% of the Company's stock were directly or indirectly owned or voted by Aliens. The Company's Amended and Restated Articles of Incorporation restrict the ownership, voting and transfer of the Company's capital stock in accordance with the Communications Act and the rules of the FCC, and prohibit the issuance of more than 25% of the Company's outstanding capital stock (or more than 25% of the voting rights it represents) to or for the account of Aliens or corporations otherwise subject to domination or control by Aliens. The Amended and Restated Articles of Incorporation authorize the Company's Board of Directors to enforce these prohibitions. In addition, the Amended and Restated Articles of Incorporation provide that shares of capital stock of the Company determined by the Company's Board of Directors to be owned 63 66 beneficially by an Alien or an entity directly or indirectly owned by Aliens in whole or in part shall be subject to redemption by the Company by action of the Board of Directors to the extent necessary, in the judgment of the Board of Directors, to comply with these alien ownership restrictions. See "Description of Capital Stock." Time Brokerage Agreements. Over the past few years, a number of radio stations have entered into what have commonly been referred to TBAs. While these agreements may take varying forms, under a typical TBA, separately owned and licensed radio stations agree to enter into cooperative arrangements of varying sorts, subject to compliance with the requirements of antitrust laws and with the FCC's rules and policies. Under these arrangements, separately-owned stations could agree to function cooperatively in programming, advertising sales and similar matters, subject to the requirement that the licensee of each station maintain independent control over the programming and operations of its own station. One typical type of TBA is a programming agreement between two separately-owned radio stations serving a common service area, whereby the licensee of one station provides substantial portions of the broadcast programming for airing on the other licensee's station, subject to ultimate editorial and other controls being exercised by the latter licensee, and sells advertising time during those program segments. The FCC has specifically revised its "cross-interest" policy to make that policy inapplicable to TBAs. Furthermore, the staff of the FCC's Mass Media Bureau has held that TBAs are not contrary to the Communications Act provided that the licensee of the station that is being substantially programmed by another entity maintains complete responsibility for, and control over, programming and operations of its broadcast station and assures compliance with applicable FCC rules and policies. The FCC's multiple ownership rules specifically permit radio station TBAs to continue to be entered into and implemented, but provide that a licensee or a radio station that brokers more than 15% of the weekly broadcast time on another station serving the same market will be considered to have an attributable ownership interest in the brokered station for purposes of the FCC's multiple ownership rules. As a result, in a market where it owns a radio station, the Company would not be permitted to enter into a TBA with another local radio station in the same market that it could not own under the local ownership rules, unless the Company's programming on the brokered station constituted 15% or less of the other local station's programming time on a weekly basis. The FCC rules also prohibit a 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) through a TBA where the brokered and brokering stations which it owns or programs serve substantially the same area. Such 25% simulcasting limitation also applies to commonly owned stations in the same broadcast service that serve substantially the same area. Joint Sales Agreements. Over the past few years, a number of radio stations have entered into cooperative arrangements commonly known as JSAs. While these agreements may take varying forms, under the typical JSA, a station licensee obtains, for a fee, the right to sell substantially all of the commercial advertising on a separately-owned and licensed station in the same market. The typical JSA also customarily involves the provision by the selling party of certain sales, accounting and "back office" services to the station whose advertising is being sold. The typical JSA is distinct from a TBA in that a JSA normally does not involve programming. The FCC has determined that issues of joint advertising sales should be left to enforcement by antitrust authorities, and therefore does not generally regulate joint sales practices between stations. Currently, stations for which another licensee sells time under a JSA are not deemed by the FCC to be attributable interests of that licensee. However, in connection with its ongoing rulemaking proceeding concerning the attribution rules, the FCC is considering whether JSAs should be considered attributable interests or within the scope of the FCC's cross-interest policy, particularly when JSAs contain provisions for the supply of programming services and/or other elements typically associated with TBAs. If JSAs become attributable interests as a result of changes in the FCC rules, the Company may be required to terminate any JSA it might have with a radio station which the Company could not own under the FCC's multiple ownership rules. Programming and Operation. The Communications Act requires broadcasters to serve the "public interest." The FCC gradually has relaxed or eliminated many of the more formalized procedures it had developed in the past to promote the broadcast of certain types of programming responsive to the needs of a 64 67 station's community of license. A licensee continues to be required, however, to present programming that is responsive to issues of the station's community of license and to maintain certain records demonstrating such responsiveness. Complaints from listeners concerning a station's programming often will be considered by the FCC when it evaluates renewal applications of a licensee, although listener complaints may be filed at any time, are required to be maintained in the station's public file and generally may be considered by the FCC at any time. Stations also must pay regulatory and application fees and follow various rules promulgated under the Communications Act that regulate, among other things, political advertising, sponsorship identifications, the advertisement of contests and lotteries, obscene and indecent broadcasts, and technical operations, including limits on human exposure to radio frequency radiation. In addition, the FCC rules formerly required that licensees develop and implement affirmative action programs designed to promote equal employment opportunities and submit reports to the FCC with respect to these matters on an annual basis and in connection with a renewal application. The U.S. Court of Appeals for the District of Columbia has declared these rules unconstitutional. The FCC has announced that it intends to reestablish employment regulations through rulemaking proceedings to be initiated in the future. Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of "short term" (less than the full term) license renewal, the imposition of a condition on the renewal of a license or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license. Proposed and Recent Changes. The FCC has pending a rulemaking proceeding that seeks, among other things, comment on whether the FCC should modify its radio and television broadcast ownership "attribution" rules by (i) raising the basic benchmark for attributing ownership in a corporate licensee from 5% to 10% of the licensee's outstanding voting power, (ii) increasing from 10% to 20% of the licensee's outstanding voting power the attribution benchmark for institutional investors in corporate licensees holding interests deemed "passive" in nature, (iii) attributing certain minority stockholdings in corporations with a single majority shareholder and (iv) attributing certain local marketing agreements ("LMA"), TBAs, JSAs, debt or non-voting stock interests that have heretofore been non-attributable. Moreover, Congress and the FCC have under consideration, and in the future may consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could affect, directly or indirectly, the operation, ownership and profitability of 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 to finance those acquisitions. Such matters may include spectrum use or other fees on FCC licenses; foreign ownership of broadcast licenses; restatement in revised form of the FCC's equal employment opportunity rules and revisions to the FCC's rules relating to political broadcasting; technical and frequency allocation matters; 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 attribution policies; and new technologies such as DARS and microbroadcasting. As required by the Telecom Act, the FCC has instituted a proceeding to investigate, among other things, the effect of the revised ownership rules for radio stations adopted through the Telecom Act, and the resulting consolidation in the radio industry, on the diversity of programming and ownership, and on programming and advertising competition. The FCC may conclude, as a consequence of this review, to modify the radio ownership rules. Finally, the FCC has adopted procedures for the auction of broadcast spectrum in circumstances where two or more parties have filed for major change applications which are mutually exclusive; such procedure may limit the Company's efforts to modify or expand the broadcast signals of its stations. The Company cannot predict what other matters might be considered in the future by the FCC or Congress, nor can it judge in advance what impact, if any, the implementation of any of these proposals or changes might have on its business. Federal Antitrust Laws. In addition to the risks associated with the acquisition of radio stations, the Company is also aware of the possibility that certain acquisitions it proposes to make may be investigated by the FTC or the DOJ, which are the agencies responsible for enforcing the federal antitrust laws. The Company cannot predict the outcome of any specific DOJ or FTC investigation, which is necessarily fact specific. Any 65 68 decision by the FTC or the DOJ to challenge a proposed acquisition could affect the ability of the Company to consummate the acquisition or to consummate it on the proposed terms. 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 prior to 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 with the Second Request by all parties to the acquisition. Thereafter, such waiting period may only be extended by court order or with the consent of the parties. In practice, complying with a Second Request can take a significant amount of time. In addition, if the investigating agency raises substantive issues in connection with a proposed transaction, then the parties frequently engage in lengthy discussions or negotiations with the investigating agency concerning possible means of addressing those issues, including but not limited to persuading the agency that the proposed acquisition would not violate the antitrust laws, restructuring the proposed acquisition, divestiture of other assets of one or more parties, or abandonment of the transaction. Such discussions and negotiations can be time-consuming and expensive, 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. As part of its increased scrutiny of radio station acquisitions, the DOJ has stated publicly that it believes that LMAs, JSAs, TBAs and other similar agreements customarily entered into in connection with radio station transfers could violate the HSR Act if such agreements take effect prior to the expiration of the waiting period under the HSR Act. Furthermore, the DOJ has noted that JSAs may raise antitrust concerns under Section 1 of the Sherman Act and has challenged JSAs in certain locations. EMPLOYEES On October 20, 1998, the Company had a staff of 821 full-time employees and 373 part-time employees. The Company is a party to interim collective bargaining agreements with the American Federation of Television and Radio Artists ("AFTRA") which apply to certain of the Company's programming personnel in Seattle and Kansas City. Under the interim agreements the Company has agreed to recognize AFTRA as the collective bargaining unit and to not lock out its employees, and AFTRA has agreed to recognize management's rights and to refrain from taking a strike vote. The interim agreements are terminable, by either party, upon seven days notice. The Company is currently negotiating the terms of longer-term comprehensive agreements with these unions. In addition, certain personnel in the stations included in the Boston Transactions are members of AFTRA and the International Brotherhood of Electrical Workers. Upon completion of either of the Boston Transactions, the Company will be required to either assume the existing collective bargaining agreements or negotiate a new collective bargaining agreement with such personnel. The Company believes that its relations with its employees are good. SEASONALITY Seasonal revenue fluctuations are common in the radio broadcasting industry and are due primarily to fluctuations in advertising expenditures by retailers. The Company's revenues and broadcast cash flows are typically lowest in the first calendar quarter. 66 69 PROPERTIES AND FACILITIES The types of properties required to support each of the Company's radio stations include offices, studios and transmitter/antenna sites. The Company typically leases its studio and office space with lease terms that expire in five to ten years, although the Company does own certain of its facilities. A station's studios are generally housed with its offices in downtown or business districts. The Company generally considers its facilities to be suitable and of adequate size for its current and intended purposes. The Company owns a majority of its main transmitter and antenna sites and leases the remainder of its transmitter/antenna sites with lease terms that expire, including renewal options, in periods ranging up to twenty years. The transmitter/antenna site for each station is generally located so as to provide maximum market coverage, consistent with the station's FCC license. In general, the Company does not anticipate difficulties in renewing facility or transmitter/antenna site leases or in leasing additional space or sites if required. The Company owns substantially all of its other equipment, consisting principally of transmitting antennae, transmitters, studio equipment and general office equipment. The towers, antennae and other transmission equipment used by the Company's stations are generally in good condition, although opportunities to upgrade facilities are continuously reviewed. Substantially all of the property owned by the Company secures the Company's borrowings under the Credit Facility. The principal executive offices of the Company are located at 401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004. The telephone number of the Company is (610) 660-5610. 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 management, is likely to have a material adverse effect on the Company. 67 70 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The following table provides information concerning the directors and executive officers of the Company.
NAME AGE POSITION WITH THE COMPANY - ---- --- ------------------------- Joseph M. Field........................... 66 Chairman of the Board and Chief Executive Officer David J. Field............................ 36 President, Chief Operating Officer, Chief Financial Officer and Director John C. Donlevie.......................... 51 Executive Vice President, General Counsel and Director Eugene D. Levin........................... 47 Treasurer and Controller Deborah Kane.............................. 43 Vice President - Sales Herbert Kean, M.D......................... 66 Director S. Gordon Elkins.......................... 67 Director Thomas H. Ginley, M.D..................... 74 Director Lee Hague................................. 52 Director Marie H. Field............................ 61 Director Michael R. Hannon......................... 38 Director
Joseph M. Field founded Entercom in 1968 and has served since the Company's inception as Chairman of the Board and Chief Executive Officer and was the Company's President until September 1998. Mr. Field served on the Board of Directors of the National Association of Broadcasters for four years as a representative of the major radio group broadcasters. Mr. Field is a graduate of the University of Pennsylvania and of Yale Law School and practiced law in New York and Philadelphia before entering the broadcasting business. Mr. Field currently serves on the Boards of Directors of The Curtis Institute of Music, the Settlement Music School, the American Interfaith Institute, the Liberty Museum, the Jewish Educational and Vocational Service (JEVS) and the Philadelphia Chamber Music Society in Philadelphia. Joseph M. Field is the spouse of Marie H. Field and the father of David J. Field. David J. Field has served as President of the Company since September 1998, as Chief Operating Officer and Chief Financial Officer since April 1996 and as director since November 1995. Mr. Field joined the Company in 1987 and served as Director of Finance and Corporate Development from 1987 to 1988, Vice President - Finance and Corporate Development from 1988 to 1992, Vice President - Operations and Chief Financial Officer from 1992 to 1995 and Senior Vice President - Operations and Chief Financial Officer from 1995 to 1996. Prior to joining the Company, Mr. Field was an investment banker with Goldman, Sachs & Co. Mr. Field has a B.A. from Amherst College and an M.B.A. from the Wharton School of the University of Pennsylvania. Mr. Field currently serves on the Board of Directors of The Wilderness Society in Washington, D.C. David J. Field is the son of Joseph M. Field and Marie H. Field. John C. Donlevie has served as Executive Vice President and director since 1989 and as General Counsel of the Company since 1984 when he joined the Company. In addition, Mr. Donlevie served as Vice President - Legal and Administrative from 1984 through 1989. Prior to joining the Company, Mr. Donlevie practiced law for eleven years, most recently as Corporate Counsel of Ecolaire Incorporated in Malvern, Pennsylvania. Mr. Donlevie has a B.S. in engineering from Drexel University and a J.D. from Temple University School of Law. Eugene D. Levin has served as Controller of the Company since 1977 when he joined the Company, and as Treasurer since 1988. Prior to joining the Company, Mr. Levin was a senior accountant for Laventhal and Horwath, and an operational/financial auditor and divisional controller for After-Six Inc. Mr. Levin has a B.S. from Pennsylvania State University and is a certified public accountant. 68 71 Deborah Kane has served as Vice President - Sales of the Company since June 1996. Ms. Kane joined the Company in 1990 and served as the Local Sales Manager for Entercom's previously owned San Francisco station KITS-FM from 1990 to 1994. From 1994 to 1996, Ms. Kane served as the Company's Director of Strategic Sales. Ms. Kane has over 20 years of experience in the radio industry. Ms. Kane has a B.A. in Radio, Television and Film from the University of Maryland. Herbert Kean, M.D. has served as a director of the Company since its inception and as secretary from its inception until February 1984. Dr. Kean is currently a medical physician in private practice in the Philadelphia area. Dr. Kean has a B.S. from the University of Pennsylvania and a M.D. from Hahnemann University. S. Gordon Elkins has served as a director of the Company since February 1978. Mr. Elkins is a partner in the law firm of Stradley, Ronon, Stevens & Young. Mr. Elkins has a B.S. from Temple University and an L.L.B. from Yale Law School. Thomas H. Ginley, M.D. has served as a director of the Company since January 1971 and as Secretary of the Company since February 1984. Dr. Ginley is currently a medical physician in private practice in the Philadelphia area. Mr. Ginley serves on the Board of Directors of A & T Development Corporation, Vanesa Noel Couture, Inc. and GEM Treasury International Corporation. Dr. Ginley has a M.D. from Georgetown University. Lee Hague has served as a director of the Company since March 1980. Mr. Hague has served as an independent consultant to various broadcasting groups and provides financial advisory and media brokering services to the industry. Mr. Hague has over 20 years' experience in the radio industry. Mr. Hague has a B.S. in Economics from Northwestern University and a M.M. from the J.L. Kellogg Graduate School of Management, Northwestern University. Marie H. Field has served as a director of the Company since 1989. Mrs. Field served for over 25 years as a teacher in public and private schools in New York and Philadelphia. Mrs. Field serves on the Board of Directors of the Ovarian Cancer Research Fund in New York and the Board of Overseers of the University of Pennsylvania School of Social Work. Mrs. Field has a B.A. from Barnard College. Mrs. Field is the spouse of Joseph M. Field and the mother of David J. Field. Michael R. Hannon was elected to serve as a director of the Company in 1998. Mr. Hannon is a general partner of Chase Capital, a general partnership which invests in international private equity opportunities with a significant concentration on the media and telecommunications industries. Prior to joining Chase Capital in 1988, Mr. Hannon held various positions at Morgan Stanley & Co. Incorporated. Mr. Hannon currently serves as Chairman of Telecorp PCS, Inc. and as a director of Formus Communications, Financial Equity Partners and Bell Sports. Mr. Hannon has a B.A. from Yale University and an M.B.A. from Columbia Business School. COMMITTEES OF THE BOARD OF DIRECTORS The Company's Board of Directors has established an Audit Committee and a Compensation Committee. The responsibilities of the Audit Committee include recommending to the Board of Directors independent public accountants to conduct the annual audit of the financial statements of the Company, reviewing the proposed scope of such audit and approving the audit fees to be paid, reviewing accounting and financial controls of the Company with the independent public accountants and the Company's financial and accounting staff and reviewing and approving transactions, other than compensation matters, between the Company and its directors, officers and affiliates. Prior to the consummation of the Offering, the Board will appoint two or more non-employee directors to be the initial members of the Audit Committee. The Compensation Committee provides a general review of the Company's compensation plans to ensure that they meet corporate objectives. The responsibilities of the Compensation Committee also include administering and interpreting the Company's 1998 Equity Compensation Plan, including selecting the officers 69 72 and salaried employees to whom awards will be granted. Messrs. Ginley, Hague and Kean serve as the initial members of the Compensation Committee. DIRECTOR COMPENSATION During the last fiscal year, all directors of the Company were compensated $200 for each meeting of the Board that they attended in person. Upon consummation of the Offering, all directors who are not currently receiving compensation as officers, employees or consultants of the Company will be entitled to receive an annual retainer fee of $ , plus $ and reimbursement of expenses for each meeting of the Board and each committee meeting that they attend in person. Directors who serve as employees of the Company will not receive additional compensation for their services as directors. EXECUTIVE OFFICER COMPENSATION The following table sets forth certain information concerning compensation paid to or earned by the Chief Executive Officer of the Company and the Company's other most highly compensated executive officers for services rendered during the year ended September 30, 1997 (the "Named Executive Officers"). Summary Compensation Table
ANNUAL COMPENSATION -------------------- OTHER ANNUAL NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION --------------------------- ---- -------- -------- ------------ Joseph M. Field, Chairman of the Board and Chief Executive Officer............................... 1997 $542,335 0 * David J. Field, President, Chief Operating Officer and Chief Financial Officer..................... 1997 $257,250 $89,500 * John C. Donlevie, Executive Vice President and General Counsel................................. 1997 $178,071 $89,500 * Deborah Kane, Vice President - Sales.............. 1997 $117,500 $68,800 * Eugene D. Levin, Treasurer and Controller......... 1997 $ 97,130 $44,750 *
- --------------- * Value of perquisites and other personal benefits paid does not exceed the lesser of $50,000 or 10% of the total annual salary and bonus reported for the executive officer and, therefore, is not required to be disclosed pursuant to rules of the Securities and Exchange Commission (the "Commission"). (1) Includes amounts accrued during year presented but paid in the subsequent year. 1998 EQUITY COMPENSATION PLAN The Company has adopted the 1998 Equity Compensation Plan, effective as of June 24, 1998. The 1998 Equity Compensation Plan provides for grants of (i) options intended to qualify as incentive stock options ("ISOs") within the meaning of Section 422 of the Code, (ii) "nonqualified stock options" that are not intended to so qualify ("NQSOs"), (iii) restricted stock and (iv) stock appreciation rights ("SARs"). Such grants may be made to employees of the Company and its subsidiaries (including employees who are officers or directors), non-employee directors of the Company and certain advisors and consultants who perform services for the Company and its subsidiaries (the "Participants"). Only shares of Class A Common Stock may be issued under the 1998 Equity Compensation Plan. By encouraging stock ownership, the Company seeks to motivate such individuals and to encourage such individuals to devote their best efforts to the business and financial success of the Company. General. Subject to adjustment in certain circumstances as discussed below, up to 10% of the outstanding Class A Common Stock of the Company may be issued under the 1998 Equity Compensation Plan. The number of shares for which ISOs may be issued under the 1998 Equity Compensation Plan may not exceed shares (subject to adjustment as described below), and the number of shares of restricted stock that may be issued under the 1998 Equity Compensation Plan may not exceed shares (subject to adjustment as described below). If and to the extent grants awarded under the 1998 Equity Compensation Plan expire or are terminated for any reason without being exercised, the shares of Class A 70 73 Common Stock subject to such grant again will be available for purposes of the 1998 Equity Compensation Plan. Administration of the 1998 Equity Compensation Plan. The 1998 Equity Compensation Plan is administered and interpreted by the Compensation Committee (the "Committee") of the Board of Directors consisting of not less than two persons appointed by the Board of Directors from among its members, each of whom may be a "disinterested person" as defined by Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and an "outside director" as defined by Section 162(m) of the Code. Subject to the ratification or approval by the Board of Directors, if the Board retains such right, the Committee has the sole authority to (i) determine the individuals to whom awards shall be made under the 1998 Equity Compensation Plan, (ii) determine the type, size and terms of the awards to be made to each such individual, (iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including the criteria for vesting and the acceleration of vesting, (iv) delegate to the Chief Executive Officer of the Company the authority to make grants under the 1998 Equity Compensation Plan to employees of the Company who are not subject to the limitations of Section 16(b) of the Exchange Act and who are not expected to be subject to the limitations of Section 162(m) of the Code and (v) deal with any other matters arising under the Plan. See "-- Committees of the Board of Directors." Eligibility for Participation. Awards may only be made to Participants. During any calendar year, no Participant may receive awards for more than 1,000,000 shares of Class A Common Stock issued or available for issuance under the 1998 Equity Compensation Plan. As of June 30, 1998, no options were outstanding under the 1998 Equity Compensation Plan. Options. The exercise price of any ISO granted under the 1998 Equity Compensation Plan will not be less than the fair market value of the underlying shares of Common Stock on the date of grant. The exercise price of an ISO granted to an employee who owns more than 10% of the Common Stock may not be less than 110% of the fair market value of the underlying shares of Common Stock on the date of grant. The exercise price of an NQSO may be greater than, equal to or less than the fair market value of the underlying shares of Common Stock on the date of grant. The Committee will determine the term of each option; provided, however, that the exercise period may not exceed ten years from the date of grant, and the exercise period of an ISO granted to an employee who owns more than 10% of the Common Stock may not exceed five years from the date of grant. The Participant may pay the exercise price (i) in cash, (ii) with the approval of the Committee, by delivering shares of Common Stock owned by the Participant and having a fair market value on the date of exercise equal to the exercise price or (iii) by such other method as the Committee approves. The participant may instruct the Company to deliver the shares of Common Stock due upon the exercise to a designated broker instead of to the Participant. Restricted Stock. The Committee may issue shares of restricted Common Stock to a Participant pursuant to the 1998 Equity Compensation Plan. Shares may be issued for consideration or for no consideration, as the Committee determines. The number of shares of Common Stock granted to each Participant shall be determined by the Committee, subject to the maximum limit described above. Grants of restricted stock will be made subject to such performance requirements, vesting provisions, transfer restrictions or other restrictions and conditions as the Committee may determine in its sole discretion. Stock Appreciation Rights. The Committee may grant SARs alone or in tandem with any stock option pursuant to the 1998 Equity Compensation Plan. Unless the Committee determines otherwise, the exercise price of an SAR will be either (i) the exercise price of the related stock option or (ii) the fair market value of a share of Common Stock on the date of grant of the SAR. When the Participant exercises a SAR, the Participant will receive the amount by which the fair market value of the Common Stock on the date of exercise exceeds the exercise price of the SAR. The appreciation shall be paid in cash or in shares of Common Stock, as the Committee determines. To the extent a Participant exercises a tandem SAR, the related option shall terminate. Similarly, upon exercise of a stock option, the related SAR, if any, shall terminate. Amendment and Termination of the 1998 Equity Compensation Plan. The Board of Directors may amend or terminate the 1998 Equity Compensation Plan at any time; provided, however, that, the Board of Directors may not amend, without stockholder approval, the 1998 Equity Compensation Plan to make any 71 74 amendment that requires stockholder approval pursuant to Rule 16b-3 of the Exchange Act, Section 162(m) of the Code or Section 422 of the Code. The 1998 Equity Compensation Plan will terminate on the day immediately preceding the tenth anniversary of its effective date, unless terminated earlier by the Board of Directors or extended by the Board of Directors with approval of the stockholders. Adjustment Provisions. Subject to the change of control provisions below, in the event of certain transactions identified in the 1998 Equity Compensation Plan, the Committee may appropriately adjust (i) the number and kind of shares of Class A Common Stock (and the option price per share) subject to awards, (ii) the number and kind of shares for which awards may be made under the 1998 Equity Compensation Plan and (iii) the maximum number of shares that may be awarded to an individual, and such adjustments shall be effective and binding for all purposes of the 1998 Equity Compensation Plan. Change of Control of the Company. In the event of a change of control, unless the Committee determines otherwise, all grants shall become fully vested and all restrictions and conditions on restricted stock shall lapse. If the Company is not the surviving corporation, unless the Committee determines otherwise, outstanding options and SARs will be replaced by options and SARs or equivalent rights of the surviving corporation. The Committee may also provide for a cashout or termination of outstanding options and SARs. A change of control is defined as (i) any person or group becomes the owner of more than 50% of the votes required to elect a majority of the Board of Directors, except if such change in control results from the death of a shareholder, (ii) a liquidation or a sale of substantially all the Company's assets or (iii) a merger in which the shareholders of the Company immediately before the merger do not own, after the merger, more than 50% of all votes required to elect a majority of the Board of Directors of the surviving corporation. Section 162(m). Under Section 162(m) of the Code, the Company may be precluded from claiming a federal income tax deduction for total remuneration in excess of $1,000,000 paid to the chief executive officer or to any of the other four most highly compensated officers in any one year. Total remuneration would include amounts received upon the exercise of stock options or SARs granted under the 1998 Equity Compensation Plan and the value of shares received when the shares of restricted stock became transferable (or such other time when income is recognized). An exception exists, however, for "performance-based compensation," including amounts received upon the exercise of stock options or SARs pursuant to a plan approved by shareholders that meets certain requirements. The 1998 Equity Compensation Plan has been approved by shareholders and is intended to make grants of options thereunder that meet the requirements of "performance- based compensation." Awards of restricted stock will not qualify as "performance-based compensation." New Plan Benefits. Prior to the effective date of the Offering, the Company will grant certain options under the 1998 Equity Compensation Plan. The Company anticipates that these options will vest one-fourth each year over the next four years. All options expire on the tenth anniversary of the date of grant. The following table sets forth certain information with respect to such contemplated Option grants.
NAME AND POSITION DOLLAR VALUE NUMBER OF UNITS (1) - ----------------- ------------ ------------------- Joseph M. Field, Chairman of the Board and Chief Executive Officer................................................... David J. Field, President, Chief Operating Officer, Chief Financial Officer and Director............................ John C. Donlevie, Executive Vice President and General Counsel................................................... Deborah Kane, Vice-President - Sales........................ Eugene D. Levin, Treasurer and Controller................... All current executive officers as a group................... All current directors who are not executive officers as a group..................................................... All employees, including all current officers who are not executive officers, as a group............................
- --------------- (1) The number of units represents the number of shares of Class A Common Stock underlying the options expected to be granted. 72 75 EMPLOYEE STOCK PURCHASE PLAN The Company's Employee Stock Purchase Plan (the "ESP Plan") was adopted in June 1998 and will become effective after the Offering on such date as the Board of Directors or the committee established to administer the ESP Plan (the "Committee") designates. The purpose of the ESP Plan is to provide eligible employees of the Company an opportunity to purchase Common Stock of the Company. The Company believes that employee participation in stock ownership will be to the mutual benefit of both the employees and the Company. The ESP Plan is intended to constitute an employee stock purchase plan within the meaning of Section 423 of the Code. The ESP Plan is not intended to constitute an employee benefit plan within the meaning of Section 3(3) of the Employee Retirement Security Act of 1974, as amended. A total of up to shares of Class A Common Stock of the Company may be issued under the ESP Plan (subject to adjustment in the event of certain changes in the Common Stock). The ESP Plan will terminate after a term of 10 years, unless it is terminated earlier pursuant to its terms or by action of the Board of Directors. All funds received or held by the Company under the ESP Plan are general assets of the Company, shall be held free of any trust or other restriction and may be used for any corporate purpose. In order to be eligible to participate in the ESP Plan, an employee must (i) be classified by the Company as a full or part-time employee, (ii) be employed by the Company for more than 20 hours per week and for more than five months per year, (iii) have completed at least one year of service with the Company or a predecessor and (iv) not be deemed for purposes of Section 423(b)(3) of the Code to own stock representing five percent or more of the total combined voting power of all classes of stock of the Company or any subsidiary of the Company. Employees who are covered by a collective bargaining agreement will not participate during any period in which the union has determined that such employees will not participate in the ESP Plan. Under the ESP Plan, the Company will withhold a specified percentage (not to exceed 10%) of the compensation paid to each participant, and the amount withheld (and any additional amount contributed by the participant) will be used to purchase Class A Common Stock from the Company on the last day of each purchase period. The price at which the Class A Common Stock will be purchased under the ESP Plan will be determined by the Committee and shall not be less than 85% of the value of the stock on the last day of the purchase period. The length of each purchase period shall be specified by the Committee, with the first purchase period to begin on a date subsequent to the effective date of this Prospectus. Employees may end their participation in a purchase period at any time, and participation ends automatically upon termination of employment with the Company. The maximum value of shares that a participant in the ESP Plan may purchase during any calendar year is $25,000. In the event of a dissolution or liquidation of the Company or of a merger or consolidation in which the Company is not the surviving corporation, the ESP Plan and any purchase periods then in progress will terminate upon the effective date of such event. The Board of Directors has the right to amend or terminate the ESP Plan. However, any amendment that requires shareholder approval under Section 423 of the Code shall be approved by the Company's shareholders. EMPLOYMENT AGREEMENTS Joseph M. Field Employment Agreement. The Company has entered into an employment agreement with Joseph M. Field pursuant to which Mr. Field serves as Chief Executive Officer. The employment agreement with Mr. Field may be terminated upon written notice no less than 30 days prior to the end of any calendar year. Absent such written notice, the employment agreement is automatically renewed for a period of one year. In the event of Mr. Field's death during the term of the employment agreement, the Company will pay his survivors Mr. Field's compensation for one year at the then current rate. In the event of the total disability of Mr. Field, the Company will pay Mr. Field compensation for the lesser of the period of his disability or one year at the then applicable rate. Mr. Field's current base salary is $544,800 and is increased or decreased annually by a percentage equal to the percentage of inflation or deflation over the immediately preceding twelve month period, provided that the base salary shall never be less than $500,000. The Board of Directors may approve additional salary, bonuses, fees, or other compensation for Mr. Field. Mr. Field is 73 76 entitled to participate in any bonus, profit sharing, retirement, insurance or other plan or program adopted by the Company. Absent the express prior written consent of the Company, Mr. Field is prohibited, in the event of his termination by resignation or for cause, for a period of two years following the termination of the employment agreement, from engaging in any broadcast business in competition with the Company in any standard metropolitan statistical area in which the Company is then operating a broadcast property. Executive Officer Employment Agreements. The Company has entered into employment agreements with David J. Field, John C. Donlevie and Eugene D. Levin. Each of the employment agreements provides that the employee may be terminated at will by either party (i) immediately if good cause for termination exists, or (ii) upon thirty days notice in the absence of good cause. Pursuant to the employment agreements, the current annual salaries of Mr. Field, Mr. Donlevie and Mr. Levin are $263,000, $183,000 and $100,000, respectively. Each of the employment agreements provides for yearly salary adjustments for inflation and an annual incentive bonus based on the increased real cash flow (as defined in the agreement) of the Company. In addition, Mr. Donlevie and Mr. Levin may collect a percentage of any special or liquidating distributions made by the Company. Deborah Kane Employment Agreement. The Company has entered into an employment agreement with Deborah Kane pursuant to which Ms. Kane serves as Vice President - Sales. The employment agreement with Ms. Kane may be terminated at will by either party with or without cause or notice. Ms. Kane is paid an annual base salary of $160,000 under the employment agreement and is entitled to receive certain quarterly and annual incentive bonuses based on the completion of several performance related objectives. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS S. Gordon Elkins, a director of the Company, is a partner at the law firm of Stradley, Ronon, Stevens & Young, that has served as the Company's outside counsel on various matters. Michael R. Hannon, a director of the Company, is a general partner of Chase Capital. In May 1996, Chase Equity Associates, L.P., an affiliate of Chase Capital, acquired the 7% Subordinated Convertible Note for $25 million. The 7% Subordinated Convertible Note will be converted in the Chase Conversion into shares of Class A Common Stock. Chase Equity Associates, L.P. is the Selling Shareholder in the Offering and will receive net proceeds of $ from the sale of shares of Class A Common Stock in the Offering. Upon completion of the Offering, Chase Capital will beneficially own approximately % of the Company's Class A Common Stock. 74 77 PRINCIPAL AND SELLING SHAREHOLDERS The following table sets forth certain information regarding the beneficial ownership of the Common Stock as of May 31, 1998, by: (i) each person (or group of affiliated persons) known by the Company to be the beneficial owner of more than five percent of the outstanding Common Stock; (ii) each Named Executive Officer of the Company; (iii) each director of the Company; (iv) the Selling Shareholder and (v) all of the Company's directors and executive officers as a group. Each shareholder possesses sole voting and investment power with respect to the shares listed, unless otherwise noted.
CLASS B CLASS A COMMON STOCK(1) COMMON STOCK(2) --------------------------------------------------------- ------------------------------------- PERCENT OF CLASS NUMBER OF PERCENT OF SHARES ---------------------- SHARES CLASS NAME OF BEFORE BEING AFTER BEFORE AFTER AFTER AFTER BENEFICIAL OWNER OFFERING OFFERED OFFERING(3) OFFERING OFFERING(3) OFFERING(3) OFFERING(3) - ----------------------- -------- ------- ----------- -------- ----------- ----------------- ----------------- Joseph M. Field (4).... David J. Field (4)..... John C. Donlevie....... Eugene D. Levin........ Deborah Kane........... Herbert Kean, M.D...... S. Gordon Elkins....... Thomas H. Ginley, M.D. ................ Lee Hague.............. Marie H. Field(4)...... Michael R. Hannon(5)... Nancy E. Field(4)...... Chase Equity Associates, L.P.(5) 380 Madison Avenue New York, NY 10017.... All directors, and executive officers, as a group ("persons").......... PERCENT OF PERCENT OF NAME OF TOTAL ECONOMIC TOTAL VOTING BENEFICIAL OWNER INTEREST POWER - ----------------------- -------------- ------------ Joseph M. Field (4).... David J. Field (4)..... John C. Donlevie....... Eugene D. Levin........ Deborah Kane........... Herbert Kean, M.D...... S. Gordon Elkins....... Thomas H. Ginley, M.D. ................ Lee Hague.............. Marie H. Field(4)...... Michael R. Hannon(5)... Nancy E. Field(4)...... Chase Equity Associates, L.P.(5) 380 Madison Avenue New York, NY 10017.... All directors, and executive officers, as a group ("persons")..........
- --------------- * Less than one percent. (1) The number of shares of Class A Common Stock does not include the shares of Class A Common Stock issuable upon conversion of the outstanding shares of Class B Common Stock. (2) The holders of the Class B Common Stock are entitled to vote with the holders of the Class A Common Stock on all matters submitted to a vote of shareholders of the Company, except with respect to the election of Class A Directors and as otherwise required by law. Each share of Class B Common Stock that is voted by Joseph M. Field and David J. Field is entitled to ten votes per share on all matters submitted to a vote of shareholders, except certain "going private" transactions or as otherwise required by law. The shares of Class B Common Stock are convertible in whole or in part, at the option of the holder or holders thereof, subject to certain conditions, into the same number of shares of Class A Common Stock. See "Description of Capital Stock." (3) Shares beneficially owned and percentage ownership are based on shares of Class A Common Stock and shares of Class B Common Stock outstanding after the Offering. (4) The address of these shareholders is 401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004. (5) The amounts shown consist of shares held of record by Chase Equity Associates, L.P. to be received upon the Chase Conversion. Michael Hannon is a general partner of Chase Capital, which is an affiliate of Chase Equity Associates, L.P. Mr. Hannon exercises shared investment and voting power with respect to such shares, but disclaims beneficial ownership of such shares. 75 78 DESCRIPTION OF CAPITAL STOCK The following description of the capital stock of the Company gives effect to the Recapitalization and the Chase Conversion, which will occur immediately prior to the Offering, and to the proposed sale of shares of Class A Common Stock in the Offering. The Company's authorized capital stock consists of (i) 200,000,000 shares of Class A Common Stock, of which shares are issued and outstanding; (ii) 75,000,000 shares of Class B Common Stock, of which shares are issued and outstanding; (iii) 50,000,000 shares of Class C Common Stock, none of which are issued or outstanding; and (iv) 25,000,000 shares of preferred stock, none of which are issued or outstanding. In addition, the Company has reserved for issuance shares of Class A Common Stock under the 1998 Equity Compensation Plan. See "Management -- 1998 Equity Compensation Plan." The following summary description of the capital stock of the Company does not purport to be complete and is subject to the detailed provisions of, and qualified in its entirety by reference to, the Company's Amended and Restated Articles of Incorporation and Amended and Restated Bylaws, copies of which have been filed as exhibits to the registration statement of which this Prospectus forms a part, and to the applicable provisions of the Pennsylvania Business Corporation Law of 1988 (the "PBCL"). Common Stock The rights of holders of the Common Stock are identical in all respects, except as discussed below. All the outstanding shares of Class A Common Stock and Class B Common Stock and the shares of Class A Common Stock sold in the Offering will be, upon issuance and payment of the purchase price therefor, validly issued, fully paid and nonassessable. Dividends. Subject to the right of the holders of any class of preferred stock, holders of shares of Common Stock are entitled to receive such dividends as may be declared by the Company's Board of Directors out of funds legally available for such purpose. No dividend may be declared or paid in cash or property on any share of any class of Common Stock unless simultaneously the same dividend is declared or paid on each share of that and every other class of Common Stock; provided that, in the event of stock dividends, holders of a specific class of Common Stock shall be entitled to receive only additional shares of such class. Voting Rights. The Class A Common Stock and the Class B Common Stock vote together as a single class on all matters submitted to a vote of shareholders, with each share of Class A Common Stock entitling the holder thereof to one vote and each share of Class B Common Stock entitling the holder thereof to ten votes, except that (i) beginning with the Company's first annual meeting following the Offering, the holders of Class A Common Stock, voting as a separate class, shall be entitled to elect two Class A Directors, (ii) with respect to a Going Private Transaction (defined as a "Rule 13e-3 transaction" under the Exchange Act), each share of Class A Common Stock and Class B Common Stock shall be entitled to one vote, (iii) any share of Class B Common Stock shall only be entitled to ten votes if it is voted by either Joseph M. Field, or David J. Field, in their own right or pursuant to a proxy and (iv) as otherwise required by law. The Class C Common Stock has no voting rights except as otherwise required by law. The first two Class A Directors will be appointed by the Company's Board of Directors as soon as practicable after the consummation of the Offering and will serve until the Company's next annual meeting of shareholders, when the holders of the Class A Common Stock will elect the Class A Directors. The Class A Directors serve one-year terms and must be "independent directors." For this purpose, an "independent director" means a person who is not an officer or employee of the Company or its subsidiaries, and who does not have a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Holders of Common Stock are not entitled to cumulate votes in the election of directors. Liquidation Rights. Upon liquidation, dissolution or winding-up of the Company, the holders of the Common Stock are entitled to share ratably in all assets available for distribution after payment in full of creditors and holders of the preferred stock of the Company, if any. 76 79 Conversion of Class A Common Stock. Shares of Class A Common Stock owned by a Regulated Entity (defined as either an entity that is a "bank holding company" under the Bank Holding Company Act of 1956 (the "BHC Act") or a non-bank subsidiary of such an entity, or an entity that, pursuant to Section 8(a) of the International Banking Act of 1978, as amended, is subject to the provisions of the BHC Act, or any non-bank subsidiary of such an entity), are convertible at any time, at the option of the holder thereof, into an equal number of fully paid and non-assessable shares of Class C Common Stock. All conversion rights of Class A Common Stock are subject to any necessary FCC approval. Conversion, Transferability of Class B Common Stock. Shares of Class B Common Stock are convertible at any time, at the option of the holder thereof, into an equal number of fully paid and non-assessable shares of Class A Common Stock. All conversion rights of Class B Common Stock are subject to any necessary FCC approval. Shares of Class B Common Stock transferred to a party other than a Field Shareholder are automatically converted into an equal number of fully paid and non-assessable shares of Class A Common Stock. Conversion, Transferability of Class C Common Stock. Shares of Class C Common Stock are convertible at any time, at the option of the holder thereof, into an equal number of fully paid and non-assessable shares of Class A Common Stock. All conversion rights of Class C Common Stock are subject to any necessary FCC approval. Shares of Class C Common Stock transferred to a party other than a Regulated Entity are automatically converted into an equal number of fully paid and non-assessable shares of Class A Common Stock. Shares of Class C Common Stock may be transferred by a Regulated Entity under a limited set of circumstances. Other Provisions. The holders of Common Stock are not entitled to preemptive or similar rights. Preferred Stock The Company is authorized to issue 25,000,000 shares of preferred stock, par value $.01 per share. The Board of Directors of the Company, in its sole discretion, may designate and issue one or more series of preferred stock from the authorized and unissued shares of preferred stock. Subject to limitations imposed by law or the Amended and Restated Articles of Incorporation of the Company, the Board of Directors is empowered to determine the designation of and the number of shares constituting a series of preferred stock, the dividend rate, if any, for the series, the terms and conditions of any voting and conversion rights for the series, if any, the number of directors, if any, which the series shall be entitled to elect, the amounts payable on the series upon the liquidation, dissolution or winding-up of the Company, the redemption prices and terms applicable to the series, if any, and the preferences and relative rights among the series of preferred stock. Such rights, preferences, privileges and limitations of preferred stock could adversely affect the rights of holders of Common Stock. There are currently no shares of preferred stock outstanding. FOREIGN OWNERSHIP The Amended and Restated Articles of Incorporation of the Company restrict the ownership, voting and transfer of the Company's capital stock, including the Common Stock, in accordance with the Communications Act and the rules of the FCC, which prohibit the issuance of more than 25% of the Company's outstanding capital stock (or more than 25% of the voting rights it represents) to or for the account of Aliens or corporations otherwise subject to domination or control by Aliens. The Company's Amended and Restated Articles of Incorporation prohibit any transfer of the Company's capital stock that would cause a violation of this prohibition. In addition, the Amended and Restated Articles authorize the Board of Directors of the Company to take action to enforce these prohibitions, including requiring redemptions of Common Stock and placing a legend regarding restrictions on foreign ownership on the certificates representing the Common Stock. See "Business -- Federal Regulation of Radio Broadcasting -- Ownership Matters." 77 80 CERTAIN PROVISIONS OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION AND AMENDED AND RESTATED BYLAWS OF THE COMPANY The Company's Amended and Restated Articles of Incorporation and Amended and Restated Bylaws include certain provisions that could have an anti-takeover effect. These provisions are intended to preserve the continuity and stability of the Board of Directors and the policies formulated by the Board of Directors. These provisions are also intended to help ensure that the Board of Directors, if confronted by a surprise proposal from a third party which has acquired a block of stock of the Company, will have sufficient time to review the proposal, to consider appropriate alternatives to the proposal and to act in what it believes to be the best interests of the shareholders. The following is a summary of the provisions included in the Amended and Restated Articles of Incorporation and is qualified in its entirety by reference to such documents, copies of which will be filed as exhibits to the Registration Statement, of which this Prospectus forms a part. The Board of Directors has no current plans to formulate or effect additional measures that could have an anti-takeover effect. Exculpation. The Amended and Restated Articles of Incorporation of the Company provide that a director or officer of the Corporation shall not be personally liable for monetary damages as such (including, without limitation, any judgment, amount paid in settlement, penalty, punitive damages or expense of any nature (including, without limitation, attorneys' fees and disbursements)) for any action taken, or any failure to take any action, unless (i) the director has breached or failed to perform the duties of his or her office under the Amended and Restated Articles of Incorporation of the Company, the Amended and Restated Bylaws of the Company or applicable provisions of law and (ii) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. Indemnification. The Amended and Restated Articles of Incorporation of the Company provide that, to the fullest extent permitted by the PBCL, the Company will indemnify any person who was, is, or is threatened to be made, a party to a proceeding by reason of the fact that he or she (i) is or was a director or officer of the Company or (ii) while a director or officer of the Company, is or was serving at the request of the Company as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise. Blank Check Preferred Stock. The Company's Amended and Restated Articles of Incorporation will provide that the Board of Directors of the Company may authorize the issuance of up to 25,000,000 shares of preferred stock in one or more classes or series and may designate the dividend rate, voting rights and other rights, preferences and restrictions of each such class or series. The Board of Directors of the Company has no present intention to issue any preferred stock; however, the Board of Directors of the Company has the authority, without further shareholder approval, to issue one or more series of preferred stock that could, depending on the terms of such series, either impede or facilitate the completion of a merger, tender offer or other takeover attempt. Although the Board of Directors of the Company is required to make any determination to issue such stock based on its judgment as to the best interests of the shareholders of the Company, the Board of Directors of the Company could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of the shareholders might believe to be in their best interests or in which shareholders might receive a premium for their stock over the then market price of such stock. The Board of Directors of the Company does not intend to seek shareholder approval prior to any issuance of such stock, unless otherwise required by law. PENNSYLVANIA CONTROL-SHARE ACQUISITIONS LAW Generally, subchapters 25E, F, G, H, I and J of the PBCL place certain procedural requirements and establish certain restrictions upon the acquisition of voting shares of a corporation which would entitle the acquiring person to cast or direct the casting of a certain percentage of votes in an election of directors. Subchapter 25E of the PBCL provides generally that, if the Company were involved in a "control transaction," shareholders of the Company would have the right to demand from a "controlling person or group" payment of the fair value of their shares. For purposes of subchapter 25E, a "controlling person or 78 81 group" is a person or group of persons acting in concert that, through voting shares, has voting power over at least 20% of the votes which shareholders of the Company would be entitled to cast in the election of directors. A control transaction arises, in general, when a person or group acquires the status of a controlling person or group. In general, Subchapter 25F of the PBCL delays for five years and imposes conditions upon "business combinations" between an "interested shareholder" and the Company. The term "business combination" is defined broadly to include various merger, consolidation, division, exchange or sale transactions, including transactions utilizing the Company's assets for purchase price amortization or refinancing purposes. An "interested shareholder," in general, would be a beneficial owner of at least 20% of the Company's voting shares. In general, Subchapter 25G of the PBCL suspends the voting rights of the "control shares" of a shareholder that acquires for the first time 20% or more, 33 1/3% or more or 50% or more of the Company's shares entitled to be voted in an election of directors. The voting rights of the control shares generally remain suspended until such time as the "disinterested" shareholders of the Company vote to restore the voting power of the acquiring shareholder. Subchapter 25H of the PBCL provides in certain circumstances for the recovery by the Company of profits made upon the sale of its common stock by a "controlling person or group" if the sale occurs within 18 months after the controlling person or group became such and the common stock was acquired during such 18 month period or within 24 months prior thereto. In general, for purposes of Subchapter 25H, a "controlling person or group" is a person or group that (i) has acquired, (ii) offered to acquire or (iii) publicly disclosed or caused to be disclosed an intention to acquire voting power over shares that would entitle such person or group to cast at least 20% of the votes that shareholders of the Company would be entitled to cast in the election of directors. If the disinterested shareholders of the Company vote to restore the voting power of a shareholder who acquires control shares subject to Subchapter 25G, the Company would then be subject to subchapters 25I and J of the PBCL. Subchapter 25I generally provides for a minimum severance payment to certain employees terminated within two years of such approval. Subchapter 25J, in general, prohibits the abrogation of certain labor contracts prior to their stated date of expiration. The foregoing descriptions of certain subchapters of the PBCL do not purport to be complete. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Common Stock is . 79 82 SHARES ELIGIBLE FOR FUTURE SALE Prior to the Offering, there has been no public market for the Class A Common Stock of the Company. The sale, or availability for sale, of substantial amounts of Class A Common Stock in the public market subsequent to the Offering, could adversely affect the prevailing market price of the shares of Class A Common Stock and could impair the Company's ability to raise additional capital through the sale of equity securities. Upon completion of the Offering, the Company will have outstanding shares of Class A Common Stock and shares of Class B Common Stock. Of these outstanding shares, the shares of Class A Common Stock sold in the Offering will be freely transferable without restriction under the Securities Act, except for any such shares purchased by an "affiliate" (as defined in Rule 144 under the Securities Act) of the Company, which shares may generally only be sold in compliance with the limitations of Rule 144 described below. The remaining shares of Class A Common Stock and all of Class B Common Stock will be "restricted securities" for purposes of Rule 144 and may not be resold unless registered under the Securities Act or sold pursuant to an applicable exemption thereunder, including the exemption contained in Rule 144. The number of shares of Common Stock available for sale in the public market is limited by restrictions under the Securities Act and lock-up agreements under which all of the holders of such shares have agreed not to sell or otherwise dispose of their shares during the Lock-Up Period without the prior written consent of Credit Suisse First Boston Corporation. Because of these restrictions, on the date of this Prospectus, no shares other than those offered hereby will be eligible for sale. Upon expiration of the Lock-Up Period, all of the restricted securities will be eligible for sale in the public market, subject to compliance with the manner-of-sale, volume and other limitations of Rule 144. In general, under Rule 144, as currently in effect, a shareholder (or shareholders whose shares are aggregated) who has beneficially owned restricted securities for at least one year (including persons who may be deemed "affiliates" of the Company under Rule 144) is entitled to sell a number of shares within any three-month period that does not exceed the greater of 1% of the then outstanding shares of the class of Common Stock or the average weekly trading volume of such stock during the four calendar weeks preceding such sale, subject to certain manner of sale limitations. A shareholder who is deemed not to have been an affiliate of the Company for at least three months prior to the date of sale and who has beneficially owned restricted securities for at least two years would be entitled to sell such shares under Rule 144 without regard to the volume or manner of sale limitations described above. 80 83 UNDERWRITING Under the terms and subject to the conditions contained in an Underwriting Agreement dated , 1998 (the "Underwriting Agreement"), the underwriters named below (the "Underwriters"), for whom Credit Suisse First Boston Corporation, BT Alex. Brown Incorporated, Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, acting as representatives (the "Representatives"), have severally but not jointly agreed to purchase from the Company and the Selling Shareholder the following respective numbers of shares of Class A Common Stock:
NUMBER UNDERWRITER OF SHARES ----------- --------- Credit Suisse First Boston Corporation...................... BT Alex. Brown Incorporated................................. Goldman, Sachs & Co. ....................................... Morgan Stanley & Co. Incorporated........................... ------- Total............................................. =======
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will be obligated to purchase all of the shares of Class A Common Stock offered hereby (other than those shares covered by the over-allotment option described below) if any are purchased. The Underwriting Agreement provides that, in the event of a default by an Underwriter, in certain circumstances the purchase commitments of non-defaulting Underwriters may be increased or the Underwriting Agreement may be terminated. The Company and the Selling Shareholder have granted to the Underwriters an option, expiring at the close of business on the 30th day after the date of this Prospectus, to purchase up to additional shares from the Company and additional outstanding shares from the Selling Shareholder at the initial public offering price less the underwriting discounts and commissions, all as set forth on the cover page of this Prospectus. Such option may be exercised only to cover over-allotments in the sale of the shares of Class A Common Stock. To the extent such option is exercised, each Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares of Class A Common Stock as it was obligated to purchase pursuant to the Underwriting Agreement. The Company and the Selling Shareholder have been advised by the Representatives that the Underwriters propose to offer the shares of Class A Common Stock to the public initially at the public offering price set forth on the cover page of this Prospectus and, through the Representatives, to certain dealers at such price less a concession of $ per share of Class A Common Stock, and the Underwriters and such dealers may allow a discount of $ per share of Class A Common Stock on sales to certain other dealers. After the initial public offering, the public offering price and concession and discount to dealers may be changed by the Representatives. The Representatives have informed the Company that they do not expect discretionary sales by the Underwriters to exceed 5% of the shares of Class A Common Stock being offered hereby. The Company has agreed that it will not offer, sell, contract to sell, announce its intention to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Securities Act relating to, any additional shares of its Class A Common Stock or securities convertible into or exchangeable or exercisable for any shares of capital stock of the Company without the prior written consent of Credit Suisse First Boston Corporation for a period of 180 days after the date of this Prospectus (the "Lock-Up Period"), except (i) pursuant to or in connection with employee stock option plans or other 81 84 employee or non-employee director or key advisor compensation arrangements or agreements, in each case in effect on the date of this Prospectus, and (ii) in connection with the conversion of shares of Class A Common Stock, Class B Common Stock or Class C Common Stock solely into another class of Common Stock. Each of the Company's officers, directors and the Selling Shareholder have agreed not to sell, offer, or otherwise dispose of any shares of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock, except for the conversion of the Class A Common Stock, Class B Common Stock and Class C Common Stock solely into shares of another class of Common Stock, without the prior written consent of Credit Suisse First Boston Corporation during the Lock-Up Period, except for certain limited exceptions. The Underwriters have reserved for sale, at the initial public offering price up to shares of the Class A Common Stock for employees, directors and certain other persons associated with the Company or with its officers or directors, who have expressed an interest in purchasing such shares of Class A Common Stock in the Offering. The number of shares available for sale to the general public in the Offering will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the Underwriters to the general public on the same terms as the other shares offered hereby. The Company and the Selling Shareholder have agreed to indemnify the Underwriters against certain liabilities, including civil liabilities under the Securities Act, or contribute to payments which the Underwriters may be required to make in respect thereof. Application will be made to list the shares of Class A Common Stock on the New York Stock Exchange. In connection with the listing of the Class A Common Stock on The New York Stock Exchange, the Underwriters will undertake to sell round lots of 100 shares or more to a minimum of 2,000 beneficial owners. Prior to this Offering, there has been no public market for the Class A Common Stock. Accordingly, the initial public offering price for the Class A Common Stock will be determined by negotiations between the Company and the Representatives. Among the factors considered in determining the initial public offering price will be the history of, and the prospects for, the Company's business and the industry in which it competes, an assessment of the Company's management, its past and present operations, its past and present earnings and the trend of such earnings, the prospects for earnings of the Company, the present state of the Company's development, the general condition of the securities markets at the time of the Offering and the market prices and the earnings of similar securities of comparable companies at the time of the Offering. The Representatives, on behalf of the Underwriters, may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act. Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of the Class A Common Stock in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the Representatives to reclaim a selling concession from a syndicate member when the shares of Class A Common Stock originally sold by such syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. Such stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the Class A Common Stock to be higher than it would otherwise be in the absence of such transactions. These transactions may be effected on the New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time. NOTICE TO CANADIAN RESIDENTS RESALE RESTRICTIONS The distribution of the shares of Class A Common Stock in Canada is being made only on a private placement basis exempt from the requirement that the Company and the Selling Shareholder prepare and file a prospectus with the securities regulatory authorities in each province where trades of shares of Class A Common Stock are effected. Accordingly, any resale of the shares of Class A Common Stock in Canada must 82 85 be made in accordance with applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with available statutory exemptions or pursuant to a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the shares of Class A Common Stock. REPRESENTATIONS OF PURCHASERS Each purchaser of shares of Class A Common Stock in Canada who receives a purchase confirmation will be deemed to represent to the Company, the Selling Shareholder and the dealer from whom such purchase confirmation is received that (i) such purchaser is entitled under applicable provincial securities laws to purchase such shares of Class A Common Stock without the benefit of a prospectus qualified under such securities laws, (ii) where required by law, that such purchaser is purchasing as principal and not as agent and (iii) such purchaser has reviewed the text above under "Resale Restrictions." RIGHTS OF ACTION (ONTARIO PURCHASERS) The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by section 32 of the Regulations under the Securities Act (Ontario). As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws. ENFORCEMENT OF LEGAL RIGHTS All of the issuer's directors and officers as well as the experts named herein and the Selling Shareholder may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets of the issuer and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against such issuer or persons outside of Canada. NOTICE TO BRITISH COLUMBIA RESIDENTS A purchaser of shares of Class A Common Stock to whom the Securities Act (British Columbia) applies is advised that such purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any shares of Class A Common Stock acquired by such purchaser pursuant to this offering. Such report must be in the form attached to British Columbia Securities Commission Blanket Order (BOR) #95/17, a copy of which may be obtained from the Company. Only one such report must be filed in respect of Class A Common Stock acquired on the same date and under the same prospectus exemption. TAXATION AND ELIGIBILITY FOR INVESTMENT Canadian purchasers of shares of Class A Common Stock should consult their own legal and tax advisers with respect to the tax consequences of an investment in the shares of Class A Common Stock in their particular circumstances and with respect to the eligibility of the shares of Class A Common Stock for investment by the purchaser under relevant Canadian Legislation. LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. Certain legal matters will be passed upon for the Underwriters by Weil, Gotshal & Manges LLP, Dallas, Texas and New York, New York. EXPERTS The financial statements of Entercom Communications Corp. as of September 30, 1996 and 1997 and June 30, 1998 and for each of the three years in the period ended September 30, 1997 and for the nine months ended June 30, 1998 included in this Prospectus and the related financial statement schedule included elsewhere in the registration statement have been audited by Deloitte & Touche LLP, independent auditors, 83 86 as stated in their reports appearing herein and elsewhere in the registration statement, and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The combined financial statements of KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM and KING-FM 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 so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The combined financial statements of the Sacramento Station Group for the period January 1, 1996 to September 18, 1996 and for the period September 19, 1996 to 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 so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The combined financial statements of KBSG, Inc. and KNDD, Inc. for the year ended December 31, 1995 included in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The combined financial statements of the Portland, Oregon and Rochester, New York Radio Groups of Heritage Media Services, Inc. - Broadcasting Segment as of December 31, 1997 and for the eight month period ended August 31, 1997 and the four month period ended December 31, 1997 included in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants, as stated in their report appearing herein, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The combined financial statements of the Boston Radio Market of CBS Radio, Inc. for the year ended December 31, 1997 included in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Commission a Registration Statement on Form S-1 (the "Registration Statement") under the Securities Act and the rules and regulations promulgated thereunder, covering the Common Stock offered hereby. This Prospectus omits certain information contained in the Registration Statement, and reference is made to the Registration Statement, and the exhibits and schedules thereto for further information with respect to the Company and the Common Stock offered hereby. Statements contained in this Prospectus as to the contents of any contract, agreement or other document filed as an exhibit to the Registration Statement are not necessarily complete, and in each instance, reference is made to the exhibit for a more complete description of the matter involved, each such statement being qualified in its entirety by such reference. The Registration Statement may be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the Commission maintained at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such materials may be obtained from the Public Reference Section of the Commission, Room 10124, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, registration statements and certain other filings made with the Commission through its Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system are publicly available through the Commission's site on the Internet's World Wide Web, located at http://www.sec.gov. The Registration Statement, including all exhibits thereto and amendments thereof, has been filed with the Commission through EDGAR. 84 87 INDEX TO FINANCIAL STATEMENTS
PAGE ---- ENTERCOM COMMUNICATIONS CORP. CONSOLIDATED FINANCIAL STATEMENTS Independent Auditors' Report.............................. F-3 Balance Sheets as of September 30, 1996, 1997 and June 30, 1998................................................... F-4 Statements of Income for the Years Ended September 30, 1995, 1996 and 1997 and nine months ended June 30, 1997 and 1998............................................... F-6 Statements of Retained Earnings for the Years Ended September 30, 1995, 1996 and 1997 and nine months ended June 30, 1998.......................................... F-7 Statements of Cash Flows for the Years Ended September 30, 1995, 1996 and 1997 and nine months ended June 30, 1997 and 1998............................................... F-8 Notes to the Consolidated Financial Statements for years ended September 30, 1995, 1996, and 1997 and for the nine month periods ended June 30, 1997 and 1998........ F-9 THE BONNEVILLE TRANSACTION KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM Independent Auditors' Report........................... F-24 Combined Statements of Operations for the Years Ended December 31, 1994, 1995 and 1996 and for the Three Months Ended March 27, 1996 and 1997 (Unaudited)...... F-25 Combined Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996 and for the Three Months Ended March 27, 1996 and 1997 (Unaudited)...... F-26 Notes to Combined Statements of Operations and of Cash Flows................................................. F-27 THE CITICASTERS TRANSACTION SACRAMENTO STATION GROUP (KSEG-FM AND KRXQ-FM) Independent Auditors' Report........................... F-31 Combined Statements of Operations for the Periods January 1, 1996 to September 18, 1996 (Predecessor) and September 19, 1996 to December 31, 1996 and for the Five Months Ended May 31, 1996 (Predecessor) and 1997 (Unaudited)...................................... F-32 Combined Statements of Cash flows for the Periods January 1, 1996 to September 18, 1996 (Predecessor) and September 19, 1996 to December 31, 1996 and for the Five Months Ended May 31, 1996 (Predecessor) and 1997 (Unaudited)...................................... F-33 Notes to Combined Financial Statements................. F-34 KBSG, INC. AND KNDD, INC. (KBSG-FM AND KNDD-FM) Independent Auditors' Report.............................. F-36 Combined Statements of Operations for the Year Ended December 31, 1995 and for the Seven-Month Periods Ended July 31, 1995 and 1996 (Unaudited)..................... F-37 Combined Statements of Cash Flows for the Year Ended December 31, 1995 and for the Seven-Month Periods Ended July 31, 1995 and 1996 (Unaudited)..................... F-38 Notes to Combined Financial Statements.................... F-39
F-1 88
PAGE ---- THE SINCLAIR TRANSACTION THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT Report of Independent Public Accountants............... F-42 Combined Balance Sheet as of December 31, 1997......... F-43 Combined Statements of Operations for the Eight-Month Period Ended August 31, 1997 (Predecessor) and for the Four-Month Period Ended December 31, 1997............. F-44 Combined Statements of Stockholders' Equity for the Eight-Month Period Ended August 31, 1997 (Predecessor) and for the Four-Month Period Ended December 31, 1997.................................................. F-45 Combined Statements of Cash Flows for the Eight-Month Period Ended August 31, 1997 (Predecessor) and for the Four-Month Period Ended December 31, 1997............. F-46 Notes to Combined Financial Statements................. F-47 Unaudited Financial Statements Combined Balance Sheets as of December 31, 1997 and March 31, 1998........................................ F-52 Combined Statements of Operations for the Three Months Ended March 31, 1997, the Two-Month Period Ended February 28, 1998 and the One-Month Period Ended March 31, 1998.............................................. F-53 Combined Statements of Cash Flows for the Three Months Ended March 31, 1997, the Two-Month Period Ended February 28, 1998 and the One-Month Period Ended March 31, 1998.............................................. F-54 Notes to Combined Financial Statements................. F-55 THE BOSTON TRANSACTION THE BOSTON RADIO MARKET OF CBS RADIO, INC. Independent Auditors' Report........................... F-56 Combined Balance Sheet as of December 31, 1997......... F-57 Combined Statements of Operations for the Year Ended December 31, 1997 and for the Six-Month Periods Ended June 30, 1997 and 1998 (Unaudited).................... F-58 Combined Statements of Cash Flows for the Year Ended December 31, 1997 and for the Six-Month Periods Ended June 30, 1997 and 1998 (Unaudited).................... F-59 Notes to Combined Financial Statements................. F-60
F-2 89 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Entercom Communications Corp.: We have audited the accompanying consolidated balance sheets of Entercom Communications Corp. (formerly Entertainment Communications, Inc.) and subsidiaries (the "Company") as of September 30, 1996 and 1997 and as of June 30, 1998, and the related consolidated statements of income, retained earnings, and cash flows for each of the three years in the period ended September 30, 1997 and for the nine months ended June 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our 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 Entercom Communications Corp. and subsidiaries at September 30, 1996 and 1997 and June 30, 1998, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1997 and for the nine months ended June 30, 1998 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania September 18, 1998 (October 8, 1998 as to Note 12(F) and October 29, 1998 as to Note 6(B)(3)) F-3 90 ENTERCOM COMMUNICATIONS CORP. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1996 AND 1997 JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 30, JUNE 30, -------------------- -------- 1996 1997 1998 -------- -------- -------- ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 2)....................... $ 5,292 $ 3,626 $ 6,094 Accounts receivable (net of allowance for doubtful accounts of $117 in 1996, $292 in 1997 and $422 in 1998)................................................. 12,998 24,796 30,469 Prepaid expenses and deposits............................ 735 1,691 1,298 Station acquisition deposits............................. 131 4,957 521 Income tax deposit....................................... 517 490 978 -------- -------- -------- Total current assets............................. 19,673 35,560 39,360 -------- -------- -------- PROPERTY AND EQUIPMENT -- At cost (Note 2): Land and land easements.................................. 1,495 4,445 6,788 Land improvements........................................ 109 139 Building................................................. 970 2,454 5,858 Equipment................................................ 15,634 22,784 31,307 Furniture and fixtures................................... 2,831 5,064 7,527 Leasehold improvements................................... 864 1,047 4,002 -------- -------- -------- 21,903 35,933 55,482 Accumulated depreciation................................. (10,403) (8,158) (10,699) -------- -------- -------- 11,500 27,775 44,783 Capital improvements in progress......................... 133 1,379 759 -------- -------- -------- Net property and equipment....................... 11,633 29,154 45,542 -------- -------- -------- RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES Net of accumulated amortization of $1,864 in 1996, $6,307 in 1997 and $11,822 in 1998 (Notes 2, 3, and 4)....... 114,754 295,419 425,365 DEFERRED CHARGES AND OTHER ASSETS -- Net (Notes 2, 3 and 5)....................................................... 4,515 4,610 3,178 -------- -------- -------- TOTAL...................................................... $150,575 $364,743 $513,445 ======== ======== ========
See notes to consolidated financial statements. F-4 91 ENTERCOM COMMUNICATIONS CORP. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1996 AND 1997 AND JUNE 30, 1998 (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 30, ------------------- JUNE 30, JUNE 30, 1998 1996 1997 1998 PRO FORMA -------- -------- -------- ------------- (NOTE 1) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable............................... $ 5,788 $ 7,128 $ 7,022 $ 7,022 Accrued liabilities: Salaries.................................... 1,629 2,422 3,139 3,139 Interest.................................... 993 109 829 829 Taxes other than income..................... 40 69 206 206 Barter (Note 2)............................. 120 5 19 19 Corporate state income taxes (Note 2).......... 23 323 228 228 Long-term debt -- current...................... 9 9 -------- -------- -------- -------- Total current liabilities.............. 8,593 10,056 11,452 11,452 LONG-TERM DEBT (Note 6).......................... 136,000 142,000 276,776 293,678 ACCRUED INTEREST (Note 6)........................ 642 2,427 3,848 3,848 DEFERRED TAX LIABILITY........................... 78,820 MINORITY INTEREST IN EQUITY OF PARTNERSHIP (Notes 2 and 8)....................................... 261 2,171 2,194 2,194 -------- -------- -------- -------- Total liabilities...................... 145,496 156,654 294,270 389,992 -------- -------- -------- -------- COMMITMENTS AND CONTINGENCIES (Note 9) SHAREHOLDERS' EQUITY (Note 10): Common stock $.05 par value; nonvoting; authorized 180,000 shares; issued 46,260, 43,650 and 43,650 shares in 1996, 1997 and 1998, respectively.......................... 2 2 2 2 Common stock $.05 par value; voting; authorized 180,000 shares; issued 80,580, 72,750 and 72,750 shares in 1996, 1997 and 1998, respectively................................ 4 4 4 4 Capital in excess of par value................. 710 710 710 125,654 Retained earnings.............................. 5,407 207,373 218,459 0 -------- -------- -------- -------- 6,123 208,089 219,175 125,660 Treasury stock consisting of 2,610 shares nonvoting common stock and 7,830 shares voting common stock at cost................. (1,044) -------- -------- -------- -------- Total shareholders' equity............. 5,079 208,089 219,175 125,660 -------- -------- -------- -------- TOTAL............................................ $150,575 $364,743 $513,445 515,652 ======== ======== ======== ========
See notes to consolidated financial statements. F-5 92 ENTERCOM COMMUNICATIONS CORP. CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND NINE MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND 1998 (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, JUNE 30, ----------------------------- -------------------- 1995 1996 1997 1997 1998 ------- ------- --------- ---------- ------- NET REVENUES....................................... $35,893 $48,675 $ 93,862 $ 64,540 $92,086 OPERATING EXPENSES: Station operating expenses....................... 24,061 31,659 61,280 41,757 61,617 Depreciation and amortization.................... 2,225 2,960 7,685 3,874 8,959 Corporate general and administrative expenses.... 2,535 2,872 3,249 2,259 3,042 Net time brokerage agreement expenses (income)... 603 (879) (476) (476) 2,273 ------- ------- --------- ---------- ------- 29,424 36,612 71,738 47,414 75,891 ------- ------- --------- ---------- ------- OPERATING INCOME................................... 6,469 12,063 22,124 17,126 16,195 OTHER EXPENSE (INCOME) ITEMS: Interest expense................................. 1,992 5,196 11,388 8,454 9,175 Interest income.................................. (104) (95) (482) (390) (307) Other nonoperating expenses...................... 4 28 1,986 1,970 82 Gains on sale of assets and other................ (228) (119) (197,097) (197,097) (8,791) ------- ------- --------- ---------- ------- Total other expenses (income)............. 1,664 5,010 (184,205) 187,063 (159) ------- ------- --------- ---------- ------- INCOME FROM OPERATIONS BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS.............................. 4,805 7,053 206,329 204,189 16,036 INCOME TAXES....................................... 270 274 489 261 172 ------- ------- --------- ---------- ------- INCOME BEFORE EXTRAORDINARY ITEMS.................. 4,535 6,779 205,840 203,928 15,864 EXTRAORDINARY ITEMS: Debt extinguishment (net of taxes of $20, $23 and $24 in 1995, 1996 and 1998, respectively) (Note 6)............................................... 334 539 2,377 ------- ------- --------- ---------- ------- NET INCOME......................................... $ 4,201 $ 6,240 $ 205,840 $ 203,928 $13,487 ======= ======= ========= ========== ======= PRO FORMA DATA (UNAUDITED) PRO FORMA NET INCOME DATA: Income before income taxes and extraordinary items.......................................... 4,805 7,053 206,329 $ 204,189 $16,036 Pro forma income taxes (Note 1).................. 1,826 2,680 78,405 77,592 6,094 ------- ------- --------- ---------- ------- Pro forma income before extraordinary items...... 2,979 4,373 127,924 126,597 9,942 Extraordinary items, net of pro forma taxes...... 219 348 1,488 ------- ------- --------- ---------- ------- PRO FORMA NET INCOME............................... $ 2,760 $ 4,025 $ 127,924 $ 126,597 $ 8,454 ======= ======= ========= ========== ======= PRO FORMA EARNINGS PER SHARE (Note 1): Basic: Pro forma earnings before extraordinary items........................................ $ 25.59 $ 37.57 $1,099.00 $ 1,087.60 $ 85.41 Extraordinary items, net of pro forma taxes.... 1.88 2.99 12.78 ------- ------- --------- ---------- ------- Pro forma earnings per share................... $ 23.71 $ 34.58 $1,099.00 $ 1,087.60 $ 72.63 ======= ======= ========= ========== ======= Diluted: Pro forma earnings before extraordinary items........................................ $ 25.59 $ 31.93 $ 934.08 $ 924.39 $ 72.59 Extraordinary items, net of pro forma taxes.... 1.88 2.54 10.87 ------- ------- --------- ---------- ------- Pro forma earnings per share................... $ 23.71 $ 29.39 $ 934.08 $ 924.39 $ 61.72 ======= ======= ========= ========== ======= WEIGHTED AVERAGE SHARES: Basic............................................ 116,400 116,400 116,400 116,400 116,400 Diluted.......................................... 116,400 136,952 136,952 136,952 136,952
See notes to consolidated financial statements. F-6 93 ENTERCOM COMMUNICATIONS CORP. CONSOLIDATED STATEMENTS OF RETAINED EARNINGS YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND NINE MONTHS ENDED JUNE 30, 1998 (AMOUNTS IN THOUSANDS)
NINE MONTHS YEARS ENDED SEPTEMBER 30, ENDED ---------------------------- ------------- 1995 1996 1997 JUNE 30, 1998 ------- ------- -------- ------------- RETAINED EARNINGS, BEGINNING OF PERIOD............. $ 754 $ 1,155 $ 5,407 $207,373 NET INCOME......................................... 4,201 6,240 205,840 13,487 RETIREMENT OF TREASURY STOCK....................... (1,044) DIVIDENDS (Note 10)................................ (3,800) (1,988) (2,830) (2,401) ------- ------- -------- -------- RETAINED EARNINGS, END OF PERIOD................... $ 1,155 $ 5,407 $207,373 $218,459 ======= ======= ======== ========
See notes to consolidated financial statements F-7 94 ENTERCOM COMMUNICATIONS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND NINE MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND 1998 (AMOUNTS IN THOUSANDS)
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, JUNE 30, ------------------------------- --------------------- 1995 1996 1997 1997 1998 -------- -------- --------- --------- --------- OPERATING ACTIVITIES: Net income........................................ $ 4,201 $ 6,240 $ 205,840 $ 203,928 $ 13,487 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.................................... 1,163 1,554 2,141 1,173 2,636 Amortization of: Covenant not to compete....................... 296 50 25 25 Radio broadcasting licenses, other intangible and deferred charges........................ 766 1,357 5,519 2,676 6,323 Extraordinary items............................. 354 562 2,401 Gains on dispositions and exchanges of assets... (228) (119) (197,097) (197,097) (8,791) Interest accrued................................ 642 1,785 1,318 1,421 Changes in assets and liabilities which provided (used) cash: Other liabilities............................. (257) Accounts receivable........................... (3,863) (3,336) (11,798) (10,707) (5,673) Funds held for asset exchange................. (3,511) 3,511 Prepaid expenses.............................. (405) (150) (956) (1,403) 393 Accounts payable, accrued liabilities and corporate state income taxes................ 1,148 4,048 1,463 229 1,386 Minority interest............................. 244 (21) 1,910 1,824 23 IRS deposit................................... (2,237) 1,946 27 27 (488) -------- -------- --------- --------- --------- Net cash provided (used) by operating activities................................ 1,182 12,773 8,859 (1,518) 16,629 -------- -------- --------- --------- --------- INVESTING ACTIVITIES: Additions to property and equipment............... (733) (1,493) (4,373) (2,499) (9,967) Proceeds from sale of property and equipment, intangibles and other assets.................... 310 560 3,750 3,750 8,974 Proceeds from exchanges of radio stations......... 72,200 72,200 3,132 Payments for exchanges of radio stations.......... (5,304) (5,304) (306) Purchases of radio station assets (Note 3)........ (27,962) (91,519) (74,498) (74,498) (146,090) Deferred charges and other assets................. (251) (4,050) (644) (610) (3,213) Station acquisition deposits...................... (4,826) 11 925 -------- -------- --------- --------- --------- Net cash used in investing activities....... (28,636) (96,502) (13,695) (6,950) (146,545) -------- -------- --------- --------- --------- FINANCING ACTIVITIES: Proceeds from issuance of long-term debt.......... 68,307 137,500 20,000 20,000 270,793 Payments of long-term debt........................ (37,002) (48,055) (14,000) (12,500) (136,008) Dividends paid.................................... (3,800) (1,988) (2,830) (2,018) (2,401) -------- -------- --------- --------- --------- Net cash provided by financing activities... 27,505 87,457 3,170 5,482 132,384 -------- -------- --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................................... 51 3,728 (1,666) (2,986) 2,468 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...... 1,513 1,564 5,292 5,292 3,626 -------- -------- --------- --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD............................................ $ 1,564 $ 5,292 $ 3,626 $ 2,306 $ 6,094 ======== ======== ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during the period for: Interest........................................ $ 2,050 $ 3,688 $ 10,203 $ 8,024 $ 6,880 ======== ======== ========= ========= ========= Income taxes.................................... $ 622 $ 148 $ 211 $ 170 $ 243 ======== ======== ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES -- In connection with the radio station exchange transactions completed by the Company, the noncash portion of assets recorded was $127,000 for the periods ended June 30, 1997 and September 30, 1997 and $22,500 for the period ended June 30, 1998.
See notes to consolidated financial statements. F-8 95 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND FOR THE NINE MONTH PERIODS ENDED JUNE 30, 1997 (UNAUDITED) AND 1998 1. BASIS OF PRESENTATION AND ORGANIZATION Operations -- Entercom Communications Corp. (formerly Entertainment Communications, Inc.) (the "Company") is principally engaged in the management and operation of radio broadcast stations throughout the United States. The Company has three or more radio stations in the following markets: Seattle, Kansas City, Portland, Sacramento and Rochester. Interim Financial Information -- Information, with respect to the June 30, 1997 financial statements is unaudited; however, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Also, operating results for the nine month periods ended June 30, 1997 and 1998 are not necessarily indicative of the results that may be expected for a full fiscal year. Pro Forma Adjustments -- The Company intends to offer shares of its Class A Common Stock to the public during 1998 (the "Offering"). Upon completion of the Offering of Class A Common Stock, the Company will be subject to federal and state income taxes from the date of termination of the Company's S corporation status (the "Termination Date"). The unaudited pro forma net income data for each of the three years in the period ended September 30, 1997 and for the nine month periods ended June 30, 1997 and 1998 reflects adjustments for income taxes based upon income before income taxes as if the Company had been subject to additional federal and state income taxes based upon a pro forma effective tax rate of 38%. In addition, the Company will be required to provide a deferred tax liability for cumulative temporary differences between financial statement and income tax bases of the Company's assets and liabilities by recording an expense for such deferred tax liabilities in its consolidated statement of income for the period following the effective date of the Offering. Such deferred tax liabilities will be based on the cumulative temporary differences upon the conversion from an S Corporation to a C Corporation on the Termination Date. The net difference between the financial statement and income tax bases of the Company's assets and liabilities resulted in a deferred tax liability of approximately $78.8 million at June 30, 1998. In addition, prior to the conversion from an S Corporation to a C Corporation, distributions of approximately $86.0 million will be made to the Company's existing S Corporation shareholders. Pro Forma Earnings Per Share -- Pro forma earnings per share is calculated in accordance with Statement of Financial Accounting Standards No. 128 and, as such, is based on the weighted average number of shares of Common Stock outstanding and dilutive common equivalent shares from convertible debt (using the if-converted method).
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, JUNE 30 ----------------------------- ------------------ 1995 1996 1997 1997 1998 ------- ------- ------- ------- ------- Weighted average shares -- basic...... 116,400 116,400 116,400 116,400 116,400 Common Stock equivalent -- convertible debt................. 20,552 20,552 20,552 20,552 Weighted average shares -- diluted.... 116,400 136,952 136,952 136,952 136,952
2. SIGNIFICANT ACCOUNTING POLICIES Income Tax Status -- The shareholders of the Company elected to change the tax status of the Company from a C Corporation to an S Corporation beginning October 1, 1987 for federal and certain state income tax F-9 96 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) purposes. For certain other states for which an S Corporation election has not been made, the Company incurs state income taxes. The shareholders' election to be taxed as an S Corporation relieves the Company of the obligation to pay federal and certain state corporate income taxes but results in shareholders being directly liable for payment of such income taxes on their pro rata share of the Company's taxable income, including taxable income which has been deferred as a result of the Company's use of different accounting methods for financial reporting and income tax reporting. Principles of Consolidation -- The accompanying consolidated financial statements include the accounts of the Company, its limited partnership interest and its subsidiaries, all of which are consolidated. All intercompany transactions and balances have been eliminated in consolidation. Management's Use of Estimates -- The preparation of consolidated financial statements, in accordance with generally accepted accounting principles, requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities, as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Depreciation -- Depreciation is determined on a straight-line basis. The estimated useful lives for depreciation are as follows: Land improvements.................................... 10 years Building............................................. 20 years Equipment............................................ 5-20 years Furniture and fixtures............................... 5-10 years Leasehold improvements............................... Various
Revenue Recognition -- Revenue from the sale of commercial broadcast time to advertisers is recognized when the commercials are broadcast. Promotional fees are recognized as services are rendered. Concentration of Credit Risk -- The Company's revenues and accounts receivable relate primarily to the sale of advertising within the radio stations' broadcast areas. Credit is extended based on an evaluation of the customers' financial condition, and generally, collateral is not required. Credit losses are provided for in the financial statements and consistently have been within management's expectations. Advertising Costs -- Advertising costs are expensed as incurred and approximated $3.9 million, $4.3 million, $6.0 million, $5.1 million and $5.7 million for the fiscal years ended September 30, 1995, 1996 and 1997 and the nine month periods ended June 30, 1997 and 1998, respectively. Radio Broadcasting Licenses and Other Intangibles -- Broadcasting licenses and other intangibles are being amortized on a straight-line basis over 40 years. Long-Lived Assets -- In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the Company evaluates the recoverability of its long-lived assets which include broadcasting licenses, other intangibles, deferred charges, and other assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If indications are that the carrying amount of the asset is not recoverable, the Company will estimate the future cash flows expected to result from use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, the Company recognizes an impairment loss. The impairment loss recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. F-10 97 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred Charges -- The Company defers and amortizes debt issuance costs and leasehold premiums over the term of the debt and life of the lease, respectively. Costs of program format changes are expensed when incurred. Covenants not to compete are being amortized over the lives of the respective contracts. Time Brokerage Agreements for Acquisitions -- With respect to its acquisitions as described in Note 3, the Company programmed certain radio stations under Time Brokerage Agreements ("TBAs") for the periods prior to consummation of the purchase transactions. Under these TBAs, revenues and expenses were approximately $3.7 million and $3.3 million, $2.4 million and $1.7 million, and $12.3 million and $11.2 million for the years ended September 30, 1995, 1996 and 1997, and $12.3 million and $11.2 million and $6.4 million and $6.2 million for the nine month periods ended June 30, 1997 and 1998, respectively. These amounts are included in net broadcasting revenues and operating costs and expenses. Time Brokerage Agreements for Dispositions -- The Company has received TBA fees for the right granted to other broadcasters to program certain stations that the Company had agreed to exchange (Pittsburgh in 1996, and Houston and Pittsburgh in 1997) for the periods prior to consummation of the exchange transactions. Under these TBAs, revenues during the relevant periods were approximately $1.2 million and $2.7 million for the years ended September 30, 1996 and 1997, respectively, and $2.7 million for the nine months ended June 30, 1997. These amounts are included as income under the Time Brokerage Agreements. Barter Transactions -- The Company provides advertising broadcast time in exchange for certain products, supplies and services. The terms of the exchanges generally permit the Company to preempt such broadcast time in favor of advertisers who purchase time on regular terms. The Company includes the value of such exchanges in both broadcasting revenues and operating costs and expenses. Barter valuation is based upon management's estimate of the fair value of the products, supplies and services received. For the years ended September 30, 1995, 1996 and 1997 and nine months ended June 30, 1997 and 1998, barter transactions amounted to approximately $684,000, $632,000, $822,000, $579,000 and $749,000, respectively. The Company accrues as a liability the amount by which the value of broadcasting time to be provided exceeds the value of products, supplies and services to be received. At September 30, 1996, 1997 and June 30, 1998, such amounts were approximately $120,000, $5,000 and $19,000, respectively. Cash and Cash Equivalents -- Cash and cash equivalents consist primarily of amounts held on deposit with financial institutions in immediately available money market accounts. Derivative Financial Instruments -- The Company uses derivative financial instruments, including interest rate exchange agreements ("Swaps") and interest rate cap agreements ("Caps"), to manage its exposure to fluctuations in interest rates. Swaps and Caps are matched with debt and periodic cash payments and are accrued on a net basis as an adjustment to interest expense. Any fees associated with these instruments are amortized over their term. Recent Accounting Pronouncements -- In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings per Share", which was effective for the Company beginning October 1, 1997. SFAS No. 128 establishes standards for computing and presenting earnings per share ("EPS") and applies to entities with publicly held common stock or potential common stock. It replaces the presentation of primary EPS with a presentation of basic EPS and requires the dual presentation of basic and diluted EPS on the face of the income statement. This statement requires restatement of all prior period EPS data presented. The Company had a simple capital structure in 1995. Diluted EPS for 1996, 1997 and 1998 includes the effect of convertible debt. In June 1998, the FASB issued SFAS No. 133 entitled "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as "derivatives") and for hedging activities. It requires that an entity recognize all derivatives as either assets or F-11 98 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Management has not yet determined what effect, if any, this statement will have on the Company. 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. Reclassifications -- Certain reclassifications have been made to the consolidated financial statements for the years ended September 30, 1995, 1996 and 1997 and the nine months ended June 30, 1997 in order to conform to the current period presentation. 3. ACQUISITIONS AND OTHER SIGNIFICANT TRANSACTIONS During each of the periods presented the Company consummated acquisitions of radio stations. All of these acquisitions were accounted for under the purchase method of accounting (unless otherwise noted below), and the purchase prices, including transaction costs, were allocated to the assets based upon their respective fair values as determined by independent appraisal as of the purchase dates. Gains on exchange transactions are determined based on the excess of the fair value of the station assets acquired, as determined by an independent appraisal, plus any cash received, over the Company's carrying basis in the station assets exchanged, plus cash paid by the Company, all less transaction costs. 1995 Acquisitions On April 17, 1995, the Company acquired the assets of WLLD-FM (formerly WISP-FM), a radio station serving the Sarasota/Bradenton, Florida radio market. The assets were acquired from Alpalm Broadcasting Corporation for a price of $2.9 million. In addition, the Company paid $100,000 for a two-year covenant not to compete by the Seller. The Company incurred approximately $118,000 in transaction costs related to the acquisition. Broadcasting licenses and other intangibles totaling approximately $2.4 million were recorded in connection with this transaction. On September 1, 1995, the Company acquired the assets of three radio stations, KGON-FM, KFXX-AM and KNRK-FM, serving the Portland, Oregon market. The assets were acquired from Apogee Communications, Inc. and related Apogee entities for a price of $24.5 million. The Company incurred approximately $343,000 in transaction costs related to the acquisitions. Broadcasting licenses and other intangibles totaling approximately $21.6 million were recorded in connection with this transaction. 1996 Acquisitions The Company completed a three party Asset Purchase Agreement on August 1, 1996, whereby the Company acquired WAXQ-FM, New York City, from GAF Corporation for a cash purchase price of $90 million and simultaneously exchanged WAXQ-FM and $1.2 million in cash to Viacom, Inc. for all of Viacom's broadcast assets of three radio stations, KBSG-FM, KBSG-AM and KNDD-FM, and two tower facilities, all serving the Seattle, Washington radio market. The Company incurred approximately $319,000 in transaction costs related to the acquisition. Broadcasting licenses and other intangibles totaling approximately $87.5 million were recorded in connection with this transaction. 1997 Acquisitions On March 27, 1997, the Company acquired the assets of KMBZ-AM, KYYS-FM (formerly KLTH-FM), KCMO-AM and KCMO-FM, serving the Kansas City, Kansas/Missouri radio market, from Bonneville F-12 99 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) International Corporation and Bonneville Holding Corporation (collectively referred to hereafter as "Bonneville") for a purchase price of $35 million. The Company also acquired the assets of KIRO-AM, KIRO-FM and KNWX-AM, serving the Seattle, Washington radio market, from KIRO, Inc., a wholly owned subsidiary of Bonneville International Corporation ("KIRO") for a purchase price of $60 million. As consideration for the assets received, the Company transferred the assets of KLDE-FM serving the Houston, Texas radio market, plus $5 million, to Bonneville and KIRO resulting in a gain of $88.7 million. The Company incurred transaction costs of $246,000 related to these acquisitions. Broadcasting licenses and other intangibles in the amount of $85.8 million were recorded in connection with these transactions. On April 28, 1997, the Company acquired the assets of KEDO-AM and KLYK-FM, serving the Longview/Kelso, Washington radio market, for $1.8 million from Longview Broadcasting Company and Premier Development Company. The Company incurred transaction costs of $38,000 related to these acquisitions. Broadcasting licenses and other intangibles in the amount of $733,000 were recorded in connection with this transaction. On May 30, 1997, the Company completed an Asset Exchange Agreement with Nationwide Communications, Inc. ("Nationwide") and Secret Communications, LP ("Secret"). In this three party agreement, in exchange for the transfer to Secret of the Company's two FM radio stations in Pittsburgh, WDSY and WNRQ, the Company received Nationwide's FM radio station in Seattle, KISW, plus $32.5 million, resulting in a gain of $43.9 million. Broadcasting licenses and other intangibles in the amount of $12.1 million were recorded in connection with this transaction. The total purchase price of this transaction was $47 million. On May 30, 1997, the Company acquired the assets of KLOU-FM, serving the St. Louis, Missouri radio market, from Group W Broadcasting, Inc., plus $39.7 million, in exchange for the assets of KITS-FM, resulting in a gain of $61.2 million. The Company incurred transaction costs of $58,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $21.6 million were recorded in connection with this transaction. The total purchase price of this transaction was $62.2 million. On June 3, 1997, the Company acquired the assets of KDND-FM (formerly KXOA-FM), serving the Sacramento, California radio market, from American Radio Systems Corporation for $27.2 million. The Company incurred transaction costs of $192,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $26.9 million were recorded in connection with this transaction. On June 4, 1997, the Company acquired the assets of KRXQ-FM and KSEG-FM, serving the Sacramento, California radio market, from Citicasters Co. for $45.0 million. The Company incurred transaction costs of $268,000 related to these acquisitions. Broadcasting licenses and other intangibles in the amount of $40.7 million were recorded in connection with this transaction. 1998 Acquisitions On November 26, 1997, the Company acquired the assets of KSSJ-FM (formerly KBYA-FM), serving the Sacramento, California radio market, from Susquehanna Radio Corp., KTHX License Investment Co. and KTHX Radio Inc. for $15.9 million. The Company incurred transaction costs of $87,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $15.8 million were recorded in connection with this transaction. On January 1, 1998, the Company acquired the assets of KCTC-AM, serving the Sacramento, California radio market, from ARS for $4.0 million. The Company incurred transaction costs of $13,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $2.7 million were recorded in connection with this transaction. On January 1, 1998, the Company acquired the assets of KUDL-FM and WDAF-AM, serving the Kansas City, Kansas/Missouri radio market from ARS. As consideration for the assets received, which F-13 100 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) included the receipt of $7.1 million in cash from ARS, the Company transferred the assets of KLOU-FM, serving the St. Louis radio market, to ARS resulting in a gain of $300,000. The Company incurred transaction costs of $294,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $12.8 million were recorded in connection with this transaction. The total purchase price of this transaction was $15.4 million. On May 7, 1998, the Company acquired the assets of WSKY-FM (formerly WRRX-FM), serving the Gainesville/Ocala, Florida radio market, from Gator Broadcasting Co. for $2.0 million. The Company incurred transaction costs of $66,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $1.7 million were recorded in connection with this transaction. On May 15, 1998, the Company acquired the assets of KBAM-AM and KRQT-FM, serving the Longview, Washington radio market, from Armak Broadcasters Inc. for $1.0 million. The Company incurred transaction costs of $43,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $350,000 were recorded in connection with this transaction. On June 19, 1998, the Company acquired from Sinclair Broadcast Group the assets of KKSN-AM, KKSN-FM, and KKRH-FM, all serving the Portland, Oregon radio market, and WBEE-FM, WBBF-FM (formerly WKLX-FM), WQRV-FM and WEZO-AM (formerly WBBF-AM) all serving the Rochester, New York radio market. The purchase price for the stations was $126.5 million. The Company began operations at these stations on March 1, 1998 under a time brokerage agreement ("TBA"). The Company incurred transaction costs of $494,000 related to this acquisition. Broadcasting licenses and other intangibles in the amount of $121.3 million were recorded in connection with this transaction. Other Transactions On March 6, 1996, the Company sold all of the assets of KMTT-AM, Tacoma, Washington, including assignment of the FCC license, to Southwave Wireless Communications, Inc. LLC for a cash purchase price of $500,000, resulting in a gain of approximately $140,000. On December 6, 1996, the Company sold certain assets of KEGE-AM, Minneapolis, Minnesota, including assignment of the FCC license, to Salem Media of Minnesota, Inc. for $3.0 million, resulting in a gain of approximately $2.6 million. On February 6, 1997, the Company sold all of the assets of WDSY-AM, Pittsburgh, Pennsylvania, including assignment of the FCC license, to Mortenson Broadcasting Company for a cash purchase price of $750,000, resulting in a gain of approximately $700,000. On May 7, 1998, the Company sold certain rights in a license for the Vancouver, Washington radio market to Jacor Communications and Smith Broadcasting, Inc. $10 million. The Company acquired an interest in these rights at a cost of $1.3 million through an agreement with Q Prime Inc., Clifford Burnstein and Peter D. Mensch. The sale resulted in a gain of $8.5 million. On June 25, 1998, the Company completed its transaction with McKenzie River Broadcasting Company ("McKenzie") whereby McKenzie received FCC approval to reclassify the broadcast license of its KMGE-FM station, serving the Eugene, Oregon radio market, from a Class C to a Class C-1. Such a reclassification of that station allowed the Company to seek approval from the FCC for construction and operation of an enhanced transmission facility for its KNRK-FM station serving the Portland, Oregon radio market. In consideration for its agreement, McKenzie was paid approximately $1.2 million and the Company recorded this amount as broadcast licenses. Effective July 1, 1997, the Company entered into a Joint Sales Agreement ("JSA") with Classic Radio, Inc. ("Classic"), whereby the Company will be the exclusive sales agent for the Classic-owned KING-FM F-14 101 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) radio station, located in Seattle, Washington. This agreement is a continuation of a relationship under a prior JSA which expired on June 30, 1997. Under the new JSA, which continues through June 30, 2002, the Company will be entitled to all revenues from the sale of advertising time broadcast on KING-FM, but will be required to pay a monthly fee to Classic based upon calculations as defined in the agreement. Under the terms of the JSA, the Company will be responsible for all costs incurred in selling the advertising time. Classic will be responsible for all costs incurred in operating the station. On October 7, 1997, the Company, in a transaction with Kanza Inc., exchanged the broadcasting frequency and the transmitter related assets of KCMO-AM, Kansas City, Missouri for the broadcasting frequency and transmitter related assets of WHB-AM, Kansas City, Missouri. The Company incurred transaction costs of $233,000. The transaction was accounted for as a non-monetary exchange. The total purchase price of this transaction was $5.5 million. The following unaudited pro forma summary presents the consolidated results of operations as if the transactions which occurred within either the 1996 or 1997 fiscal years had all occurred at the beginning of the 1996 fiscal year, after giving effect to certain adjustments, including depreciation and amortization of assets and interest expense on any debt incurred to fund the acquisitions which would have been incurred had such acquisitions and other transactions occurred at the beginning of the 1996 fiscal year. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions and other transactions been made as of that date or results which may occur in the future.
YEARS ENDED SEPTEMBER 30, -------------------------- 1996 1997 ---------- ---------- (AMOUNTS IN THOUSANDS) Net revenues................................................ $ 92,100 $105,700 ======== ======== Income before extraordinary items and gains on sales of assets.................................................... $ 9,400 $ 4,600 ======== ======== Net income.................................................. $206,100 $ 4,600 ======== ========
The following unaudited pro forma summary presents the consolidated results of operations as if the transactions which occurred within either fiscal 1997 or the nine month period ended June 30, 1998 had all occurred on October 1, 1996, after giving effect to certain adjustments, including depreciation and amortization of assets and interest expense on any debt incurred to fund the acquisitions which would have been incurred had such acquisitions and other transactions occurred on October 1, 1996. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisitions and other transactions been made as of that date or results which may occur in the future.
NINE MONTH PERIODS ENDED JUNE 30, ---------------------- 1997 1998 -------- -------- (AMOUNTS IN THOUSANDS) Net revenues................................................ $ 88,566 $ 99,631 ======== ======== Income before extraordinary items and gains on sales of assets.................................................... $ 4,673 $ 7,766 ======== ======== Net income.................................................. $207,896 $ 8,057 ======== ========
F-15 102 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES Radio Broadcasting Licenses and other intangibles consist of the following:
SEPTEMBER 30, JUNE 30, -------------------- -------- 1996 1997 1998 -------- -------- -------- FCC Licenses....................................... $116,618 $300,022 $434,645 Other Intangibles.................................. 0 1,704 2,542 -------- -------- -------- Subtotal................................. 116,618 301,726 437,187 Less accumulated amortization...................... (1,864) (6,307) (11,822) -------- -------- -------- Total radio broadcasting licenses and other intangibles...................................... $114,754 $295,419 $425,365 ======== ======== ========
5. DEFERRED CHARGES AND OTHER ASSETS Deferred charges and other assets (which are amortized principally on the straight-line method) consist of the following:
SEPTEMBER 30, JUNE 30, ---------------- -------- 1996 1997 1998 ------ ------ -------- (AMOUNTS IN THOUSANDS) Debt issuance costs, less accumulated amortization of $123,000, $715,000 and $474,000 in 1996, 1997 and 1998, respectively........................................... 3,667 $3,629 $2,228 Leasehold premium, less accumulated amortization of $90,000, $125,000 and $195,000 in 1996, 1997 and 1998, respectively........................................... 700 862 792 Other deferred charges, less accumulated amortization of $120,000, $77,000 and $246,000 in 1996, 1997 and 1998, respectively........................................... 148 119 158 ------ ------ ------ $4,515 $4,610 3,178 ====== ====== ======
6. DEBT (A) Long-term debt consists of the following:
SEPTEMBER 30, JUNE 30, -------------------- -------- 1996 1997 1998 -------- -------- -------- (AMOUNTS IN THOUSANDS) Notes payable due February 13, 2006 (A)(4)......... $251,500 Notes payable, due June 30, 2003 ((A)(2) in 1996)(A)(3)(a) in 1997........................... $ 86,000 $ 92,000 -- Notes payable, due June 30, 2003 ((A)(2) in 1996)(A)(3)(b) in 1997........................... 25,000 25,000 -- Note payable, subordinated, due May 21, 2003(A)(1)....................................... 25,000 25,000 25,002 Other.............................................. 285 -------- -------- -------- Total.................................... 136,000 142,000 276,785 Amounts due within one year........................ 9 -------- -------- -------- $136,000 $142,000 $276,776 ======== ======== ========
(1) On May 21, 1996, the Company entered into a convertible subordinated note purchase agreement with an investment partnership in the principal amount of $25 million. Interest on the note accrues at the rate of 7% per annum. Such interest compounds annually and is deferred and payable with principal in one F-16 103 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) installment on May 21, 2003. The payment due date can be deferred by one year under certain circumstances. The obligations of the Company under the note are subordinate to the obligations of the notes payable to the banks as noted in (A)(4) below. The convertible subordinated note is convertible by the holder under certain events and circumstances such as a public offering of the Company's capital stock, a change of control of the Company, a sale of substantially all of the Company's assets, a merger or consolidation into a publicly traded company or the company's ceasing to be an S Corporation. In the event of conversion, the holders would receive shares of the common stock of the Company representing an ownership interest of approximately 15% of the Company prior to such event in lieu of all outstanding principal and interest. If the note is not converted by May 21, 2003, then the holder of the note has the option to put the convertible subordinated note to the Company and receive, at the option of the Company, either cash or a new note (Put Note). The amount of cash or principal of the Put Note will equal the fair market value of the shares of common stock into which the convertible subordinated notes were convertible. The Put Note would accrue interest at prime plus 2% and would be due May 21, 2004. In the event that the note is not converted or put to the Company by May 21, 2003, then the Company can redeem the convertible subordinated note by either paying cash or issuing a new note (Redemption Note). The amount of cash or principal of the Redemption Note will equal the original principal amount of the convertible subordinated note ($25 million) plus interest accrued through the Date of Redemption at an interest rate of 7% per annum . The Redemption Note would also accrue interest at 7% per annum and would be due on May 21, 2004. (2) On August 1, 1996, the Company entered into a $100 million reducing revolving credit agreement and a $25 million amortizing term loan with a group of banks. At September 30, 1996, outstanding balances against these credit facilities were $86 million and $25 million, respectively. The Company used proceeds from borrowings against these credit facilities to retire existing debt, finance the acquisition from Viacom of three stations serving the Seattle market (KBSG-AM/FM, KNDD-FM, see Note 3), and provide for capital expenditures and working capital. These debt facilities were replaced with the debt facilities described in paragraph (A)(3). (3) On March 25, 1997, the Company expanded its existing credit facility with a group of banks to $165 million. The credit facility consisted of a $140 million reducing revolving credit and a $25 million amortizing term loan. At September 30, 1997, outstanding balances against these credit facilities were $92 million and $25 million, respectively. The Company expects to use borrowings against these credit facilities to finance future acquisitions, and provide for capital expenditures and working capital. Under the loan agreement, the Company has provided the banks with a pledge of its 99% interest in ECI License Company LP, a pledge of all of the outstanding stock of the Company, and a pledge of all the Company's other assets. The agreement includes certain restrictive covenants, including a limitation on dividends. These debt facilities were replaced with the debt facility described in paragraph (A)(4) below. (a) The reducing revolving credit agreement, which matures on June 30, 2003, reduces on a quarterly basis beginning September 30, 1997 in amounts which vary from $3.5 million to $12.4 million. The Company has the option under this agreement to elect to pay interest at a rate equal to LIBOR (in increments with durations of 1,2,3 or 6 months) plus 1.25% or the prime rate. Under certain events, the Company's borrowing costs can increase to a maximum of LIBOR plus 3.25% or prime plus 2%. The interest payable on LIBOR rates is payable at the end of the selected duration but not less frequently than every three months and on prime rates is payable at the end of each calendar quarter. The weighted average interest rate under this agreement at September 30, 1997 was 7.46%. The Company is required to maintain a minimum of $1 million in cash, cash equivalents, or cash available under this facility. F-17 104 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (b) The $25 million amortizing term loan, which matures on June 30, 2003, reduces in ten equal quarterly payments of $625,000, beginning December 31, 2000 with a final payment of $18.75 million due June 30, 2003. The Company has the option to pay interest at a rate of LIBOR plus 3.25% or prime plus 2%. The interest payment is due in the same manner as described in (A)(3)(a) above. The interest rate under this agreement at September 30, 1997 was 8.91%. (4) The Company's term and revolving credit facilities were refinanced on February 13, 1998, under a new bank credit agreement (the "New Credit Agreement") with Key Corporate Capital Inc., as administrative agent. The New Credit Agreement provides for a $300 million Senior Secured Revolving Credit Facility (the "New Bank Facility"). See Note 12, Subsequent Events, for further discussion. The New Bank Facility is secured by (i) a pledge of 100% of the Company's interest in ECI License Company LP ("ECI"), (ii) a security interest in substantially all of the assets of ECI, (iii) a pledge of 100% of the outstanding stock of the Company; provided, however, that this pledge will be released if the Company restructures by forming subsidiaries to hold the station assets and licenses (in such a restructuring, the Company will pledge the stock of all such subsidiaries which will become Guarantors, and ECI will be dissolved, further, upon such restructuring and pledge of stock, the pledges under (i) and (ii) above will be terminated and released), (iv) a security interest in all major tangible and intangible personal property assets of the Company and any future subsidiaries as well as a negative pledge on all real property, and (v) an assignment of all major leases, rights, etc. as appropriate. The reducing revolving credit agreement, which matures on February 13, 2006, reduces on a quarterly basis beginning June 30, 2000 in amounts which vary from $3.75 million to $15.0 million. The Company has the option under this agreement to elect to pay interest at a rate equal to LIBOR (in increments with durations of 1, 2, 3 or 6 months) plus .50% or the prime rate. Under certain events, the Company's borrowing costs can increase to a maximum of LIBOR plus 2.125% or prime plus .875%. The interest payable on LIBOR rates is payable at the end of the selected duration but not less frequently than every three months and on prime rates is payable at the end of each calendar quarter. The weighted average interest rates under this agreement at June 30, 1998 was 7.53%. The Company also pays a commitment fee of 0.375% per annum on the average unused balance of the New Bank Facility. (B) The Company has entered into several interest rate transactions as hedges against the variable rate debt discussed in 6(A) above: (1) In June 1987, the Company entered into an interest rate agreement or "swap" for a notional amount of $6 million which concluded in June 1996. The Company paid a fixed rate of 9.55% on the notional amount to a bank and the bank paid to the Company a variable rate equal to three-month LIBOR as determined from time to time on a quarterly basis through June 30, 1996. The amounts the Company paid under this agreement were $214,000 and $175,000 for the years ended September 30, 1995 and 1996, respectively, and have been accounted for as interest expense. (2) In May 1995, the Company entered into an interest rate swap agreement for a notional amount of $20 million through May 16, 2000. Under this agreement, the Company pays a fixed rate of 6.77% on the notional amount to a bank and the bank pays to the Company a variable rate equal to three-month LIBOR as determined from time to time on a quarterly basis through May 16, 2000. The variable rate was 5.9%, 5.5%, 5.7% and 5.7% at September 30, 1995, 1996, 1997 and June 30, 1998, respectively. The amount the Company paid under this agreement was $54,000, $240,000 and $235,000 for the years ended September 30, 1995, 1996 and 1997, and 185,000 and 156,000 for the nine month periods ended June 30, 1997 and 1998, respectively. These amounts have been accounted for as interest expense. F-18 105 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (3) In July 1996, the Company entered into a convertible rate cap transaction in the amount of $25 million to hedge a portion of its variable rate debt. The bank elected, effective October 29, 1998, to convert the transaction into a swap for a notional amount of $25 million in which the Company pays a fixed rate of 5.89% on the notional amount to a bank and the bank pays to the Company a variable rate equal to three-month LIBOR through July 29, 2003. No amounts were paid relating to this transaction during the years ended September 30, 1996 and 1997 or the nine month period ended June 30, 1998. (4) In August 1996, the Company simultaneously entered into a rate cap transaction and a swap option transaction in the amount of $25 million to hedge a portion of its variable rate debt. Under the rate cap transaction, which expires August 8, 2000, the Company's base LIBOR rate cannot exceed 7.5% at the time of any quarterly reset date. Under the swap option transaction, the bank may make an election prior to August 8, 2000 to enter into a swap in which the Company pays a fixed rate of 6.05% on the notional amount to a bank and the bank pays to the Company a variable rate equal to three-month LIBOR. If the bank exercises its election, then the swap will terminate on August 8, 2002. Any election by the bank will not terminate the rate cap transaction described above. No amounts were paid related to these transactions during the years ended September 30, 1996 and 1997 or the nine month period ended June 30, 1998. (5) On January 6, 1998, the Company entered into an interest rate swap agreement transaction with a bank in the amount of $15 million to hedge a portion of its variable rate debt. Under the swap transaction, which expires January 10, 2005, unless terminated by the bank by January 6, 2003, the Company pays a fixed rate of 5.61% on the notational amount to the bank and the bank pays to the Company a variable rate equal to three month LIBOR as determined from time to time on a quarterly basis through the end of the transaction period. The variable rate was 5.7% as of June 30, 1998. The amount paid to the Company under this agreement was $6,000 for the nine month period ended June 30, 1998. (6) On January 6, 1998, the Company entered into an interest rate swap agreement with a bank in the amount of $14 million to hedge a portion of its variable rate debt. Under the swap transaction, which expires January 10, 2005, the Company pays a fixed rate of 5.86% on the notational amount to the bank and the bank pays to the Company a variable rate equal to three months LIBOR as determined from time to time on a quarterly basis through the end of the transaction period. The variable rate was 5.7% as of June 30, 1998. The amount paid by the Company under this agreement was $11,000 for the nine month period ended June 30, 1998. (7) On February 26, 1998, the Company entered into an interest rate swap agreement with a bank in the amount of $30 million to hedge a portion of its variable rate debt. Under the swap transaction, which expires February 27, 2008, unless terminated by the bank on February 28, 2005, the Company pays a fixed rate of 5.77% on the notational amount to the bank and the bank pays to the Company a variable rate equal to three month LIBOR as determined from time to time on a quarterly basis through the end of the transaction period. The variable rate was 5.7% as of June 30, 1998. The amount paid by the Company under this agreement was $10,000 for the nine month period ended June 30, 1998. F-19 106 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (C) Aggregate principal maturities on long-term debt are as follows (amounts in thousands): Fiscal years ending September 30: 1998.......................................... 1999.......................................... $ 9 2000.......................................... 9 2001.......................................... 9 2002.......................................... 42,509 Thereafter.................................... 234,240 -------- Total...................................... $276,776 ========
The extraordinary charges for 1995, 1996, and 1998 are the result of the write-off's ($334,000, $539,000 and $2,376,000 respectively, net of tax benefits) of unamortized finance charges resulting from the early extinguishment of long-term debt. 7. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of the Company's financial instruments, which consist of notes receivable from a related party, debt and interest rate instruments, have been determined by the Company using available market information and appropriate valuation methodologies. At September 30, 1996 and 1997 and June 30, 1998, the fair value of notes receivable from a related party and debt approximate their carrying value. At September 30, 1996 and 1997 and June 30, 1998, respectively, unrealized gains (losses) on interest rate hedges described under Note 6(B) (2), (3), (4), (5), (6) and (7) are as follows (amounts in thousands):
SEPTEMBER 30, ---------------------- JUNE 30, 1996 1997 1998 --------- --------- --------- 6(B)(2)................. $ (208) $ (351) $ (399) (3)................ (117) (212) (301) (4)................ 15 (103) (230) (5)................ -- -- 164 (6)................ -- -- (38) (7)................ -- -- (303)
8. MINORITY INTEREST On December 2, 1992, in connection with a financing transaction, the Company created a wholly owned subsidiary, ECI Investors Corporation ("Investors"), with a capital of $50,000. Upon creation, the Company immediately distributed the stock of Investors to the Company's shareholders. On December 23, 1992, the Company formed a limited partnership, ECI License Company, LP ("Partnership") with Investors. The Company is the sole general partner of the Partnership. The Company contributed its Federal Communications Commission (FCC) licenses and authorizations to the Partnership in exchange for a 99% interest in the Partnership, and Investors acquired its 1% interest in the Partnership for cash. On all subsequent occasions when the Company acquired FCC licenses and authorizations it has contributed them to the Partnership for its 99% interest and Investors has contributed its matching 1% interest. On each such occasion, as well as on the dispositions of FCC licenses and authorizations, excluding those FCC licenses and authorizations used to acquire new FCC licenses and authorizations which qualify under IRC Section 1031, commonly known as "SWAPS," the book value of the Partnership has been adjusted to reflect such transaction. The book value of the Partnership at September 30, 1996, after reflecting all acquisitions and dispositions described in Note 3 was approximately $113.7 million (net of accumulated F-20 107 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) amortization of approximately $1.6 million), at September 30, 1997, the book value was approximately $114.2 million (net of accumulated amortization of approximately $4.5 million), and at June 30, 1998, the book value was approximately $121.2 million (net of accumulated amortization of approximately $6.5 million). The Company's 99% interest in the Partnership is pledged as collateral for the debt described in Note 6A(4). The Company pays a licensing fee to the Partnership in exchange for the right to utilize the Partnership's licenses and authorizations in connection with the operation of the stations. As discussed in Note 2, the financial impact of such transactions is substantially eliminated in consolidation. The minority interest at September 30, 1996 and 1997 and June 30, 1998 included in the accompanying consolidated balance sheets represents the 1% interest of Investors in the Partnership, net of two notes receivable by the Partnership from Investors. These notes were in the amounts of approximately $884,000 and $34,000 at September 30, 1996, $875,000 and $7,000 at September 30, 1997 and $839,000 plus various other notes which total approximately $200,000 at June 30, 1998. These notes bear interest at rates ranging from 6% to 8% per annum, and were issued to the Partnership by Investors for Investors' share of the FCC licenses and authorizations acquired by the Company during 1996, 1997 and 1998. These notes are due in ten equal annual installments, plus accrued interest. 9. COMMITMENTS AND CONTINGENCIES Acquisitions The Company entered into a preliminary agreement on February 6, 1996 for the Company to acquire the assets of radio station KWOD-FM, Sacramento, California, from Royce International Broadcasting Corporation subject to approval by the FCC for a purchase price of $25 million. Notwithstanding efforts by the Company to pursue this transaction, the seller has been nonresponsive. Accordingly, the Company cannot determine if and when the transaction might occur. Other The Company's employment agreement with its Chairman and Chief Executive Officer renews automatically each calendar year unless terminated by either party in accordance with the contract. Under the terms of the agreement, compensation is calculated annually by utilizing the gross national product implicit price deflator issued by the Bureau of Economic Analysis to determine the equivalent of 1993 base compensation of $500,000. Total compensation for the years ended September 30, 1995, 1996, 1997 and nine months ended June 30, 1997 and 1998 was approximately $519,000, $540,000, $554,000, $406,000 and $415,000, respectively. The Company also has various contracts for sports programming and on-air personalities with terms ranging from one to five years. Rental expense is incurred principally for office and broadcasting facilities. Rental expense during the years ended September 30, 1995, 1996, 1997 and nine months ended June 30, 1997 and 1998 was approximately $822,000, $1,208,000, $2,190,000 $1,592,000 and $2,186,000, respectively. F-21 108 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The aggregate minimum annual commitments as of June 30, 1998 for operating leases, sports programming and on-air personalities are as follows:
OPERATING SPORTS ON-AIR LEASES PROGRAMMING PERSONALITIES --------- ----------- ------------- (AMOUNTS IN THOUSANDS) Fiscal years ending September 30: 1998..................................... $ 525 $ 2,326 $1.024 1999..................................... 2,408 10,080 3,293 2000..................................... 2,250 10,960 1,689 2001..................................... 2,099 6,703 315 2002..................................... 2,231 6,718 Thereafter............................... 10,127 ------- ------- ------ $19,640 $36,787 $6,321 ======= ======= ======
The Company is subject to various outstanding claims which arose in the ordinary course of business and to other legal proceedings. In the opinion of management, any liability of the Company which may arise out of or with respect to these matters will not materially affect the financial position, results of operations or cash flows of the Company. 10. SHAREHOLDERS' EQUITY During 1997, the Company retired treasury stock consisting of 2,610 shares of nonvoting common stock and 7,830 shares of voting common stock. For the fiscal years ended September 30, 1995, 1996, and 1997 and the nine month periods ended June 30, 1997, and 1998, the Company paid total dividends of $3,800,000, $1,988,000, $2,830,000, $2,018,000 and $2,401,000, respectively. These amounts include special dividends paid to the Company's shareholders to compensate them for federal and state tax obligations attributable to pass-through taxable income generated by the Company. On June 24, 1998, the Board of Directors and the shareholders of the Company approved the Company's amended and restated Articles of Incorporation to provide for, among other things, an increase in the aggregate number of shares which the Company has authority to issue to 350,000,000 shares, par value $.01 per share, consisting of the following: (i) 200,000,000 shares of Class A Common Stock; (ii) 75,000,000 shares of Class B Common Stock; (iii) 50,000,000 shares of Class C Common Stock; and (iv) 25,000,000 shares of Preferred Stock. Such change will occur just prior to the effective date of the Company's initial public offering. 11. EMPLOYEE SAVINGS AND BENEFIT PLANS The Company sponsors a 401(k) savings plan which includes a provision under which the Company contributes 50% of the amount of any eligible employee's contribution to the plan up to a maximum employer contribution of 3% of an employee's compensation. The maximum eligible employee contribution under the plan was $9,240, $9,500, $9,500 and $10,000 for the plan years ended December 31, 1995, 1996, 1997 and 1998. The Company may at its discretion suspend future matching contributions. The Company contributed approximately $193,000, $232,000, $485,000, $324,000 and $411,000, under the 401(k) plan for the years ended September 30, 1995, 1996 and 1997, and the nine month periods ended June 30, 1997 and 1998, respectively. F-22 109 ENTERCOM COMMUNICATIONS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On June 24, 1998, the Company adopted an Equity Compensation Plan (the "Compensation Plan"). The Compensation Plan will allow officers (including those also serving as directors) and other employees, non-employee directors and key advisors or consultants, selected by a Committee of the Board of Directors, to receive incentive stock options, nonqualified stock options, restricted stock and stock appreciation rights in the Common Stock of the Company. There are 5,000,000 shares of Common Stock reserved for issuance under the Compensation Plan. On June 24, 1998, the Company adopted an Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan will allow the participants to purchase shares of the Company's Common Stock at a purchase price equal to 85% of the Market Value of such shares on the Purchase Date. There are 1,000,000 shares of Common Stock reserved for issuance under the Purchase Plan. 12. SUBSEQUENT EVENTS (A) On July 2, 1998, the name of the Company was changed from Entertainment Communications, Inc. to Entercom Communications Corp. (B) On July 13, 1998, the Company entered into a preliminary agreement with Willamette Broadcasting Co. to acquire KSLM-AM, serving the Salem, Oregon radio markets. The purchase price for the station is $605,000. The Company anticipates that this transaction will close in the fourth quarter of fiscal year 1998. (C) On August 13, 1998, the Company entered into three agreements with CBS Radio, Inc. pursuant to which it will (i) purchase WRKO-AM and WEEI-AM in Boston for $82.0 million in cash (the "First Boston Transaction"), (ii) sell WLLD-FM and WYUU-FM in Tampa for $75.0 million in cash (the "Tampa Transaction") and (iii) purchase WAAF-AM and WEGQ-FM in Boston and WWTM-AM in Worchester for $58.0 million (the "Second Boston Transaction"). The Company anticipates that the First Boston Transaction and the Tampa Transaction will close in the calendar year 1998 and that the Second Boston Transaction will close during the 1999 calendar year. (D) On August 13, 1998 the Company acquired from Capital Broadcasting, Inc. the assets and rental leaves used in connection with the operation of a tower facility serving the Kansas City, Kansas/Missouri radio market for a purchase price of $2.1 million. (E) On September 16, 1998, the Company closed an agreement with American Radio Systems, Inc. and American Radio Systems License Corp., (collectively referred to as "ARS") to exchange certain assets used in the operation of radio stations serving the Sacramento radio market. ARS provided KRAK-FM's license and transmission facility to the Company in exchange for KRXO's license and transmission facility and $4.5 million. Each of the stations retained its own call letters, programming format and studio and office property and equipment, and the parties provided each other with reciprocal covenants against programming competition on the respective frequencies for a period of two years. ARS also transferred the intellectual property comprising the programming format of its KSSJ-FM (a station it is transferring to another party in a separate transaction) for use by the Company on its recently acquired KBYA-FM in that market. In a related transaction the Company sold the KRXQ-FM transmitter site, including broadcast tower facilities, to ARS for $750,000, resulting in a loss of $34,000. (F) On October 8, 1998, the Company amended their New Credit Agreement with Key Corporation Capital Inc. to increase their Senior Secured Revolving Credit Facility to $350 million. F-23 110 INDEPENDENT AUDITORS' REPORT Entercom Communications Corp.: We have audited the accompanying combined statements of operations and of cash flows of KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, and KING-FM (the Stations) for the years ended December 31, 1994, 1995, and 1996. These combined financial statements are the responsibility of the Stations' management. Our responsibility is to express an opinion on these combined 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 combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such combined financial statements present fairly, in all material respects, the results of operations and cash flows of the Stations for the years ended December 31, 1994, 1995, and 1996 in conformity with generally accepted accounting principles. The accompanying combined financial statements have been prepared from the separate records maintained by the Stations and may not be indicative of the conditions that would have existed or the results of operations had the Stations been operated as an unaffiliated company. As discussed in Note 1, certain corporate overhead expenses represent allocations made by the Stations' parent. DELOITTE & TOUCHE LLP Salt Lake City, Utah June 10, 1998 F-24 111 KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM COMBINED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996 AND FOR THE THREE MONTHS ENDED MARCH 27, 1996 AND 1997 (UNAUDITED)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 27, --------------------------------------- ----------------------- 1994 1995 1996 1996 1997 ----------- ----------- ----------- ---------- ---------- (UNAUDITED) GROSS REVENUE..................... $33,030,947 $35,313,323 $39,508,602 $6,882,991 $4,804,521 AGENCY AND REPRESENTATIVE COMMISSIONS AND REVENUE SHARING FEES............................ 5,854,857 6,863,145 7,847,095 1,519,908 1,090,028 ----------- ----------- ----------- ---------- ---------- NET REVENUES...................... 27,176,090 28,450,178 31,661,507 5,363,083 3,714,493 OPERATING EXPENSES................ 11,827,214 15,046,401 16,666,152 2,120,720 1,246,577 SELLING AND PROMOTIONAL EXPENSES........................ 7,381,684 9,121,858 9,395,272 2,139,418 1,469,538 GENERAL AND ADMINISTRATIVE EXPENSES........................ 5,011,439 4,603,611 4,986,714 1,349,394 872,442 ALLOCATED CORPORATE EXPENSES...... 355,553 458,364 452,288 86,414 58,657 DEPRECIATION AND AMORTIZATION..... 1,291,220 1,517,720 1,421,065 405,676 338,826 ----------- ----------- ----------- ---------- ---------- OPERATING INCOME (LOSS)........... 1,308,980 (2,297,776) (1,259,984) (738,539) (271,547) OTHER EXPENSE: Interest expense................ (72,566) (28,223) Other -- net.................... (19,781) (41,309) (139,216) ----------- ----------- ----------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES........................... 1,216,633 (2,367,308) (1,399,200) (738,539) (271,547) INCOME TAX (EXPENSE) BENEFIT...... (456,000) 888,000 525,000 277,000 102,000 ----------- ----------- ----------- ---------- ---------- NET INCOME (LOSS)................. $ 760,633 $(1,479,308) $ (874,200) $ (461,539) $ (169,547) =========== =========== =========== ========== ==========
See notes to combined statements of operations and of cash flows. F-25 112 KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996 AND FOR THE THREE MONTHS ENDED MARCH 27, 1996 AND 1997 (UNAUDITED)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 27, --------------------------------------- ------------------------- 1994 1995 1996 1996 1997 ----------- ----------- ----------- ----------- ----------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)...................... $ 760,633 $(1,479,308) $ (874,200) $ (461,539) $ (169,547) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation and amortization....... 1,291,220 1,517,720 1,421,065 405,676 338,826 Loss (gain) on disposal of property and equipment..................... 2,750 (32,549) 114,134 675 (3,545) Changes in operating assets and liabilities: Receivables....................... (1,172,491) (1,741,557) (1,440) 2,258,629 1,977,565 Prepaid expenses and other current assets......................... 196,719 (498,815) 213,850 (249,871) 366,198 Other assets...................... (67,730) 62,741 (12,619) (4,185) 5,490 Accounts payable.................. (331,108) 227,182 (416,504) 331,145 (304,234) Accrued expenses.................. (19,759) (357,472) (405,954) 58,362 399,655 Due to parent -- current.......... 394,680 (3,974,049) 202,305 (1,908,945) (1,317,870) ----------- ----------- ----------- ----------- ----------- Net cash provided by (used in) operating activities......... 1,054,914 (6,276,107) 240,637 429,947 1,292,538 ----------- ----------- ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment..... (951,151) (3,227,605) (3,637,864) (1,145,450) (546,944) Proceeds from sale of property and equipment........................... 8,024 390,439 25,294 17,647 ----------- ----------- ----------- ----------- ----------- Net cash (used in) investing activities................... (943,127) (2,837,166) (3,612,570) (1,127,803) (546,944) ----------- ----------- ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES -- Net interdivisional transfers from (to) parent.............................. 71,514 9,408,614 3,030,472 (86,398) (1,123,328) ----------- ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................ 183,301 295,341 (341,461) (784,254) (377,734) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................. 504,233 687,534 982,875 982,875 641,414 ----------- ----------- ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD................................. $ 687,534 $ 982,875 $ 641,414 $ 198,621 $ 263,680 =========== =========== =========== =========== ===========
See notes to combined statements of operations and of cash flows. F-26 113 KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM NOTES TO COMBINED STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996 (INFORMATION PERTAINING TO THE THREE MONTHS ENDED MARCH 27, 1996 AND 1997 IS UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business -- The radio stations, KMBZ-AM, KLTH-FM, and KCMO-AM/FM are broadcast in the Kansas City, Missouri area. The radio stations KIRO-AM/FM, KNWX-AM, and KING-FM are broadcast in the Seattle, Washington area. Through March 27, 1997, KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, and KING-FM (the Stations) were operated by Bonneville International Corporation (BIC) with the FCC broadcasting licenses for all Stations except KING-FM being owned by Bonneville Holding Company (BHC), an affiliate of BIC, and the operating assets for all Stations except KING-FM being owned by BIC. BIC marketed and sold advertising for KING-FM under a Joint Sales Agreement (the "KING Agreement") whereby BIC, through its wholly-owned subsidiary, KIRO, Inc., acted as the exclusive sales agent for KING-FM. Under the KING Agreement, BIC was required to pay to the Licensee an advertising revenue sharing fee equal to the greater of 70% of net sales or an annual fixed dollar amount that varied for each ratings share level. In addition, the KING Agreement required BIC to pay costs of selling advertising time other than agency fees while the Licensee paid for costs of operating the station. The accompanying statements of operations include both the gross advertising revenues of KIRO-FM and the advertising revenue sharing fees paid by BIC under the KING Agreement. On March 27, 1997, BIC and BHC entered into an agreement (the "Exchange Agreement") with Entercom Communications Corp., formerly Entertainment Communications, Inc. ("Entercom"), whereby BIC and BHC agreed to transfer title to the net assets and related FCC licenses of the Stations and BIC's sales agent claim under the KING Agreement to Entercom in exchange for Entercom transferring title to the assets and related FCC license of a radio station located in Houston, Texas to BIC and BHC, respectively. In addition to the assets exchanged, BIC received an additional $5.0 million in cash from Entercom under the Exchange Agreement. For income tax purposes, the exchange was structured as a "like-kind exchange" through a Qualified Intermediary under the provisions of Section 1031 of the Internal Revenue Code. The parties to the Exchange Agreement operated each other's stations under a time brokerage agreement ("TBA") for the period March 1, 1997 through March 27, 1997, the closing date. The accompanying statement of operations for the period January 1, 1997 through March 27, 1997 does not include the revenues or expenses of the Stations during the TBA period, March 1, 1997 through March 27, 1997. However, the accompanying statement of operations for the period January 1, 1997 through March 27, 1997 does include as revenue, TBA fees received from Entercom in the amount of $104,000, and as expense, TBA fees paid to Entercom in the amount of $71,000. Basis of Accounting -- The combined statements of operations and net assets and of cash flows include the historical accounts and transactions of the Stations, as operated by BIC, including the FCC licenses owned by BHC. Historically, BIC did not charge the Stations for certain corporate overhead expenses; however, for purposes of the accompanying statements of operations, such expenses have been charged as described below. All inter-station transactions have been eliminated in combination. Use of Estimates in Preparing Financial Statements -- 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. F-27 114 KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM NOTES TO COMBINED STATEMENTS OF OPERATIONS AND OF CASH FLOWS -- (CONTINUED) Transactions with BIC -- The Stations are charged for certain corporate services received from BIC based upon the percentage of revenue of each station to total revenue of all stations operated by BIC. Although management is of the opinion that the allocations used are reasonable and appropriate, other allocations might be used that could produce results substantially different from those reflected herein and these cost allocations might not be indicative of amounts which might be paid to unrelated parties for similar services. The following BIC corporate departmental expenses have been charged to the Stations' accompanying statements of operations:
THREE MONTHS YEARS ENDED ENDED MARCH 27 -------------------------------- ------------------ 1994 1995 1996 1996 1997 -------- -------- -------- ------- ------- (UNAUDITED) Management............................ $110,588 $137,140 $115,079 $29,805 $19,072 Finance............................... 72,503 97,982 99,146 18,425 12,993 Information systems................... 57,327 85,556 66,436 11,453 8,551 Human resources....................... 71,928 84,571 113,088 16,532 11,488 Engineering........................... 19,034 24,871 27,160 4,532 3,822 Legal................................. 24,173 28,244 31,379 5,667 2,731 -------- -------- -------- ------- ------- Total....................... $355,553 $458,364 $452,288 $86,414 $58,657 ======== ======== ======== ======= =======
Revenue Recognition -- Revenues (including agency and representative commissions and revenue sharing fees) are recognized when advertisements are broadcast. Included in revenue are nonmonetary transactions arising from the trading of advertising time for merchandise and services. These transactions are recorded as the advertising is broadcast at the fair market value of the merchandise and services received. Advertising time exchanged for merchandise and services amounted to approximately $1,253,000, $1,975,000, and $1,619,000 in 1994, 1995, and 1996 and $134,000 and $20,000 for the three months ended March 27, 1996 and 1997, respectively. Depreciation and Amortization -- Depreciation and amortization are computed using the straight-line method, based on historical costs, over estimated useful lives, as follows:
ESTIMATED LIVES (YEARS) ------------- Buildings.............................................. 8 - 40 Furniture and fixtures................................. 5 - 8 Equipment.............................................. 3 - 15 Leasehold improvements................................. Life of lease
Intangible Assets -- Intangible assets (primarily the FCC licenses owned by BHC) acquired prior to November 1, 1970 are not being amortized because management believes there has been no decline in their values nor evidence of limited lives. Amortization expense related to intangible assets acquired subsequent to October 31, 1970 (effective date of the adoption by the Accounting Principles Board of principles relating to the accounting for intangible assets) has been included in the accompanying statements of operations. The intangible assets are being amortized over various periods not exceeding forty years. Income Taxes -- Through March 27, 1997, the results of the Stations' operations are included in consolidated Federal, Utah, and Kansas income tax returns filed by the parent corporation of BIC, Deseret Management Corporation ("DMC"). The Stations' portion of the income tax provision (benefit) is allocated at a Federal and state computed statutory rate of 37.5%. The Stations' Federal and Kansas income taxes are generally paid to, or refunded from, DMC. F-28 115 KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM NOTES TO COMBINED STATEMENTS OF OPERATIONS AND OF CASH FLOWS -- (CONTINUED) Concentration of Credit Risk -- The Stations extend credit to customers on an unsecured basis in the normal course of business. The customers are generally located in the greater Seattle, Washington and Kansas City, Missouri areas, and no individual industry or industry segment is significant to the Stations' customer base. The Stations have policies governing the extension of credit and collection of amounts due from customers. Statements of Cash Flows -- For purposes of the statements of cash flows, the Stations consider all highly liquid, short-term investments purchased with remaining maturities of three months or less to be cash equivalents. Interim Results (Unaudited) -- In the opinion of management, the accompanying unaudited interim financial statements for the periods January 1 to March 27, 1996 and 1997 (referred to as the three months ended March 27, 1996 and 1997) have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of operating results and cash flows for such periods. 2. EMPLOYEE BENEFIT PLANS Defined Benefit Plan -- Through March 27, 1997, the Stations participated in a defined benefit plan of BIC which covered all employees who worked at least 1,000 hours in a year, had one year or more of service, and were at least 21 years of age. The plan was sponsored by BIC. Retirement benefits were based on years of service and an average of the employee's highest five years of compensation during the last ten years of employment. BIC's policy is to fund the maximum amounts required by the Employee Retirement Income Security Act of 1974. Contributions were intended to provide not only for benefits attributed for service to date but also for those expected to be earned in the future. The Stations have included in the accompanying statements of operations, pension expense (benefit) under this plan of approximately $113,000, $(42,000), and $21,000 for the years ended December 31, 1994, 1995, and 1996, respectively, and $5,000 and $(21,000) for the three months ended March 27, 1996 and 1997, respectively. Thrift Plan -- The Stations also participated in a Section 401(k) defined contribution plan (the Thrift Plan) of BIC in which employees age 21 or older could participate. Under provisions of the Thrift Plan, participants could contribute up to 17% of their pre-tax compensation to either a savings option (based on after tax earnings) or a deferred option (based on pre-tax earnings), subject to the "excess contribution" limitations defined in the Internal Revenue Code. For each participating employee, the Stations provided a matching contribution of up to 3% of a participant's annual salary. The Stations' contributions to the Thrift Plan were approximately $372,000, $295,000, and $263,000 in 1994, 1995, and 1996, respectively, and $66,000 and $55,000 for the three months ended March 27, 1996 and 1997, respectively. The plan was sponsored by BIC. Postretirement Benefits Other Than Pensions -- BIC provided a postretirement monetary benefit other than pensions. It consisted of a fixed monthly dollar contribution toward the purchase of medical, dental, and life insurance for substantially all of its retired employees. In 1993, BIC began advance funding for postretirement life benefits for employees retiring on or after January 1, 1994. Advance funding for medical benefits commenced in 1994. Medical benefits for employees who retired before January 1, 1994 continue to be funded on a pay-as-you-go basis. The Stations have included in the accompanying statements of operations, expense under this plan of approximately $32,000, $48,000, and $34,000 for the years ended December 31, 1994, 1995, and 1996, respectively, and $9,000 and $19,000 for the three months ended March 27, 1996 and 1997, respectively. F-29 116 KMBZ-AM, KLTH-FM, KCMO-AM/FM, KIRO-AM/FM, KNWX-AM, AND KING-FM NOTES TO COMBINED STATEMENTS OF OPERATIONS AND OF CASH FLOWS -- (CONTINUED) 3. COMMITMENTS AND CONTINGENCIES Leases -- The Stations lease office and studio space under operating leases expiring in 2010 and lease antennas under operating leases expiring in 2002. Rental expense pursuant to the terms of these operating leases was approximately $354,000, $232,000, and $492,000 for the years ended December 31, 1994, 1995, and 1996 and $208,000 and $89,000 for the three months ended March 27, 1996 and 1997. At December 31, 1996, future minimum rental payments required under these leases are as follows: 1997..................................................... $ 509,012 1998..................................................... 498,956 1999..................................................... 502,508 2000..................................................... 433,030 2001..................................................... 459,019 Thereafter............................................... 4,190,178 ---------- Total.......................................... $6,592,703 ==========
Contingencies -- The Stations are involved in litigation regarding transactions conducted in the ordinary course of business and are defending their positions. The final outcome of litigation is not presently determinable; however, in the opinion of management, the effects, if any, will not be material to the net assets or the results of operations and cash flows derived from such net assets. F-30 117 INDEPENDENT AUDITORS' REPORT Entercom Communications Corp.: We have audited the accompanying combined statements of operations and cash flows of the Sacramento Station Group consisting of stations KSEG-FM and KRXQ-FM (the "Stations") for the period January 1, 1996 to September 18, 1996 (the "Predecessor") and for the period September 19, 1996 to December 31, 1996 (the "Company"). These financial statements are the responsibility of the Station'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 combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such combined financial statements present fairly, in all material respects, the results of operations and cash flows of the Predecessor for the period January 1, 1996 to September 18, 1996 and of the Company for the period September 19, 1996 to December 31, 1996 in conformity with generally accepted accounting principles. The accompanying combined financial statements have been prepared from the separate records maintained by the Predecessor and the Company and may not be indicative of the results of operations and cash flows had the Stations been operated as an unaffiliated company and, as discussed in Note 3, certain expenses represent allocations made from the Stations' parent. DELOITTE & TOUCHE LLP Cincinnati, Ohio May 21, 1998 F-31 118 SACRAMENTO STATION GROUP COMBINED STATEMENTS OF OPERATIONS FOR THE PERIODS JANUARY 1, 1996 TO SEPTEMBER 18, 1996 AND SEPTEMBER 19, 1996 TO DECEMBER 31, 1996 AND THE FIVE MONTHS ENDED MAY 31, 1996 AND 1997
PERIOD JANUARY 1, PERIOD FIVE MONTHS 1996 TO SEPTEMBER 19, ENDED MAY 31, SEPTEMBER 18, 1996 TO -------------------------- 1996 DECEMBER 31, 1996 (PREDECESSOR) 1996 (PREDECESSOR) 1997 ----------------- ------------- ------------- --------- (UNAUDITED) NET REVENUES.......................... $5,189,461 $1,944,529 $2,638,700 ---------- ---------- OPERATING EXPENSES: Operating expenses, excluding depreciation and amortization.... 3,765,749 1,572,153 2,052,346 Depreciation and amortization....... 1,136,300 361,936 629,481 $ 580,527 Corporate and general expenses...... 202,000 78,000 112,000 112,000 ---------- ---------- ---------- --------- Total operating expenses.... 5,104,049 2,012,089 2,793,827 692,527 ---------- ---------- ---------- --------- OPERATING INCOME (LOSS)............... 85,412 (67,560) (155,127) (692,527) OTHER INCOME (EXPENSE) -- Net......... (27,341) 35,361 (27,341) 586,000 ---------- ---------- ---------- --------- INCOME (LOSS) BEFORE INCOME TAXES..... 58,071 (32,199) (182,468) (106,527) ---------- ---------- ---------- --------- PROVISION FOR INCOME TAXES............ 287,000 75,000 74,000 104,000 ---------- ---------- ---------- --------- NET LOSS.............................. $ (228,929) $ (107,199) $ (256,468) $(210,527) ========== ========== ========== =========
See notes to financial statements. F-32 119 SACRAMENTO STATION GROUP COMBINED STATEMENTS OF CASH FLOWS FOR THE PERIODS JANUARY 1, 1996 TO SEPTEMBER 18, 1996 AND SEPTEMBER 19, 1996 TO DECEMBER 31, 1996 AND THE FIVE MONTHS ENDED MAY 31, 1996 AND 1997
PERIOD JANUARY 1, PERIOD FIVE MONTHS 1996 TO SEPTEMBER 19, ENDED MAY 31, SEPTEMBER 18, 1996 TO --------------------------- 1996 DECEMBER 31, 1996 (PREDECESSOR) 1996 (PREDECESSOR) 1997 ----------------- ------------- ------------- ----------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss................................. $ (228,929) $(107,199) $(256,468) $ (210,527) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization......... 1,136,300 361,936 629,481 580,527 Loss on disposal of property and equipment........................... 32,341 32,341 Change in assets and liabilities: Accounts receivable................. (245,215) (56,840) 68,087 1,755,043 Prepaid expenses and other assets... 11,698 138,711 (22,673) 31,768 Accounts payable and accrued expenses......................... (13,569) (264,917) (224,392) (119,146) ---------- --------- --------- ----------- Cash provided by operating activities..................... 692,626 71,691 226,376 2,037,665 ---------- --------- --------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES -- Purchase of property and equipment................................ (298,383) (17,348) (239,717) -- ---------- --------- --------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES -- Change in due to Parent.... (336,450) (186,679) (57,374) (2,122,203) ---------- --------- --------- ----------- INCREASE (DECREASE) IN CASH................ 57,793 (132,336) (70,715) (84,538) CASH, BEGINNING OF PERIOD.................. 159,081 216,874 159,081 84,538 ---------- --------- --------- ----------- CASH, END OF PERIOD........................ $ 216,874 $ 84,538 $ 88,366 $ -- ========== ========= ========= ===========
See notes to financial statements. F-33 120 SACRAMENTO STATION GROUP NOTES TO COMBINED FINANCIAL STATEMENTS (INFORMATION PERTAINING TO THE FIVE-MONTH PERIODS ENDED MAY 31, 1996 AND 1997 IS UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business -- The Sacramento Station Group consists of radio stations KSEG-FM and KRXQ-FM (the "Stations") which broadcast in the Sacramento, California area. The stations were an operating unit of Jacor Communication, Inc. (the "Parent") during the period September 19, 1996 through June 4, 1997. During the period January 1, 1996 to September 18, 1996 ("Predecessor Period"), the Stations were owned and operated by Citicasters, Inc. ("Predecessor Parent"). Basis of Presentation -- The accompanying combined statements of operations and cash flows have been prepared from the separate records of the Stations and may not be indicative of the results of operations and cash flows had the Stations been operated as an unaffiliated entity. The accompanying combined statements of operations and cash flows for the period from January 1, 1996 to September 18, 1996 represent the results of direct revenues and expenses and cash flows generated from the historical basis of assets and liabilities of the Predecessor Parent. On September 18, 1996, Citicasters, Inc. was acquired by Jacor Communications, Inc. and in accordance with the purchase method of accounting the assets and liabilities of the Stations were adjusted to fair value on the date of the acquisition. Accordingly, the combined statements of operations and cash flows for the period from September 19, 1996 to December 31, 1996 represent the results of revenues and expenses and cash flows generated from the revalued assets and liabilities. A vertical black line is shown in the accompanying combined financial statements to separate the post acquisition operations from those prior September 19, 1996 since they have not been prepared on a comparable basis. Effective January 1997, the Parent entered into a time brokerage agreement with Entercom Communications Corp. ("Entercom"), formerly Entertainment Communications, Inc. whereby Entercom operated the Stations and remitted to the Parent a monthly rental fee totaling approximately $586,000 through June 4, 1997. The time brokerage agreement expired on June 4, 1997 at which time the Parent sold substantially all of the tangible and intangible assets of the Stations to Entercom for approximately $45,000,000. The Parent retained the ownership of the FCC broadcast license for Stations throughout the contract period of the time brokerage agreement. Revenue Recognition -- Revenues are recognized when advertisements are broadcast. Property and Equipment -- Building, property and equipment are recorded at cost and depreciation is provided using the straight-line method over estimated useful lives ranging from 3 to 25 years. Leasehold improvements are depreciated over the term of the lease. Intangible Assets -- Intangible assets consisting primarily of goodwill, FCC licenses and call letters acquired in connection with the acquisition of the Stations are being amortized over their respective estimated useful lives (ranging from 19 to 40 years during the period January 1, 1996 to September 18, 1996 and 40 years effective September 19, 1996 and thereafter) using the straight-line method. Income Taxes -- The results of operations of the Stations are included in the consolidated tax returns of the Predecessor Parent and the Parent during their respective periods of ownership. The Predecessor Parent and the Parent did not historically allocate taxes to the Stations. However, for purposes of the accompanying financial statements, a provision for income taxes has been made in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, as if the stations filed separate returns. The effective income tax rate for the periods September 19, 1996 to December 31, 1996 and January 1, 1996 to September 18, 1996 varies from the statutory rate of 35% due to non-deductible amortization. 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. F-34 121 SACRAMENTO STATION GROUP NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Interim Financial Statements (Unaudited) -- In the opinion of management, the accompanying unaudited interim combined financial statements for the five months ended May 31, have been prepared on the same basis as the audited combined financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the operating results and cash flows for such periods. Results of operations for an interim period are not necessarily indicative of results to be expected for a full year. 2. EMPLOYEE BENEFIT PLAN The Stations participate in a retirement savings plan (the "Plan") that is sponsored by the Parent. The Stations' expense for the Plan was approximately $15,000 for the period September 19, 1996 to December 31, 1996. A similar plan was sponsored by the Predecessor Parent for which the Stations expensed approximately $45,000 for the period January 1, 1996 to September 18, 1996. 3. RELATED-PARTY TRANSACTIONS Corporate and general expenses consists of corporate overhead costs including treasury, tax, legal, data processing, risk management and other administrative services not specifically related to any specific stations. Management is of the opinion that the allocations used are reasonable and appropriate. 4. LEASES The Stations lease office and studio space under operating leases. Total rent expense was approximately $59,000 for the period September 19, 1996 to December 31, 1996 and approximately $177,000 for the period January 1, 1996 to September 18, 1996. Future minimum rental commitments for noncancellable leases are as follows: 1997, $242,000; 1998, $245,000; 1999, $245,000; 2000, $143,000; 2001, $109,000; thereafter, $290,000. F-35 122 INDEPENDENT AUDITORS' REPORT Entercom Communications Corp.: We have audited the accompanying combined statements of income and cash flows of KBSG, Inc. and KNDD, Inc., (wholly owned subsidiaries of Viacom Inc. (the "Parent"), which businesses were acquired on August 1, 1996 by Entercom Communications Corp., formerly Entertainment Communications, Inc.) (the "Companies") for the year ended December 31, 1995. These combined financial statements are the responsibility of the Companies' 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 financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the combined results of operations and combined cash flows of the Companies for the year ended December 31, 1995 in conformity with generally accepted accounting principles. The accompanying combined financial statements have been prepared from the separate records maintained by the Companies and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Companies had been operated as unaffiliated companies. As described in Note 3, portions of certain expenses represent allocations made from the Companies' Parent. DELOITTE & TOUCHE LLP Seattle, Washington May 29, 1998 F-36 123 KBSG, INC. AND KNDD, INC. COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1995, AND SEVEN-MONTH PERIODS ENDED JULY 31, 1995 AND 1996 (UNAUDITED)
YEAR ENDED SEVEN MONTHS ENDED JULY 31, DECEMBER 31, --------------------------- 1995 1995 1996 ------------ ----------- ------------ (UNAUDITED) NET REVENUES: Unaffiliated customers............................. $18,744,926 $8,682,084 $ 9,093,436 Related party...................................... 743,602 431,844 1,028,412 ----------- ---------- ----------- 19,488,528 9,113,928 10,121,848 OPERATING EXPENSES: Operating expenses, excluding depreciation and amortization and corporate, general, and administrative expenses......................... 10,938,095 4,595,159 4,821,993 Depreciation and amortization...................... 1,532,665 889,813 902,825 Provision for doubtful accounts.................... 163,379 107,827 27,735 General and administrative......................... 1,505,255 976,678 578,459 ----------- ---------- ----------- Total operating expenses................... 14,139,394 6,569,477 6,331,012 ----------- ---------- ----------- Operating income........................... 5,349,134 2,544,451 3,790,836 OTHER INCOME......................................... 343,164 173,129 181,781 INTEREST EXPENSE, related party...................... (1,365,000) (796,250) (630,287) ----------- ---------- ----------- Income before income taxes................. 4,327,298 1,921,330 3,342,330 INCOME TAXES......................................... 1,745,960 813,482 1,296,621 ----------- ---------- ----------- NET INCOME........................................... $ 2,581,338 $1,107,848 $ 2,045,709 =========== ========== ===========
See notes to combined financial statements. F-37 124 KBSG, INC. AND KNDD, INC. STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 1995, AND SEVEN-MONTH PERIODS ENDED JULY 31, 1995 AND 1996 (UNAUDITED)
YEAR ENDED SEVEN MONTHS ENDED JULY 31, DECEMBER 31, --------------------------- 1995 1995 1996 ------------ ------------ ------------ (UNAUDITED) OPERATING ACTIVITIES: Net income............................................ $ 2,581,338 $ 1,107,848 $ 2,045,709 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization...................... 1,532,665 889,813 902,825 Loss (gain) on sale of property and equipment...... 7,655 (3,219) Cash provided (used) by changes in operating assets and liabilities: Accounts receivable.............................. (117,162) 303,582 (14,244) Prepaid expenses and other assets................ 11,651 10,436 34,222 Accounts payable and accrued expenses............ 284,600 (258,713) 185,407 ----------- ----------- ----------- Net cash provided by operating activities..... 4,300,747 2,052,966 3,150,700 =========== =========== =========== INVESTING ACTIVITIES: Purchase of property and equipment.................... (225,615) (158,778) (92,076) Proceeds from sale of property and equipment.......... 14,711 12,366 8,255 Net cash used by investing activities................. (210,904) (146,412) (83,821) ----------- ----------- ----------- FINANCING ACTIVITIES: Net Change in due from Parent......................... (4,116,170) (1,932,962) (3,073,980) NET DECREASE IN CASH AND CASH EQUIVALENTS............... (26,327) (26,408) (7,101) CASH AND CASH EQUIVALENTS: Beginning of period................................... 51,760 51,760 25,433 ----------- ----------- ----------- End of period......................................... $ 25,433 $ 25,352 $ 18,332 =========== =========== ===========
See notes to combined financial statements. F-38 125 KBSG, INC. AND KNDD, INC. NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1995, AND SEVEN-MONTH PERIODS ENDED JULY 31, 1995 AND 1996 (UNAUDITED) NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION: KBSG, Inc. and KNDD, Inc. (the "Companies") own and operate radio stations KBSG-AM and -FM, and KNDD-FM, respectively (the "Stations"), which broadcast in the greater Seattle, Washington area. The Companies are wholly owned subsidiaries of Viacom Inc. (the "Parent"). Effective August 1, 1996, the Stations were acquired by Entercom Communications Corp., formerly Entertainment Communications, Inc. Accordingly, the accompanying statements of income and cash flows include the accounts of the Companies on a combined basis for 1995, and the unaudited interim seven-month periods ended July 31, 1995 and 1996. Intercompany transactions are eliminated in combination. UNAUDITED INTERIM FINANCIAL INFORMATION: The accompanying unaudited interim statements of income and cash flows for the seven-month periods ended July 31, 1995 and 1996 are unaudited. In the opinion of management, such unaudited interim financial statements have been prepared on a basis substantially consistent with the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the statements of income and cash flows for those periods. REVENUE RECOGNITION: Revenues consist primarily of sales of advertising time and are recognized when advertisements are broadcast. Revenues from the Stations' exchange of advertising time for goods or services (barter revenue) are recognized based on the estimated value of advertising time provided, which approximates the estimated fair value of the items received or to be received. The value assigned to the goods and services received is charged to expense when used. Barter revenue was approximately $1,035,800 for 1995. DEPRECIATION AND AMORTIZATION: Depreciation of property and equipment is provided using the straight-line method over their estimated useful lives ranging from three to 20 years. Amortization of intangible assets, consisting primarily of FCC licenses and goodwill is provided using the straight-line method over 30 years. ADVERTISING EXPENSES: Advertising costs are expensed as incurred and totalled approximately $1,426,187 for 1995. INCOME TAXES: The Companies are included in the consolidated federal income tax return of the Parent. Income taxes have not historically been allocated to the Companies. However, for purposes of the accompanying financial statements, a provision for income taxes has been made in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes, as if the Companies filed separate tax returns. Information regarding deferred income taxes is not available. The effective income tax rate for the year ended December 31, 1995, varies from the statutory income tax rate of 34% due to nondeductible amortization. STATEMENTS OF CASH FLOWS: For purposes of the statements of cash flow, the Companies consider highly liquid, short-term investments purchased with remaining maturities of 90 days or less to be cash equivalents. Interest on Parent debt and income taxes are deemed paid when accrued and credited to amounts due from Parent. Actual payments to creditors and tax authorities are made by the Parent. Also see Note 3. PROVISION FOR DOUBTFUL ACCOUNTS: The Companies extend credit to customers on an unsecured basis in the normal course of business. The customers are generally located in the greater Seattle, Washington area, and no individual industry or industry segment is significant to the Company's customer base. The Companies record a provision for doubtful accounts based on their estimate of uncollectible accounts receivable. Bad debt write-offs, net of recoveries, were $193,000 for the year ended December 31, 1995. F-39 126 KBSG, INC. AND KNDD, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) USE OF ESTIMATES: 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 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. NOTE 2: COMMITMENTS The Companies lease office space under operating leases expiring from 1998 to 2004. Rental expenses pursuant to the terms of these operating leases were $295,670 for the year ended December 31, 1995. At December 31, 1995, future minimum rental payments required under these leases are as follows: 1996..................................................... $ 790,548 1997..................................................... 790,548 1998..................................................... 372,548 1999..................................................... 268,482 2000..................................................... 148,848 Thereafter............................................... 58,404 ---------- $2,429,378 ==========
NOTE 3: RELATED PARTY TRANSACTIONS In the ordinary course of business, the Companies enter into transactions with the Parent which are recorded through a due-from-Parent account. Such transactions for the year ended December 31, 1995, consist primarily of: Barter revenue.............................................. $ 744,000 Income tax expense payable to Parent........................ 1,746,000 Interest expense on Parent company debt at 9.75%............ 1,365,000 Corporate overhead charges.................................. 806,000
The corporate overhead charge allocated to the seven month period ended July 31, 1995 was approximately $470,000. There was no corporate overhead charge for the seven month period ended July 31, 1996 (unaudited). Other transactions include immaterial amounts related to employee benefits, insurance, and other items. Although management is of the opinion that the allocations used are reasonable, other allocations might be used that could produce results substantially different from those reflected herein, and these allocations might not be indicative of amounts which might be incurred with unrelated parties. The Companies' cash and financing requirements are managed on a centralized basis by the Parent. Accordingly, the Companies' available cash is deposited in, and cash requirements are transferred from, corporate accounts on a regular basis. Such transactions are recorded through the due-from-Parent account. The due-from-Parent account is noninterest bearing and has no specified repayment date, which may not be indicative of arrangements that could be made with unrelated parties. Arrangements with unrelated parties could produce results substantially different from these reflected herein. In June 1996, Parent Company debt of $14,000,000 was retired through adjustment to the Parent company account. F-40 127 KBSG, INC. AND KNDD, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 4: EMPLOYEE BENEFIT PLANS The Companies participate in a pension and other employee benefit plans offered by the Parent covering substantially all employees. The Companies' expenses related to the plans were not significant for the year ended December 31, 1995. NOTE 5: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Subsequent to December 31, 1995, SFAS No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of, became effective. SFAS No. 121 requires the Companies to analyze their long-lived assets, such as fixed assets, identifiable intangibles, and goodwill, for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Adoption of this standard is not expected to have a material effect on the financial statements. Other subsequently issued pronouncements, such as SFAS No. 123, Stock-based Compensation, SFAS No. 128, Earnings per Share, SFAS No. 130, Segment Information, SFAS No. 131, Reporting Comprehensive Income, Statement of Position (SOP) 98-1, Reporting the Costs of Computer Software Developed or Obtained for Internal Use, SOP 98-5, Reporting the Costs of Start-up Activities, either do not apply to the Companies or their adoption is not expected to have a material effect on the financial statements. F-41 128 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Entertainment Communications, Inc. and Subsidiaries: We have audited the accompanying combined balance sheet of the Portland, Oregon and Rochester, New York Radio Groups of Heritage Media Services, Inc. -- Broadcasting Segment (the Company) as of December 31, 1997, and the related combined statements of operations, stockholders' equity and cash flows of the Portland, Oregon and Rochester, New York Radio Groups of Heritage Media Services, Inc. -- Broadcasting Segment (the Predecessor) for the eight months ended August 31, 1997 and of the Company for the four months ended December 31, 1997. These financial statements are the responsibility of the Company's and the Predecessor'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 combined financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1997, and the results of operations and cash flows of the Predecessor for the eight months ended August 31, 1997, and of the Company for the four months ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Baltimore, Maryland, May 29, 1998 F-42 129 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED BALANCE SHEET AS OF DECEMBER 31, 1997 (IN THOUSANDS)
1997 -------- ASSETS CURRENT ASSETS: Cash...................................................... $ 594 Accounts receivable, net of allowance for doubtful accounts of $166....................................... 3,474 Prepaid expenses and other current assets................. 41 Deferred barter costs..................................... 113 Deferred tax asset........................................ 64 -------- Total current assets.............................. 4,286 PROPERTY, PLANT AND EQUIPMENT, net.......................... 4,497 DUE FROM AFFILIATE.......................................... 1,719 ACQUIRED INTANGIBLE BROADCASTING ASSETS, net................ 116,171 -------- Total Assets...................................... $126,673 ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses..................... $ 520 Deferred revenue.......................................... 11 Deferred barter revenue................................... 108 -------- Total current liabilities......................... 639 DEFERRED TAX LIABILITY...................................... 98 OTHER LONG-TERM LIABILITIES................................. 292 -------- Total Liabilities................................. 1,029 -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $1.00 par value, 10,000 shares authorized and 10,000 shares issued and outstanding............... 10 Additional paid-in capital................................ 127,035 Accumulated deficit....................................... (1,401) -------- Total Stockholders' Equity........................ 125,644 -------- Total Liabilities and Stockholders' Equity........ $126,673 ========
The accompanying notes are an integral part of this combined balance sheet. F-43 130 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS)
PREDECESSOR COMPANY ------------ ------------ EIGHT MONTHS FOUR MONTHS ENDED ENDED AUGUST 31, DECEMBER 31, 1997 1997 ------------ ------------ NET REVENUES: Station broadcasting revenues, net of agency commissions of $1,060 and $1,845, respectively..................... $10,449 $ 5,635 Revenues realized from station barter arrangements........ 847 464 ------- ------- Total net revenues................................ 11,296 6,099 ------- ------- OPERATING EXPENSES: Programming and production................................ 4,024 2,059 Selling, general and administrative....................... 1,618 830 Corporate overhead allocation............................. 814 478 Expenses realized from station barter arrangements........ 922 411 Depreciation of property and equipment.................... 395 251 Amortization of acquired intangible broadcasting assets and other assets....................................... 775 2,623 ------- ------- Total operating expenses.......................... 8,548 6,652 ------- ------- Broadcast operating income (loss)................. 2,748 (553) ------- ------- OTHER INCOME (EXPENSE): Interest expense.......................................... 651 265 Other expense, net........................................ -- 21 ------- ------- Income (loss) before provision for income taxes... 2,097 (839) PROVISION FOR INCOME TAXES.................................. 1,339 562 ------- ------- Net income (loss)................................. $ 758 $(1,401) ======= =======
The accompanying notes are an integral part of these combined statements. F-44 131 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
COMMON STOCK ADDITIONAL RETAINED EARNINGS/ --------------- PAID-IN (ACCUMULATED STOCKHOLDER'S SHARES AMOUNT CAPITAL DEFICIT) EQUITY ------ ------ ---------- ------------------ ------------- PREDECESSOR: BALANCE, January 1, 1997......... 10 $ 10 $ -- $ 7,041 $ 7,051 HMC noncash capital contributions............... -- -- 1,209 -- 1,209 Net income.................... -- -- -- 758 758 Acquisition by News Corporation................. -- -- 125,291 (7,799) 117,492 ----- ------ -------- ------- -------- BALANCE, August 31, 1997......... 10 $ 10 $126,500 $ -- $126,510 ===== ====== ======== ======= ======== COMPANY: BALANCE, September 1, 1997....... 10 $ 10 $126,500 $ -- $126,510 News Corporation noncash capital contributions....... -- -- 535 -- 535 Net loss...................... -- -- -- (1,401) (1,401) ----- ------ -------- ------- -------- BALANCE, December 31, 1997....... 10 $ 10 $127,035 $(1,401) $125,644 ===== ====== ======== ======= ========
The accompanying notes are an integral part of these combined statements. F-45 132 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
PREDECESSOR COMPANY ------------ ------------ EIGHT MONTHS FOUR MONTHS ENDED ENDED AUGUST 31, DECEMBER 31, 1997 1997 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)......................................... $ 758 $(1,401) Adjustments to reconcile net income (loss) to net cash flows from operating activities- Depreciation of property and equipment................. 395 251 Amortization of acquired intangible broadcasting assets and other assets...................................... 775 2,623 Changes in assets and liabilities, net of effects of acquisitions- (Increase) decrease in accounts receivable, net........ 121 (225) Net effect of change in deferred barter revenue and deferred barter costs................................. 76 (49) Increase in prepaid expenses and other current assets................................................ (15) (15) Increase in deferred tax asset......................... (50) (15) Increase (decrease) in accounts payable and accrued expenses.............................................. (826) 150 Increase (decrease) in deferred revenue................ (75) 11 (Decrease) increase in deferred tax liability.......... 99 (1) Decrease in other long-term liabilities................ (12) (25) ------- ------- Net cash flows from operating activities.......... 1,246 1,304 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment..................... (157) (11) Acquisitions, net of cash acquired........................ (1,859) -- ------- ------- Net cash flows from investing activities.......... (2,016) (11) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in due to affiliates............................. (512) -- Increase in due from affiliates........................... -- (1,719) Capital contributions made by Parent...................... 1,209 535 ------- ------- Net cash flows from financing activities.......... 697 (1,184) ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (73) 109 CASH, beginning of period................................... 558 485 ------- ------- CASH, end of period......................................... $ 485 $ 594 ======= ======= SUPPLEMENTAL DISCLOSURES: Cash paid for interest.................................... $ -- $ 21 ======= ======= Cash paid for income taxes................................ $ 152 $ 29 ======= =======
The accompanying notes are an integral part of these combined statements. F-46 133 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Presentation Heritage Media Services, Inc. ("HMSI") operates in two segments -- Marketing Services and Broadcasting. Heritage Media Corporation is the parent company of HMSI, (collectively referred to hereafter as either "HMC" or the "Parent"). The Broadcasting Segment was wholly-owned and operated by HMSI, which was owned by HMC through August 31, 1997 (the "Predecessor"). In July 1997, HMC entered into an asset sale agreement with Sinclair Broadcast Group, Inc. ("SBG") whereby SBG would acquire 100% of the Broadcasting Segment (which consisted of six television stations in three markets and 24 radio stations in seven markets) for $630 million in cash. Effective September 1, 1997, The News Corporation Limited ("News Corporation") acquired all of the license and nonlicense assets of HMC. Due to certain regulatory requirements, News Corporation has established a trust to hold all of the license and nonlicense assets of the Broadcasting Segment until the sale to SBG has closed. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets and acquired intangible broadcasting assets of $51.4 million and $578.6 million, respectively. During January 1998, Entertainment Communications, Inc. ("Entercom") entered into an Asset Purchase Agreement with Tuscaloosa Broadcasting Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc. (collectively referred to hereafter as "Sinclair") to acquire KKSN-AM, KKSN-FM and KKRH-FM, all serving the Portland, Oregon radio market and WBBF-AM, WBBF-FM, WKLX-FM and WQRV-FM, all serving the Rochester, New York radio market for a purchase price of $126.5 million. Simultaneously with the above agreement, Entercom entered into a Time Brokerage Agreement ("TBA") with Sinclair whereby, effective March 1, 1998, Entercom programs these stations for the period prior to consummation of the purchase agreement and Sinclair receives a monthly TBA fee of $631,500. Closing on this transaction is expected in June 1998. The accompanying combined financial statements include the accounts of the Portland, Oregon and Rochester, New York Radio Group, which are collectively referred to hereafter as "the Company." The accompanying December 31, 1997, balance sheet and related statements of operations and cash flows for the four-month period ended December 31, 1997, are presented on a new basis of accounting, reflecting the impact of the News Corporation acquisition. The accompanying financial statements for the eight-month period ended August 31, 1997, are presented as "Predecessor" financial statements. Disclosure of Certain Significant Risks and Uncertainties 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. Concentration of Credit Risk The Company's revenues and accounts receivable relate primarily to the sale of advertising within the radio stations' broadcast areas. Credit is extended based on an evaluation of the customers' financial condition. Credit losses are provided for in the financial statements. In the opinion of management, credit risk with respect to trade receivables is limited due to the large number of diversified customers and the geographic diversification of the Company's customer base. The Company performs ongoing credit evaluations of its customers and believes that adequate allowances for any F-47 134 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) uncollectable trade receivables are maintained. At December 31, 1997, no receivable from any customer exceeded 5% of stockholders' equity, and no customer accounted for more than 10% of net revenues for the eight months ended August 31, 1997 or for the four months ended December 31, 1997. Acquired Intangible Broadcasting Assets Acquired intangible broadcasting assets are being amortized over periods of 4 to 40 years. These amounts result from the acquisition of certain radio station license and nonlicense assets by The News Corporation (see Note 1). The Company monitors the individual financial performance of each of the stations and continually evaluates the realizability of intangible and tangible assets and the existence of any impairment to its recoverability based on the projected undiscounted cash flows of the respective stations. Intangible assets consist of the following as of December 31, 1997 (in thousands):
AMORTIZATION PERIOD 1997 ------------ -------- Goodwill.......................................... 40 years $1,897 FCC licenses...................................... 15-25 years 52,092 Other............................................. 4-25 years 65,172 -------- 119,161 Less: Accumulated amortization.................... 2,626 -------- $116,535 ========
Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded on the straight-line basis over the estimated useful lives of the assets. Property and equipment at December 31, 1997, are summarized as follows (in thousands):
USEFUL LIFE 1997 ----------- ------ Land........................................................ -- $ 442 Broadcasting equipment...................................... 5-25 years 366 Buildings and improvements.................................. 12-30 years 3,684 Other equipment............................................. 4-8 years 256 ------ 4,748 Less: Accumulated depreciation.............................. 251 ------ $4,497 ======
Barter Transactions Certain program contracts provide for the exchange of advertising air time in lieu of cash payments for the rights to such programming. These contracts are recorded as the programs are aired at the estimated fair value of the advertising air time given in exchange for the program rights. Network programming is excluded from these calculations. The Company broadcasts certain customers' advertising in exchange for equipment, merchandise and services. The estimated fair value of the equipment, merchandise or services received is recorded as deferred barter costs and the corresponding obligation to broadcast advertising is recorded as deferred barter revenues. F-48 135 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) The deferred barter costs are expensed or capitalized as they are used, consumed or received. Deferred barter revenues are recognized as the related advertising is aired. Revenues Revenue from the sale of commercial broadcast time to advertisers is recognized when the commercials are broadcast. Promotional fees are recognized as services are rendered. 2. ACCRUED EXPENSES: Accrued expenses consist of the following at December 31, 1997, (in thousands):
1997 ---- Commissions................................................. $193 Payroll and employee benefits............................... 137 Other....................................................... 187 ---- $517 ====
3. DUE TO AFFILIATE: The Predecessor had an arrangement with HMSI whereby HMSI would provide certain management and other services to the Predecessor. The services provided included consultation and direct management assistance with respect to operations and strategic planning. The Predecessor was allocated approximately $814,000 of corporate overhead expenses for these services for the eight months ended August 31, 1997. In order to fund acquisitions and provide operating funds, HMSI entered into a Bank Credit Agreement. The debt used to finance acquisitions and fund daily operations of the Predecessor was recorded by the Predecessor as due to affiliate in the year ending December 31, 1996. HMSI allocated interest at a rate of approximately 10.0%, which approximated the average rate paid on the borrowings. Associated with the HMSI debt, the Predecessor was allocated approximately $0.6 million of deferred financing costs in 1996. The deferred financing costs were fully amortized in accordance with the acquisition by News Corporation on September 1, 1997. 4. INCOME TAXES: The Parent files a consolidated federal tax return and separate state tax returns for each of its subsidiaries in certain filing jurisdictions. It is the Parent's policy to pay the federal income tax provision of the Company. The accompanying financial statements have been prepared in accordance with the separate return method of FASB 109, whereby the allocation of the federal tax provision due to the Parent is based on what the Company's current and deferred federal tax provision would have been had the Company filed a federal income tax return outside of its consolidated group. The Company is not required to reimburse the Parent for its federal tax provision. Accordingly, this amount is recorded as a capital contribution in the accompanying consolidated financial statements. No federal deferred tax assets or liabilities are recorded because those amounts are considered currently paid to or received by the Parent. The federal and state tax provision was calculated based on pretax income, plus or minus permanent book-to-tax differences, times the statutory tax rate of 40%. The Company had no alternative minimum tax credit carryforwards as of December 31, 1997. The effective tax rate in the current year exceeds the statutory tax rate of 40% due to the effects of nondeductible goodwill. F-49 136 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) The provision for income taxes consists of the following (in thousands):
PREDECESSOR COMPANY ------------ ------------ EIGHT MONTHS FOUR MONTHS ENDED ENDED AUGUST 31, DECEMBER 31, 1997 1997 ------------ ------------ Current: Federal.................................................. $1,267 $523 State.................................................... 81 33 ------ ---- 1,348 556 ------ ---- Deferred: Federal.................................................. -- -- State.................................................... (9) 6 ------ ---- (9) 6 ------ ---- Provision for income taxes................................. $1,339 $562 ====== ====
The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision (in thousands):
PREDECESSOR COMPANY ------------ ------------ EIGHT MONTHS FOUR MONTHS ENDED ENDED AUGUST 31, DECEMBER 31, 1997 1997 ------------ ------------ Statutory federal income taxes............................. $ 703 $ (504) Adjustments: State income taxes, net of federal effect................ 82 (59) Non-deductible goodwill amortization..................... 276 1,125 Other.................................................... 278 -- ------ ------ Provision for income taxes................................. $1,339 $ 562 ====== ======
The following table summarizes the state tax effects of the significant types of temporary differences between financial reporting basis and tax basis which were generated during the years ended December 31, 1997 (in thousands):
1997 ---- Deferred Tax Assets: Bad debt reserve.......................................... $14 Accruals.................................................. 27 Other intangibles......................................... 23 --- $64 === Deferred Tax Liability: Depreciation.............................................. $98 ===
5. EMPLOYEE BENEFIT PLAN: Company employees were covered by HMC's Retirement Savings Plan (the Plan) through December 31, 1997, whereby participants contributed portions of their annual compensation to the Plan and F-50 137 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) certain contributions were made at the discretion of the Company based on criteria set forth in the Plan Agreement. Participants are generally 100% vested in Company contributions after five years of employment with the Company. Company expenses under the Plan were not material for the year ended December 31, 1997. 6. RELATED PARTY TRANSACTIONS: The Company received certain advances from HMC during the eight months ended August 31, 1997, which were evidenced by a subordination agreement. All advances from HMC were repaid on August 31, 1997. 7. CONTINGENCIES AND OTHER COMMITMENTS: Leases and Contracts The Company and its subsidiaries lease certain real property and transportation and other equipment under noncancellable operating leases expiring at various dates through 2015. The Company also has long-term contractual obligations with two major broadcast ratings firms that provide monthly ratings services and guaranteed store contracts. Rent expense under these leases for the eight months ended August 31, 1997, and for the four months ended December 31, 1997, was approximately $210,000 and $105,000, respectively. Future minimum payments under the leases are as follows (in thousands): 1998........................................................ $ 392 1999........................................................ 386 2000........................................................ 386 2001........................................................ 371 2002........................................................ 357 2003 and thereafter......................................... 814 ------ $2,706 ======
Litigation Lawsuits and claims are filed against the Company from time to time in the ordinary course of business which are generally incidental to its business. Management of the Company does not believe the resolution of such matters will have a significant effect on its liquidity, financial position or results of operations. F-51 138 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND MARCH 31, 1998 (IN THOUSANDS)
PREDECESSOR COMPANY DECEMBER 31, MARCH 31, 1997 1998 ------------ -------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash...................................................... $ 594 $ -- Accounts receivable, net of allowance for doubtful accounts of $166....................................... 3,474 -- Prepaid expenses and other current assets................. 41 -- Deferred barter costs..................................... 113 -- Deferred tax asset........................................ 64 -- -------- -------- Total current assets.............................. 4,286 -- PROPERTY, PLANT AND EQUIPMENT, net.......................... 4,497 5,152 DUE FROM AFFILIATE.......................................... 1,719 -- ACQUIRED INTANGIBLE BROADCASTING ASSETS, net................ 116,171 116,934 -------- -------- Total Assets...................................... $126,673 $122,086 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses..................... $ 520 $ -- Deferred revenue.......................................... 11 -- Deferred barter revenue................................... 108 -- Due to parent............................................. -- 70 -------- -------- Total current liabilities......................... 639 70 DEFERRED TAX LIABILITY...................................... 98 -- OTHER LONG-TERM LIABILITIES................................. 292 -- -------- -------- Total Liabilities................................. 1,029 70 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $1.00 par value, 10,000 shares authorized and 10,000 and 0 shares issued and outstanding......... 10 -- Additional paid-in capital................................ 127,035 122,827 Accumulated deficit....................................... (1,401) (811) -------- -------- Total Stockholders' Equity........................ 125,644 122,016 -------- -------- Total Liabilities and Stockholders' Equity........ $126,673 $122,086 ======== ========
The accompanying notes are an integral part of these combined balance sheets. F-52 139 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS)
PREDECESSOR PREDECESSOR COMPANY THREE MONTHS TWO MONTHS ONE MONTH ENDED ENDED ENDED MARCH 31, 1997 FEBRUARY 28, 1998 MARCH 31, 1998 -------------- ----------------- -------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) NET REVENUES: Station broadcasting revenue, net of agency commissions of $611 and $387, respectively.... $3,349 $ 2,169 $ -- Revenues realized from station barter arrangements.................................. 249 187 -- Time brokerage agreement revenues............... -- -- 635 ------ ------- ----- Total net revenues.................... 3,598 2,356 635 OPERATING EXPENSES: Programming and production...................... 1,303 824 3 Selling, general and administrative............. 885 603 -- Expenses realized from station barter arrangements.................................. 245 280 -- Depreciation of property and equipment.......... 147 126 78 Amortization of acquired intangible broadcasting assets and other assets....................... 287 1,503 663 ------ ------- ----- Total operating expenses.............. 2,867 3,336 744 ------ ------- ----- Broadcast operating income (loss)..... 731 (980) (109) ------ ------- ----- OTHER EXPENSE: Interest expense................................ 261 -- 702 ------ ------- ----- Income (loss) before provision for income taxes........................ 470 (980) (811) PROVISION FOR INCOME TAXES...................... 52 40 -- ------ ------- ----- Net income (loss)..................... $ 418 $(1,020) $(811) ====== ======= =====
The accompanying notes are an integral part of these combined statements. F-53 140 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT COMBINED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
PREDECESSOR PREDECESSOR COMPANY THREE MONTHS TWO MONTHS ONE MONTH ENDED ENDED ENDED MARCH 31, 1997 FEBRUARY 28, 1998 MARCH 31, 1998 -------------- ----------------- -------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)............................. $ 418 $(1,020) $(811) Adjustments to reconcile net income (loss) to net cash flows from operating activities- Depreciation of property and equipment...... 147 126 78 Amortization of acquired intangible broadcasting assets and other assets..... 287 1,503 663 Changes in certain assets and liabilities, net of effects of acquisitions: Decrease in accounts receivable, net........ 644 415 -- Net effect of change in deferred barter revenue and deferred barter costs........ (6) 96 -- Increase in prepaid expenses and other assets................................... (9) (3) -- (Decrease) increase in accounts payable and accrued expenses......................... (535) 76 -- Decrease in deferred revenue................ (3) -- -- Decrease in other long-term liabilities..... (1) (70) -- ------- ------- ----- Net cash flows from operating activities........................ 942 1,123 (70) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment......... (82) (7) -- Acquisitions, net of cash acquired............ (1,894) -- -- ------- ------- ----- Net cash flows from investing activities........................ (1,976) (7) -- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in due to affiliates...... 995 (1,111) 70 ------- ------- ----- Net cash flows from financing activities........................ 995 (1,111) 70 ------- ------- ----- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS................................. (39) 5 -- CASH, beginning of period..................... 558 594 -- ------- ------- ----- CASH, end of period........................... $ 519 $ 599 $ -- ======= ======= =====
The accompanying notes are an integral part of these combined statements. F-54 141 THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Presentation Heritage Media Services, Inc. ("HMSI") operates in two segments -- Marketing Services and Broadcasting. Heritage Media Corporation is the parent company of HMSI, (collectively referred to hereafter as either "HMC" or the "Parent"). The Broadcasting Segment was wholly-owned and operated by HMSI, which was owned by HMC through August 31, 1997 (the "Predecessor"). In July 1997, HMC entered into an asset sale agreement with Sinclair Broadcast Group, Inc. ("SBG") whereby SBG would acquire 100% of the Broadcasting Segment (which consisted of six television stations in three markets and 24 radio stations in seven markets) for $630 million in cash. Effective September 1, 1997, The News Corporation Limited ("News Corporation") acquired all of the license and nonlicense assets of HMC. Due to certain regulatory requirements, News Corporation established a trust to hold all of the license and nonlicense assets of the Broadcasting Segment until the sale to SBG had closed. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets and acquired intangible broadcasting assets of $51.4 million and $578.6 million, respectively. During January 1998, Entertainment Communications, Inc. ("Entercom") entered into an Asset Purchase Agreement with Tuscaloosa Broadcasting Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc. (collectively referred to hereafter as "Sinclair") to acquire KKSN-AM, KKSN-FM and KKRH-FM, all serving the Portland, Oregon radio market and WBBF-AM, WBBF-FM, WKLX-FM and WQRV-FM, all serving the Rochester, New York radio market for a purchase price of $126.5 million. Simultaneously with the above agreement, Entercom entered into a Time Brokerage Agreement ("TBA") with Sinclair whereby, effective March 1, 1998, Entercom programs these stations for the period prior to consummation of the purchase agreement and Sinclair receives a monthly TBA fee of $631,500. Effective March 1, 1998, SBG completed its acquisition of the Portland, Oregon and Rochester, New York Radio Groups from News Corporation. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to the assets to be sold. In June 1998, Entercom closed its transaction with Sinclair. The accompanying combined financial statements include the accounts of the Portland, Oregon and Rochester, New York Radio Group, which are collectively referred to hereafter as "the Company." The accompanying March 31, 1998, balance sheet and the related statements of operations and cash flows for the one-month period ended March 31, 1998, are presented on a new basis of accounting, reflecting the impact of the acquisition by SBG. The accompanying financial statements for the three months ended March 31, 1997, and the two months ended February 28, 1998, are presented as "Predecessor" financial statements. Interim Financial Statements The combined financial statements for the period ended March 31, 1997, the two months ended February 28, 1998, and the one month ended March 31, 1998, are unaudited, but in the opinion of management, such financial statements have been presented on the same basis as the audited combined financial statements and include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial position and results of operations, and cash flows for these periods. The results of operations presented in the accompanying financial statements are not necessarily representative of operations for an entire year. F-55 142 INDEPENDENT AUDITORS' REPORT Entercom Communications Corp.: We have audited the accompanying combined balance sheet of the Boston Radio Market of CBS Radio, Inc. (the "Boston Radio Market") (formerly American Radio Systems Corporation ("ARS") prior to the sale of ARS to CBS on June 4, 1998), which is comprised of radio properties owned by CBS Radio, Inc., a wholly owned subsidiary of CBS Corporation ("CBS") as of December 31, 1997, and the related combined statements of operations, and cash flows for the year ended December 31, 1997. These financial statements are the responsibility of the management of the Boston Radio Market. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the combined financial position of the Boston Radio Market as of December 31, 1997, and the results of their combined operations and their combined cash flows for the year then ended in conformity with generally accepted accounting principles. The accompanying combined financial statements have been prepared from the separate accounting records maintained by the Boston Radio Market while owned by ARS and may not be indicative of the conditions that would have existed or the results of operations had the assets to be sold been operated as an unaffiliated company. As discussed in Note 1, certain of the operating expenses represent allocations made by ARS in the accompanying financial statements. In August 1998, CBS Radio, Inc. entered into an agreement to sell the net assets of the Boston Radio Market to Entercom Communications Corp. DELOITTE & TOUCHE LLP Boston, Massachusetts September 18, 1998 F-56 143 THE BOSTON RADIO MARKET OF CBS RADIO, INC. COMBINED BALANCE SHEETS DECEMBER 31, 1997 AND JUNE 30, 1998
PREDECESSOR CURRENT OWNER OWNER ------------ ----------- DECEMBER 31, JUNE 30, 1997 1998 ------------ ----------- (UNAUDITED) (NOTE 1) ASSETS CURRENT ASSETS: Accounts and notes receivable (less allowances for doubtful accounts of $2,140,000 in 1997 and $2,690,000 (unaudited) in 1998)................................... $ 8,246,194 $ 9,275,415 Prepaid expenses and other assets......................... 486,976 893,408 Deposits and other current assets -- related parties...... 6,695 -- ----------- ----------- Total............................................. 8,739,865 10,168,823 ----------- ----------- PROPERTY AND EQUIPMENT -- Net............................... 11,799,363 10,380,837 ----------- ----------- OTHER ASSETS: Intangible assets -- net.................................. 33,006,828 32,292,335 Other assets.............................................. 94,758 94,758 ----------- ----------- Total............................................. 33,101,586 32,387,093 ----------- ----------- TOTAL....................................................... $53,640,814 $52,936,753 =========== =========== LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable.......................................... $ 994,252 $ 661,201 Accrued compensation...................................... 303,104 607,799 Accrued expenses.......................................... 794,867 1,714,657 Capitalized lease obligation.............................. 137,762 35,324 ----------- ----------- Total............................................. 2,229,985 3,018,981 COMMITMENTS AND CONTINGENCIES (Note 6) EQUITY...................................................... 51,410,829 49,917,772 ----------- ----------- TOTAL....................................................... $53,640,814 $52,936,753 =========== ===========
See notes to combined financial statements. F-57 144 THE BOSTON RADIO MARKET OF CBS RADIO, INC. COMBINED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1997, SIX MONTHS ENDED JUNE 30, 1997, FIVE MONTHS ENDED MAY 31, 1998, AND ONE MONTH ENDED JUNE 30, 1998
PREDECESSOR OWNER CURRENT OWNER ----------------------------------------------- -------------- YEAR ENDED SIX MONTHS FIVE MONTHS ONE MONTH DECEMBER 31, ENDED JUNE 30, ENDED MAY 31, ENDED JUNE 30, 1997 1997 1998 1998 ------------ -------------- ------------- -------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (NOTE 1) NET REVENUES........................ $37,331,314 $19,468,896 $14,994,176 $3,475,627 ----------- ----------- ----------- ---------- OPERATING EXPENSES: Operating expenses, excluding depreciation, amortization, general and administrative expenses....................... 27,747,140 14,143,092 12,205,334 2,533,595 Depreciation and amortization..... 2,852,025 1,287,158 1,245,587 249,117 General and administrative........ 5,092,850 2,652,002 2,630,801 340,448 ----------- ----------- ----------- ---------- Total operating expenses................ 35,692,015 18,082,252 16,081,722 3,123,160 ----------- ----------- ----------- ---------- OPERATING INCOME (LOSS) BEFORE INCOME TAXES...................... 1,639,299 1,386,644 (1,087,546) 352,467 INCOME TAX EXPENSE (BENEFIT)........ 660,600 558,800 (438,300) 142,000 ----------- ----------- ----------- ---------- NET INCOME (LOSS)................... $ 978,699 $ 827,844 $ (649,246) $ 210,467 =========== =========== =========== ==========
See notes to combined financial statements. F-58 145 THE BOSTON RADIO MARKET OF CBS RADIO, INC. COMBINED STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31, 1997, SIX MONTHS ENDED JUNE 30, 1997, FIVE MONTHS ENDED MAY 31, 1998, AND ONE MONTH ENDED JUNE 30, 1998
CURRENT PREDECESSOR OWNER OWNER ------------------------------------------ ----------- SIX MONTHS FIVE MONTHS ONE MONTH YEAR ENDED ENDED ENDED ENDED DECEMBER 31, JUNE 30, MAY 31, JUNE 30, 1997 1997 1998 1998 ------------ ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (NOTE 1) NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (Note 1).................... $ 3,674,288 $ 2,037,283 $ (4,440) $ (888) ----------- ----------- ----------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment..... (1,396,694) (322,184) (373,488) -- Proceeds from sale of property......... 60,654 10,500 -- -- ----------- ----------- ----------- -------- Net cash used for investing activities................... (1,336,040) (311,684) (373,488) -- ----------- ----------- ----------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt........... (189,840) (92,480) (85,000) (17,438) ----------- ----------- ----------- -------- Net transfer (to) from Owner........... (2,148,408) (1,633,119) 462,928 18,326 ----------- ----------- ----------- -------- Net cash (used for) provided by financing activities......... (2,338,248) (1,725,599) 377,928 888 ----------- ----------- ----------- -------- CASH, BEGINNING AND END OF PERIOD........ $ -- $ -- $ -- $ -- =========== =========== =========== ========
- --------------- NONCASH ACTIVITIES: In 1997, the Predecessor Owner acquired $24.8 million in assets, principally intangible assets, which were financed by the Owners. In 1997, the Predecessor Owner transferred assets to an affiliate of the Stations totaling approximately $1 million. See notes to combined financial statements. F-59 146 THE BOSTON RADIO MARKET OF CBS RADIO, INC. NOTES TO COMBINED FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1997, SIX MONTHS ENDED JUNE 30, 1997, FIVE MONTHS ENDED MAY 31, 1998, AND ONE MONTH ENDED JUNE 30, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business and Basis of Presentation -- The accompanying financial statements present the combined assets, liabilities and operations of the Boston Radio Market of CBS Radio, Inc. (the "Boston Radio Market"), which is comprised of radio stations WRKO-AM, WEEI-AM, WEGQ-FM, WAAF-FM, serving the Boston, Massachusetts, radio market, and WWTM-AM, serving the Worcester, Massachusetts, radio market (the "Stations"). Through June 4, 1998, the Stations were owned by American Radio Systems Corporation (the "Predecessor Owner" or "ARS"), an operator of radio stations throughout the United States. On June 4, 1998, ARS was acquired by CBS Radio, Inc., a wholly owned subsidiary of CBS Corporation (collectively with CBS Radio, Inc., "CBS" or the "Current Owner"). In connection with the acquisition of ARS by CBS (the "ARS/CBS merger"), CBS was required to sell the Boston Radio Market to comply with certain regulations of the Federal Communications Commission. During August 1998, CBS entered into purchase and sale agreements with Entercom Communications Corp. ("Entercom") to sell the net assets of the Boston Radio Market for approximately $140.0 million, subject to receipt of regulatory approval which is expected to be received during 1998. CBS and ARS are referred to as the Stations' "Owners" for purposes of these notes to combined financial statements. All significant intercompany transactions have been eliminated in combination. Interim Financial Information and Related Valuation of Assets Acquired and Liabilities Assumed -- The unaudited financial statements for the six months ended June 30, 1997, the five months ended May 31, 1998, and the one month ended June 30, 1998 have been prepared on a basis substantially consistent with that of the audited Predecessor Owner's financial statements included herein. The valuations of the assets acquired and the liabilities assumed have not been prepared and, accordingly, the accompanying June 30, 1998 unaudited financial statements have been prepared on the Predecessor Owner's historical cost basis and do not reflect any purchase price adjustments. For purposes of preparing the Predecessor Owner's unaudited financial statements, the ARS/CBS merger is assumed to have occurred on May 31, 1998. In the opinion of management, such unaudited financial statements include all adjustments, which are only of a normal and recurring nature, considered necessary for a fair presentation. Operating results for the unaudited periods presented are not necessarily indicative of the results that may be expected for a full year. Revenue Recognition -- Revenues are recognized when advertisements are broadcast. Property and Equipment -- Property and equipment are recorded at cost, and depreciation is computed using straight-line and accelerated methods over estimated useful lives ranging from three to twenty years. Intangible Assets -- Intangible assets consist primarily of goodwill, FCC licenses, and call letters acquired in connection with the acquisition of the Stations and are being amortized over their respective estimated useful lives (ranging from one to forty years) using the straight-line method. On an ongoing basis, management evaluates the recoverability of the net carrying value of property and equipment and intangible assets by reference to the Stations' anticipated future cash flows generated by said assets and comparison of carrying value to management's estimates of undiscounted fair value, generally determined by using certain accepted industry measures of value (principally, cash flow multiple methods). Income Taxes -- The results of the Stations' operations are included in the federal and state income tax returns filed by the Stations' Owners. The Stations' portion of the income tax provision (benefit) is allocated at a federal and state computed statutory rate of 40.3%. The Stations' federal and state income taxes are generally paid to, or refunded from, the Owners. Deferred tax assets and liabilities are maintained at the Owners' ownership levels. F-60 147 THE BOSTON RADIO MARKET OF CBS RADIO, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Barter Transactions -- Revenues from the Stations' exchanges of advertising time for goods or services are recognized at the fair market value of the items received or to be received. The value of the goods and services received is charged to expense when used. Net unearned barter balances are included in accounts receivable. Barter transactions are reported on a net basis within operating expenses and balances as of and for the year ended December 31, 1997 were approximately as follows: Barter revenues.......................................... $2,273,689 Barter expenses.......................................... 1,978,702 Net barter receivable.................................... 120,852
Use of Estimates -- The preparation of combined financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes to the financial statements. Management bases its estimates on certain assumptions which they believe are reasonable in the circumstances, and while actual results could differ from those estimates. management does not believe that any change in those assumptions in the near term would have a material effect on its financial position, results of operations or liquidity. Allocation of Certain Operating Expenses -- The operations, as presented herein, include allocations and estimates of certain expenses, principally corporate accounting and tax, rent, administrative salaries, and legal, historically provided to the Stations by the Owners. The amounts of such allocated expenses in these combined financial statements have been allocated by management based on a variety of factors, including, for example, personnel, labor costs and square footage. Management believes these allocations have been made on a reasonable basis. However, the financial position and results of operations, as presented herein, may not be the same as would have occurred had the Stations been operated as a stand-alone entity. Interest expense incurred by the Owners under various long-term debt arrangements has not historically been allocated to the Stations and, accordingly, the accompanying combined financial statements do not include interest expense. See Note 4 for interest expense associated with a capitalized lease obligation. Concentration of Credit Risk -- The Stations extend credit to customers on an unsecured basis in the normal course of business. No individual industry or industry segment is significant to the Stations' customer base. The Stations have policies governing the extension of credit and collection of amounts due from customers. Impairment of Long-Lived Assets -- Recoverability of long-lived assets is determined by periodically comparing the forecasted undiscounted net cash flows of the operations to which the assets relate to the carrying amount, including associated intangible assets of such operations. Through December 31, 1997, no impairments requiring adjustments have occurred. Supplemental Cash Flow Information -- The Stations participate in a centralized cash management system maintained by the Owners. Accordingly, cash balances are not maintained at the Stations. The Stations' assets are pledged as collateral for the Owners' long-term debt agreements. F-61 148 THE BOSTON RADIO MARKET OF CBS RADIO, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) The components of cash provided by operating activities for the year ended December 31, 1997 are as follows: Net income.................................................. $ 978,699 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization............................. 2,852,025 Loss on disposal of property and equipment................ 28,021 Change in assets and liabilities: Accounts receivable.................................... 405,299 Prepaid expenses....................................... (324,285) Other assets........................................... 709,979 Accounts payable and accrued expenses.................. (975,450) ---------- Net cash provided by operating activities................... $3,674,288 ==========
Cash paid for interest aggregated $44,900 during 1997. New Accounting Pronouncements -- During 1998, the Stations adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The adoption of SFAS No. 130 and No. 131 did not affect the Stations' combined financial statements. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which the Stations will adopt during fiscal year 2000. The adoption of SFAS No. 133 is not expected to have a material impact on the Stations' combined financial statements. 2. ACQUISITIONS In January 1997, ARS completed the acquisition of WAAF-FM and WWTM-AM for an aggregate purchase price of approximately $24.8 million (the "1997 Acquisition"). The purchase price related to the 1997 Acquisition was allocated to the assets acquired, principally intangible assets, based on their estimated fair value at the date of acquisition. Since the acquisition, the 1997 Acquisition has been included as a component of the Boston Radio Market. The Predecessor Owner began programming and marketing the Stations pursuant to a Local Marketing Agreement ("LMA") in August 1996 and, as a result, proforma financial information has not been presented as such information would not be materially different from the amounts presented in the historical 1997 combined statements of operations. 3. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS Property and equipment consisted of the following at December 31, 1997: Land and improvements....................................... $ 1,426,552 Buildings and improvements.................................. 3,133,400 Broadcast equipment(1)...................................... 8,847,524 Office and other equipment, furniture and fixtures.......... 2,382,158 Other....................................................... 7,430 ----------- Total....................................................... 15,797,064 Less accumulated depreciation............................... (3,997,701) ----------- Property and equipment -- net............................... $11,799,363 ===========
- --------------- (1) Includes approximately $570,000 of assets recorded under a capital lease (see Note 4). F-62 149 THE BOSTON RADIO MARKET OF CBS RADIO, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Intangible assets consisted of the following at December 31, 1997: FCC licenses................................................ $30,786,241 Goodwill.................................................... 4,246,985 Other intangibles........................................... 2,044,207 ----------- Total....................................................... 37,077,433 Less accumulated amortization............................... (4,070,605) ----------- Intangible assets -- net.................................... $33,006,828 ===========
4. CAPITALIZED LEASE OBLIGATION In September of 1996, an equipment lease agreement with Fleet Capital Corporation dated May 17, 1990 was extended for an additional twenty-four months. Upon the lease's final payment in August 1998, ownership of the property was transferred to the Stations. Interest expense, reported within general and administrative expense in the accompanying combined statement of operations, aggregated $32,400 during 1997. 5. EMPLOYEE BENEFIT PLAN Through December 31, 1997, employees of the Stations participated in a retirement savings plan (the "Plan") sponsored by the Predecessor Owner. The Plan is a defined contribution plan that covers eligible salaried employees who have at least one year of service. Participants may make pre-tax contributions to the Plan up to 10% of their compensation, not to exceed the annual limit prescribed by the Internal Revenue Service. The Owners matched contributions to the Plan in an amount equal to 100% of the first 5% of base compensation that a participant contributes to the Plan, unless otherwise determined by annual resolution. The Stations were charged $90,000 by the Predecessor Owner for the year ended December 31, 1997. 6. COMMITMENTS AND CONTINGENCIES Broadcast Rights -- At December 31, 1997, the Stations were committed to the purchase of broadcast rights for various sports events and other programming, including on-air talent, aggregating approximately $21,134,000. This programming is not yet available for broadcast. As of December 31, 1997, aggregate payments related to these commitments during the next five years are as follows (in thousands):
YEAR ENDING DECEMBER 31 1998....................................................... $ 8,042 1999....................................................... 7,266 2000....................................................... 5,408 2001....................................................... 358 2002....................................................... 60 ------- $21,134 =======
F-63 150 THE BOSTON RADIO MARKET OF CBS RADIO, INC. NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Leases -- The Stations lease various offices, studios, and broadcast and other equipment under operating leases that expire over various terms. Most leases contain renewal options with specified increases in lease payments in the event of renewal by the Stations. Future minimum rental payments required under noncancelable operating leases in effect at December 31, 1997 are approximately as follows (in thousands):
YEAR ENDING DECEMBER 31 1998........................................................ $ 620 1999........................................................ 473 2000........................................................ 295 2001........................................................ 286 2002........................................................ 187 Thereafter.................................................. 1,378 ------ Total....................................................... $3,239 ======
Aggregate rent expense under operating leases for the year ended December 31, 1997 approximated $438,000. Audience Rating and Other Service Employment Contracts -- The Stations have entered into various noncancelable audience rating and other service and employment contracts that expire over the next five years. Most of these audience rating and other service agreements are subject to escalation clauses and may be renewed for successive periods ranging from one to five years on terms similar to current agreements, except for specified increases in payments. Certain of these contracts will not be assumed by Entercom. Future minimum payments required under these contracts at December 31, 1997 are as follows (in thousands): 1998........................................................ $2,481 1999........................................................ 2,573 2000........................................................ 1,725 2001........................................................ 699 2002........................................................ 648 ------ Total....................................................... $8,126 ======
Total expense under these contracts for the year ended December 31, 1997 approximated $2,574,000. Litigation -- CBS has agreed to indemnify Entercom for any litigation expenses associated with the Stations prior to the acquisition by Entercom. * * * * * * F-64 151 - ------------------------------------------------------ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. ------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................... 4 Risk Factors.......................... 13 Use of Proceeds....................... 20 Recapitalization, Chase Conversion and Former S Corporation Status......... 20 Dividend Policy....................... 21 Dilution.............................. 22 Capitalization........................ 23 CBS Transactions...................... 24 Completed Transactions................ 24 Unaudited Pro Forma Financial Information......................... 26 Selected Historical Financial Data.... 39 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 41 Business.............................. 49 Management............................ 68 Certain Relationships and Related Party Transactions.................. 74 Principal and Selling Shareholders.... 75 Description of Capital Stock.......... 76 Shares Eligible for Future Sale....... 80 Underwriting.......................... 81 Notice to Canadian Residents.......... 82 Legal Matters......................... 83 Experts............................... 83 Additional Information................ 84 Index to Financial Statements......... F-1
------------------ UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), 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 OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - ------------------------------------------------------ - ------------------------------------------------------ [ENTERCOM LOGO] Entercom Communications Corp. Shares Class A Common Stock ($.01 par value) PROSPECTUS Credit Suisse First Boston BT Alex. Brown Goldman, Sachs & Co. Morgan Stanley Dean Witter ------------------------------------------------------ 152 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth fees payable to the Securities and Exchange Commission and the National Association of Securities Dealers, Inc., and other estimated expenses expected to be incurred in connection with the issuance and distribution of securities being registered. All such fees and expenses shall be paid by the Company.
Securities and Exchange Commission Registration Fee......... $71,242.50 NASD Fee.................................................... * New York Stock Exchange Listing Fee......................... * Printing and Engraving Expenses............................. * Accounting Fees and Expenses................................ * Legal Fees and Expenses..................................... * Directors and Officers Insurance............................ * Transfer Agent Fees and Expenses............................ * Miscellaneous............................................... * ---------- Total............................................. $ ==========
- --------------- * To be filed by amendment ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company's Amended and Restated Articles of Incorporation provide that the Company's directors shall not be personally liable to the Company and its shareholders for monetary damages for any action taken, or any failure to take any action, unless: (i) the director has breached or failed to perform the duties of his or her office under applicable provisions of Pennsylvania law, and (ii) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. This provision does not eliminate the duty of care, and, in appropriate circumstances, equitable remedies such as an injunction or other forms of non-monetary relief would remain available under Pennsylvania law. The provision does not affect a director's responsibilities under any other law, such as federal securities laws, criminal laws or state or federal environmental laws. The Company's Amended and Restated Bylaws provide that the Company shall indemnify its officers and directors to the fullest extent permitted by Pennsylvania law, including some instances in which indemnification is otherwise discretionary under Pennsylvania law. In general, any officer or director of the Company shall be indemnified by the Company against expenses including attorneys' fees, judgments, fines and settlements actually and reasonably incurred by that person in connection with a legal proceeding as a result of such relationship, whether or not the indemnified liability arises from an action by or in the right of the Company, if the officer or director acted in good faith and in the manner believed to be in, or not opposed to, the Company's best interest, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful. Such indemnity is limited to the extent that (i) such person is not otherwise indemnified and (ii) such indemnifications are not prohibited by Pennsylvania law or any other applicable law. Any indemnification under the previous paragraph (unless ordered by a court) shall be made by the Company only as authorized in the specific case upon the determination that indemnification of the director or officer is proper in the circumstances because that person has met the applicable standard of conduct set forth above. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum of disinterested directors who are not parties to such action or (ii) if such quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion. To the extent that a director or officer of the Company shall be successful in prosecuting an indemnity claim, the reasonable expenses of any such person and the fees and expenses of any special legal counsel engaged to determine the possibility of indemnification shall be borne by the Company. II-1 153 Expenses incurred by a director or officer of the Company in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that person is not entitled to be indemnified by the Company under the Bylaws or applicable provisions of Pennsylvania law. The indemnification and advancement of expenses provided by, or granted pursuant to Article VIII of the Bylaws is not deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled, both as to action in that person's official capacity and as to action in another capacity while holding such office. To satisfy its indemnification obligations, the Company may maintain insurance, obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the Company, or use any other mechanism or arrangement whatsoever in such amounts, costs, terms and conditions as the Board of Directors shall deem appropriate. The obligations of the Company to indemnify a director or officer under Article VIII of the Bylaws is a contract between the Company and such director or officer and no modification or repeal of the Bylaws shall detrimentally affect such officer or director with regard to that person's acts or omissions prior to such amendment or repeal. Upon consummation of the Offering, the Company will purchase insurance for its directors and officers for certain losses arising from claims or charges made against them in their capacities as directors and officers of the Company. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. On May 21, 1996, the registrant sold a 7% Subordinated Convertible Note due 2003 in the principal amount of $25 million to Chase Equity Associates, L.P., an affiliate of Chase Capital Partners, for the aggregate purchase price of $25 million, which is convertible into the registrant's common stock. The transaction was intended to be exempt from the registration requirements of the Securities Act by virtue of Section 4(2) thereof. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) The following exhibits are filed as part of this registration statement:
EXHIBIT NUMBER DESCRIPTION ------- ----------- 1.01 Form of Underwriting Agreement 3.01 Form of Amended and Restated Articles of Incorporation of the Registrant 3.02 Form of Amended and Restated Bylaws of the Registrant 5.01 Opinion of Morgan, Lewis & Bockius LLP as to the Legality of the Securities Being Registered(1) 10.01 Registration Rights Agreement, dated as of May 21, 1996, between the Registrant and Chase Equity Associates, L.P. 10.02 Employment Agreement, dated June 25, 1993, between the Registrant and Joseph M. Field, as amended 10.03 Employment Agreement, dated December 28, 1992, between the Registrant and David J. Field, as amended 10.04 Employment Agreement, dated December 28, 1992, between the Registrant and John C. Donlevie, as amended 10.05 Employment Agreement, dated March 31, 1995, between the Registrant and Deborah Kane, as amended 10.06 Employment Agreement, dated December 28, 1992, between the Registrant and Euguene D. Levin, as amended
II-2 154
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.07 Asset Purchase Agreement, dated as of January 26, 1998, among the Registrant, Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc. 10.08 Time Brokerage Agreement, dated as of January 26, 1998, among the Registrant, Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc. 10.09 Loan Agreement, dated as of February 13, 1998, among the Registrant, Key Corporate Capital Inc., as administrative agent, Bank of America, National Trust and Savings Association, as syndication agent, and certain banks listed therein, as amended by the First Amendment to Loan Agreement dated October 8, 1998 10.10 Asset Purchase Agreement, dated as of August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc. and the Registrant 10.11 Time Brokerage Agreement, dated as of August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc. and the Registrant 10.12 Asset Purchase Agreement, dated as of August 13, 1998, among the Registrant, CBS Radio, Inc. and CBS Radio License, Inc. 10.13 Time Brokerage Agreement, dated as of August 13, 1998, among the Registrant, CBS Radio, Inc. and CBS Radio License, Inc. 10.14 Asset Purchase Agreement, dated as of August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition II, Inc. and the Registrant 10.15 Time Brokerage Agreement, dated as of August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition II, Inc. and the Registrant 21.01 Information Regarding Subsidiaries of the Registrant(1) 23.01 Consent of Deloitte & Touche LLP, Philadelphia, PA 23.02 Consent of Deloitte & Touche LLP, Salt Lake City, UT 23.03 Consent of Deloitte & Touche LLP, Cincinnati, OH 23.04 Consent of Deloitte & Touche LLP, Seattle, WA 23.05 Consent of Deloitte & Touche LLP, Boston, MA 23.06 Consent of Arthur Andersen LLP, Baltimore, MD 23.07 Consent of Morgan, Lewis & Bockius LLP (included in opinion filed as Exhibit 5.01)(1) 24.01 Power of Attorney (included on signature page of this registration statement)(2) 27.01 Financial Data Schedule 99.01 Consent of Person About to Become a Director from Michael R. Hannon(2)
- --------------- (1) To be filed by amendment. (2) Previously filed with Registration Statement dated August 13, 1998. (b) FINANCIAL STATEMENT SCHEDULE SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. II-3 155 Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 156 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Bala Cynwyd, Pennsylvania, on November 4, 1998. ENTERCOM COMMUNICATIONS CORP. By: /s/ JOSEPH M. FIELD ------------------------------------ Joseph M. Field Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- * Chairman of the Board and November 4, 1998 - ----------------------------------------------------- Chief Executive Officer Joseph M. Field (Principal Executive Officer) * President, Chief Operating November 4, 1998 - ----------------------------------------------------- Officer, Chief Financial David J. Field Officer and a Director (Principal Financial Officer) * Executive Vice President, November 4, 1998 - ----------------------------------------------------- General Counsel and a John C. Donlevie Director * Treasurer and Controller November 4, 1998 - ----------------------------------------------------- (Principal Accounting Eugene D. Levin Officer) * Director November 4, 1998 - ----------------------------------------------------- Marie H. Field * Director November 4, 1998 - ----------------------------------------------------- Herbert Kean, M.D * Director November 4, 1998 - ----------------------------------------------------- Lee Hague * Director November 4, 1998 - ----------------------------------------------------- Thomas H. Ginley, M.D. * Director November 4, 1998 - ----------------------------------------------------- S. Gordon Elkins *By: /s/ DAVID J. FIELD ------------------------------------------------ David J. Field Attorney-in-Fact
II-5 157 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Entercom Communications Corp.: We have audited the accompanying consolidated financial statements of Entercom Communications Corp. and subsidiaries (the "Company") as of September 30, 1996 and 1997, and June 30, 1998 and for each of the three years in the period ended September 30, 1997 and for the nine months ended June 30, 1998, and have issued our report thereon dated September 18, 1998 (October 8, 1998 as to Note 12(F) and October 29, 1998 as to Note 6(B)(3)) (included elsewhere in this Registration Statement). Our audits also included the financial statement schedule listed in Item 16 of this Registration Statement. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Philadelphia, PA September 18, 1998 (October 8, 1998 as to Note 12(F) and October 29, 1998 as to Note 6(B)(3)) 158 SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS ENTERCOM COMMUNICATIONS CORP. YEARS ENDED SEPTEMBER 30, 1995, 1996, AND 1997 AND NINE MONTHS ENDED JUNE 30, 1998
ADDITIONS BALANCE AT CHARGED TO DEDUCTIONS BEGINNING COSTS AND FROM BALANCE AT ALLOWANCE FOR DOUBTFUL ACCOUNTS OF PERIOD EXPENSES RESERVES(A) END OF PERIOD ------------------------------- ---------- ---------- ----------- ------------- 1995.................................. $ 65,964 $225,370 $227,810 $ 63,524 1996.................................. 63,524 318,599 265,283 116,840 1997.................................. 116,840 548,726 373,566 292,000 1998.................................. 292,000 931,797 802,181 421,616
- --------------- (A) Uncollectible accounts written off. 159 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1.01 Form of Underwriting Agreement 3.01 Form of Amended and Restated Articles of Incorporation of the Registrant 3.02 Form of Amended and Restated Bylaws of the Registrant 10.01 Registration Rights Agreement, dated as of May 21, 1996, between the Registrant and Chase Equity Associates, L.P. 10.02 Employment Agreement, dated June 25, 1993, between the Registrant and Joseph M. Field, as amended 10.03 Employment Agreement, dated December 28, 1992, between the Registrant and David J. Field, as amended 10.04 Employment Agreement, dated December 28, 1992, between the Registrant and John C. Donlevie, as amended 10.05 Employment Agreement, dated March 31, 1995, between the Registrant and Deborah Kane, as amended 10.06 Employment Agreement, dated December 28, 1992, between the Registrant and Euguene D. Levin, as amended 10.07 Asset Purchase Agreement, dated as of January 26, 1998, among the Registrant, Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc. 10.08 Time Brokerage Agreement, dated as of January 26, 1998, among the Registrant, Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc. 10.09 Loan Agreement, dated as of February 13, 1998, among the Registrant, Key Corporate Capital Inc., as administrative agent, Bank of America, National Trust and Savings Association, as syndication agent, and certain banks listed therein, as amended by the First Amendment to Loan Agreement dated October 8, 1998 10.10 Asset Purchase Agreement, dated as of August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc. and the Registrant 10.11 Time Brokerage Agreement, dated as of August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc. and the Registrant 10.12 Asset Purchase Agreement, dated as of August 13, 1998, among the Registrant, CBS Radio, Inc. and CBS Radio License, Inc. 10.13 Time Brokerage Agreement, dated as of August 13, 1998, among the Registrant, CBS Radio, Inc. and CBS Radio License, Inc. 10.14 Asset Purchase Agreement, dated as of August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition II, Inc. and the Registrant 10.15 Time Brokerage Agreement, dated as of August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition II, Inc. and the Registrant 23.01 Consent of Deloitte & Touche LLP, Philadelphia, PA 23.02 Consent of Deloitte & Touche LLP, Salt Lake City, UT 23.03 Consent of Deloitte & Touche LLP, Cincinnati, OH 23.04 Consent of Deloitte & Touche LLP, Seattle, WA 23.05 Consent of Deloitte & Touche LLP, Boston, MA 23.06 Consent of Arthur Andersen LLP, Baltimore, MD 27.01 Financial Data Schedule
EX-1.01 2 FORM OF UNDERWRITING AGREEMENT 1 EXHIBIT 1.01 _________ Shares ENTERCOM COMMUNICATIONS CORP. CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE UNDERWRITING AGREEMENT ___________, 1998 CREDIT SUISSE FIRST BOSTON CORPORATION BT ALEX.BROWN INCORPORATED GOLDMAN, SACHS & CO. MORGAN STANLEY & CO. INCORPORATED As Representatives of the Several Underwriters, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue New York, N.Y. 10010-3629 Ladies and Gentlemen: 1. Introductory. Entercom Communications Corp., a Pennsylvania corporation (the "Company") proposes to issue and sell ___________ shares of its Class A Common Stock, par value $.01 per share (the "Securities") and Chase Equity Associates, L.P. (the "Selling Stockholder") proposes to sell an aggregate of __________ outstanding shares of the Securities (such __________ shares of Securities being hereinafter referred to as the "Firm Securities"). The Company also proposes to sell to the Underwriters, at the option of the Underwriters, an aggregate of not more than __________ additional shares of its Securities and the Selling Stockholder also proposes to sell to the Underwriters, at the option of the Underwriters, an aggregate of not more than __________ additional outstanding shares of the Company's Securities, as set forth below (such ____________ additional shares being hereinafter referred to as the "Optional Securities"). The Firm Securities and the Optional Securities are herein collectively called the "Offered Securities." The Company and the Selling Stockholder hereby agree with the several Underwriters named in Schedule A hereto (the "Underwriters") as follows: 2. Representations and Warranties of the Company and the Selling Stockholder. (a) The Company represents and warrants to, and agrees with, the several Underwriters that: (i) Registration statement (No. 333-61381) relating to the Offered Securities, including a form of prospectus, has been filed with the Securities and Exchange Commission (the "Commission") and either (A) has been declared effective under the Securities Act of 1933, as amended (the "Act") and is not proposed to be amended or (B) is proposed to be amended by amendment or post-effective amendment. If such registration statement (the "initial registration statement") has been declared effective, either (A) an additional registration statement (the "additional registration statement") relating to the Offered Securities may have been filed with the Commission pursuant to Rule 462(b) ("Rule 462(b)") under the Act and, if so filed, has become effective upon filing pursuant to such Rule and the Offered Securities all have been duly registered under the Act pursuant to the initial registration statement and, if applicable, the additional registration statement or (B) such an additional registration statement is proposed to be filed with the Commission pursuant to Rule 462(b) and 1 2 will become effective upon filing pursuant to such Rule and upon such filing the Offered Securities will all have been duly registered under the Act pursuant to the initial registration statement and such additional registration statement. If the Company does not propose to amend the initial registration statement or if an additional registration statement has been filed and the Company does not propose to amend it, and if any post-effective amendment to either such registration statement has been filed with the Commission prior to the execution and delivery of this Agreement, the most recent amendment (if any) to each such registration statement has been declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act or, in the case of the additional registration statement, Rule 462(b). For purposes of this Agreement, "Effective Time" with respect to the initial registration statement or, if filed prior to the execution and delivery of this Agreement, the additional registration statement means (A) if the Company has advised the Representatives that it does not propose to amend such registration statement, the date and time as of which such registration statement, or the most recent post-effective amendment thereto (if any) filed prior to the execution and delivery of this Agreement, was declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c), or (B)if the Company has advised the Representatives that it proposes to file an amendment or post-effective amendment to such registration statement, the date and time as of which such registration statement, as amended by such amendment or post-effective amendment, as the case may be, is declared effective by the Commission. If an additional registration statement has not been filed prior to the execution and delivery of this Agreement but the Company has advised the Representatives that it proposes to file one, "Effective Time" with respect to such additional registration statement means the date and time as of which such registration statement is filed and becomes effective pursuant to Rule 462(b). "Effective Date" with respect to the initial registration statement or the additional registration statement (if any) means the date of the Effective Time thereof. The initial registration statement, as amended at its Effective Time, including all information contained in the additional registration statement (if any) and deemed to be a part of the initial registration statement as of the Effective Time of the additional registration statement pursuant to the General Instructions of the Form on which it is filed and including all information (if any) deemed to be a part of the initial registration statement as of its Effective Time pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is hereinafter referred to as the "Initial Registration Statement." The additional registration statement, as amended at its Effective Time, including the contents of the initial registration statement incorporated by reference therein and including all information (if any) deemed to be a part of the additional registration statement as of its Effective Time pursuant to Rule 430A(b), is hereinafter referred to as the "Additional Registration Statement." The Initial Registration Statement and the Additional Registration are hereinafter referred to collectively as the "Registration Statements" and individually as a "Registration Statement." The form of prospectus relating to the Offered Securities, as first filed with the Commission pursuant to and in accordance with Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is required) as included in a Registration Statement, is hereinafter referred to as the "Prospectus." No document has been or will be prepared or distributed in reliance on Rule 434 under the Act. (ii) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement: (A) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement conformed in all respects to the requirements of the Act and the rules and regulations of the Commission ("Rules and Regulations") and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (B) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement conformed or will conform, in all respects to the requirements of the Act and the Rules and Regulations and did not include, or will not include, any untrue statement of a material fact and did not omit, or will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (C) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement is prior to the execution and delivery of this Agreement, the Additional Registration Statement each conforms, and at the time of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration 2 3 Statement in which the Prospectus is included, each Registration Statement and the Prospectus will conform, in all respects to the requirements of the Act and the Rules and Regulations, and neither of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and the Prospectus will conform in all respects to the requirements of the Act and the Rules and Regulations, neither of such documents will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and no Additional Registration Statement has been or will be filed. The two preceding sentences do not apply to statements in or omissions from a Registration Statement or the Prospectus based upon written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(c) hereof. (iii) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Pennsylvania, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification. (iv) Each subsidiary of the Company, has been duly incorporated and is an existing corporation in good standing under the laws of the jurisdiction of its incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; and each subsidiary of the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification; all of the issued and outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects. (v) The Offered Securities and all other outstanding shares of capital stock of the Company have been duly authorized and validly issued, fully paid and nonassessable and conform to the description thereof contained in the Prospectus; and the stockholders of the Company have no preemptive rights with respect to the Securities and, except as described in the Prospectus, there are no outstanding options, warrants or other rights calling for the issuance of, or any commitment, plan or arrangement to issue, any shares of capital stock of the Company or any security convertible into or exchangeable or exercisable for any capital stock of the Company. (vi) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finder's fee or other like payment in connection with this offering. (vii) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to a Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act. (viii) The Securities have been approved for listing on The New York Stock Exchange subject to notice of issuance. 3 4 (ix) No consent, approval, authorization, or order of, or filing with, any governmental agency or body (including, without limitation, the Federal Communications Commission (the "FCC") or any court is required to be obtained or made by the Company for the consummation of the transactions contemplated by this Agreement in connection with the sale of the Offered Securities, except such as have been obtained and made under the Act and such as may be required under state securities laws. (x) The execution, delivery and performance of this Agreement, and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject, or the charter or by-laws of the Company or any such subsidiary, and the Company has full power and authority to authorize, issue and sell the Offered Securities pursuant to this Agreement. (xi) This Agreement has been duly authorized, executed and delivered by the Company. (xii) Except as disclosed in the Prospectus, the Company and its subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them; and except as disclosed in the Prospectus, the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or to be made thereof by them. (xiii) The Company and its subsidiaries possess adequate certificates, authorities or permits and hold all necessary licenses (including, without limitation, licenses issued by the FCC) issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations ("Material Adverse Effect") of the Company and its subsidiaries taken as a whole. (xiv) No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent that might have a Material Adverse Effect on the Company and its subsidiaries taken as a whole. (xv) The Company and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "intellectual property rights") necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any intellectual property rights that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect on the Company and its subsidiaries taken as a whole. (xvi) The Company and its subsidiaries have filed all necessary federal, state, local and foreign income and franchise tax returns, except where the failure to file such returns would not have a Material Adverse Effect, and the Company and its subsidiaries have paid all taxes shown as due thereon; and other than tax deficiencies that the Company or its subsidiaries are contesting in good faith and for which adequate reserves have been provided, there is no tax deficiency that has been asserted against the Company or its subsidiaries that would, individually or in the aggregate, have a Material Adverse Effect. 4 5 (xvii) Except as disclosed in the Prospectus, neither the Company nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "environmental laws"), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any environmental laws, which violation, contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect on the Company and its subsidiaries taken as a whole; and the Company is not aware of any pending investigation which might lead to such a claim. (xviii) Except as disclosed in the Prospectus, there are no pending actions, suits, proceedings, inquiries or investigations before or brought by any court or governmental agency or body (including, without limitation, the FCC) against or affecting the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect on the Company and its subsidiaries taken as a whole, or would materially and adversely affect the ability of the Company to perform its obligations under this Agreement, or which are otherwise material in the context of the sale of the Offered Securities; and no such actions, suits or proceedings are threatened or, to the Company's knowledge, contemplated. (xix) The financial statements included in each Registration Statement and the Prospectus present fairly the financial position of the Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and, except as otherwise disclosed in the Prospectus, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis; and the schedules included in each Registration Statement present fairly the information required to be stated therein; and the assumptions used in preparing the pro forma financial statements included in each Registration Statement and the Prospectus provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts. (xx) Except as disclosed in the Prospectus, since the date of the latest audited financial statements included in the Prospectus there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Prospectus, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (xxi) The statistical and market-related data included in the Prospectus are based on or derived from sources that the Company believes to be accurate and reliable. (xxii) Each of the Company and its subsidiaries (i) make and keep accurate books and records and (ii) maintain internal accounting controls that provide reasonable assurance that (A) transactions are executed in accordance with management's authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain profitability for its assets, (C) access to its assets is permitted only in accordance with management's authorization and (D) the reported accountability for its assets is compared with existing assets at reasonable intervals. 5 6 (xxiii) The Company is not and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as defined in the Investment Company Act of 1940, as amended. (xxiv) Each of Deloitte & Touche LLP and Arthur Andersen LLP, which firms have examined the consolidated financial statements as set forth in their reports included in the Prospectus, is an independent public accounting firm within the meaning of the Act and the rules and regulations thereunder. (xxv) Neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075, Florida Statutes and the Company agrees to comply with such Section if prior to the completion of the distribution of the Offered Securities it commences doing such business. (b) The Selling Stockholder represents and warrants to, and agrees with, the several Underwriters that: (i) The Selling Stockholder has and on each Closing Date hereinafter mentioned will have valid and unencumbered title to the Offered Securities to be delivered by the Selling Stockholder on such Closing Date and full right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver the Offered Securities to be delivered by the Selling Stockholder on such Closing Date hereunder; and upon the delivery of and payment for the Offered Securities on each Closing Date hereunder the several Underwriters will acquire valid and unencumbered title to the Offered Securities to be delivered by the Selling Stockholder on such Closing Date. (ii) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement: (A) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement conformed in all respects to the requirements of the Act and the Rules and Regulations and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (B) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement conformed, or will conform, in all respects to the requirements of the Act and the Rules and Regulations did not include, or will not include, any untrue statement of a material fact and did not omit, or will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (C) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement is prior to the execution and delivery of this Agreement, the Additional Registration Statement each conforms, and at the time of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration Statement in which the Prospectus is included, each Registration Statement and the Prospectus will conform, in all respects to the requirements of the Act and the Rules and Regulations, and neither of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and the Prospectus will conform in all respects to the requirements of the Act and the Rules and Regulations, neither of such documents will include any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The two preceding sentences apply only to the extent that any statements in or omissions from a Registration Statement or the Prospectus are based on written information furnished to the Company by the Selling Stockholder specifically for use therein. (iii) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Selling Stockholder and any person that would give rise to a valid claim against the Selling 6 7 Stockholder or any Underwriter for a brokerage commission, finder's fee or other like payment in connection with this offering. 3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company and the Selling Stockholder agree, severally and not jointly, to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company and the Selling Stockholder, at a purchase price of $_ per share, the number of Firm Securities set forth below the caption "Company" or "Selling Stockholder," as the case may be, and opposite the name of such Underwriter in Schedule A hereto. Certificates in negotiable form for the Offered Securities to be sold by the Selling Stockholder hereunder have been placed in custody, for delivery under this Agreement, under a Custody Agreement made with __________, as custodian ("Custodian"). The Selling Stockholder agrees that the shares represented by the certificates held in custody for the Selling Stockholder under such Custody Agreement are subject to the interests of the Underwriters hereunder, that the arrangements made by the Selling Stockholder for such custody are to that extent irrevocable, and that the obligations of the Selling Stockholder hereunder shall not be terminated by operation of law, whether by the death of the Selling Stockholder or the occurrence of any other event, or in the case of a trust, by the death of any trustee or trustees or the termination of such trust. If the Selling Stockholder or any such trustee or trustees should die, or if any other such event should occur, or if any of such trusts should terminate, before the delivery of the Offered Securities hereunder, certificates for such Offered Securities shall be delivered by the Custodian in accordance with the terms and conditions of this Agreement as if such death or other event or termination had not occurred, regardless of whether or not the Custodian shall have received notice of such death or other event or termination. The Company and the Custodian will deliver the Firm Securities to the Representatives for the accounts of the Underwriters, against payment of the purchase price in Federal (same day) funds by official bank check or checks or wire transfer to an account at a bank acceptable to Credit Suisse First Boston Corporation ("CSFBC") drawn to the order of the Company at the office of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York, at 10:00 A.M., New York time, on _, 1998, or at such other time not later than seven full business days thereafter as CSFBC and the Company determine, such time being herein referred to as the "First Closing Date." For purposes of Rule 15c6-1 under the Securities Exchange Act of 1934, the First Closing Date (if later than the otherwise applicable settlement date) shall be the settlement date for payment of funds and delivery of securities for all the Offered Securities sold pursuant to the offering. The certificates for the Firm Securities so to be delivered will be in definitive form, in such denominations and registered in such names as CSFBC requests and will be made available for checking and packaging at the above office of Weil, Gotshal & Manges LLP, at least 24 hours prior to the First Closing Date. In addition, upon written notice from CSFBC given to the Company and the Selling Stockholder from time to time not more than 30 days subsequent to the date of the Prospectus, the Underwriters may purchase all or less than all of the Optional Securities at the purchase price per Security to be paid for the Firm Securities. The Company and the Selling Stockholder agree, severally and not jointly, to sell to the Underwriters the respective numbers of Optional Securities obtained by multiplying the number of shares specified in such notice by a fraction the numerator of which is in the case of the Company and in the case of the Selling Stockholder and the denominator of which is the total number of Optional Securities (subject to adjustment by CSFBC to eliminate fractions). Such Optional Securities shall be purchased from the Company and the Selling Stockholder for the account of each Underwriter in the same proportion as the number of Firm Securities set forth opposite such Underwriter's name bears to the total number of Firm Securities (subject to adjustment by CSFBC to eliminate fractions) and may be purchased by the Underwriters only for the purpose of covering over-allotments made in connection with the sale of the Firm Securities. No Optional Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised from time to time and to the extent not previously exercised may be surrendered and terminated at any time upon notice by CSFBC to the Company and the Selling Stockholder. 7 8 Each time for the delivery of and payment for the Optional Securities, being herein referred to as an "Optional Closing Date," which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a "Closing Date"), shall be determined by CSFBC but shall be not later than five full business days after written notice of election to purchase Optional Securities is given. The Company and the Custodian will deliver the Optional Securities being purchased on each Optional Closing Date to the Representatives for the accounts of the several Underwriters, against payment of the purchase price therefor in Federal (same day) funds by official bank check or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to the order of the Company, at the above office of Weil, Gotshal & Manges LLP. The certificates for the Optional Securities being purchased on each Optional Closing Date will be in definitive form, in such denominations and registered in such names as CSFBC requests upon reasonable notice prior to such Optional Closing Date and will be made available for checking and packaging at the above office of Weil, Gotshal & Manges LLP at a reasonable time in advance of such Optional Closing Date. 4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Offered Securities for sale to the public as set forth in the Prospectus. 5. Certain Agreements of the Company and the Selling Stockholder. The Company agrees with the several Underwriters and the Selling Stockholder that: (a) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Company will file the Prospectus with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable and if consented to by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the second business day following the execution and delivery of this Agreement or (B) the fifteenth business day after the Effective Date of the Initial Registration Statement. The Company will advise CSFBC promptly of any such filing pursuant to Rule 424(b). If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement and an additional registration statement is necessary to register a portion of the Offered Securities under the Act but the Effective Time thereof has not occurred as of such execution and delivery, the Company will file the additional registration statement or, if filed, will file a post-effective amendment thereto with the Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on the date of this Agreement or, if earlier, on or prior to the time the Prospectus is printed and distributed to any Underwriter, or will make such filing at such later date as shall have been consented to by CSFBC. (b) The Company will advise CSFBC promptly of any proposal to amend or supplement the initial or any additional registration statement as filed or the related prospectus or the Initial Registration Statement, the Additional Registration Statement (if any) or the Prospectus and will not effect such amendment or supplementation without CSFBC's consent; and the Company will also advise CSFBC promptly of the effectiveness of each Registration Statement (if its Effective Time is subsequent to the execution and delivery of this Agreement) and of any amendment or supplementation of a Registration Statement or the Prospectus and of the institution by the Commission of any stop order proceedings in respect of a Registration Statement and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued. (c) If, at any time when a prospectus relating to the Offered Securities is required to be delivered under the Act in connection with sales by any Underwriter or dealer, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Act, the Company will promptly notify CSFBC of such event and will promptly prepare and file with the Commission, at its own expense, an amendment or supplement which will correct such statement or omission 8 9 or an amendment which will effect such compliance. Neither CSFBC's consent to, nor the Underwriters' delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. (d) As soon as practicable, but not later than the Availability Date (as defined below), the Company will make generally available to its security holders an earnings statement covering a period of at least 12 months beginning after the Effective Date of the Initial Registration Statement (or, if later, the Effective Date of the Additional Registration Statement) which will satisfy the provisions of Section II (a) of the Act. For the purpose of the preceding sentence, "Availability Date" means the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes such Effective Date, except that, if such fourth fiscal quarter is the last quarter of the Company's fiscal year, "Availability Date" means the 90th day after the end of such fourth fiscal quarter. (e) The Company will furnish to the Representatives copies of each Registration Statement (five of which will be signed and will include all exhibits), each related preliminary prospectus, and, so long as a prospectus relating to the Offered Securities is required to be delivered under the Act in connection with sales by any Underwriter or dealer, the Prospectus and all amendments and supplements to such documents, in each case in such quantities as CSFBC requests. The Prospectus shall be so furnished on or prior to 3:00 P.M., New York time, on the business day following the later of the execution and delivery of this Agreement or the Effective Time of the Initial Registration Statement. All other such documents shall be so furnished as soon as available. The Company will pay the expenses of printing and distributing to the Underwriters all such documents. (f) The Company will arrange for the qualification of the Offered Securities for sale under the laws of such jurisdictions as CSFBC designates and will continue such qualifications in effect so long as required for the distribution. (g) During the period of five years hereafter, the Company will furnish to the Representatives and, upon request, to each of the other Underwriters, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to the Representatives (i) as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Securities Exchange Act of 1934, as amended, or mailed to stockholders, and (ii) from time to time, such other information concerning the Company as CSFBC may reasonably request. (h) For a period of 180 days after the date of the initial public offering of the Offered Securities, the Company will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Act relating to, any additional shares of its Securities or securities convertible into or exchangeable or exercisable for any shares of its Securities, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of CSFBC, except issuances of Securities pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of options, in each case outstanding on the date hereof, grants of employee stock options pursuant to the terms of a plan in effect on the date hereof, or issuances of Securities pursuant to the exercise of such options. (i) The Company agrees with the several Underwriters that the Company will pay all expenses incident to the performance of the obligations of the Company and the Selling Stockholder, as the case may be, under this Agreement, for any filing fees and other expenses (including fees and disbursements of counsel) in connection with qualification of the Offered Securities for sale under the laws of such jurisdictions as CSFBC designates and the printing of memoranda relating thereto, for the filing fee incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by the National Association of Securities Dealers, Inc. of the Offered Securities, for any travel expenses of the 9 10 Company's officers and employees and any other expenses of the Company in connection with attending or hosting meetings with prospective purchasers of the Offered Securities, for any transfer taxes on the sale by the Selling Stockholder of the Offered Securities to the Underwriters and for expenses incurred in distributing preliminary prospectuses and the Prospectus (including any amendments and supplements thereto) to the Underwriters. (j) The Selling Stockholder agrees to deliver to CSFBC, attention: Transactions Advisory Group on or prior to the First Closing Date a properly completed and executed United States Treasury Department Form W-9 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof. (k) The Selling Stockholder agrees, for a period of 180 days after the date of the initial public offering of the Offered Securities, not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any additional shares of the Securities of the Company or securities convertible into or exchangeable or exercisable for any shares of Securities, or publicly disclose the intention to make any such offer, sale, pledge or disposal, without the prior written consent of CSFBC. 6. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Securities on the First Closing Date and the Optional Securities to be purchased on each Optional Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company and the Selling Stockholder herein, to the accuracy of the statements of Company officers made pursuant to the provisions hereof, to the performance by the Company and the Selling Stockholder of their respective obligations hereunder and to the following additional conditions precedent: (a) The Representatives shall have received a letter, dated the date of delivery thereof (which, if the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, shall be on or prior to the date of this Agreement or, if the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement~ shall be prior to the filing of the amendment or post-effective amendment to the registration statement to be filed shortly prior to such Effective Time), of Deloitte & Touche LLP and Arthur Andersen LLP confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating to the effect that: (i) in their opinion the financial statements and schedules examined by them and included in the Registration Statements comply as to form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations; (ii) with respect to Deloitte & Touche LLP only, they have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement of Auditing Standards No. 71, Interim Financial Information, on the unaudited financial statements included in the Registration Statements; (iii) with respect to Deloitte & Touche LLP only, on the basis of the review referred to in clause (ii) above, a reading of the latest available interim financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) the unaudited financial statements included in the Registration Statements do not comply as to form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations or any material modifications should be made to such unaudited financial statements for them to be in conformity with generally accepted accounting principles; 10 11 (B) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three business days prior to the date of this Agreement, there was any change in the capital stock or any increase in short-term indebtedness or long-term debt of the Company and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net assets, as compared with amounts shown on the latest balance sheet included in the Prospectus; or (C) for the period from the closing date of the latest income statement included in the Prospectus to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year and with the period of corresponding length ended the date of the latest income statement included in the Prospectus, in consolidated net broadcast revenue, net income (loss) or in the total or per share amounts of consolidated income (loss) before extraordinary items; except in all cases set forth in clauses (B) and (C) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Registration Statements (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter. For purposes of this subsection, (i) if the Effective Time of the Initial Registration Statements is subsequent to the execution and delivery of this Agreement, "Registration Statements" shall mean the initial registration statement as proposed to be amended by the amendment or post-effective amendment to be filed shortly prior to its Effective Time, (ii) if the Effective Time of the Initial Registration Statements is prior to the execution and delivery of this Agreement but the Effective Time of the Additional Registration Statement is subsequent to such execution and delivery, "Registration Statements" shall mean the Initial Registration Statement and the additional registration statement as proposed to be filed or as proposed to be amended by the post-effective amendment to be filed shortly prior to its Effective Time, and (iii) "Prospectus" shall mean the prospectus included in the Registration Statements. (b) If the Effective Time of the Initial Registration Statement is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or such later date as shall have been consented to by CSFBC. If the Effective Time of the Additional Registration Statement (if any) is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or, if earlier, the time the Prospectus is printed and distributed to any Underwriter, or shall have occurred at such later date as shall have been consented to by CSFBC. If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing Date, no stop order suspending the effectiveness of a Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Selling Stockholder, the Company or the Representatives, shall be contemplated by the Commission. 11 12 (c) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company or its subsidiaries which, in the judgment of a majority in interest of the Underwriters including the Representatives, is material and adverse and makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the Offered Securities; (ii) any downgrading in the rating of any debt securities or preferred stock of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities or preferred stock of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any suspension or limitation of trading in securities generally on The New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (iv) any banking moratorium declared by U.S. Federal, New York or Delaware authorities; or (y) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Underwriters including the Representatives, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the public offering or the sale of and payment for the Offered Securities. (d) The Representatives shall have received an opinion, dated such Closing Date, of Morgan, Lewis & Bockius LLP, counsel for the Company, to the effect that: (i) Each of the Company and Entercom Portland, LLC, Entercom Portland License, LLC, Entercom Rochester, Inc. and [the Boston Subsidiaries] (the "Subsidiaries") has been duly incorporated and is an existing corporation in good standing under the laws of the state of its incorporation, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; and the Company and each Subsidiary is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification; (ii) Except as set forth in the Prospectus, all of the outstanding shares of capital stock of, or other ownership interests in, each of the Subsidiaries have been duly authorized and validly issued and are fully paid and nonassessable, and were not issued in violation of any preemptive rights, rights of first refusal or other similar rights (in each case created by statute or under any Subsidiary's certificate of incorporation or bylaws or any agreement to which any Subsidiary is a party of which we have knowledge); to such counsel's knowledge, all such shares are owned by the Company, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature, except liens set forth in the Prospectus; (iii) The Offered Securities delivered on such Closing Date and all other outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and conform to the description thereof contained in the Prospectus; and the stockholders of the Company have no preemptive rights with respect to the Securities, (iv) Except as described in the Prospectus, to such counsel's knowledge, there are no outstanding options, warrants or other rights calling for the issuance of, or any commitment plan or arrangement to issue, any shares of capital stock of the Company or any security convertible into or exchangeable or exercisable for any capital stock of the Company. 12 13 (v) Except as described in the Prospectus, there are no contracts, agreements or understandings known to such counsel between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act, (vi) No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by the Company or any Selling Stockholder for the consummation of the transactions contemplated by this Agreement or the Custody Agreement in connection with the sale of the Offered Securities, except such as have been obtained and made under the Act and such as may be required under state securities laws; (vii) The execution, delivery and performance of this Agreement and the Custody Agreement and the consummation of the transactions herein or therein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rate, regulation or order of any governmental agency or body or any court having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject, or the charter or by-laws of the Company or any such subsidiary; (viii) The Initial Registration Statement was declared effective under the Act as of the date and time specified in such opinion, the Additional Registration Statement (if any) was filed and became effective under the Act as of the date and time (if determinable) specified in such opinion, the Prospectus either was filed with the Commission pursuant to the subparagraph of Rule 424(b) specified in such opinion on the date specified therein or was included in the Initial Registration Statement or the Additional Registration Statement (as the case may be), and, to the best of the knowledge of such counsel, no stop order suspending the effectiveness of a Registration Statement or any part thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Act, and each Registration Statement and the Prospectus, and each amendment or supplement thereto, as of their respective effective or issue dates, complied as to form in all material respects with the requirements of the Act and the Rules and Regulations; such counsel have no reason to believe that any part of a Registration Statement or any amendment thereto, as of its effective date or as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading; or that the Prospectus or any amendment or supplement thereto, as of its issue date or as of such Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; the descriptions in the Registration Statements and Prospectus of statutes, legal and governmental proceedings and contracts and other documents are accurate and fairly present the information required to be shown; and such counsel do not know of any legal or governmental proceedings required to be described in a Registration Statement or the Prospectus which are not described as required or of any contracts or documents of a character required to be described in a Registration Statement or the Prospectus or to be filed as exhibits to a Registration Statement which are not described and filed as required; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statements or the Prospectus; and (ix) This Agreement has been duly authorized, executed and delivered by the Company and constitutes a validly and legally binding obligation of the Company enforceable in accordance 13 14 with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (x) [The [Boston II Purchase Agreement] has been duly authorized, executed and delivered by the Company and constitutes a validly and legally binding obligation of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles.] (e) The Representatives shall have received an opinion, dated such Closing Date, of Leventhal, Senter & Lerman, FCC counsel for the Company, to the effect that: (i) The issuance and sale of the Offered Securities by the Company in accordance with this Agreement does not require FCC approval assuming that, in connection therewith, (i) no individual or entity will acquire an attributable interest (as defined by the FCC) in the Company that requires any such consent or approval; and (ii) not more than 25% of the capital stock of the Company will be owned by alien individuals or entities, or representatives thereof (ii) The execution and delivery by the Company of this Agreement and the issuance and sale of the Offered Securities by the Company in accordance with this Agreement does not constitute a violation by the Company of the Communications Act of 1934, as amended , and the regulations promulgated thereunder (the "Communications Laws") assuming that in connection therewith: (i) no individual or entity will acquire an attributable interest (as defined by the FCC) in the Company that violates the Communications Laws; and (ii) not more than 25% of the capital stock of the Company will be owned by alien individuals or entities, or representatives thereof. (iii) The entities listed on Exhibit A and on Exhibit B attached to such opinion (the "Licensees") hold the respective FCC Licenses listed thereon. Such FCC Licenses are in full force and effect. (iv) To the knowledge of such counsel, except for those disclosed in this Agreement, the Registration Statement or on Exhibit C attached to such opinion, and except for proceedings affecting the radio broadcasting industry generally, there are no proceedings pending or threatened in writing under the Communications Laws against the Company, the Licensees or the stations by or before the FCC or before any court having jurisdiction of matters under the Communications Laws which seek the revocation, non-renewal, or material adverse modification of any of the FCC Licenses. (v) The FCC Statements (Which include the statements of the Company in the Registration Statements under the captions "Risk Factors -- Governmental Regulation of Broadcasting Industry," "Business -- Federal Regulation of Radio Broadcasting" and "Business -- Competition; Changes in Broadcasting Industry"), insofar as they constitute summaries of the Communications Laws and material proceedings thereunder, are accurate and fairly present the information set forth therein in all material respects. (vi) The FCC has granted its consent (the "FCC Consent") to (Boston 111. FCC Consent is not subject to any material adverse conditions imposed by the FCC outside the ordinary course, except as set forth in the FCC Mass Media Bureau Memorandum Opinion and Order, DA 98-970, released May 21, 1998. Without limiting the other qualifications set forth in such opinion, in providing the foregoing opinion such counsel may assume that all other conditions set forth on the FCC forms evidencing the FCC Consent, those set forth in the FCC orders granting the FCC Licenses 14 15 or any renewal thereof, and those set forth in the Communications Laws imposed upon licensees generally or radio broadcasting licenses specifically, are conditions in the ordinary course, and such counsel need not express any view on such matters. (vii) To such counsel's knowledge, no petition for reconsideration or review of the FCC Consent has been filed with the FCC and the FCC has not rescinded or revoked the FCC Consent or given public notice of review of the FCC Consent on its own motion- (f) The Representatives shall have received an opinion, dated such Closing Date, of Mayer, Brown & Platt, counsel for the Selling Stockholder, to the effect that: (i) The Selling Stockholder had valid and unencumbered title to the Offered Securities delivered by the Selling Stockholder on such Closing Date and had full right, power and authority to sell, assign, transfer and deliver the Offered Securities delivered by the Selling Stockholder on such Closing Date hereunder; and the several Underwriters have acquired valid and unencumbered title to the Offered Securities purchased by them from the Selling Stockholder on such Closing Date hereunder, (ii) No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by the Selling Stockholder for the consummation of the transactions contemplated by the Custody Agreement or this Agreement in connection with the sale of the Offered Securities sold by the Selling Stockholder, except such as have been obtained and made under the Act and such as may be required under state securities laws; (iii) The execution, delivery and performance of the Custody Agreement and this Agreement and the consummation of the transactions therein and herein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court having jurisdiction over the Selling Stockholder or any of its properties or any agreement or instrument to which the Selling Stockholder is a party or by which the Selling Stockholder is bound or to which any of the properties of the Selling Stockholder is subject, or the charter or by-laws of the Selling Stockholder; (iv) Each of this Agreement, the Power of Attorney and the related Custody Agreement with respect to the Selling Stockholder has been duly authorized, executed and delivered by the Selling Stockholder and constitutes a valid and legally binding obligation of the Selling Stockholder enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (g) The Representatives shall have received from Weil, Gotshal & Manges LLP, counsel for the Underwriters, such opinion or opinions, dated such Closing Date, with respect to the incorporation of the Company, the validity of the Offered Securities delivered on-such Closing Date, the Registration Statements, the Prospectus and other related matters as the Representatives may require, and the Selling Stockholder and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (h) The Representatives shall have received a certificate, dated such Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Company in which such officers, to the best of their knowledge after reasonable investigation, shall state that: the representations and warranties of the Company in this Agreement are true and correct; the Company has complied with all 15 16 agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date; no stop order suspending the effectiveness of any Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission; the Additional Registration Statement (if any) satisfying the requirements of subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment of the applicable filing fee in accordance with Rule III (a) or (b) under the Act, prior to the time the Prospectus was printed and distributed to any Underwriter; and, subsequent to the date of the most recent financial statements in the Prospectus, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole except as set forth in or contemplated by the Prospectus or as described in such certificate. (i) The Representatives shall have received letters, dated such Closing Date, of Deloitte & Touche LLP and Arthur Andersen LLP which meet the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than three business days prior to such Closing Date for the purposes of this subsection. The Selling Stockholder and the Company will furnish the Representatives with such conformed copies of such opinions, certificates, letters and documents as the Representatives reasonably request. CSFBC may in its sole discretion waive on behalf of the Underwriters compliance with any conditions to the obligations of the Underwriters hereunder, whether respect of an Optional Closing Date or otherwise. 7. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter 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 any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; 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 an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in subsection (c) below. (b) The Selling Stockholder will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter 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 any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Selling Stockholder 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 an untrue statement or alleged untrue statement in or omissions or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by an Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in subsection (c) below. 16 17 (c) Each Underwriter will severally and not jointly indemnify and hold harmless the Company and the Selling Stockholder against any losses, claims, damages or liabilities to which the Company or the Selling Stockholder 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 any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein 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 such Underwriter through the Representatives specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company and the Selling Stockholder in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: the last paragraph at the bottom of the cover page concerning the terms of the offering by the Underwriters, the legend concerning over-allotments and stabilizing on the inside front cover page, the over-allotment and stabilization information contained in the last paragraph under the caption "Underwriting," the concession and reallowance figures appearing in the fourth paragraph under the caption "Underwriting" and the information concerning discretionary sales contained in the fifth paragraph under the caption "Underwriting." (d) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under subsection (a), (b) or (c) above, 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 subsection (a), (b) or (c) above. In case any such action is brought against any indemnified party and it notifies an 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 satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. (e) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a), (b) or (c) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a), (b) or (c) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholder on the one hand and the Underwriters on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Selling Stockholder on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Stockholder on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Selling Stockholder bear to the total underwriting discounts and commissions received by the Underwriters. Me relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Selling Stockholder or the Underwriters and the parties' relative 17 18 intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (e). Notwithstanding the provisions of this subsection (e), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section II (0 of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint. (f) The obligations of the Company and the Selling Stockholder under this Section shall be in addition to any liability which the Company and the Selling Stockholder may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter (as hereinafter defined) within the meaning of the Act; and the obligations of the Underwriters under this Section shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, Upon the same terms and conditions, to each director of the Company, to each officer of the Company who has signed a Registration Statement and to each person, if any, who controls the Company within the meaning of the Act. 8. Default of Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Offered Securities hereunder on either the First or any Optional Closing Date and the aggregate number of shares of Offered Securities that such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date, CSFBC may make arrangements satisfactory to the Company and the Selling Stockholder for the purchase of such Offered Securities by other persons, including any of the Underwriters, but if no such arrangements are made by such Closing Date, the nondefaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate number of shares of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date and arrangements satisfactory to CSFBC, the Company and the Selling Stockholder for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter, the Company or the Selling Stockholder, except as provided in Section 9 (provided that if such default occurs with respect to Optional Securities after the First Closing Date, this Agreement will not terminate as to the Firm Securities or any Optional Securities purchased prior to such termination). As used in this Agreement, the term "Underwriter" includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Selling Stockholder, of the Company or its officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, the Selling Stockholder, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Underwriters is not consummated, the Company and the Selling Stockholder shall remain responsible for the expenses to be paid or reimbursed by them pursuant to Section 5 and the respective obligations of the Company, the Selling Stockholder, and the Underwriters pursuant to Section 7 shall remain in effect, and if any Offered Securities have been purchased hereunder the representations and warranties in Section 2 and all obligations under Section 5 shall also remain in effect. If the purchase of the Offered Securities by the Underwriters is not consummated for any reason other than solely because of the termination of this Agreement 18 19 pursuant to Section 8 or the occurrence of any event specified in clause (iii), (iv) or (v) of Section 6(c), the Company and the Selling Stockholder will, jointly and severally, reimburse the Underwriters for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 10. Notices. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking Department --Transactions Advisory Group, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at 401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004, Attention: John C. Donlevie, Esq., or, if sent to the Selling Stockholder, will be mailed, delivered or telegraphed and confirmed to Michael R. Hannon at Chase Capital Partners, 380 Madison Avenue, 12th Floor, New York, New York 10017; provided, however, that any notice to an Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Underwriter. 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder. 12. Representation. The Representatives will act for the several Underwriters in connection with the transactions contemplated by this Agreement, and any action under this Agreement taken by the Representatives jointly or by CSFBC will be binding upon all the Underwriters. Joseph M. Field, David J. Field and John C. Donlevie will act for the Selling Stockholder in connection with such transactions, and any action under or in respect of this Agreement taken by Joseph M. Field, David I Field or John C. Donlevie will be binding upon the Selling Stockholder. 13. Counterparts. This Agreement may-be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 14. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of laws. The Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 19 20 If the foregoing is in accordance with the Representatives' understanding of our agreement kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement among the Selling Stockholder, the Company and the several Underwriters in accordance with its terms. Very truly yours. CHASE EQUITY ASSOCIATES, L.P. By:____________________________________ Name:__________________________________ Title: Attorney-in-fact ENTERCOM COMMUNICATIONS CORP. By:____________________________________ John C. Donlevie, Esq. Executive Vice President and General Counsel The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. CREDIT Sam FIRST BOSTON CORPORATION BT ALEX. BROWN INCORPORATED GOLDMAN, SACHS & CO. MORGAN STANLEY & Co. INCORPORATED Acting on behalf of themselves and as the Representatives of the several Underwriters. By: CREDIT SUISSE FIRST BOSTON CORPORATION By:____________________________________ Kristin Allen Managing Director 20 21 SCHEDULE A
TOTAL NUMBER OF FIRM SECURITIES NUMBER OF TO BE SOLD BY FIRM SECURITIES SELLING TO BE UNDERWRITER COMPANY STOCKHOLDER PURCHASED - --------------------------------------------------------------------------------------------- Credit Suisse First Boston Corporation....... BT Alex. Brown Incorporated.................. Goldman, Sachs & Co.......................... Morgan Stanley & Co. Incorporated............ ------ ------- ------- Total............................... ====== ======= =======
21 EX-3.01 3 FORM OF ARTICLES OF INCORPORATION (AMENDED) 1 EXHIBIT 3.01 EXHIBIT A AMENDED AND RESTATED ARTICLES OF INCORPORATION OF ENTERCOM COMMUNICATIONS CORP. (A Pennsylvania Corporation) The Articles of Incorporation of Entercom Communications Corp. are hereby amended and restated in their entirety to read as follows: FIRST: Corporate Name. The name of the corporation is Entercom Communications Corp. (hereinafter referred to as the "Corporation"). SECOND: Registered Office. The location and post office address of the registered office of the Corporation in the Commonwealth of Pennsylvania is 401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004. THIRD: Original Incorporation. The Corporation was incorporated under the provisions of the Business Corporation Law, Act of May 5, 1933, as amended. The date of its incorporation is on October 21, 1968. FOURTH: Method of Adoption. These Amended and Restated Articles of Incorporation were duly adopted by vote of the shareholders in accordance with Sections 1914 and 1915 of the Pennsylvania Business Corporation Law of 1988, as amended (the "Pennsylvania BCL"). FIFTH: Corporate Purposes. The purpose for which the Corporation is organized is to engage in any and all lawful acts and activity for which corporations may be organized under the Pennsylvania BCL. SIXTH: Corporate Existence. The term of existence of the Corporation is perpetual. SEVENTH: Capital Stock. The aggregate number of shares which the Corporation shall have authority to issue is 350,000,000 shares, par value of one cent ($.01) per share, consisting of: (a) 200,000,000 shares of Class A Common Stock (the "Class A Common Stock"); (b) 75,000,000 shares of Class B Common Stock (the "Class B Common Stock"); 2 (c) 50,000,000 shares of Class C Common Stock (the "Class C Common Stock" and together with the Class A Common Stock and the Class B Common Stock, the "Common Stock"); and (d) 25,000,000 shares of Preferred Stock. EIGHTH: Reclassification. Upon these Amended and Restated Articles of Incorporation becoming effective with the Pennsylvania Secretary of State: (a) each share of the common stock, par value $.05, whether voting or non voting, of the Corporation (the "Existing Common Stock"), held by record by any shareholder other than the Management Shareholders (as hereinafter defined) and issued and outstanding immediately prior to such filing shall, without any action on the part of the holder thereof, be converted and reclassified into, and immediately represent one validly issued, fully paid and non-assessable share of Class A Common Stock; and (b) each share of the Existing Common Stock held of record by the Management Shareholders and issued and outstanding immediately prior to such filing shall, without any action on the part of the holder thereof, be converted and reclassified into, and immediately represent one validly issued, fully paid and non-assessable share of Class B Common Stock. Each certificate representing shares of Existing Common Stock shall thereafter represent that number of shares of either Class A Common Stock or Class B Common Stock, as determined in the previous sentences. Each person holding of record a stock certificate or certificates representing shares of Existing Common Stock shall receive, upon surrender of such certificate or certificates, a new certificate or certificates evidencing and representing the number of shares of Class A Common Stock or Class B Common Stock, as the case may be, to which such person is entitled. NINTH: Preferred Stock. The Board of Directors may authorize the issuance from time to time of Preferred Shares in one or more classes or series and with designations, voting rights, preferences, and special rights, if any, as the Board of Directors may fix by resolution. TENTH: Rights of Common Stock. The designations, powers, preferences, rights, qualifications, limitations and restrictions of the Common Stock are as follows: (a) General. Except as otherwise provided herein or as otherwise provided by applicable law, all shares of Common Stock shall have identical rights and privileges in every respect and shall be treated identically in all respects. 2 3 (b) Dividends. Subject to the prior rights and preferences, if any, applicable to shares of the Preferred Stock, the holders of the Common Stock shall be entitled to participate ratably, on a share-for-share basis as if all shares were of a single class, in such dividends, whether in cash, stock or otherwise, as may be declared by the Board of Directors from time to time out of funds of the Corporation legally available therefor; provided, however, that any dividends payable in shares of Common Stock (or payable in rights to subscribe for or purchase shares of Common Stock or securities or indebtedness convertible into or exchangeable for shares of Common Stock) shall be declared and paid at the same rate on each class of Common Stock and only: (i) in shares of Class A Common Stock (or rights to subscribe for or to purchase shares of Class A Common Stock or securities or indebtedness convertible into or exchangeable for shares of Class A Common Stock) to holders of Class A Common Stock; (ii) in shares of Class B Common Stock (or rights to subscribe for or to purchase shares of Class B Common Stock or securities or indebtedness convertible into or exchangeable for shares of Class B Common Stock) to holders of Class B Common Stock; and (iii) in shares of Class C Common Stock (or rights to subscribe for or to purchase shares of Class C Common Stock or securities or indebtedness convertible into or exchangeable for shares of Class C Common Stock) to holders of Class C Common Stock. (c) Voting. (i) Class A and Class B. The holders of Class A Common Stock and Class B Common Stock shall vote together as a single class with respect to all matters submitted to a vote of shareholders with each such holder having the number of votes specified in subparagraph (ii) below, except: (A) with respect to the election of directors which shall be governed by subparagraphs (iii) and (iv) below; (B) with respect to any Going Private Transaction (as hereinafter defined), which shall be governed by subparagraph (v) below; and (C) as otherwise provided by law. (ii) Class A and Class B Votes Per Share. The Class A Common Stock shall entitle the holders thereof to one (1) vote per share. The Class B Common 3 4 Stock shall entitle the holders thereof to ten (10) votes per share at such times as the shares are voted by a Management Shareholder in his own right in person or by proxy or pursuant to a Qualified Voting Agreement; at all other times the holders of Class B Common Stock shall be entitled to one vote per share. (iii) Election of Directors. The holders of Class A Common Stock and Class B Common Stock, voting as a single class, shall have the right to vote on the election or removal of all directors of the Corporation (other than the Class A Directors elected pursuant to subparagraph (iv) below and the directors, if any, who may be elected by the holders of any class or series of Preferred Stock) with each share of Class A Common Stock and each share of Class B Common Stock entitling the holder thereof to the number of votes specified in subparagraph (ii) above. (iv) Election of Class A Directors. The Board of Directors shall appoint the initial Class A Directors. Commencing with the first annual meeting of shareholders after completion of an IPO, the holders of Class A Common Stock shall be entitled by class vote, exclusive of all other shareholders, to elect two directors of the Corporation (the "Class A Directors") with each share of Class A Common Stock entitling the holder thereof to one (1) vote per share; provided, each director elected pursuant to this subparagraph must be an Independent Director (as hereinafter defined). (v) Going Private Transactions. With respect to a vote on a Going Private Transaction in which the Management Shareholders will remain shareholders after such transaction, the holders of Class A Common Stock and Class B Common Stock shall vote as a single class, with each share of Class A Common Stock and Class B Common Stock entitled to one vote. (vi) Class C. The Class C Common Stock shall not be entitled to vote, except as required by law. (d) Conversion of Class A Common Stock by a Regulated Entity. The shares of Class A Common Stock shall be convertible in whole or in part at any time only by a Regulated Entity (as hereinafter defined) at the option of such holder or holders, into an equal number of fully paid and non-assessable shares of Class C Common Stock, for no additional consideration. Such right shall be exercised by delivering to the office of the Corporation, or the transfer agent, (A) the certificate or certificates representing the shares of Class A Common Stock to be converted, duly endorsed in blank or accompanied by duly executed proper instruments of transfer, (B) written notice to the Corporation stating that such holder or holders elect(s) to convert such share or shares and stating the name and address in which 4 5 each certificate for shares of Class C Common Stock issued upon such conversion is to be issued, and (C) evidence satisfactory to the Corporation that the holder of the Class A Common Stock is a Regulated Entity. Conversion shall be deemed to have been effected as of the date as of which the conversion is recorded on the books of the Corporation. The Corporation shall deliver, or cause the transfer agent to deliver, a certificate or certificates for the Class C Common Stock as promptly as reasonably practicable after the conversion has been recorded on the books of the Corporation. (e) Conversion of Class B Common Stock. (i) Voluntary Conversion of Class B Common Stock. Subject to any necessary approval of the FCC (as hereinafter defined), the shares of Class B Common Stock shall be convertible in whole or in part at any time at the option of the holder or holders thereof, into an equal number of fully paid and non-assessable shares of Class A Common Stock, for no additional consideration. Such right shall be exercised by delivering to the office of the Corporation (A) the certificate or certificates representing the shares of Class B Common Stock to be converted, duly endorsed in blank or accompanied by duly executed proper instruments of transfer, and (B) written notice to the Corporation stating that such holder or holders elect(s) to convert such share or shares and stating the name and address in which each certificate for shares of Class A Common Stock issued upon such conversion is to be issued. Conversion shall be deemed to have been effected as of the date as of which the conversion is recorded on the books of the Corporation; provided, however, that to the extent a conversion shall require the approval of the FCC, the conversion shall become effective at the time and date as the order of the FCC approving such event shall become a Final Order (as hereinafter defined). The Corporation shall cause the transfer agent to deliver a certificate or certificates for the Class A Common Stock as promptly as reasonably practicable after the conversion has been recorded on the books of the Corporation. (ii) Automatic Conversion of Class B Common Stock. Except for a transfer pursuant to subsection (f) of this Article TENTH, each share of Class B Common Stock shall convert automatically into one fully paid and non-assessable share of Class A Common Stock for no additional consideration upon any sale, assignment, gift, bequest, appointment or other transfer, voluntary or involuntary, subject to any necessary approval of the FCC (an "Event of Automatic Conversion"). Promptly upon the occurrence of an Event of Automatic Conversion, the holder of the shares of Class B Common Stock being converted shall surrender the certificate or certificates therefor, duly endorsed in blank or accompanied by duly 5 6 executed proper instruments of transfer, at the office of the Corporation. The conversion of the shares of Class B Common Stock subject to the Event of Automatic Conversion shall be the date as of which the conversion is recorded on the books of the Corporation. The Corporation shall cause the transfer agent to deliver a certificate or certificates for the Class A Common Stock as promptly as reasonably practicable after the conversion has been recorded on the books of the Corporation. The Corporation may, in connection with preparing a list of shareholders entitled to vote at any meeting of shareholders, or as a condition to the transfer or the recording of shares of Class B Common Stock on the Corporation's books, require the furnishing of such affidavits or other proof as it deems necessary to establish that any person is the beneficial owner of shares of Class B Common Stock or is a Class B Permitted Transferee. The good faith determination by the Secretary of the Corporation that an Event of Automatic Conversion has occurred shall be final and binding as to the holder of the shares in question for purposes of determining the holders right to vote such shares. (f) Transfer of Class B Common Stock. No person holding shares of Class B Common Stock of record may transfer, and the Corporation shall not register the transfer of, such shares of Class B Common Stock, as Class B Common Stock, whether by sale, assignment, gift, bequest, appointment or otherwise, except (i) to a Management Shareholder, or (ii) to a Permitted Class B Transferee (as hereinafter defined). Upon any attempted transfer of shares of Class B Common Stock not permitted hereunder such shares shall be automatically converted into Class A Common Stock as provided by subsection (e)(ii) of this Article TENTH. (g) Pledges of Class B Common Stock. Notwithstanding anything to the contrary set forth herein, any Class B Holder may pledge such holder's shares of Class B Common Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares shall not be transferred to or registered in the name of the pledgee and shall remain subject to the provisions of this Article ELEVENTH. In the event of foreclosure or other similar action by the pledgee, such pledged shares of Class B Common Stock may only be transferred to a Permitted Class B Transferee or shall be converted into shares of Class A Common Stock. (h) Conversion of Class C Common Stock. (i) Voluntary Conversion of Class C Common Stock. Subject to any necessary approval of the FCC, the shares of Class C Common Stock shall be convertible in whole or in part at any time at the option of the holder or 6 7 holders thereof into an equal number of fully paid and non-assessable shares of Class A Common Stock, for no additional consideration. Such right shall be exercised by delivery to the office of the Corporation (A) the certificate or certificates representing the shares of Class C Common Stock, to be converted, duly endorsed in blank or accompanied by duly executed proper instruments of transfer, and (B) written notice to the Corporation stating that such holder or holders elect(s) to convert such share or shares and stating the name and address in which each certificate for shares of Class A Common Stock issued upon such conversion is to be issued. Conversion shall be deemed to have been effected as of the date as of which the conversion is recorded on the books of the Corporation. The Corporation shall cause the transfer agent to deliver a certificate or certificates for the Class A Common Stock as promptly as reasonably practicable after the conversion has been recorded on the books of the Corporation. (ii) Automatic Conversion of Class C Common Stock. Each share of Class C Common Stock shall convert automatically into one fully paid and non- assessable share of Class A Common Stock for no additional consideration upon any sale, assignment, gift, bequest, appointment or other transfer, voluntary or involuntary other than pursuant to subsection (i) of this Article TENTH. Promptly upon the occurrence of such an automatic conversion event, the holder of shares of Class C Common Stock being converted shall surrender the certificate or certificates therefor, duly endorsed in blank or accompanied by duly executed proper instruments of transfer, at the office of the Corporation. Conversion shall be deemed to have been effected as of the date as of which the conversion is recorded on the books of the Corporation. The Corporation shall cause the transfer agent to deliver a certificate or certificates for the Class A Common Stock as promptly as reasonably practicable after the conversion has been recorded on the books of the Corporation. (i) Transfer of Class C Common Stock. No person holding shares of Class C Common Stock of record may transfer, and the Corporation shall not register the transfer of, such shares of Class C Common Stock, as Class C Common Stock, whether by sale, assignment, gift, bequest, appointment or otherwise, except only under the following circumstances: (i) in a widely distributed public offering of Class C Common Stock; (ii) in a transfer pursuant to Rule 144 under the Securities Act of 1933 or any similar rule then in force; (iii) in a transfer to the Corporation; (iv) in a transfer to an Affiliate of such holder; or (v) in a transfer to a Regulated Entity. Upon any attempted transfer of shares of Class C Common Stock not permitted hereunder such shares shall be automatically converted into Class A Common Stock as provided by subsection (h)(ii) of this Article TENTH. 7 8 (j) Reservation of Shares. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversions provided for herein, such number of shares of Class A Common Stock as shall from time to time be sufficient to effect the conversions provided for herein and shall take all such corporate action as may be necessary to assure that such shares of Class A Common Stock shall be validly issued, fully paid and non-assessable upon conversion of all of the outstanding shares of Class B Common Stock and Class C Common Stock, as applicable; moreover, if at any time the number of authorized but unissued shares of Class A Common Stock shall not be sufficient to effect the conversions provided for herein, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Class A Common Stock to such number of shares as shall be sufficient for such purpose. (k) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, after all creditors of the Corporation shall have been paid in full and after payment of all sums payable in respect of Preferred Stock, if any, the holders of the Common Stock shall share ratably on a share-for-share basis in all distributions of assets pursuant to such voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation. For the purposes of this paragraph (k), neither the merger nor the consolidation of the Corporation into or with another entity or the merger or consolidation of any other entity into or with the Corporation, or the sale, transfer, or other disposition of all or substantially all the assets of the Corporation, shall be deemed to be a voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation. (l) Reissue of Shares. Shares of Class B Common Stock that are converted into shares of Class A Common Stock, as provided herein, shall be retired and canceled and shall not be reissued. (m) Dividends on Converted Shares. Any dividends declared and not paid on shares of Common Stock prior to their conversion as provided above shall be paid, on the payment date, to the holder or holders entitled thereto on the record date for such dividend payment, notwithstanding such conversion; provided, however, that such holder or holders shall not be entitled to receive the corresponding dividends declared but not paid on the shares of Common Stock issuable upon such conversion. (n) Street Name. Shares of Class B Common Stock and Class C Common Stock shall be registered in the names of the beneficial owners thereof and not in "street" or "nominee" name. For this purpose "beneficial owner" shall mean any person who, or entity which, possesses the power, singly or jointly, to direct the disposition of such shares. 8 9 ELEVENTH: Definitions. Capitalized terms used in these Amended and Restated Articles of Incorporation and not otherwise defined are used with the meanings set forth below. "Affiliate" shall have the same meaning as such term has under Rule 12b-2 of the Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934. "FCC" shall mean the Federal Communications Commission. "Final Order" shall mean an order, action or decision of the FCC (without the inclusion of any material adverse conditions not customarily imposed with respect to such orders, actions or decisions) (i) that has not been reversed, stayed, enjoined, set aside, annulled or suspended and (ii) with respect to which (A) no timely request has been filed for administrative or judicial review, reconsideration, appeal, or stay, and the time for filing any such requests and for the FCC to set aside the action on its own motion has expired or (B) in the event of review, reconsideration, or appeal, such review, reconsideration, or appeal has been denied and the time for further review, reconsideration, or appeal has expired. "Going Private Transaction" shall mean any transaction that is a "Rule 13e-3 transaction," as such term is defined in Rule 13e-3(a)(3) promulgated under the Exchange Act; provided, however, that the term "affiliate" as used in Rule 13e-3(a)(3)(i) shall be deemed to include an Affiliate, as defined in these Amended and Restated Articles of Incorporation. "Independent Director" shall mean a person who is not an officer or employee of the Corporation or its subsidiaries or a "family member" of any of the foregoing, and who does not have a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. For purposes of this definition, "family member" shall mean a spouse, sibling, child, parent, brother-in-law, sister-in-law, mother-in-law or father-in-law. "IPO" shall mean a firm commitment underwritten initial public offering of Class A Common Stock for cash pursuant to a registration statement under the Securities Act of 1933 where the aggregate proceeds to the Company (prior to deducting any underwriters' discounts and commissions from such offering) exceed $10 million. "Management Shareholder" shall mean Joseph M. Field or David J. Field. 9 10 "Pennsylvania BCL" shall mean the Pennsylvania Business Corporation Law of 1988, as amended. "Permitted Class B Transferee" A "Permitted Class B Transferee" shall mean: (i) A Management Shareholder, the spouse or lineal descendant of a Management Shareholder and any spouse of such lineal descendant; (ii) The trustee of a trust (including a voting trust) principally for the benefit of one or more of the persons described in (i) above; (iii) The estate of any of the persons described in (i) above. (iv) For purposes of the definition of Permitted Class B Transferee: (A) The relationship of any person that is derived by or through legal adoption shall be treated the same as if such relationship were a natural one. (B) Ownership in the form of joint tenancy by a Permitted Class B Transferee shall be considered ownership by the Permitted Class B Transferee provided that the terms of such joint tenancy includes a right of survivorship. Upon the death of a Permitted Class B Transferee, at least one of the surviving joint tenants must independently qualify as a Permitted Class B Transferee or there will be an Event of Automatic Conversion. (C) A minor for whom shares of Class B Common Stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered to be held by a Class B Holder for so long as the person entitled to vote the shares under applicable laws independently qualifies as a Permitted Class B Transferee or there will be an Event of Automatic Conversion. (D) Unless otherwise specified, the term "person" means both natural persons and legal entities. "Qualified Voting Agreement" shall mean any proxy, voting agreement, voting trust or similar document, instrument or agreement pursuant to which a Management Shareholder generally controls the vote of the shares of Class B Common Stock held by a Management Shareholder or held by a Permitted Class B Transferee which shares are subject to such Qualified Voting Agreement (the "Qualified Voting Shares"), regardless of whether the beneficial owner of the 10 11 Qualified Voting Shares reserves or is granted a limited right to vote the Qualified Voting Shares in certain circumstances or retains the right to revoke such right and/or to reinstate such right at any time or from time to time. A good faith determination by the Board of Directors as to whether a proxy, voting agreement, voting trust or similar document, instrument or agreement constitutes a Qualified Voting Agreement shall be conclusive and binding on all shareholders. "Regulated Entity" means (i) any entity that is a "bank holding company" (as defined in Section 2(a) of the Bank Holding Company Act of 1956, as amended (the "BHC Act")) or any non-bank subsidiary of such an entity and (ii) any entity that, pursuant to Section 8(a) of the International Banking Act of 1978, as amended, is subject to the provisions of the BHC Act or any non-bank subsidiary of such an entity. TWELFTH: General. (a) Issuance of Shares. Subject to the foregoing provisions of these Amended and Restated Articles of Incorporation, the Corporation may issue shares of its Class A Common Stock, Class C Common Stock or Preferred Stock from time to time for such consideration (not less than the par value thereof) as may be fixed by the Board of Directors, which is expressly authorized to fix the same in its absolute and uncontrolled discretion subject to the foregoing provisions. Shares so issued for which the consideration shall have been paid or delivered to the Corporation shall be deemed fully paid capital stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares. (b) Rights and Options. The Corporation shall have authority to create and issue rights and options entitling their holders to purchase shares of the Corporation's capital stock of any class or series or other securities of the Corporation except Class B Common Stock, and such rights and options shall be evidenced by instrument(s) approved by the Board of Directors or otherwise provided in a plan relating to the issuance of such rights and options which has been approved by the Board of Directors. The Board of Directors or a committee of the Board of Directors shall be empowered to set the exercise price, duration, times for exercise, and other terms of such options or rights; provided, however, that the consideration to be received for any shares of capital stock subject thereto shall not be less than the par value thereof. THIRTEENTH: Board of Directors. The number, classification, and terms of the Board of Directors of the Corporation and the procedures to elect directors, to remove directors, and to fill vacancies in the Board of Directors shall be as stated in the Corporation's By-Laws. 11 12 FOURTEENTH: No Cumulative Voting. The shareholders of the Corporation shall not have the right to cumulate their votes for the election of directors of the Corporation. FIFTEENTH: Restrictions of Foreign Ownership. The following provisions are included for the purpose of ensuring that the control and management of the Corporation remain with citizens of the United States and/or corporations formed under the laws of the Unites States or any of the states of the United States, as required by the Communications Act of 1934, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time (collectively, the "Communications Act"): (a) Definition of Alien. "Alien" shall mean: (i) a person who is a citizen of a country other than the United States; (ii) any entity organized under the laws of a government other than the government of the United States or any state, territory, or possession of the United States; (iii) a government other than the government of the United States or of any state, territory, or possession of the United States; or (iv) a representative of, or an individual or entity controlled by, any of the foregoing. (b) Restrictions on Issuances and Transfer. The Corporation shall not issue any shares of capital stock of the Corporation if such issuance would result in the total number of shares of such capital stock held or voted by Aliens (or for or by the account of Aliens) to exceed 25% of: (i) the total number of all shares of such capital stock outstanding at any time and from time to time, or (ii) the total voting power of all shares of such capital stock outstanding and entitled to vote at any time and from time to time. The Corporation shall not permit the transfer on the books of the Corporation of any capital stock to any Alien that would result in the total number of shares of such capital stock held or voted by Aliens (or for or by the account of Aliens) exceeding such 25% limits. (c) Restrictions on Ownership by Aliens. No Alien or Aliens, individually or collectively, shall be entitled to vote or direct or control the vote of more than 25% of: 12 13 (i) the total number of all shares of capital stock of the Corporation outstanding at any time and from time to time, or (ii) the total voting power of all shares of capital stock of the Corporation outstanding and entitled to vote at any time and from time to time, and issuances and transfers of capital stock of the Corporation in violation of this subsection (c) shall be prohibited. (d) Powers of the Board of Directors to Implement Alien Ownership Restrictions. The Board of Directors shall have all powers necessary to implement the provisions of this Article FIFTEENTH and to ensure compliance with the alien ownership restrictions (the "Alien Ownership Restrictions") of the Communications Act, including, without limitation, the power to prohibit the transfer of any shares of capital stock of the Corporation to any Alien, to prohibit the vote by any Alien, and to take or cause to be taken such action as it deems appropriate to implement such prohibition, including placing a legend regarding restrictions on foreign ownership of the capital stock on certificates representing such capital stock. (e) Redemption. Without limiting the generality of the foregoing and notwithstanding any other provision of these Amended and Restated Articles of Incorporation to the contrary, any shares of capital stock of the Corporation determined by the Board of Directors to be owned by an Alien or Aliens shall always be subject to redemption by the Corporation by action of the Board of Directors, pursuant to Sections 1521 and 1906 of the Pennsylvania BCL, or any other applicable provision of law, to the extent necessary in the judgment of the Board of Directors to comply with the Alien Ownership Restrictions. The terms, conditions and procedures of such redemption shall be as follows: (i) the redemption price of the shares to be redeemed pursuant to this Article FIFTEENTH shall be equal to the fair market value of the shares to be redeemed, as determined by the Board of Directors in good faith; (ii) the redemption price of such shares may be paid in cash, securities or any combination thereof; (iii) if the aggregate redemption price for all of the Alien-owned shares to be redeemed exceeds $5 million in the aggregate during any one year period consisting of any twelve (12) consecutive calendar months, then the Corporation may elect to pay the balance of any redemption price after the Corporation has paid $5 million in any such period in installments not to exceed $5 million per year in the aggregate, with interest payable semi-annually at a rate equal to the six-month LIBOR rate for such six-month 13 14 period from time to time as determined by the Board of Directors in good faith; (iv) if less than all the shares held by Aliens are to be redeemed, the shares to be redeemed shall be selected in any manner determined by the Board of Directors to be fair and equitable; (v) at least 10 days' prior written notice of the redemption, which notice shall specify the date the redemption is to be effective (the "Redemption Date"), shall be given to the holders of record of the shares selected to be redeemed (unless waived in writing by any such holder), provided that the Redemption Date may be the date on which written notice shall be given to holders if the cash or securities necessary to effect the redemption shall have been deposited in trust for the benefit of such holders and such cash and securities are subject to immediate withdrawal by them upon surrender of the stock certificates for their shares to be redeemed duly endorsed in blank or accompanied by duly executed proper instruments of transfer; (vi) from and after the Redemption Date, the shares to be redeemed shall cease to be regarded as outstanding and any and all rights of the holders in respect of the shares to be redeemed or attaching to such shares of whatever nature (including without limitation any rights to vote or participate in dividends declared on capital stock of the same class or series as such shares excepting only payment of dividends declared prior to the Redemption Date for which the record date precedes the Redemption Date) shall cease and terminate, and the holders thereof thereafter shall be entitled only to receive the cash or securities payable upon redemption; and (vii) such other terms and conditions as the Board of Directors shall determine. SIXTEENTH: Indemnification. The Corporation shall indemnify any Person who was, is, or is threatened to be made a party to a proceeding (as hereinafter defined) by reason of the fact that he or she (i) is or was a director or officer of the Corporation or (ii) while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise, to the fullest extent permitted under the Pennsylvania BCL, as the same exists or may hereafter be amended. Such right shall be a contract right and as such shall run to the benefit of any director or officer who is elected and accepts the position of director or officer of the Corporation or elects to continue to serve as a director or officer of the Corporation while this Article SIXTEENTH is in effect. Any repeal or amendment of this Article SIXTEENTH shall be prospective only and shall not limit the rights of any such director 14 15 or officer or the obligations of the Corporation with respect to any claim arising from or related to the services of such director or officer in any of the foregoing capacities prior to any such repeal or amendment to this Article SIXTEENTH. Such right shall include the right to be paid by the Corporation expenses incurred in investigating or defending any such proceeding in advance of its final disposition to the maximum extent permitted under the Pennsylvania BCL, as the same exists or may hereafter be amended. If a claim for indemnification or advancement of expenses hereunder is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, the claimant shall also be entitled to be paid the expenses of prosecuting such claim. It shall be a defense to any such action that such indemnification or advancement of costs of defense is not permitted under the Pennsylvania BCL, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors or any committee thereof, independent legal counsel, or shareholders) to have made its determination prior to the commencement of such action that indemnification of, or advancement of costs of defense to, the claimant is permissible in the circumstances nor an actual determination by the Corporation (including its Board of Directors or any committee thereof, independent legal counsel, or shareholders) that such indemnification or advancement is not permissible shall be a defense to the action or create a presumption that such indemnification or advancement is not permissible. In the event of the death of any Person having a right of indemnification under the foregoing provisions, such right shall inure to the benefit of his or her heirs, executors, administrators, and personal representatives. The rights conferred above shall not be exclusive of any other right which any Person may have or hereafter acquire under any statute, bylaw, resolution of shareholders or directors, agreement, or otherwise. The Corporation may additionally indemnify any employee or agent of the Corporation to the fullest extent permitted by law. Without limiting the generality of the foregoing, to the extent permitted by then applicable law, the grant of mandatory indemnification pursuant to this Article SIXTEENTH shall extend to proceedings involving the negligence of such Person. As used herein, the term "proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative, any appeal in such an action, suit, or proceeding, and any inquiry or investigation that could lead to such an action, suit, or proceeding. SEVENTEENTH: Personal Liability of Directors and Officers. (a) Directors. A director of the Corporation shall not be personally liable, as such, to the Corporation or its shareholders for monetary damages (including, without limitation, any judgment, amount paid in settlement, penalty, punitive damages or expense of any nature (including, without limitation, attorneys' fees and 15 16 disbursements)) for any action taken, or any failure to take any action, unless the director has breached or failed to perform the duties of his or her office under these Amended and Restated Articles of Incorporation, the Amended and Restated Bylaws of the Corporation or applicable provisions of law and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. (b) Officers. An officer of the Corporation shall not be personally liable, as such, to the Corporation or its shareholders for monetary damages (including, without limitation, any judgment, amount paid in settlement, penalty, punitive damages or expense of any nature (including, without limitation, attorneys' fees and disbursements)) for any action taken, or any failure to take any action, unless the officer has breached or failed to perform the duties of his or her office under these Amended and Restated Articles of Incorporation, the Amended and Restated Bylaws of the Corporation or applicable provisions of law and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. EIGHTEENTH: Powers of the Board of Directors. All of the power of the Corporation, insofar as it may be lawfully vested by these Amended and Restated Articles of Incorporation in the Board of Directors, is hereby conferred upon the Board of Directors of the Corporation. NINETEENTH: Special Meetings. Special meetings of the shareholders may only be called by the Chairman or Chief Executive Officer of the Corporation or by resolution of the Board of Directors; provided, however, that if there are two vacancies in the offices for the Class A Directors, then the holders of 50% of the Class A Common Stock outstanding shall have the right to call a special meeting of shareholders for the purpose of electing Class A Directors to fill such vacancies. 16 EX-3.02 4 FORM OF AMENDED AND RESTATED BYLAWS 1 Exhibit 3.02 AMENDED AND RESTATED BYLAWS OF ENTERCOM COMMUNICATIONS CORP. ARTICLE I Name and Seal Section 1.01. Name. The name of the Corporation is ENTERCOM COMMUNICATIONS CORP. Section 1.02. State of Incorporation. The Corporation is incorporated under the laws of the Commonwealth of Pennsylvania. Section 1.03. Seal. The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization, the words "Corporate Seal," and the name of the State of Incorporation. The seal may be used by any person authorized by the Board of Directors of the Corporation or by these Bylaws by causing the seal or a facsimile thereof to be impressed or affixed, or in any manner reproduced. ARTICLE II Offices and Fiscal Year Section 2.01. Registered Office. The registered office of the Corporation in the Commonwealth of Pennsylvania shall be at 401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004 until otherwise established by an amendment of the articles of incorporation (the "articles") or by the Board of Directors of the Corporation (the "Board of Directors" or the "Board") and a record of such change is filed with the Pennsylvania Department of State in the manner provided by law. Section 2.02. Other Offices. The Corporation may also have offices at such other places within or without the Commonwealth of Pennsylvania as the Board of Directors may from time to time appoint or the business of the Corporation may require. Section 2.03. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of October in each year, until 1999 when it shall begin on January 1, 1999 and then and thereafter become the calendar year. 2 ARTICLE III Notice--Waivers--Meetings Generally Section 3.01. Manner of Giving Notice. (a) General Rule. Whenever written notice is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws, it may be given to the person either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by facsimile transmission, to the address (or to the telex, TWX, facsimile or telephone number) of the person appearing on the books of the Corporation or, in the case of directors, supplied by the director to the Corporation for the purpose of notice. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person or, in the case of telex or TWX, when dispatched or, in the case of facsimile transmission, when received. A notice of meeting shall specify the place, day and hour of the meeting and any other information required by any other provision of the Business Corporation Law, the articles or these bylaws. (b) Bulk Mail. If the Corporation has more than 30 shareholders, notice of any regular or special meeting of the shareholders, or any other notice required by the Business Corporation Law or by the articles or these bylaws to be given to all shareholders or to all holders of a class or series of shares, may be given by any class of postpaid mail if the notice is deposited in the United States mail at least 20 days prior to the day named for the meeting or any corporate or shareholder action specified in the notice. (c) Adjourned Shareholder Meetings. When a meeting of shareholders is adjourned by the Chairman of the meeting or a vote of the shareholders, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the Board fixes a new record date for the adjourned meeting in which event notice shall be given in accordance with Section 3.03. Section 3.02. Notice of Meetings of Board of Directors. Notice of a regular meeting of the Board of Directors need not be given, provided that the dates for such meetings are fixed by the Board of Directors or the Chairman for an ensuing period of at least twelve months, and such dates are set forth in the minutes of the meeting at which such dates were fixed, which minutes were distributed to each director. Notice of every special meeting of the Board of Directors shall be given to each director by telephone or in writing at least 24 hours (in the case of notice by telephone, telex, TWX or facsimile transmission) or 48 hours (in the case of notice by telegraph, courier service or express mail) or five days (in the case of notice by first class mail) before the time at which the meeting is to be held. Every such notice shall state the time 2 3 and place of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in a notice of the meeting. Section 3.03. Notice of Meetings of Shareholders. (a) General Rule. Except as otherwise provided in Section 3.01(b), written notice of every meeting of the shareholders shall be given by, or at the direction of, the Secretary or other authorized person to each shareholder of record entitled to vote at the meeting at least (10) ten days prior to the day named for a meeting (and, in case of a meeting called to consider a merger, consolidation, share exchange or division, to each shareholder of record not entitled to vote at the meeting) called to consider a fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day named for the meeting in any other case. If the Secretary neglects or refuses to give notice of a meeting, the person or persons calling the meeting may do so. In the case of a special meeting of shareholders, the notice shall specify the general nature of the business to be transacted. (b) Notice of Action by Shareholders on Bylaws. In the case of a meeting of shareholders that has as one of its purposes action on the bylaws, written notice shall be given to each shareholder that the purpose, or one of the purposes, of the meeting is to consider the adoption, amendment or repeal of the bylaws. There shall be included in, or enclosed with, the notice a copy of the proposed amendment or a summary of the changes to be effected thereby. (c) Notice of Action by Shareholders on Fundamental Change. In the case of a meeting of the shareholders that has as one of its purposes action with respect to any fundamental change under 15 Pa.C.S. Chapter 19, each shareholder shall be given, together with written notice of the meeting, a copy or summary of the amendment or plan to be considered at the meeting in compliance with the provisions of Chapter 19. (d) Notice of Action by Shareholders Giving Rise to Dissenters Rights. In the case of a meeting of the shareholders that has as one of its purposes action that would give rise to dissenters rights under the provisions of 15 Pa.C.S. Subchapter 15D, each shareholder shall be given, together with written notice of the meeting: (1) statement that the shareholders have a right to dissent and obtain payment of the fair value of their shares by complying with the provisions of Subchapter 15D (relating to dissenters rights); and (2) copy of Subchapter 15D. 3 4 Section 3.04. Waiver of Notice. (a) Written Waiver. Whenever any written notice is required to be given under the provisions of the Business Corporation Law, the articles or these bylaws, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of the notice. Neither the business to be transacted at, nor the purpose of, a meeting need be specified in the waiver of notice of the meeting. (b) Waiver by Attendance. Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 3.05. Modification of Proposal Contained in Notice. Whenever the language of a proposed resolution is included in a written notice of a meeting required to be given under the provisions of the Business Corporation Law or the articles or these bylaws, the meeting considering the resolution may without further notice adopt it with such clarifying or other amendments as do not materially enlarge its original purpose. Section 3.06. Exception to Requirement of Notice. (a) General Rule. Whenever any notice or communication is required to be given to any person under the provisions of the Business Corporation Law or by the articles or these bylaws or by the terms of any agreement or other instrument or as a condition precedent to taking any corporate action and communication with that person is then unlawful, the giving of the notice or communication to that person shall not be required. (b) Shareholders Without Forwarding Addresses. Notice or other communications need not be sent to any shareholder with whom the Corporation has been unable to communicate for more than 24 consecutive months because communications to the shareholder are returned unclaimed or the shareholder has otherwise failed to provide the Corporation with a current address. Whenever the shareholder provides the Corporation with a current address, the Corporation shall commence sending notices and other communications to the shareholder in the same manner as to other shareholders. Section 3.07. Use of Conference Telephone and Similar Equipment. Any director may participate in any meeting of the Board of Directors, and the Board of Directors may provide by resolution with respect to a specific meeting or with respect to a class of meetings that one or more persons may participate in a meeting of the shareholders of the Corporation, by means of conference telephone or similar communications equipment by means 4 5 of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at the meeting. ARTICLE IV Shareholders Section 4.01. Place of Meeting. All meetings of the shareholders of the Corporation shall be held at such place, within or without the Commonwealth of Pennsylvania, as shall be determined by the Board of Directors from time to time. Section 4.02. Annual Meeting. The Board of Directors may fix and designate the date and time of the annual meeting of the shareholders, but if no such date and time is fixed and designated by the Board, the meeting for any calendar year shall be called for and held on the third Tuesday in April in such year, if not a legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on the next succeeding business day, not a Saturday, at 10 o'clock A.M. and at said meeting the shareholders then entitled to vote shall elect directors and shall transact such other business as may properly be brought before the meeting. If the annual meeting shall not have been called and held within six months after the designated time, any shareholder may call the meeting at any time thereafter. Section 4.03. Special Meetings. Special meetings of the shareholders may only be called by the Chairman or CEO, or by resolution of the Board of Directors, which may fix the date, time and place of the meeting; provided, however, that if there are two vacancies in the offices for the Class A Directors, then the holders of 50% of the Class A Common Stock outstanding shall have the right to call a special meeting of shareholders for the purpose of electing Class A Directors to fill such vacancies. If the Board does not fix the date, time or place of the meeting, it shall be the duty of the Secretary to do so. A date fixed by the Secretary shall not be more than 60 days after the date of the adoption of the resolution of the Board calling the special meeting. Section 4.04. Quorum and Adjournment. (a) General Rule. A meeting of shareholders of the Corporation duly called shall not be organized for the transaction of business unless a quorum is present. The presence of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted upon at the meeting shall constitute a quorum for the purposes of consideration and action on the matter. Shares of the Corporation owned, directly or indirectly, by the Corporation which are controlled, directly or indirectly, by the Board of Directors shall not be counted in determining the total number of outstanding shares for quorum purposes at any given time. 5 6 (b) Withdrawal of a Quorum. The shareholders present at a duly organized meeting can continue to do business until conclusion of the meeting, including any adjournment thereof, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. (c) Adjournments Generally. Any regular or special meeting of the shareholders, including one at which directors are to be elected and one which cannot be organized because a quorum has not attended, may be adjourned for such period and to such place (i) as the shareholders present and entitled to vote shall direct, or (ii) if no shareholder vote is taken, as the Chairman of the meeting shall direct. (d) Electing Directors at Adjourned Meeting. Those shareholders entitled to vote who attend a meeting called for the election of directors that has been previously adjourned for lack of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of electing directors. (e) Other Action in Absence of Quorum. Those shareholders entitled to vote who attend a meeting of shareholders that has been previously adjourned for one or more periods aggregating at least 15 days because of an absence of a quorum, although less than a quorum as fixed in this section, shall nevertheless constitute a quorum for the purpose of acting upon any matter set forth in the notice of the meeting if such notice states that in the event a quorum is not present on the date set forth in such notice and the meeting is adjourned to a later date at least 15 days after the initial date then those shareholders who attend the adjourned meeting shall nevertheless constitute a quorum for the purpose of acting upon the matter. Section 4.05. Action by Shareholders. Except as otherwise provided in the Business Corporation Law or the articles or these bylaws, whenever any corporate action is to be taken by vote of the shareholders of the Corporation, it shall be authorized upon receiving the affirmative vote of a majority of the votes cast by all shareholders entitled to vote thereon at a meeting duly called and organized and, if any shareholders are entitled to vote thereon as a class, upon receiving the affirmative vote of a majority of the votes cast by the shareholders entitled to vote as a class. Section 4.06. Organization. At every meeting of the shareholders, the Chairman of the Board, if there be one, or, in the case of vacancy in office or absence of the Chairman of the Board, one of the following persons present in the order stated: the Vice Chairman of the Board, the CEO, the President, the COO, the CFO, the Executive Vice President or a person chosen by vote of the shareholders present, shall act as Chairman of the meeting. The Secretary or, in the absence of the Secretary, an assistant Secretary, or, in the absence of both the Secretary and assistant secretaries, a person appointed by the Chairman of the meeting, shall act as Secretary of the meeting. 6 7 Section 4.07. Voting Rights of Shareholders. Except as otherwise provided in the articles, every shareholder of the Corporation shall be entitled to one vote for each full share having voting power standing in the name of the shareholder on the books of the Corporation. Section 4.08. Voting and Other Action by Proxy. (a) General Rule. (1) every shareholder entitled to vote at a meeting of shareholders may authorize another person to act for the shareholder by proxy. (2) The presence of, or vote or other action at a meeting of shareholders by a proxy of a shareholder shall constitute the presence of, or vote or action by the shareholder. (3) Where two or more proxies of a shareholder are present, the Corporation shall, unless otherwise expressly provided in the proxy, accept as the vote of all shares represented thereby the vote cast by a majority of them and, if a majority of the proxies cannot agree whether the shares represented shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among those persons. (b) Execution and Filing. Every proxy shall be executed in writing by the shareholder or by the duly authorized attorney-in-fact of the shareholder and filed with the Secretary of the Corporation. A telegram, telex, cablegram, datagram or similar transmission from a shareholder or attorney-in-fact, or a photographic, facsimile or similar reproduction of a writing executed by a shareholder or attorney-in-fact: (1) may be treated as properly executed for purposes of this subsection; and (2) shall be so treated if it sets forth a confidential and unique identification number or other mark furnished by the Corporation to the shareholder for the purposes of a particular meeting or transaction. (c) Revocation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until written notice thereof has been given to the Secretary of the Corporation. An unrevoked proxy shall not be valid after three years from the date of its execution unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the Secretary of the Corporation. 7 8 (d) Expenses. The Corporation shall pay the reasonable expenses of solicitation of votes, proxies or consents of shareholders by or on behalf of the Board of Directors or its nominees for election to the Board, including solicitation by professional proxy solicitors and otherwise. Section 4.09. Voting by Fiduciaries and Pledgees. Shares of the Corporation standing in the name of a trustee or other fiduciary and shares held by an assignee for the benefit of creditors or by a receiver may be voted by the trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged shall be entitled to vote the shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, but nothing in this section shall affect the validity of a proxy given to a pledgee or nominee. Section 4.10. Voting by Joint Holders of Shares. (a) General Rule. Where shares of the Corporation are held jointly or as tenants in common by two or more persons, as fiduciaries or otherwise: (1) if only one or more of such persons is present in person or by proxy, all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum and the Corporation shall accept as the vote of all the shares the vote cast by a joint owner or a majority of them; and (2) if the persons are equally divided upon whether the shares held by them shall be voted or upon the manner of voting the shares, the voting of the shares shall be divided equally among the persons without prejudice to the rights of the joint owners or the beneficial owners thereof among themselves. (b) Exception. If there has been filed with the Secretary of the Corporation a copy, certified by an attorney at law to be correct, of the relevant portions of the agreement under which the shares are held or the instrument by which the trust or estate was created or the order of court appointing them or of an order of court directing the voting of the shares, the persons specified as having such voting power in the document latest in date of operative effect so filed, and only those persons, shall be entitled to vote the shares but only in accordance therewith. Section 4.11. Voting by Corporate Shareholders. Any corporation that is a shareholder of this Corporation may vote at meetings of shareholders of this Corporation by any of its officers or agents, or by proxy appointed by any officer or agent, unless some other person, by resolution of the board of directors of the other corporation or a provision of its articles or bylaws, a copy of which resolution or provision certified to be correct by one of its officers has been filed with the Secretary of this Corporation, is appointed its general or special proxy in which case that person shall be entitled to vote the shares. 8 9 Section 4.12. Determination of Shareholders of Record. (a) Fixing Record Date. The Board of Directors may fix a time prior to the date of any meeting of shareholders as a record date for the determination of the shareholders entitled to notice of, or to vote at, the meeting, which time, except in the case of an adjourned meeting, shall be not more than 90 days prior to the date of the meeting of shareholders. Only shareholders of record on the date fixed shall be so entitled notwithstanding any transfer of shares on the books of the Corporation after any record date fixed as provided in this subsection. The Board of Directors may similarly fix a record date for the determination of shareholders of record for any other purpose. When a determination of shareholders of record has been made as provided in this section for purposes of a meeting, the determination shall apply to any adjournment thereof unless the Board fixes a new record date for the adjourned meeting. (b) Determination When a Record Date is Not Fixed. If a record date is not fixed: (1) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day that is ten days prior to the day on which notice is given. (2) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (c) Certification by Nominee. The Board of Directors may adopt a procedure whereby a shareholder of the Corporation may certify in writing to the Corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons. Upon receipt by the Corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. Section 4.13. Voting Lists. (a) General Rule. The officer or agent having charge of the transfer books for shares of the Corporation shall make a complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each. The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof except that, if the Corporation has 1,000 or more shareholders, in lieu of the making of the list the Corporation may make the information therein available at the meeting by any other means. 9 10 (b) Effect of List. Failure to comply with the requirements of this section shall not affect the validity of any action taken at a meeting prior to a demand at the meeting by any shareholder entitled to vote thereat to examine the list. The original share register or transfer book, or a duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to who are the shareholders entitled to examine the list or share register or transfer book or to vote at any meeting of shareholders. Section 4.14. Judges of Election. (a) Appointment. In advance of any meeting of shareholders of the Corporation, the Board of Directors may appoint judges of election, who need not be shareholders, to act at the meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder shall, appoint judges of election at the meeting. The number of judges shall be one or three. A person who is a candidate for an office to be filled at the meeting shall not act as a judge. (b) Vacancies. In case any person appointed as a judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Board of Directors in advance of the convening of the meeting or at the meeting by the presiding officer thereof. (c) Duties. The judges of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with nominations by shareholders or the right to vote, count and tabulate all votes, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. (d) Report. On request of the presiding officer of the meeting or of any shareholder, the judges shall make a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated therein. Section 4.15. Minors as Security Holders. The Corporation may treat a minor who holds shares or obligations of the Corporation as having capacity to receive and to empower others to receive dividends, interest, principal and other payments or distributions, to vote or express consent or dissent and to make elections and exercise rights relating to such shares or obligations unless, in the case of payments or distributions on shares, the corporate officer responsible for maintaining the list of shareholders or the transfer agent of the Corporation or, in the case of payments or distributions on obligations, the Treasurer or paying officer or agent has received written notice that the holder is a minor. 10 11 Section 4.16. Advance Notice of Nomination of Directors. (a) Nominations for election of directors may be made by any shareholder entitled to vote for the election of directors only if written notice (the "Notice") of such shareholder's intent to nominate a director at the meeting is given by the shareholder and received by the Secretary of the Corporation in the manner and within the time specified herein. The Notice shall be delivered to the Secretary of the Corporation not less than (i) for an election of directors to be held at an annual meeting of shareholders, sixty (60) days prior to the anniversary date of the immediately preceding annual meeting of shareholders, and (ii) for an election of directors to be held at a special meeting of shareholders, not later than the close of business on the seventh (7th) day following the day on which notice of the meeting was first mailed to shareholders or public disclosure of the special meeting is made. In lieu of delivery to the Secretary of the Corporation, the Notice may be mailed to the Secretary of the Corporation by certified mail, return receipt requested, but shall be deemed to have been given only upon actual receipt by the Secretary of the Corporation. (b) The Notice shall be in writing and shall contain or be accompanied by; (1) the name and residence of such shareholder; (2) a representation that the shareholder is a holder of the Corporation's voting stock and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the Notice; (3) such information regarding each nominee as would have been required to be included in a proxy statement filed pursuant to Regulation 14A of the rules and regulations established by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (or pursuant to any successor act or regulation) had proxies been solicited with respect to such nominee by the management or Board of Directors of the Corporation; (4) a description of all arrangements or understandings among the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which such nomination or nominations are to be made by the shareholder; and (5) the consent of each nominee to serve as director of the Corporation if so elected. (c) The Chairman of the meeting may, in good faith, determine and declare to the meeting that any nomination made at the meeting was not made in accordance with the foregoing procedures and, in such event, the nomination shall be disregarded. 11 12 ARTICLE V Board of Directors Section 5.01. Powers; Personal Liability. (a) General Rule. Unless otherwise provided by statute, all powers vested by law in the Corporation shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors. (b) Personal Liability of Directors. (1) A director shall not be personally liable to the Corporation or any of its shareholders, as such, for monetary damages (including, without limitation, any judgment, amount paid in settlement, penalty, punitive damages or expense of any nature (including, without limitation, attorneys' fees and disbursements)) for any action taken, or any failure to take any action, unless: (i) the director has breached or failed to perform the duties of his or her office under Subchapter 17B of the Business Corporation Law or any successor provision; and (ii) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. (2) The provisions of paragraph (1) shall not apply to the responsibility or liability of a director pursuant to any criminal statute, or the liability of a director for the payment of taxes pursuant to local, State or Federal law. (c) Notation of Dissent. A director of the Corporation who is present at a meeting of the Board of Directors, or of a committee of the Board, at which action on any corporate matter is taken on which the director is generally competent to act, shall be presumed to have assented to the action taken unless his or her dissent is entered in the minutes of the meeting or unless the director files his or her written dissent to the action with the Secretary of the meeting before the adjournment thereof or transmits the dissent in writing to the Secretary of the Corporation immediately after the adjournment of the meeting. The right to dissent shall not apply to a director who voted in favor of the action. Nothing in this section shall bar a director from asserting that minutes of the meeting incorrectly omitted his or her dissent if, promptly upon receipt of a copy of such minutes, the director notifies the Secretary, in writing, of the asserted omission or inaccuracy. 12 13 Section 5.02. Qualifications and Selection of Directors. (a) Qualifications. Each director of the Corporation shall be a natural person of full age who need not be a resident of the Commonwealth of Pennsylvania or a shareholder of the Corporation. (b) Election of Directors. In elections for directors, voting need not be by ballot, unless required by vote of the shareholders before the voting for the election of directors begins. The candidates receiving the highest number of votes from each class or group of classes, if any, entitled to elect directors separately up to the number of directors to be elected by the class or group of classes shall be elected. If at any meeting of shareholders, directors of more than one class are to be elected, each class of directors shall be elected in a separate election. Section 5.03. Number and Term of Office. (a) Number. The Board of Directors shall consist of not less than seven (7) Directors nor more than fifteen (15) directors, including such number of directors as may be elected from time to time by the holders of any class or series of Preferred Stock entitled to elect directors ("Preferred Stock Directors") and the Class A Directors (as hereinafter defined), such number to be determined from time to time by resolution of the Board of Directors. The Board of Directors shall include two directors elected by the holders of the Class A Common Stock by class vote pursuant to the articles (the "Class A Directors"). (b) Term of Office. Each director, other than Class A Directors, shall be elected at the annual meeting of shareholders, except as provided in Section 5.04, and each director shall hold office for such term as shall be established by the Board of Directors provided that no term shall exceed a period of more than three years and until a successor has been selected and qualified or until his or her earlier death, resignation or removal. A decrease in the number of directors shall not have the effect of shortening the term of any incumbent director. (c) Resignation. Any director may resign at any time upon written notice to the Corporation. The resignation shall be effective upon receipt thereof by the Corporation or at such subsequent time as shall be specified in the notice of resignation. (d) Class A Directors. The Class A Directors will be elected at each annual meeting of shareholders commencing with the annual meeting of shareholders to be held in 1999. Section 5.04. Vacancies. (a) General Rule. Vacancies in the Board of Directors, including vacancies resulting from an increase in the number of directors, may be filled by a majority vote of the remaining members of the Board though less than a quorum, or by a sole remaining director, and each person so selected shall be a director to serve until the next selection of the class for which such director has been chosen, and until a successor has been selected and qualified or until his 13 14 or her earlier death, resignation or removal; provided, however that a vacancy in a Class A Director may only be filled by the sole remaining Class A Director, and if both Class A Directors are vacant, then only the holders of the Class A Common Stock may fill such vacancies. (b) Action by Resigned Directors. When one or more directors resign from the Board effective at a future date, the directors then in office, including those who have so resigned, shall have power by the applicable vote to fill the vacancies, the vote thereon to take effect when the resignations become effective. Section 5.05. Removal of Directors. (a) Removal by the Shareholders. The entire Board of Directors, or any class of the Board, or any individual director may be removed from office only for cause by vote of a majority of the shareholders entitled to vote thereon. In case the Board, or a class of the Board or any one or more directors are so removed, new directors may be elected at the same meeting. The repeal of a provision of the articles or bylaws prohibiting, or the addition of a provision to the articles or bylaws permitting, the removal by the shareholders of the Board, a class of the Board or any individual director without assigning any cause shall not apply to any incumbent director during the balance of the term for which the director was selected. (b) Removal by the Board. The Board of Directors may declare vacant the office of a director who has been judicially declared of unsound mind or who has been convicted of an offense punishable by imprisonment for a term of more than one year or if, within 60 days after notice of his or her selection, the director does not accept the office either in writing or by attending a meeting of the Board of Directors. Section 5.06. Place of Meetings. Meetings of the Board of Directors may be held at such place within or without the Commonwealth of Pennsylvania as the Board of Directors may from time to time appoint or as may be designated in the notice of the meeting. Section 5.07. Organization of Meetings. At every meeting of the Board of Directors, the Chairman of the Board, if there be one, or, in the case of a vacancy in the office or absence of the Chairman of the Board, one of the following officers present in the order stated: the Vice Chairman of the Board, the CEO, the President, the COO, the CFO, the Executive Vice President, or a person chosen by a majority of the directors present, shall act as Chairman of the meeting. The Secretary or, in the absence of the Secretary, an assistant Secretary, or, in the absence of the Secretary and the assistant secretaries, any person appointed by the Chairman of the meeting, shall act as Secretary of the meeting. Section 5.08. Regular Meetings. Regular meetings of the Board of Directors shall be held at such time and place as shall be designated from time to time by resolution of the Board of Directors, or as called by the Chairman. Section 5.09. Special Meetings. Special meetings of the Board of Directors shall be held whenever called by the Chairman or by two or more of the directors. 14 15 Section 5.10. Quorum of and Action by Directors. (a) General Rule. A majority of the directors in office of the Corporation shall be necessary to constitute a quorum for the transaction of business and the acts of a majority of the directors present and voting at a meeting at which a quorum is present shall be the acts of the Board of Directors. (b) Action by Written Consent or Ratification. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the Secretary of the Corporation or the action is ratified by the directors at the next regular or special meeting thereof. Section 5.11. Executive and Other Committees. (a) Establishment and Powers. The Board of Directors may, by resolution adopted by a majority of the directors in office, establish one or more committees to consist of one or more directors of the Corporation. Any committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all of the powers and authority of the Board of Directors except that a committee shall not have any power or authority as to the following: (1) The submission to shareholders of any action requiring approval of shareholders under the Business Corporation Law. (2) The creation or filling of vacancies in the Board of Directors. (3) The adoption, amendment or repeal of these bylaws. (4) The amendment or repeal of any resolution of the Board. (5) Action on matters committed by a resolution of the Board of Directors to another committee of the Board. (b) Alternate Committee Members. The Board may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee. In the absence or disqualification of a member and alternate member or members of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member. (c) Term. Each committee of the Board shall serve at the pleasure of the Board. 15 16 (d) Committee Procedures. Any provision of these bylaws relating to the organization or procedures of or the manner of taking action by the Board of Directors, shall be construed to apply and refer to the organization and procedures of any executive or other committee of the Board. Section 5.12. Compensation. The Board of Directors shall have the authority to fix the compensation of directors for their services as directors and a director may be a salaried officer of the Corporation. ARTICLE VI Officers Section 6.01. Officers Generally. (a) Number, Qualifications and Designation. The officers of the Corporation shall be a Chief Executive Officer ("CEO"), a President, an Executive Vice President, a Chief Operating Officer ("COO"), a Chief Financial Officer ("CFO"), a Secretary, a Treasurer, and such other officers as may be elected in accordance with the provisions of Section 6.03. Officers may but need not be directors or shareholders of the Corporation. All of the officers shall be natural persons of full age, except that the Treasurer may be a Corporation. The Board of Directors may elect from among the members of the Board a Chairman of the Board and a Vice Chairman of the Board who may both need not be officers of the Corporation. Any number of offices may be held by the same person. (b) Bonding. The Corporation may secure the fidelity of any or all of its officers by bond or otherwise. (c) Standard of Care. In lieu of the standards of conduct otherwise provided by law, officers of the Corporation shall be subject to the same standards of conduct, including standards of care and loyalty and rights of justifiable reliance, as shall at the time be applicable to directors of the Corporation. An officer of the Corporation shall not be personally liable, as such, to the Corporation or its shareholders for monetary damages (including, without limitation, any judgment, amount paid in settlement, penalty, punitive damages or expense of any nature (including, without limitation, attorneys' fees and disbursements)) for any action taken, or any failure to take any action, unless the officer has breached or failed to perform the duties of his or her office under the articles, these bylaws, or the applicable provisions of law and the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. The provisions of this subsection shall not apply to the responsibility or liability of an officer pursuant to any criminal statute or for the payment of taxes pursuant to local, state or federal law. Section 6.02. Election, Term of Office and Resignations. (a) Election and Term of Office. The officers of the Corporation, except those appointed by delegated authority pursuant to Section 6.03, shall be elected annually by the Board 16 17 of Directors, and each such officer shall hold office such term as may be provided by the Board and until a successor has been elected and qualified or until his or her earlier death, resignation or removal. (b) Resignations. Any officer may resign at any time upon written notice to the Corporation. The resignation shall be effective upon receipt thereof by the Corporation or at such subsequent time as may be specified in the notice of resignation. Section 6.03. Subordinate Officers, Committees and Agents. The Board of Directors may from time to time appoint such other officers and such committees, employees or other agents as the business of the Corporation may require, including one or more assistant secretaries, and one or more assistant Treasurers, each of whom shall hold office for such period, 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 committee the power to appoint subordinate officers and to retain or appoint employees or other agents, or committees thereof, and to prescribe the authority and duties of such subordinate officers, committees, employees or other agents. Section 6.04. Removal of Officers and Agents. Any officer or agent of the Corporation may be removed by the Board of Directors or by the CEO with or without cause. The removal shall be without prejudice to the contract rights, if any, of any person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 6.05. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or any other cause, may be filled by the Board of Directors or by the CEO or by the officer or committee to which the power to fill such office has been delegated pursuant to Section 6.03, as the case may be, and if the office is one for which these bylaws prescribe a term, shall be filled for the unexpired portion of the term. Section 6.06. Authority. All officers of the Corporation, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided by or pursuant to resolutions or orders of the Board of Directors or, in the absence of controlling provisions in the resolutions or orders of the Board of Directors, as may be determined by or pursuant to these bylaws or in the absence of any such controlling authority then as provided by the CEO. Section 6.07. The Chairman and Vice Chairman of the Board. The Chairman of the Board or in the absence of the Chairman, the Vice Chairman of the Board, shall preside at all meetings of the shareholders and of the Board of Directors, and shall perform such other duties as may from time to time be requested by the Board of Directors. Section 6.08. CEO. The CEO shall be the chief executive officer of the Corporation. The CEO shall have general supervision over the business, finances, operations and welfare of the Corporation, subject however, to the control of the Board of Directors. The CEO shall sign, execute, and acknowledge, in the name of the Corporation, deeds, mortgages, bonds, 17 18 contracts or other instruments, authorized by the Board of Directors, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors, or by these bylaws or by the CEO, to some other officer or agent of the Corporation; and, in general, shall have all powers and perform all duties incident to the position of a chief executive officer and such other powers and duties as from time to time may be assigned by the Board of Directors. The CEO shall from time to time make such reports of the affairs of the Corporation as the Board may require and shall present to the annual meeting of the shareholders a report of the business of the Corporation for the preceding fiscal year. Section 6.09. The President. The President shall perform the duties of the CEO in the absence of the CEO and such other duties as may from time to time be assigned to the President by the CEO. Section 6.10. The Vice Presidents. The Vice Presidents shall perform such duties as may from time to time be assigned to them by the Board of Directors, the CEO or the President. Section 6.11. The Secretary. The Secretary or an assistant Secretary shall attend all meetings of the shareholders and of the Board of Directors and all committees thereof and shall record all the votes of the shareholders and of the directors and the minutes of the meetings of the shareholders and of the Board of Directors and of committees of the Board in a book or books to be kept for that purpose; shall see that notices are given and records and reports properly kept and filed by the Corporation as required by law; shall be the custodian of the seal of the Corporation and see that it is affixed to all documents to be executed on behalf of the Corporation under its seal; and, in general, shall perform all duties incident to the office of Secretary, and such other duties as may from time to time be assigned by the Board of Directors or the CEO. Section 6.12. The COO. The COO shall be the chief operating officer and shall have general management and supervision of the operations of the Corporation under the direction and supervision of the CEO; and, in general, shall discharge such other duties as may from time to time be assigned by the Board of Directors or the CEO. Section 6.13. The CFO. The CFO shall be the chief financial officer and shall have general management and supervision of the fiscal affairs of the Corporation under the direction and supervision of the CEO. The CFO shall see that a full and accurate accounting of all financial transactions is made; shall oversee the investment and reinvestment of the capital funds of the Corporation; shall oversee the preparation of any financial reports of the Corporation; shall cooperate in the conduct of the annual audit of the Corporation's financial records by the Corporation's certified public accountants; and, in general, shall discharge such other duties as may from time to time be assigned by the Board of Directors or the CEO. Section 6.14. The Treasurer. The Treasurer shall perform the duties of the CFO in the absence of the CFO and shall have or provide for the custody of the funds or other property of the Corporation; shall collect and receive or provide for the collection and receipt of 18 19 moneys earned by or in any manner due to or received by the Corporation; shall deposit all funds in his or her custody as Treasurer in such banks or other places of deposit as the Board of Directors may from time to time designate; shall, whenever so required by the Board of Directors, render an account showing all transactions as Treasurer, and the financial condition of the Corporation; and, in general, shall discharge such other duties as may from time to time be assigned by the Board of Directors, the CEO, or the CFO. Section 6.15. Salaries. The salaries of the officers elected by the Board of Directors shall be fixed from time to time by the Board of Directors or by such committee or officer as may be designated by resolution of the Board, or in the absence of such designation by the CEO. The salaries or other compensation of any other officers, employees and other agents shall be fixed from time to time by the Board, or by the officer or committee to which the power to appoint such officers or to retain or appoint such employees or other agents has been delegated pursuant to Section 6.03, or in the absence of such designation by the CEO or other officer designated by the CEO. No officer shall be prevented from receiving such salary or other compensation by reason of the fact that the officer is also a director of the Corporation. ARTICLE VII Certificates of Stock, Transfer, Etc. Section 7.01. Share Certificates. (a) Form of Certificates. Certificates for shares of the Corporation shall be in such form as approved by the Board of Directors, and shall state that the Corporation is incorporated under the laws of the Commonwealth of Pennsylvania, the name of the person to whom issued, and the number and class of shares and the designation of the series (if any) that the certificate represents. If the Corporation is authorized to issue shares of more than one class or series, certificates for shares of the Corporation shall set forth upon the face or back of the certificate (or shall state on the face or back of the certificate that the Corporation will furnish to any shareholder upon request and without charge), a full or summary statement of the designations, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the Board of Directors to fix and determine the designations, voting rights, preferences, limitations and special rights of the classes and series of shares of the Corporation. (b) Share Register. The share register or transfer books and blank share certificates shall be kept by the Secretary or by any transfer agent or registrar designated by the Board of Directors for that purpose. Section 7.02. Issuance. The share certificates of the Corporation shall be numbered and registered in the share register or transfer books of the Corporation as they are issued. They shall be executed in such manner as the Board of Directors shall determine. In case any officer, transfer agent or registrar who has signed or authenticated, or whose facsimile signature or authentication has been placed upon, any share certificate shall have ceased to be 19 20 such officer, transfer agent or registrar because of death, resignation or otherwise, before the certificate is issued, the certificate may be issued with the same effect as if the officer, transfer agent or registrar had not ceased to be such at the date of its issue. The provisions of this Section 7.02 shall be subject to any inconsistent or contrary agreement in effect at the time between the Corporation and any transfer agent or registrar. Section 7.03. Transfer. Transfers of shares shall be made on the share register or transfer books of the Corporation upon surrender of the certificate therefor, endorsed by the person named in the certificate or by an attorney lawfully constituted in writing. No transfer shall be made inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S. Sections 8101 et seq., and its amendments and supplements. Section 7.04. Record Holder of Shares. The Corporation shall be entitled to treat the person in whose name any share or shares of the Corporation stand on the books of the Corporation as the absolute owner thereof, 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 except that the Corporation may in its discretion recognize certain beneficial owners or shareholders in accordance with the procedures set forth in Section 4.12(c). Section 7.05. Lost, Destroyed or Mutilated Certificates. The holder of any shares of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate therefor, and the Board of Directors may, in its discretion, cause a new certificate or certificates to be issued to such holder, in case of mutilation of the certificate, upon the surrender of the mutilated certificate or, in case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction and, if the Board of Directors shall so determine, the deposit of a bond in such form and in such sum, and with such surety or sureties, as it may direct. Section 7.06. Agreements Restricting Transfer of Shares. The Board of Directors may authorize the Corporation to become party to agreements with shareholders and others relating to transfer, repurchase and issuance of shares of stock of the Corporation; provided, however, that such agreements must be filed with the Corporation and all share certificates affected thereby shall have clearly imprinted thereon a legend containing such agreement or referring thereto. ARTICLE VIII Indemnification of Directors, Officers and Other Authorized Representatives Section 8.01. Scope of Indemnification. (a) General Rule. The Corporation shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise by reason of the fact that such person is or was serving in an indemnified capacity, including, without limitation, liabilities 20 21 resulting from any actual or alleged breach or neglect of duty, error, misstatement or misleading statement, negligence, gross negligence or act giving rise to strict or products liability, except: (1) where such indemnification is expressly prohibited by applicable law; (2) where the conduct of the indemnified representative has been finally determined pursuant to Section 8.06 or otherwise: (i) to constitute willful misconduct or recklessness within the meaning of 15 Pa.C.S. Section 1746(b) or any superseding provision of law sufficient in the circumstances to bar indemnification against liabilities arising from the conduct; or (ii) to be based upon or attributable to the receipt by the indemnified representative from the Corporation of a personal benefit to which the indemnified representative is not legally entitled; or (3) to the extent such indemnification has been finally determined in a final adjudication pursuant to Section 8.06 to be otherwise unlawful. (b) Partial Payment. If an indemnified representative is entitled to indemnification in respect of a portion, but not all, of any liabilities to which such person may be subject, the Corporation shall indemnify such indemnified representative to the maximum extent for such portion of the liabilities. (c) Presumption. The termination of a proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the indemnified representative is not entitled to indemnification. (d) Definitions. For purposes of this Article: (1) "indemnified capacity" means any and all past, present and future service by an indemnified representative in one or more capacities as a director, officer, employee or agent of the Corporation, or, at the request of the Corporation, as a director, officer, employee, agent, fiduciary or trustee of another Corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise; (2) "indemnified representative" means any and all directors and officers of the Corporation and any other person designated as an indemnified representative by the Board of Directors of the Corporation (which may, but need not, include any person serving at the request of the Corporation, as a director, officer, employee, agent, fiduciary or trustee of another Corporation, partnership, joint venture, trust, employee benefit plan or other entity or enterprise); 21 22 (3) "liability" means any damage, judgment, amount paid in settlement, fine, penalty, punitive damages, excise tax assessed with respect to an employee benefit plan, or cost or expense of any nature (including, without limitation, attorneys' fees and disbursements); and (4) "proceeding" means any threatened, pending or completed action, suit, appeal or other proceeding of any nature, whether civil, criminal, administrative or investigative, whether formal or informal, and whether brought by or in the right of the Corporation, a class of its security holders or otherwise. Section 8.02. Proceedings Initiated by Indemnified Representatives. Notwithstanding any other provision of this Article, the Corporation shall not indemnify under this Article an indemnified representative for any liability incurred in a proceeding initiated (which shall not be deemed to include counter claims or affirmative defenses) or participated in as an intervenor or amicus curiae by the person seeking indemnification unless such initiation of or participation in the proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors in office. This section does not apply to reimbursement of expenses incurred in successfully prosecuting or defending an arbitration under Section 8.06 or otherwise successfully prosecuting or defending the rights of an indemnified representative granted by or pursuant to this Article. Section 8.03. Advancing Expenses. The Corporation shall pay the expenses (including attorneys' fees and disbursements) incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 8.01 or the initiation of or participation in a proceeding which has been authorized by a majority of the directors in office pursuant to Section 8.02 upon receipt of an undertaking by or on behalf of the indemnified representative to repay the amount if it is ultimately determined pursuant to Section 8.06 that such person is not entitled to be indemnified by the Corporation pursuant to this Article. The financial ability of an indemnified representative to repay an advance shall not be a prerequisite to the making of such advance. Section 8.04. Securing of Indemnification Obligations. To further effect, satisfy or secure the indemnification obligations provided herein or otherwise, the Corporation may maintain insurance, obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the Corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the Board of Directors shall deem appropriate. Absent fraud, the determination of the Board of Directors with respect to such amounts, costs, terms and conditions shall be conclusive against all security holders, officers and directors and shall not be subject to voidability. Section 8.05. Payment of Indemnification. An indemnified representative who is entitled to indemnification under this Article VIII shall be entitled to payment within 30 days after a written request for indemnification has been delivered to the Secretary of the Corporation. 22 23 Section 8.06. Arbitration. (a) General Rule. Any dispute related to the right to indemnification, contribution or advancement of expenses as provided under this Article, except with respect to indemnification for liabilities arising under the Securities Act of 1933 that the Corporation has undertaken to submit to a court for adjudication, shall be decided only by arbitration in the metropolitan area in which the principal executive offices of the Corporation are located at the time, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the Corporation, the second of whom shall be selected by the indemnified representative and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, and if one of the parties fails or refuses to select an arbitrator or the arbitrators selected by the Corporation and the indemnified representative cannot agree on the selection of the third arbitrator within 30 days after such time as the Corporation and the indemnified representative have each been notified of the selection of the other's arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of general jurisdiction in the county in which the Corporation's executive office is located. (b) Qualifications of Arbitrators. Each arbitrator selected as provided herein is required to be or have been a director or executive officer of a Corporation whose shares of common stock were listed during at least one year of such service on the New York Stock Exchange or the American Stock Exchange or quoted on the National Association of Securities Dealers Automated Quotations System. (c) Burden of Proof. The party or parties challenging the right of an indemnified representative to the benefits of this Article shall have the burden of proof. (d) Expenses. The Corporation shall reimburse an indemnified representative for the expenses (including attorneys' fees and disbursements) incurred in successfully prosecuting or defending such arbitration. (e) Effect. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction, except that the Corporation shall be entitled to interpose as a defense in any such judicial enforcement proceeding any prior final judicial determination adverse to the indemnified representative under Section 8.01(a)(1) or Section 8.01(a)(2). This arbitration provision shall be specifically enforceable. Section 8.07. Contribution. If the indemnification provided for in this Article or otherwise is unavailable for any reason in respect of any liability or portion thereof, the Corporation shall contribute to the liabilities to which the indemnified representative may be subject in such proportion as is appropriate to reflect the intent of this Article or otherwise. 23 24 Section 8.08. Mandatory Indemnification of Directors, Officers, etc. To the extent that an authorized representative of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1741 or 1742 of the Business Corporation Law or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection therewith. Section 8.09. Contract Rights; Amendment or Repeal. All rights under this Article shall be deemed a contract between the Corporation and the indemnified representative pursuant to which the Corporation and each indemnified representative intend to be legally bound. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing. Section 8.10. Scope of Article. The rights granted by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification, contribution or advancement of expenses may be entitled under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an indemnified capacity and as to action in any other capacity. The indemnification, contribution and advancement of expenses provided by or granted pursuant to this Article shall continue as to a person who has ceased to be an indemnified representative in respect of matters arising prior to such time, and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person. Section 8.11. Reliance on Provisions. Each person who shall act as an indemnified representative of the Corporation shall be deemed to be doing so in reliance upon the rights of indemnification, contribution and advancement of expenses provided by this Article. Section 8.12. Interpretation. The provisions of this Article are intended to constitute bylaws authorized by 15 Pa.C.S. Section 1746. Section 8.13. Changes in Pennsylvania Law. References in this Article VIII to Pennsylvania law or to any provision thereof shall be to such law (including without limitation to the Directors' Liability Act) as it existed on the date this Article VIII was adopted or as such law thereafter may be changed; provided that (a) in the case of any change which expands the liability of Directors (or expands the liability of officers) or limits the indemnification rights or the rights to advancement of expenses which the Corporation may provide, the rights to limited liability, to indemnification and to the advancement of expenses provided in this Article shall continue as theretofore to the extent permitted by law; and (b) if such change permits the Corporation without the requirement of any further action by shareholders or Directors to limit further the liability of Directors (or limit the liability of Officers) or to provide broader indemnification rights or rights to the advancement of expenses than the Corporation was permitted to provide prior to such change, then liability thereupon shall be so limited and the rights to indemnification and the advancement of expenses shall be so broadened to the extent permitted by law. 24 25 ARTICLE IX Dividends and Other Distributions to Shareholders Section 9.01. Dividends. Subject to applicable law of the Commonwealth of Pennsylvania, and in accordance with the provisions thereof at the pertinent applicable time, the Board of Directors of the Corporation may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in cash or property other than its own shares, except when the Corporation is insolvent, or when the payment thereof would render the Corporation insolvent, or when the declaration or payment thereof would be contrary to any restriction contained in the articles, but: (1) Dividends may be declared and paid in cash or property only out of unreserved and unrestricted earned surplus of the Corporation, except as otherwise provided by statute; and (2) No dividends shall be paid which would reduce the remaining net assets of the Corporation below the aggregate preferential amount payable in the event of voluntary liquidation to the holders of shares having preferential rights to the assets of the Corporation in the event of liquidation. The Board of Directors may also, from time to time, distribute to the holders of the Corporation's outstanding shares having a cumulative preferential right to receive dividends in discharge of their cumulative dividend rights, dividends payable in cash out of the unrestricted capital surplus of the Corporation, if at the time the Corporation has no earned surplus and is not insolvent and would not thereby be rendered insolvent. Each such distribution, when made, shall be identified as a payment of cumulative dividends out of capital surplus. Section 9.02 Distributions of Shares of the Corporation. The Board of Directors of the Corporation may, from time to time, distribute pro rata to holders of any class or classes of its issued shares, treasury shares and authorized but unissued shares, but (1) If distribution is made, in the Corporation's authorized but unissued shares having a par value, there shall be transferred to stated capital at the time of such distribution an amount of surplus at least equal to the aggregate par value of the shares so issued; (2) If a distribution is made in the Corporation's authorized but unissued shares without par value, the Board of Directors may fix a stated value for the shares so issued, and there shall be transferred to stated capital, at the time of such distribution, an amount of surplus equal to the aggregate stated value, if any, so fixed; 25 26 (3) The amount per share so transferred to stated capital, or the fact that there was no such transfer, shall be disclosed to the shareholders receiving such distribution concurrently with the distribution thereof; (4) No distribution of shares of any class shall be made to holders of shares of any other class unless the articles so provide or such distribution is authorized by the affirmative vote or written consent of the holders of a majority of the outstanding shares of the class in which the distribution is to be made. In lieu of issuing fractional shares in any such distribution, the Corporation may pay in cash the fair value thereof, as determined by the Board of Directors, to shareholders entitled thereto. Section 9.03. Reserves. There may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Directors, from time to time, in their absolute discretion determine as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for the purchase of additional property, or for such other purpose as the Board of Directors shall think conducive to the interests of the Corporation. The Board of Directors may abolish or modify any such reserve. Section 9.04 Distributions in Partial Liquidation. The Board of Directors of the Corporation may, from time to time, distribute to the common shareholders in partial liquidation, out of unrestricted capital surplus of the Corporation, a portion of its assets in cash or property, subject to the following conditions: (1) No such distribution shall be made at a time when the Corporation is insolvent or when such distribution would render the Corporation insolvent; (2) No such distribution shall be made unless such distribution shall have been authorized by the prior affirmative vote, obtained within one (1) year of such distribution, of the holders of at least a majority of the outstanding shares of each class of common stock, whether or not entitled to vote thereon by the provisions of the articles; (3) No such distribution shall be made to the holders of any class of shares unless all cumulative dividends accrued on all classes of shares entitled to preferential dividends shall have been fully paid prior to dividends on the shares to the holders of which such distribution is to be made; (4) No such distribution shall be made to the holders of any class of shares which would reduce the remaining net assets of the Corporation below the aggregate preferential amount payable in the event of voluntary liquidation to the holders of shares having preferential rights to the assets of the Corporation in the event of liquidation; 26 27 (5) Each such distribution, when made, shall be identified as a distribution in partial liquidation and the amount per share disclosed to the shareholders receiving the same concurrently with the distribution thereof. ARTICLE X Miscellaneous Section 10.01. Checks. All checks, notes, bills of exchange or other similar orders in writing shall be signed by such one or more officers or employees of the Corporation as the Board of Directors may from time to time designate. Section 10.02. Contracts. (a) General Rule. Except as otherwise provided in the Business Corporation Law in the case of transactions that require action by the shareholders, the Board of Directors may authorize any officer or agent to enter into any contract or to execute or deliver any instrument on behalf of the Corporation, and such authority may be general or confined to specific instances. (b) Statutory Form of Execution of Instruments. Any note, mortgage, evidence of indebtedness, contract or other document, or any assignment or endorsement thereof, executed or entered into between the Corporation and any other person, when signed by one or more officers or agents having actual or apparent authority to sign it, or by the CEO, or Executive Vice President, COO or CFO and Secretary or assistant Secretary or Treasurer or assistant Treasurer of the Corporation, shall be held to have been properly executed for and in behalf of the Corporation, without prejudice to the rights of the Corporation against any person who shall have executed the instrument in excess of his or her actual authority. Section 10.03. Interested Directors or Officers; Quorum. (a) General Rule. A contract or transaction between the Corporation and one or more of its directors or officers or between the Corporation and another Corporation, partnership, joint venture, trust or other enterprise in which one or more of its directors or officers are directors or officers or have a financial or other interest, shall not be void or voidable solely for that reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors that authorizes the contract or transaction, or solely because his, her or their votes are counted for that purpose, if: (1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors and the Board authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors even though the disinterested directors are less than a quorum; 27 28 (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of those shareholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors or the shareholders. (b) Quorum. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board which authorizes a contract or transaction specified in subsection (a). Section 10.04. Deposits. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board of Directors may approve or designate, and all such funds shall be withdrawn only upon checks signed by such one or more officers or employees of the Corporation as the Board of Directors shall from time to time designate. Section 10.05. Corporate Records. (a) Required Records. The Corporation shall keep complete and accurate books and records of account, minutes of the proceedings of the incorporators, shareholders and directors and a share register giving the names and addresses of all shareholders and the number and class of shares held by each. The share register shall be kept at either the registered office of the Corporation in the Commonwealth of Pennsylvania or at its principal place of business wherever situated or at the office of its registrar or transfer agent. Any books, minutes or other records may be in written form or any other form capable of being converted into written form within a reasonable time. (b) Right of Inspection. Every shareholder shall, upon written verified demand stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books and records of account, and records of the proceedings of the incorporators, shareholders and directors and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to the interest of the person as a shareholder. In every instance where an attorney or other agent is the person who seeks the right of inspection, the demand shall be accompanied by a verified power of attorney or other writing that authorizes the attorney or other agent to so act on behalf of the shareholder. The demand shall be directed to the Corporation at its registered office in the Commonwealth of Pennsylvania or at its principal place of business wherever situated. 28 29 ARTICLE XI Amendments Section 11.01. Amendment of Bylaws. These bylaws may be amended or repealed, or new bylaws may be adopted, either (i) by vote of the shareholders at any duly organized annual or special meeting of shareholders, or (ii) with respect to those matters that are not by statute committed expressly to the shareholders and regardless of whether the shareholders have previously adopted or approved the bylaw being amended or repealed, by vote of a majority of the Board of Directors of the Corporation in office at any regular or special meeting of directors. Any change in these bylaws shall take effect when adopted unless otherwise provided in the resolution effecting the change. Section 11.02. Recording Amendments and Alterations. The text of all amendments and alterations to these bylaws shall be attached to the bylaws with a notation of the date of each such amendment or alteration and a notation of whether such amendment or alteration was adopted by the shareholders or the Board of Directors. ARTICLE XII Adoption of Bylaws - Record of Amendment Section 12.1. Adoption. These Amended and Restated Bylaws have been adopted and filed with the undersigned on the ___ day of June, 1998, and shall be effective as of ___________________. Section 12.2. Amendments to Bylaws. Section Amended Date Amended Adopted by ______________________________ [ ] Secretary June ___, 1998 29 EX-10.01 5 REGISTRATION RIGHTS AGREEMENT (CHASE EQUITY) 1 EXHIBIT 10.01 [EXECUTION COPY] ENTERTAINMENT COMMUNICATIONS, INC. REGISTRATION RIGHTS AGREEMENT Dated as of May 21, 1996 2 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of May 21, 1996 among ENTERTAINMENT COMMUNICATIONS, INC., a Pennsylvania corporation (the "Company") and CHASE EQUITY ASSOCIATES, L.P., a California limited partnership (the "Purchaser"). W I T N E S S E T H: WHEREAS, pursuant to the Convertible Subordinated Note Purchase Agreement, dated May 21, 1996, between the Company and certain other parties signatories thereto (the "Purchase Agreement"), the Purchaser has purchased Convertible Subordinated Notes from the Company; and WHEREAS, as a condition to the execution and delivery by the Purchaser of the Purchase Agreement, the Company has agreed to grant to the Purchaser registration rights with respect to certain securities of the Company; NOW, THEREFORE, in consideration of the mutual agreements and understandings set forth herein, the parties hereto hereby agree as follows: ARTICLE I CERTAIN DEFINITIONS As used in this Agreement, the following terms shall have the following respective meanings; provided, however, that capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Purchase Agreement: "Agreement" means this Agreement as in effect on the date hereof and as hereafter from time to time amended, modified or supplemented in accordance with the terms hereof. "Commission" means the Securities and Exchange Commission and any successor commission or agency having similar powers. "Company" has the meaning specified in the preamble to this Agreement. "Company Securities" has the meaning specified in Section 2.1(g). "Holder Request" has the meaning specified in Section 2.1(a). 3 "Initial Public Offering" means the public offer and sale of Common Stock of the Company, pursuant to the initial registration thereof under the Securities Act. "Managing Underwriter" has the meaning specified in Section 2.1(f). "NASDAQ" means the NASDAQ National Market or the NASDAQ Small Cap Market. "Note" means each of the Convertible Subordinated Notes issued pursuant to the Purchase Agreement. "Purchase Agreement" has the meaning specified in the first recital to this Agreement. "Registrable Securities" means Underlying Securities of the following types: (a) all shares of Common Stock issued or issuable upon the conversion of Notes or other convertible securities (including New Securities, if any) now or hereafter owned or acquired of record by any Qualified Holder; and (b) any shares of Common Stock issued or issuable by the Company in respect of the Notes or shares of Common Stock referred to in the foregoing clause (a) by way of a stock dividend or stock split or in connection with a combination or subdivision of shares, reclassification, recapitalization, merger, consolidation or other reorganization of the Company. As to any particular Registrable Securities that have been issued, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of under such registration statement, (ii) they shall have been distributed to the public pursuant to Rule 144 (or any similar provision then in effect), (iii) they shall have been otherwise transferred or disposed of, and new certificates therefor not bearing a legend restricting further transfer shall have been delivered by the Company, and subsequent transfer or disposition of them shall not require their registration or qualification under the Securities Act or any similar state law then in force, or (iv) they shall have ceased to be outstanding. "Registration Expenses" means any and all out-of-pocket expenses incident to the Company's performance of or compliance with Article II hereof, including, without limitation, all Commission, stock exchange or National Association of Securities Dealers, Inc. ("NASD") registration and filing fees, all fees and -2- 4 expenses of complying with securities and blue sky laws (including the reasonable fees and disbursements of underwriters' counsel in connection with blue sky qualifications and NASD filings), all fees and expenses of the transfer agent and registrar for the Registrable Securities, all printing expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits and/or "cold comfort" letters required by or incident to such performance and compliance, and one firm of counsel (other than house counsel) retained by the Holders, but excluding underwriting discounts and commissions, applicable transfer and documentary stamp taxes, if any, and filing fees which shall be borne by the seller of the securities in all cases. "Representative" means a representative designated by the Requisite Holders of Registrable Securities that are subject to a registration request pursuant to Article II hereof. "Securities" means any Common Stock or other capital stock of the Company, or warrants, options, convertible securities or other rights to acquire the foregoing. "Transferee" means any Person to whom any Purchaser has transferred Registrable Securities and who continues to hold Registrable Securities. "Underwritten Offering" has the meaning specified in Section 2.1(b). ARTICLE II REGISTRATION RIGHTS SECTION 2.1. Demand Registrations. (a) Subject to Section 2.1(j) below, at any time, and from time to time, following the first anniversary of an underwritten Initial Public Offering, any Qualified Holder may request in writing that the Company effect the registration under the Securities Act of all or part of the Registrable Securities of such Holder, specifying in the request the number and type of Registrable Securities to be registered by such Holder and the intended method of disposition thereof (such notice is hereinafter referred to as a "Holder Request"). Upon receipt of a Holder Request, the Company will promptly give written notice of such requested registration to all other Holders of Registrable Securities and securities convertible or exercisable into Registrable Securities, which other Holders shall have the right to include as Registrable Securities held by them in such registration and thereupon the Company will, as -3- 5 expeditiously as possible, use all reasonable efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which the Company has been so requested to register by the Qualified Holder requesting registration; (ii) all other Registrable Securities which the Company has been requested to register by any other Holder thereof by written request given to the Company within 30 calendar days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such Registrable Securities), all to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered; and (iii) shares of Common Stock for which Notes may be converted and which the Company has been requested to register by the Holder thereof by written request given to the Company within 30 days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such shares of Common Stock), all to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of such shares of Common Stock so to be registered; provided, however, that, in addition to postponements and delays pursuant to applicable law, the Company may postpone for not more than 90 calendar days, on one occasion only with respect to each request for registration made under this Section 2.1(a), the filing or effectiveness of a registration statement under this Section 2.1(a) if the Company and the Representative agree that such registration might reasonably be expected to have an adverse effect on any proposal or plan by the Company to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or similar transaction; provided, further, however, that, in such event, the Holders of Registrable Securities and securities convertible or exercisable into Registrable Securities initiating the request for such registration will be entitled to withdraw such request, and if such request is withdrawn such registration will not count as one of the permitted registrations under this Section 2.1. (b) Notwithstanding the foregoing provisions of Section 2.1(a), the Company shall not be obligated to effect more than one registration pursuant to this Section 2.1 in any twelve month period, in each case through a firm commitment underwriting through a nationally recognized underwriter (an "Underwritten Offering") and any requested registration must be for an -4- 6 aggregate number of Registrable Securities which the Representative reasonably believes will have aggregate net sale proceeds of $5,000,000. (c) If the Company proposes to effect a registration requested pursuant to this Section 2.1 by the filing of a registration statement on Form S-3 (or any similar short-form registration statement), the Company will comply with any and all reasonable requests by the Managing Underwriter to effect such registration on another permitted form if such Managing Underwriter advises the Company that, in its reasonable opinion, the use of another form of registration statement is of material importance to such proposed offering. (d) A registration requested pursuant to Section 2.1(a) will not be deemed to have been effected unless it has become effective; provided, however, that if after it has become effective, the offering of Registrable Securities pursuant to such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court (and such stop order, injunction or other order or requirement is not caused by (i) the breach by a Holder requesting registration of such Holder's obligations under this Agreement or (ii) an act or omission by any such Holder), such registration will be deemed not to have been effected. (e) The Company shall bear all Registration Expenses in connection with any registration requested pursuant to Section 2.1 and the Holders (together with Transferees, if any, participating in the registration on a pro rata basis); provided, however, in the event a Holder withdraws its demand subsequent to the exclusion of certain Registrable Securities pursuant to clause (h) below, such Holder shall reimburse the Company for its pro rata share of Registration Expenses based upon the proportion the number of shares of Registrable Securities such Holder requested to be registered bears to the total number of shares requested or proposed to be registered in such registration. (f) The Company shall have the right, subject to the reasonable approval of the Representative, to select the investment banker (or investment bankers) that shall manage the offering (collectively, the "Managing Underwriter"). (g) In connection with any offering pursuant to this Section 2.1, the only shares that may be included in such offering are (i) Registrable Securities, (ii) shares of authorized but unissued Common Stock that the Company elects to include in such offering ("Company Securities"), and (iii) shares of authorized but unissued Common Stock for which the Notes are convertible. -5- 7 (h) If in connection with any Underwritten Offering pursuant to this Section 2.1, the Managing Underwriter shall advise the Company that, in its judgment, the number of shares proposed to be included in such offering should be limited due to market conditions, then the Company will promptly so advise each Holder of Registrable Securities and securities convertible or exercisable into Registrable Securities that has requested registration, and shares shall be excluded from such offering in the following order until such limitation has been met: Company Securities, if any, shall be excluded until all of the Company Securities shall have been so excluded, and, thereafter the Registrable Securities requested to be included in such offering pursuant to Section 2.1(a)(ii) shall be excluded pro rata from among all Holders seeking to participate in such offering, based on the respective number of Registrable Securities as to which registration has been so requested by such Holders. (i) If (i) any shares of Common Stock requested to be included in a sale pursuant to this Section 2.1 shall not be outstanding but shall be issuable upon conversion of Notes which are outstanding, or (ii) any shares of Common Stock requested to be included in a sale pursuant to this Section 2.1 shall not be shares of Voting Common Stock then the Holders of such Notes or Non-Voting Common Stock and the Company shall take all actions necessary in order to convert such Notes or Non-Voting Common Stock into shares of Voting Common Stock in order to effect such sale. (j) The Company shall be obligated to effect two registrations under Section 2.1(a); provided, however, that such registrations under Section 2.1(a) shall only count towards this limit if (i) the registration statement thereunder becomes effective and remains effective (unless the failure to sell is due solely to the breach by a Holder requesting registration of such Holder's obligations under this Agreement or is due to a stop order, injunction or other order or action of the Commission which is caused by a Holder requesting registration) for 120 days or (if such sale occurs prior to the end of such 120 day period) until all shares of Registrable Stock and Common Stock for which the Notes are convertible registered under such statement are sold and (ii) such registration provides for distribution of all shares of Registrable Stock requested to be included therein. SECTION 2.2. Piggyback Registrations. (a) If the Company at any time proposes to register any of its equity securities under the Securities Act (other than a registration on Form S-4 or S-8 or any successor or similar forms thereto and other than pursuant to a registration under Section 2.1), whether or not for sale for its own account, on a form and in a manner that would permit registration of Registrable Securities for sale to the public under the Securities Act, it will give written notice to -6- 8 Holders and Transferees, if any, promptly of its intention to do so, describing such securities and specifying the form and manner and the other relevant facts involved in such proposed registration (including, without limitation, (x) whether or not such registration will be in connection with an underwritten offering of Registrable Securities and, if so, the identity of the Managing Underwriter and whether such offering will be pursuant to a "best efforts" or "firm commitment" underwriting and (y) the price (net of any underwriting commissions, discounts and the like) at which the Registrable Securities are reasonably expected to be sold). Upon the written request of any Holder or Transferee delivered to the Company within 30 calendar days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by the Holders or Transferees and the intended method of disposition thereof), such Holder or Transferee may participate in such registration and sale, and the Company will use all reasonable efforts to effect such registration under the Securities Act of all of the Registrable Securities that the Company has been so requested to register; provided, however, that: (i) If, at any time after giving such written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such securities, the Company may, at its election, give written notice of such determination to the Holders and the Transferees and thereupon the Company shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights, of the Holders or Transferees to request that such registration be effected as a registration under Section 2.1. (ii) If such registration involves an Underwritten Offering, the Holders and Transferees must sell their Registrable Securities to the underwriters selected by the Company on the same terms and conditions as apply to the Company. No registration effected under this Section 2.2 shall relieve the Company of its obligation to effect registration upon request under Section 2.1. (b) The Company shall not be obligated to effect any registration of Registrable Securities under this Section 2.2 incidental to the registration of any of its securities in connection with mergers, acquisitions, exchange offers, dividend -7- 9 reinvestment plans or stock option or other employee benefit plans. (c) The Registration Expenses (other than out of pocket expenses incurred by the Holders or Transferees) incurred in connection with each registration of Registrable Securities requested pursuant to this Section 2.2 shall be paid by the Company; provided, however, the Holders and Transferees shall pay their pro rata share of any underwriting discounts and commissions. (d) If a registration pursuant to this Section 2.2 involves an Underwritten Offering and the Managing Underwriter advises the issuer that, in its opinion, the number of securities proposed to be included in such registration should be limited due to market conditions, then the Company will exclude from such registration (i) first, on a pro rata basis, all equity securities (other than equity securities which the Company proposes to include in such registration) requested to be included in such registration, and (ii) thereafter, the equity securities the Company proposes to sell in such registration. (e) The Company shall have the right to select the Managing Underwriter with respect to the offering. (f) If (i) any shares of Common Stock requested to be included in a sale pursuant to this Section 2.2 shall not be outstanding but shall be issuable upon the conversion of the Notes which are outstanding, or (ii) any shares of Common Stock requested to be included in a sale pursuant to this Section 2.2 shall not be shares of Voting Common Stock, then the Holders of such Notes or Non-Voting Common Stock and the Company shall take all actions necessary in order to convert such Notes or NonVoting Common Stock into shares of Voting Common Stock in order to effect such sale. SECTION 2.3. Registration Procedures. (a) If and whenever the Company is required to use all reasonable efforts to effect or cause the registration of any Registrable Securities under the Securities Act as provided in Section 2.1 or Section 2.2, the Company will, as expeditiously as possible: (i) Prepare and, in any event within 90 calendar days after the end of the period within which requests for registration may be given to the Company, file with the Commission a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statements to become and remain effective; provided, however, that in the case of a registration provided for in Section 2.1 or Section 2.2, before filing a registration statement or prospectus or any -8- 10 amendments or supplements thereof, the Company will furnish to the counsel selected by the Representative copies of all such documents proposed to be filed, which documents will be subject to the review of such counsel; and, provided, further, that the Company may discontinue any registration of its securities that is being effected pursuant to Section 2.2 at any time prior to the effective date of the registration statement relating thereto. (ii) Prepare and file with the Commission such amendments (including post-effective amendments) and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period as may be requested by the Representative not exceeding the earlier of the day 120 days from the date of effectiveness of such registration statement or the date all Registrable Securities or shares of Common Stock for which the Notes are convertible registered by such registration statement have been sold and to comply with the provisions of the Securities Act with respect to the disposition of all Common Stock covered by such registration statement during such period in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement. (iii) Furnish to the Representative and to each underwriter, if any, of such Registrable Securities, such number of copies of a prospectus and preliminary prospectus for delivery in conformity with the requirements of the Securities Act, and such other documents, as the Representative may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities. (iv) Use all reasonable efforts to register or qualify such Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as the Representative shall reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable the Holders or Transferees to consummate the disposition of the Registrable Securities owned by the Holders or Transferees in such jurisdictions, except that the Company shall not for any such purpose be required (A) to qualify to do business as a foreign corporation in any jurisdiction where, but for the requirements of this Section 2.3(a)(iv), it is not then so qualified, or (B) to subject itself to taxation in any such jurisdiction, or (C) to take any action which would subject it to general or unlimited service of process in any such jurisdiction where it is not then so subject. -9- 11 (v) Use all reasonable efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Holders or Transferees to consummate the disposition of such Registrable Securities. (vi) Immediately notify the Representative at any time when a prospectus relating thereto is required to be delivered under the Securities Act within the appropriate period mentioned in Section 2.3(a)(ii), if the Company becomes aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and, at the request of the Representative deliver a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include 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 in the light of the circumstances then existing. (vii) Otherwise use its best efforts to comply with all applicable rules and regulations of the Commission and make generally available to its security Holders, in each case as soon as practicable, but not later than 45 calendar days after the close of the period covered thereby (90 calendar days in case the period covered corresponds to a fiscal year of the Company), an earnings statement of the Company which will satisfy the provisions of Section 11(a) of the Securities Act. (viii) Use all reasonable efforts in cooperation with the underwriters to list such Registrable Securities on the National Market System of NASDAQ, the American Stock Exchange or the New York Stock Exchange. (ix) In the event the offering is an Underwritten Offering, use all reasonable efforts to obtain a "cold comfort" letter from the independent public accountants for the Company in customary form and covering such matters of the type customarily covered by such letters as the Representative reasonably requests. (x) Execute and deliver all instruments and documents (including in an Underwritten Offering an underwriting agreement in customary form) and take such other actions and -10- 12 obtain such certificates and opinions as the Representative reasonably requests in order to effect an underwritten public offering of such Registrable Securities. (b) Holders and Transferees will, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2.3(a)(vi), forthwith discontinue disposition of the Registrable Securities pursuant to the registration statement covering such Registrable Securities until Holders and Transferees receive copies of the supplemented or amended prospectus contemplated by Section 2.3(a)(vi). (c) If a registration pursuant to Section 2.1 or Section 2.2 involves an Underwritten Offering, Holders and Transferees, whether or not the Registrable Securities of Holders or Transferees, or shares of Common Stock for which the Notes are convertible are included in such registration, not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any Registrable Securities, or of any security convertible into or exchangeable or exercisable for any Registrable Securities (other than as part of such Underwritten Offering) or the Notes or any shares of Common Stock for which the Notes are convertible without the consent of the Managing Underwriter, during a period commencing seven calendar days before and ending 120 calendar days (or such lesser number as the Managing Underwriter shall designate) after the effective date of such registration. (d) If a registration pursuant to Section 2.1 or Section 2.2 involves an Underwritten Offering, Holders and Transferees agree to execute an underwriting agreement in such customary form as the Underwriters may reasonably request. (e) If a registration pursuant to Section 2.1 or Section 2.2 involves an Underwritten Offering, the Company agrees, if so required by the Managing Underwriter, not to effect any public sale or distribution of any of its equity or debt securities, as the case may be, or securities convertible into or exchangeable or exercisable for any of such equity or debt securities, as the case may be, during a period commencing seven calendar days before and ending 120 calendar days after the effective date of such registration, except for such Underwritten Offering or except in connection with a stock option plan, stock purchase plan, savings or similar plan, or an acquisition, merger or exchange offer. (f) If a registration pursuant to Section 2.1 or Section 2.2 involves an Underwritten Offering, any Holder of Registrable Securities (or Notes with respect to the shares of Common Stock for which the Notes are convertible) requesting to be included in such registration may elect, in writing, prior to the effective -11- 13 date of the registration statement filed in connection with such registration, not to register such securities in connection with such registration, if such Holder has agreed with the Company or the Managing Underwriter to limit its rights under this Section 2.3. (g) It is understood that in any Underwritten Offering, in addition to any shares of Common Stock (the "initial shares") the underwriters have committed to purchase, the underwriting agreement may grant the underwriters an option to purchase up to a number of additional shares of authorized but unissued shares of Common Stock (the "allotment shares") equal to 15% of the initial shares (or such other maximum amount as the rules and regulations of the National Association of Securities Dealers, Inc. may then permit), solely to cover over-allotments. Allotment shares proposed to be sold shall first be allocated to shares proposed to be sold by the Company until all such securities, if any, shall have been so allocated. Thereafter, any additional allotment shares shall be allocated to Registrable Securities proposed to be sold by the Purchasers, the Transferees and any other shareholders of the Company, pro rata. (h) Notwithstanding anything in this Article II to the contrary, in lieu of converting any Note prior to or simultaneously with the filing or the effectiveness of any registration statement filed pursuant to this Article II, the Holder of such Note may sell such Note to the underwriter of the offering being registered upon the undertaking of such underwriter to convert such Note before making any distribution pursuant to such registration statement and to include the Common Stock issued upon such conversion among the securities being offered pursuant to such registration statement. The Company agrees to cause such Common Stock to be included among the securities being offered pursuant to such registration statement to be issued within such time as will permit the underwriter to make and complete the distribution contemplated by the underwriting. (i) With respect to any registration pursuant to Section 2.1 or Section 2.2 in which Registrable Securities of a Holder or Transferee are included, such Holder or Transferee shall use all reasonable efforts to provide the Company with such information as is necessary for the Company to effect such registration pursuant to Section 2.1 or Section 2.2. SECTION 2.4. Indemnification. (a) In the event of any registration of any securities of the Company under the Securities Act pursuant to Section 2.1 or Section 2.2, the Company will, and it hereby agrees to, indemnify and hold harmless, to the extent permitted by law, each seller of any Registrable Securities covered by such registration statement, -12- 14 its directors and officers or general and limited partners, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the Securities Act, as follows: (i) against any and all loss, liability, claim, damage or expense whatsoever arising out of or based upon an untrue statement or alleged untrue statement of a material fact contained in any registration statement (or any amendment or supplement thereto), including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of an untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense reasonably incurred by them in connection with investigating, preparing or defending against, or serving as witnesses in connection with, any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that this indemnity does not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such seller or underwriter expressly for use in the preparation of any registration statement (or any amendment thereto) or any preliminary prospectus or prospectus (or any amendment or supplement thereto); and provided, further, that the Company will not be liable to any Person who -13- 15 participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the Securities Act, under the indemnity agreement in this Section 2.4(a) with respect to any preliminary prospectus or final prospectus or final prospectus as amended or supplemented, as the case may be, to the extent that any such loss, claim, damage or liability of such underwriter or controlling Person results from the fact that such underwriter sold Registrable Securities to a Person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the final prospectus or of the final prospectus as then amended or supplemented, whichever is most recent, if the Company has previously furnished copies thereof to such underwriter. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, general or limited partner, investment advisor or agent, underwriter or controlling Person and shall survive the transfer of such securities by such seller. (b) The Company may require, as a condition to including any Registrable Securities in any registration statement filed in accordance with Section 2.1 or Section 2.2, that the Company shall have received an undertaking reasonably satisfactory to it from the prospective seller of such Registrable Securities or any underwriter, to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 2.4(a)) the Company (and its directors and officers and each other Person who controls the Company within the meaning of the Securities Act) with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such seller or underwriter specifically stating that it is for use in the preparation of such registration statement, preliminary, final or summary prospectus or amendment or supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling Person and shall survive the transfer of such securities by such seller. In that event, the obligations of the Company and such sellers pursuant to this Section 2.4 are to be several and not joint; provided, however, that with respect to each claim pursuant to this Section, the Company shall be liable for the full amount of such claim, and each such seller's liability under this Section 2.4 shall be limited to an amount equal to the net proceeds (after deducting the underwriting discount and expenses) received by such seller from the sale of -14- 16 Registrable Securities held by such seller pursuant to this Agreement. (c) Promptly after receipt by an indemnified party hereunder of written notice of the commencement of any action or proceeding involving a claim referred to in this Section 2.4, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to such indemnifying party of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section 2.4, except to the extent (not including any such notice of an underwriter) that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim (in which case the indemnifying party shall not be liable for the fees and expenses of more than one firm of counsel for the sellers of Registrable Securities, or more than one firm of counsel for the underwriters in connection with any one action or separate but similar or related actions), the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that it may wish with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnifying party in connection with the defense thereof. (d) The Company and each seller of Registrable Securities shall provide for the foregoing indemnity (with appropriate modifications) in any underwriting agreement with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority. SECTION 2.5. Contribution. In order to provide for just and equitable contribution in circumstances under which the indemnity contemplated by Section 2.4 is for any reason not available, the parties required to indemnify by the terms thereof shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company, any seller of Registrable Securities and one or more of the underwriters, except to the extent that contribution is not permitted under Section 11(f) of the Securities Act. In determining the amounts which the respective parties shall contribute, there shall be considered -15- 17 the relative benefits received by each party from the offering of the Registrable Securities (taking into account the portion of the proceeds of the offering realized by each), the parties' relative knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any statement or omission and any other equitable considerations appropriate under the circumstances. The Company and each Person selling securities agree with each other that no seller of Registrable Securities shall be required to contribute any amount in excess of the amount such seller would have been required to pay to an indemnified party if the indemnity under Section 2.4(b) were available. The Company and each such seller agree with each other and the underwriters of the Registrable Securities, if requested by such underwriters, that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation (even if the underwriters were treated as one entity for such purpose) or for the underwriters' portion of such contribution to exceed the percentage that the underwriting discount bears to the initial public offering price of the Registrable Securities. For purposes of this Section 2.5, each Person, if any, who controls an underwriter within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as such underwriter, and each director and each officer of the Company who signed the registration statement, and each Person, if any, who controls the Company or a seller of Registrable Securities within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Company or a seller of Registrable Securities, as the case may be. SECTION 2.6. Rule 144. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder (or, if the Company is not required to file such reports, it will, upon the request of the Representative make publicly available other information), and it will take such further action as a Holder or Transferee may reasonably request, all to the extent required from time to time to enable the Holder or Transferee to sell shares of Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the Commission. Upon the request of a Holder or Transferee, the Company will deliver to such Holder or Transferee a written statement as to whether it has complied with such requirements. -16- 18 SECTION 2.7. Other Provisions Regarding Registration Rights. Notwithstanding anything to the contrary in any previous agreement or security, upon the execution and delivery of this Agreement by all parties hereto, the Company shall have no obligations to the Holders with respect to the registration of any shares of Stock, except as provided in this Agreement. ARTICLE III TERMINATION This Agreement shall in any event terminate with respect to any Holder or any Transferee when (i) such Person and its Affiliates (other than the Company) cease to hold Common Stock (including shares to be received upon the conversion of the Notes) and (ii) solely with respect to the provisions of Article II, on the third anniversary of the Company's Initial Public Offering. ARTICLE IV MISCELLANEOUS SECTION 4.1. Successors and Assigns. Except as otherwise provided herein, this Agreement shall be binding upon the parties hereto and their respective successors and assigns, including, without limitation and without the need for an express assignment, Transferees, and shall inure to the benefit of and shall be enforceable by the respective successors and assigns of the parties hereto and the successors and assigns of all Transferees. No Purchaser may assign any of its rights hereunder to any Person other than a Transferee that has complied with the requirements of the Purchase Agreement (if applicable) as provided therein in all respects. Such Transferee must represent to the Company in writing that it agrees (x) to be bound by and to comply with all provisions of this Agreement or any other Transaction Document and (y) to execute any amendment, supplement or other modification of this Agreement or any other Transaction Document as may be reasonably requested by the Company; provided, that the purpose of such amendment or other modification shall be limited to the furtherance of the preceding clause (x) and shall not, in any respect, be substantively inconsistent with any other terms or provisions hereof or thereof. SECTION 4.2. Amendment and Modification; Waiver of Compliance; Conflicts. (a) This Agreement may be amended only by a written instrument duly executed by the Company and Holders and Transferees representing a majority in interest of the Registrable Securities. -17- 19 (b) Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. (c) In addition to the provisions of Section 4.2(b), any failure of the Company to comply with any obligation, covenant, agreement or condition herein may be waived by a written instrument duly executed by the Representative, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. SECTION 4.3. Notices. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and shall be made by personal service, facsimile, or reputable courier service: (i) if to any Stockholder or subsequent Stockholder, at the address or telecopier number set forth on the signature pages hereof, or such other address as shall be designated in a written notice delivered to the Company, with a copy to Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019, Facsimile No. (212) 262-1910, Attention: Mark S. Wojciechowski, Esq.; and (ii) if to the Company, at the address or telecopy number set forth on the signature pages hereof, or such other address as shall be designated in a written notice delivered to the other parties hereto, with a copy to: Morgan, Lewis & Bockius LLP, 2000 One Logan Square, Philadelphia, Pennsylvania 19103-6993, Facsimile No. (215) 963-5299, Attention: Michael J. Pedrick. Unless otherwise specifically provided herein, any notice or other communication shall be deemed to have been given when delivered in person or by courier service, upon receipt of facsimile (electronically confirmed), or five Business Days after depositing it in the United States airmail with postage prepaid and properly addressed. SECTION 4.4. Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding, written or verbal, of the parties -18- 20 hereto in respect of the subject matter contained herein and supersedes all prior agreements and understandings between the parties with respect to such subject matter. SECTION 4.5. Injunctive Relief. The Holders and the Company acknowledge and agree that a violation of any of the terms of this Agreement will cause the Holders irreparable injury for which an adequate remedy at law is not available. Therefore, the Holders and the Company agree that the Holders shall be entitled to an injunction, restraining order or other equitable relief from any court of competent jurisdiction, restraining the Company from committing any violations of the provisions of this Agreement. SECTION 4.6. Inspection. For so long as this Agreement shall be in effect, this Agreement shall be made available for inspection by any Holder at the principal executive offices of the Company. SECTION 4.7. Headings. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. SECTION 4.8. Indemnification. The Company hereby agrees, without limitation as to time, to indemnify and hold harmless all Indemnified Parties (as defined below) from and against all Losses (as defined below). "Indemnified Party" shall mean each of the Holders, each affiliate of any Holder and respective directors, officers, agents and employees of each of the foregoing, and each other Person controlling any of the foregoing within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act. "Losses" shall mean any and all losses, claims, damages, liabilities or other costs or expenses to which an Indemnified Party may become subject which arise out of or relate to or result from any investigative, administrative or judicial proceeding brought or threatened relating to this Agreement, the Purchase Agreement or any other Transaction Document, or arising out of or relating to a breach by the Company of any of the terms of any such agreement or any transaction, action or proceeding to or connected with the transactions described in this Agreement, the Purchase Agreement or any other Transaction Document; provided, that no Indemnified Party shall have the right to be indemnified hereunder for such Indemnified Party's own gross negligence or wilful misconduct as determined by a court of competent jurisdiction. In addition to the foregoing, the Company agrees to reimburse each Indemnified Party for all legal or other expenses incurred in connection with investigating, defending or participating in any action or other proceeding relating to any Losses (whether or not such Indemnified Party is a party to any such action or proceeding). -19- 21 SECTION 4.9. Recapitalizations, Exchanges, Etc., Affecting the Common Stock; New Issuances. The provisions of this Agreement shall apply, to the full extent set forth herein with respect to the Common Stock and to any and all other Securities of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution of, such equity or debt securities and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, reclassifications, recapitalizations, reorganizations and the like occurring after the date hereof. SECTION 4.10. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 4.11. Consent to Jurisdiction and Service of Process. ALL JUDICIAL PROCEEDINGS BROUGHT BY THE COMPANY OR THE HOLDERS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OBLIGATION MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND EACH HOLDER, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER TRANSACTION DOCUMENT OR SUCH OBLIGATION. The Company and each Holder hereby agrees that service of all process in any such proceeding in any such court may be made by registered or certified mail, return receipt requested, to such Person at its address provided on the signature pages hereto, such service being hereby acknowledged by such Person to be sufficient for personal jurisdiction in any action against such Person in any such court and to be otherwise effective and binding service in every respect. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of the Company or any Holder to bring proceedings against the other in the courts of any other jurisdiction. SECTION 4.12. Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party hereto acknowledges that this waiver is a material inducement to enter -20- 22 into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings. Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. -21- 23 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of the date first above written. ENTERTAINMENT COMMUNICATIONS, INC. By:_____________________________________ Name: Title: Notice Address: 401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 Attention:______________________________ Telephone: 610-660-5610 Facsimile: 610-660-5620 CHASE EQUITY ASSOCIATES, L.P. By: CHASE CAPITAL PARTNERS, L.P. its General Partner By: Name: Michael R. Hannon Title: Principal Notice Address: 380 Madison Avenue, 12th Floor New York, New York 10017 Attention: Michael R. Hannon Telephone: 212-622-3012 Facsimile: 212-622-3101 -22- 24 TABLE OF CONTENTS Page RECITALS..................................................................... 1 ARTICLE I CERTAIN DEFINITIONS Agreement.................................................... 1 Commission................................................... 1 Company...................................................... 1 Company Securities........................................... 1 Holder Request............................................... 1 Initial Public Offering...................................... 2 Managing Underwriter......................................... 2 NASDAQ....................................................... 2 Note......................................................... 2 Purchase Agreement........................................... 2 Registrable Securities....................................... 2 Registration Expenses........................................ 2 Representative............................................... 3 Securities................................................... 3 Transferee................................................... 3 Underwritten Offering........................................ 3 ARTICLE II REGISTRATION RIGHTS 2.1. Demand Registrations......................................... 3 2.2. Piggyback Registrations...................................... 6 2.3. Registration Procedures...................................... 8 2.4. Indemnification.............................................. 12 2.5. Contribution................................................. 15 2.6. Rule 144..................................................... 16 2.7. Other Provisions Regarding Registration Rights............... 17 ARTICLE III TERMINATION ARTICLE IV MISCELLANEOUS 4.1. Successors and Assigns....................................... 17 4.2. Amendment and Modification; Waiver of Compliance -i- 25 Page Conflicts.................................................... 17 4.3. Notices...................................................... 18 4.4. Entire Agreement............................................. 18 4.5. Injunctive Relief............................................ 19 4.6. Inspection................................................... 19 4.7. Headings..................................................... 19 4.8. Indemnification.............................................. 19 4.9. Recapitalizations, Exchanges, Etc., Affecting the Common Stock; New Issuances.............................. 20 4.10. Applicable Law............................................... 20 4.11. Consent to Jurisdiction and Service of Process............... 20 4.12. Waiver of Jury Trial......................................... 20 -ii- EX-10.02 6 EMPLOYMENT AGREEMENT JOSEPH FIELD 1 EXHIBIT 10.02 EMPLOYMENT AGREEMENT THIS AGREEMENT made and entered into in Bala Cynwyd, Montgomery County, Pennsylvania this 25th day of June, 1993 as of January 1, 1993 by and between JOSEPH M. FIELD ("Employee"), and ENTERTAINMENT COMMUNICATIONS, INC., a Pennsylvania corporation ("Employer"). W I T N E S S E T H: WHEREAS, Employer is in the business of owning and operating radio broadcasting stations licensed to it by the Federal Communications Commission; and WHEREAS, Employee has served as President and Chief Executive officer of the Company since its inception approximately twenty-four years ago; and WHEREAS, the term of the Employment Agreement previously in effect between Employer and Employee by its terms expired on December 31, 1991 but was temporarily extended by agreement of the parties pending entry into this Agreement, and Employee and Employer have agreed to a new agreement for a term and on the basis described herein. NOW, THEREFORE, intending to be legally bound, the parties hereby agree as follows: 1. The Employment Agreement previously in force between the parties dated July 12, 1989, the term of which was extended by agreement, is hereby superseded and abrogated by the terms hereof effective January 1, 1993. 2. Employer hereby employs Employee as President and Chief Executive officer of the company for a period of two (2) years commencing January 1, 1993 and Employee agrees to devote his full business time and attention to carry out the duties as President and Chief Executive officer of Employer. Either party desiring this Agreement to terminate at the end of such initial two year period or any renewal period shall give the other party at least thirty days written notice of termination prior to the end of the then current term. In the absence of such a notice of termination at the end of the initial term or any renewal term, this Agreement shall automatically renew for an additional period of one year. 3. In consideration of the services to be rendered to Employer, Employee shall receive annual base compensation during his first year of employment hereunder of $500,000.00. Said annual base compensation shall be increased or decreased annually as of the anniversary date of the commencement date of the Agreement by a percentage equal to the percentage of inflation or deflation over the last preceding twelve month period as determined in the seasonally adjusted Gross National Product implicit Price Deflator issued by the Bureau of Economic Analysis of the United States Department of Commerce for the period from the 31st of December immediately preceding the prior year to the 31st of December immediately preceding the then current year. In addition, 2 Employee shall receive such additional salary, bonuses, fees and other compensation as may be approved by the Board of Directors from time to time and shall be entitled to participate in any bonus, profit sharing, retirement, insurance or other plan or program adopted by the Company for employees generally. 4. During the term of this Agreement, Employer shall furnish Employee with the use of a Company automobile. 5. In the event of the death of Employee during the term of this Agreement, Employer shall pay to Employee's widow, if surviving, otherwise to his children or their issue surviving per stirpes, compensation at the rate then being received by Employee for a period of one (1) year following Employee's death. 6. In the event of the onset of conditions during the term of this Agreement which with the passage of time result in the total disability of Employee, Employer shall pay to Employee the compensation payable under this Agreement at the rate then being received by Employee for the period or periods of total disability, or one year, whichever is less, and anything herein to the contrary notwithstanding the term of this Agreement shall be extended through the end of the period during which disability compensation pursuant to this paragraph is payable to Employee. For purposes of the foregoing, a period of total disability shall mean a period during which physical, mental, emotional or neurological conditions prevent Employee from performing Employee's normal duties under this Agreement. 7. In the event of termination of Employee's employment by resignation or termination by Employer for cause, Employee agrees that he will not without the written consent of Employer for a period of two (2) years from and after the date of such termination engage in any broadcast business competing with Employer in any standard metropolitan statistical area as defined by the Federal Bureau of Census in which Employer is then operating a broadcast property. 8. This Agreement shall be binding upon Employer and its successors by merger, consolidation or otherwise and shall be construed in accordance with the laws of the Commonwealth of Pennsylvania This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. It supersedes any previous oral or written communications and agreements and shall not be amended, modified or changed except in writing duly executed by the parties hereto. 3 IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written. ENTERTAINMENT COMMUNICATIONS, INC. By: /s/ John C. Donlevie Executive Vice President /s/ Jane F. Sweeney /s/ Joseph M. Field Witness Joseph M. Field 4 Memo to: Joseph M. Field From: Gene Levin Re: Auto Allowance Date: August 20, 1996 In accordance with paragraph 4 of the Employment Agreement between Entertainment Communications, Inc. and Joseph M. Field, the Company is required to furnish you with the use of an automobile. Due to the theft and non-replacement of the previously supplied Company automobile, you are entitled to a car allowance until such time as another vehicle is purchased by the Company. Accordingly, you will be paid a monthly car allowance of $1,000 retroactive to 4/12/96 . cc: John Donlevie David Field EX-10.03 7 EMPLOYMENT AGREEMENT DAVID FIELD 1 Exhibit 10.03 December 28, 1992 TO: David J. Field FROM: Joseph M. Field RE: Terms of Employment This will confirm the agreement which we have reached regarding the terms of your employment as Vice President-Operations and Chief Financial officer at Entercom effective October 1, 1992. We have agreed that commencing October 1, 1992 you will be compensated as follows: 1. Your weekly salary will be $2,876.71 (annual rate of $150,000.00). Effective as of October 1, 1993 your weekly salary will be increased to $3356.16 (annual rate of $175,000.00) and effective as of October 1, 1994 your weekly salary will be increased to $3,835.62 (annual rate of $200,000.00). 2. in addition to the salary set forth in 1 above, we have agreed that you will be paid an incentive bonus based on increases in the real cash flow of the Company. The formula set out below attempts to do this but it cannot anticipate significant changes in the Company's accounting methods which may occur subsequent to the date of this letter. Therefore in the event of a significant change in the Company's accounting methods that would result in a significant deviation from the stated purpose of the incentive then we have agreed to equitably adjust the formula set forth below so that after reflecting such accounting change the formula reflects the principle that the incentive is to be based on changes in real cash flow. Changes in the Company's accounting methods which have occurred prior to the date of this letter have already been considered and are fully reflected in the formula. The formula to which we have agreed is that you will be paid incentive compensation equal to 1.0% of the excess of the Company's annual Adjusted Net Income (as defined below) over the ANI Bass (as defined below) using an October 1 to September 30 fiscal year, beginning with the fiscal year commencing October 1, 1992. Such incentive shall be paid on the first regular payroll date for the corporate office which occurs after the December 31st following the end of the fiscal year in question. In the event of a termination of your employment, the incentive payable under this paragraph 2 for the year of termination shall be the portion of the incentive that would have been payable for the entire fiscal year in which the termination occurs which is computed by multiplying the incentive for such entire fiscal year by a fraction in which the numerator is the number of days from the start of such fiscal year to the date of termination and the denominator is 365. 3. For purposes of this agreement the following definitions shall be applicable. 1 2 (a) For the fiscal year ending 9/30/93 the "ANI Base" shall be $1,080,594.00, the amount of the adjusted net income for the fiscal year ending 9/30/92. For each subsequent fiscal year the "ANI Base" shall be increased by a percentage equal to the percentage increase in the CPI-U for September of that year compared to the CPI-U for September one year earlier. (b) "Normal Capital Replacements" in the fiscal year ending 9/30/92 shall mean $56,552.22 for each station owned and operated by the Company (i.e. 11 x $56,552.22 - $622.077.75 total for FYE 9/30/92). This per station amount will be increased each fiscal year thereafter in accordance with increases in the CPI-U for the preceding one year period (September to September) and shall also be adjusted for any changes in the number of stations owned and operated by the Company. (c) "Pro Forma Taxable Income (Loss)" shall mean the net income of the Company as shown on the audited financial statements of the Company for the fiscal year in question adjusted for book vs. tax permanent differences but not adjusted for book vs. tax timing differences. For example, 20% of certain travel and entertainment expenses are not deductible expenses for tax purposes and are a book vs. tax permanent difference. Therefore the net income of the Company must be increased by the non-deductible portion of such expenses in computing "Pro Forma Taxable Income." On the other hand the difference between book depreciation (computed an a straight line basis) and tax depreciation (computed on an accelerated basis) is a book vs. tax timing difference and is not to be used as an adjustment to net income of the Company in computing "Pro Forma Taxable Income." All such book vs. tax differences (both permanent and timing differences) are identified on the Company's Federal Income Tax Return. In the event that the Company files an amended tax return which changes the tax treatment of any such book vs. tax difference from a timing difference to a permanent difference or vice versa, then the effect of such change on the Pro Forma Taxable Income for the amended year shall be added (or subtracted as the case may be) from the Pro Forma Taxable Income of the year in which such amended tax return is filed. (d) "Shareholders Tax Obligation (Benefit)" shall mean the amount, for any fiscal year in which the Company is taxed as a Subchapter S corporation, which is computed by multiplying the Pro Forma 2 3 Taxable Income or Loss of the Company by the higher of the combined maximum income tax rates (federal, state and local) applicable to a shareholder or shareholders resident in Lower Merion Township, Pennsylvania or to a shareholder or shareholders holding at least 25% of the Company's capital stock who reside in any other jurisdiction as of the end of the calendar year in which the Company's fiscal year ends. In the event that there is Pro Forma Taxable Income the resultant number is the Shareholders Subchapter S Tax Obligation. In the event that there is a Pro Forma Taxable Loss the resultant number is the Shareholders Subchapter S Tax Benefit. (e) "Adjusted Net Income" shall mean net income of the Company as shown on the audited financial statements of the Company for the fiscal year in question plus charges or expenses for depreciation or amortization (exclusive of amortization of format change expenses) less Normal Capital Replacements (as defined above) and, so long as the Company is taxed as a Subchapter S corporation, less the Shareholders Subchapter S Tax Obligation or plus the Shareholders Subchapter S Tax Benefit (as defined above) as the case may be. 4. You will be provided with the use of a Company vehicle (to be selected by the Company) and insurance thereon. You will be responsible for gas for the automobile. The Company will be responsible for repairs and maintenance (including oil). 5. You will be entitled to medical insurance for yourself and your dependents and to life insurance, vacation and other benefits available to officers of the Company in accordance with Company policy. You will also be eligible to participate in the Entercom Officers Profit Sharing Plan in accordance with the terms of the Plan. 6. It is understood and agreed that your position is one of executive authority involving the exercise of discretion in matters affecting the vital interests of the Company, including the existence and degree of profitability of the enterprise and the maintenance and renewal of its principal assets, its FCC broadcast licenses. It is therefore essential that the relationship at all times be one of complete confidence and mutual understanding with respect to policies and goals. Accordingly it is expressly understood that nothing herein shall be construed as altering the "at will" nature of your employment and either party retains the right to terminate this agreement at any time either for good cause or solely for the convenience of either party provided that, except where there is good cause for said termination, each party agrees to give at least thirty (30) days' notice in advance of said termination. If you give notice of termination, the Company may at its option waive such notice and accept your termination effective at any time prior to the expiration of the notice period. 3 4 Memo to: David Field From: Joe Field Date: December 1, 1996 Re: Modification to Employment Agreement This will confirm that we have agreed to modify your Entercom employment agreement dated December 28, 1992. Effective October 1, 1996, your current annual salary of $250,000, as last adjusted on October 1, 1995, will be increased annually effective on October 1 of each year commencing October 1, 1996. The increase shall be a percentage equal to the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U), as published by the U.S. Department of Labor for the immediately preceding August, compared to the CPI-U for the month of August one year earlier. Please confirm your agreement to the above by signing and returning the enclosed copy of this memo. Accepted and Agreed: By: /s/ David Field ------------------ David Field Date: 2/11/97 ------------------ 4 5 7. In addition it is understood and agreed that for the one year period following the termination of your employment with the Company you will not, without the express prior written permission of the Company, employ, offer to employ, counsel a third party to employ, or participate in any manner in the recommendation, recruitment or solicitation of the employment of any person who was an employee of the Company on the date of the termination of your employment or at any time within the 90 days prior thereto. In the event that any such person shall be employed in a position under your direct or indirect supervision within such one year period without the Company's express prior written permission, it shall be conclusively presumed that this restriction has been violated. Please confirm your agreement to the foregoing by signing and returning the enclosed copy of this memo. Very truly yours, /s/ Joseph M. Field Joseph M. Field As agreed /s/ David J. Field David J. Field Date 5/18/93 5 EX-10.04 8 EMPLOYMENT AGREEMENT JOHN C DONLEVIE 1 Exhibit 10.04 December 28, 1992 TO: John C. Donlevie FROM: Joseph M. Field RE: Terms of Employment This will confirm the agreement which we have reached regarding the terms of your employment at Entercom effective October 1, 1992. 1. Your weekly salary will be $2,710.88 (annual rate of $141,353.00). Effective January 1, 1993 your weekly salary will be increased to $2,876.71 (annual rate of $150,000.00). Your salary will be increased annually effective January 1 of each year commencing January 1, 1994. The increase shall be a percentage equal to the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U), as published by the U.S. Department of Labor for the immediately preceding November compared to the CPI-U for the month of November one year earlier. 2. In addition to the salary set forth in 1 above, we have agreed that you will be paid an incentive bonus based on increases in the real cash flow of the Company. The formula set out below attempts to do this but it cannot anticipate significant changes in the Company's accounting methods which may occur subsequent to the date of this letter. Therefore in the event of a significant change in the Company's accounting methods that would result in a significant deviation from the stated purpose of the incentive then we have agreed to equitably adjust the formula set forth below so that after reflecting such accounting change the formula reflects the principle that the incentive is to be based on changes in real cash flow. Changes in the Company's accounting methods which have occurred prior to the date of this letter have already been considered and are fully reflected in the formula. The formula to which we have agreed is that you will be paid incentive compensation equal to 1.0% of the excess of the Company's annual Adjusted Net Income (as defined below) over the ANI Base (as defined below) using an October 1 to September 30 fiscal year, beginning with the 1992-93 fiscal year. Such incentive shall be paid on the first regular payroll date for the corporate office which occurs after the December 31st following the and of the fiscal year in question. In the event of a termination of your employment, the incentive payable under this paragraph 2 for the year of termination shall be that portion of the incentive that would have been payable for the entire fiscal year in which the termination occurs, which is computed by multiplying the incentive for the entire fiscal year by a fraction in which the numerator is the number of days from the start of the fiscal year to the date of termination and the denominator is 365. 3. For purposes of this agreement the following definitions shall be applicable. (a) The "ANI Base" for the 1992-93 fiscal year shall be $1,080,594.00 This amount is the ANI for the 1991-92 fiscal year. For each fiscal year following the 1992-93 fiscal year the "ANI Base" shall be increased by a percentage equal to the percentage 2 increase in the CPI-U for September of that year compared to the CPI-U for September one year earlier. (b) "Normal Capital Replacements" in the 1991-92 fiscal year shall be $56,552.22 for each radio station owned and operated by the Company. This per station amount will be increased each fiscal year thereafter in accordance with increases in the CPI-U for the preceding one year period (September to September) and shall also be adjusted pro rata for any changes in the number of stations owned and operated by the Company during any year. (c) "Pro Forma Taxable Income (Loss)" shall mean the net income of the Company as shown on the audited financial statements of the Company for the fiscal year in question adjusted for book vs. tax permanent differences but not adjusted for book vs. tax timing differences. For example, 20% of certain travel and entertainment expenses are not deductible expenses for tax purposes and are a book vs. tax permanent difference. Therefore the net income of the Company must be increased by the non-deductible portion of such expenses in computing "Pro Forma Taxable Income". On the other hand the difference between book depreciation (computed on a straight line basis) and tax depreciation (computed on an accelerated basis) is a book vs. tax timing difference and is not to be used as an adjustment to net income of the Company in computing "Pro Forma Taxable Income." All such book vs. tax differences (both permanent and timing differences) are identified on the Company's Federal Income Tax Return. In the event that the Company files an amended tax return which changes the tax treatment of any such book vs. tax difference from a timing difference to a permanent difference or vice versa, then the effect of such change on the Pro Forma Taxable Income for the amended year shall be added (or subtracted as the case may be) from the Pro Forma Taxable Income of the year in which such amended tax return is filed. (d) "Shareholders Tax Obligation (Benefit)" shall mean the amount, for any fiscal year in which the company is taxed as a Subchapter S corporation, which is computed by multiplying the Pro Forma Taxable Income (or Loss) of the Company by the higher of the combined maximum income tax rates (federal, state and local) applicable to a shareholder or shareholders resident in Lower Merion Township, Pennsylvania or to a shareholder or shareholders holding at least 25% of the Company's capital stock who reside in any other jurisdiction as of the and of the calendar year in which the Company's fiscal year ends. In the event that there is Pro Forma Taxable Income the resultant number is the Shareholders Subchapter S Tax Obligation In the event that there is a Pro Forma Taxable Loss the resultant number is the Shareholders Subchapter S Tax Benefit. (e) "Adjusted Net Income" shall mean net income of the Company as shown on the audited financial statements of the Company for the fiscal year in question plus charges or expenses for depreciation or amortization (exclusive of amortization of format change expenses) less Normal Capital Replacements (as defined above) and, so long as the Company 3 is taxed as a Subchapter S corporation, less the Shareholders Subchapter S Tax Obligation or plus the Shareholders Subchapter S Tax Benefit (as defined above) as the case may be. 4. In the event the Company makes a Special or Liquidating Distribution, as defined below, you will be paid a Special Bonus equal to 0.5% of the total amount or value of any such Special Distribution or 0.1% of any such Liquidating Distribution. Such Special Bonus will be in addition to the salary and incentive compensation set forth in paragraphs 1 and 2 above. Notwithstanding anything to the contrary set forth herein, in the event that any portion of any special or Liquidating Distribution is made in a medium other than cash, the Company at its option may elect to pay the same portion of any such Special Bonus in the same medium or alternatively in a similar medium or in cash of at least equivalent value. Such Special Bonus shall be earned as of the record date for any such Distribution and shall be paid on the same date as such Distribution is made to shareholders, provided that you must be employed on such record date to earn any such Special Bonus, and further provided that no change or adjustment shall be made to the "ANI Base" as a result of any such Special or Liquidating Distribution in the year of any such Distribution or in any subsequent year, it being agreed that the Special Bonus shall be in lieu of any such change or adjustment. A Special Distribution shall be defined as any dividend or distribution made to the shareholders except: (a) regular dividends or distributions made on a quarterly or other periodic basis; (b) dividends or distributions made to defray shareholders' liability for income taxes with respect to the taxable income of the Company; and (c) any dividend or distribution of stock or rights, warrants or options to acquire stock either in the Company or any other company which is related to it either as a parent, subsidiary, successor or company under common or similar ownership or control; and (d) any Liquidating Distribution. A "Liquidating Distribution" shall be defined as any dividend or distribution made to the shareholders pursuant to a plan of complete liquidation of the Company. 5. You will be entitled to medical insurance for yourself and your dependents and to life insurance, vacation and other benefits available to officers of the company in accordance with Company policy. You will also be eligible to participate in the Entercom Officers Profit Sharing Plan in accordance with the terms of the Plan. 6. You will be provided with the use of a Company vehicle (to be selected by the Company) and insurance thereon. You will be responsible for gas for the automobile. The Company will be responsible for repairs and maintenance (including oil). 4 7. It is understood and agreed that your position is one of executive authority involving the exercise of discretion in matters affecting the vital interests of the Company, including the existence and degree of profitability of the enterprise and the maintenance and renewal of its principal assets, its FCC broadcast licenses It is therefore essential that the relationship at all time be one of complete confidence and mutual understanding with respect to policies and goals. Accordingly it is expressly understood that nothing herein shall be construed as altering the "at will" nature of your employment and either party retains the right to terminate this agreement at any time either for good cause or solely for the convenience of either party provided that, except where there is good cause for said termination, each party agrees to give at least thirty (30) days' notice in advance of said termination. If you give notice of termination, the Company may at its option waive such notice and accept your termination effective at any time prior to the expiration of the notice period. Please confirm your agreement to the foregoing by signing and returning the enclosed copy of this memo. Very truly yours, /s/ Joseph M. Field Joseph M. Field As agreed /s/ John C. Donlevie - -------------------- John C. Donlevie Date ------------------- 5 John C. Donlevie Employment Agreement Calculation of Adjusted Net Income for Fiscal Year Ending 9/30/92 Net Income 370,187 Plus: Depreciation and Amortization 1,468,193 (exclusive of amortization of format change expenses) Subtotal 1,838,380 Less: Normal Capital Replacements 1 622,077 - ---- Less: Shareholders Tax Obligation 2 135,709 - ---- --------- Adjusted Net Income FYE 9/30/92 1,080,594 (1) Normal Capital Replacements for FYE 9/30/92 is computed in accordance with paragraph 3(b) as follows: Normal capital replacements for FYE 9/30/91 was $54,905.36 per station x CPI increase of 3.0% = $56,552.52 This amount x 11 stations = $622,077.75. (2) The Shareholders Tax Obligation is computed as follows: Pro Forma Taxable Income is equal to Net Income of $370,187 plus an adjustment for permanent book vs. tax differentials of $29,546. Thus Pro Forma Taxable Income is $399,733. The applicable tax rate is 33.95%, which is the sum of the 31% Federal Income Tax Rate and the 2.95% Pennsylvania State Income Tax Rate. The Shareholders Tax Obligation is equal to Pro Forma Taxable Income x the applicable tax rate: i.e. $399,733 x 33.95% which equals $135,709.35. 6 MEMORANDUM TO: John C. Donlevie and Eugene D. Levin FROM: Joseph M. Field DATE: September 8, 1994 IN RE: Incentive Compensation Calculation In connection with the calculation of the incentive compensation which you are to receive based upon the special distribution paid to shareholders of the Company on August 2, 1994, we have discussed the issue of the amount of state tax obligation that the shareholders may have relating to the tax on the gain on the sale of the assets of KRXX-FM - Minneapolis and KOQL-FM - Oklahoma City. The taxation of this gain in the various states is not free from doubt. The Company has adopted a position with respect to such state tax obligation, which tax counsel to the Company has advised is a reasonable position. Based upon this position, the total income tax obligation of the shareholders relating to the sale of the assets referenced above is $8,022,582.00. Of that amount the obligation for state income taxes is $593,159.00. This memo will confirm that we have agreed to compute the incentive compensation on the basis of the state tax obligation of the shareholders determined in accordance with the above-referenced position. However, in the event that the state tax obligation of the shareholders with respect to such sales is increased either through final audit or settlement, then each of you has agreed that the incentive compensation payable as a result of said special distribution would be recomputed and in the event the incentive compensation bonus is reduced as a result of such recomputation, your compensation at the time of such recomputation will be reduced by the amount of the reduction in the incentive bonus. Please confirm your agreement to the foregoing by signing and returning the enclosed copy of this memo. AS AGREED: /s/ Eugene D. Levin /s/ John C. Donlevie - ------------------- -------------------- Eugene D. Levin John C. Donlevie 7 MEMORANDUM MEMO TO: John C. Donlevie FROM: Joe Field DATE: August 2, 1996 RE: Incentive Compensation This will confirm that we have agreed to change the formula for incentive compensation set forth in the memorandum dated 12/28/92 as modified by memos dated 3/17/94 and 9/8/94 to eliminate the effects of the deferral of program format change expenses and to change the treatment of amortization of financing costs. We have also agreed that amortization of financing costs should not be added back to net income in order to determine ANI. This adjustment will be made retroactive to years ending 1992 and thereafter. As a result of this change the ANI base set forth in the memo dated 12/28/92 is amended to the sum of $1,194,440.00. The net adjustment in incentive for fiscal years ending 1993 and 1994, using the new ANI base and eliminating all effects for deferral of program format change costs results in a net additional payment to you of $5,777.00. Please confirm your agreement to the above changes by signing and returning the enclosed copy of this memo If you have any questions regarding this memo please call me. ACCEPTED AND AGREED: BY:/s/ John C. Donlevie DATE: 8/9/96 EX-10.05 9 EMPLOYMENT AGREEMENT DEBORAH KANE 1 Exhibit 10.05 March 31, 1995 MEMO TO: Deborah Kane FROM: David J. Field RE: Appointment as Entercom's Director of Strategic Sales This will confirm our arrangement regarding your appointment as Entercom's Director of Strategic Sales effective January 1, 1995. The terms of your appointment to this new position are as follows: 1. Your duties and responsibilities shall be as set forth in Exhibit A hereto. 2. Compensation. So long as you are performing the duties of Director of Strategic Selling you will be compensated as follows: a. Salary. You will be paid a semi-monthly salary of $3,333.33 (annual rate of $80,000). b. One Time Payment. You will receive a one time payment of $5,000 payable on February 23, 1995. c. Car Allowance. You will receive a semi-monthly car allowance of $208.33 (annual rate of $5,000) to reimburse you for your expense involved in using your own vehicle in connection with your duties. d. Corporate SBD Incentive. You will be paid 2% of Entercom SBD Revenue, as defined below (i) in excess of $250,000 in each fiscal quarter during the period 4/1/95 to 9/30/95 and (ii) in excess of $450,000 in each fiscal quarter commencing on or after 10/1/95. e. KITS SBD Incentive. In addition, you will earn 1% of all SBD Revenue from KITS in San Francisco commencing 4/1/95. f. Quarterly SBD Budget Incentive. You will be paid a quarterly bonus of $2,000 for each fiscal quarter year commencing on 4/1/95 in which Entercom's SBD Revenue equals or exceeds the SBD Revenue budget amount for that quarter. The SBD Revenue budget amount will be set for each quarter in any particular fiscal year (October 1 to 2 September 30) at the beginning of that fiscal year by David Field after consulting with you. If such bonus is not earned in a particular quarter but in a subsequent quarter in the same fiscal year the aggregate year to date SBD Revenue budget is met, then the $2,000 bonus for the missed quarter will be paid with the bonus for the current quarter (i.e. if the fiscal year SBD Revenue budget is met on a year-to-date basis then to the extent not paid for prior quarters in the fiscal year you will be paid the $2,000 per quarter for each quarter in the fiscal year, up to a maximum quarterly SBD budget incentive bonus of $8,000 per fiscal year.) g. Quarterly Gross Revenue Budget Incentive. You will be paid a quarterly bonus of $2,000 for each fiscal quarter year commencing 1/1/95 in which Entercom's Consolidated Gross Revenue equals or exceeds the Consolidated Gross Revenue budget amount for that quarter. The Consolidated Gross Revenue budget amount will be set for each quarter in any particular fiscal year at the beginning of the fiscal year by David Field based on the approved Gross Revenue budgets for each of Entercom's stations. If such bonus is not earned in a particular quarter but in a subsequent quarter in the same fiscal year the aggregate year to date Gross Revenue budget is met, then the $2,000 bonus for the missed quarter will be paid with the bonus for the current quarter (i.e. if the fiscal year Gross Revenue budget is met on a year-to-date basis then to the extent not paid for prior quarters in the fiscal year you will be paid the $2,000 per quarter for each quarter in the fiscal year, up to a maximum quarterly Gross Revenue budget incentive bonus of $8, 000 per fiscal year.) h. KITS LSM Override - You will continue to earn the override on adjusted gross revenue for local accounts on KITS set forth in your prior agreement through the end of the March, 1995 Standard Broadcast Month. Thereafter this override will terminate. i. The incentives set forth in 2.d. through 2.g. above shall be paid on the 23rd of the 2nd month following the end of the quarter in question. Calculation of such incentives may be estimated using monthly or weekly billing reports but are subject to adjustment or refund in any subsequent payroll where the final quarterly financial statements are available. 3. You will be entitled to such vacation, leave and other benefits and shall be subject to such rules and regulations and disciplinary action as shall be in effect from time to time in accordance with Company policy. Company reserves the right to modify or terminate any such 3 benefits, rules or regulations at any time upon notice to you. During any periods of unpaid leave in accordance with such benefits, no salary or incentive compensation shall be earned. 4. It is understood and agreed that your position is one of executive authority involving the exercise of discretion in matters involving the vital interests of the Company, including the existence and degree of profitability of the enterprise. It is therefore essential that the relationship at all times be one of complete confidence and mutual understanding with respect to policies and goals. Accordingly, it is expressly agreed that your employment shall be employment "at will" and shall be subject to termination at any time with or without cause and with or without notice at the option of either you or the Company. If at the time of any termination of this Agreement you are entitled to severance pay, payment in lieu of notice, or payment for unused vacation, such pay shall be based upon the amount of the salary set forth herein and shall not contain any amounts for incentive compensation. 5. You will be required to maintain and use your own vehicle to perform your duties hereunder. You agree to maintain automobile liability insurance for such vehicle with coverage of at least $300,000 per occurrence. Company's obligation with respect to your vehicle shall be limited to the "Car Allowance" set forth in 2.c. above and Company shall not be responsible for any costs or expenses associated with the use of such vehicle. 6. This Agreement constitutes the entire agreement and understanding between you and the Company concerning the compensation to be paid to you and all of the terms and conditions of your employment. This Agreement supersedes any prior understanding, representations or agreements whether oral or written concerning the subject matter hereof. This Agreement may not be modified or amended except by written instrument duly executed by each of the parties. A waiver by either party of any term or condition of this Agreement, or the breach thereof, shall not be deemed to constitute a waiver of any other term or condition of this Agreement or of any subsequent breach of any term or condition hereof. I am excited about the prospects for our new Strategic Selling program and can't think of anybody in the world who I'd rather have leading the change. 4 Please confirm your agreement to the foregoing by signing and returning the enclosed copy of this memo. Very truly yours, /s/ David J. Field David J. Field Sr. Vice President DJF: dbs As agreed: /s/ Deborah Kane Deborah Kane Date 4/20/95 5 EXHIBIT "A" Your duties and responsibilities will include: a. Build a customer focused selling culture which materially enhances Entercom's selling effectiveness on a sustainable, day-to-day basis. To accomplish this, you will develop industry-leading selling capabilities within the organization on Strategic Business Development. b. Develop, oversee and administer a systematic program of training, reinforcement and consultation and develop and maintain the required systems and procedures, reporting, communications, troubleshooting, feedback, and rewards. c. Provide daily telephone contact with SM's, AE's, and Account Decision Makers for sales call plans, review strategy, solve problems, brainstorm, etc. d. Conduct monthly conference calls with the stations. e. Distribute sales leads. f. Coordinate the vendor and non-traditional sales training and marketing efforts at all Entercom's stations. g. Periodically provide ideas, information and materials to each of the Entercom stations to enhance and improve the Entercom stations' SBD, vendor and overall sales efforts. h. Be available for consultation, brainstorming and problem solving with personnel at each of the Entercom stations involved in vendor and non-traditional sales. i. Work to develop multi-station/market vendor and strategic sales opportunities for the Entercom stations. j. Become certified to instruct Entercom personnel various training programs such as Conceptual Selling, Strategic Selling, Negotiation Skills, Time Management, in addition to any other program that Entercom deems as necessary and beneficial to its people. k. Conduct on-site training sessions at all Entercom Radio stations and follow up each training program with station visits to ensure correct application of the programs. Visits will include training, problem-solving and strategy sessions with local staff and management plus Green Sheet reviews and sales calls with Station personnel. Minimum of two station visits per month. 6 l. Develop a complete sales training manual for all Entercom Radio Stations that incorporates the best points of all programs. m. Continue to investigate the very best sales and staff training programs available and to determine the most cost effective manner to implement the programs. n. As new sales people and managers enter our stations, train them on all available programs. o. Continue your role as National Vendor Director of Entercom by assisting Entercom's stations in the management of the Alternative Sales efforts through, in-station training, infield sales calls, reviewing proposals, uncovering and distributing sales leads, and monthly conference calls. p. Continue to assist the sales management at Entercom's radio stations in an effort to stimulate the sales staffs to get maximum effectiveness in the alternative arenas. q. Provide a report on a monthly basis to David Field concerning your activities and the status and success of the company's vendor and strategic sales efforts. r. You will no longer serve as the Local Sales Manager of KITS, San Francisco, but you will be responsible for the direct supervision of the station's Business Development Program at KITS. s. Continue to develop alternative and direct sales programs for Live 105/KITS. 7 M E M O R A N D U M DATE: May 28,1996 TO: Deborah Kane FROM: David J. Field RE: Compensation Agreement CC: JCD, GL Deborah, I have listed below an outline of terms for your new contract which will have an effective date of April 1, 1996. You will note that the contract generally reflects our prior discussions and meetings, but I have made some modifications and actually enhanced the structure in certain respects to better reflect your contributions to Entercom. While I will be out of the country until May 20, feel free to leave a message on my voice mail if you would like to discuss any aspect of the agreement. If the terms are acceptable to you, please confirm your agreement with Jack and Gene, so that they may document the arrangement and immediately change your compensation to reflect your new structure. This has been an exciting year of enormous progress for Entercom and you have played a vital role in our corporate evolution. You have done an outstanding job in refining the Essential Sales Management Skills program, working with each of the stations on programs, skills and systems, and helping to develop our sales and sales management personnel. Now, we must make ESMS an integral part of our stations' systems and methods so that we may reap the benefits of this outstanding program. We have some extraordinary challenges and opportunities ahead of us in the coming months and years as we continue to rapidly grow the Company, both in terms of our size and our operational capabilities. I have enormous confidence in your judgment, skills and effectiveness and know that you will play a critical role in our success. SUMMARY CONTRACT TERMS Salary: $100,000 Benefits: General Manager equivalent 8 Company Car: You will forego your car allowance and be entitled to an automobile on similar terms and conditions as Entercom General Managers. Bonus: You will no longer receive any bonus for SBD revenue or LIVE 105 sales revenues. Your bonus plan will be based entirely an the MBO plan. MBO Plan: You will receive incentive compensation of $10,000 - $15,000 per quarter based upon the following MBO criteria. You will complete a worksheet to cover all of these criteria which you will complete and send to David Field after each quarter. On the Worksheet, you will evaluate your performance against each of the MBO goals and based on this self-evaluation you will propose an appropriate bonus level within the $10,000 to $15,000 range. Your evaluation should emphasize the quality of your performance and the magnitude of your contributions, more than just the satisfactory completion of each goal. An outstanding performance and the achievement of all goals should yield a $15,000 bonus. A merely good performance with the completion of most goals should justify a $10,000 bonus. David Field will review your self-evaluation and determine the level of your MBO bonus compensation. While your self-evaluation will be considered as part of your compensation review, it is not binding in any way on David Field. The following will be your MBO goals for the twelve months ending March 31, 1997. These goals will be subject to change. MBO's Assist in developing and implementing strategic plans to reach or exceed market share goals for each station and market. These goals will be established by David Field in consultation with Deborah Kane and local management. Certain markets may be designated as key markets, due to opportunity or problems, and these markets will be accorded greater weight in evaluating performance against this MBO. Complete the initial implementation of ESMS's mandatory systems and station-directed core systems with station management at all existing stations by April 30, 1996 and at all new acquisitions within 60 days of operating takeover. Provide David Field with updated list of each station's core systems. Ensure that ESMS becomes an essential element of each station's process and procedures by reinforcement (training, follow-up visits and calls, etc.), compliance review, training new hires, etc. ESMS must be a passionate, core component of the Entercom culture and system. If it is not, we will have failed. Provide David Field with succinct monthly report by the 15th of the following month. The reports should cover the following areas, albeit it not in every monthly report: a one paragraph review of each market with an emphasis on future development not past history; Deborah Kane's top three priorities; significant problems with planned solutions; major projects with timelines for 9 completion; list of individuals deserving special recognition; plan of action for the following month(s); and a broad assessment of our progress. Implement AE training of all AE Skill Enhancement systems such as Conceptual Selling, Strategic Selling, CNA, Negotiation Skills and Written Presentation Model. Continue to provide on-going Sales Management training. Evaluate new training needs and programs, and consider enhancements to existing training systems and tools. In sum, passionately pursue a goal of continuous improvement as we strive to build our "Culture of Excellence". Interview and provide substantive input on all station Sales Management hires. Advise station sales management in recruiting key sales talent. Make a substantive contribution to planning and implementing the successful integration and development of new acquisitions, particularly multi-station "'clusters". Conduct. and accompany AE's on a minimum of five Key and/or Target accounts per market visit. Minimum of one visit to each market per quarter. Take an active role in the strategic planning for all Entercom Key and Target Accounts. Oversee the Entercom Sales Club Assist in structuring and implementation of new compensation structures for Account Executives. Conduct a competitive compensation study for GM, GSM and AE's with major competitors. Continue to maintain a special focus on LIVE 105 sales, based on your history in the market and at the station and your proximity. Become actively involved in reviewing station sales budgets for fiscal 1997. Performance against these budgets will be a key component of your future bonuses. Each quarter, do three unequivocally great things which make a difference in our collective success. Examples might include making a manifest difference in the development of an employee, successfully recruiting an outstanding talent, or implementing a company-wide policy or system that makes us a stronger operation. The only qualification is that these "great things" are unambiguous and that you are truly proud of them. Retake Strategic Selling OTHER: Your bonus for the period January-March, 1996 should be based on 2% of SBD revenues for January and February in excess of $300,000. You should already 10 have received 1% of all LIVE 105 SBD dollars. In addition, we will pay you a $6,500 bonus for your outstanding launch of ESMS during March. Please provide Gene Levin immediately with a copy of the January and February summary SBD revenues so that he may process your May 23, 1996 bonus without delay. 11 MEMORANDUM MEMO TO: Deborah Kane RE: Compensation Plan FROM: David J. Field DATE: May 9, 1997 As we discussed, you will receive $14,000 for your 2nd fiscal quarterly bonus. I'm also very pleased to make the following changes in your compensation package retroactive to April 1, 1997. * Base salary of $135,000 * In addition to your existing MBO bonus, we will add a performance bonus based upon Entercom revenue performance vs. budget, vs. market growth and considering other relevant factors. Because of the extraordinary number of new properties, this performance bonus will not be tied to any objective formula for the remainder of Fiscal 1997, but will be determined by me after reviewing the company-wide revenue statistics. This bonus will be limited to $5,000 per quarter for excellent company-wide performance. Commencing October 1, 1997, your salary will remain at $135,000, but we will make the following changes to your incentive plan: * Your MBO incentive will be reduced to a maximum of $35,000 per year ($8,750 per quarter) for excellent performance as described in my memo of May 28, 1996, which is attached. * In lieu of the $5,000 per quarter performance bonus, you will be eligible for the following: - $5,000 per quarter if Entercom achieves its aggregate quarterly revenue budget. - $2,500 for achievement of between 95% and 99.9% of that budget - 0.2% of all revenue in excess of the aggregate Entercom budget. - We will, of course, exclude from the calculation any new stations which we acquire until they are integrated into our budgeting system. * We will add a market share bonus of $15,000 per year ($3,750 per quarter) for achievement of quarterly market revenue share goals to be determined and defined prior to the commencement of Fiscal 1998. 12 Deborah, we have made great progress towards our goal of building a "culture of excellence". You have made a remarkable impact over the past year and I took forward to great accomplishment in the future. cc: Joseph M. Field John C. Donlevie Eugene D. Levin EX-10.06 10 EMPLOYMENT AGREEMENT EUGENE D. LEVIN 1 Exhibit 10.06 December 28, 1992 TO: Eugene D. Levin FROM: Joseph M. Field RE: Terms of Employment This will confirm the agreement which we have reached regarding the terms of your employment at Entercom effective October 1, 1992. We have agreed that commencing October 1, 1992 you will be compensated as follows: 1. Your weekly salary will be $1,534.25 (annual rate of $80,000.00). Effective as of January 1, 1993 your weekly salary will be increased to $1,630.14 (annual rate of $85,000.00). Your salary will be increased annually effective January 1 of each year commencing January 1, 1994. The increase shall be a percentage equal to the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U), as published by the U.S. Department of Labor for the immediately preceding November, compared to the CPI-U for the month of November one year earlier. 2. In addition to the salary set forth in 1 above, we have agreed that you will be paid an incentive bonus based on increases in the real cash flow of the Company. The formula set out below attempts to do this but it cannot anticipate significant changes in the Company's accounting methods which may occur subsequent to the date of this letter. Therefore in the event of a significant change in the Company's accounting methods that would result in a significant deviation from the stated purpose of the incentive then we have agreed to equitably adjust the formula set forth below so that after reflecting such accounting change the formula reflects the principle that the incentive is to be based on changes in real cash flow. Changes in the Company's accounting methods which have occurred prior to the date of this letter have already been considered and are fully reflected in the formula. The formula to which we have agreed is that you will be paid incentive compensation equal to 0.5% of the excess of the Company's annual Adjusted Net Income (as defined below) over the ANI Base (as defined below) using an October 1 to September 30 fiscal year, beginning with the 1992-93 fiscal year. Such incentive shall be paid on the first regular payroll date for the corporate office which occurs after the December 31st following the end of the fiscal year in question. In the event of a termination of your employment, 2 the incentive payable under this paragraph 2 for the year of termination shall be that portion of the incentive that would have been payable for the entire fiscal year in which the termination occurs, which is computed by multiplying the incentive for the entire fiscal year by a fraction in which the numerator is the number of days from the start of the fiscal year to the date of termination and the denominator is 365. 3. For purposes of this agreement the following definitions shall be applicable. (a) The "ANI Base" for the 1992-93 fiscal year shall be $1,080,594.00. This amount is the ANI for the 1991-92 fiscal year. For each fiscal year following the 1992-93 fiscal year the "ANI Base" shall be increased by a percentage equal to the percentage increase in the CPI-U for September of that year compared to the CPI-U for September one year earlier." (b) "Normal Capital Replacements" in the 1991-92 fiscal year shall be $56,552.22 for each radio station owned and operated by the Company. This per station amount will be increased each fiscal year thereafter in accordance with increases in the CPI-U for the preceding one year period (September to September) and shall also be adjusted pro rata for any changes in the number of stations owned and operated by the Company during any year. (c) "Pro Forma Taxable Income (Loss)" shall mean the net income of the Company as shown on the audited financial statements of the Company for the fiscal year in question adjusted for book vs. tax permanent differences but not adjusted for book vs. tax timing differences. For example, 20% of certain travel and entertainment expenses are not deductible expenses for tax purposes and are a book vs. tax permanent difference. Therefore the net income of the Company must be increased by the non-deductible portion of such expenses in computing "Pro Forma Taxable Income". On the other hand the difference between book depreciation (computed on a straight line basis) and tax depreciation (computed on an accelerated basis) is a book vs. tax timing difference and is not to be used as an adjustment to net income of the Company in computing "Pro Forma Taxable Income". All such book vs. tax 3 differences (both permanent and timing differences) are identified on the Company's Federal Income Tax Return. In the event that the Company files an amended tax return which changes the tax treatment of any such book vs. tax difference from a timing difference to a permanent difference or vice versa, then the effect of such change on the Pro Forma Taxable Income for the amended year shall be added (or subtracted as the case may be) from the Pro Forma Taxable Income of the year in which such amended tax return is filed. (d) "Shareholders Tax Obligation (Benefit)" shall mean the amount, for any fiscal year in which the Company is taxed as a Subchapter S corporation, which is computed by multiplying the Pro Forma Taxable Income (or Loss) of the Company by the higher of the combined maximum income tax rates (federal, state and local) applicable to a shareholder or shareholders resident in Lower Merion Township, Pennsylvania or to a shareholder or shareholders holding at least 25% of the Company's capital stock who reside in any other jurisdiction as of the end of the calendar year in which the Company's fiscal year ends. In the event that there is Pro Forma Taxable Income the resultant number is the Shareholders Subchapter S Tax Obligation. In the event that there is a Pro Forma Taxable Loss the resultant number is the Shareholders Subchapter S Tax Benefit. (e) "Adjusted Net Income" shall mean net income of the Company as shown on the audited financial statements of the Company for the fiscal year in question plus charges or expenses for depreciation or amortization (exclusive of amortization of format change expenses) less Normal Capital Replacements (as defined above) and, so long as the Company is taxed as a Subchapter S corporation, less the Shareholders Subchapter S Tax Obligation or plus the Shareholders Subchapter S Tax Benefit (as defined above) as the case may be. 4. In the event the Company makes a Special or Liquidating Distribution, as defined below, you will be paid a Special Bonus equal to 0.25% of the total amount or value of any such Special Distribution or 0.05% of any such Liquidating Distribution. Such Special Bonus will be in addition to the salary and incentive compensation set forth in paragraphs 1 and 2 above. Notwithstanding anything to the contrary set forth 4 herein, in the event that any portion of any special or Liquidating Distribution is made in a medium other than cash, the Company at its option may elect to pay the same portion of any such Special Bonus in the same medium or alternatively in a similar medium or in cash of at least equivalent value. Such Special Bonus shall be earned as of the record date for any such Distribution and shall be paid on the same date as such Distribution is made to shareholders, provided that you must be employed on such record date to earn any such Special Bonus, and further provided that no change or adjustment shall be made to the "ANI Base" as a result of any such Special or Liquidating Distribution in the year of any such Distribution or in any subsequent year, it being agreed that the Special Bonus shall be in lieu of any such change or adjustment. A Special Distribution shall be defined as any dividend or distribution made to the shareholders except: (a) regular dividends or distributions made on a quarterly or other periodic basis; (b) dividends or distributions made to defray shareholders' liability for income taxes with respect to the taxable income of the Company; and (c) any dividend or distribution of stock or rights, warrants or options to acquire stock either in the Company or any other company which is related to it either as a parent, subsidiary, successor or company under common or similar ownership or control; and (d) any Liquidating Distribution. A "Liquidating Distribution" shall be defined as any dividend or distribution made to the shareholders pursuant to a plan of complete liquidation of the Company. 5. You will be entitled to medical insurance for yourself and your dependents and to life insurance, vacation and other benefits available to officers of the Company in accordance with Company policy. You will also be eligible to participate in the Entercom Officers Profit Sharing Plan in accordance with the terms of the Plan. 5 6. You will be provided with the use of a Company vehicle (to be selected by the Company) and insurance thereon. You will be responsible for gas for the automobile. The Company will be responsible for repairs and maintenance (including oil). 7. It is understood and agreed that your position is one of executive authority involving the exercise of discretion in matters affecting the vital interests of the Company, including the existence and degree of profitability of the enterprise and the maintenance and renewal of its principal assets, its FCC broadcast licenses. It is therefore essential that the relationship at all times be one of complete confidence and mutual understanding with respect to policies and goals. Accordingly it is expressly understood that nothing herein shall be construed as altering the "at will" nature of your employment and either party retains the right to terminate this agreement at any time either for good cause or solely for the convenience of either party provided that, except where there is good cause for said termination, each party agrees to give at least thirty (30) days' notice in advance of said termination. If you give notice of termination, the Company may at its option waive such notice and accept your termination effective at any time prior to the expiration of the notice period. Please confirm your agreement to the foregoing by signing and returning the enclosed copy of this memo. Very truly yours, /s/ Joseph M. Field Joseph M. Field As agreed /s/ Eugene D. Levin Eugene D. Levin Date: 8/13/93 6 Eugene D. Levin Employment Agreement Calculation of Adjusted Net Income for Fiscal Year Ending 9/30/92 Net Income 370,187 Plus: Depreciation and Amortization 1,468,193 (exclusive of amortization of format change expenses) Subtotal 1,838,380 Less: Normal Capital Replacements 1 622,077 - ---- Less: Shareholders Tax Obligation 2 135,709 ----------- Adjusted Net Income for FYE 9/30/92 1,080,594 (1) Normal Capital Replacements for FYE 9/30/92 is computed in accordance with paragraph 3(b) as follows: Normal capital replacements for FYE 9/30/91 was $54,905.36 per station x CPI increase of 3.0% - $56,552.52. This amount x 11 stations = $622,077.75. (2) The Shareholders Tax Obligation is computed as follows: Pro Forma Taxable Income is equal to Net Income of $370,187 plus an adjustment for permanent book vs. tax differentials of $29,546. Thus Pro Forma Taxable Income is $399,733. The applicable tax rate is 33.95%, which is the sum of the 31% Federal Income Tax Rate and the 2.95% Pennsylvania State Income Tax Rate. The Shareholders Tax Obligation is equal to Pro Forma Taxable Income x the applicable tax rate: i.e. $399,733 x 33.95% which equals $135,709.35. 7 March 17, 1994 MEMO TO: Eugene D. Levin FROM: Joseph M. Field RE: Terms of Employment This will confirm our agreement regarding amendments to our letter agreement dated December 28, 1992 as follows: 1. The definition of Pro Forma Taxable Income (Loss) contained in paragraph 3(c) of the letter agreement is amended to read as follows: (c) "Pro Forma Taxable Income (Loss)" shall mean the net income of the Company as shown on the audited financial statements of the Company for the fiscal year in question excluding any gain or loss from the sale or other disposition of Company owned real estate, radio stations (including FCC licenses, goodwill and other intangibles as well as real and tangible assets associated therewith) or other business units, adjusted for book vs. tax permanent differences but not adjusted for book vs. tax timing differences. For example, 20% of certain travel and entertainment expenses are not deductible expenses for tax purposes and are a book vs. tax permanent difference. Therefore the net income of the Company must be increased by the non-deductible portion of such expenses in computing "Pro Forma Taxable Income". On the other hand the difference between book depreciation (computed on a straight line basis) and tax depreciation (computed on an accelerated basis) is a book vs. tax timing difference and is not to be used as an adjustment to net income of the Company in computing "Pro Forma Taxable Income". All such book vs. tax differences (both permanent and timing differences) are identified on the Company's Federal Income Tax Return. In the event that the Company files an amended tax return which changes the tax treatment of any such book vs. tax difference from a timing difference to a permanent difference or vice versa, then the effect of such change on the Pro Forma Taxable Income for the amended year shall be reflected by adding (or subtracting as the case may be) to or from the Pro Forma Taxable Income of the year in which such amended tax return is filed, instead of making any adjustment to the Pro Forma Taxable Income for the amended year. 8 Page Two 2. The definition of Adjusted Net income contained in paragraph 3 (e) of the agreement is amended to read as follows: (e) "Adjusted Net Income" shall mean net income of the Company as shown on the audited financial statements of the Company for the fiscal year in question excluding any gain or loss from the sale or other disposition of Company owned real estate, radio stations (including FCC licenses, goodwill and other intangibles as well as real and tangible assets associated therewith) or other business units, plus charges or expenses for depreciation or amortization (exclusive of amortization of format change expenses) less Normal Capital Replacements (as defined above) and, so long as the Company is taxed as a Subchapter S corporation, less the Shareholders Subchapter S Tax Obligation or plus the Shareholders Subchapter S Tax Benefit (as defined above) as the case may be. 3. These changes shall be effective January 1, 1994. 4. Except as modified above, the letter agreement dated December 28, 1992 shall remain in full force and effect. Please confirm your agreement to the foregoing by signing and returning a copy of this memo. Sincerely, /s/ Joseph M. Field Joseph M. Field Agreed: /s/ Eugene D. Levin Eugene D. Levin Date 8/2/94 9 MEMORANDUM TO: John C. Donlevie and Eugene D. Levin FROM: Joseph M. Field DATE: September 8, 1994 IN RE: Incentive Compensation Calculation In connection with the calculation of the incentive compensation which you are to receive based upon the special distribution paid to shareholders of the Company on August 2, 1994, we have discussed the issue of the amount of state tax obligation that the shareholders may have relating to the tax on the gain on the sale of the assets of KRXX-FM - Minneapolis and KOQL-FM - Oklahoma City. The taxation of this gain in the various states is not free from doubt. The Company has adopted a position with respect to such state tax obligation, which tax counsel to the Company has advised is a reasonable position. Based upon this position, the total income tax obligation of the shareholders relating to the sale of the assets referenced above is $8,022,582.00. Of that amount the obligation for state income taxes is $593,159.00. This memo will confirm that we have agreed to compute the incentive compensation on the basis of the state tax obligation of the shareholders determined in accordance with the above-referenced position. However, in the event that the state tax obligation of the shareholders with respect to such sales is increased either through final audit or settlement, then each of you has agreed that the incentive compensation payable as a result of said special distribution would be recomputed and in the event the incentive compensation bonus is reduced as a result of such recomputation, your compensation at the time of such recomputation will be reduced by the amount of the reduction in the incentive bonus. Please confirm your agreement to the foregoing by signing and returning the enclosed copy of this memo. AS AGREED: /s/ Eugene D. Levin /s/ John C. Donlevie Eugene D. Levin John C. Donlevie 10 MEMORANDUM MEMO TO: Gene Levin FROM: Joe Field DATE: August 7, 1996 RE: Incentive Compensation This will confirm that we have agreed to change the formula for incentive compensation set forth in the memorandum dated 12/28/92 as modified by memos dated 3/17/94 and 9/8/94 to eliminate the effects of the deferral of program format change expenses and to change the treatment of amortization of financing costs. We have also agreed that amortization of financing costs should not be added back to net income in order to determine ANI. This adjustment will be made retroactive to years ending 1992 and thereafter. As a result of this change the ANI base set forth in the memo dated 12/28/92 is amended to the sum of $1,194,440.00. The net adjustment in incentive for fiscal years ending 1993 and 1994, using the new ANI base and eliminating all effects for deferral of program format change costs results in a net additional payment to you of $2,888.00. Please confirm your agreement to the above changes by signing and returning the enclosed copy of this memo. If you have any questions regarding this memo please call me. ACCEPTED AND AGREED: BY: /s/ Eugene D. Levin DATE: 8/6/96 EX-10.07 11 ASSET PURCHASE AGREEMENT TUSCALOOSA 1 EXHIBIT 10.07 - -------------------------------------------------------------------------------- ASSET PURCHASE AGREEMENT AMONG ENTERTAINMENT COMMUNICATIONS, INC., TUSCALOOSA BROADCASTING, INC., SINCLAIR RADIO OF PORTLAND LICENSEE, INC. AND SINCLAIR RADIO OF ROCHESTER LICENSEE, INC. DATED AS OF JANUARY 26, 1998 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS PAGE ARTICLE I. DEFINITIONS .................................................2 ARTICLE II. SALE AND PURCHASE ...........................................7 2.1. TRANSFER OF ASSETS ...................................................7 2.2. EXCLUDED ASSETS ......................................................9 3. PURCHASE PRICE ......................................................11 2.4. ESCROW ..............................................................11 2.5. PAYMENT .............................................................11 2.6. ALLOCATION OF PURCHASE PRICE ........................................11 ARTICLE III. LIABILITIES ................................................12 3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM ...............................12 3.2. OTHER LIABILITIES ...................................................12 3.3. NON-ASSIGNABLE STATION CONTRACTS ....................................12 ARTICLE IV. REPRESENTATIONS AND WARRANTIES .............................13 4.1. SELLERS' REPRESENTATIONS ............................................13 4.2. ENTERCOM'S REPRESENTATIONS ..........................................22 ARTICLE V. CONDITIONS .................................................24 5.1. MUTUAL CONDITIONS ...................................................24 5.2. ENTERCOM'S CONDITIONS ...............................................25 5.3. SELLERS' CONDITIONS .................................................25 ARTICLE VI. COVENANTS AND AGREEMENTS ...................................26 6.1. AFFIRMATIVE COVENANTS OF SELLERS ....................................26 6.2. NEGATIVE COVENANTS OF SELLERS .......................................28 6.3. AFFIRMATIVE COVENANTS OF ENTERCOM ...................................28 6.4. MUTUAL COVENANTS OF SELLERS AND ENTERCOM ............................29 6.5. NO CONTROL BY ENTERCOM ..............................................30 ARTICLE VII. PREPARATION FOR CLOSING ....................................30 7.1. APPLICATION TO COMMISSION ...........................................30 7.2. INSPECTION BY ENTERCOM ..............................................30 7.3. HART-SCOTT-RODINO NOTIFICATION ......................................31 ARTICLE VIII. CLOSING ....................................................31 8.1. CLOSING .............................................................31 8.2. ADJUSTMENTS .........................................................31 8.3. CLOSING DELIVERIES TO ENTERCOM ......................................33 8.4. CLOSING DELIVERIES TO SELLERS .......................................34 8.5. COVENANTS OF FURTHER ASSURANCE ......................................35 8.6. DAMAGE TO PROPERTY ..................................................35 8.7. TAXES ON TRANSACTION ................................................35 ARTICLE IX. TERMINATION, DEFAULT AND INDEMNIFICATION ...................36 9.1. TERMINATION BY REASON OTHER THAN DEFAULT ............................36 (iii) 3 9.2. EFFECT OF TERMINATION BY REASON OTHER THAN DEFAULT ..................36 9.3. DEFAULT .............................................................36 9.4. REMEDIES OF SELLERS .................................................37 9.5. ENTERCOM'S REMEDIES .................................................37 9.6. LIQUIDATED DAMAGES NOT A PENALTY ....................................37 9.7. INDEMNIFICATION .....................................................38 ARTICLE X. GENERAL PROVISIONS .........................................40 10.1. EXPENSES OF THE PARTIES .............................................40 10.2. BROKERS .............................................................40 10.3. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES ...............40 10.4. AMENDMENT AND WAIVER ................................................41 10.5. ASSIGNMENT ..........................................................41 10.6. EFFECT OF THIS AGREEMENT ............................................41 10.7. HEADINGS ............................................................41 10.8. COUNTERPARTS ........................................................41 10.9. GOVERNING LAW .......................................................41 10.10. NOTICES .............................................................41 10.11. STATION EMPLOYEES ...................................................43 10.12. SECTION 1031 ASSET EXCHANGE .........................................43 (iv) 4 EXHIBITS A Form of Time Brokerage Agreement B Form of Sinclair Communications, Inc. Guarantee C Form of Escrow Agreement D Form of Indemnification Escrow Agreement E Forms of Bill of Sale and Assignment of Assets, Assignments of FCC Licenses, Assignment of Contracts and Leases, and Assumption Agreement F Form of Sellers' Corporate Legal Opinion G Form of Sellers' FCC Legal Opinion H Form of Entercom's Legal Opinion SCHEDULES 2.1.1 FCC Licenses 2.1.2 Real and Leased Property 2.1.3 Tangible Personal Property 2.1.5 Program Contracts 2.1.6 Trade-out Agreements 2.1.8 Operating Contracts 2.1.9 Vehicles 2.2.11 Miscellaneous Excluded Assets 4.1.6 Changes or Events 4.1.7 Litigation 4.1.8 Permitted Encumbrances 4.1.9 FCC Matters 4.1.14 Employee Benefit Plans 4.1.15 Labor Relations 4.1.16 Environmental Matters 4.1.17 Insurance 4.1.19 Matters Regarding the Heritage Agreement 4.2.3 Entercom's Qualifications as Assignee (v) 5 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT made and entered into this 26th day of January, 1998 by and among, TUSCALOOSA BROADCASTING, INC., a Maryland corporation (hereinafter "Tuscaloosa"), SINCLAIR RADIO OF PORTLAND LICENSEE, INC., a Maryland corporation ("SRPLI"), SINCLAIR RADIO OF ROCHESTER LICENSEE, INC., a Maryland corporation ("SRRLI"), (Tuscaloosa, SRPLI and SRRLI are sometimes collectively referred to herein as "Sellers"), and ENTERTAINMENT COMMUNICATIONS, INC., a Pennsylvania corporation (hereinafter "Entercom"). W I T N E S S E T H: WHEREAS, pursuant to authorizations duly granted and issued by the Federal Communications Commission (the "Commission"), certain subsidiaries (the "Operating Subsidiaries") of HMC Acquisition Corp., a Delaware corporation ("HMC" and collectively with the Operating Subsidiaries, "Heritage") presently own and operate radio stations KKSN(AM), Vancouver, Washington, KKSN-FM, Portland, Oregon, KKRH(FM), Salem, Oregon, WKLX(FM), WBEE(FM) and WBBF(AM), Rochester, New York, and WQRV(FM), Avon, New York (each, a "Station" and collectively, the "Stations"); and WHEREAS, on August 20, 1997, Heritage Media Corporation, formerly the parent of the Operating Subsidiaries, merged with and into HMC, a wholly-owned subsidiary of The News Corporation, Limited ("News Corp."); and WHEREAS, Sinclair Broadcast Group, Inc. ("Sinclair") has agreed, pursuant to an Asset Purchase Agreement, among Sinclair and certain subsidiaries of Heritage, dated as July 16, 1997 (as such agreement may be amended from time to time, the "Heritage Agreement"), to acquire the assets owned, leased or used by Heritage or such subsidiaries in connection with the business and operations of the Stations and other radio and television stations; and WHEREAS, Tuscaloosa, SRPLI and SRRLI are wholly-owned subsidiaries of Sinclair and will acquire the Stations pursuant to one or more assignments of Sinclair's rights and obligations under the Heritage Agreement from Sinclair to Tuscaloosa, SRPLI and SRRLI; and WHEREAS, Entercom and Sellers have agreed, subject to the prior acquisition of the Stations by Sellers, prior approval by the Commission and certain other conditions, to transfer and assign the assets, properties, rights, privileges, licenses and all other authorizations used in connection with or relating to the Stations from Sellers to Entercom as hereinafter set forth; and 6 WHEREAS, Entercom may elect to accomplish such transfer in whole or part as the acquisition of replacement property in a deferred like-kind exchange under Section 1031 of the Code; and WHEREAS, concurrently with the execution of this Agreement, (i) Entercom and Sellers are entering into a Time Brokerage Agreement substantially in the form of Exhibit A hereto (the "TBA") providing for the programming and sale by Entercom, upon the acquisition by Sellers of the Station, of substantially all of the broadcast time available on the Stations and (ii) Sinclair Communications, Inc., a Maryland corporation and wholly-owned subsidiary of Sinclair ("SCI"), is delivering a guarantee substantially in the form of Exhibit B hereto (the "Sinclair Guarantee") of certain of Sellers' obligations under this Agreement. NOW, THEREFORE, in consideration of the mutual promises herein contained and of the representations and warranties hereinafter set forth and for other good and valuable consideration, the parties, intending to be legally bound hereby, agree as follows: ARTICLE 1. DEFINITIONS As used herein, the following terms shall have the following respective meanings: "ADJUSTMENT TIME" shall mean 12:00:01 a.m. eastern standard time on the Closing Date. "AGREEMENT" shall mean this Asset Purchase Agreement. "APPLICATIONS" shall have the meaning set forth in Section 7.1 hereof. "BENEFIT ARRANGEMENT" means any benefit arrangement, obligation, custom, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors, other than any obligation, arrangement, custom or practice that is a Plan, including, without limitation, employment agreements, executive compensation arrangements, incentive programs or arrangements, sick leave, vacation pay, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock option or purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, perquisite, company cars, any plans subject to Code Section 125 and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors, or agents. "CLOSING" shall mean the event of consummation of the transactions contemplated by this Agreement as more fully described in Article VIII of this Agreement. 2 7 "CLOSING DATE" shall mean the date specified for Closing in Section 8.1 hereof. "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COMMISSION" shall mean the Federal Communications Commission. "DOJ" shall mean the Antitrust Division of the United States Department of Justice. "ENCUMBRANCES" shall mean any mortgages, pledges, liens, security interests, defects in title, easements, rights-of-way, encumbrances, restrictions and any other matter affecting title. "ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1802 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.; the Occupational Safety and Health Act ("OSHA"), 29 U.S.C. Section 651 et seq.; or any other applicable federal, state, or local laws relating to Hazardous Materials generation, production, use, storage, treatment, transportation or disposal, or the protection of the environment from Hazardous Materials. "ENTERCOM" shall mean the corporation identified as such in the Preamble to this Agreement and any Qualified Intermediary to which Entercom may elect to assign all or part of its rights hereunder pursuant to Section 10.12 hereof. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and all laws promulgated pursuant thereto or in connection therewith. "ERISA AFFILIATE" shall mean any person that, together with any other person, would be or was prior to March 17, 1997 treated as a single employer under Section 414 of the Code or Section 4001 of ERISA. "FINAL ORDER" shall mean an action by the Commission upon any application including, without limitation, the Applications, for its consent, approval or authorization, which action has not been reversed, stayed, enjoined, set aside, annulled or suspended, and with respect to which action, no protest, petition to deny, petition for rehearing or reconsideration, appeal or request for stay is pending, and as to which action the time for filing of any such protest, petition, appeal or request and any period during which the Commission may reconsider or review such action on its own authority has expired. 3 8 "FTC" shall mean the United States Federal Trade Commission. "HAZARDOUS MATERIALS" shall mean any wastes, substances, or materials (whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants, or contaminants, including without limitation, substances defined as "hazardous waste," "hazardous substances," "toxic substances," "radioactive materials," or other similar designations in, or otherwise subject to regulation under, any Environmental Laws. "HERITAGE" shall mean HMC and the Operating Subsidiaries. "HERITAGE AGREEMENT CLOSING DATE" shall mean the latest date on which all of the Stations are acquired by Sinclair under the Heritage Agreement, whether or not all stations subject to the Heritage Agreement are acquired on such date. "HERITAGE AGREEMENT DATE" shall mean July 16, 1997. "HMC" shall mean the corporation identified as such in the Preamble to this Agreement. "KNOWLEDGE" shall mean the actual knowledge of the party to whom such knowledge is imputed or the knowledge that the party should have upon reasonable investigation in light of the facts and circumstances available to such party. "LIABILITIES" shall mean, as to any Person, all debts, adverse claims, liabilities and obligations, direct, indirect, absolute or contingent of such Person, whether accrued, vested or otherwise, whether in contract, tort, strict liability or otherwise and whether or not actually reflected, or required by generally accepted accounting principles to be reflected, in such Person's balance sheets or other books and records. "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the business, assets or financial condition of the Stations taken as a whole, except for any such material adverse effect resulting from (a) general economic conditions applicable to the radio broadcast industry, (b) general conditions in the markets in which the Stations operate or (c) circumstances that are not likely to recur and either have been substantially remedied or can be substantially remedied without substantial cost or delay. "MULTIEMPLOYER PLAN" shall mean any Plan described in Section 3(37) of ERISA. "NEWS CORP." shall mean The News Corporation Limited, a South Australian corporation. 4 9 "ORDINARY COURSE OF BUSINESS" shall mean, with respect to any person, the ordinary course of business consistent with past practices of such person both with respect to type and amount; any actions taken pursuant to the requirements of law or contracts existing on the date hereof shall be deemed to be action in the Ordinary Course of Business. "PERMITTED ENCUMBRANCES" shall mean (a) Encumbrances of a landlord or other statutory lien not yet due and payable, or a landlord's lien arising in the Ordinary Course of Business, (b) Encumbrances arising in connection with equipment or maintenance financing or leasing under the terms of the Station Contracts set forth on the Schedules which have been made available to Entercom, (c) Encumbrances arising pursuant to the terms of leases on Real Property or Leased Property as set forth on Schedule 2.1.1 and Schedule 2.1.8 which are subject to any lease or sublease to a third party, (d) Encumbrances for taxes not yet due and payable or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained in accordance with generally accepted accounting principles, (e) Encumbrances that do not materially detract from the value of any of the Assets or materially interfere with the use thereof as currently used, or (f) those Encumbrances on Schedule 4.1.8. "PLAN" means any plan, program or arrangement, whether or not written, that is or was an "employee benefit plan" as such term is defined in Section 3(3) of ERISA and (a) which was or is established or maintained by Heritage, Sellers or any ERISA Affiliate of such parties; (b) to which Heritage, Sellers contributed or was obligated to contribute or to fund or provide benefits or had any liability (whether actual or contingent) with respect to any of its assets or otherwise; or (c) which provides or promises benefits to any person who performs or who has performed services for Heritage, Sellers and because of those services is or has been (i) as participant therein or (ii) entitled to benefits thereunder. "PORTLAND STATIONS" shall mean KKSN(AM), KKSN-FM and KKRH(FM). "PRORATION ITEMS" shall mean any power and utility charges, business and license fees (including retroactive adjustments thereof), sales and service charges, commissions, special assessments, and rental payments and personal and real estate taxes and assessments with respect to the Real Property, taxes (except for taxes arising from the transfer of the Assets hereunder), deposits, Trade-out Agreements, accrued vacation, unused sick leave and other similar prepaid and deferred items and any other operating expenses incurred in the Ordinary Course of Business. The parties acknowledge and agree that there shall be excluded from Proration Items the following: (a) except as otherwise provided in the TBA, severance pay relating to any employee of the Stations who shall have been terminated prior to the Closing Date, and (b) any Liabilities not being assumed by Entercom in accordance with Section 3.1. "QUALIFIED INTERMEDIARY" shall mean a party described in U.S. Treasury Regulations Section 1.1031(k)-1(g)(4). 5 10 "QUALIFIED PLAN" shall mean a Plan that satisfies, or is intended to satisfy, the requirements for tax qualification described in Section 401 of the Code including, without limitation, any Plan that was terminated on or after July 1, 1989, as to which a person may have any actual or contingent liability. "ROCHESTER STATIONS" shall mean WKLX(FM), WBEE(FM), WBBF(AM) and WQRV(FM). "SCI" shall mean the corporation identified as such in the Preamble to this Agreement. "SELLERS" shall mean Tuscaloosa, SRPLI and SRRLI. "SELLERS' KNOWLEDGE" shall mean, except as otherwise expressly provided in Section 4.1.16.1 of this Agreement, the knowledge of the Sellers, Sinclair, SCI or any of their respective affiliates, officers, directors, partners, agents, representatives or consultants. "SINCLAIR" shall mean the corporation identified as such in the Preamble to this Agreement. "SINCLAIR GUARANTEE" shall mean the guarantee, substantially in the form of Exhibit B hereto, dated of even date herewith, providing for the guarantee by SCI of Sellers' obligations under this Agreement. "STATIONS" shall mean (i) the frequency modulation (FM) radio broadcast station licensed by the Commission to Portland, Oregon broadcasting on 97.1 MHz and currently assigned the call letters KKSN-FM, (ii) the amplitude modulation (AM) radio broadcast station licensed by the Commission to Vancouver, Washington broadcasting on 910 kHz and currently assigned the call letters KKSN(AM), (iii) the frequency modulation (FM) radio broadcast station licensed by the Commission to Salem, Oregon broadcasting on 105.1 MHz and currently assigned the call letters KKRH(FM), (iv) the frequency modulation (FM) radio broadcast station licensed by the Commission to Rochester, New York broadcasting on 98.9 MHz and currently assigned the call letters WKLX(FM), (v) the frequency modulation (FM) radio broadcast station licensed by the Commission to Rochester, New York broadcasting on 92.5 MHz and currently assigned the call letters WBEE(FM), (vi) the frequency modulation (FM) radio broadcast station licensed by the Commission to Avon, New York broadcasting on 93.3 MHz and currently assigned the call letters WQRV(FM) and (vii) the amplitude modulation (AM) radio broadcast station licensed by the Commission to Rochester, New York broadcasting on 950 kHz and currently assigned the call letters WBBF(AM). "SRPLI" shall mean the corporation identified as such in the Preamble to this Agreement. 6 11 "SRRLI" shall mean the corporation identified as such in the Preamble to this Agreement. "TBA" shall mean the Time Brokerage Agreement, substantially in the form of Exhibit A hereto, dated of even date herewith, providing for the programming by and sale to Entercom of substantially all of the broadcast time available on the Stations upon acquisition thereof by Sellers. "TUSCALOOSA" shall mean the corporation identified as such in the Preamble to this Agreement. "WELFARE PLAN" shall mean an "employee welfare benefit plan" as such term is defined in Section 3(1) of ERISA. ARTICLE 2. SALE AND PURCHASE 2.1. TRANSFER OF ASSETS. Subject to the terms and conditions set forth in this Agreement, at the Closing Sellers shall transfer, convey, grant, assign and deliver to Entercom, free and clear of all Encumbrances (other than Permitted Encumbrances) and Entercom shall buy, accept and receive from Sellers, all right, title and interest in, to and under all real, personal and mixed assets, rights, benefits and privileges, both tangible and intangible, owned, leased, used or useful in connection with the business and operations of the Stations (collectively, the "Assets"), but excluding the Excluded Assets described in Section 2.2. The Assets shall include, without limitation, all right, title and interest in, to and under the following: 2.1.1. FCC LICENSES. All licenses, permits and other authorizations issued by the Commission to Heritage, prior to the Heritage Agreement Closing Date, or issued to Sellers or Sinclair after such date, for the operation of the Stations (the "FCC Licenses"), including without limitation those listed in Schedule 2.1.1. and all applications therefor, together with any renewals, extensions or modifications thereof and additions thereto. 2.1.2. REAL AND LEASED PROPERTY INTERESTS. (a) All the real property owned by Heritage, prior to the Heritage Agreement Closing Date, or owned by Sellers or Sinclair, after such date, and related to the business and operations of the Stations including, without limitation, all land, fee interests, 7 12 easements and other interests of every kind and description in real property, buildings, structures, fixtures, appurtenances, towers and antennae, and other improvements thereon owned by Heritage, prior to the Heritage Agreement Closing Date, or owned by Sellers or Sinclair, after such date, and used or useful in connection with the business and operations of the Stations ("Real Property"), including, without limitation, all of those items listed in Schedule 2.1.2. (b) All the real property leasehold interests of Heritage, prior to the Heritage Agreement Closing Date, or the real property leasehold interests of Sellers or Sinclair, after such date, related to the business and operations of the Stations, including, without limitation, leases and subleases of any land, easements and other real property leasehold interests of every kind and description in real property, buildings, structures, fixtures, appurtenances, towers and antennae, and other improvements thereon leased by Heritage, prior to the Heritage Agreement Closing Date, or leased by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations ("Leased Property"), including, without limitation, all of those items listed in Schedule 2.1.2. 2.1.3. TANGIBLE PERSONAL PROPERTY. All of the furniture, fixtures, furnishings, machinery, computers, equipment, inventory, spare parts, supplies, office materials and other tangible property of every kind and description owned, leased or used by Heritage, prior to the Heritage Agreement Closing Date, or owned, leased or used by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations, together with any replacements thereof and additions thereto made before the Closing, and less any retirements or dispositions thereof made before the Closing in the Ordinary Course of Business, including, without limitation, those items which have a book value in excess of Five Thousand Dollars ($5,000), all of which as of the Heritage Agreement Date are set forth and identified in Schedule 2.1.3. 2.1.4. INTELLECTUAL PROPERTY. All of the service marks, copyrights, franchises, trademarks, trade names, jingles, slogans, logotypes and other similar intangible assets maintained, owned, leased or used by Heritage, prior to the Heritage Agreement Closing Date, or maintained, owned, leased or used by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations (including any and all applications, registrations extensions and renewals relating thereto) (the "Intellectual Property"), and all of the rights, benefits and privileges associated therewith including, without limitation, the right to use the call letters for the Stations. 2.1.5. PROGRAM CONTRACTS. The program licenses and contracts under which Heritage, prior to the Heritage Agreement Closing Date, or under which Sellers or Sinclair, after such date, are authorized to broadcast programs on the Stations (collectively the "Program Contracts") 8 13 including, without limitation, (a) all program (cash and non-cash) licenses and contracts listed on Schedule 2.1.5, and (b) any other such program contracts that have been or will be entered into between the date of the Heritage Agreement and the Closing Date in accordance with the terms of the Heritage Agreement and this Agreement. 2.1.6. TRADE-OUT AGREEMENTS. All contracts and agreements (excluding Program Contracts) pursuant to which commercial air time on the Stations has been sold, traded or bartered in consideration for any property or services in lieu of or in addition to cash (collectively, the "Trade-out Agreements"), including, without limitation, those set forth and identified in Schedule 2.1.6. 2.1.7. BROADCAST TIME SALES AGREEMENT. All contracts and agreements pursuant to which commercial air time has been sold on the Stations for cash (collectively the "Time Sales Agreements"). 2.1.8. OPERATING CONTRACTS. All other operating contracts and agreements relating to the business or operations of the Stations, all material such contracts as of the Heritage Agreement Date being listed on Schedule 2.1.8. (including, without limitation, all employment agreements and talent contracts, all leases and subleases relating to the Leased Property, all agreements relating to any motor vehicles, all network affiliation agreements and all national and local advertising representation agreements for the Stations), together with all contracts and agreements that have been or will be entered into between the Heritage Agreement Date and the Closing Date in accordance with the terms of the Heritage Agreement and this Agreement (collectively, the "Operating Contracts" and together with the Program Contracts, Trade-out Agreements and the Time Sales Agreements, the "Station Contracts"). 2.1.9. VEHICLES. All automotive equipment and motor vehicles maintained, owned, leased or otherwise used by Heritage, prior to the Heritage Agreement Closing Date, or maintained, owned, leased or otherwise used by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations, including, without limitation, those set forth and described in Schedule 2.1.9. 2.1.10. FILES AND RECORDS. All engineering, business and other books, papers, logs, files and records pertaining to the business and operations of the Stations, but not the organizational documents and records described in Section 2.2.7. 2.1.11. AUXILIARY FACILITIES. All translators, earth stations, and other auxiliary facilities, and all applications therefor owned, leased or otherwise used or useful by Heritage, prior to the Heritage Agreement Closing Date, or used or useful by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations. 2.1.12. PERMITS AND LICENSES. All permits, approvals, orders, authorizations, consents, licenses, certificates, franchises, exemptions of, or filings or registrations with, any court or governmental authority (other than the Commission) in any jurisdiction, which have been issued or granted to or are owned or used or useful by Heritage, prior to the Heritage Agreement Closing Date, or which have been issued or granted to or are owned or used or useful by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations, and all pending applications therefor. 2.1.13. GOODWILL. The business of the Stations as a "going concern," customer relationships and goodwill, if any. 9 14 EXCLUDED ASSETS. Notwithstanding anything to the contrary in this Agreement, there shall be excluded from the Assets and retained by Sellers, to the extent in existence as of the Closing Date for a particular Station, the following assets (collectively, the "Excluded Assets"). 2.2.1. CASH. All cash, cash equivalents or deposits held by Sellers, all interest payable in connection with any such cash, cash equivalents or deposits or short term investments, bank balances and rights in and to bank accounts, marketable and other securities of Sellers. 2.2.2. ACCOUNTS RECEIVABLE. Except as otherwise provided in the TBA, all Accounts Receivable arising out of the business and operations of the Stations by Sellers prior to the Adjustment Time. 2.2.3. PERSONAL PROPERTY DISPOSED OF. All tangible personal property disposed of or consumed in the Ordinary Course of Business by Heritage or by Sellers as permitted by the Heritage Agreement or this Agreement. 2.2.4. INSURANCE. All contracts of insurance and all insurance plans and the assets thereof. 2.2.5. EMPLOYEE PLANS AND ASSETS. All Plans, Benefit Arrangements (except for any Station Contracts, Proration Items or other matters which are specifically assumed by Entercom pursuant to the terms hereof), Qualified Plans and Welfare Plans and the assets hereof. 2.2.6. RIGHT TO TAX REFUNDS. Any and all claims of Sellers with respect to any tax refunds. 2.2.7. CERTAIN BOOKS AND RECORDS All of (a) the Stations' originals of account books of original entry, (b) duplicated copies of any books, records, accounts, checks, payment records, tax records (including payroll, unemployment, real estate and other tax records) and other similar books, records and information relating to the operation of the business of the Stations prior to the Closing, and (c) all records and documents relating to any Excluded Assets maintained by or in the possession of Sellers; provided, in each case, that (i) prior to the Heritage Agreement Closing Date, to the extent permitted under the Heritage Agreement and (ii) at and after the Heritage Agreement Closing Date, without such limitation, Entercom shall be permitted full access to all such books and records and to make copies thereof upon reasonable request. 2.2.8. THIRD-PARTY CLAIMS. All rights and claims of Sellers, whether mature, contingent or otherwise, against third parties relating to the Assets or the Stations, whether in tort, contract, or otherwise. 2.2.9. DEPOSIT AND PREPAID EXPENSES. All deposits and prepaid expenses related to Sellers' ownership or operation of the Stations, provided, however, any deposit and prepaid expenses shall be included in the Assets conveyed pursuant hereto to the extent that Sellers receive a credit therefor in the calculation of the Proration Amount pursuant to Section 8.2. 2.2.10. NAMES. Any and all rights to use the names "Heritage Broadcasting," "Heritage Media," "Tuscaloosa," "Tuscaloosa Broadcasting," "Sinclair," or "Sinclair Communications" and any logo or variation thereof and the goodwill associated therewith. 10 15 2.2.11. MISCELLANEOUS EXCLUDED ASSETS. The assets listed and identified on Schedule 2.2.11. PURCHASE PRICE. The Purchase Price for the Assets is the sum of ONE HUNDRED TWENTY SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($126,500,000). ESCROW. For and in partial consideration of the execution and delivery of this Agreement, simultaneously with the execution and delivery of this Agreement, Entercom is depositing in escrow with an escrow agent (the "Escrow Agent") an irrevocable standby letter of credit (in form satisfactory to Sellers and for the benefit of Sellers ) in the amount of NINE MILLION FOUR HUNDRED EIGHTY SEVEN THOUSAND FIVE HUNDRED DOLLARS ($9,487,500) (the "Letter of Credit"), to secure Entercom's obligations described herein, in accordance with the terms and conditions of an escrow agreement substantially in the form attached as Exhibit C hereto (the "Escrow Agreement"). The Escrow Agent shall be a bank or financial institution with a combined capital and surplus of at least $100,000,000.00. 2.5. PAYMENT. The Purchase Price to be paid by Entercom shall be payable in cash delivered at the Closing by wire transfer of immediately available federal funds to the account of Sellers at such financial institution as Sellers shall specify in writing. 2.6. ALLOCATION OF PURCHASE PRICE. Entercom and Sellers agree that the aggregate fair market value of the Assets (the "Aggregate Fair Market Value") will be appraised by the appraisal firm of BIA Consulting, Inc. ("BIA") (the "Appraisal"). All costs and expenses of BIA in preparing the Appraisal shall be borne one-half by Entercom and one-half by Sellers. The parties acknowledge that a draft Appraisal has been prepared by BIA prior to the date of this Agreement, and that Sellers and Entercom will cooperate to finalize such Appraisal. Entercom shall prepare IRS Form 8594 reflecting the Aggregate Fair Market Value as found by BIA and such other information as required by the form, and shall forward it within 30 days after Closing to Sellers for their approval, which approval shall not be withheld unreasonably. Entercom and Sellers shall each file with their respective federal income tax return for the tax year in which the Closing occurs, IRS Form 8594 containing the information agreed upon by the parties pursuant to the this Section 2.6. Entercom agrees to report the purchase of the Assets and each of Sellers agrees to report the sale of such assets for income tax purposes in a manner consistent with the information agreed upon by the parties pursuant to this Section 2.6 and contained in its IRS Form 8594. In the event either or both of the parties elects to treat all or a portion of the Assets transferred as part of a deferred like-kind exchange under Section 1031 of the Code, each party shall, in completing any IRS Forms 8824 that the party might be required to file with the IRS, reflect the values for the Assets as determined pursuant to this Section 2.6. The parties expressly agree that Seventy Six Million Dollars ($76,000,000) of the Purchase Price shall be allocated to the Portland Stations, and Fifty Million Five Hundred Thousand Dollars ($50,500,000) of the Purchase Price shall be allocated to the Rochester Stations. Notwithstanding any other provision of this Agreement, the provisions of this Section 2.6 shall survive the Closing without limitation. ARTICLE 11 16 LIABILITIES ASSUMPTION OF LIABILITIES BY ENTERCOM. From and after the Closing Date, Entercom shall assume, pay, perform, and discharge the following Liabilities (collectively, the "Assumed Liabilities") of Sellers: The Liabilities arising out of events occurring on or after the Closing Date related to the businesses or operations of the Stations or Entercom's ownership of the Assets; 12 17 All Liabilities arising out of events occurring on or after the Closing Date with respect to the FCC Licenses; All Liabilities arising on or after the Closing Date under the Station Contracts (including, without limitation, Trade-out Agreements) pursuant to their terms (except for Liabilities for any breaches thereunder by Sellers or Heritage occurring prior to the Closing Date); and All those Liabilities for which, and only to the extent, that Entercom receives the benefit of a Proration Item in accordance with Section 8.2 hereof. OTHER LIABILITIES. Except for the Assumed Liabilities or as otherwise expressly provided in the TBA, Entercom does not and shall not assume any other Liabilities of any kind or description. NON-ASSIGNABLE STATION CONTRACTS. Sellers shall, beginning immediately upon execution of this Agreement, take all reasonable action required to obtain all consents, approvals and agreements of any third parties necessary to authorize, approve or permit the consummation of the transactions contemplated by this Agreement, including, without limitation, any consent of the parties to the Station Contracts designated as necessary in Schedule 2.1.8 in order to consummate the transactions contemplated hereby (collectively, the "Restricted Contracts"). Notwithstanding anything to the contrary set forth in this Agreement or otherwise, to the extent that the consent or approval of any third party is required under any Restricted Contract, Sellers shall only be required to use reasonable efforts (not involving the payment by Sellers of any money to any party to any such Restricted Contract, except to the extent required by Section 3.3.2) to obtain such consents and approvals, and in the event that Sellers fail to obtain any such consent or approval, Entercom shall have no right to terminate this Agreement. Notwithstanding anything to the contrary in Section 3.3.1, Sellers shall retain, until such time as any required consents shall have been obtained by Sellers, all rights to and obligations under any Station Contract which requires the consent of any other party thereto for assignment to Entercom if such consent has not been obtained on the Closing Date (the "Deferred Contract"). Until the assignment of the Deferred Contract, (i) Sellers shall continue to use all commercially reasonable efforts and Entercom shall cooperate with Sellers to obtain the consent and/or to remove any other impediments to such assignment, and (ii) Sellers and Entercom agree to cooperate in any lawful arrangement to provide (to the extent permitted without breach of the 13 18 Deferred Contract) that Entercom shall receive the benefits of such interest after the Closing Date to the same extent as if it were Sellers; provided, however, (y) if Entercom shall fail to receive such benefits after the Closing Date for any leased property that is a main transmitter tower site or a studio site for any Station (the "Designated Properties"), Sellers agree to make such payments as are necessary for Entercom to receive such benefits and/or necessary to receive such consents for assignment as long as the aggregate amount of all such payments does not exceed Seventy Five Thousand Dollars ($75,000) for all such Designated Properties under this Agreement and (z) Entercom shall, at its sole discretion, not be obligated to perform the obligations under any Deferred Contract if it is not also receiving all of the benefits thereunder. If, subsequent to the Closing, Sellers shall obtain any consent required to assign any Deferred Contract, the Deferred Contract for which consent to assign has been obtained shall at that time be deemed to be conveyed, granted, bargained, sold, transferred, setover, assigned, released, delivered and confirmed to Entercom, without need of further action by Sellers or of future documentation. ARTICLE REPRESENTATIONS AND WARRANTIES SELLERS' REPRESENTATIONS. Sellers hereby represent and warrant to Entercom that: CORPORATE STANDING. Tuscaloosa, SRPLI and SRRLI are corporations, duly organized, validly existing and in good standing under the laws of the states of their respective organizations, and are duly qualified to do business and are in good standing in any jurisdiction where it owns or operates a radio station and in each other jurisdiction where such qualification is necessary, except for those jurisdictions where the failure to be so qualified could not, individually or in the aggregate, have a material adverse effect. AUTHORIZATION OF AGREEMENT; NO BREACH. Tuscaloosa, SRPLI and SRRLI have the corporate power and authority to execute, deliver and perform this Agreement and such other agreements as are necessary to consummate the transactions contemplated hereby. Subject to the receipt of the consents and approvals required elsewhere herein, this Agreement constitutes the valid and binding obligation of each of Tuscaloosa, SRPLI and SRRLI, enforceable against each in accordance with its terms, except as such enforceability may be limited by bankruptcy and laws affecting the enforcement of creditors' 14 19 rights generally or equitable principles. Assuming the said consents and approvals are obtained, neither such execution, delivery and performance nor compliance by each Seller with the terms and provisions hereof will conflict with or result in a breach of any of the terms, conditions or provisions of the organizational documents of such entities or any judgment, order, injunction, decree, regulation or ruling of any court or any other governmental authority to which each is subject or any material agreement or contract to which each is a party or to which each is subject, or constitute a material default thereunder. QUALIFICATIONS AS ASSIGNOR. Sellers know of no facts which, under the Communications Act of 1934, as amended, or the existing rules and regulations of the Commission, would disqualify Heritage or Sellers as an assignor of the FCC Licenses to be assigned by each under the Heritage Agreement or hereunder, as applicable. ABSENCE OF CONFLICTING ORDERS. Neither Seller is subject to any judgment, award, order, writ, injunction, arbitration decision or decree which prohibits or prevents the performance of this Agreement or the consummation of any transaction contemplated under this Agreement, and there is no litigation, administrative action, arbitration, proceeding or investigation pending, or to Sellers' Knowledge, threatened, against any Seller or affecting any Seller in any federal, state or local court or before any administrative agency or arbitrator that would adversely affect Sellers' ability to perform their obligations under this Agreement or would hinder the consummation of the transactions contemplated hereunder. FINANCIAL STATEMENTS: UNDISCLOSED LIABILITIES. Sellers have provided to Entercom an unaudited balance sheet of the Stations as of November 30, 1997 (the "Balance Sheet") and an unaudited statement of income and operating cash flows for the ten month period ending November 30, 1997, in each case, provided 15 20 to Sellers by Heritage. To Sellers' Knowledge, the financial statements referred to in this Section 4.1.5.1 (a) present fairly in all material respects the financial condition of its Stations as of the date and the results of operations and operating cash flows for the period indicated and (b) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except that the financial statements referred to in this Section 4.1.5.1 do not contain all footnotes and cash flow information from investing and financing activities required under generally accepted accounting principles and are subject to customary year-end adjustments). To Sellers' Knowledge, there exist no Liabilities of the Stations relating to, or arising out of, the business or operations of such Stations, contingent or absolute, matured or unmatured, known or unknown, except (a) as reflected on the Balance Sheet and (b) for Liabilities that (i) were incurred after November 30, 1997 (the "Current Balance Sheet Date") in the Ordinary Course of Business, or (ii) were not required to be reflected on the Balance Sheet in accordance with generally accepted accounting principles applied on a consistent basis. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth and described in Schedule 4.1.6, (i) to Sellers' Knowledge, after the Current Balance Sheet Date through the date hereof there has been no, (ii) to Sellers' Knowledge, from the date hereof through the Heritage Agreement there will be no, and (iii) except as may be caused by Entercom pursuant to the TBA, after the Heritage Agreement Closing Date there will be no, Material Adverse Effect. Since the Current Balance Sheet Date, the business of the Stations has been conducted in the Ordinary Course of Business. After the Heritage Agreement Closing Date, Sellers will not have, and to Sellers' Knowledge, Heritage has not (a) incurred any extraordinary loss of, or injury to, any of its Assets as the result of any fire, explosion, flood, windstorm, earthquake, labor trouble, riot, accident, act of God or public enemy or armed forces, or other casualty; (b) incurred, or become subject to, any Liability, except current Liabilities incurred in the Ordinary Course of Business; (c) discharged or satisfied any Encumbrance or paid any Liability other than current Liabilities shown in the Balance Sheet, current Liabilities incurred since the Current Balance Sheet Date in the Ordinary Course of Business and Liabilities (including, without limitation, partial and complete prepayments) arising under any credit or loan agreement between such parties and their lenders; (d) mortgaged, pledged or subjected to any Encumbrance any of the Assets (except for Permitted Encumbrances); (e) made any material change in any method of accounting or accounting practice; (f) sold, leased, assigned or otherwise transferred any of the material Assets other than obsolete Assets which have been replaced 16 21 by suitable replacements; (g) made any material increase in compensation or benefits payable to any employee other than in the Ordinary Course of Business; or (h) made any agreement to do any of the foregoing. ABSENCE OF LITIGATION. Except as set forth on Schedule 4.1.7, as of the date hereof, there is no material or, to Sellers' Knowledge, immaterial, action, suit, investigation, claim, arbitration, litigation or similar proceeding, nor any order, decree or judgment pending or, to Sellers' Knowledge, threatened, against Sinclair, Sellers, the Assets or the Stations before any governmental authority. ASSETS. Except for the Excluded Assets, the Assets include all of the assets or property used or useful in the businesses of the Stations as presently operated. Except for leased or licensed Assets, at and after the Heritage Agreement Closing Date, Sellers or one of them will be the owners of, and will have good title to, the Assets free and clear of any Encumbrances, except for Permitted Encumbrances (including, without limitation, those items set forth on Schedule 4.1.8). At the Closing, Entercom shall acquire good title to, and all right, title and interest in and to the Assets, free and clear of all Encumbrances, except for the Permitted Encumbrances. FCC MATTERS. At and after the Heritage Agreement Closing Date, Sellers or one of them will hold the FCC Licenses listed as held on Schedule 2.1.1. Such FCC Licenses constitute all of the licenses, permits and authorizations from the Commission which have been issued to Heritage that are required for the business and operations of the Stations. Except as set forth on Schedule 4.1.9, such FCC Licenses are valid and in full force and effect through the dates set forth on Schedule 2.1.1, unimpaired by any condition, other than as set forth in the FCC Licenses. Except as set forth on Schedule 4.1.9, no application, action or proceeding is pending for the renewal or modification of any of the FCC Licenses and, except for actions or proceedings affecting radio broadcast stations or the radio industry generally, no application, complaint, action or proceeding is pending or, to Sellers' Knowledge, threatened, that may result in (a) the revocation, modification, non-renewal or suspension of any of such FCC Licenses, or (b) the issuance of a cease-and-desist order. To Sellers' Knowledge, except as set forth in Schedule 4.1.9, no facts, conditions or events exist relating to Heritage, Sellers, or the Stations that would reasonably be expected to cause the Commission to revoke any FCC License or not to grant any pending applications for renewal of the FCC Licenses or to deny the assignment of the FCC Licenses to Entercom as provided for in this Agreement. REAL PROPERTY. At and after the Heritage Agreement Closing Date, Sellers or one of them will have good and marketable fee simple title to all fee estates included in the Real Property 17 22 and good title to all other owned Real Property, in each case free and clear of all Encumbrances, except for Permitted Encumbrances. At and after the Heritage Agreement Closing Date, Sellers or one of them will have a valid leasehold interest in all Leased Property listed as leased in Schedule 2.1.2. Schedule 2.1.2 lists all leases and subleases pursuant to which any of the Leased Property is leased. At and after the Heritage Agreement Closing Date, Sellers or one of them will be the owner and holder of all the Leased Property purported to be granted by such leases and subleases. At and after the Heritage Agreement Closing Date, each such lease and sublease will be valid as to Sellers or one of them and, to Sellers' Knowledge, will constitute a legal and binding obligation of, and will be legally enforceable against, each party thereto and grants the leasehold interest it purports to grant, including any rights to nondisturbance and peaceful and quiet enjoyment that may be contained therein. At and after the Heritage Agreement Closing Date, Sellers or one of them will be, and to Sellers' Knowledge, all other parties will be, in compliance in all material respects with the provisions of such leases and subleases. The Real Property and the Leased Property listed in Schedule 2.1.2 constitute all of the real property owned, leased or used in the business and operations of the Stations which is material to the business and operations of the Stations. To Sellers' Knowledge, no portion of the Real Property or any building, structure, fixture or improvement thereon is the subject of, or affected by, any condemnation, eminent domain or inverse condemnation proceeding currently instituted or pending or threatened. To Sellers' Knowledge and to the extent that such documents are in Sellers' possession, Sellers have delivered to Entercom true, correct and complete copies of the following documents with respect to the Real Property and Leased Property: (i) deeds, by which a fee interest in any of the Real Property and Leased Property has been received; (ii) leases, by which any of the Real Property is leased; (iii) title insurance policies or commitments; (iv) surveys; and (v) inspection reports or other instruments or reports, including, without limitation, any phase I or phase II environmental reports or other similar environmental reports, surveys or assessments (including any and all amendments and other modifications of such instruments). INTELLECTUAL PROPERTY. At and after the Heritage Agreement Closing Date, Sellers or one of them will possess adequate rights, licenses and authority to use all Intellectual Property necessary to conduct the business of the Stations as presently conducted. At and after the Heritage Agreement Closing Date, Sellers or one of them will have good title to all Intellectual Property that each owns, free and clear of any Encumbrances, except for Permitted Encumbrances. At and after the Heritage Agreement Closing Date, no Seller will be obligated to pay any royalty or other fees to anyone with respect to the Intellectual Property. No Seller has, and to Sellers' Knowledge, Heritage has not, received any written notice to the effect that any service 18 23 rendered or to be rendered by Heritage or any of Sellers relating to the business of the Stations may infringe, or that such parties are otherwise infringing, on any Intellectual Property right or other legally protectable right of another. No director, officer or employee of Heritage or Sellers has any interest in any Intellectual Property. STATION CONTRACTS. Complete and correct copies of the Station Contracts set forth in Schedules 2.1.5, 2.1.6 and 2.1.8 (which schedules are true and correct in all material respects) have been made available to Entercom and (a) at and after the Heritage Agreement Closing Date, each such material Station Contract and, to Sellers' Knowledge, each such immaterial Station Contract, will be in full force and effect and will constitute a legal, valid and binding obligation of the parties thereto; (b) at and after the Heritage Agreement Closing Date, each Seller which has become subject to a Station Contract will not be in breach or default in any material respect of the terms thereto; (c) at and after the Heritage Agreement Closing Date, none of the material rights under any such Station Contract of each Seller which has become subject thereto will be subject to termination, nor will a default occur, as a result of the consummation of the transactions contemplated hereby, except to the extent that failure to obtain the prior consent to assignment thereof of any party thereto shall or could be interpreted to constitute a termination or modification of or a default under any such Station Contract; and (d) to Sellers' Knowledge, no other party to any such Station Contract is in breach or default in any material respect of the terms thereunder. TAXES. Each Seller has (or, in the case of returns becoming due after the date hereof and on or before the Closing Date, will have prior to the Closing Date) duly filed all material tax returns required to be filed on or before the Closing Date with respect to all material taxes applicable to the ownership or operation of the Stations by Sellers. In the case of any tax returns which receive an extension for their date of filing, such tax returns will be considered due on, and not considered required to be filed before, the extended due date. To Sellers' Knowledge, all tax returns are (or, in the case of returns becoming due after the date hereof and on or before the Closing Date, will be) true and complete in all material respects. Sellers: (a) have paid all taxes due to any governmental authority as indicated on the tax returns applicable to the ownership 19 24 or operation of the Stations by Sellers; or (b) have established (or, in the case of amounts becoming due after the date hereof but prior to the Closing Date will have established) adequate reserves (in conformity with generally accepted accounting principles consistently applied) for the payment of taxes applicable to the ownership or operation of the Stations by Sellers. EMPLOYEE BENEFIT PLANS. Schedule 4.1.14 lists all Plans and Benefit Arrangements (exclusive of severance arrangements and retention agreements) maintained or contributed to for the benefit of the employees of the Stations (collectively, the "Benefit Plans"). Each Benefit Plan maintained or contributed to by Sellers, and, to Sellers' Knowledge, each Benefit Plan maintained or contributed to by Heritage, has been maintained in material compliance with its terms and with ERISA, the Code and other applicable laws. Schedule 4.1.14 sets forth a list of all Qualified Plans maintained or contributed to by Sellers, and to Sellers' Knowledge, all Qualified Plans maintained or contributed to by Heritage, in each case, for the benefit of the employees of the Stations. All such Qualified Plans and any related trust agreements or annuity agreements (or any other funding document) have been maintained in material compliance with ERISA and the Code (including, without limitation, the requirements for tax qualification described in Section 401 thereof), other than any Multiemployer Plan. To Sellers' Knowledge, any trusts established under such Plans are exempt from federal income taxes under Section 501(a) of the Code. Schedule 4.1.14 sets forth a list of all funded Welfare Plans maintained or contributed to by Sellers, and to Sellers' Knowledge, all funded Welfare Plans maintained or contributed to by Heritage, in each case, that provide benefits to current or former employees of the Stations or their beneficiaries. To Sellers' Knowledge, the funding under each Welfare Plan does not exceed and has not exceeded the limitations under Sections 419A(b) and 419A(c) of the Code. At and after the Heritage Agreement Closing Date, Sellers will not be, and to Sellers' Knowledge, Heritage is not, subject to taxation on the income of any Welfare Plan's welfare benefit fund (as such term is defined in Section 419(e) of the Code) under Section 419A(g) of the Code, which Welfare Plan has been maintained or contributed to by any such party. Sellers have no, and to Sellers' Knowledge, Heritage has no, post-retirement medical life insurance or other benefits promised, provided or otherwise due now or in the future to current, former or retired employees of the Stations. 20 25 Except as set forth in Schedule 4.1.14, at and after the Heritage Agreement Closing Date, Sellers will have, and to Sellers' Knowledge, Heritage has (a) filed or caused to be filed all returns and reports on the Plans that each such party is required to file and (b) paid or made adequate provision for all fees, interest, penalties, assessments or deficiencies that have become due pursuant to those returns or reports or pursuant to any assessment or adjustment that has been made relating to those returns or reports. All other fees, interest, penalties and assessments that are payable by or for Heritage and Sellers have been or will be timely reported, fully paid and discharged. There will be no unpaid fees, penalties, interest or assessments due from Sellers, and to Sellers' Knowledge, there are no unpaid fees, penalties, interest or assessments due from Heritage or from any other person, in each case, that are or could become an Encumbrance on any of its Assets or could otherwise adversely affect the businesses or operations of the Stations or the Assets. At and after the Heritage Agreement Closing Date, Sellers or one of them will have, and to Sellers' Knowledge, Heritage has, collected or withheld all amounts that are required to be collected or withheld by each such party to discharge its obligations, and all of those amounts have been paid to the appropriate governmental authority or set aside in appropriate accounts for future payment when due. Sellers have furnished to Entercom true and complete copies of all documents setting forth the terms and funding of each Plan. Except as set forth in Schedule 4.1.14, at and after the Heritage Agreement Closing Date, none of Sellers or any ERISA Affiliate of such parties will have, and none of Heritage or any ERISA Affiliate of Heritage has ever, sponsored or maintained, had any obligation to sponsor or maintain, or had any liability (whether actual or contingent, with respect to any of its assets or otherwise) with respect to any Plan subject to Section 302 of ERISA or Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan). At and after the Heritage Agreement Closing Date, none of Sellers or any ERISA Affiliate of such parties will have, and none of Heritage or any ERISA Affiliate of Heritage (since January 1, 1989) has, terminated or withdrawn from or sought a funding waiver with respect to any plan subject to Title IV of ERISA, and no facts exist that could reasonably be expected to cause such actions in the future; no accumulated funding deficiency (as defined in Code Section 412), whether or not waived, exists with respect to any such plan; no reportable event (as defined in ERISA Section 4043) has occurred with respect to any such plan (other than events for which reporting is waived); all costs of any such plans have been provided for on the basis of consistent methods in accordance with sound actuarial assumptions and practices, and the assets of each such plan, as of its last valuation date, exceeded its "Benefits Liabilities" (as defined in ERISA Section 4001(a)(16)); and, since the last valuation date for each such plan, no such plan has been amended or changed to increase the amounts of benefits thereunder and, to Sellers' Knowledge, there has been no event that would reduce the excess of assets over benefit liabilities; and except as set forth in Schedule 4.1.14, at and after the Heritage Agreement Closing Date, none of Sellers or any ERISA Affiliate of such parties will have, and none of Heritage or any ERISA Affiliate of Heritage has ever, made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any Multiemployer Plan. No claims or lawsuits are pending or, to Sellers' Knowledge, threatened, by, against, or relating to any Benefit Plan. To Sellers' Knowledge, the Benefit Plans 21 26 are not presently under audit or examination (nor has notice been received of a potential audit or examination) by the Internal Revenue Service, the Department of Labor, or any other governmental agency or entity and no matters are pending with respect to any Qualified Plan under the Internal Revenue Service's Voluntary Compliance Resolution program, its Closing Agreement Program, or other similar programs. To Sellers' Knowledge, with respect to each Plan, there has occurred no non-exempt "prohibited transaction" (within the meaning of Section 4975 of the Code) or transaction prohibited by Section 406 of ERISA or breach of any fiduciary duty described in Section 404 of ERISA that would, if successful, result in any liability for Sellers. Sellers will take no action that would result in such a liability between the date hereof and the Closing Date. At and after the Heritage Agreement Closing Date, Sellers will have no liability, and to Sellers' Knowledge, Heritage has no liability (whether actual, contingent, with respect to any of the Assets or otherwise) with respect to any employee benefit plan that is not a Benefit Plan (exclusive of severance arrangements and retention agreements) or with respect to any employee benefit plan sponsored or maintained (or which has been or should have been sponsored or maintained) by any ERISA Affiliate of such parties. At and after the Heritage Agreement Closing Date, all group health plans of Sellers and their ERISA Affiliates will have been, and all group health plans of Heritage and its ERISA Affiliates have been, operated in material compliance with the requirements of Sections 4980B (and its predecessor) and 5000 of the Code, and Sellers have provided or will have provided before the Closing Date, to individuals entitled thereto, all required notices and coverage pursuant to Section 4980B with respect to any "qualifying event" (as defined therein) occurring before or on the Closing Date. LABOR RELATIONS. Sellers have made available to Entercom a true and complete list of all employees engaged in the business or operations of the Stations as of the date set forth on the list, together with such employee's position, salary and date of hire. Schedule 4.1.15 lists all written employment contracts of Heritage and Sellers related to employees of the Stations and all written agreements, plans, arrangements, commitments and understandings pursuant to which Heritage has, or at and after the Heritage Agreement Closing Date, pursuant to which Sellers will have, severance obligations related to employees at the Stations. Except as set forth on Schedule 4.1.15, no labor union or other collective bargaining unit represents or, to Sellers' Knowledge, claims to represent, any of the employees of the Station. Except as set forth in Schedule 4.1.15, there are no strikes, work stoppages, grievance proceedings, union organization efforts, or other controversies pending between Heritage or Sellers, and any union or collective bargaining unit representing 22 27 (or, to Sellers' Knowledge, claiming to represent) the employees at the Stations. At and after the Heritage Agreement Closing Date, Sellers will be, and Heritage is, in compliance with all laws relating to the employment or the workplace, including, without limitation, provisions relating to wages, hours, collective bargaining, safety and health, work authorization, equal employment opportunity, immigration and the withholding of income taxes, unemployment compensation, worker's compensation, employee privacy and right to know and social security contributions, except for any noncompliance which would not have a Material Adverse Effect. Except as set forth herein, there are no collective bargaining agreements relating to the Stations or the business and operations thereof. ENVIRONMENTAL MATTERS. Except as set forth in Schedule 4.1.16, to Sellers' Knowledge (which knowledge is based on the items set forth on Schedule 4.1.16), Heritage is, and at and after the Heritage Agreement Closing Date, Sellers will be, in material compliance with, and the Real Property and all improvements thereon are in material compliance with, all Environmental Laws. Except as set forth in Schedule 4.1.16, there are no pending or, to Sellers' Knowledge, threatened, actions, suits, claims, or other legal proceedings based on (and none of Sellers have received any written notice of any complaint, order, directive, citation, notice of responsibility, notice of potential responsibility, or information request from any governmental authority arising out of or attributable to): (a) the current or past presence at any part of the Real Property of Hazardous Materials; (b) the current or past release or threatened release into the environment from the Real Property (including, without limitation, into any storm drain, sewer, septic system or publicly owned treatment works) of any Hazardous Materials; (c) the off-site disposal of Hazardous Materials originating on or from the Real Property or the businesses or Assets of the Stations; (d) any facility operations or procedures of the Stations since Heritage's ownership thereof which do not conform to requirements of the Environmental Laws; or (e) any violation of Environmental Laws at any part of the Real Property arising from activities of the Stations since Heritage's ownership thereof involving Hazardous Materials. At and after the Heritage Agreement Closing Date, Sellers will have been, and to Sellers' Knowledge, Heritage has been, duly issued all material permits, licenses, certificates and approvals required under any Environmental Law. INSURANCE. Schedule 4.1.17 contains a true and complete list and brief summary of all policies of title, property, fire, casualty, liability, life, workmen's compensation, libel and slander, and other forms of insurance of any kind relating to the Assets or the business and operations of the 23 28 Stations. To Sellers' Knowledge, all such policies: (a) are in full force and effect; (b) are sufficient for compliance in all material respects by Heritage with all requirements of law and of all material agreements to which Heritage is a party; and (c) are valid, outstanding, and enforceable policies and Heritage is not in default in any material respect thereunder. Between the Heritage Agreement Closing Date and the Closing Date of this Agreement, Sellers will carry insurance relating to the Assets or the business and operations of the Stations such that this Section 4.1.17 would be true after substituting "Sellers" for "Heritage" in each instance. All such insurance of Sellers shall provide for full replacement cost coverage of any tangible property that is lost or damaged due to an insured event or cause. REPORTS. All material returns, reports and statements that the Station will be required to file with the Commission or any governmental agency after the date of this Agreement, and to Sellers' Knowledge, all material returns, reports and statements that the Stations have been required to file with the Commission or any governmental agency through the date of this Agreement, have been or will be timely filed, and all reporting requirements of the Commission and other governmental authorities having jurisdiction thereof have been or will be complied with by Sellers and, to Sellers' Knowledge, by Heritage, in each case, in all material respects. All such reports, returns and statements to be filed after the date hereof will be complete and correct in all material respects as filed and, to Sellers' Knowledge, all such reports, returns and statements that have been filed through the date of this Agreement, are complete and correct in all material reports as filed. At and after the Heritage Agreement Closing Date all documents required by the Commission to be deposited by Sellers. and, to Sellers' Knowledge, all documents required by the Commission to be deposited by Heritage since the period of operation of the Stations by Heritage, in each case, in the public file of the Stations (as defined in the rules and regulations of the Commission) have been or will be deposited therein. HERITAGE AGREEMENT. Except as set forth on Schedule 4.1.19, Sinclair and its affiliates have not waived any of their rights under the Heritage Agreement related to the Stations. Sinclair is unaware of any material breach or misrepresentation by Heritage or News Corp. under 24 29 the Heritage Agreement. Sinclair is not in material breach of, and has not defaulted under, any of the terms of the Heritage Agreement (unless waived or consented to in writing by Heritage and described on Schedule 4.1.19). The Heritage Agreement constitutes the valid and binding obligation of Sinclair, enforceable against Sinclair and, by assignments, against Sellers, in accordance with its terms, except as such enforceability may be limited by bankruptcy and laws affecting the enforcement of creditors' rights generally or equitable principles. Sinclair is not, and, to Seller's Knowledge, Heritage and News Corp. are not, subject to any judgment, award, order, writ, injunction, arbitration decision or decree which prohibits the performance of the Heritage Agreement or the consummation of any transaction contemplated under the Heritage Agreement, and, except as disclosed on Schedule 4.1.19, there is no litigation, administrative action, arbitration, proceeding or investigation pending or, to Sellers' Knowledge, threatened, against Heritage, News Corp., Sinclair or Sellers or affecting such parties in any federal, state or local court, or before any administrative agency or arbitrator that would adversely affect the ability of Sinclair, Sellers, Heritage or News Corp. to consummate, or that would prohibit, the transactions contemplated under the Heritage Agreement related to the Stations. INTERPRETATION OF CERTAIN PROVISIONS. Sellers have not relied and are not relying on the specification of any dollar amount in any representation or warranty made in this Agreement or any Schedule hereto to indicate that such amounts, or higher or lower amounts, are or are not material, and agree not to assert in any dispute or controversy between the parties hereto that specification of such amounts indicates or is evidence as to whether or not any obligation, item or matter is or is not material for purposes of this Agreement and the transactions contemplated hereby. ENTERCOM'S REPRESENTATIONS. Entercom represents and warrants to Sellers that: 25 30 CORPORATE STANDING. Entercom is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, and at the Closing Date will have the corporate power and authority to conduct its business as proposed to be conducted and upon the acquisition of the Assets will be duly qualified to do business in any jurisdiction where it owns and operates a radio station and in each other jurisdiction where such qualification is necessary, except for those jurisdictions where the failure to be so qualified could not, individually or in the aggregate, have a material adverse effect. AUTHORIZATION OF AGREEMENT: NO BREACH. Entercom has the corporate power and authority to execute, deliver and perform this Agreement and such other agreements as are necessary to consummate the transactions contemplated hereby. Subject to the receipt of the consents and approvals required elsewhere herein, this Agreement constitutes the valid and binding obligation of Entercom, enforceable against Entercom in accordance with its terms, except as such enforceability may be limited by bankruptcy and laws affecting the enforcement of creditors' rights generally or equitable principles. Assuming the said consents and approvals are obtained, neither such execution, delivery and performance nor compliance by Entercom with the terms and provisions hereof will conflict with or result in a breach of any of the terms, conditions or provisions of the organizational documents of Entercom or any judgment, order, injunction, decree, regulation or ruling of any court or any other governmental authority to which Entercom is subject or any material agreement or contract to which Entercom is a party or to which it is subject, or constitute a material default thereunder. QUALIFICATION AS ASSIGNEE. Except as disclosed in Schedule 4.2.3, Entercom is, and pending Closing will remain, legally, financially and otherwise qualified under the Communications Act of 1934, as amended (the "Communications Act") and all rules, regulations and policies of the Commission to acquire and operate the Stations. Except as disclosed in Schedule 4.2.3, there are no facts 26 31 or proceedings which would reasonably be expected to disqualify Entercom under the Communications Act or otherwise from acquiring or operating any of the Stations or would cause the Commission not to approve the assignment of the FCC Licenses to Entercom. Except as disclosed in Schedule 4.2.3, Entercom has no knowledge of any fact or circumstance relating to Entercom or any of Entercom's Affiliates that would reasonably be expected to (a) cause the filing of any objection to the assignment of the FCC Licenses to Entercom, (b) lead to a delay in the processing by the Commission of the applications for such assignment or (c) lead to a material delay in the processing by the Commission of the renewals of the FCC Licenses for the Portland Stations or the Rochester Stations. Except as disclosed in Schedule 4.2.3, no waiver of any Commission rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses to Entercom, nor will processing pursuant to any exception or rule of general applicability be requested or required in connection with the consummation of the transactions herein. ABSENCE OF CONFLICTING ORDERS. Entercom is not subject to any judgment, award, order, writ, injunction, arbitration decision or decree which prohibits the performance of this Agreement or the consummation of any transaction contemplated under this Agreement, and there is no litigation, administrative action, arbitration, proceeding or investigating pending, or to the knowledge of Entercom, threatened, against Entercom or affecting Entercom in any federal, state or local court, or before any administrative agency or arbitrator that would adversely affect Entercom's ability to perform its obligations under this Agreement or would hinder the consummation of the transactions contemplated hereunder. AVAILABILITY OF FUNDS. Entercom will have available on the Closing Date sufficient funds to enable it to consummate the transactions contemplated hereby. 27 32 WARN ACT. Entercom is not planning or contemplating, and has not made or taken, any decisions or actions concerning the employees of the Stations after the Closing Date that would require the service of notice under the Worker Adjustment and Retraining Act of 1988, as amended. NO OUTSIDE RELIANCE. Entercom has not relied and is not relying on any statement, representation or warranty not made in this Agreement, any Schedule hereto or any certificate to be delivered to Entercom at the Closing pursuant to this Agreement. Entercom is not relying on any projections or other predictions contained or referred to in materials (other than the Schedules) that have been or may hereafter be provided to Entercom or any of its Affiliates, agents or representatives, and Sellers make no representations or warranties with respect to any such projections or other predictions. INTERPRETATION OF CONCERN PROVISIONS. Entercom has not relied and is not relying on the specifications of any dollar amount in any representation or warranty made in this Agreement or any Schedule hereto to indicate that such amounts, or higher or lower amounts, are or are not material, and agrees not to assert in any dispute or controversy between the parties hereto that specification of such amounts indicates or is evidence as to whether or not any obligation, item or matter is or is not material for purposes of this Agreement and the transactions contemplated hereby. ARTICLE CONDITIONS MUTUAL CONDITIONS. Performance of the obligations of the parties under this Agreement and the Closing of the transaction provided for herein are and shall be subject to the occurrence and concurrence of the express conditions precedent that: 5.1.1. The Stations shall have been acquired by Sellers from Heritage pursuant to the Heritage Agreement; and 28 33 5.1.2. The Commission has granted its consent and approval in writing to the assignment to Entercom of the FCC Licenses as contemplated hereby, such consent to be free of any material adverse condition, and the Commission's consent shall have become a Final Order, provided, that if no objection or petition to deny has been filed against the Applications and if Entercom's lenders consent to Closing upon FCC consent prior to such consent becoming a Final Order, then the condition set forth in this Section 5.1.2 will be deemed to be satisfied upon the consent and approval of the Commission; and 5.1.3. The waiting period (as it may be extended) applicable to the transfer of the Assets under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have expired or been earlier terminated. 5.1.4. No statute, rule or regulation, or order of any court or administrative agency, shall be in effect which restrains or prohibits Entercom or Sellers, or any one of them, from consummating the transactions contemplated hereby. ENTERCOM'S CONDITIONS. Performance of the obligations of Entercom under this Agreement and the Closing of the transactions provided for herein also are and shall be subject to the occurrence of each of the following express conditions precedent, each of which may be waived by Entercom, that: The applications for the renewal of the FCC Licenses of each of the Portland Stations and the Rochester Stations shall have been granted without any material adverse condition, and such grants shall have become Final Orders; and The representations and warranties contained in Section 4.1 hereof shall be true and correct at and as of the Closing Date as if made on and as of such date except to the extent that they speak as of a particular date or time other then the Closing Date (in which case such representations and warranties shall be true and correct as of such date or time); provided, that the failure of such representations and warranties to be true and correct at and as of the Closing Date shall only be a condition to Entercom's obligations hereunder if such failures involve costs, damages and/or expenditures in excess of $1,265,000 (as determined by a qualified independent third party), provided, further, that if such amount is less than $1,265,000 but more than $150,000, such amount shall be placed in escrow on the Closing Date pursuant to an indemnification escrow agreement, the form of which is attached hereto as Exhibit D hereto, to secure Sellers' indemnification obligations under Section 9.7.1 hereunder; and 29 34 All of the terms, covenants and conditions to be complied with and performed by each Seller on or prior to the Closing Date shall have been complied with or performed in all material respects; and There shall have been no material adverse change relating to the material FCC Licenses of any of the Stations (other than WBBF(AM)). SELLERS' CONDITIONS. Performance of the obligations of Sellers under this Agreement and the Closing of the transactions provided for herein also are and shall be subject to the occurrence of each of the following express conditions precedent, each of which may be waived by any Seller, that: The representations and warranties contained in Section 4.2 hereof shall be true and correct at and as of the Closing Date in all material respects as if made on and as of such date except to the extent they speak as of a particular date or time other than the Closing Date (in which case such representations and warranties shall be true and correct in all material respects as of such date or time); and All of the terms, covenants and conditions to be complied with and performed by Entercom on or prior to the Closing Date (including delivery of the Purchase Price) shall have been complied with or performed in all material respects. Entercom shall have complied in all material respects with its obligations to pay Monthly Payments (as defined in the TBA) and to reimburse Sellers for capital expenditures for the Stations under Section 1.2 and Schedule 1.2 of the TBA. ARTICLE COVENANTS AND AGREEMENTS. AFFIRMATIVE COVENANTS OF SELLERS. During the period from the date of this Agreement to the Closing Date, Sellers shall: Should Sellers acquire any Station or operate any Station prior to the sale of such Station to Entercom pursuant to this Agreement, Sellers shall conduct the business and operations of such Station at least in accordance with the provisions of Sections 6.1.1 through and including 6.1.12 and Sections 6.2.1 through and including 6.2.12 under the Heritage Agreement. Subject to the provisions of the TBA, cooperate with Entercom in connection with its review, analysis and monitoring of the Assets and the operations 30 35 of the Stations to the end that an efficient transfer of the Assets may be made at Closing and the business of the Stations may continue on an uninterrupted basis. Sellers or one of them shall obtain Entercom's consent, such consent not to be unreasonably withheld, prior to the exercise of Sellers' or any of their rights under the Heritage Agreement as such rights pertain to the Stations (other than the right to consummate the acquisition of the Stations upon satisfaction of all conditions thereto). In addition to providing information required hereunder or reasonably requested by the other parties hereto, Sellers agree promptly to notify Entercom of any material problems or developments of which any Seller becomes aware with respect to any of the Assets or the business of any of the Stations. Use their reasonable best efforts to cause Heritage to prosecute, or to prosecute with the Commission, the applications for renewal of the FCC Licenses for the Portland Stations and the Rochester Stations, such that the applications are granted without any material adverse condition and, to the extent reasonably possible, on or prior to the date for expiration of such FCC Licenses. Use reasonable best efforts to enforce all of its rights under the Heritage Agreement as such rights pertain to the Stations, including, without limitation, causing Heritage to act in conformity with the Heritage Agreement and requiring Heritage to conduct the business of the Stations in the Ordinary Course of Business in accordance with the terms of the Heritage Agreement, except where such would not have a material adverse effect on the business and operations of any Station, and, to the extent consistent with the foregoing, in the same manner in which the same have heretofore been conducted with the intent of preserving the ongoing operations and business of the Stations. Use their reasonable best efforts to close the transactions contemplated by the Heritage Agreement as they pertain to the Stations in a timely fashion consistent with the terms of such agreement. Sellers shall enforce their rights to the fullest extent possible under the Heritage Agreement as they pertain to the Stations, unless otherwise directed by Entercom. To the extent that Sinclair or Sellers receive notifications from Heritage with respect to the Stations under the Heritage Agreement or otherwise becomes aware of any breach of any representation, warranty, covenant or agreement in the Heritage Agreement or the failure to satisfy any condition in such agreement, in each case with respect to the Stations, Sellers shall promptly notify Entercom, and thereafter use reasonable best efforts to enforce, perform or waive any provision of the Heritage Agreement pertaining to the Stations as may be reasonably requested by Entercom, provided, that Sellers shall not be obligated to take any action at Entercom's request inconsistent with their rights and obligations under the Heritage Agreement. To the extent permitted under the Heritage Agreement, at Closing Sellers will assign any and all rights with respect to the Stations that it may have against Heritage, News Corp., and their respective subsidiaries to Entercom. Entercom acknowledges that the assignment of such rights by Sellers requires the prior written consent of Heritage, which consent 31 36 Heritage may withhold in its sole discretion. In this regard, Sellers will use their reasonable efforts (without obligation to spend any amount of money) to obtain any consent of Heritage or News Corp. required to assign such rights to Entercom prior to the Closing Date. The failure of Sellers to obtain such consent shall not limit Entercom's obligation to close if all other conditions precedent to Entercom's obligations have been satisfied or waived; however, in such case, Sellers shall fully enforce their rights which relate to the Stations against Heritage and News Corp. under the Heritage Agreement at Entercom's request, and this covenant shall survive the Closing for the period that Sinclair has any rights under the Heritage Agreement. Any proceeds received by Sellers from the exercise of their rights which relate to the Stations against Heritage and News Corp. and their respective subsidiaries shall be paid over to Entercom within five (5) business days of receipt by Sellers, less any reasonable costs and expenses of enforcement incurred by Sellers in such exercise. At all times, maintain strict confidentiality with respect to all documents and information furnished to Sellers by or on behalf of Entercom. Nothing shall be deemed to be confidential information that: (a) is known to Sellers at the time of its disclosure to Sellers; (b) becomes publicly known or available other than through disclosure by Sellers; (c) is received by Sellers from a third party not actually known by Sellers to be bound by a confidentiality agreement with or obligation to Entercom; or (d) is independently developed by Sellers. Notwithstanding the foregoing provisions of this Section 6.1.8, Sellers may disclose such confidential information (a) to the extent required or deemed advisable to comply with applicable laws; (b) to its officers, directors, employees, representatives, financial advisors, attorneys, accountants, and agents with respect to the transactions contemplated hereby (so long as such parties agree to maintain the confidentiality of such information); and (c) to any governmental authority in connection with the transactions contemplated hereby. In the event this Agreement is terminated, Sellers will return to Entercom all documents and other material prepared or furnished by Entercom relating to the transactions contemplated hereunder, whether obtained before or after the execution of this Agreement. NEGATIVE COVENANTS OF SELLERS. Unless Entercom has given its prior consent in writing, which consent shall not be unreasonably withheld or delayed, Sellers shall not, directly or indirectly, during the period from the date of this Agreement to the Closing Date: Except as set forth on Schedule 4.1.19 hereto, fail to comply with the terms of, waive any of Sellers' rights under or consent to any actions requiring Sinclair's or Sellers' consent under the Heritage Agreement related to the Stations. Fail to consummate the acquisition of the Stations upon the occurrence or waiver of all conditions precedent thereto under the Heritage Agreement. AFFIRMATIVE COVENANTS OF ENTERCOM. During the period from the date of this Agreement to the Closing Date (or solely in the case of Section 6.3.4, from and after the Closing Date), Entercom shall: 32 37 Use reasonable efforts to obtain its lenders' consent to Closing of this Agreement upon the consent and approval of the Commission of the Applications but prior to such consent and approval becoming a Final Order. At all times prior to the Closing, maintain strict confidentiality with respect to all documents and information furnished to Entercom by or on behalf of Sellers. Nothing shall be deemed to be confidential information that: (a) is known to Entercom at the time of its disclosure to Entercom; (b) becomes publicly known or available other than through disclosure by Entercom; (c) is received by Entercom from a third party not actually known by Entercom to be bound by a confidentiality agreement with or obligation to Sellers; or (d) is independently developed by Entercom. Notwithstanding the foregoing provisions of this Section 6.3.2, Entercom may disclose such confidential information (a) to the extent required or deemed advisable to comply with applicable laws; (b) to its officers, directors, partners, employees, representatives, financial advisors, attorneys, accountants, agents, underwriters, lenders, investors and any other potential sources of financing with respect to the transactions contemplated hereby (so long as such parties agree to maintain the confidentiality of such information); and (c) to any governmental authority in connection with the transactions contemplated hereby. In the event this Agreement is terminated, Entercom will return to Sellers all documents and other material prepared or furnished by Sellers relating to the transactions contemplated by this Agreement, whether obtained before or after the execution of this Agreement. Take all corporate action (including, without limitation, all shareholder action), under the laws of any state having jurisdiction over Entercom necessary to effectuate the transactions contemplated by this Agreement. From and after the Closing Date, cause to be afforded to representatives of Sellers reasonable access during normal business hours to the offices, books and records, contracts and reports of the Stations, as Sellers shall from time to time reasonably request; provided, however, that (a) such investigation shall only be upon reasonable notice and shall not unreasonably disrupt the personnel or operations of Entercom or the Stations, and (b) under no circumstances shall Entercom be required to provide access to Sellers or any representatives of Sellers (i) any information or materials subject to confidentiality agreements with third parties required to be kept confidential by applicable laws, or (ii) any privileged attorney-client communications or attorney work product. All requests for access to the offices, books and records, contracts and reports of the Stations shall be made to such representatives as Entercom shall designate in writing, who shall be solely responsible for coordinating all such requests and all access permitted hereunder. Entercom agrees not to dispose of any books and records, contracts and reports of the Stations which relate to the operations of the Stations during the period during which the Stations were owned by Sellers without consulting with Sellers prior to disposal thereof and taking any reasonable action requested by Sellers with respect to retention and transfer to Sellers thereof. 33 38 MUTUAL COVENANTS OF SELLERS AND ENTERCOM. DISCLOSURE SCHEDULES. Sellers and Entercom acknowledge and agree that Sellers shall have the right from time to time after the date hereof to update or correct solely Schedules 2.1.5, 2.1.6, 2.1.8, 2.1.9 and 4.1.17 attached hereto solely to reflect actions by Sellers after the date hereof which are not prohibited by Section 6.1 hereof. The inclusion of any fact or item on a Schedule referenced by a particular section in this Agreement shall, should the existence of the fact or item or its contents, be relevant to any other section, be deemed to be disclosed with respect to such other section whether or not an explicit cross-reference appears in the Schedules. BULK SALES LAWS. Entercom hereby waives compliance by Sellers, in connection with the transactions contemplated hereby, with the provisions of any applicable bulk transfer laws. TAX MATTERS. Sellers and Entercom each represent, warrant, covenant and agree with each other that for tax purposes the sale of Assets described herein is not effective until the Closing Date. Sellers and Entercom agree that all Tax returns and reports shall be filed consistent with the sale of assets taking place on the Closing Date. PRESERVATION OF BOOKS AND RECORDS. For a period of three (3) years after the Closing Date, Sellers agree not to dispose of, and agree to provide Entercom reasonable access to, any material books or records in Sellers' possession immediately after the Closing Date that relate to the business or operation of the Stations prior to the Closing Date. NO CONTROL BY ENTERCOM. Subject to the provisions of the TBA, nothing contained in this Agreement shall give to Entercom any right to control the operations of the Stations prior to the Closing Date. Any advice, counsel or consent given to Sellers by Entercom under this Article VI will not mitigate, detract from or otherwise affect Sellers' representations, warranties or obligations under this Agreement. Any advice, counsel or consent given to Entercom by Sellers under this Article VI will not mitigate, detract from or otherwise affect Entercom's representations, warranties or obligations under this Agreement. 34 39 ARTICLE PREPARATION FOR CLOSING APPLICATION TO COMMISSION. The parties hereto bind themselves to use all reasonable efforts, and to cooperate with each other, in seeking the consent and approval of the Commission to the assignment of all FCC Licenses, as herein provided; and Sellers and Entercom agree that each shall diligently and promptly prepare, sign and file with the Commission within five (5) business days from the date of this Agreement any and all applications requisite or desirable to procure such consent and approval (the "Applications"); and diligently and promptly to prepare and submit to the Commission all information, data, exhibits, amendments, resolutions, statements and other material necessary or proper in connection with the Applications; and diligently to pursue the grant of a Final Order approving such Applications by the Commission. With respect to the foregoing, Sellers hereby agree, commit and bind themselves to prepare and deliver to Entercom on or before five (5) days from the date of this Agreement Sellers' portions of all applications and documents necessary for filing with the Commission to obtain the consent and approval of the Commission as required to permit the consummation of the transactions contemplated by this Agreement. INSPECTION BY ENTERCOM. To the extent permitted under the Heritage Agreement, during the period from the date of this Agreement to the Heritage Agreement Closing Date, and between the period from the Heritage Agreement Closing Date and the Closing Date, Sellers shall afford engineers, attorneys, accountants and other consultants and/or representatives of Entercom free access during normal business hours to the employees, offices, studios, transmitter site, equipment, records and other documents pertaining to the Stations and furnish Entercom with all information concerning said Stations as Entercom may reasonably request, including but not limited to applications, responses to the Commission inquiries, and other documents filed by Sellers with the Commission. Without limiting the foregoing, Entercom shall have the right, subject to the limitations set forth above and at its sole expense, to perform such phase I and phase II environmental site assessments of any real property for the Stations included within the Assets, and upon receipt 35 40 of such assessments agrees to deliver a copy of each to Sellers. No right of termination for Entercom shall arise as a result of any issue identified in such environmental site assessments (unless a separate cause for termination under other provisions of this Agreement may provide such a right); however, following the Closing Date, if Entercom performs remediation for any issues specifically identified in such environmental site assessments requiring remediation under any Environmental Law, Sellers shall reimburse Entercom for the costs and expenses of such remediation, up to a maximum aggregate amount of $250,000, subject to the limitations on indemnification set forth in Section 9.7.4. HART-SCOTT-RODINO NOTIFICATION. As promptly as practicable and no later than five (5) business days after the date hereof, the parties hereto shall take all steps reasonably necessary to file and shall participate in the filing of all requisite documents and notifications required to be filed pursuant to the HSR Act. The parties will jointly request early termination of any required waiting period under the HSR Act unless mutually agreed otherwise. The parties agree diligently to take and fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested in order to obtain promptly the expiration of the waiting period under the HSR Act. ARTICLE CLOSING CLOSING. Closing shall take place at the time and place agreed to by the parties hereto. It is expressly contemplated hereunder that Entercom shall have no right to close on the acquisition of less than all the Stations without the consent of Sellers. In the absence of agreement thereon and except as modified elsewhere herein, the Closing shall take place by mail at 10:00 a.m., Eastern Time, at the offices of Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Suite 1300, Washington, D.C. 2004, on a date selected by Entercom within ten (10) business days after the later of: (a) the satisfaction or waiver of each condition to closing contained herein (other than such conditions as can only be satisfied at the Closing); and (b) the expiration of any period of extension for Closing provided elsewhere in this Agreement. If such date falls on a 36 41 Saturday, Sunday or legal holiday in the State of New York, then such Closing shall take place as provided herein on the next business day. ADJUSTMENTS. Except as otherwise provided in the TBA, and subject to the terms and conditions of Section 8.2.2, at least five (5) days prior to the Closing Date, Sellers shall make a good faith estimate of the adjustment to the Purchase Price customary in radio broadcast station transactions for Proration Items (the "Proration Amount") to reflect that all Proration Items of all Stations shall be apportioned between Entercom and Sellers in accordance with the principle that Sellers shall receive the benefit of all revenues, refunds, deposits (other than deposits for Program Contracts which shall be prorated based on the percentage of the term that the program was aired on such Stations before the Closing Date and the percentage available to be aired on and after the Closing Date) and prepaid expenses, and shall be responsible for all expenses, costs and liabilities allocable to the conduct of the businesses or operations of such Stations for the period prior to the Closing Date, and Entercom shall receive the benefit of all revenues, refunds, deposits and prepaid expenses, and shall be responsible for all expenses, costs and liabilities allocable to the conduct of the businesses or operations of such Stations from and after the Closing Date; provided, however, that there shall be no adjustment or proration for any negative or positive net trade balance except to the extent that the negative net trade balance for the Stations exceeds $50,000. Determinations pursuant to this Section 8.2.1, shall be made in accordance with generally accepted accounting principles consistently applied for the period prior to the Closing Date. Within ninety (90) days after the Closing Date, Entercom shall deliver to Sellers in writing and in reasonable detail a good faith final determination of the Proration Amount determined as of the Closing Date under Section 8.2.1 (the "Final Proration Amount"). Sellers shall assist Entercom in making such determination, and Entercom shall provide Sellers with reasonable access to the properties, books and records relating to the Stations for the purpose of determining the Final Proration Amount. Sellers shall have the right to review the computations and workpapers used in connection with Entercom's preparation of the Final Proration Amount. If Sellers disagree with the amount of the Final Proration Amount determined by Entercom, Sellers shall so notify Entercom in writing within thirty (30) days after the date of receipt of Entercom's Final Proration Amount, specifying in detail any point of disagreement; provided however, that if Sellers fail to notify Entercom in writing of Sellers' disagreement within such thirty (30) day period, Entercom's determination of the Final Proration Amount shall be final, conclusive and binding on Sellers and Entercom. After the receipt of any notice of disagreement, Entercom and Sellers shall negotiate in good faith to resolve any disagreements regarding the Final Proration Amount. If any such disagreement cannot be resolved by Sellers and Entercom within thirty (30) days after Entercom has received notice from Sellers of the existence of such disagreement, 37 42 Entercom and Sellers shall jointly select a nationally recognized independent public accounting firm (which has not performed any service for either Entercom or Sellers or any of their respective subsidiaries at anytime during the two (2) year period prior to the date such firm is selected (the "Accounting Firm")), to review Entercom's determination of the Final Proration Amount and to resolve as soon as possible all points of disagreement raised by Sellers. All determinations made by the Accounting Firm with respect to the Final Proration Amount shall be final, conclusive and binding on Entercom and Sellers. The fees and expenses of the Accounting Firm incurred in connection with any such determination shall be shared one-half by Entercom and one-half by Sellers. Upon determination of the Final Proration Amount, the appropriate party owing any prorations shall pay such amounts in cash, within two (2) business days following the final determination of the Final Proration Amount. Any amounts paid pursuant to this Section 8.2.2 shall be by wire transfer of immediately available funds for credit to the recipient at a bank account identified by such recipient in writing. Entercom and Sellers agree that prior to the date of the final determination of the Final Proration Amount pursuant to this Section 8.2.2 (by the Accounting Firm or otherwise), neither party will destroy any records pertaining to, or necessary for, the final determination of the Final Proration Amount. CLOSING DELIVERIES TO ENTERCOM. At or before the Closing, Sellers or one of them, as the case may be, shall deliver to Entercom the following items and documents in form satisfactory to counsel for Entercom and properly executed, unless Entercom shall waive in whole or in part in writing such delivery and then only to the extent of such waiver: One or more Bills of Sale and assignments and other instruments of transfer and conveyance, substantially in the form attached hereto as Exhibit E, transferring to Entercom the Assets to be sold, transferred or assigned hereunder and the rights and interests under the Station Contracts being assigned to Entercom hereunder, copies of all consents from third parties to the assignment of Station Contracts received prior to the Closing Date (if any), and estoppel certifications received prior to the Closing Date (if any) by the other parties to such Station Contracts that Sellers are not then in default under the terms of the Station Contract to which such other party is a party. An assignment of all right, title and interest of Sellers in and to the FCC Licenses and all pending applications relating to the Stations before the Commission, substantially in the form attached hereto as Exhibit E. 38 43 All keys to and actual possession of all of the Assets, in the same condition as the same now is, except for ordinary wear and tear thereof, unless disposed of or otherwise altered as permitted by this Agreement. Certified copies of resolutions of the Board of Directors and shareholders (if required by law) of each of Sellers, duly authorizing the execution, delivery and performance of this Agreement and all documents to be executed and delivered by each Seller at the Closing and thereafter, and certified copies of resolutions of the Board of Directors of Sinclair, duly authorizing the execution, delivery and performance of the SCI Guarantee. Certificates signed by authorized officers of each Seller (each certificate being applicable to each Seller only), to the effect that no act or omission by each Seller, or state of facts contrary to the agreements, representations and warranties made herein by each Seller has been taken or has occurred and that, subject to Section 5.2.2 of this Agreement, said representations and warranties are true and correct at and as of the Closing Date as if made on and as of the time of Closing Date, except to the extent that said representations and warranties speak as of a particular date or time other than the Closing Date (in which case such representations and warranties shall be true and correct as of such date or time). The consents of any public authorities or third persons that may be required in connection with the performance of this Agreement. All books, records, public files, contracts, leases, Commission filings, correspondence, files and other documents in Sellers' possession relating to and necessary or appropriate to the operation of the Stations, excluding however, accounting records relating to Sellers' period of ownership (provided Entercom is given copies thereof). A special warranty deed in recordable form transferring to Entercom a fee simple interest in any owned real property included within the Assets and a commitment to issue extended coverage policies of title insurance (ATLA owners and Mortgagee's policy-Form 1970, if available or Form 1984 or 1990 with 1970 endorsements), for the benefit of insuring good and marketable title to such real property free and clear of all liens and encumbrances issued by a title insurance company reasonably acceptable to Entercom and in the amount allocated to such real property hereunder, subject to standard title exceptions and survey exceptions, none of which will impair or interfere with the continued use of such real property as such is currently used. All fees and expenses for the issuance of such title insurance policies shall be paid for by Entercom. To the extent Sellers have obtained such consent, the consent of Heritage and/or News Corp., as necessary, to the assignment of the rights related to the Stations under the Heritage Agreement to Entercom. Instructions to the Escrow Agent to deliver the original Letter of Credit to Entercom promptly after the Closing. 39 44 Opinions of Thomas & Libowitz, P.A., counsel to Sellers, and of Fisher, Wayland, Cooper, Leader & Zaragoza, regulatory counsel to Sellers, substantially in the forms attached hereto as Exhibits F and G. CLOSING DELIVERIES TO SELLERS. At the Closing, Entercom shall deliver to Sellers the Purchase Price as set forth in Section 2.5 allocated between Sellers as Sellers shall direct and deliver the following items and documents in form satisfactory to counsel for Sellers and properly executed unless each Seller waives in whole or part in writing a delivery and then only to the extent of such waiver: One or more Agreements whereby Entercom assumes and agrees to pay when due any Liabilities of each Seller specifically required to be assumed by Entercom hereunder, substantially in the form attached hereto as Exhibit E. Certified copies of the resolutions of the Board of Directors of Entercom approving and ratifying this Agreement and all transactions contemplated by this Agreement. A certificate signed by the President or any Vice President of Entercom to the effect that with respect to any matter which would prevent Entercom from consummating the Closing, no act or omission of Entercom or state of facts contrary to the agreements, representations and warranties made herein by Entercom has been taken or has occurred and that said representations and warranties are true and correct at and as of the Closing Date in all material respects as if made on and as of Closing Date, except to the extent that said representations and warranties speak as of a particular date or time other than the Closing Date (in which case such representations and warranties shall be true and correct in all material respects as of such date or time). An opinion of John C. Donlevie, General Counsel to Entercom, substantially in the form attached hereto as Exhibit H. COVENANTS OF FURTHER ASSURANCE. At and after the time of Closing, upon request of Entercom or Sellers, as the case may be, the parties shall take such reasonable action and deliver to the party so requesting such further instruments of assignment, conveyance or transfer or other documents of further assurance as in the opinion of counsel for either Sellers or Entercom may be reasonably necessary to evidence the full and effective transfer, conveyance and assignment of the Assets and possession thereof to Entercom. 40 45 DAMAGE TO PROPERTY. If, at the time of Closing, any of the real or tangible personal property included in the Assets shall have suffered loss or damage for which Entercom is not responsible under the term of the TBA, Sellers shall use their reasonable efforts to repair, replace or restore the same prior to Closing. In the event that such repair, replacement or restoration cannot be completed prior to the date scheduled for Closing, then, except as provided immediately below, Closing shall occur and Sellers shall assign to Entercom their rights to all insurance proceeds relating to such loss or damage. In the event such loss or damage is uninsured or so material as to prevent one of the Stations (other than WBBF(AM)) from using its studios or any of its transmitter facilities in the normal course, consistent with past practices, Closing shall be deferred until the completion of such repair, replacement or restoration by Sellers to the extent that the Station's or Stations' studios and transmitter facilities are again useable in the normal course, consistent with past practices, and such delay shall not give rise to a right to terminate this Agreement as provided in Section 9.1.4 hereof. TAXES ON TRANSACTION. All sales, purchase, transfer, use or documentary taxes, if any, payable by reason of this Agreement or any of the transactions contemplated hereby or the sale, transfer or delivery of any of the Assets to Entercom, whether or not imposed on Entercom or Sellers, shall be paid one-half by Entercom and one-half by Sellers promptly when due. ARTICLE TERMINATION, DEFAULT AND INDEMNIFICATION TERMINATION BY REASON OTHER THAN DEFAULT. This Agreement may be terminated by any party hereto not then in default hereunder at the time of such termination upon written notice to the other party if: The Commission denies or designates for hearing any of the Applications or any portion thereof by Final Order; or 41 46 Events occur which give rise to a specific right hereunder to terminate this Agreement by the party seeking to terminate; or Other than as a result of a default by the party seeking to terminate, any material condition set forth herein to the obligation of the party seeking to terminate this Agreement to complete the transaction has not been satisfied or complied with by the Closing Date and has not been waived by the party seeking to terminate; or By either party, subject to Section 8.6 hereof, if the Commission does not grant its consent and approval to the Applications and the waiting period required under the HSR Act has not expired or been terminated by the date that is six months after the date of this Agreement and the TBA has not commenced by such six-month anniversary, provided, that if an issue has been raised before the Commission, the DOJ or the FTC concerning either Sellers, or any of their predecessors, on the one hand, or Entercom, on the other hand, and such issue has delayed the consent and approval of the Commission or the expiration or termination of the waiting period contemplated by the foregoing clause, then the party to which such issue relates shall not be permitted to terminate the Agreement pursuant to this provision on such six-month anniversary date. If the TBA has commenced within the six-month period set forth above, the period for termination by either party pursuant to this Section 9.1.4 shall be one (1) year, provided, that on such one-year anniversary date, either party may, subject to Section 8.6 hereof, terminate this Agreement even if an issue has been raised before the Commission concerning such party and such issue has delayed the consent and approval of the Commission. EFFECT OF TERMINATION BY REASON OTHER THAN DEFAULT. If this Agreement is duly terminated by either party as provided in Section 9.1, then the Letter of Credit shall be returned to Entercom and all obligations of either party to the other shall cease and both parties shall be fully and finally released herefrom. DEFAULT. The following shall constitute a default hereunder: If any of the representations or warranties of a party contained herein is inaccurate or breached in any material respect; or If any of the obligations to be performed hereunder by a party hereto is not performed during the period or at or before the time specified herein for such performance. REMEDIES OF SELLERS. 42 47 In the event of a default by Entercom, which is not waived by Sellers, Sellers shall have the following remedies: Prior to Closing, Sellers may, as their sole remedy, by written notice to Entercom terminate this Agreement in which event Seller shall be entitled to receive the proceeds of the Letter of Credit as liquidated damages in full and final settlement of all claims under this Agreement, and there shall be no other or further obligations, liabilities or remedies of the parties hereunder. In the event Closing occurs hereunder, Sellers' remedy for any default by Entercom shall be indemnification pursuant to Section 9.7 hereof. ENTERCOM'S REMEDIES. In the event of a default by either Seller hereunder, which is not waived by Entercom, Entercom shall have the following remedies: Prior to Closing, subject to the provisions regarding failures of representations and warranties contained in Section 5.2.2 hereof, Entercom may by written notice to Sellers terminate this Agreement in which event Entercom shall be entitled to recover from Sellers, jointly and severally, any damages Entercom sustained as a result of the default by such breaching Seller hereunder. Prior to Closing, Entercom may seek specific performance by Sellers of Sellers' obligations hereunder and shall also be entitled to any other remedy available at law or in equity, including without limitation the recovery of any damages (including attorneys fees and costs) incurred by Entercom as a result of the default by Sellers hereunder. Each Seller covenants that under such circumstances it shall not assert in defense of an action seeking specific performance of this Agreement in favor of Entercom that Entercom has available adequate remedies at Law. In the event Closing occurs hereunder, Entercom's remedy for any default by Sellers shall be indemnification pursuant to Section 9.7 hereof. LIQUIDATED DAMAGES NOT A PENALTY. With respect to the liquidated damages as described and provided for in Section 9.4.1 hereof, Sellers and Entercom hereby acknowledge and agree that the damage that may be suffered by Sellers in the event of a default by Entercom hereunder is not readily ascertainable and that such liquidated damages as of the date hereof are a 43 48 reasonable estimate of such damages and are intended to compensate Sellers for any such damage and are not to be construed as a penalty. INDEMNIFICATION. BY SELLERS. Subject to Sections 9.7.4 and 10.3, from and after the Closing Date, Sellers shall, jointly and severally, indemnify, defend and hold Entercom and its officers, directors, employees and affiliates harmless from, against and with respect to any and all loss, damage, claim, obligation, assessment, cost, liability, and reasonable expense (including, without limitation, reasonable attorney's fees and reasonable costs and expenses incurred in investigating, preparing, defending against or prosecuting any litigation or claim, action, suit, proceeding or demand) of any kind or character (a "Loss") incurred, suffered, sustained or required to be paid by any of them and resulting from, related to or arising out of: any breach of any of the covenants, representations or warranties made by Sellers in or pursuant to this Agreement, or in any agreement, document or instrument executed and delivered pursuant hereto or in connection with the Closing hereunder; any failure by Sellers to perform or observe, or to have performed or observed, in full, any covenant, agreement or condition to be performed or observed by them pursuant to this Agreement or in any agreement, document or instrument executed and delivered by or on behalf of them in connection with the Closing hereunder; any and all Liabilities of Sellers, except for Liabilities to be assumed or retained by Entercom under the terms of this Agreement; or Sellers' operation or ownership of the Assets prior to the Adjustment Time, including any and all obligations and liabilities arising under the FCC Licenses or the Station Contracts which accrue or relate to a period of time prior to the Adjustment Time; or 44 49 1. BY ENTERCOM. If Closing does not occur due to a default by Entercom in its obligation to complete such Closing hereunder, Sellers' remedy shall be liquidated damages pursuant to Section 9.4 hereof. Provided Closing occurs hereunder, subject to Section 10.3, Entercom shall indemnify, defend and hold Sellers and their respective officers, directors, employees and affiliates harmless from, against and with respect to any Loss (as defined in Section 9.7.1) incurred, suffered, sustained or required to be paid by any of them and resulting from, related to or arising out of: 1. any breach of any of the covenants, representations or warranties made by Entercom in or pursuant to this Agreement or in any agreement, document or instrument executed and delivered pursuant hereto or in connection with the Closing hereunder; 2. any failure by Entercom to perform or observe, or to have performed or observed, in full, any covenant, agreement or condition to be performed or observed by it pursuant to this Agreement or in any agreement, document or instrument executed and delivered by or on behalf of it in connection with the Closing hereunder; or 3. any and all Liabilities of Entercom except for Liabilities to be assumed or retained by Sellers under the terms of this Agreement; or 4. Entercom's operation or ownership of the Assets after the Adjustment Time, including any and all Liabilities arising under the FCC Licenses or the Station Contracts assumed by Entercom which accrue after the Adjustment Time or which relate to or arise out of events occurring after the Adjustment Time. 1. PROCEDURES. Any party seeking indemnification under this Agreement (the "Indemnified Party") shall promptly give the party from whom indemnification is sought (the "Indemnifying Party") written notice of any claim or the commencement of any action or proceeding for which the Indemnified Party may seek indemnification, and the Indemnified Party shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting from such claim, unless injunctive relief is sought against the Indemnified Party in which case the Indemnified Party shall have the right to join in any defense. The Indemnified Party's failure to give the Indemnifying Party notice under this clause shall not preclude the Indemnified Party from seeking indemnification from the Indemnifying Party except to the extent that the 45 50 Indemnified Party's failure has materially prejudiced the Indemnifying Party's ability to defend the claim or litigation. The Indemnifying Party shall not settle any claim for which the Indemnified Party seeks indemnification or consent to entry of any judgment in litigation arising from such a claim without obtaining a written release of the Indemnified Party from all liability in respect of such claim or litigation. If the Indemnifying Party shall not assume the defense of any such claim or litigation resulting therefrom, or if injunctive relief is sought against the Indemnified Party, the Indemnified Party may defend against or settle such claim or litigation in such manner as it may deem appropriate, and in such cases, upon a written demand therefore, the Indemnifying Party shall promptly reimburse the Indemnified Party for the amount of all reasonable expenses, legal or otherwise, incurred by the Indemnified Party in connection with the defense against or settlement of such claim or litigation. In addition, if the Indemnifying Party shall not assume the defense of any such claim or litigation resulting therefrom, or if injunctive relief is sought against the Indemnified Party, and if no settlement of the claim or litigation is made, upon written demand therefor, the Indemnifying Party shall promptly reimburse the Indemnified Party for the amount of any judgment rendered with respect to such claim or in such litigation and for all reasonable expenses, legal or otherwise, incurred by the Indemnified Party in the defense against such claim or litigation. 2. LIMITS ON INDEMNIFICATION. Notwithstanding any other provision hereof, Entercom shall not be entitled to make a claim against Sellers for indemnification under this Agreement until the aggregate amount of such claims by Entercom exceeds One Hundred Fifty Thousand Dollars ($150,000) (the "Threshold"), provided, that once the Threshold has been exceeded, Entercom shall be entitled to seek from Sellers, jointly and severally, the full amount of such claims. The amount of the Threshold shall have no bearing on any determination as to what constitutes "material" for purposes of this Agreement. In addition, notwithstanding any other provision of this Agreement to the contrary, in no event shall a Loss include a party's incidental, consequential or punitive damages, regardless of the theory of recovery. ARTICLE 3. GENERAL PROVISIONS 46 51 4. EXPENSES OF THE PARTIES. Except as otherwise expressly provided herein, all expenses involved in the preparation, authorization and consummation of this Agreement, including, without limitation, all fees and expenses of agents, representatives, counsel and accountants in connection therewith and in connection with applications to the Commission hereunder, shall be borne solely by the party who shall have incurred the same, and the other party shall have no liability in respect thereof. The foregoing notwithstanding, the parties agree to pay in equal shares (i) any filing fees of the Commission relating to the filing of the Applications, (ii) fees related to notifications under the HSR Act or to any other governmental agency and (iii) fees and expenses of the Escrow Agent under the Escrow Agreement and the Indemnification Escrow Agreement. In addition, (y) assuming Sellers obtain the consent of Geraghty & Miller to allow Entercom and its lenders to rely upon the phase I environmental site assessment performed for the Real Property and identified on Schedule 4.1.16, Entercom agrees to pay one-half of the total cost of such phase I environmental site assessment performed by Geraghty & Miller and (z) Entercom shall pay all of the cost involved in the update by Geraghty & Miller of such phase I environmental site assessment (as contemplated by Section 4.1.16.1), provided that Entercom shall receive a dollar-for-dollar credit against any amount paid by Entercom pursuant to clause (y) above. 5. BROKERS. Each party hereto represents and warrants to the other party hereto that it has not incurred any Liability, contingent or otherwise, for brokerage or finders' fees or agents commissions or other like payment in connection with this Agreement or the transactions contemplated hereby for which the other party will have any Liability, and each party hereto agrees to indemnify and hold the other party hereto harmless against and in respect to any such Liability based in any way on any agreement, arrangement or understanding claimed to have been made by such party with any third party. 6. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. The provisions hereof which by their terms are to be performed and observed after the Closing Date and the several representations, warranties, indemnities and agreements of Entercom and Sellers herein contained shall survive the Closing Date hereunder for one (1) year 47 52 following the Closing Date. No claim for indemnification may be made pursuant to Article IX after the survival period set forth in this Section 10.3 (except that all claims which are properly asserted prior to the expiration of the survival period set forth in this Section 10.3 shall survive with respect to such claims until the final resolution thereof). 7. AMENDMENT AND WAIVER. This Agreement cannot be changed or terminated orally. Any amendment of modification hereof must be in writing signed by the party against whom enforcement is sought. No waiver of compliance with any provision or condition hereof, and no consent provided for herein, shall be effective unless evidenced by an instrument in writing duly executed by the party sought to be charged with such waiver or consent. 8. ASSIGNMENT. Entercom shall have the right to assign all or any portion of its rights under this Agreement to any entity under common control with Entercom or a Qualified Intermediary under Section 1031 of the Code, provided, that no such assignment shall relieve Entercom of its obligations hereunder. Other than as expressly set forth above, no party may assign all or any portion of its rights under the Agreement without the prior written consent of the other parties hereto. 9. EFFECT OF THIS AGREEMENT. This Agreement, together with the exhibits and schedules hereto and a letter agreement, among Entercom and SCI, dated of even date herewith, sets forth the entire understanding of the parties and supersedes any and all prior written or oral agreements, arrangements or understandings relating to the subject matter hereof. No representation, promise, inducement or statement of intention has been made by either party which is not embodied in this Agreement or the letter agreement referred to above, and neither party shall be bound by, or be liable for, any alleged representation, promise, inducement or statement of intention not embodied herein unless same shall have been made subsequent hereto, shall be in writing and shall be signed by the party to be charged therewith. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 48 53 10. HEADINGS. The article or section headings of this Agreement are for convenience of reference only and do not form a part of and do not in any way modify, interpret or construe the intention of the parties. 11. COUNTERPARTS. This Agreement may be executed in one or more counterparts and all such counterparts shall be construed as one and the same instrument. 12. GOVERNING LAW. The construction and performance of this Agreement shall be governed by the laws of the State of New York, excluding choice of law provisions thereunder. 13. NOTICES. Any notice, report, demand, waiver or consent required or permitted hereunder shall be in writing and shall be given by hand delivery, by prepaid registered or certified mail, with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery or by telecopy addressed as follows: If to Sellers: David D. Smith, President Sinclair Communications, Inc. 2000 West 41st Street Baltimore, MD 21211-1420 Telecopy Number: (410) 467-5043 49 54 with copies to: Robert Quicksilver, General Counsel Sinclair Communications, Inc. 2000 West 41st Street Baltimore, MD 21211-1420 Telecopy Number: (410) 662-4707 Steven A. Thomas, Esq. Thomas & Libowitz, P.A. 100 Light Street, Suite 1100 Baltimore, MD 21202 Telecopy Number: (410) 752-2046 If to Entercom: Joseph M. Field, President Entertainment Communications, Inc. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopy Number: (610) 660-5620 50 55 with copies to: John C. Donlevie, General Counsel Entertainment Communications, Inc. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopy Number: (610) 660-5620 Joseph D. Sullivan, Esq. Latham & Watkins 1001 Pennsylvania Avenue, N.W., Suite 1300 Washington, D.C. 20004 Telecopy Number: (202) 637-2201 The date of any such notice and service thereof shall be deemed to be: (i) the day of delivery if hand delivered or delivered by overnight courier; (ii) the day of delivery as indicated on the return receipt if dispatched by mail, or (iii) the date of telecopy transmission as indicated on the telecopier transmission report provided that any telecopy transmission shall not be effective unless a paper copy is sent by overnight courier on the date of the telecopy transmission. Either party may change its address for the purpose of notice by giving notice of such change in accordance with the provisions of this section. 14. STATION EMPLOYEES. Subject to the terms of the TBA, Sellers agree that for a period of one year after the Commencement Date of the TBA, neither they nor any of their affiliates, successors or assignees will employ or solicit for employment, or counsel others to solicit for employment, any current employee of the Stations that Entercom employs after the Closing; provided, that if Entercom terminates any employee of the Stations, such restrictions shall not apply to any such terminated employees. 15. SECTION 1031 ASSET EXCHANGE. Entercom may elect to effect the acquisition of all or part of the Assets as part of a deferred like-kind exchange under Section 1031 of the Code, in lieu of buying such assets hereunder; provided, that the consummation of this Agreement is not predicated or conditioned on such exchange. If Entercom so elects, it shall provide notice to Sellers of its election, 51 56 and thereafter (i) may at any time at or prior to Closing assign its rights under this Agreement to a "qualified intermediary" as defined in Treas. Reg. Section 1.1031(k)-1(g)(4), subject to all of Sellers' rights and obligations hereunder and (ii) shall promptly provide written notice of such assignment to all parties hereto; provided, that no such assignment shall relieve Entercom of its obligations hereunder. Notwithstanding the assignment of Entercom's rights hereunder, the parties acknowledge and agree that the representations, warranties and covenants of Sellers hereunder are for the benefit of Entercom and shall remain enforceable by Entercom against Sellers in accordance with the terms hereof. Sellers shall cooperate with all reasonable requests of Entercom and the "qualified intermediary" in arranging and effecting the exchange as one which qualifies under Section 1031 of the Code; provided, that Sellers shall incur no additional costs, expenses, delays or liabilities in connection with this transaction as a result of or in connection with the exchange. Without limiting the generality of the foregoing, if Entercom has given notice of its intention to effect the acquisition of all or part of the Assets as part of a tax-deferred exchange, Sellers shall (i) promptly provide Entercom with written acknowledgment of such notice and (ii) at Closing, accept payment for all or that portion of the Assets for which like-kind exchange treatment is sought by Entercom from the "qualified intermediary" rather than from Entercom (which payment shall discharge the obligation of Entercom hereunder to make payment for such assets) and transfer, assign and convey such assets to Entercom. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 52 57 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized corporate officers on the date first written above. TUSCALOOSA: TUSCALOOSA BROADCASTING, INC. By: Title: SRPLI: SINCLAIR RADIO OF PORTLAND LICENSEE, INC. By: Title: SRRLI: SINCLAIR RADIO OF ROCHESTER LICENSEE, INC. By: Title: ENTERCOM ENTERTAINMENT COMMUNICATIONS, INC. By: Title: 53 EX-10.08 12 TIME BROKERAGE AGREEMENT TUSCALOOSA 1 EXHIBIT 10.08 TIME BROKERAGE AGREEMENT by and among ENTERTAINMENT COMMUNICATIONS, INC., TUSCALOOSA BROADCASTING, INC., SINCLAIR RADIO OF PORTLAND LICENSEE, INC. and SINCLAIR RADIO OF ROCHESTER LICENSEE, INC. Dated as of January 26, 1998 2 TABLE OF SCHEDULES AND EXHIBITS Schedule 1.1 Programming Schedule 1.2 Compensation Schedule 2.1 Programming Policy Statement Schedule 4.1 Excluded Contracts Schedule 11.1 Time Broker's Actions and Proceedings Schedule 11.2 Licensee's Actions and Proceedings (i) 3 TABLE OF CONTENTS
PAGE ARTICLE I. - SALE OF TIME........................................................................................ 1 Section 1.1. Broadcast of Programming......................................................... 1 Section 1.2. Payment.......................................................................... 2 Section 1.3. Term............................................................................. 2 ARTICLE II. - PROGRAMMING AND OPERATING STANDARDS AND PRACTICES.................................................. 2 Section 2.1. Compliance with Standards........................................................ 2 Section 2.2. Political Broadcasts............................................................. 2 Section 2.3. Handling of Communications....................................................... 3 Section 2.4. Preemption....................................................................... 3 Section 2.5. Broadcasting Obligations of Licensee............................................. 3 Section 2.6. Rights in Programs............................................................... 4 Section 2.7. "Payola" and "Plugola"........................................................... 4 Section 2.8. Advertising and Programming...................................................... 5 Section 2.9. Format and Transmitter Locations................................................. 5 Section 2.10. Compliance with Laws............................................................ 5 Section 2.11. Certifications.................................................................. 6 ARTICLE III. - RESPONSIBILITY FOR EMPLOYEES AND EXPENSES......................................................... 6 Section 3.1. Time Broker's Employees.......................................................... 6 Section 3.2. Licensee's Employees............................................................. 6 Section 3.3. Time Broker's Expenses........................................................... 6 Section 3.4. Operating Expenses............................................................... 7 Section 3.5. Employee Matters................................................................. 7 ARTICLE IV. - ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS........................................................ 9 Section 4.1. Assignment....................................................................... 9 Section 4.2. Proration........................................................................ 10 Section 4.3. Accounts Receivable.............................................................. 10 ARTICLE V. - OPERATION OF STATION................................................................................ 11 ARTICLE VI. - GRANT OF LICENSES.................................................................................. 12 Section 6.1. License to Use Station Facilities................................................ 12 Section 6.2. License of Intellectual Property................................................. 12 ARTICLE VII. - INDEMNIFICATION................................................................................... 12 Section 7.1. Indemnification Rights........................................................... 12 Section 7.2. Procedures....................................................................... 13
(i) 4 ARTICLE VIII. - DEFAULT.......................................................................................... 14 Section 8.1. Time Broker Events of Default.................................................... 14 Section 8.2. Licensee's Events of Default..................................................... 14 Section 8.3. Cure Periods..................................................................... 14 Section 8.4. Other Defaults................................................................... 15 ARTICLE IX. - TERMINATION........................................................................................ 15 Section 9.1. Termination...................................................................... 15 Section 9.2. Certain Matters Upon Termination................................................. 16 ARTICLE X. - REMEDIES............................................................................................ 17 ARTICLE XI. - CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES................................................................. 17 Section 11.1. Representations and Warranties of Time Broker................................... 17 Section 11.2. Representations, Warranties and Covenants of Licensee........................... 18 ARTICLE XII. - MISCELLANEOUS..................................................................................... 19 Section 12.1. Modification and Waiver......................................................... 19 Section 12.2. No Waiver; Remedies Cumulative.................................................. 19 Section 12.3. Construction.................................................................... 19 Section 12.4. Headings........................................................................ 20 Section 12.5. Successors and Assigns.......................................................... 20 Section 12.6. Force Majeure................................................................... 20 Section 12.7. Broker.......................................................................... 20 Section 12.8. Counterpart Signatures.......................................................... 20 Section 12.9. Notices......................................................................... 20 Section 12.10. Effect of this Agreement....................................................... 22 Section 12.11. Severability................................................................... 22 Section 12.12. No Joint Venture............................................................... 22 Section 12.13. Damage to Stations............................................................. 22 Section 12.14. Noninterference................................................................ 23 Section 12.15. Regulatory Changes............................................................. 23
(ii) 5 TIME BROKERAGE AGREEMENT This Time Brokerage Agreement (this "Agreement") is made as of the 26th day of January, 1998, by and among Entertainment Communications, Inc., a Pennsylvania corporation ("Time Broker"), and Tuscaloosa Broadcasting, Inc., a Maryland corporation ("Tuscaloosa"), Sinclair Radio of Portland Licensee, Inc., a Maryland corporation ("SRPLI") and Sinclair Radio of Rochester Licensee, Inc., a Maryland corporation ("SRRLI") (Tuscaloosa, SRPLI and SRRLI are sometimes collectively referred to herein as "Licensee"). Upon the consummation of the transactions contemplated by that certain Asset Purchase Agreement, dated July 16, 1997, among Sinclair Broadcast Group, Inc. ("Sinclair") and various subsidiaries of Heritage Media Corporation ("HMC") (control of which subsidiaries, on August 20, 1997, was transferred to William G. Evans, Trustee) (HMC is sometimes collectively referred to with its subsidiaries as "Heritage"), SRPLI will become the licensee of broadcast stations KKSN(AM), Vancouver, Washington, KKSN-FM, Portland, Oregon and KKRH(FM), Salem, Oregon (collectively, the "Portland Stations"), and SRRLI will become the licensee of broadcast stations WKLX(FM), Rochester, New York, WBEE(FM), Rochester, New York, WBBF(AM), Rochester, New York and WQRV(FM), Avon, New York (collectively, the "Rochester Stations" and together with the Portland Stations, the "Stations"). Time Broker and Licensee desire to enter into an agreement providing for the programming and sale, upon the acquisition by Licensee of the Stations from Heritage, of substantially all of the broadcast time of the Stations to Time Broker, subject to and in compliance with the rules and policies of the Federal Communications Commission (the "FCC"). Simultaneously herewith, Time Broker and Licensee are entering into an Asset Purchase Agreement (the "Purchase Agreement") providing for the acquisition by Time Broker of the Stations. Accordingly, in consideration of the foregoing and of the mutual promises, covenants, and conditions set forth below, the parties agree as follows: ARTICLE I. SALE OF TIME Section 1.1. Broadcast of Programming. Effective upon the date (the "Commencement Date") that is the later to occur of (a) the date that Licensee acquires the Stations from Heritage or (b) the date that is ten (10) business days after the expiration or early termination of any waiting period applicable to the transfer of the Stations to Time Broker under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), Licensee shall broadcast on the Stations, or cause to be 6 broadcast on the Stations, programs which are presented to it by Time Broker as described in greater detail on Schedule 1.1 (the "Programming"). Section 1.2. Payment. Time Broker shall pay Licensee for broadcast of the Programming the amounts set forth in Schedule 1.2 (the "Monthly Payment"), subject to adjustment as set forth in Sections 2.4 and 2.5 below. All payments shall be made by wire transfer of immediately-available funds by the last business day of each calendar month, in arrears, to which such payment pertains. Section 1.3. Term. This Agreement shall commence on the Commencement Date and shall terminate on the earlier of (i) 12:01 a.m. on the Closing Date (as defined in the Purchase Agreement) under the Purchase Agreement, (ii) the date the Purchase Agreement is terminated, or (iii) the date this Agreement is terminated pursuant to Section 9.1 hereof. ARTICLE II. PROGRAMMING AND OPERATING STANDARDS AND PRACTICES Section 2.1. Compliance with Standards. All Programming delivered by Time Broker during the term of this Agreement shall be in accordance with applicable statutes, FCC requirements and the programming policies set forth on Schedule 2.1. Licensee reserves the right to refuse to broadcast any Programming containing matter which the Licensee believes is unsuitable or not consistent with the needs and interests of its service area or may be violative of any right of any third party, or which may constitute a "personal attack" as that term is and has been defined by the FCC or which Licensee reasonably determines is, or in the reasonable opinion of Licensee may be deemed to be, indecent (and not broadcast during the safe harbor for indecent programming established by the FCC) or obscene by the FCC or any court or other regulatory body with authority over Licensee or the Station. Section 2.2. Political Broadcasts. Time Broker shall maintain and deliver to Licensee all records and information required by the FCC to be placed in the public inspection files of the Stations pertaining to the broadcast of political programming and controversial issue advertisements, in accordance with the provisions of Sections 73.1212 and 73.3526 of the FCC's rules, and agrees to broadcast sponsored programming addressing political issues or controversial subjects of public importance, in accordance with the provisions of Section 73.1212 of the FCC's rules. Time Broker shall consult and cooperate with Licensee and adhere to all applicable statutes and the rules, regulations and policies of the FCC, as announced from time to time, with respect to the 2 7 carriage of political advertisements and programming and the charges permitted therefor. Time Broker shall promptly provide to Licensee such documentation relating to such programming as Licensee is required to maintain in its public inspection files or as Licensee shall reasonably request. Licensee shall be responsible for the maintenance of the public inspection files of the Stations. Section 2.3. Handling of Communications. Time Broker shall cooperate with Licensee in promptly responding to all mail, cables, telegrams or telephone calls directed to the Stations in connection with the Programming provided by Time Broker or any other matter relevant to its responsibilities hereunder. Promptly upon receipt, Time Broker shall provide copies of all such correspondence to Licensee. Time Broker shall promptly advise Licensee of any public or FCC complaint or inquiry known to Time Broker concerning such Programming, and shall provide Licensee with copies of any letters to Time Broker from the public, including complaints concerning such Programming. Upon Licensee's request, Time Broker shall provide Licensee with such information as will allow Licensee to respond to such complaints and inquiries. Notwithstanding the foregoing, Licensee shall handle all matters or inquiries relating to FCC complaints and any other matters required to be handled by Licensee under the rules and regulations of the FCC. Section 2.4. Preemption. Licensee may, from time to time, preempt portions of the Programming to broadcast emergency information or programs it deems would better serve the public interest. Time Broker shall be notified at least one week in advance of any preemption of any of the Programming for the purpose of broadcasting programs Licensee deems necessary to better serve the public interest unless such advance notice is impossible or impractical, in which case Licensee shall notify Time Broker promptly upon making such determination. In the event of any such preemption, Time Broker shall be entitled to a credit against any other amounts due Licensee under this Agreement in an amount equal to the product of (a) the Monthly Payment and (b) the result of dividing the number of hours so affected by the aggregate number of hours available for Programming during such month. Licensee represents and covenants that preemption pursuant to this Section 2.4 shall only occur to the extent Licensee deems necessary to carry out its obligations as an FCC licensee, and expressly agrees that its right of preemption shall not be exercised for the commercial advantage of Licensee or others. Section 2.5. Broadcasting Obligations of Licensee. During the term of this Agreement, except as set forth in Sections 2.1 and 2.4 and this Section 2.5, Licensee will broadcast the Programming in its entirety (including commercials), without interruption, deletion or addition of any kind: 3 8 (i) Licensee may temporarily refrain from broadcasting the Programming from the main transmitter of each Station between the hours of 12:30 a.m. and 5:30 a.m. (or at such other time in the event that weather conditions or contractual arrangements relating to transmitter sites dealing with the exposure of humans to RF radiation so require or as may otherwise be required under compelling circumstances that cannot be rescheduled between the hours of 12:30 a.m. and 5:30 a.m.) in order to perform normal, customary and routine maintenance on the Station's main transmitting facilities; provided, that Licensee shall provide written notice to Time Broker of its intent to refrain from broadcasting the Programming from the main transmitter of each Station at least forty-eight (48) hours in advance, except when an emergency requires such suspension, and provided further that Licensee shall use its best efforts to minimize the impact, frequency and duration of such interruptions, including without limitation by way of use of any auxiliary transmitter that may be available for the applicable Station; and (ii) Licensee may temporarily cease broadcasting the Programming from the main transmitter of each Station as a result of a technical malfunction, natural disaster, act of public enemy, act of God, or any other cause beyond the control of Licensee; provided that in any such case, Licensee will act expediently and use its best efforts to resume the broadcast of the Programming from the main transmitter of each Station as quickly as the applicable circumstances will allow, and will use its best efforts to broadcast the Programming from any auxiliary transmitter that may be available for the applicable Station. In the event of any interruption pursuant to this Section (other than (a) interruption pursuant to Section 2.5(i) occurring between the hours of 12:30 a.m. and 5:30 a.m. and (b) interruption pursuant to Section 2.5(ii)), if Licensee is not able to broadcast the Programming from an available auxiliary transmitter, Time Broker shall be entitled to a credit against the Monthly Payment or any other sums due hereunder, in an amount equal to the product of (a) the Monthly Payment and (b) the result of dividing the number of hours so affected by the aggregate number of hours available for Programming during such month. Section 2.6. Rights in Programs. All right, title and interest in and to the Programming, and the right to authorize the use of the Programming in any manner and in any media whatsoever, shall be and remain vested at all times solely in Time Broker. Section 2.7. "Payola" and "Plugola". Time Broker agrees that it will not accept any gift, gratuity or other consideration, including, but not limited to, a commission, discount, bonus, material supplies or other merchandise, services or labor (collectively, the "Consideration"), directly or indirectly, from any person or company for the playing of records, the presentation of any programming or the broadcast of any commercial announcement over the Stations unless the payor is identified in the 4 9 program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act of 1934, as amended (the "Communications Act") and the FCC requirements. It is further understood and agreed that no commercial message, plugs, or undue reference shall be made in programming presented over the Stations to any business venture, profit-making activity or other interest (other than non-commercial announcements for bona fide charities, church activities or other public service activities) unless the payor is identified in the program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act and the FCC requirements. In addition, Time Broker agrees that it will take steps, including the continuation of Licensee's system for periodic execution of affidavits, reasonably designed to assure that it, its employees and agents comply with this Section 2.7. Section 2.8. Advertising and Programming. Beginning with the Commencement Date, Time Broker shall be solely responsible for any expenses incurred in connection with and shall be entitled to all revenue from the sale of advertising or program time in the Programming. Except as otherwise provided herein, Time Broker does not assume any obligation of Licensee under any contract or advertising arrangement entered into by Licensee on or after the Commencement Date. Licensee shall indemnify Time Broker for the amount of any lost revenue caused by any sale of advertising time made by Licensee that would lower the Station's lowest unit charge for political advertising. Section 2.9. Format and Transmitter Locations. During the term of this Agreement, except as otherwise consented to in writing by Licensee or as otherwise provided in the following sentence, Time Broker agrees that it will not make any material changes in the Stations' existing programming formats or seek to change the location of any of the Stations' studio or transmitting facilities. Notwithstanding the foregoing, (i) the parties expressly agree that Time Broker, in its sole discretion, is permitted during the term of this Agreement to exchange the programming formats on KKSN(AM) and KFXX(AM) (which is owned and operated by Time Broker) (it being understood that, should this Agreement terminate other than as a result of the Closing (as defined in the Purchase Agreement) under the Purchase Agreement, Time Broker shall, promptly upon such termination, change the programming formats on each such station back to their programming formats substantially as they exist on the date of this Agreement) and (ii) Licensee agrees that it will not unreasonably withhold consent to any request by Time Broker to change the programming format for WBBF(AM). Section 2.10. Compliance with Laws. At all times during the term of this Agreement, Time Broker and Licensee shall comply in all material respects with all applicable federal, state and local laws, rules and regulations. 5 10 Section 2.11. Certifications. Pursuant to Section 73.3555(a)(3)(ii) of the FCC's rules, Licensee certifies that it maintains ultimate control over the Station's facilities, including specifically control over station finances, personnel and programming, and Time Broker certifies that this Agreement complies with the provisions of Section 73.3555(a) of the FCC's rules. ARTICLE III. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES Section 3.1. Time Broker's Employees. Time Broker shall employ and be responsible for the payment of salaries, taxes, insurance and all other costs related to all personnel used in the production of the Programming. Except as provided in Section 3.5 with respect to Transferred Employees, Time Broker will not incur any liability on account of Licensee's employees arising and accruing prior to the Commencement Date including, without limitation, any such liability on account of unemployment insurance contributions, termination and severance payments, accrued sick leave or accrued vacation. Section 3.2. Licensee's Employees. Licensee shall employ and be responsible for the payment of salaries, taxes, insurance and all other costs related to the personnel necessary to fulfill its obligations as Licensee and under this Agreement, and to produce Licensee's programming on the Stations subject to reimbursement as provided in Schedule 1.2. Time Broker shall have no authority and shall not supervise persons in the employ of Licensee after the Commencement Date. Licensee acknowledges that its employees may have access to certain confidential information of Time Broker. Licensee shall, therefore, inform its employees of the confidential nature of such information and require that each such employee keep such information confidential. Section 3.3. Time Broker's Expenses. Time Broker shall pay for all costs associated with the production and delivery of the Programming, including but not limited to (i) all ASCAP, BMI, SESAC and other copyright fees, (ii) any expenses incurred in connection with its sale of advertising time hereunder (including without limitation sales commissions) in connection with the Programming and (iii) the salaries, taxes, insurance and related costs for all of Time Broker's personnel used in the production of the Programming and all of Time Broker's sales personnel (including salespeople, traffic personnel, and programming staff). 6 11 Section 3.4. Operating Expenses. Licensee shall be responsible for the payment when due of all fees and expenses relating to operation and maintenance of the Stations to the extent necessary for Licensee to maintain the licensed transmitting capability of the Stations and to fulfill its obligations as an FCC licensee, including, without limitation, salaries, benefits and similar expenses for Licensee's employees, Licensee's federal, state and local taxes, rent, utilities (excluding telephone), maintenance and repairs at each of the Station's transmitter and studio sites, any capital expense at each of the Station's transmitter and studio sites, insurance on the Stations' equipment, insurance deductibles on claims on the Stations' equipment, and ad valorem property taxes, subject to reimbursement as provided in Schedule 1.2. Section 3.5. Employee Matters. On the Commencement Date, Time Broker shall offer employment to each of the employees of the Stations (including those on leave of absence, whether short-term, long-term, family, maternity, disability, paid, unpaid or other), other than those employees that are retained by Licensee pursuant to Section 3.2 above during the term of this Agreement, at a comparable salary, position and place of employment as held by each such employee immediately prior to the Commencement Date (such employees who are given such offers of employment are referred to herein as the "Transferred Employees"). Nothing in this Section 3.5.1 is intended to guarantee employment for any Transferred Employee for any length of time after the Commencement Date. (i) Except as provided otherwise in this Section 3.5, Licensee shall pay, discharge and be responsible for (a) all salary and wages arising out of or relating to the employment of the employees of the Stations prior to the Commencement Date and (b) any employee benefits arising under the Benefit Plans (as defined in the Purchase Agreement) of Licensee and their Affiliates during the period prior to the Commencement Date. From and after the Commencement Date, Time Broker shall pay, discharge and be responsible for all salary, wages and benefits arising out of or relating to the employment of the Transferred Employees by Time Broker on and after the Commencement Date. Time Broker shall be responsible for all severance Liabilities (as such term is defined in the Purchase Agreement), and all COBRA Liabilities for any Transferred Employees of the Stations terminated on or after the Commencement Date. (ii) Time Broker shall cause all Transferred Employees as of the Commencement Date to be eligible to participate in the "employee welfare benefit plans" and "employee pension benefit plans" (as defined in Section 3(1) and 3(2) of ERISA, respectively) of Time Broker in which similarly situated employees of Time Broker are generally eligible to participate; provided, however, that all Transferred Employees and their spouses and dependents shall be eligible for coverage immediately after the Commencement Date (and shall not be 7 12 excluded from coverage on account of any preexisting condition) to the extent provided under such plans with respect to Transferred Employees. (iii) For purposes of any length of service requirements, waiting periods, vesting periods or differential benefits based on length of service in any such plan for which a Transferred Employee may be eligible after the Commencement Date, Time Broker shall ensure that, to the extent permitted by law, service by such Transferred Employee with Heritage, Licensee or any Affiliate of Heritage or Licensee shall be deemed to have been service with the Time Broker. In addition, Time Broker shall ensure that each Transferred Employee receives credit under any welfare benefit plan of Time Broker for any deductibles or co-payments paid by such Transferred Employee and his or her dependents for the current plan year under a plan maintained by Heritage or Licensee or any Affiliate of Heritage or Licensee. Time Broker shall grant credit to each Transferred Employee for all sick leave in accordance with the policies of Time Broker applicable generally to its employees after giving effect to service for Heritage or Licensee as service for Time Broker. To the extent taken into account in determining prorations under Section 4.2 hereunder, Time Broker shall assume and discharge Licensee's liabilities for the payment of all unused vacation leave accrued by Transferred Employees as of the Commencement Date. To the extent any claim with respect to such accrued vacation leave is lodged against Licensee, with respect to any Transferred Employee, Time Broker shall indemnify, defend and hold harmless Licensee from and against any and all losses, directly or indirectly, as a result of, or based upon or arising from the same, up to the amount of the proration credit received by Time Broker under Section 4.2 for such items. (iv) [Intentionally omitted] (v) As soon as practicable following the Commencement Date, Time Broker shall establish and maintain a defined contribution plan or plans (which may be a preexisting plan or plans) (the "Time Broker's Plan") intended to be qualified under Section 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"), for the benefit of the Transferred Employees. Effective as of the Commencement Date, Licensee shall cause appropriate amendments to be made to its defined contribution plan or plans (the "Licensee's Plan") to provide that the Transferred Employees shall be fully vested in their accounts under the Licensee's Plan. As soon as practicable after the Commencement Date, Time Broker shall take all necessary action to qualify Time Broker's Plan under the applicable provisions of the Code (including but not limited to Section 401), if it is not yet so qualified, and Time Broker and Licensee shall make any and all filings and submissions to the appropriate governmental agencies required to be made by them in connection with the transfer of assets described hereafter. As soon as practicable following the earlier of the receipt of a favorable determination letter from the Internal Revenue Service regarding the qualified status of both the Licensee's Plan and the Time Broker's Plan (each as amended to the date of transfer) or sooner, if Licensee and Time Broker so agree, Licensee shall cause to be transferred to Time Broker's Plan, in cash, all of the individual account balances of Transferred Employees under the Licensee's Plan, including any outstanding plan participant loan receivables allocated to such accounts. 8 13 (vi) Subject to Section 3.2, Time Broker acknowledges and agrees that Time Broker's obligations pursuant to this Section 3.5 are in addition to, and not in limitation of, Time Broker's obligation to assume the employment contracts set forth on Schedule 2.1.8 to the Purchase Agreement. (vii) Except as otherwise provided in this Section 3.5 or in any employment, severance or retention agreements of any Transferred Employees, all Transferred Employees shall be at-will employees, and Time Broker may terminate their employment or change their terms of employment at will. No employee (or beneficiary of any employee) of Seller may sue to enforce the terms of this Agreement, including specifically this Section 3.5, and no employee or beneficiary shall be treated as a third party beneficiary of this Agreement. Except to the extent provided for herein, Time Broker may cover the Transferred Employees under existing or new benefit plans, programs, and arrangements, and may amend or terminate any such plans, programs, or arrangements at any time. (viii) Upon the Closing (as defined in the Purchase Agreement) of the Purchase Agreement, Time Broker shall offer employment to each of the employees of the Stations that have been retained during the term of this Agreement by Licensee pursuant to Section 3.2. Such offer of employment will be at a comparable salary, position and place of employment as held by each such employee immediately prior to the Closing Date (as defined in the Purchase Agreement) (such employees who are given such offers of employment are referred to herein as the "Closing Date Transferred Employees"). Nothing in this Section 3.5.9 is intended to guarantee employment for any such Closing Date Transferred Employee for any length of time after the Closing Date (as defined in the Purchase Agreement). Upon the Closing (as defined in the Purchase Agreement) of the Purchase Agreement, the provisions of Sections 3.5.2 through and including 3.5.8 of this Agreement shall also apply to such Closing Date Transferred Employees after substituting (i) "Closing Date Transferred Employees" for "Transferred Employees," in each instance, and (ii) "Closing Date" for "Commencement Date," in each instance. ARTICLE IV. ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS Section 4.1. Assignment. On the Commencement Date, Licensee shall assign to Time Broker all Station Contracts (as defined in the Purchase Agreement) other than those contracts and other agreements identified on Schedule 4.1 (the "Excluded Contracts"). All such Station Contracts to be assigned hereunder are referred to collectively as the "Assigned Contracts." Time Broker shall assume, pay, perform, and discharge all liabilities arising on or after the Commencement Date under the Assigned Contracts (including, without limitation, Trade-out Agreements) pursuant to their terms (except for liabilities for any breaches thereunder by Licensee or Heritage occurring prior to the Commencement Date). Licensee has provided Time Broker with true and 9 14 complete copies, including amendments, of the Assigned Contracts. The Assigned Contracts are freely assignable, or, if consent of the other contracting party to the assignment is required, Licensee shall make reasonable best efforts to obtain all such consents prior to the Commencement Date. Subject to and in compliance with the provisions of Section 3.3 of the Purchase Agreement, to the extent that any such consents are not obtained prior to the Commencement Date, during the period between the Commencement Date and the date that Licensee obtains such consent, the parties shall cooperate to cause Time Broker to receive the benefit of the Assigned Contract in exchange for performance by Time Broker of all of Licensee's obligations under such Assigned Contract (including but not limited to the payment to Licensee of all amounts due under the Assigned Contract on and after the Commencement Date for services provided by Licensee). Section 4.2. Proration. All expenses and income arising under the Assigned Contracts shall be prorated between Licensee and Time Broker as of the Commencement Date in a manner such that the costs and benefits thereunder through the date before the Commencement Date shall be for the account of Licensee and, thereafter, during the term of this Agreement, for the account of Time Broker. With respect to any items of salary, accrued vacation or other benefits relating to Transferred Employees, such prorations shall also include an amount payable for applicable payroll taxes. Such proration shall include an adjustment for Trade-out Agreements (as defined in the Purchase Agreement) which are included in the Assigned Contracts only to the extent that any Net Negative Trade Balance (as defined below) for the Stations exceeds $50,000. "Net Negative Trade Balance" means the extent, if any, to which the value (at current rates for time on each Station as of the Commencement Date) of unfulfilled obligations of the Station under Trade-out Agreements exceed the stated consideration yet to be received by the Station pursuant to such Trade-out Agreements. Such prorations shall be completed and any necessary payments on account of such prorations paid within sixty (60) days of the Commencement Date. If any disagreement with respect to the proration of such income and expenses cannot be resolved by the parties, Licensee and Time Broker will select a certified public accountant knowledgeable in the broadcast industry to resolve the dispute. The parties will use their best efforts in good faith to cause to occur as expeditiously as possible the appointment of the certified public accountant, and once appointed, the resolution of the dispute. The resolution of such accountant shall be binding on the parties and subject to judicial enforcement. Payment of the cost of the accountant shall be shared equally between Time Broker and Licensee. Section 4.3. Accounts Receivable. All cash accounts receivable for broadcasts on the Stations which occur prior to the Commencement Date (the "Accounts Receivable") shall belong to Licensee and all Accounts Receivable for Programming which occurs thereafter shall belong to Time Broker. Within ten business (10) days following the Commencement Date, Licensee shall deliver to Time Broker a schedule of Cash Accounts Receivable for the Stations as of the Commencement Date, by 10 15 accounts and the amounts then owing (the "Schedule of Accounts Receivable"). Time Broker agrees to use its reasonable efforts (with at least the care and diligence that Time Broker uses to collect its own accounts receivable) to collect for Licensee its Accounts Receivable as shown on the Schedule of Accounts Receivable delivered by Licensee for a period of one hundred fifty (150) days following the Commencement Date; provided, that Time Broker's obligation to collect the Accounts Receivable shall survive the Closing Date (as defined in the Purchase Agreement) to the extent necessary for Time Broker to collect the Accounts Receivable for a period of one hundred fifty (150) days following the Commencement Date. All payments received by Time Broker from any customer whose name appears in the Schedule of Accounts Receivable shall be first applied to the oldest balance then due on the Accounts Receivable unless the account debtor indicates in writing that payment is to be applied otherwise due to a dispute over an Account Receivable. Time Broker shall keep accurate records of the payment received by it on such Accounts Receivable and Licensee shall have access at reasonable times to Time Broker's records to verify such status of the Accounts Receivable. On the fifth day following the last day of each month during such one hundred fifty (150) day period (or, if any such day is a Saturday, Sunday or holiday, on the next day on which banking transactions are resumed), Time Broker shall remit to Licensee collections received by Time Broker with respect to the Accounts Receivable. Any Accounts Receivable that have not been collected within such one hundred fifty (150) day period shall be reassigned, without recourse to Time Broker, to Licensee, together with all records in connection therewith, whereupon Licensee may pursue collection thereof in such manner as it, in its sole discretion, may determine. Time Broker shall not make any referral or compromise of any Accounts Receivable to a collection agency or attorney for collection and shall not compromise for less than full value any Account Receivable without the prior written consent of Licensee. Except to remit collected Accounts Receivable in accordance herewith, Time Broker shall have no liability or obligation to Licensee with respect to the collection of its accounts and shall not be obligated to take any action to collect such accounts. ARTICLE V. OPERATION OF STATION Notwithstanding any provision of this Agreement to the contrary, Licensee shall retain full authority and power with respect to the management and operation of the Stations during the term of this Agreement. Licensee shall employ the General Manager of the Stations and such other personnel as Licensee determines may be necessary to fulfill its obligations as a licensee under the Communications Act and its obligations in accordance with Section 3.2 hereof. Licensee shall retain full authority and control over the policies, programming and operations of the Stations, including, without limitation, the decision whether to preempt Programming in accordance with Section 2.4 hereof. Licensee shall have ultimate responsibility to effectuate compliance with the Communications Act and with FCC rules, regulations and policies. In no event shall Time Broker or its employees represent, depict, describe or portray Time Broker as the licensee of the Stations. 11 16 ARTICLE VI. GRANT OF LICENSES Section 6.1. License to Use Station Facilities. Effective as of the Commencement Date, Licensee grants Time Broker permission to access and use all of the studio and office space and other facilities of the Stations ("Station Facilities") and all equipment and furnishings contained therein ("Station Equipment") as reasonably necessary for the production and broadcasting of the Programming and sales and administration relating thereto, in accordance with the terms set forth in this Article VI. Time Broker shall not remove from the Station Facilities or modify any Station Equipment owned by or leased or licensed to Licensee without Licensee's prior written consent, such consent not to be unreasonably withheld. Licensee shall not license the use of the Station Facilities to any other party during the term of this Agreement; and Time Broker's use of the Station Facilities shall be exclusive except for Licensee's right to use such facilities as it deems appropriate in connection with the satisfaction of its obligations as the Licensee of the Station, including the use of such facilities and adequate office space for the employees of Licensee that are required for Licensee to comply with its obligations under Sections 3.2 and 5 hereof. Time Broker shall use due care in the use of any property of Licensee. Time Broker shall indemnify Licensee for any damage (normal wear and tear excepted) to Licensee's property caused by Time Broker or any employee, contractor, agent or guest of Time Broker. Time Broker shall have the right to install any additional equipment at the Station Facilities deemed by Time Broker to be necessary to deliver the Programming. If this Agreement shall terminate other than pursuant to the Closing under the Purchase Agreement, Time Broker shall, promptly after such termination, remove all such equipment and make all repairs necessitated by such removal. Section 6.2. License of Intellectual Property. Effective as of the Commencement Date and subject to the terms of any existing license agreement, Licensee grants Time Broker the right to use all intellectual property owned by or licensed to Licensee and used solely in the operation of the Stations (including, but not limited to, logos, jingles, promotional materials, call signs and goodwill). Time Broker shall own all trademarks, service marks, trade names, characters, formats, jingles, promotional materials, logos and positioning statements which Time Broker develops for the Programming during the term of this Agreement. ARTICLE VII. INDEMNIFICATION Section 7.1. Indemnification Rights. Each party will indemnify and hold harmless the other party, and the directors, officers, partners, employees, agents and affiliates of such other party, from and against any and 12 17 all liability, including without limitation reasonable attorneys' fees arising out of or incident to (i) any breach by such party of a representation, warranty or covenant made herein, (ii) the programming produced or furnished by such party hereunder, or (iii) the conduct of such party, its employees, contractors or agents (including negligence) in performing its or their obligations hereunder. Without limiting the generality of the foregoing, each party will indemnify and hold harmless the other party, and the directors, officers, partners, employees, agents and affiliates of such other party, from and against any and all liability for libel, slander, infringement of trademarks, trade names, or program titles, violation of rights of privacy, and infringement of copyrights and proprietary rights resulting from the programming produced or furnished by it hereunder. The parties' indemnification obligations hereunder shall survive any termination or expiration of this Agreement. Section 7.2. Procedures. Any party seeking indemnification under this Agreement (the "Indemnified Party") shall promptly give the party from whom indemnification is sought (the "Indemnifying Party") written notice of any claim or the commencement of any action or proceeding for which the Indemnified Party may seek indemnification, and the Indemnified Party shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting from such claim, unless injunctive relief is sought against the Indemnified Party in which case the Indemnified Party shall have the right to join in any defense. The Indemnified Party's failure to give the Indemnifying Party notice under this clause shall not preclude the Indemnified Party from seeking indemnification from the Indemnifying Party except to the extent that the Indemnified Party's failure has materially prejudiced the Indemnifying Party's ability to defend the claim or litigation. The Indemnifying Party shall not settle any claim for which the Indemnified Party seeks indemnification or consent to entry of any judgment in litigation arising from such a claim without obtaining a written release of the Indemnified Party from all liability in respect of such claim or litigation. If the Indemnifying Party shall not assume the defense of any such claim or litigation resulting therefrom, or if injunctive relief is sought against the Indemnified Party, the Indemnified Party may defend against or settle such claim or litigation in such manner as it may deem appropriate, and in such cases, upon a written demand therefore, the Indemnifying Party shall promptly reimburse the Indemnified Part for the amount of all reasonable expenses, legal or otherwise, incurred by the Indemnified Party in connection with the defense against or settlement of such claim or litigation. In addition, if the Indemnifying Party shall not assume the defense of any such claim or litigation resulting therefrom, or if injunctive relief is sought against the Indemnified Party, and if no settlement of the claim or litigation is made, upon written demand therefor, the Indemnifying Party shall promptly reimburse the Indemnified Party for the amount of any judgment rendered with respect to such claim or in such litigation and for all reasonable expenses, legal or otherwise, incurred by the Indemnified Party in the defense against such claim or litigation. 13 18 ARTICLE VIII. DEFAULT Section 8.1. Time Broker Events of Default. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be an Event of Default by Time Broker under this Agreement: (a) Time Broker's failure to timely pay any Monthly Payment provided for in Section 1.2 or other payments required hereunder; (b) except as otherwise provided for in this Agreement, the failure of Time Broker to supply the Programming; (c) any termination of this Agreement by Time Broker other than as permitted in Section 9.1; or (d) the issuance by the FCC of an order designating an evidentiary hearing which arises out of, relates to or is attributable solely to the acts or omissions of Time Broker under this Agreement but excluding issues which are based upon Licensee's conduct hereunder for which Time Broker may be held responsible. Section 8.2. Licensee's Events of Default. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be an Event of Default by Licensee under this Agreement: (a) except as otherwise provided for in this Agreement, the failure of Licensee to broadcast the Programming; (b) any termination of this Agreement by Licensee other than as permitted in Section 9.1; or (c) the issuance by the FCC of an order designating an evidentiary hearing which arises out of, relates to or is attributable solely to the acts or omissions of Licensee under this Agreement or during any period prior to the Commencement Date during which Licensee owns the Stations, but excluding issues which are based upon Time Broker's conduct hereunder for which Licensee may be held responsible. Section 8.3. Cure Periods. The cure periods before any event listed in Sections 8.1 or 8.2 shall become an Event of Default are as follows: (i) Payment by Time Broker. The Monthly Payment or other payments required hereunder to be paid to Licensee must be received by Licensee within five (5) business days after Licensee gives written notice of non-payment to Time Broker. a. Certain Matters. There shall be no cure period for (i) the matters relating to the FCC set forth in Sections 8.1(d) or 8.2(c) hereof, (ii) a termination by Time Broker described in Section 8.1(c); or (iii) a termination by Licensee described in Section 8.2(b) hereof. b. Programs and Broadcast Matters. With respect to Time Broker's failure to provide the Programming referred to in Section 8.1(b) hereof or Licensee's failure to 14 19 broadcast the Programming referred to in Section 8.2(a) hereof, the period allowed for cure shall be three business days from the giving of written notice of such failure to the defaulting party by the non-defaulting party. Section 8.4. Other Defaults. For any other breach of a representation, warranty or covenant made herein that is not listed in Sections 8.1 or 8.2, a party's sole remedy shall be indemnification pursuant to Article VII hereof. ARTICLE IX. TERMINATION This Agreement shall automatically terminate upon the expiration of the term of this Agreement as set forth in Section 1.3. In addition, this Agreement shall terminate as provided below. Section 9.1. Termination. In addition to other remedies available at law or equity, this Agreement may be terminated by either Licensee or Time Broker by written notice to the other, specifying an effective date of termination which is not less than seven (7) days nor more than ninety (90) days from the date such notice is given, if the party seeking to terminate is not then in material default or breach hereof, upon either: (i) an uncured Event of Default, or (ii) as provided in Section 12.15, or (iii) upon the event that the party not seeking to terminate makes a general assignment for the benefit of creditors, files or has filed against it a petition for bankruptcy, reorganization or an arrangement for the benefit of creditors, or for the appointment of a receiver, trustee or similar creditors' representative for the property or assets of such party under any federal or state insolvency law, which if filed against such party has not been dismissed within sixty (60) days thereof. In the event that the non-defaulting party does not exercise such right of termination by giving such written notice within sixty (60) days of the occurrence of an uncured Event of Default, then the Event of Default giving rise to such right of termination shall be deemed waived and the Agreement shall continue in full force and effect. 15 20 Section 9.2. Certain Matters Upon Termination. (i) Upon any termination of this Agreement, Licensee shall have no further obligation to provide to Time Broker any broadcast time or broadcast transmission facilities and Time Broker shall have no further obligations to make any payments to Licensee under Section 1.2 hereof. Upon any termination, Time Broker shall be responsible for all debts and obligations of Time Broker to third parties based upon the purchase of air time and use of Licensee's transmission facilities including, without limitation, accounts payable, barter agreements and unaired advertisements, but not for Licensee's federal, state and local income and business franchise tax liabilities or taxes levied upon Licensee's personal property. Notwithstanding anything herein to the contrary, to the extent that any invoice, bill or statement submitted to Licensee after the termination of this Agreement or any payment made by Time Broker prior to the termination of this Agreement relates to expenses incurred in operating the Stations, for periods both before and after the termination of this Agreement, such expenses shall be prorated between Licensee and Time Broker in accordance with the principle that Time Broker shall be responsible for expenses allocable to the period prior to the termination of this Agreement and Licensee shall be responsible for expenses allocable to the period on and after the termination of this Agreement. Such proration shall include an adjustment for Time Broker's Trade-out Agreements only to the extent that Time Broker's Net Negative Trade Balance exceeds $50,000. Each party agrees to reimburse the other party for expenses paid by the other party to the extent appropriate to implement the proration of expenses pursuant to the preceding sentence. If this Agreement terminates other than as a result of the Closing (as defined in the Purchase Agreement), Time Broker shall (i) assign to Licensee and Licensee shall assume all Assigned Contracts (including those employment contracts assumed by Time Broker pursuant to this Agreement) and all renewals, replacements or other contracts entered in the ordinary course of business relating to the Stations and customary for radio stations of similar type between the Commencement Date and the date of termination of this Agreement ("Supplemental Contracts") in effect on the date of such termination or expiration; (ii) be responsible for only those obligations under the Assigned Contracts and Supplemental Contracts arising on or after the Commencement Date and prior to the termination of this Agreement and, (iii) terminate, and Licensee shall hire, all Transferred Employees in accordance with the principles set forth in Section 3.5, except that, for purposes of this Section 9.2(b)(iii), "Transferred Employees" shall not include any employees hired by Time Broker pursuant to Section 3.5 who also perform substantial services for other stations in the applicable market operated by Time Broker. Notwithstanding anything in Section 7.1 to the contrary, no expiration or termination of this Agreement shall terminate the obligation of each party to indemnify the other for claims under Article VII hereof or limit or impair any party's rights to receive payments due and owing hereunder on or before the date of such termination. 16 21 ARTICLE X. REMEDIES In addition to a party's rights of termination hereunder (and in addition to any other remedies available to it or provided under law), in the event of an uncured Event of Default with respect to either party, the other may seek specific performance of this Agreement, in which case the defaulting party shall waive the defense in any such suit that the other party has an adequate remedy at law and interpose no opposition, legal or otherwise, as to the propriety of specific performance as a remedy hereunder. ARTICLE XI. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES Section 11.1. Representations and Warranties of Time Broker. Time Broker hereby represents and warrants to Licensee as follows: (i) Corporate Organization. Time Broker is a corporation duly organized, validly existing and in good standing under the laws of the state of its jurisdiction of organization and is duly qualified to do business in and is in good standing in any jurisdiction where it owns or operates a radio station and in each other jurisdiction where such qualification is necessary, except for those jurisdictions where the failure to be so qualified could not, individually or in the aggregate, have a material adverse effect on the ability of Time Broker to perform its obligations hereunder. (ii) Authorization of Agreement; No Breach. Time Broker has the corporate power and authority to execute, deliver and perform this Agreement. This Agreement constitutes the valid and binding obligation of Time Broker, enforceable against Time Broker in accordance with its terms, except as such enforceability may be limited by bankruptcy and laws affecting the enforcement of creditors' rights generally or equitable principles. Assuming the consents and approvals required elsewhere herein are obtained, neither such execution, delivery and performance nor compliance by Time Broker with the terms and provisions hereof will conflict with or result in a breach of any of the terms, conditions or provisions of the organizational documents of Time Broker or any judgment, order, injunction, decree, regulation or ruling of any court or any other governmental authority to which Time Broker is subject or any material agreement or contract to which Time Broker is a party or to which it is subject, or constitute a material default thereunder. (iii) Actions and Proceedings. Except as disclosed in Schedule 11.1, Time Broker is not subject to any judgment, award, order, writ, injunction, arbitration decision or decree which prohibits the performance of this Agreement or the consummation of any 17 22 transaction contemplated under this Agreement, and there is no litigation, administrative action, arbitration, proceeding or investigation pending, or to the knowledge of Time Broker, threatened, against Time Broker or affecting Time Broker in any federal, state or local court, or before any administrative agency or arbitrator that would adversely affect Time Broker's ability to perform its obligations under this Agreement or would prohibit the consummation of the transactions contemplated hereunder. (iv) Qualifications. Time Broker is qualified in accordance with the Communications Act and the rules and policies of the FCC to enter into this Agreement and provide Programming on the Stations in accordance with its terms. Between the date hereof and the termination of this Agreement, either by the Closing of the Purchase Agreement or the earlier termination in accordance with Article IX hereof, Time Broker will not take any action that Time Broker knows, or has reason to believe, would disqualify it from providing programming on the Stations pursuant to this Agreement. Section 11.2. Representations, Warranties and Covenants of Licensee. Licensee hereby represents, warrants and covenants to Time Broker as follows: (i) Corporate Organization. Tuscaloosa, SRPLI and SRRLI are corporations, duly organized, validly existing and in good standing under the laws of the states of their respective organizations, and are duly qualified to do business and are in good standing in any jurisdiction where they own or operate a radio station and in each other jurisdiction where such qualification is necessary, except for those jurisdictions where the failure to be so qualified could not, individually or in the aggregate, have a material adverse effect on the ability of Tuscaloosa, SRPLI or SRRLI to perform their obligations hereunder. (ii) Authorization of Agreement; No Breach. Tuscaloosa, SRPLI and SRRLI have the corporate power and authority to execute, deliver and perform this Agreement. This Agreement constitutes the valid and binding obligation of each of Tuscaloosa, SRPLI and SRRLI, enforceable against each in accordance with its terms, except as such enforceability may be limited by bankruptcy and laws affecting the enforcement of creditors' rights generally or equitable principles. Assuming the consents and approvals required elsewhere herein are obtained and that this Agreement is filed with the FCC, neither such execution, delivery and performance nor compliance by Tuscaloosa, SRPLI and SRRLI with the terms and provisions hereof will conflict with or result in a breach of any of the terms, conditions or provisions of the organizational documents of such entities or any judgment, order, injunction, decree, regulation or ruling of any court or any other governmental authority to which each is subject or any material agreement or contract to which each is a party or to which they are subject, or constitute a material default thereunder. (iii) Actions and Proceedings. Except as disclosed in Schedule 11.2, none of Tuscaloosa, SRPLI or SRRLI is subject to any judgment, award, order, writ, injunction, 18 23 arbitration decision or decree which prohibits or prevents the performance of this Agreement or the consummation of any transaction contemplated under this Agreement, and there is no litigation, administrative action, arbitration, proceeding or investigation pending, or to the knowledge of Tuscaloosa, SRPLI or SRRLI, threatened, against each or affecting each in any federal, state or local court or before any administrative agency or arbitrator that would adversely affect Tuscaloosa's, SRPLI's or SRRLI's ability to perform their obligations under this Agreement or would prohibit the consummation of the transactions contemplated hereunder. (iv) Maintenance of Current Operations. The Stations' transmission equipment shall be maintained by Tuscaloosa, SRPLI and SRRLI in a condition consistent with good engineering practices and in compliance in all material respects with the Communications Act and all other applicable rules, regulations and technical standards of the FCC. (v) Other Agreements. During the term of this Agreement, Tuscaloosa, SRPLI and SRRLI will not enter into any other time brokerage, program provision, local management or similar agreement with any third party with respect to the Stations. ARTICLE XII. MISCELLANEOUS Section 12.1. Modification and Waiver. No modification or waiver of any provision of this Agreement shall in any event be effective unless the same shall be in writing signed by the party against whom the waiver is sought to be enforced, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. Section 12.2. No Waiver; Remedies Cumulative. Except as otherwise provided herein, no failure or delay on the part of Licensee or Time Broker in exercising any right or power hereunder shall operate as a waiver thereof, nor any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensee and Time Broker herein provided are cumulative and are not exclusive of any rights or remedies which they may otherwise have. Section 12.3. Construction. The construction and performance of this Agreement shall be governed by the laws of the State of New York, excluding choice of law provisions thereunder, and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations 19 24 now or hereafter in force and to the regulations of the FCC and all other governmental bodies or authorities presently or hereafter duly constituted. Section 12.4. Headings. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. Section 12.5. Successors and Assigns. Any party may assign all or any part of this Agreement or the rights and obligations hereunder to a person or entity controlling, controlled by or under common control with such party, provided that any such assignment shall not relieve such party of its obligations hereunder. Except as otherwise provided herein, this Agreement and the rights and obligations hereunder may not be assigned by any party hereto without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Section 12.6. Force Majeure. The parties acknowledge and agree that a party will not be liable for any failure to timely perform any of its obligations under this Agreement if such failure is due, in whole or in part, directly or indirectly, to accidents, fires, floods, governmental actions, war, civil disturbances, other causes beyond such party's control or any other occurrence which would generally be considered an event of force majeure. Section 12.7. Broker. The parties agree to indemnify and hold each other harmless against any claims from any broker or finder based upon any agreement, arrangement, or understanding alleged to have been made by the indemnifying party. Section 12.8. Counterpart Signatures. This Agreement may be signed in one or more counterparts. Section 12.9. Notices. Any notice, report, demand, waiver or consent required or permitted hereunder shall be in writing and shall be given by hand delivery, by prepaid registered or certified mail, with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery or by telecopy addressed as follows: 20 25 If the notice is to Time Broker: Entertainment Communications, Inc. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Attention: Joseph M. Field, President Telecopy Number: (610) 660-5641 With copies to: John C. Donlevie, General Counsel Entertainment Communications, Inc. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopy Number: (610) 660-5641 Joseph D. Sullivan, Esq. Latham & Watkins 1001 Pennsylvania Ave., N.W., Suite 1300 Washington, D.C. 20004 Telecopy Number: (202) 637-2201 If the notice is to Licensee: Sinclair Communications, Inc. 2000 West 41st Street Baltimore, MD 21211-1420 Attention: David Amy, Chief Financial Officer Telecopy Number: (410) 467-5043 With copies to: Robert E. Quicksilver, General Counsel Sinclair Communications, Inc. 2000 West 41st Street Baltimore, MD 21211-1420 Telecopy Number: (410) 662-4707 Steven A. Thomas, Esq. Thomas & Libowitz 100 Light Street, 11th Floor Baltimore, MD 21202-1053 Telecopy Number: (410) 752-2046 The date of any such notice and service thereof shall be deemed to be: (i) the day of delivery if hand delivered or delivered by overnight courier; (ii) the day of delivery as indicated on the return receipt if dispatched by mail; or (iii) the date of telecopy transmission as 21 26 indicated on the telecopier transmission report provided that any telecopy transmission shall not be effective unless a paper copy is sent by overnight delivery on the date of the telecopy transmission. Either party may change its address for the purpose of notice by giving notice of such change in accordance with the provisions of this Section. Section 12.10. Effect of this Agreement. This Agreement and the Purchase Agreement, together with the exhibits and schedules hereto and thereto and a letter agreement among Time Broker and Sinclair Communications, Inc. dated of even date herewith, set forth the entire understanding of the parties and supersede any and all prior written or oral agreements, arrangements or understandings relating to the subject matter hereof. No representation, promise, inducement or statement of intention has been made by either party which is not embodied in this Agreement, the Purchase Agreement or the letter agreement referenced above and neither party shall be bound by, or be liable for, any alleged representation, promise, inducement or statement of intention not embodied herein unless same shall have been made subsequent hereto in writing and signed by the party to be charged therewith. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Section 12.11. Severability. Except as expressly set forth in Section 12.15, if any provision contained in this Agreement is held to be invalid, illegal or unenforceable in any respect by any court or other authority, then such provision shall be deemed limited to the extent that such court or other authority deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court or other authority shall deem any such provision wholly unenforceable, this shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had not been contained herein. Section 12.12. No Joint Venture. The parties agree that nothing herein shall constitute a joint venture or agency between them. The parties acknowledge that call letters, trademarks and other intellectual property shall at all times remain the property of the respective parties and that neither party shall obtain any ownership interest in the other party's intellectual property by virtue of this Agreement (subject to Section 6.2). Section 12.13. Damage to Stations. In the event of damage or destruction to any of the Stations (other than damage or destruction caused by Time Broker), Licensee shall proceed to repair, replace or restore the applicable Station to its former condition as promptly as is commercially reasonable. If Time 22 27 Broker causes damage or destruction to any of the Stations, Time Broker shall proceed to repair, replace or restore the applicable Station to its former condition as promptly as is commercially reasonable. If Time Broker must undertake repairs, replacements or restorations pursuant to the previous sentence, Licensee shall reimburse Time Broker for the cost of such repairs, replacements or restorations out of the proceeds from any insurance policies maintained by Licensee that are received by Licensee as a result of such damage or destruction. Licensee shall use reasonable efforts to effect the maximum possible recovery for such damage or destruction under such insurance policies. Section 12.14. Noninterference. During the term of this Agreement, neither Licensee nor any of their employees shall take any actions that might impair the operations of Time Broker conducted hereunder, except to the extent expressly contemplated by this Agreement or as otherwise required by law. Section 12.15. Regulatory Changes. In the event of any order or decree of an administrative agency or court of competent jurisdiction, including without limitation any material change or clarification in FCC rules, policies, or precedent, that would cause this Agreement to be invalid or violate any applicable law, and such order or decree has become effective and has not been stayed, the parties will use their respective best efforts and negotiate in good faith to modify this Agreement to the minimum extent necessary so as to comply with such order or decree without material economic detriment to either party, and this Agreement, as so modified, shall then continue in full force and effect. In the event that the parties are unable to agree upon a modification of this Agreement so as to cause it to comply with such order or decree without material economic detriment to either party, then this Agreement shall be terminated. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 23 28 IN WITNESS WHEREOF, the parties have executed this Time Brokerage Agreement as of the date first above written. ENTERTAINMENT COMMUNICATIONS, INC. By: ------------------------------- Title: TUSCALOOSA BROADCASTING, INC. By: ------------------------------- Title: SINCLAIR RADIO OF PORTLAND LICENSEE , INC. By: ------------------------------- Title: SINCLAIR RADIO OF ROCHESTER LICENSEE , INC. By: ------------------------------- Title: 24 29 SCHEDULE 1.1 PROGRAMMING The Programming shall consist of one hundred sixty-six (166) hours per week on each of the Stations in an entertainment format to be chosen by Time Broker, subject to Article II of this Agreement. The Programming shall include (a) news and weather information; (b) public service announcements; (c) an announcement in form sufficient to meet the station identification requirements of the FCC at the beginning of each hour; (d) an announcement at the beginning of each segment of Programming to indicate that program time has been purchased by Time Broker; and (e) any other announcement that may be required by applicable law or regulation. Time Broker shall maintain and deliver to Licensee copies of all programming information, including, without limitation, information concerning portions of the Programming that are responsive to issues of public importance identified to Time Broker by Licensee, necessary for Licensee to maintain its FCC public inspection file, and all other records required to be kept by FCC rule or policy. Time Broker shall have the sole and exclusive right to sell advertising to be included in the Programming and shall be entitled to retain all the revenues derived from the sale thereof, provided, however, that Licensee shall be entitled to sell such time as it deems necessary to comply with the political advertising rules of the FCC in the event the Programming does not comply with such rules. Notwithstanding any other provision of this Agreement, Time Broker recognizes that Licensee has certain obligations to broadcast programming to meet the needs and interests of the communities of license for the Stations. Licensee shall have the right to air specific programming on issues of local importance to the communities. Nothing in this Agreement shall abrogate the unrestricted authority of Licensee to discharge its obligations to the public and to comply with the laws, rules and policies of the FCC with respect to meeting the ascertained needs and interests of the public. Accordingly, Licensee may air or cause Time Broker to produce and present under Licensee's supervision two (2) hours a week on each of the Stations such public affairs programming that responds to the needs and interests of listeners in each such Station's community of license. Such public affairs programming shall be presented between 6:00 a.m. and 9:00 a.m. on Saturdays and/or Sundays or at such other times as the public interest may require. 1 30 SCHEDULE 1.2 COMPENSATION (A) Beginning on the Commencement Date, Time Broker shall pay a monthly fee (the "Monthly Payment") in the amount of the Monthly Projected Broadcast Cash Flow (as defined below) for the Stations. The "Monthly Projected Broadcast Cash Flow" for the Stations shall be the broadcast cash flow for the Stations that is projected by the parties in good faith for the term of this Agreement, and is expressly agreed to equal $631,500 per month. In the event that the Commencement Date occurs on a day other than the first day of a month, the initial Monthly Payment shall be an amount equal to the Monthly Payment as determined above multiplied by a ratio, the numerator of which is the number of days between the Commencement Date and the end of the month in which the Commencement Date occurs and the denominator of which is the number of days in the month in which the Commencement Date occurs. In the event that the day in which the term of this Agreement ends is not the last day of a month, the Monthly Payment for the month in which such day occurs shall be similarly prorated. (B) Except as otherwise provided in this Agreement (specifically including Paragraph (C) to this Schedule 1.2 below), Time Broker shall reimburse Licensee for all of its ordinary and customary expenses (excluding only Licensee's federal, state and local income taxes) incurred in operating the Stations (the "Operating Expenses"), including but not limited to, rent, utilities (excluding telephone expenses incurred by Licensee), maintenance and repairs at each of the Stations' studio and transmitter sites, insurance on the Stations' equipment, insurance deductibles on claims on the Stations' equipment payable in respect of damage to the Stations' equipment caused by Time Broker, and ad valorem property taxes. Licensee shall bill Time Broker for such Operating Expenses on a monthly basis by delivery of a statement in reasonable detail with back-up invoices, payment for which shall be due within thirty (30) days of such billing. (C) During the term of this Agreement, Licensee shall make all capital expenditures required to maintain the Stations consistent with past practice of the Stations and as required to make the Stations operate in full compliance with all FCC rules and regulations. At the Closing of the Purchase Agreement, Time Broker shall reimburse Licensee for all costs of such capital expenditures. 2 31 SCHEDULE 2.1 PROGRAMMING POLICY STATEMENT Time Broker agrees to cooperate with Licensee in the broadcasting of programs of the highest possible standard of excellence and for this purpose to observe the following regulations in the preparation, writing and broadcasting of its programs. Further, Time Broker agrees that all material broadcast on the Stations shall comply with all federal, state and local applicable laws, rules and regulations. 1 1. No Plugola or Payola. The broadcast of any material for which any money, service or other valuable consideration is directly or indirectly paid, or promised to or charged or accepted by, the Time Broker, from any person, shall be prohibited, unless, at the time the same is broadcast, it is announced as paid for or furnished by such person. 2. Political Broadcasting. Within thirty (30) days of the Commencement Date, Time Broker shall distribute to all parties making requests for the purchase of political time on the Stations, and provide Licensee with, a written political advertising disclosure statement which fully and accurately discloses how the Time Broker sells programming and advertising time and which makes parties purchasing political programming and advertising time fully aware of the lowest unit charge provisions of Section 315 of the Communications Act. In addition, at least thirty (30) days before the start of any primary or election campaign, Time Broker will clear with the Stations' general manager the rate Time Broker will charge for the time to be sold to candidates to make certain that the rate charged is in conformance with the applicable law and station policy. 3. Required Announcements. Time Broker shall broadcast (i) announcements in a form satisfactory to Licensee at the beginning of each hour to identify the Stations and (ii) any other announcements that may be required by law, regulation, or Licensee's station policy. 4. No Illegal Announcements. No announcements, broadcasts or promotions prohibited by federal, state or local law shall be made over the Stations. This prohibition specifically includes, but is not limited to, any and all unlawful programming or other broadcast material concerning tobacco or alcohol related products. The airing of any broadcast material concerning contests, lotteries or games must be conducted in accordance with all applicable law, including FCC rules and regulations. Any obscene, indecent, or fraudulent programming is prohibited. All sponsored programming or other broadcast material must be identified in accordance with applicable law, including FCC rules and regulations. 1 32 5. Licensee Discretion Paramount. In accordance with the Licensee's responsibility under the Communications Act and the rules and regulations of the FCC, Licensee reserves the right to reject or terminate any programming (including advertising) proposed to be presented or being presented over the Stations which is in conflict with station policy or which in Licensee's or its general manager's reasonable judgment would not serve the public interest. In any case where questions of policy or interpretation arise, Time Broker should submit the same to Licensee for decision before making any commitments in connection therewith. 2 33 SCHEDULE 4.1 EXCLUDED CONTRACTS [To be provided by Sinclair] 1 EX-10.09 13 LOAN AGREEMENT KEY CORPORATE CAPITAL 1 EXHIBIT 10.09 EXECUTION COPY LOAN AGREEMENT by and among ENTERTAINMENT COMMUNICATIONS, INC., as the Borrower, KEY CORPORATE CAPITAL INC., as Administrative Agent and Documentation Agent, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Syndication Agent, and THE FINANCIAL INSTITUTIONS LISTED HEREIN AS OF FEBRUARY 13, 1998 2 TABLE OF CONTENTS
SECTION 1 DEFINITIONS.....................................................................................1 1.1 Definitions................................................................................1 1.2 Other Terms...............................................................................19 1.3 Accounting Provisions.....................................................................19 SECTION 2 THE LOANS......................................................................................20 2.1 The Commitment and the Loans..............................................................20 2.2 Letters of Credit.........................................................................21 2.3 Making and Continuation/Conversion of the Loans...........................................26 2.4 The Notes.................................................................................27 2.5 Fees......................................................................................27 2.6 Prepayment................................................................................28 2.7 Reserves or Deposit Requirements, Etc.....................................................32 2.8 Tax Law, Increased Costs, Etc.............................................................32 2.9 Eurodollar Deposits Unavailable or Interest Rate Unascertainable................................................................................33 2.10 Changes in Law Rendering LIBOR Loans Unlawful............................................33 2.11 Funding..................................................................................33 2.12 Indemnity................................................................................33 2.13 Capital Adequacy.........................................................................34 2.14 Taxes....................................................................................34 2.15 Incremental Commitment...................................................................36 SECTION 3 INTEREST; PAYMENTS.............................................................................36 3.1 Interest..................................................................................36 3.2 Manner of Payments........................................................................37 SECTION 4 CLOSING........................................................................................38 SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE BORROWER.................................................38 5.1 Organization and Powers...................................................................39 5.2 Authorization.............................................................................39 5.3 Financial Statements......................................................................40 5.4 Projections...............................................................................40 5.5 Capitalization of the Borrower and its Subsidiaries...................................................................................40 5.6 Title to Properties; Patents, Trademarks, Etc.............................................41 5.7 Litigation; Proceedings...................................................................41 5.8 Taxes.....................................................................................41 5.9 Absence of Conflicts......................................................................42
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5.10 Indebtedness.............................................................................42 5.11 Compliance...............................................................................43 5.12 Statements Not Misleading................................................................43 5.13 Consents or Approvals....................................................................44 5.14 Material Contracts and Commitments.......................................................44 5.15 Employee Benefit Plans...................................................................45 5.16 Licenses and Operating Agreements........................................................45 5.17 Material Restrictions....................................................................46 5.18 Investment Company Act...................................................................46 5.19 Absence of Material Adverse Effect.......................................................46 5.20 Defaults.................................................................................46 5.21 Real Estate..............................................................................46 5.22 Securities Laws..........................................................................46 5.23 Insurance................................................................................46 5.24 Labor Matters............................................................................47 5.25 Environmental Compliance.................................................................47 5.26 Solvency.................................................................................49 5.27 Subordinated Purchase Agreement..........................................................50 SECTION 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BANKS...............................................50 6.1 Compliance................................................................................50 6.2 Security Agreements.......................................................................51 6.3 Pledge Agreements.........................................................................51 6.4 Financing Statements......................................................................52 6.5 Subsidiary Guaranty.......................................................................52 6.6 Opinion of Borrower's Counsel.............................................................52 6.7 Consummation of Acquisition Agreements....................................................52 6.8 Financial Information.....................................................................52 6.9 Borrowing Request.........................................................................53 6.10 Insurance Certificates...................................................................53 6.11 Corporate and Partnership Documents......................................................54 6.12 Lien Searches, Consents and Releases of Liens............................................54 6.13 No Order, Judgment or Decree.............................................................54 6.14 No Material Adverse Effect...............................................................54 6.15 Fee Letters..............................................................................54 6.16 Legal Approval...........................................................................55 6.17 Other Documents..........................................................................55 SECTION 7 AFFIRMATIVE COVENANTS OF THE BORROWER..........................................................55 7.1 Use of Proceeds...........................................................................55 7.2 Continued Existence; Maintenance of Rights and Licenses; Compliance with Law..................................................................55
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7.3 Insurance.................................................................................55 7.4 Obligations and Taxes.....................................................................56 7.5 Financial Statements and Reports..........................................................57 7.6 Notices...................................................................................59 7.7 Maintenance of Property...................................................................60 7.8 Information and Inspection................................................................60 7.9 Maintenance of Liens......................................................................60 7.10 Title To Property........................................................................61 7.11 Environmental Compliance and Indemnity...................................................61 7.12 Rate Hedging Obligations.................................................................63 7.13 FCC Consents.............................................................................63 SECTION 8 NEGATIVE COVENANTS OF THE BORROWER....................................................64 8.1 Indebtedness. ...........................................................................64 8.2 Liens.....................................................................................65 8.3 Guaranties................................................................................65 8.4 Rental and Conditional Sale Obligations...................................................66 8.5 Real Property Interests...................................................................66 8.6 Capitalized Lease Obligations.............................................................66 8.7 Capital Expenditures......................................................................66 8.8 Notes, Accounts Receivable and Claims.....................................................66 8.9 Capital Distributions; Restrictions on Payments to Stockholders..............................................................................67 8.10 Disposal of Property; Mergers; Acquisitions; Reorganizations..........................................................................68 8.11 Investments..............................................................................72 8.12 Amendment of Governing Documents.........................................................73 8.13 Financial Covenants......................................................................73 8.14 Management Agreements and Fees...........................................................75 8.15 Fiscal Year..............................................................................75 8.16 ERISA....................................................................................75 8.17 Affiliates...............................................................................75 8.18 Change of Name, Identity or Structure....................................................76 8.19 Amendments or Waivers....................................................................76 8.20 Issuance or Transfer of Capital Stock....................................................76 8.21 Change in Business.......................................................................76 8.22 Regulation U.............................................................................76 8.23 License Subsidiaries.....................................................................77 8.24 Subordinated Debt........................................................................77 SECTION 9 EVENTS OF DEFAULT..............................................................................78 9.1 Non-Payment...............................................................................78
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9.2 Failure of Performance in Respect of Other Obligations...............................................................................78 9.3 Breach of Warranty........................................................................78 9.4 Cross-Defaults............................................................................78 9.5 Assignment for Benefit of Creditors.......................................................79 9.6 Bankruptcy................................................................................79 9.7 Appointment of Receiver; Liquidation......................................................79 9.8 Judgments.................................................................................79 9.9 Impairment of Collateral; Invalidation of any Loan Document..................................................................................79 9.10 Termination of License or Operating Agreement............................................80 9.11 Change of Control........................................................................81 9.12 Condemnation.............................................................................81 9.13 Cessation of Operations..................................................................81 9.14 Subordination............................................................................81 9.15 Material Adverse Effect..................................................................81 SECTION 10 REMEDIES.......................................................................................82 10.1 Optional Defaults........................................................................82 10.2 Automatic Defaults.......................................................................82 10.3 Performance by the Banks.................................................................83 10.4 Other Remedies...........................................................................83 10.5 Enforcement and Waiver by the Banks......................................................83 SECTION 11 THE ADMINISTRATIVE AGENT.......................................................................83 11.1 Appointment..............................................................................83 11.2 Powers...................................................................................84 11.3 General Immunity.........................................................................84 11.4 Action on Instructions of the Banks......................................................84 11.5 Employment of Agents and Counsel.........................................................85 11.6 Reliance on Documents; Counsel...........................................................85 11.7 Administrative Agent's Reimbursement and Indemnification..........................................................................85 11.8 Rights as a Bank.........................................................................85 11.9 Bank Credit Decision.....................................................................86 11.10 Successor Administrative Agent..........................................................86 11.11 Ratable Sharing.........................................................................87 11.12 Actions by the Administrative Agent and the Banks...................................................................................87 SECTION 12 MISCELLANEOUS..................................................................................88 12.1 Construction.............................................................................88 12.2 Further Assurance........................................................................88
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12.3 Expenses of the Administrative Agent and the Banks; Indemnification...................................................................88 12.4 Notices..................................................................................90 12.5 Waiver and Release by the Borrower. .....................................................91 12.6 Right of Set Off.........................................................................91 12.7 Successors and Assigns; Participations...................................................92 12.8 Applicable Law...........................................................................94 12.9 Binding Effect and Entire Agreement......................................................94 12.10 Counterparts............................................................................94 12.11 Survival of Agreements..................................................................94 12.12 Modification............................................................................94 12.13 Separability............................................................................95 12.14 Section Headings........................................................................95 12.15 Enforcement.............................................................................95 12.16 Termination.............................................................................96 12.17 FCC Compliance..........................................................................96 12.18 Jury Trial Waiver.......................................................................97 12.19 Sale as a Going Concern.................................................................98 12.20 Marshaling; Payments Set Aside..........................................................98
-v- 7 LOAN AGREEMENT THIS LOAN AGREEMENT is made and entered into as of February 13, 1998, by and among ENTERTAINMENT COMMUNICATIONS, INC., a Pennsylvania corporation (the "Borrower"), the BANKS (as that term is defined below), KEY CORPORATE CAPITAL INC., as documentation agent and administrative agent (the "Administrative Agent"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as syndication agent (the "Syndication Agent"). R E C I T A L S: The Borrower desires to borrow from the Banks up to $300,000,000 (subject to increase under certain circumstances up to $350,000,000) on a reducing revolving credit basis, the proceeds of which will be used to refinance amounts outstanding under the Loan Agreement dated as of August 1, 1996, as amended, among the Borrower, KeyBank National Association, as agent, and the financial institutions which are a party thereto, to fund certain acquisitions and for capital expenditures and working capital purposes in the operations of the Borrower. A G R E E M E N T S: Accordingly, the Borrower, the Banks, the Administrative Agent and the Syndication Agent agree as follows: SECTION 1 DEFINITIONS. 1.1 Definitions. All terms typed with leading capitals are terms defined in this Agreement. For the purposes of this Agreement, the terms defined in this Section 1 shall have the meanings set out below. "Acquisition Agreements" means the Armak Purchase Agreement, the ARS Purchase Agreement, the Capital Broadcasting Purchase Agreement, the Gator Purchase Agreement and the Sinclair Purchase Agreement and any other purchase or exchange agreement pursuant 8 to which the Borrower or any of its Subsidiaries is to acquire a Station pursuant to a Permitted Acquisition. "Acquisition Capital Expenditures" means Capital Expenditures incurred by the Borrower or any of its Subsidiaries with respect to a radio station which are incurred within twelve months following the acquisition of such radio station. "Affiliate" means, with respect to any Person (a) any other Person which is directly or indirectly controlled by, under common control with or controlling the first specified Person; (b) a Person owning beneficially or controlling 10% or more of the equity interest in such other Person; (c) any officer, director or partner of such other Person; or (d) any spouse or relative (by blood, adoption or marriage) of any such individual 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, partnership interests, by contract or otherwise. "Agents" means the Administrative Agent and the Syndication Agent. "Applicable Margin" means, as of any date of determination, the percentage determined from the following table based upon the Leverage Ratio:
Leverage Ratio: Applicable Margin Applicable Margin for Base Rate for LIBOR Loans: Loans: Greater than 0.875% 2.125% 6.50:1.0 but less than or equal to 7.00:1.0: Greater than 0.625% 1.875% 6.00:1.0 but less than or equal to 6.50:1.0:
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Greater than 0.250% 1.500% 5.50:1.0 but less than or equal to 6.00:1.0: Greater than 0.000% 1.250% 5.00:1.0 but less than or equal to 5.50:1.0: Greater than 0.000% 1.125% 4.50:1.0 but less than or equal to 5.00:1.0: Greater than 0.000% 1.000% 4.00:1.0 but less than or equal to 4:50:1.0: Greater than 0.000% 0.750% 3.50:1.0 but less than or equal to 4.00:1.0: Less than or equal 0.000% 0.500% to 3.50:1.0:
"Armak Purchase Agreement" means the Asset Purchase Agreement, dated January 23, 1998, between Armak Broadcasters, Inc. and the Borrower pursuant to which the Borrower is to acquire substantially all of the assets relating to radio stations KRQT, Castle Rock, Washington and KBAM, Longview, Washington for a purchase price of approximately $1,000,000. "ARS Purchase Agreement" means the Letter Agreement, dated November 24, 1997, among American Radio Systems Corporation ("ARS"), the License Partnership and the Borrower pursuant to which the License Partnership and the Borrower will exchange the FCC Licenses of KRXQ, Roseville, California, plus $4,500,000 in cash for the FCC Licenses of KRAK, Sacramento, California, plus certain intellectual property relating to KSSJ and also pursuant - 3 - 10 to which ARS will purchase from the Borrower the KRXQ transmitter site for $750,000 in cash. "Asset Sale" means the sale, exchange, transfer or other disposition by the Borrower or any of its Subsidiaries to any Person of any of the stock, partnership interests or other equity interests of any Subsidiary or any other assets of the Borrower or any Subsidiary, other than (a) the sale of assets in one transaction or a series of transactions with an aggregate value which does not exceed in any fiscal year an amount equal to $2,000,000; (b) the sale in the ordinary course of business of assets held for resale in the ordinary course of business or the trade in or replacement of assets in the ordinary course of business; and (c) the sale, exchange, transfer or other disposition from the Borrower to a wholly owned Subsidiary or from one wholly owned Subsidiary to another wholly owned Subsidiary. "Banking Day" means a day on which the main office of the Administrative Agent is open to the public for the transaction of business, and on which, with respect to any LIBOR Loan, banks are open for business in London, England, and quoting deposit rates for dollar deposits. "Banks" means the financial institutions listed on the signature pages of this Agreement and their respective successors and assigns; the term "Banks" shall include the Issuing Bank. "Base Rate" means the rate of interest determined and publicly announced by KeyBank from time to time as its prime rate at its main office in Cleveland, Ohio. The prime rate functions as a reference rate index, and KeyBank may charge borrowers more or less than the prime rate. The Base Rate will automatically change as and when such prime rate changes. "Base Rate Loans" means those Loans described in Section 2.1 on which the Borrower shall pay interest at a rate based on the Base Rate. "Benefit Arrangement" means any pension, profit-sharing, thrift, or other retirement plan, medical, hospitalization, vision, dental, life, disability or other insurance or benefit plan, deferred compensation, stock ownership, stock purchase, - 4 - 11 stock option, performance share, bonus, fringe benefit, savings or other incentive plan, severance plan or other similar plan, agreement, arrangement or understanding, to which the Borrower or any member of the Controlled Group is, or in the preceding six years was, required to contribute on behalf of its employees or directors, whether or not such plan, agreement, arrangement or understanding is subject to ERISA. "Borrower Pledge Agreement" has the meaning assigned to it in Section 6.3(a). "Borrower Security Agreement" has the meaning assigned to it in Section 6.2. "Broadcast Cash Flow" for any period means Operating Cash Flow for such period plus the aggregate administrative, legal, accounting, management and overhead expenses attributable to the corporate management of the Borrower for such period. "Capital Broadcasting Purchase Agreement" means the Asset Purchase Agreement, dated September 18, 1997, between Capital Broadcasting, Inc. and the Borrower pursuant to which the Borrower will acquire substantially all of the assets relating to the communications tower business operating at 2800 Wallace, Kansas City, Missouri for a purchase price of approximately $2,100,000. "Capital Distribution" means any payment or distribution made, liability incurred or other consideration given for the purchase, acquisition, redemption or retirement of any stock, partnership interest or other equity interest of the Borrower or any of its Subsidiaries or as a dividend, return of capital or other payment or distribution of any kind to a shareholder or partner of the Borrower or any of its Subsidiaries in respect of the Borrower's or such Subsidiary's stock or partnership interests. "Capital Expenditures" means any payments by a Person for or in connection with the rental, lease, purchase, construction or use of any real or personal property the value or cost of which, under GAAP, should be capitalized and appear on such Person's balance sheets in the category of property, plant or equipment, without regard to the manner in which such payments or the - 5 - 12 instrument pursuant to which they are made are characterized by such Person or any other Person; provided, however, that neither (a) the capitalized portion of the purchase price payable in connection with a Permitted Acquisition, nor (b) expenditures of proceeds of casualty insurance policies reasonably and promptly applied to replace insured assets, shall constitute a Capital Expenditure for purposes of this Agreement. "Capitalized Lease Obligations" means, as to any Person, the obligations of such Person to pay rent or other amounts under leases of, or other agreements conveying the right to use real or personal property, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person, prepared in accordance with GAAP. "Closing" and "Closing Date" have the meanings assigned to them in Section 4. "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute thereto. "Collateral Documents" means all promissory notes, letters of credit, agreements, assignments, guaranties, mortgages, financing statements, certificates and other instruments and documents which are required by this Agreement or any other Collateral Document to be executed or delivered by or on behalf of the Borrower, any of its Subsidiaries or any other Person. "Commitment" has the meaning assigned to it in Section 2.1(a). "Controlled Group" means a controlled group of entities which are treated as a single employer under Sections 414(b), 414(c) or 414(m) of the Code of which the Borrower or any of its Subsidiaries is a part. "Default Interest Rate" means a rate of interest equal to the sum of the Base Rate plus the Applicable Margin plus 2.00% per annum. "Discount Rate" means, with respect to a prepayment or conversion of a LIBOR Loan on a date other than the last day of its Interest Period, a rate equal to the interest rate (as of the - 6 - 13 date of prepayment) on United States Treasury obligations in a like amount as such Loan and with a maturity approximately equal to the period between the prepayment or conversion date and the last day of the Interest Period of such Loan, as determined by the Administrative Agent. "Distributions to Pay Tax Liabilities" means Capital Distributions to a shareholder of the Borrower to enable such shareholder to pay his Tax Liability for any tax year. "Environmental Claim" means, with respect to any Person, any written or oral notice, claim, demand, request for information, citation, summons, order or other communication (each, a "claim") by any other Person alleging or asserting the liability of the recipient of such claim for investigatory costs, cleanup costs, governmental response costs, damages to natural resources or other property or health, personal injuries, fines or penalties arising out of, based on or resulting from (a) the presence, or Release, of any Hazardous Material at or from any location, whether or not owned by such Person, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. The term "Environmental Claim" shall include, without limitation, any claim by any governmental authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and any claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence or Release of Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Laws" means all provisions of law, statutes, ordinances, rules, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated by the government of the United States of America or by any state or municipality thereof or by any court, agency, instrumentality, regulatory authority or commission of any of the foregoing concerning health, safety and protection of, or regulation of the emission, release or discharge of substances into, the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder. - 7 - 14 "Event of Default" means any of the events specified in Section 9. "Excess Cash Flow" for any fiscal year of the Borrower means Operating Cash Flow for such fiscal year, minus the sum of the following without duplication: (a) all actual cash principal payments required to be made as a result of scheduled Commitment reductions on the Loans pursuant to Sections 2.1 and 2.6(b)(i) during such fiscal year, plus (b) all principal payments required to be made by the Borrower and its Subsidiaries on Total Debt (other than the Loans) during such fiscal year, plus (c) all Interest Expense of the Borrower and its Subsidiaries incurred during such fiscal year, plus (d) Capital Expenditures paid or incurred by the Borrower and its Subsidiaries during such fiscal year, plus (e) federal, state and local income taxes incurred during such fiscal year and Distributions to Pay Tax Liabilities made during such fiscal year and to be made after such fiscal year with respect to income of the Borrower for such fiscal year, plus (f) the increase, if any, in Working Capital as of the end of such fiscal year over Working Capital as of the end of the prior fiscal year, plus (g) $1,000,000. "FCC" means the Federal Communications Commission or any governmental authority at any time substituted therefor. "Fee Letters" means collectively the letter agreement dated December 26, 1997, among the Borrower, the Agents and BancAmerica Robertson Stephens, and the letter agreement dated December 26, 1997, between the Borrower and the Administrative Agent. "Field Family" means (a) Joseph M. Field, David J. Field, Marie H. Field and Nancy E. Field and any of their respective spouses, (b) any other relative or spouse of any relative of Joseph M. Field who, directly or indirectly, holds any of the Borrower's Common Stock (or beneficial interest therein) or rights to acquire any such Common Stock and (c) any trust which holds any of the Borrower's Common Stock or rights to acquire any such Common Stock for the benefit of any Person identified in clause (a) or (b) of this definition. "Final Order" means an action or order issued by the FCC (a) which has not been reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with respect to which (i) no - 8 - 15 requests or petitions have been filed for administrative or judicial review, reconsideration, rehearing, appeal or stay, and the time for filing any such requests or petitions and for the FCC to set aside the action on its own motion has expired, (ii) in the event of review, reconsideration or appeal, the time for further review, reconsideration or appeal has expired, and (iii) no appeal to a court or request for stay by a court of such action is pending or in effect, and, if any deadline for filing any such appeal or request is designated by statute or rule, it has passed. "Fixed Charge Coverage Ratio" means, as of the end of any quarter, the ratio of Operating Cash Flow for the four quarter period then ended to the sum of (a) all Projected Debt Service as of the end of such quarter, plus (b) Capital Expenditures (other than Acquisition Capital Expenditures and Project Capital Expenditures) incurred by the Borrower and its Subsidiaries in such four quarter period, plus (c) any federal, state or local income taxes incurred by the Borrower or any of its Subsidiaries during such four quarter period, plus (d) any Capital Distributions (including, without limitation, Distributions to Pay Tax Liabilities) made by the Borrower in such four quarter period. "GAAP" means generally accepted accounting principles in effect from time to time in the United States, consistently applied. "Gator Purchase Agreement" means the Asset Purchase Agreement, dated January 23, 1998 between Gator Broadcasting Corporation and the Borrower pursuant to which the Borrower is to acquire substantially all of the assets relating to radio station WRRX, Micanopy, Florida for a purchase price of approximately $2,000,000, plus $850,000 and expenses (not to exceed $150,000) relating to the upgrade of WRRX to a Class C-2 Station in the event the FCC licenses such upgrade by Final Order. "Guarantor" means one who pledges its credit or property in any manner, or otherwise becomes responsible for the payment or other performance of the indebtedness, contract or other obligation of another Person and includes (without limitation) any guarantor (whether of payment or of collection), surety, co-maker, endorser or one who agrees conditionally or otherwise - 9 - 16 to make any purchase, loan or investment in order thereby to enable another to prevent or correct a default of any kind and one who has endorsed (otherwise than for collection or deposit in the ordinary course of business), or has discounted with recourse or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire or become liable for, any Indebtedness. "Guaranty" shall have the meaning assigned to it in Section 6.5. "Hazardous Material" means, collectively, (a) any petroleum or petroleum products, flammable materials, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, and transformers or other equipment that contain polychlorinated biphenyls ("PCBs"), (b) any chemicals or other materials or substances that are now or hereafter become defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants" or words of similar import under any Environmental Law and (c) any other chemical or other material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law. "Indebtedness" of any Person means, without duplication, all liabilities, obligations and reserves, contingent or otherwise, which, in accordance with GAAP, would be reflected as a liability on a balance sheet (excluding trade accounts payable and accrued expenses arising in the ordinary course of business), and (without duplication) (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services, (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been - 10 - 17 assumed by such Person, (g) all obligations or liabilities in respect of which such Person is a Guarantor, (h) all Capitalized Lease Obligations of such Person, (i) all Rate Hedging Obligations, and (j) all obligations of such Person as an account party to reimburse any Person in respect of letters of credit (including the Letters of Credit) or bankers' acceptances. The Indebtedness of any Person shall include any recourse Indebtedness of any partnership in which such Person is a general partner. "Interest Expense" shall mean, for any period, the gross interest expense incurred by the Borrower and its Subsidiaries in respect of their Indebtedness for such period (other than interest incurred on the Indebtedness under the Subordinated Purchase Agreement), determined on a consolidated basis, all fees payable under Section 2.5 or the Fee Letters (other than any one time closing fees) and any other fees, charges, commissions and discounts in respect of Indebtedness, including fees payable in connection with the Letters of Credit. For purposes of the foregoing, net payments made or received by the Borrower with respect to Rate Hedging Obligations shall be included in the computation of gross interest expense. "Interest Period" means, with respect to any LIBOR Loan, the period selected by the Borrower, commencing on the date such Loan is made, continued or converted and ending on the last day of such period as selected by the Borrower. The Interest Period for each LIBOR Loan shall be one, two, three or six months; provided, however, that whenever the last day of such Interest Period would otherwise occur on a day other than a Banking Day, the last day of such Interest Period shall occur on the next succeeding Banking Day; provided, further, that if such extension of time would cause the last day of such Interest Period to occur in the next calendar month, the last day of such Interest Period shall occur on the next preceding Banking Day. The Borrower shall not select any Interest Period which extends beyond any date on which a scheduled payment is or may be required to be made pursuant to Sections 2.1 or 2.6(b)(i) unless the sum of the amount available to be drawn under the Commitment plus the aggregate principal balance of all Base Rate Loans and all LIBOR Loans with Interest Periods ending prior to such date is at least equal to the maximum amount that is, or may be, required to be paid on such date. - 11 - 18 "Issuing Bank" means KCCI in its capacity as the issuer of the Letters of Credit, or any successor issuer of the Letters of Credit. "KCCI" means Key Corporate Capital Inc., a Michigan corporation. "KeyBank" means KeyBank National Association. "Letters of Credit" has the meaning assigned to it in Section 2.2. "Leverage Ratio", as of any date, means the ratio of Total Debt as of such date to Operating Cash Flow for the four quarter period then ended or most recently ended. "LIBOR" means the average (rounded upwards, if necessary, to the nearest 1/16th of 1%) of the per annum rates at which deposits in immediately available funds in United States dollars for the relevant Interest Period and in an amount approximately equal to the Loan to be disbursed or to remain outstanding during such Interest Period, as the case may be, are offered to the Administrative Agent by leading banks in the London Eurodollar market, determined as of 11:00 a.m. London time (or as soon thereafter as practicable), two Banking Days prior to the beginning of the relevant Interest Period. "LIBOR Loans" means those Loans described in Section 2.1 on which the Borrower shall pay interest at a rate based on the applicable LIBOR Rate. "LIBOR Rate" means a rate per annum equal to the quotient obtained (rounded upwards, if necessary, to the nearest 1/100th of 1%) by dividing (a) the applicable LIBOR by (b) 1.00 minus the LIBOR Reserve Percentage. "LIBOR Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, all basic, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in - 12 - 19 reserve requirements) for a member bank of the Federal Reserve System in respect of Eurocurrency Liabilities (as that term is defined in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time). The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the LIBOR Reserve Percentage. "License" means any authorization, permit, consent, franchise, ordinance, registration, certificate, license, agreement or other right filed with, granted by, or entered into by a federal, state or local governmental authority which permits or authorizes the acquisition, construction or operation of a radio broadcasting station, or any part of a radio broadcasting station or which is required for the acquisition, ownership or operation of any Station. "License Partnership" means ECI License Company, L.P., a Pennsylvania limited partnership, of which the Borrower is the sole general partner with a 99% partnership interest, and ECI Investors Corporation, a Delaware corporation, is the sole limited partner with a 1% partnership interest. "License Subsidiary" means the License Partnership and each other Subsidiary formed pursuant to Section 8.10(b)or (c) solely for the purpose of holding Licenses issued by the FCC. "Licensing Authority" means a governmental authority which has granted or issued a License. "Lien" as applied to the property of any Person means: (a) any mortgage, lien, pledge, charge, lease constituting a Capitalized Lease Obligation, conditional sale or other title retention agreement, or other security interest or encumbrance of any kind in respect of any property of such Person, or upon the income or profits therefrom; (b) any arrangement, express or implied, under which any property of such Person is transferred, sequestered or otherwise identified for the purpose of subjecting the same to the payment of Indebtedness in priority to the payment of the general, unsecured creditors of such Person; (c) the filing of, or any agreement to give, any financing statement under the Uniform Commercial Code or its equivalent of any jurisdiction in respect of Indebtedness; and (d) in the case of securities or other equity interests, any purchase option, call - 13 - 20 or similar right of a third party with respect to such securities or other equity interests. "Loans" has the meaning assigned to it in Section 2.1(a). "Management Agreement" means the Management and License Agreement dated as of December 23, 1992, between the Borrower and the License Partnership and any amendments thereto. "Material Adverse Effect" means a material adverse effect upon or change in (a) the properties, assets, business, operations, financial condition or prospects of the Borrower or any of its Subsidiaries or on the ability of the Borrower or any such Subsidiary to conduct its business (other than matters reflected in the audited financial statements contained in Exhibit B attached hereto or otherwise disclosed herein), (b) the ability of the Borrower, any of the Borrower's Subsidiaries or any other party to a Collateral Document (other than either Agent or any Bank) to perform its obligations hereunder or under any other Collateral Document to which it is a party, (c) the validity or enforceability of this Agreement, the Notes or any other Collateral Document, or (d) the rights or remedies of the Agents or the Banks under this Agreement, the Notes or any other Collateral Document or at law or in equity. "Net Earnings" means, with respect to the Borrower, the consolidated net income (or deficit) of the Borrower and its Subsidiaries for the period involved, after taxes incurred and after all proper charges and reserves (excluding, however, non-recurring special charges and credits), all as determined in accordance with GAAP. "Notes" has the meaning assigned to it in Section 2.4. "Obligations" means any obligation of the Borrower or any of its Subsidiaries (a) to pay to the Banks the principal of and interest on the Loans in accordance with the terms hereof and of the Notes, including, without limitation, any interest accruing after the date of any filing by the Borrower or any Subsidiary of any petition in bankruptcy or the commencing of bankruptcy, insolvency or similar proceedings with respect to the Borrower or any of its Subsidiaries, regardless of whether such interest is allowable as a claim in any such proceeding; (b) in respect of - 14 - 21 the contingent liability of the Borrower under all outstanding Letters of Credit and in respect of the contingent liability of the Borrower to KCCI under the Sinclair Letter of Credit; (c) in respect of any net Rate Hedging Obligations owing to any Bank or any Affiliate of any Bank; (d) to pay, satisfy or perform any other liability or obligation to either Agent or any Bank, arising under this Agreement or any Collateral Document, whether now existing or hereafter incurred by reason of future advances or otherwise, matured or unmatured, direct or contingent, joint or several, including any extensions, modifications or renewals thereof and substitutions therefor, and including without limitation all fees, indemnification amounts, costs and expenses, including interest thereon and reasonable attorneys' fees, incurred by either Agent or any Bank for the protection, preservation or enforcement of its rights and remedies arising hereunder or under the Collateral Documents; (e) to repay to the Banks all amounts advanced at any time by the Banks hereunder or under any Collateral Document, including, without limitation, advances for principal or interest payments to prior secured parties, mortgagees, lienors or other Persons, or for taxes, levies, insurance, rent or repairs to, or maintenance or storage of, any of the property of the Borrower or any of its Subsidiaries; (f) to perform any covenant or agreement made with the Banks pursuant to this Agreement or any Collateral Document; or (g) to take any other action in respect of any other liability of any nature of the Borrower or any of its Subsidiaries to the Banks under this Agreement or any Collateral Document. "Operating Agreement" means any programming agreement, time brokerage, local marketing or similar agreement, franchise agreement, lease or other agreement relating to the operation of a Station by the Borrower or any of its Subsidiaries, the termination or adverse modification of which could have a Material Adverse Effect. "Operating Cash Flow" means, during any period, the consolidated Net Earnings of the Borrower for such period (excluding, to the extent included in Net Earnings, (i) the effect of any exchange of advertising time for non-cash consideration, such as merchandise or services, (ii) any other non-cash income or expense (including the cumulative effect of a change in accounting principles and extraordinary items), and (iii) any gains or losses net of taxes from sales, exchanges and - 15 - 22 other dispositions of property not in the ordinary course of business, including non-recurring charges relating to such exchanges or dispositions), minus any non-operating income (other than interest income and investment income), plus the sum of (a) depreciation on or obsolescence of fixed or capital assets and amortization of intangibles and leasehold improvements for such period, plus (b) Interest Expense incurred in such period plus interest incurred on the Indebtedness under the Subordinated Purchase Agreement, plus (c) federal, state and local income taxes incurred in such period to the extent deducted in calculating Net Earnings in such period (other than any such tax Distributions resulting from any gains from sales and exchanges and other distributions not in the ordinary course of business), plus (d) the costs relating to discontinued operations, all on a consolidated basis and computed on the accrual method. For purposes of calculating Operating Cash Flow in any period (other than for purposes of calculating Excess Cash Flow): (A) any acquisition of any Station, and any sale or other disposition of any Station, which occurs during such period shall be deemed to have occurred on the first day of such period; (B) Operating Cash Flow shall be increased by the difference, if positive, of $167,000 minus the product of $13,917 times the number of months in the period from March 1, 1997, through the end of the period for which Operating Cash Flow is being calculated; (C) Operating Cash Flow shall be increased by the difference, if positive, of $339,000 minus the product of $28,250 times the number of months in the period from March 1, 1997, through the end of the period for which Operating Cash Flow is being calculated; (D) Operating Cash Flow shall be increased by the difference, if positive, of $2,800,000 minus the product of $233,333 times the number of months in the period from May 1, 1997, through the end of the period for which Operating Cash Flow is being calculated; (E) Operating Cash Flow shall be increased by the difference, if positive, of $400,000 minus the product of $33,333 times the number of months in the period from May 1, 1997, - 16 - 23 through the end of the period for which Operating Cash Flow is being calculated; (F) Operating Cash Flow shall be increased by the difference, if positive, of $802,000 minus the product of $66,833 times the number of months in the period from March 1, 1998, through the end of the period for which Operating Cash Flow is being calculated; (G) For periods after the date on which the Borrower acquires radio stations KKSN-AM, KKSN-FM and KKRH-FM pursuant to the Sinclair Purchase Agreement, Operating Cash Flow shall be increased by the difference, if positive, of $323,000 minus the product of $26,917 times the number of months in the period from the first day of the third full calendar month after the date on which the Borrower acquires such stations through the end of the period for which Operating Cash Flow is being calculated; and (H) Operating Cash Flow shall be calculated as if the License Partnership were a wholly owned Subsidiary of the Borrower. "PBGC" means the Pension Benefit Guaranty Corporation or any governmental authority at any time substituted therefor. "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA which is subject to the provisions of Section 302 or Title IV of ERISA or Section 412 of the Code. "Permitted Acquisition" has the meaning assigned to it in Section 8.10(b). "Permitted Lien" means any of the following Liens: (a) Liens for taxes or assessments and similar charges, which are either not delinquent or being contested diligently and in good faith by appropriate proceedings, and (i) as to which the Borrower or its affected Subsidiary has set aside adequate reserves in accordance with GAAP on its books and (ii) which do not entail any significant risk of loss, forfeiture, foreclosure or sale of the property subject thereto; - 17 - 24 (b) statutory Liens, such as mechanic's, materialman's, warehouseman's, landlord's, artisan's, workman's, contractor's, carrier's or other like Liens, (i) incurred in good faith in the ordinary course of business, (ii) which are either not delinquent or are being contested diligently and in good faith by appropriate proceedings, (iii) as to which the Borrower or its affected Subsidiary has set aside adequate reserves in accordance with GAAP on its books or bonded satisfactorily to the Administrative Agent and (iv) which do not entail any significant risk of loss, forfeiture, foreclosure or sale of the property subject thereto; (c) encumbrances consisting of zoning restrictions, easements, licenses, reservations, provisions, covenants, conditions, waivers, restrictions on the use of real property or minor irregularities of title, provided that none of such encumbrances materially impairs the use or value of any property in the operation of the Borrower's or any of its Subsidiaries' business; (d) Liens securing conditional sale, rental or purchase money obligations permitted under Section 8.4 and Capitalized Lease Obligations permitted under Section 8.6 (and protective UCC-1 financing statements filed by lessors in connection therewith under leases not intended as security), but only in the property which is the subject of such obligations; (e) Liens arising under or pursuant to this Agreement or any Collateral Document or otherwise securing any Obligation; (f) Liens in respect of judgments or awards with respect to which the Borrower or any of its Subsidiaries is, in good faith, prosecuting an appeal or proceeding for review and with respect to which a stay of execution upon such appeal or proceeding for review has been secured, and as to which judgments or awards the Borrower or such Subsidiary has established adequate reserves in accordance with GAAP on its books or has bonded in a manner satisfactory to the Administrative Agent; (g) pledges or deposits made in the ordinary course of business to secure payment of worker's compensation, or to participate in any fund in connection with worker's compensation, - 18 - 25 unemployment insurance, old-age pensions or other social security programs; (h) Liens granted to secure the performance of bids, tenders, contracts, leases, public or statutory obligations, surety, customs, appeal and performance bonds and other similar obligations and not incurred in connection with the borrowing of money, the obtaining of advances or the payment of the deferred purchase price of any property; and (i) any other Liens listed on Exhibit F hereto or to which the Required Banks have consented in writing. "Person" shall include natural persons, corporations, business trusts, associations, companies, limited liability companies, joint ventures and partnerships. "Plan" means any employee benefit plan, as defined under Section 3(3) of ERISA, established or maintained by the Borrower or any member of the Controlled Group or any such Plan to which the Borrower or any member of the Controlled Group is, or in the last six years was, required to contribute on behalf of its employees. "Pledge Agreements" means the Borrower Pledge Agreement and the Subsidiary Pledge Agreements. "Possible Default" means an event, condition, situation or thing which constitutes, or which with the lapse of any applicable grace period or the giving of notice or both would constitute, an Event of Default. "Prepayment Premium" with respect to the prepayment or conversion of any LIBOR Loan or any other receipt or recovery of any LIBOR Loan prior to the end of the applicable Interest Period, whether by voluntary prepayment, acceleration, conversion to a Base Rate Loan or otherwise, means an amount equal to the sum of (a) the present value (discounted at the Discount Rate) of the product of (i) the excess, if any, of the rate of interest applicable to such Loan pursuant to Section 3.1 hereof at the time of such prepayment or conversion on the principal amount so prepaid, converted or accelerated, as the case may be, over the Discount Rate, as determined by the Administrative Agent, - 19 - 26 multiplied by (ii) the principal amount so prepaid, converted or accelerated, as the case may be, multiplied by (iii) a fraction, the numerator of which is the number of days remaining in the related Interest Period and the denominator of which is 360 (taking into consideration the applicable compounding for the frequency of installment payments of the Loans being prepaid), plus (b) reasonable out-of-pocket costs and expenses incurred by the Banks and the Administrative Agent with respect to such prepayment. "Project Capital Expenditures" means Capital Expenditures incurred with respect to a radio station for (i) the construction or relocation of Station facilities; (ii) the construction of new tower and transmitting equipment; and (iii) the upgrade of radio signals, which are incurred no earlier than twelve months after the acquisition of such Station. "Projected Debt Service" means, as of the end of any quarter, the sum of (a) all principal payments required to be made on the Loans pursuant to Sections 2.1(b) and 2.6(b)(i) during the four quarter period following such date, (b) all principal payments required to be made by the Borrower and its Subsidiaries on Total Debt, other than the Loans, during such subsequent four quarter period, and (c) all Interest Expense during such subsequent four quarter period. In calculating Projected Debt Service, (i) the interest rate in effect in such subsequent period on any Indebtedness which does not bear interest at a rate which is fixed for the entire subsequent period shall be deemed to be the interest rate in effect on such Indebtedness as of the date of determination, and (ii) for the purpose of determining the amount of principal payments required on the Loans pursuant to Section 2.1(b) and 2.6(b)(i) in future periods, it shall be assumed that the principal amount of Loans outstanding as of the date of determination will be outstanding for the subsequent four quarter period, subject to any required Commitment reductions. "Quarterly Date" means the last day of each of the Borrower's fiscal quarters. "Ratable Share" means, with respect to any Bank, its pro rata share of the Commitment, the Letters of Credit or the Loans, as such pro rata share may be modified pursuant to Section 2.15 - 20 - 27 or by assignment pursuant to Section 12.7. As of the date of this Agreement, the Ratable Shares of the Banks shall be as listed on Schedule 1.1 attached hereto. "Rate Hedging Obligations" means any and all obligations of the Borrower, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all agreements, devices or arrangements designed to protect the Borrower from the fluctuations of interest rates, including interest rate exchange or swap agreements, interest rate cap or collar protection agreements, and interest rate options, puts and warrants, and (b) any and all cancellations, buy backs, reversals, terminations or assignments of any of the foregoing. "Regulatory Change" means the adoption of or any change in federal, state or local treaties, laws, rules or regulations or the adoption of or change in any interpretations, guidelines, directives or requests of or under any federal, state or local treaties, laws, rules or regulations (whether or not having the force of law) by any court, governmental authority, central bank or comparable agency charged with the interpretation or administration thereof. "Release" shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata. "Reportable Event" means a reportable event as that term is defined in Title IV of ERISA, excluding, however, such events as to which the PBGC by regulation has waived the requirement of Section 4043(a) of ERISA that it be notified within thirty days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waivers in accordance with Section 412(d) of the Code). - 21 - 28 "Required Banks" means, at any time, Banks holding at least 51% of the then aggregate unpaid principal amount of the Notes and the stated amount of the outstanding Letters of Credit, or, if no principal amount of the Notes or any Letter of Credit is then outstanding, Banks having at least 51% of the Commitment. "Security Agreements" means the Borrower Security Agreement and the Subsidiary Security Agreement. "Sinclair Letter of Credit" means the letter of credit issued by KCCI for the account of the Borrower in connection with the Sinclair Purchase Agreement. "Sinclair Purchase Agreement" means the Asset Purchase Agreement, dated January 26, 1998, among Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland Licensee, Inc., Sinclair Radio of Rochester Licensee, Inc., the Borrower and the License Partnership pursuant to which the Borrower and the License Partnership will acquire substantially all of the assets relating to radio stations KKSN-AM/FM, Portland, Oregon, KKRH, Salem, Oregon, WKLX, WBEE, WBBF, Rochester, New York, and WQRV, Avon, New York for a purchase price of approximately $126,500,000. "Stations" means, as of any date, the radio broadcasting stations owned by the Borrower or any of its Subsidiaries as of such date; all auxiliary stations owned or operated in connection with the foregoing or any other communications station owned or operated at such time by the Borrower or any of its Subsidiaries. "Subordinated Debt" means all Indebtedness of the Borrower incurred pursuant to the provisions of Section 8.1(g). Indebtedness owing to the Subordinated Lender pursuant to the Subordinated Purchase Agreement shall not constitute Subordinated Debt. "Subordinated Lender" means Chase Equity Associates, L.P. and any other holder of Indebtedness of the Borrower under the Subordinated Purchase Agreement or any of the notes issued pursuant thereto. "Subordinated Purchase Agreement" means the Convertible Subordinated Note Purchase Agreement dated as of May 21, 1996, - 22 - 29 between the Borrower and Chase Equity Associates, L.P., as the same may be amended to the extent permitted in Section 8.19. "Subsidiary" means each partnership, corporation or limited liability company, the majority of the outstanding partnership interests, capital stock, membership interests or voting power of which is (or upon the exercise of all outstanding warrants, options and other rights would be) owned, directly or indirectly, at the time in question by the Borrower. "Subsidiary Pledge Agreements" has the meaning assigned to it in Section 6.3(b). "Subsidiary Security Agreement" has the meaning assigned to it in Section 6.2. "Tax Liability" means the aggregate federal and state income tax liability for any tax year (exclusive of penalties and interest) of a shareholder of the Borrower which arises from the allocation to such shareholder for income tax purposes of taxable income and/or taxable gain of the Borrower for the tax year in question, calculated by assuming that all such income is taxed at the highest marginal rate for federal and state income tax purposes to which any shareholder is subject. Income and losses from any prior or succeeding year shall not be considered in making such calculation. "Termination Date" means February 13, 2006. "Total Debt" means (a) all Indebtedness of the Borrower and its Subsidiaries for borrowed money, including, without limitation, the Loans, (b) all Capitalized Lease Obligations of the Borrower and its Subsidiaries, (c) all other Indebtedness of the Borrower or any of its Subsidiaries represented by notes or drafts representing extensions of credit or on which interest is typically charged, (d) all obligations of the Borrower and its Subsidiaries evidenced by bonds, debentures, notes or other similar instruments (including all such obligations to which any property or asset owned by the Borrower or any of its Subsidiaries is subject, whether or not the obligation secured thereby shall have been assumed), (e) all obligations of the Borrower and its Subsidiaries under conditional sale or other title retention agreements relating to purchased assets, (f) all - 23 - 30 obligations of the Borrower and its Subsidiaries which are incurred, issued or assumed as the deferred purchase price of property or services and which are payable over a period in excess of one year, (g) all obligations or liabilities in respect of which the Borrower or any of its Subsidiaries is a Guarantor, (h) at any time after the occurrence and during the continuance of an event of default under any agreement of the Borrower or any of its Subsidiaries governing Rate Hedging Obligations, the aggregate amount payable by the Borrower or such Subsidiary under such agreement, and (i) all obligations of the Borrower and its Subsidiaries as an account party to reimburse any Person in respect of letters of credit (including the Letters of Credit) or bankers' acceptances; provided, however, that the amounts outstanding under the Subordinated Purchase Agreement and the notes issued pursuant thereto shall not constitute Total Debt. "Working Capital" means, as of any date, the excess of the consolidated current assets, other than cash, of the Borrower and its Subsidiaries over their consolidated current liabilities, other than the current portion of long term debt, as of such date. 1.2 Other Terms. Except as otherwise specifically provided in this Agreement, each term not otherwise expressly defined herein which is defined in the Uniform Commercial Code, as amended (the "UCC") as adopted in any applicable jurisdiction shall have the meaning assigned to it in the UCC in effect in such jurisdiction. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Sections, Schedules or Exhibits shall be deemed to be references to Sections of, and Schedules and Exhibits to, this Agreement unless the context shall otherwise require. Whenever any agreement, promissory note or other instrument or document is defined in this Agreement, such definition shall be deemed to mean and include, from and after the date of any amendment, restatement or modification thereof, such agreement, promissory note or other instrument or document as so amended, restated or modified. All terms defined in this Agreement in the singular shall have comparable meanings when used in the plural and vice versa. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. - 24 - 31 1.3 Accounting Provisions. All accounting terms used in this Agreement which are not expressly defined herein shall have the respective meanings given to them in accordance with GAAP, all computations shall be made in accordance with GAAP, and all balance sheets and other financial statements shall be prepared in accordance with GAAP. SECTION 2 THE LOANS. 2.1 The Commitment and the Loans. (a) Subject to the terms and conditions hereof, during the period from the Closing Date up to but not including the Termination Date, the Banks severally, but not jointly, shall make loans to the Borrower in such amounts as the Borrower may from time to time request but not exceeding in aggregate principal amount at any one time outstanding $300,000,000 (as such amount may be (i) increased pursuant to Section 2.15 or (ii) reduced pursuant to Section 2.1(d), 2.6 or any other provision of this Agreement, from time to time, the "Commitment"); provided, however, that in no event shall the aggregate principal amount of such loans plus the aggregate stated amount of the Letters of Credit exceed the Commitment. All amounts borrowed by the Borrower pursuant to this Section 2.1(a) and all amounts drawn under any Letter of Credit and not repaid may be referred to hereinafter collectively as the "Loans." Each Loan requested by the Borrower shall be funded by the Banks in accordance with their Ratable Shares of the requested Loan. A Bank shall not be obligated hereunder to make any additional Loan if immediately after making such Loan, the aggregate principal balance of all Loans made by such Bank plus such Bank's Ratable Share of any outstanding Letters of Credit would exceed such Bank's Ratable Share of the Commitment. The Loans may be comprised of Base Rate Loans or LIBOR Loans, as provided in Section 2.3. (b) On each date set forth in the table below, the Commitment shall automatically reduce by that percentage of the Commitment (as in effect on June 30, 2000, before giving effect to the reduction required by this Section 2.1(b) on that date) set forth for such date in such table: - 25 - 32
Year February 13 March 31 June 30 September 30 December 31 2000 0% 0% 1.25% 1.25% 1.25% 2001 0% 1.25% 3.75% 3.75% 3.75% 2002 0% 3.75% 5% 5% 5% 2003 0% 5% 5% 5% 5% 2004 0% 5% 5% 5% 5% 2005 0% 5% 5% 5% 5% 2006 all remaining principal
(c) Prior to the Termination Date, the Borrower may, at its option, from time to time prepay all or any portion of the Loans, subject to the provisions of Section 2.6, and the Borrower may reborrow from time to time hereunder amounts so paid up to the amount of the Commitment in effect at the time of reborrowing. (d) At any time prior to the Termination Date, by written notice to the Administrative Agent no later than 11:00 A.M. Cleveland, Ohio time five Banking Days prior to such termination or reduction, the Borrower may permanently terminate, or from time to time permanently reduce, the Commitment. Such notice shall be in writing or by telephonic communication confirmed by telecopy or other facsimile transmission on the same day as such telephone notice. Any such partial reduction hereunder shall be in an amount which is not less than $1,000,000 or an integral multiple of $500,000 in excess thereof. The Administrative Agent shall notify the Banks of any such reduction or termination of the Commitment. (e) All Loans, together with all interest accrued thereon, shall be paid in full no later than the Termination Date. (f) All reductions of the Commitment pursuant to Section 2.1(d), 2.6(c) or any other provision of this Agreement - 26 - 33 shall be permanent reductions, and the Commitment shall not be increased. 2.2 Letters of Credit. (a) Issuance. Subject to the terms and conditions hereof, including the provisions of Section 6, the Borrower may request that the Issuing Bank issue, from time to time, and the Issuing Bank agrees to issue, from time to time, letters of credit in an aggregate stated amount not exceeding $15,000,000 (the "Letters of Credit"). No Letter of Credit shall be issued for a term of more than three hundred sixty-four days, and no Letter of Credit shall have an expiration date which is later than the Termination Date. No Letter of Credit shall be issued if after giving effect to such issuance, the sum of the outstanding principal balance of the Loans (including amounts drawn on Letters of Credit and not repaid), plus the aggregate stated amount of outstanding Letters of Credit, would exceed the Commitment. Each Letter of Credit shall be issued in the manner and on the conditions set forth in this Section 2.2 and Section 6. (b) Application. Each request for a Letter of Credit shall be made to the Issuing Bank by an application on the Issuing Bank's standard form or in such other manner as the Issuing Bank may approve. Promptly following the issuance of any Letter of Credit, the Issuing Bank shall notify the Administrative Agent and the Banks of such issuance. (c) Participation by the Banks. (i) By the issuance of a Letter of Credit and without any further action on the part of the Issuing Bank, the Administrative Agent or the other Banks in respect thereof, the Issuing Bank hereby grants to each other Bank, and each other Bank hereby agrees to acquire from the Issuing Bank, a participation in such Letter of Credit equal to such Bank's Ratable Share of the stated amount of such Letter of Credit, effective upon the issuance of such Letter of Credit; provided, however, that no Bank shall be required to acquire participations in any Letter of Credit that would result in its Ratable Share of the sum of outstanding Loans plus the stated amount of all outstanding Letters of Credit to be greater than its Ratable - 27 - 34 Share of the Commitment. In consideration and in furtherance of the foregoing, each Bank hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, in accordance with Section 2.2(d), such Bank's Ratable Share of each amount disbursed pursuant to a Letter of Credit; provided, that payment by the Issuing Bank under such Letter of Credit against presentation of such draft or document shall not have constituted gross negligence or willful misconduct of the Issuing Bank. (ii) Each Bank acknowledges and agrees that its obligation to acquire participations pursuant to paragraph (i) above in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstances whatsoever, including the occurrence and continuance of an Event of Default or Possible Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (d) Letter of Credit Disbursements. (i) If the Administrative Agent has not received from the Borrower the payment permitted pursuant to paragraph (ii) of this Section 2.2(d) by 11:00 a.m., Cleveland time, on the date on which the Issuing Bank has notified the Borrower that payment of a draft presented under any Letter of Credit will be made, as provided in such paragraph (ii), the Administrative Agent shall promptly notify the Issuing Bank and each other Bank of the disbursement to be made under such Letter of Credit and, in the case of each Bank, its Ratable Share of such disbursement. Each Bank shall pay to the Administrative Agent, not later than 1:00 P.M., Cleveland time, on such date (or, if the Issuing Bank shall elect to defer reimbursement from the Banks hereunder, such later date as the Issuing Bank shall specify by notice to the Administrative Agent and the Banks), such Bank's Ratable Share of such disbursement, which the Administrative Agent shall promptly pay to the Issuing Bank. The Administrative Agent will promptly remit to each Bank its share of any amount subsequently received by the Administrative Agent from the Borrower in respect of such disbursement; provided that amounts so received for the account of any Bank prior to payment by such Bank of amounts required to be paid by it hereunder in respect of any disbursement shall be remitted to the Issuing Bank. - 28 - 35 (ii) If the Issuing Bank shall receive any draft presented under any Letter of Credit, the Issuing Bank shall give notice thereof as provided in paragraph (iii) below. If the Issuing Bank shall pay any draft presented under a Letter of Credit, the Borrower may (but shall not be required to) pay to the Administrative Agent, for the account of the Issuing Bank, an amount equal to the amount of such draft before 11:00 A.M., Cleveland time, on the Banking Day on which the Issuing Bank shall have notified the Borrower that payment of such draft will be made. The Administrative Agent will promptly pay any such amounts received by it to the Issuing Bank. (iii) The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit to ascertain that the same appear on their face to be in substantial conformity with the terms and conditions of such Letter of Credit. The Issuing Bank shall as promptly as reasonably practicable give oral notification, confirmed in writing, to the Administrative Agent and the Borrower of such demand for payment and the determination by the Issuing Bank as to whether such demand for payment was in accordance with the terms and conditions of such Letter of Credit and whether the Issuing Bank has made or will make a disbursement thereunder, provided that the failure to give such notice shall not relieve the Borrower of its obligation to reimburse such disbursement, and the Administrative Agent shall promptly give each Bank notice thereof. (iv) Any amounts paid by the Issuing Bank on any Letter of Credit shall be deemed to be a Loan for all purposes of this Agreement and shall bear interest from the date of payment by the Issuing Bank at the rates provided in Section 3.1 until paid in full. (e) Obligation to Repay Letter of Credit Disbursements, etc. The Borrower assumes all risks in connection with the Letters of Credit and the Borrower's obligation to repay each disbursement under a Letter of Credit shall be absolute, unconditional and irrevocable under any and all circumstances and irrespective of: - 29 - 36 (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, setoff, defense or other right which the Borrower or any other person may at any time have against the beneficiary under any Letter of Credit, the Administrative Agent, the Issuing Bank or any other Bank (other than the defense of payment in accordance with the terms of this Agreement or a defense based on the gross negligence or willful misconduct of the Issuing Bank) or any other Person in connection with this Agreement or any other agreement or transaction; (iii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect other than a defense based on the willful misconduct or gross negligence of the Issuing Bank; and (iv) any other circumstance or event whatsoever, whether or not similar to any of the foregoing that does not result from the willful misconduct or gross negligence of the Issuing Bank. It is understood that in making any payment under a Letter of Credit (A) the Issuing Bank's exclusive reliance as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary equals the amount of such draft and whether or not any documents presented pursuant to such Letter of Credit prove to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever, shall, in each case, not in and of itself be deemed willful misconduct or gross negligence of the Issuing Bank and (B) any noncompliance in any immaterial respect of the documents presented under a Letter of Credit with the terms thereof, shall, in each case, not in and of itself be deemed willful misconduct or gross negligence of the Issuing Bank. (f) Indemnification. The Borrower shall: (i) indemnify and hold the Administrative Agent and each Bank (including the Issuing Bank) harmless from any loss resulting - 30 - 37 from any claim, demand or liability which may be asserted against the Administrative Agent or such Bank in connection with actions taken under any Letter of Credit, and (ii) reimburse the Administrative Agent or such Bank for any fees or other reasonable expenses paid or incurred by the Administrative Agent or such Bank in connection with any Letter of Credit, other than any loss or expense resulting from the Administrative Agent's or such Bank's willful misconduct or gross negligence. (g) Security. Upon the occurrence of any Event of Default, the Borrower shall, upon demand, pay to the Issuing Bank the stated amount of all outstanding Letters of Credit, which amount the Issuing Bank shall hold as security for the obligations incurred under the Letters of Credit, this Agreement and the Notes. The payment by the Borrower of such security shall not terminate the obligations of the Borrower under this Section 2.2, but the stated amount of such Letters of Credit to the extent of such security payment shall not be deemed to be Indebtedness for purposes of determining the Borrower's compliance with the covenants set forth in Section 8.13 or for determining the Applicable Margin. (h) Additional Costs. If any Regulatory Change shall either (i) impose upon, modify, require, make or deem applicable to the Issuing Bank, the Administrative Agent or any Bank (or its holding company) any reserve requirement, special deposit requirement, insurance assessment or similar requirement against or affecting any Letter of Credit issued or to be issued hereunder, or (ii) subject the Issuing Bank, the Administrative Agent or any Bank to any tax (other than taxes imposed on the net income of the Administrative Agent, the Issuing Bank or such other Bank), charge, fee, deduction or withholding of any kind whatsoever, or (iii) impose any condition upon or cause in any manner the addition of any supplement to or increase of any kind to the Issuing Bank's, the Administrative Agent's or any Bank's (or its holding company's) capital or cost base for issuing such Letter of Credit which results in an increase in the capital requirement supporting such Letter of Credit, or (iii) impose upon, modify, require, make or deem applicable to the Issuing Bank, the Administrative Agent or any Bank (or its holding company) any capital requirement, increased capital requirement or similar requirement such as the deeming of such Letters of Credit to be assets held by the Issuing Bank, the Administrative - 31 - 38 Agent or such Bank (or its holding company) for capital calculation or other purposes and the result of any events referred to in (i), (ii), (iii) or (iv) above shall be to increase the costs or decrease the benefit in any way to the Issuing Bank, the Administrative Agent or a Bank (or its holding company) of issuing, maintaining or participating in such Letters of Credit, then and in such event the Borrower shall, within ten days after the mailing of written notice of such increased costs and/or decreased benefits to the Administrative Agent and the Borrower, pay to the Issuing Bank, the Administrative Agent or such Bank all such additional amounts which in the Issuing Bank's, the Administrative Agent's or such Bank's good faith calculation as allocated to such Letters of Credit, shall be sufficient to compensate it (or its holding company) for all such increased costs and/or decreased benefits. The Issuing Bank's, the Administrative Agent's or such Bank's calculation shall be conclusive absent manifest error. (i) Fees. Each Letter of Credit shall be issued for a fee equal to the product of the Applicable Margin applicable to LIBOR Loans as of the date of issuance thereof times the stated amount thereof, payable upon issuance. The fee shall be payable to the Administrative Agent for the benefit of the Banks in accordance with their Ratable Shares. If any Letter of Credit is drawn upon prior to its expiration date, the Banks shall reimburse to the Borrowers that portion of the fee allocable to the period from the date of the draw to the expiration date, calculated in accordance with the Issuing Bank's standard letter of credit procedures. In addition, the Borrower shall pay to the Issuing Bank for its own account its standard charges for the issuance of letters of credit and for draws upon letters of credit, which charges, as of the date hereof, are as follows: (i) $200 per Letter of Credit, payable upon issuance and (ii) $100 per Letter of Credit, payable upon a draw under such Letter of Credit. 2.3 Making and Continuation/Conversion of the Loans. (a) Making of the Loans. (i) Each Loan shall be made by the Banks in such amount as the Borrower shall request, provided that each borrowing shall be in an amount which is a minimum of (A), with - 32 - 39 respect to any LIBOR Loan, $3,000,000, and integral multiples of $500,000 in excess thereof, and (B) with respect to any Base Rate Loan, $1,000,000 and integral multiples of $500,000 in excess thereof or such lesser amount as may be equal to the then unused portion of the Commitment. The obligation of the Banks to make any Loan is conditioned upon the fact that (x) no Possible Default or Event of Default shall then exist or immediately after the Loan would exist; (y) all of the Collateral Documents shall still be in full force and effect; and (z) the representations and warranties contained herein and in the Collateral Documents shall be true and correct in all material respects as if made on and as of the date of such borrowing, except to the extent that any thereof expressly relate to an earlier date. (ii) Loans shall be effected at the principal banking office of the Administrative Agent in Cleveland, Ohio, and shall be made at such times as the Borrower may request by notice to the Administrative Agent no later than 11:00 A.M. Cleveland, Ohio time (A) three Banking Days prior to the date of a requested LIBOR Loan and (B) one Banking Day prior to the date of a requested Base Rate Loan. Such notices shall be in writing, or by telephonic communication confirmed by telecopy or other facsimile transmission on the same day as the telephone request, and shall specify the proposed date and the amount of the requested Loan, whether it is to bear interest initially based upon the Base Rate or the LIBOR Rate, and the Interest Period thereof, if applicable. (iii) Upon receipt of each borrowing notice for a Loan, the Administrative Agent shall promptly notify each Bank of the type, Interest Period, if applicable, amount and date of the proposed borrowing. Not later than 11:00 A.M. Cleveland time, on the date of a proposed borrowing of a Loan, each Bank shall provide the Administrative Agent at its address specified in Section 12.4 hereof with immediately available funds covering such Bank's Ratable Share of such Loan, and the Administrative Agent shall pay over such immediately available funds to the Borrower. (b) Conversion/Continuation of the Loans. At the Borrower's election pursuant to notice given to the Administrative Agent not later than 11:00 A.M. Cleveland, Ohio time three Banking Days prior to such conversion or continuation, - 33 - 40 any Base Rate Loan may be converted to, or any LIBOR Loan may be continued as, a LIBOR Loan as requested by the Borrower; provided, however, that each conversion shall be in an amount which is a minimum of $3,000,000, and integral multiples of $1,000,000 in excess thereof; and provided, further, that no Loan may be continued as or converted to a LIBOR Loan at any time that an Event of Default or Possible Default exists. If the Borrower has not delivered to the Administrative Agent such notice with respect to any terminating Interest Period at least three Banking Days prior to the end of such Interest Period, the affected LIBOR Loan shall convert to a Base Rate Loan at the end of such Interest Period. (c) Number of Interest Rate Options. In no event shall the Borrower have more than five LIBOR Loans outstanding at any time. 2.4 The Notes. All Loans shall be evidenced by separate promissory notes payable to the Banks substantially in the form attached hereto as Exhibit A to be duly executed and delivered by the Borrower at or prior to the Closing in the aggregate principal amount of the Commitment (such notes, together with any notes issued in connection with the issuance of a Letter of Credit being referred to hereinafter as the "Notes"). The Banks may, and are hereby authorized by the Borrower to, set forth on the grids attached to the Notes, or in other comparable records maintained by them, the amount of each Loan, all payments and prepayments of principal and interest received, the current outstanding principal balance, and other appropriate information. The aggregate unpaid amount of any Loan set forth in any records maintained by a Bank with respect to a Note shall be presumptive evidence of the principal amount owing and unpaid on such Note. Failure of a Bank to record the principal amount of any Loan on the grid(s) attached to a Note shall not limit or otherwise affect the obligation of the Borrower hereunder or under such Note to repay the principal amount of such Loan and all interest accruing thereon. 2.5 Fees. (a) Commitment Fees. The Borrower shall pay to the Administrative Agent for the benefit of the Banks a non-refundable commitment fee of 0.375% per annum (based on a year - 34 - 41 having 360 days and actual days elapsed) on the excess of the aggregate average daily undisbursed amount of the Commitment over the aggregate stated amount of the Letters of Credit then outstanding; provided, however, that the commitment fee shall be 0.25% per annum for any day on which the Leverage Ratio is less than or equal to 5.0 to 1.0. Such commitment fee shall (i) commence to accrue as of the Closing Date and continue for each day to and including the Termination Date, (ii) be in addition to any other fee required by the terms and conditions of this Agreement, (iii) be payable quarterly in arrears on each Quarterly Date and on the date the Commitment is terminated, and (iv) be shared by the Banks in accordance with their Ratable Shares of the Commitment. (b) Other Fees. The Borrower shall pay to the Agents such other fees as are set forth in the Fee Letters. 2.6 Prepayment. (a) Voluntary Prepayments. By notice to the Administrative Agent (which shall be in writing or by telephonic communication confirmed by telecopy or other facsimile transmission on the same day as such telephone notice) no later than 11:00 A.M. Cleveland, Ohio time on the Banking Day prior to such prepayment (with respect to any Base Rate Loan) or on the third Banking Day prior to such prepayment (with respect to any LIBOR Loan), the Borrower may, at its option, prepay the Loans in whole at any time or in part from time to time without penalty or premium (except that any such prepayment of any LIBOR Loan shall be made together with the applicable Prepayment Premium); provided, however, that each partial prepayment shall be in the aggregate principal amount of not less than $1,000,000 or an integral multiple of $500,000 in excess thereof. (b) Mandatory Prepayments. (i) Reduction of Commitment. If at any time the sum of the outstanding principal amount of the Loans plus the stated amount of all outstanding Letters of Credit exceeds the Commitment, the Borrower shall immediately prepay the Loans, without penalty or premium (except that any such prepayment of any LIBOR Loan shall be made together with the applicable Prepayment Premium), in an amount necessary to cause the sum of - 35 - 42 the outstanding principal amount of the Loans plus the stated amount of all outstanding Letters of Credit not to exceed the Commitment. All accrued interest on the amount prepaid shall be paid with the prepayment. (ii) Excess Cash Flow. If the Leverage Ratio as of the end of any fiscal year of the Borrower ending on or after September 30, 2000, is 5.0 to 1.0 or greater, then within one hundred twenty-five days after the end of such fiscal year the Borrower shall make a mandatory prepayment of the Loans in an amount equal to 50% of Excess Cash Flow, if any, for such fiscal year. Mandatory prepayments made pursuant to this Section 2.6(b)(ii) shall be determined from the annual financial statements for such fiscal year delivered by the Borrower pursuant to Section 7.5(a) and shall be accompanied by a certificate signed by a financial officer of the Borrower setting forth the calculations from which the amount of such prepayment was determined. (iii) Proceeds of Asset Sales. (A) Subject to paragraph (B) below, if, as of the end of the quarter most recently ended prior to the consummation of any Asset Sale, the Leverage Ratio was greater than 5.5 to 1.0, then the Borrower shall make a mandatory prepayment of the Loans in that amount (not to exceed the cash proceeds of such Asset Sale, net of any reasonable costs directly incurred in connection with such Asset Sale and any taxes payable by the Borrower or its stockholders in connection with such Asset Sale) which, had it been prepaid at the end of such quarter and applied to the Loans, would have caused the Leverage Ratio to equal 5.5 to 1.0, and the balance of such net proceeds shall be applied in accordance with the provisions of the following sentence as if the Leverage Ratio as of the end of such quarter had been less than 5.5 to 1.0. If, as of the end of the quarter most recently ended prior to the consummation of any Asset Sale, the Leverage Ratio was less than or equal to 5.5 to 1.0, then the Borrower shall not be required to make such a mandatory prepayment of the Loans, so long as (I) no Event of Default or Possible Default exists as of the date of such Asset Sale or at the date of the reinvestment of such proceeds and (II) the Borrower reinvests such proceeds by making a Permitted Acquisition within twelve months of the date of consummation of - 36 - 43 such Asset Sale. If any such Event of Default or Possible Default exists or if such proceeds are not so reinvested within such twelve month period, then the Borrower shall make a mandatory prepayment of the Loans in an amount equal to the cash proceeds of such Asset Sale, net of any reasonable costs directly incurred in connection with such Asset Sale and any taxes payable by the Borrower or its stockholders in connection with such Asset Sale. Together with any prepayment required by this Section 2.6(b)(iii), the Borrower shall deliver to the Administrative Agent a certificate executed by a financial officer of the Borrower setting forth the calculation of the net cash proceeds of such Asset Sale, including a calculation of the taxes payable by the Borrower or its stockholders in respect of such sale. Such prepayment shall be made simultaneously with the consummation of such Asset Sale. (B) Notwithstanding the foregoing provisions of this Section 2.6(b)(iii), the Borrower shall not be required to make a mandatory prepayment of the Loans in connection with the consummation of an Asset Sale if (I) the Asset Sale is structured as an exchange of like-kind property under Section 1031 of the Code to the maximum extent possible under Section 1031 (a "Like Kind Exchange"), (II) the property acquired in the Like-Kind Exchange is a radio station located in one of the top 75 markets, as ranked by Metro Survey Area as determined by The Arbitron Company, or in a market in which the Borrower or one of its Subsidiaries already owns a Station, (III) no Possible Default or Event of Default exists at the time of such Asset Sale or would exist after giving effect thereto, and (IV) the Borrower shall have delivered to the Administrative Agent a certificate of a financial officer of the Borrower in form and substance satisfactory to the Administrative Agent which shall contain calculations demonstrating on a pro forma basis the Borrower's compliance with the financial covenants set forth in Section 8 after giving effect to such Asset Sale. If the Borrower desires to effect a Like-Kind Exchange, at or prior to closing the disposition of any Station pursuant to this paragraph, the Borrower shall (A) establish a "qualified escrow account" within the meaning of Treas. Reg. Section 1.1031(k)-1(g)(3) with a "qualified intermediary" within the meaning of Treas. Reg. Section 1.1031(k)-1(g)(4) (the "Qualified Intermediary"), which account shall be governed by an escrow agreement complying with the requirements of Treas. Reg. Section 1.1031(k)-1(g) (4) and 1.1031(k)-1(g)(6), and - 37 - 44 enter into an "exchange agreement" within the meaning of Treas. Reg. Section 1.1031(k)-1(g)(4)(iii)(B) with the Qualified Intermediary and (B) deliver to the Administrative Agent, as soon as reasonably practicable but in no event later than the closing of the transfer or other disposition of such Station by the Borrower or one of its Subsidiaries, a pledge of its rights in the escrow agreement in form and substance reasonably satisfactory to the Administrative Agent which governs the "qualified escrow account" and the proceeds thereof. No later than immediately before the consummation of the closing of the transfer or other disposition of such Station by the Borrower or one of its Subsidiaries, the Administrative Agent shall release any and all liens of the Administrative Agent or the Banks in the cash proceeds from the transfer or other disposition of such Station for the period necessary (but no longer than necessary) to comply with the requirements of Treas. Reg. Section 1.1031(k)-1(g)(6). The terms of the escrow agreement governing the "qualified escrow account" shall, among other things, provide that immediately upon the occurrence of any event set forth in Treas. Reg. Section 1.1031(k)-1(g)(6)(ii) or (iii), the cash proceeds from the transfer or other disposition of such Station, together with any interest thereon, net of any reasonable costs directly incurred by the Borrower or its Subsidiary in connection with the transactions contemplated by the Like-Kind Exchange, and any taxes payable by the Borrower or its stockholders with respect to such transactions and Like-Kind Exchange, shall be released to the Administrative Agent, to the extent of any then outstanding balance of the Loans, to be applied as provided in Section 2.6(c) hereof. (iv) Insurance Proceeds. Within 180 days after the date of receipt of any cash payments in excess of $250,000 under any insurance policy maintained by the Borrower or any of its Subsidiaries which have not been reinvested in assets of a kind then used or usable in the business of the Borrower or such Subsidiary or used to maintain the business of the Borrower and its Subsidiaries as going concerns as a consequence of any business interruption, the Borrower shall make a mandatory prepayment of the Loans in the amount of such unreinvested or unused proceeds; provided, however, that notwithstanding any of the foregoing to the contrary, upon and during the continuance of any Event of Default or Possible Default, all such insurance proceeds, regardless of reinvestment or other use, received by - 38 - 45 the Borrower or any Subsidiary shall be applied as a prepayment of the Loans. (v) Net Equity Proceeds. If the Borrower issues or sells any shares of its capital stock or other equity interests or securities convertible into or exercisable for any shares of its capital stock or other equity interests, and if as of the end of the quarter most recently ended prior to such issuance or sale (the "Test Date") the Leverage Ratio was greater than 5.5 to 1.0, then the Borrower shall make a mandatory prepayment of the Loans. Such prepayment shall be in an amount (not to exceed the cash proceeds of such issuance or sale, net of any reasonable costs directly incurred in connection with such issuance or sale) equal to the sum of (A) if the Leverage Ratio as of the Test Date was greater than 6.5 to 1.0, the amount of such proceeds which, had it been prepaid on the Test Date and applied to the Loans, would have caused the Leverage Ratio to equal 6.5 to 1.0, plus (B) that amount (not to exceed 50% of the balance of such proceeds after applying the provisions of clause (A) to the extent applicable) which, had it been prepaid on the Test Date (and after giving effect to the payment, if any, pursuant to clause (A)) and applied to the Loans, would have caused the Leverage Ratio to equal 5.5 to 1.0. (vi) Subordinated Purchase Agreement. If any Indebtedness of the Borrower under the Subordinated Purchase Agreement is outstanding on April 21, 2004 (unless the Subordinated Purchase Agreement has been amended in accordance with the provisions of Section 8.19 to extend the final maturity date thereunder to a date that is at least six months later than the Termination Date), or if the Borrower fails to comply in any material respect with any of the provisions of Section 7.14, it shall make a mandatory prepayment of the Loans in the amount of all then outstanding principal together with all accrued interest and all other amounts then owing hereunder, under any Note and under any other Collateral Document. (c) Application of Prepayments; Reduction of Commitment. (i) Application to Prepayment Premium, Accrued Interest and Principal. All prepayments made pursuant to this Section 2.6 shall be applied first to any Prepayment Premium then - 39 - 46 due, then to accrued interest in accordance with the Administrative Agent's standard operating procedures and then to the principal outstanding under the Loans. For purposes of the calculation of interest and the determination of whether any Prepayment Premium is due in connection with any such prepayment, such principal prepayments shall be applied first to the Base Rate Loans and then to the LIBOR Loans with the shortest remaining Interest Periods. (ii) Reduction of Commitment and Loans. Any mandatory prepayment of the Loans pursuant to Sections 2.6(b)(ii), (iii), (iv), (v) or (vi) shall cause the Commitment to be immediately, automatically and permanently reduced by the amount of such prepayment, and no amount so prepaid may be reborrowed. Each such mandatory prepayment of the Loans (other than a prepayment pursuant to Section 2.6(b)(v)) shall be applied to the subsequent Commitment reductions set forth in Section 2.1(b) in the inverse order of maturity. Mandatory prepayments made pursuant to Section 2.6(b)(v) shall be applied to all subsequent Commitment reductions set forth in Section 2.1(b) pro rata. (d) Prepayment Premium. The Borrower shall pay to the Administrative Agent, for the benefit of the Banks, the applicable Prepayment Premium upon any prepayment or conversion (whether voluntary or involuntary) of any LIBOR Loan not made on the last day of the applicable Interest Period. 2.7 Reserves or Deposit Requirements, Etc. If at any time any Regulatory Change (including without limitation, Regulation D of the Board of Governors of the Federal Reserve System) shall impose any reserve and/or special deposit requirement (other than reserves included in the LIBOR Reserve Percentage, the effect of which is reflected in the interest rate of any LIBOR Loan) against assets held by, or deposits in or for the amount of any loans by, any Bank, and the result of the foregoing is to increase the cost (whether by incurring a cost or adding to a cost) to such Bank of taking or maintaining hereunder any LIBOR Loan or to reduce the amount of principal, interest or fees received by such Bank with respect to any such Loan, then such Bank shall notify the Administrative Agent and the Borrower of such occurrence. Thereafter, upon demand by such Bank the Borrower shall pay to such Bank additional amounts sufficient to - 40 - 47 compensate and indemnify such Bank for such increased cost or reduced amount. A statement as to the increased cost or reduced amount as a result of any event mentioned in this Section shall be submitted by such Bank to the Administrative Agent and the Borrower and shall, in the absence of manifest error, be conclusive and binding as to the amount thereof. 2.8 Tax Law, Increased Costs, Etc. In the event that by reason of any Regulatory Change, any Bank shall, with respect to this Agreement or any transaction under this Agreement, be subjected to any tax, levy, impost, charge, fee, duty, deduction or withholding of any kind whatsoever (other than any tax imposed upon the net income of such Bank and other than changes in franchise taxes), and if any such measure or any other similar measure shall result in an increase in the costs to such Bank of making or maintaining any LIBOR Loan or in a reduction in the amount of principal or interest ultimately receivable by such Bank in respect of such Loan, then such Bank shall notify the Administrative Agent and the Borrower stating the reasons therefor. The Borrower shall thereafter pay to such Bank within ten days after written demand such additional amounts as will compensate such Bank for such increased cost or reduced amount. A statement as to any such increased cost or reduced amount shall be submitted by such Bank to the Administrative Agent and the Borrower and shall, in the absence of manifest error, be conclusive and binding as to the amount thereof. 2.9 Eurodollar Deposits Unavailable or Interest Rate Unascertainable. If any Bank determines that dollar deposits of the relevant amount for the relevant Interest Period are not available to it in the applicable Eurodollar market 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, or that the LIBOR Rate does not adequately reflect the cost to such Bank of making such Loan, as the case may be, such Bank shall promptly give notice of such determination to the Administrative Agent and the Borrower, and any request for a new LIBOR Loan or notice of conversion of an existing Loan to a LIBOR Loan given thereafter or previously given by the Borrower and not yet made or converted shall be deemed a notice to make a Base Rate Loan. - 41 - 48 2.10 Changes in Law Rendering LIBOR Loans Unlawful. If at any time any Regulatory Change shall make it unlawful for any Bank to fund any LIBOR Loan which it has committed to make hereunder with moneys obtained in the applicable Eurodollar market, such Bank shall notify the Administrative Agent and the Borrower, and the obligation of the Banks to fund such Loan shall, upon the happening of such event, forthwith be suspended for the duration of such illegality. If any such change makes it unlawful for any Bank to continue in effect the funding in the applicable Eurodollar market of any LIBOR Loan previously made by it hereunder, such Bank shall, upon the happening of such event, notify the Administrative Agent and the Borrower thereof in writing stating the reasons therefor, and the Borrower shall, on the earlier of (a) the last day of the then current Interest Period or (b) if required by such Regulatory Change on such date as shall be specified in such notice, either convert all such Loans to Base Rate Loans or prepay all such Loans in full. 2.11 Funding. Any Bank may, but shall not be required to, make LIBOR Loans hereunder with funds obtained outside the United States. 2.12 Indemnity. Without prejudice to any other provisions of Sections 2.7 through Section 2.11, but without duplication, the Borrower hereby agrees to indemnify each Bank against any loss or expense which it may sustain or incur as a consequence of the Borrower's failure to borrow any LIBOR Loan requested pursuant to this Agreement or any default by the Borrower in payment when due of any amount due hereunder in respect of any LIBOR Loan, including, but not limited to, any premium or penalty actually incurred by such Bank in respect of funds borrowed by it for the purpose of making or maintaining such Loan, as determined by such Bank. A statement as to any such loss or expense shall be submitted by such Bank to the Borrower for payment under the aforesaid indemnification, with a copy to the Administrative Agent, which statement shall, in the absence of manifest error, be conclusive and binding as to the amount thereof. 2.13 Capital Adequacy. If any Bank shall determine that any Regulatory Change regarding capital adequacy or compliance by such Bank (or its lending office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any governmental authority, central bank or comparable - 42 - 49 agency has the effect of reducing the rate of return on such Bank's capital (or on the capital of such Bank's holding company) as a consequence of its obligations hereunder to a level below that which such Bank (or its holding company) could have achieved but for such Regulatory Change or compliance (taking into consideration such Bank's policies or the policies of its holding company with respect to capital adequacy) by an amount which such Bank deems to be material, then from time to time, within ten days after demand by such Bank, the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its holding company) for such reduction. Such Bank will designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of such Bank claiming compensation under this Section and setting forth the additional amount to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. Failure on the part of any Bank to demand compensation for any reduction in return on capital with respect to any period shall not constitute a waiver of such Bank's rights to demand compensation for any reduction in return on capital in such period or in any other period. The protection of this Section shall be available to each Bank regardless of any possible contention of the invalidity or inapplicability of the law, regulation or other condition which shall have been imposed. 2.14 Taxes. (a) Without duplication of any other Section of this Agreement including, without limitation Section 2.8, all sums payable by the Borrower hereunder or under the Notes or in respect of the Letters of Credit, whether of principal, interest, fees, expenses or otherwise, shall be paid in full, free of any deductions or withholdings for any and all present and future taxes, levies, imposts, stamps, duties, fees, assessments, deductions, withholdings, and other governmental charges and all liabilities with respect thereto (collectively referred to as "Taxes"). If the Borrower is prohibited by law from making payments hereunder or under the Notes or in respect of the Letters of Credit free of such deductions or withholdings, then the Borrower shall pay such additional amount as may be necessary - 43 - 50 in order that the actual amount received by the Banks after such deduction or withholding shall equal the full amount stated to be payable hereunder or under the Notes or in respect of the Letters of Credit. The Borrower shall pay directly to all appropriate taxing authorities any and all present and future Taxes, and all liabilities with respect thereto imposed by law or by any taxing authority on or with regard to any aspect of the transactions contemplated by this Agreement or the execution and delivery of this Agreement or the Notes or the issuance of the Letters of Credit, except for any Taxes or other liabilities that the Borrower is contesting in good faith by appropriate proceedings, provided that the Borrower hereby indemnifies the Administrative Agent and the Banks and holds them harmless from and against any and all liabilities, fees or additional expense with respect to or resulting from any delay in paying, or omission to pay, Taxes. Within thirty days after the payment by the Borrower of any Taxes, the Borrower shall furnish the Administrative Agent with the original or a certified copy of the receipt evidencing payment thereof, together with any other information the Administrative Agent may reasonably require to establish to its satisfaction that full and timely payment of such Taxes has been made. Each Bank shall notify the Borrower and the Administrative Agent of any payment of Taxes required or requested of it and shall give due consideration to any advice or recommendation given in response thereto by the Borrower, and upon notice from such Bank that Taxes or any liability relating thereto (including penalties and interest) have been paid, the Borrower shall pay or reimburse such Bank therefor within ten days of such notice. The foregoing to the contrary notwithstanding, in no event shall any Bank receive any amount pursuant to this Section in excess of the amount required to be paid by it in respect of any Taxes. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section shall survive the payment in full of principal and interest hereunder and under the Note. (b) Upon the timely request of the Borrower, each Bank shall execute and deliver to the Borrower, prior to the due date of any sum payable by the Borrower under this Agreement, one or more (as the Borrower may reasonably request) United States Internal Revenue Service Forms 4224, Forms 1001, Forms W-8 or Forms W-9, or any applicable successor form, as may be appropriately applicable to such Bank and which such Bank is - 44 - 51 lawfully able and legally required to execute and deliver. Notwithstanding the provisions of Sections 2.8 or 2.14(a) to the contrary, the Borrower shall have no obligation to increase any sum payable in respect of any Tax pursuant to such Sections to the extent such Bank has failed to deliver to the Borrower any such Forms reasonably requested by the Borrower pursuant to this Section which is applicable to such Bank and which such Bank is lawfully able and legally required to execute and deliver. 2.15 Incremental Commitment. At any time prior to June 30, 2000, the Borrower may solicit from the Banks an increase in the Commitment of up to $50,000,000; provided, however, that the Borrower may not request such increase at any time that a Possible Default or an Event of Default has occurred and is continuing. With such solicitation, the Borrower shall deliver to the Administrative Agent and the Banks revised projections for the period from the date of such solicitation through the Termination Date which shall be in form and substance reasonably satisfactory to the Administrative Agent and shall demonstrate the Borrower's ability to timely repay the Loans, assuming the Commitment as increased pursuant to this Section is fully drawn, and to comply with the financial covenants contained in Section 8. No Bank shall be obligated to increase its share of the Commitment beyond the maximum amount it has agreed to lend as of the Closing Date, and no Bank shall be removed as a Bank for failure to agree to such increase. If any Bank desires to participate in such increase in the Commitment (a "Consenting Bank"), such Bank shall notify the Administrative Agent and the Borrower of the amount by which it desires to increase its commitment hereunder. The Commitment shall be increased by the aggregate amount that the Consenting Banks are willing to increase their respective commitments hereunder, but in no event shall the Commitment by increased pursuant to this Section by more than $50,000,000. The aggregate increase in the Commitment shall be shared pro rata by all Consenting Banks or in such other ratio as the Consenting Banks agree among themselves. The Borrower shall deliver to each Consenting Bank a new Note reflecting the increase in its commitment hereunder. The Ratable Shares of all of the Banks shall be adjusted to reflect such increase in the Commitment, and Schedule 1.1 shall be deemed modified to reflect such adjustment to the Ratable Shares of the Banks. Any fees payable in connection with such increase in the Commitment shall be payable only to the Agents, with respect to - 45 - 52 fees payable to the Agents, and to the Consenting Banks, in their capacity as Consenting Banks. SECTION 3 INTEREST; PAYMENTS. 3.1 Interest. (a) Subject to Section 3.1(c), prior to maturity, Loans that are LIBOR Loans shall bear interest at the LIBOR Rate plus the Applicable Margin, and Loans that are Base Rate Loans shall bear interest at the Base Rate plus the Applicable Margin. (b) The Applicable Margin shall be determined by the Administrative Agent quarterly, and upon the making of each Loan and issuance of each Letter of Credit in an amount in excess of $5,000,000, based on the financial statements and the Compliance Certificate delivered to the Banks pursuant to Sections 7.5(b) and (d) (in the case of a quarterly determination) and the compliance certificate delivered pursuant to Section 6.8(c) (in the case of determination of the Applicable Margin upon the making of a Loan or issuance of a Letter of Credit). Any change in the interest rate on the Loans due to a change in the Applicable Margin shall be effective on the fifth Banking Day after delivery of such financial statements or compliance certificate; provided, however, that if any such quarterly financial statements and compliance certificate indicate an increase in the Applicable Margin and such financial statements and certificate are not provided within the time period required in Section 7.5(b), the increase in the interest rate due to such change in the Applicable Margin shall be effective retroactively as of the fifth Banking Day after the date on which such financial statements and certificate were due. Until delivery of financial statements for the first fiscal quarter of the Borrower ending after the Closing, for purposes of calculating the Applicable Margin, the Leverage Ratio shall be determined, after giving effect to the Loans made on and after the Closing Date, from the certificate delivered to the Administrative Agent pursuant to Section 6.8(c). The Borrower shall deliver to the Banks with each set of quarterly financial statements which indicate a change in the Applicable Margin a notice with respect to such change, which notice shall set forth the calculation of, and the supporting evidence for, such change. - 46 - 53 (c) Upon the occurrence of any Event of Default, the entire outstanding principal amount of each Loan and (to the extent permitted by law) unpaid interest thereon and all other amounts due hereunder shall bear interest from the date of occurrence of such Event of Default until the earlier of the date such Loan is paid in full and the date on which such Event of Default is cured or waived in writing at the Default Interest Rate which shall be payable upon demand. (d) Interest shall be computed on a Three Hundred Sixty day year basis calculated for the actual number of days elapsed. Interest accrued on each Base Rate Loan shall be paid quarterly in arrears on each Quarterly Date after the date hereof until such Loan is paid in full, and interest accrued on each LIBOR Loan shall be paid on the last day of the Interest Period thereof and, in addition, if such Interest Period is more than three months, on the day that would have been the last day of such Interest Period if such Interest Period had been three months. (e) The rate of interest payable on any Note from time to time shall in no event exceed the maximum rate, if any, permissible under applicable law. If the rate of interest payable on any Note is ever reduced as a result of the preceding sentence and any time thereafter the maximum rate permitted by applicable law shall exceed the rate of interest provided for on such Note, then the rate provided for on such Note shall be increased to the maximum rate permitted by applicable law for such period as is required so that the total amount of interest received by the holder of such Note is that which would have been received by such holder but for the operation of the preceding sentence. 3.2 Manner of Payments. (a) Prior to each Quarterly Date and the end of each Interest Period, the Administrative Agent shall render a statement to the Borrower of all amounts due to the Banks for principal, interest and fees hereunder. All amounts listed on each such statement shall be due and payable on the Quarterly Date or, for LIBOR Loans, the last day of such Interest Period, in respect of which such statement was sent. As to all other Obligations which become due and payable other than on a fixed - 47 - 54 date by their terms, the Administrative Agent shall advise the Borrower by a written statement that they are due and payable, and the Borrower shall pay the same within five days of receipt of such statement. Any failure by the Administrative Agent to render any such statement or give any such advice shall in no way relieve the Borrower of any liability for or obligation to pay any amount due and payable hereunder. (b) Whenever any payment to be made hereunder, including without limitation any payment to be made on a Note, shall be stated to be due on a day which is not a Banking Day, such payment may be made on the next succeeding Banking Day, and such extension of time shall in each case be included in the computation of the interest payable on such Note. (c) Unless otherwise provided in this Agreement, all payments or prepayments made or due hereunder or under the Notes shall be made in immediately available funds by federal funds wire transfer, and without setoff, deduction or counterclaim, to the Administrative Agent prior to 11:00 A.M., Cleveland time, on the date when due, at its offices at 127 Public Square, Cleveland, Ohio 44114, or at such other place as may be designated by the Administrative Agent. Funds received after 1:00 P.M., Cleveland time, shall be deemed to have been received on the next Banking Day. To the extent any such payment is made for the ratable benefit of the Banks, the Administrative Agent shall promptly distribute such payment to the Banks in accordance with their respective Ratable Shares. SECTION 4 CLOSING. The closing of the transactions contemplated by this Agreement shall take place at the offices of the Administrative Agent at 127 Public Square, Cleveland, Ohio 44114 on or about February 13, 1998, or such other date and place as to which the parties may agree (the "Closing" and the "Closing Date"). Subject to the terms and conditions hereof, upon the fulfillment or waiver in writing of all the conditions precedent set out in Section 6 below, and the delivery to the Administrative Agent of the Notes, the Banks shall make such Loans as the Borrower may request. SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE BORROWER. - 48 - 55 To induce the Banks to enter into this Agreement and to make the Loans, the Borrower represents and warrants as follows: 5.1 Organization and Powers. (a) The Borrower is a corporation, duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. The Borrower is duly qualified or registered to conduct business and in good standing under the laws of each other jurisdiction in which the character of its business or the ownership of its assets makes such qualification or registration necessary, except where failure to so qualify or register could not reasonably be expected to have a Material Adverse Effect. The Borrower has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, to enter into and perform the Acquisition Agreements, this Agreement, the Collateral Documents to which it is a party and all other documents to be executed by it in connection with the transactions contemplated hereby and thereby, to acquire the additional Stations pursuant to the Acquisition Agreements and to carry out the terms hereof and thereof. (b) As of the date hereof, the Borrower has no Subsidiaries other than the License Partnership. The License Partnership is a limited partnership, duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and is duly qualified and in good standing under the laws of each other jurisdiction in which the character of its business or the ownership of its assets makes such qualification or registration necessary. All of the Licenses issued by the FCC in connection with the ownership and operation of the Stations, including the Stations being acquired pursuant to the Acquisition Agreements, have been, or at the closing under the respective Acquisition Agreements will be, duly assigned to the License Partnership. The Borrower is the sole general partner of the License Partnership with a 99% partnership interest. ECI Investors Corporation, a Delaware corporation, is the sole limited partner of the License Partnership with a 1% partnership interest. The License Partnership has no assets, other than Licenses relating to the Stations and the Management Agreement, has no commitments, obligations or liabilities (other than - 49 - 56 obligations under the Management Agreement), has no employees and engages in no business (except pursuant to the Management Agreement). 5.2 Authorization. All necessary corporate, partnership, shareholder or other actions on the part of the Borrower and its Subsidiaries to authorize the execution and delivery of the Acquisition Agreements, this Agreement and the Collateral Documents and the performance of the respective obligations of the Borrower and its Subsidiaries herein and therein have been taken. The Acquisition Agreements, this Agreement and each Collateral Document are valid and legally binding upon each of the Borrower and its Subsidiaries, to the extent it is a party thereto, and enforceable in accordance with their respective terms, except to the extent that the enforceability hereof and thereof may be limited by bankruptcy, insolvency or like laws affecting creditors rights generally and by the application of general equitable principles. 5.3 Financial Statements. Exhibit B attached hereto contains (a) the audited consolidated financial statements of the Borrower and its Subsidiaries for the fiscal years ending September 30, 1995, September 30, 1996, and September 30, 1997, and (b) the unaudited consolidated financial statements of the Borrower and its Subsidiaries as of December 31, 1997, and for the three month period then ended (the "Financial Statements"). The Financial Statements are true and complete in all material respects (including, without limitation, a disclosure of all material contingent liabilities) and present fairly the financial condition and results of operations of the Borrower and its Subsidiaries, as of the dates and for the periods indicated and have been prepared in accordance with GAAP, subject in the case of statements for interim periods to normal year-end adjustments and the absence of footnotes. 5.4 Projections. Exhibit C attached hereto contains the Borrower's projections for the fiscal years 1998 through 2005. Such projections were prepared by the Borrower in good faith on the basis of assumptions the Borrower believes were reasonable in light of the conditions existing at the time of preparation thereof and remain reasonable as of the date hereof, and as of the date hereof there are no facts which are known to the - 50 - 57 Borrower which the Borrower believes would cause a material adverse change in such projections. 5.5 Capitalization of the Borrower and its Subsidiaries. The capitalization of the Borrower and the License Partnership as of the Closing Date is as set forth on Exhibit D attached hereto. All of the issued and outstanding capital stock of the Borrower has been duly and validly issued and is fully paid and nonassessable. None of the capital stock of the Borrower has been issued in violation of the Securities Act of 1933, as amended, or the securities or "Blue Sky" or any other applicable laws, rules or regulations of any applicable jurisdiction. Except as set forth on Exhibit D, as of the Closing Date, neither the Borrower nor any of its Subsidiaries has any commitment or obligation, either firm or conditional, to issue, deliver, purchase or sell, under any offer, option agreement, bonus agreement, purchase plan, incentive plan, compensation plan, warrant, conversion rights, contingent share agreement, shareholders agreement, partnership agreement or otherwise, any shares of its capital stock, partnership interests or other equity securities or securities convertible into shares of capital stock, partnership interests or other equity securities. 5.6 Title to Properties; Patents, Trademarks, Etc. The Borrower and each of its Subsidiaries have, and will have after giving effect to the closings under the Acquisition Agreements, good and marketable title to all of their assets, whether real or personal, tangible or intangible, free and clear of any Liens or adverse claims, except Permitted Liens. The Borrower and each of its Subsidiaries own or possess, and will own or possess after giving effect to the closings under the Acquisition Agreements, the valid right to use all the patents, patent applications, patent and know-how licenses, inventions, technology, permits, trademark registrations and applications, trademarks, service marks, trade names, copyrights, product designs, applications, formulae, processes, circulation, and other subscriber lists, industrial property rights and licenses and rights in respect of the foregoing used or necessary for the conduct of its business (collectively, "proprietary rights"). The Borrower is not aware of any existing or threatened infringement or misappropriation of (a) any such proprietary rights of others by the Borrower or any of its Subsidiaries or (b) any proprietary rights of the Borrower or any of its Subsidiaries by others. - 51 - 58 5.7 Litigation; Proceedings. Except as disclosed on Exhibit E attached hereto, there is no action, suit, complaint, proceeding, inquiry or investigation at law or in equity, or by or before any court or governmental instrumentality or agency, nor any order (including, without limitation, any order to show cause or order of forfeiture), decree or judgment in effect, pending or, to the best of the Borrower's knowledge, threatened against or affecting the Borrower, any of its Subsidiaries, any Station or any of the properties or rights relating to any Station which could reasonably be expected to have a Material Adverse Effect. No Person has filed or, to the best of the Borrower's knowledge, threatened to file, any material competing application, petition to deny or other opposition against any application, including any renewal application, filed or to be filed by the Borrower or any of its Subsidiaries. 5.8 Taxes. Except as disclosed on Exhibit E attached hereto, all Federal, state and local tax returns, reports and statements (including, without limitation, those relating to income taxes, withholding, social security and unemployment taxes, sales and use taxes, and franchise taxes) required to be filed by the Borrower or any of its Subsidiaries have been properly filed with the appropriate governmental agencies in all jurisdictions in which such returns, reports and statements are required to be filed, which returns, reports and statements are complete and accurate, and all taxes and other impositions due and payable have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof except where contested in good faith and by appropriate proceedings. As of the Closing Date, neither the Borrower nor any of its Subsidiaries has filed with the Internal Revenue Service or any other governmental authority any agreement or other document extending or having the effect of extending the period for assessment or collection of any Federal, state, local or foreign taxes or other impositions. All tax deficiencies asserted or assessments made as a result of any examinations conducted by the Internal Revenue Service or any other governmental authority relating to the Borrower or any of its Subsidiaries have been fully paid or are being contested in accordance with the provisions of Section 7.4. Proper and accurate amounts have been withheld by the Borrower and its Subsidiaries from its employees for all periods to fully comply - 52 - 59 with the tax, social security and unemployment withholding provisions of applicable Federal, state, local and foreign law. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate. 5.9 Absence of Conflicts. The execution, delivery and performance of the Acquisition Agreements, this Agreement and the Collateral Documents and all actions and transactions contemplated hereby and thereby will not (a) violate, be in conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under (i) any provision of the Articles of Incorporation or By-Laws or any shareholders agreement or other organizational document of the Borrower or any of its Subsidiaries or the Certificate of Limited Partnership or the Limited Partnership Agreement of the License Partnership, (ii) any arbitration award or any order of any court or of any other governmental agency or authority binding on the Borrower or any of its Subsidiaries, (iii) any License of the Borrower or any of its Subsidiaries or under which the Borrower or any of its Subsidiaries operates or will operate after giving effect to the closings under the Acquisition Agreements, (iv) any applicable law, rule, order or regulation (including without limitation, (A) the Communications Act of 1934, as amended, (B) any law, rule, regulation or policy of the FCC or any other Licensing Authority or (C) regulations G, T, U or X of the Board of Governors of the Federal Reserve System) or (v) any Operating Agreement, the Subordinated Purchase Agreement or other material agreement, instrument or document relating to a Station or to which the Borrower or any of its Subsidiaries is a party, or by which the Borrower or any of its Subsidiaries or any of their properties is bound, or (b) result in the creation or imposition of any Lien of any nature whatsoever, other than those Liens arising hereunder or under the Collateral Documents, upon any of the properties of the Borrower or any of its Subsidiaries. 5.10 Indebtedness. As of the Closing Date, the Borrower has no Indebtedness of any nature, whether due or to become due, absolute, contingent or otherwise, including Indebtedness for taxes and any interest or penalties relating thereto, which exceeds in the aggregate, $150,000, except (a) the liability to pay legal and accounting fees and reasonable closing expenses in connection with this Agreement and the Acquisition Agreements, - 53 - 60 (b) the Obligations, (c) Indebtedness incurred in the ordinary course of business since September 30, 1997, (d) as disclosed in the Financial Statements, and (e) as disclosed on Exhibit F attached hereto. The License Partnership has no Indebtedness of any nature, whether due or to become due, absolute, contingent or otherwise, including Indebtedness for taxes and any interest or penalties relating thereto, except for the obligations arising under the Management Agreement. 5.11 Compliance. Except as disclosed in Exhibit E attached hereto, neither the Borrower nor any of its Subsidiaries nor the ownership, construction or operation of any Station is in material violation of any License or any statute, ordinance, law, rule, regulation or order of the United States of America or the FCC (including, without limitation, applicable federal laws and the rules, regulation, policies and orders of the FCC relating to foreign ownership restrictions or to limitations on the nature and number of media outlets that may be held under common ownership or control), the Federal Aviation Administration or any other federal, state, county, municipal or other governmental agency or authority applicable to the Borrower or any of its Subsidiaries, their properties, the ownership, construction or operation of any Station or the conduct of their business. Neither the Borrower nor any of its Subsidiaries nor the ownership, construction or operation of any Station is in violation or has breached in any material respect the provisions of the Subordinated Purchase Agreement or any indenture, License, Operating Agreement, note, lease or other instrument or document to which it is a party or by which it is bound, nor does there exist any material default, or any event or condition which, upon notice or lapse of time, or both, would become a material default, under the Subordinated Purchase Agreement or any such indenture, License, Operating Agreement, note, lease, or other instrument or document. The Borrower and each of its Subsidiaries have the legal right and authority to conduct their respective businesses as now conducted or proposed to be conducted. 5.12 Statements Not Misleading. No statement, representation or warranty made by the Borrower or any of its Subsidiaries in or pursuant to this Agreement or the Schedules or Exhibits attached hereto or any of the Collateral Documents contains any untrue statement of a material fact, nor omits to - 54 - 61 state a material fact necessary to make such statement not misleading in light of the circumstances under which such statement was made, or otherwise violates any federal or state securities laws, rules or regulations. There is no fact known to the Borrower (other than matters of a general economic nature or relating to the broadcasting industry generally or matters reflected in the audited financial statements contained in Exhibit B attached hereto or otherwise disclosed herein) that has had or could reasonably be expected to have a Material Adverse Effect. 5.13 Consents or Approvals. No consent, approval or authorization of, or filing, registration or qualification with, any governmental authority or any other Person (including, without limitation, the FCC and any other Licensing Authority) is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution, delivery or performance of the Acquisition Agreements or this Agreement or any of the Collateral Documents, including without limitation, in connection with the granting of Liens in the Borrower's partnership interest in the License Partnership or in the capital stock or the assets of the Borrower and its Subsidiaries, which has not already been obtained or completed, except for (a) the filing with the FCC of this Agreement and certain of the Collateral Documents pursuant to FCC rules, which shall be accomplished within the required time period after the Closing, (b) the filing of financing statements and other actions expressly required to be taken pursuant to the Collateral Documents, (c) the consent of the FCC to the extent required in connection with the exercise by the Administrative Agent or the Banks of their rights and remedies hereunder or under the Collateral Documents and (d) the consent of the FCC to the consummation of the Acquisition Agreements. 5.14 Material Contracts and Commitments. Exhibit G attached hereto contains a true and complete description of all material contracts and commitments of the Borrower or any of its Subsidiaries or which relate to a Station, as of the Closing Date, whether oral or written, including, without limitation, (a) any security agreement, pledge agreement, mortgage or guaranty; (b) any material management, construction supervision, service or employment agreements, conditional sale contract or lease of personal property which involves expenditures in excess of - 55 - 62 $1,000,000 in any single case; (c) any collective bargaining agreement; (d) any material contract or commitment for the future purchase or sale of goods which involves expenditures in excess of $1,000,000 in any single case; (e) any contract or commitment which involves a material Capital Expenditure in excess of $1,000,000 in any single case; (f) all Licenses; and (g) all Operating Agreements. To the best of the Borrower's knowledge, except as disclosed on Exhibit G, as of the Closing Date, all of the items listed on Exhibit G are in full force and effect without material default. Exhibit G further identifies each such contract which requires consent to the granting of a Lien in favor of the Administrative Agent for the benefit of the Banks on the rights of the Borrower or its Subsidiaries under such contract. The Borrower has made available to the Administrative Agent true and complete copies of each of the above. 5.15 Employee Benefit Plans. Exhibit H contains a true and complete list of all Plans maintained by the Borrower or any member of the Controlled Group. Neither the Borrower nor any member of the Controlled Group has or will have, as of the closings under the Acquisition Agreements, any liability, or reasonably anticipates any liability, of any kind (other than current expenses incurred in the ordinary course of business) in excess, in the aggregate, of $150,000, to or in respect of any Plan or Benefit Arrangement, which liability is not reflected in the financial statements included in Exhibit B attached hereto. With respect to the Plans and Benefit Arrangements maintained by the Borrower or any member of the Controlled Group: (a) each Plan that is intended to be qualified under Code Section 401(a) is so qualified and has been so qualified since its adoption, and each trust forming a part thereof is exempt from tax under Code Section 501(a); (b) each Plan complies in all material respects with all applicable requirements of law, has been administered in accordance with its terms and all required contributions have been made; (c) neither the Borrower nor any member of the Controlled Group knows or has reason to know that the Borrower or any member of the Controlled Group has engaged in a transaction which would subject it to any material tax, penalty or liability under ERISA or the Code for any prohibited transaction; (d) no Plan is subject to the minimum funding requirements under ERISA Section 302 or Code Section 412, is a multiemployer plan (as defined in ERISA Section 4001(a)(3)), is a defined benefit plan (as defined under ERISA Section 3(35) or Code Section 414(j)), or - 56 - 63 is a multiple employer plan (as defined in ERISA Section 4063). No Plan or Benefit Arrangement maintained by the Borrower or any member of the Controlled Group is a multiple employer welfare arrangement (as defined in ERISA Section 3(40)). 5.16 Licenses and Operating Agreements. The Licenses and Operating Agreements shown on Exhibit G constitute all of the Licenses and Operating Agreements which, as of the Closing Date, are necessary for the lawful ownership, construction or operation of the Stations and of the other businesses of the Borrower and its Subsidiaries in the manner and to the full extent they are currently owned, constructed or operated. Exhibit G sets forth a correct and complete list, as of the Closing Date, of the expiration date of each License and of each pending application for a License. Except as specified on Exhibit G, all of the Licenses relating to the Stations and all other Licenses of the Borrower and its Subsidiaries have been duly and validly issued or assigned to and are legally held by the Borrower or one of its Subsidiaries and are in full force and effect without condition except those of general application. All such Licenses have been issued in compliance with all applicable laws and regulations, are legally binding and enforceable in accordance with their terms and are in good standing. Except as set forth on Exhibit E, the Borrower knows of no facts or conditions which would constitute grounds for any Licensing Authority to deny any pending application for a License, to suspend, revoke, materially adversely modify, designate for a hearing, annul, fail to renew on or before its renewal date, or renew for less than a full license period any License or to impose a material financial penalty on the Borrower or any of its Subsidiaries. 5.17 Material Restrictions. Except as set forth in Exhibit M attached hereto, neither the Borrower nor any of its Subsidiaries is a party to any agreement or other instrument or subject to any other restriction which has had or could reasonably be expected to have a Material Adverse Effect. 5.18 Investment Company Act. The Borrower (a) is not an investment company as that term is defined in the Investment Company Act of 1940, as amended, (b) does not directly or indirectly control, and is not directly or indirectly controlled by, a company which is an investment company as that term is - 57 - 64 defined in such act and (c) is not otherwise subject to regulation under such act. 5.19 Absence of Material Adverse Effect. No Material Adverse Effect has occurred since September 30, 1997. 5.20 Defaults. No Possible Default or Event of Default now exists or will exist upon the making of any Loan. 5.21 Real Estate. Exhibit I attached hereto lists all real estate owned as of the Closing Date by the Borrower or any of its Subsidiaries and all leases pursuant to which the Borrower or any of its Subsidiaries has acquired, as of the Closing Date, a leasehold interest in real estate. Exhibit I lists the use of such owned and leased property in the Borrower's or its Subsidiary's operations. 5.22 Securities Laws. No proceeds of any Loan will be used by the Borrower or any of its Subsidiaries to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended. Neither the registration of any security under the Securities Act of 1933, as amended, or the securities laws of any state, nor the qualification of an indenture in respect thereof under the Trust Indenture Act of 1939, as amended, is required in connection with the consummation of this Agreement or the Acquisition Agreements or the execution and delivery of the Notes. 5.23 Insurance. All policies of insurance of any kind or nature owned by or issued to the Borrower or any of its Subsidiaries are in compliance with the requirements of Section 7.3 and are in full force and effect. In the past three years neither the Borrower nor any of its Subsidiaries has been refused insurance for which it applied or had any policy of insurance terminated (except at its own request). 5.24 Labor Matters. Except as set forth in Exhibit N attached hereto, there are no material strikes, unfair labor practice charges or other material labor disputes or grievances pending or, to the best of the Borrower's knowledge, threatened against the Borrower, any of its Subsidiaries or any Station. The Borrower has not received any written complaints or knowledge of any threatened complaints, nor to the best of the Borrower's - 58 - 65 knowledge, are any such complaints on file with any Federal, state or local governmental agency, alleging employment discrimination by the Borrower or any of its Subsidiaries or in connection with any Station which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. All payments due under any collective bargaining agreement to which the Borrower or any of its Subsidiaries is a party have been paid or accrued as a liability on the books of the Borrower or such Subsidiary. 5.25 Environmental Compliance. Except as set forth in Exhibit J attached hereto and giving effect to the consummation of the Acquisition Agreements: (a) The Borrower and each of its Subsidiaries have obtained all material permits, licenses and other authorizations which are required under all Environmental Laws. The Borrower and each of its Subsidiaries is in material compliance with all terms and conditions of all such permits, licenses and authorizations and are also in material compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Environmental Law or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, including, without limitation, all Environmental Laws in all jurisdictions in which the Borrower or such Subsidiary owns or operates a Station, a facility or site, arranges or has arranged for disposal or treatment of Hazardous Materials, solid waste or other wastes, accepts or has accepted for transport any Hazardous Materials, solid waste or other wastes or holds or has held any interest in real property or otherwise. (b) No material Environmental Claim has been issued, no complaint has been filed, no penalty has been assessed and no litigation, proceeding, investigation or review is pending or, to the best of the Borrower's knowledge, threatened by any Person with respect to any alleged failure by the Borrower, any of its Subsidiaries or any property owned by the Borrower or any Subsidiary to comply with any Environmental Law or to have any permit, license or authorization required in connection with the conduct of the business of the Borrower or any of its - 59 - 66 Subsidiaries or with respect to any generation, treatment, storage, recycling, transportation, use, disposal or Release of any Hazardous Materials generated by the Borrower or any of its Subsidiaries or with respect to any real property in which the Borrower or any of its Subsidiaries holds or has held an interest or any past or present operation of the Borrower or any of its Subsidiaries. (c) There are no Environmental Laws requiring any material work, repairs, construction, Capital Expenditures or other remedial work of any nature whatsoever, with respect to any real property in which the Borrower or any of its Subsidiaries holds or has held an interest or any past or present operation of the Borrower or any Subsidiary. (d) Neither the Borrower nor any of its Subsidiaries has handled any Hazardous Material, on any property now or previously owned or leased by the Borrower or any of its Subsidiaries to an extent that it has, or could reasonably be expected to have, a Material Adverse Effect. (e) To the best of the Borrower's knowledge: (i) no PCBs or asbestos is present at any property now or previously owned or any premises now or previously leased by the Borrower or any of its Subsidiaries; (ii) no underground storage tanks for Hazardous Materials, active or abandoned, are now or were previously operated at any property now or previously owned by the Borrower or any of its Subsidiaries, and, with respect to premises now or previously leased by the Borrower or any of its Subsidiaries, no underground storage tanks for Hazardous Materials, active or abandoned, are now or were previously operated by the Borrower or any of its Subsidiaries; (iii) no Hazardous Materials have been Released, in a reportable quantity, where such a quantity has been established by statute, ordinance, rule, regulation or order, at, on or under any property now or previously owned by the Borrower or any of its Subsidiaries; and - 60 - 67 (iv) no Hazardous Materials have been otherwise Released at, on or under any property now or previously owned or any premises now or previously leased by the Borrower or any of its Subsidiaries to an extent that it has, or could reasonably be expected to have, a Material Adverse Effect. (f) Neither the Borrower nor any of its Subsidiaries has transported or arranged for the transportation of any Hazardous Material to any location that is listed on the National Priorities List ("NPL") under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for possible inclusion on the NPL by the Environmental Protection Agency in the Comprehensive Environmental Response and Liability Information System, as provided for by 40 C.F.R. Section 300.5 ("CERCLIS"), or on any similar state or local list or that is the subject of Federal, state or local enforcement actions or other investigations that may lead to Environmental Claims against the Borrower or any of its Subsidiaries. (g) No Hazardous Material generated by the Borrower or any of its Subsidiaries has been recycled, treated, stored, disposed of or Released by the Borrower or any of its Subsidiaries at any location. (h) No oral or written notification of a Release of a Hazardous Material has been filed by or on behalf of the Borrower or any of its Subsidiaries and no property now or previously owned or premises leased by the Borrower or any of its Subsidiaries is listed or proposed for listing on the National Priorities list promulgated pursuant to CERCLA, on CERCLIS or on any similar state list of sites requiring investigation or clean-up. (i) There are no Liens arising under or pursuant to any Environmental Laws on any of the property owned or premises leased by the Borrower or any of its Subsidiaries, and no government actions have been taken or are in process which could subject any of such property to such Liens, and neither the Borrower nor any of its Subsidiaries would be required to place any notice or restriction relating to the presence of Hazardous Materials at any property owned by it in any deed to such property. - 61 - 68 (j) Neither the Borrower nor any of its Subsidiaries has retained or assumed any liabilities (contingent or otherwise) in respect of any Environmental Claims under the terms of any contract or agreement or by operation of law as a result of the sale of assets or stock. (k) There have been no environmental investigations, studies, audits, tests, reviews or other analyses conducted by or which are in the possession of the Borrower or any of its Subsidiaries in relation to any property or facility now or previously owned or leased by the Borrower or such Subsidiary which have not been made available to the Banks. 5.26 Solvency. The Borrower has received, or has the right hereunder to receive, consideration which is the reasonable equivalent value of the obligations and liabilities that the Borrower has incurred to the Banks. The Borrower is not insolvent as defined in Section 101 of Title 11 of the United States Code or any applicable state insolvency statute, nor, after giving effect to the consummation of the transactions contemplated herein and in the Acquisition Agreements, will the Borrower be rendered insolvent by the execution and delivery of this Agreement, the Notes or the Collateral Documents to the Banks. The Borrower is not engaged or about to engage in any business or transaction for which the assets retained by it shall be an unreasonably small capital, taking into consideration the obligations to the Banks incurred hereunder. The Borrower does not intend to, nor does it believe that it will, incur debts beyond its ability to pay them as they mature. 5.27 Subordinated Purchase Agreement. There has been no amendment to, or waiver of any provision of, the Subordinated Purchase Agreement since August 1, 1996. No default has occurred under the Subordinated Purchase Agreement or will exist after giving effect to the execution, delivery and performance of this Agreement. SECTION 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BANKS. The obligations of the Banks to make any Loan and to issue any Letter of Credit and the performance by the Banks of the other actions to be taken by them on or after the Closing Date - 62 - 69 are subject to the fulfillment or waiver in writing of each of the following conditions precedent. The Borrower shall deliver to the Administrative Agent copies for each Bank of each document, instrument or other item to be delivered pursuant to this Section 6. 6.1 Compliance. All of the representations and warranties of the Borrower and its Subsidiaries herein and in the Collateral Documents shall be true in all material respects on and as of the Closing Date, the date of issuance of any Letter of Credit and the date of any subsequent Loan (other than a Loan resulting from the funding of a Letter of Credit), as if made on and as of such date (except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true in all material respects as of such earlier date) both before and after giving effect to the making of the proposed loan or the issuance of the proposed Letter of Credit. The Borrower and its Subsidiaries shall have performed and shall be in compliance with all the provisions of this Agreement and each Collateral Document, and no Possible Default or Event of Default shall have occurred and be continuing, on and as of the Closing Date and the date of any subsequent Loan (other than a Loan resulting from the funding of a Letter of Credit) or the issuance of a Letter of Credit, before and after giving effect to the making of the proposed Loan or the issuance of the proposed Letter of Credit. On the Closing Date and on the date of each subsequent Loan (other than a Loan resulting from the funding of a Letter of Credit) and the date of issuance of any Letter of Credit, the Borrower shall deliver to the Banks a certificate, dated as of such date, and signed by an executive officer of the Borrower, certifying compliance with the conditions of this Section 6.1. Each request by the Borrower for a Loan shall, in and of itself, constitute a representation and warranty that the Borrower, as of the date of such Loan, is in compliance with this Section. 6.2 Security Agreements. The Borrower shall have executed and delivered to the Administrative Agent a Security Agreement in form and substance satisfactory to the Administrative Agent (the "Borrower Security Agreement"), granting to the Administrative Agent, for the benefit of the Banks, a first priority security interest in substantially all of the Borrower's personal property; and the Borrower Security Agreement, and the security - 63 - 70 interests granted pursuant thereto, shall be in full force and effect. The License Partnership shall have executed and delivered to the Administrative Agent a Security Agreement in form and substance satisfactory to the Administrative Agent (the "Subsidiary Security Agreement"), granting to the Administrative Agent, for the benefit of the Banks, a first priority security interest in substantially all of the License Partnership's personal property; and the Subsidiary Security Agreement, and the security interests granted pursuant thereto, shall be in full force and effect. 6.3 Pledge Agreements. (a) All of the stockholders of the Borrower shall have executed and delivered to the Administrative Agent a Pledge Agreement in form and substance satisfactory to the Administrative Agent (the "Borrower Pledge Agreement"), granting to the Administrative Agent, for the benefit of the Banks, a first priority security interest in all of the issued and outstanding capital stock of the Borrower; such stockholders shall have delivered to the Administrative Agent stock certificates evidencing all of such capital stock and stock powers, duly endorsed in blank, with respect thereto; the Borrower and such stockholders shall have taken all other actions as may be required to effect the grant and perfection of the Administrative Agent's security interest in such capital stock; and the Borrower Pledge Agreement, and the security interests granted pursuant thereto, shall be in full force and effect. (b) The Borrower shall have executed and delivered to the Administrative Agent a Pledge Agreement in form and substance satisfactory to the Administrative Agent (together with any pledge agreements executed and delivered pursuant to Section 8.10(b) or (c), collectively, the "Subsidiary Pledge Agreements"), granting to the Administrative Agent, for the benefit of the Banks, a first priority security interest in all of the issued and outstanding partnership interests in the License Partnership held by the Borrower; the Borrower shall have taken all actions as may be required to effect the grant and perfection of the Administrative Agent's security interest in such partnership interests; and such Subsidiary Pledge Agreement, and the security interests granted pursuant thereto, shall be in full force and effect. - 64 - 71 6.4 Financing Statements. Any financing statements required by the Security Agreements and the Pledge Agreements shall have been filed for record with the appropriate governmental authorities. 6.5 Subsidiary Guaranty. The License Partnership shall have executed and delivered to the Administrative Agent, for the benefit of the Banks, a guaranty (the "Guaranty"), in form and substance satisfactory to the Administrative Agent, pursuant to which the License Partnership shall guarantee the Obligations of the Borrower to the Banks. 6.6 Opinion of Borrower's Counsel. On the Closing Date, the Administrative Agent shall have received the favorable written opinions of general counsel to the Borrower and the Subsidiaries, of Pennsylvania counsel to the Borrower and the Subsidiaries and of FCC counsel to the Borrower and the Subsidiaries, in each case dated the Closing Date, addressed to the Banks and in form and substance satisfactory to the Administrative Agent. 6.7 Consummation of Acquisition Agreements. On or prior to the date on which any Loan is made hereunder the proceeds of which will be used to pay any part of the purchase price of a Permitted Acquisition, the Borrower shall have delivered to the Administrative Agent a certified copy of the Acquisition Agreement, and of all agreements, documents and instruments entered into in connection therewith, relating to such Permitted Acquisition. The transactions contemplated by such Acquisition Agreement shall have been consummated, or shall be consummated simultaneously with the making of such Loan, without the waiver of any material term or condition by any party thereto, and, except as expressly permitted by the Administrative Agent, the FCC consent to the assignment of the FCC Licenses relating to Stations being acquired pursuant to such Permitted Acquisition shall have become a Final Order. Without limiting the foregoing sentence, the Borrower or a Subsidiary of the Borrower shall have purchased pursuant to such Acquisition Agreement substantially all of the assets being acquired free and clear of all Liens, except Permitted Liens. The consummation of the transactions contemplated by such Acquisition Agreement shall be completed in a manner satisfactory to the Administrative Agent, and the - 65 - 72 Administrative Agent shall have received conformed copies or photocopies of all documents relating thereto. The Borrower shall use its reasonable best efforts to cause all opinions and certificates of the seller under such Acquisition Agreement delivered in connection with such closing to be addressed to the Banks. 6.8 Financial Information. (a) Agreed Upon Procedures Report. On or prior to the date on which any Loan is made hereunder the proceeds of which will be used to pay any part of the purchase price of a Permitted Acquisition, the purchase price of which is in excess of $10,000,000, the Borrower shall have delivered to the Administrative Agent a report, in form and substance satisfactory to the Administrative Agent relating to the financial condition of the stations being acquired pursuant to such Permitted Acquisition, signed by an accounting or consulting firm acceptable to the Administrative Agent and prepared in accordance with the procedures reasonably requested by the Administrative Agent. (b) Pro Forma Financial Statements. On the Closing Date, the Borrower shall have delivered to the Administrative Agent (i) a consolidated pro forma balance sheet as of December 31, 1997 and income statement, for the twelve month period then ended, after giving effect to the closing under this Agreement, which pro forma financial statements may contain certain adjustments acceptable to the Administrative Agent and described therein and (ii) a certificate in form and substance satisfactory to the Administrative Agent showing in detail the calculation of the Applicable Margin (using pro forma twelve month trailing cash flow as of December 31, 1997) after giving effect to the closings under this Agreement. (c) Compliance Certificate. On, or one Banking Day prior to, the date of each borrowing hereunder of $5,000,000 or more, the date of each issuance of a Letter of Credit with a stated amount of $5,000,000 or more, and, to the extent requested by the Administrative Agent, the date of any other borrowing hereunder or issuance of a Letter of Credit, the Borrower shall have delivered to the Administrative Agent a pro forma compliance certificate using the most recently available quarterly financial - 66 - 73 statements in form and substance satisfactory to the Administrative Agent showing the Leverage Ratio as the date of such borrowing or issuance of a Letter of Credit and the Borrower's compliance on a pro forma basis with the financial covenants set forth in Section 8. (d) Subordinated Purchase Agreement. On the Closing Date, the Borrower shall have provided to the Administrative Agent evidence satisfactory to the Administrative Agent that the execution, delivery and performance of this Agreement and the incurrence of Indebtedness by the Borrower hereunder are permitted pursuant to Section 7.2(a) and Section 7.7(c) of the Subordinated Purchase Agreement. 6.9 Borrowing Request. On the date of each Loan, the Borrower shall have delivered to the Administrative Agent a borrowing request, substantially in the form attached hereto as Exhibit O, for such Loan in form and substance satisfactory to the Administrative Agent, setting forth (a) the application of the proceeds of such Loan, (b) evidence that such application is permitted pursuant to Section 7.1, (c) the recipient, the amount of the payment and the wire transfer instructions, and (d) a certificate from a financial officer of the Borrower, in form and substance acceptable to the Administrative Agent, that the entire amount of such Loan, together with the aggregate amount of all outstanding Loans, constitutes "Senior Debt" as that term is defined in the Subordinated Purchase Agreement. 6.10 Insurance Certificates. On the Closing Date, the Borrower shall have furnished to the Administrative Agent certificates of insurance together with copies, if requested by the Administrative Agent, of all policies or other satisfactory evidence that the insurance required by Section 7.3 is in full force and effect. 6.11 Corporate and Partnership Documents. On the Closing Date, the Borrower shall deliver to the Administrative Agent the following: (a) certificates of good standing for the Borrower and the License Partnership from the Secretary of State of the Commonwealth of Pennsylvania and from the Secretary of State of each other state in which the Borrower or the License Partnership - 67 - 74 is qualified or registered to do business, in each case dated as of a date as near to the Closing Date as practicable; (b) a certificate signed by the Secretary or Assistant Secretary of the Borrower, dated as of the Closing Date, certifying that attached thereto are true and complete copies of (i) the Articles of Incorporation and By-Laws of the Borrower, (ii) the Certificate of Limited Partnership and the Limited Partnership Agreement of the License Partnership; and (iii) resolutions adopted by the Board of Directors of the Borrower authorizing the execution, delivery and performance of this Agreement, the Collateral Documents and the Obligations; (c) incumbency certificates for the Borrower and the License Partnership; and (d) such other documents as any Bank may reasonably request in connection with the proceedings taken by the Borrower or any of its Subsidiaries authorizing this Agreement and the Collateral Documents. 6.12 Lien Searches, Consents and Releases of Liens. The Administrative Agent shall have received: (a) certified copies of UCC, judgment and tax lien search reports listing all effective financing statements and other Liens on any of the property of the Borrower or any Subsidiary, (b) consents to the granting of Liens in all Operating Agreements and other material contracts and leases of the Borrower and each of its Subsidiaries, which by their terms require such consent, and (c) releases of any existing Liens encumbering any assets of the Borrower or any of its Subsidiaries, except for Permitted Liens. 6.13 No Order, Judgment or Decree. No order, judgment or decree of any court, arbitrator or governmental authority shall purport to enjoin or restrain the Banks from making the Loans. 6.14 No Material Adverse Effect. There shall have occurred no Material Adverse Effect since September 30, 1997. 6.15 Fee Letters. The Borrower shall have paid all fees, expenses and other amounts due pursuant hereto and pursuant to the Fee Letters. - 68 - 75 6.16 Legal Approval. All legal matters incident to this Agreement and the consummation of the transactions contemplated hereby shall be satisfactory to Dow, Lohnes & Albertson, PLLC, special counsel to the Administrative Agent. 6.17 Other Documents. The Administrative Agent shall have received all Collateral Documents duly executed, and each Bank shall have received such other certificates, opinions, agreements and documents, in form and substance satisfactory to it, as it may reasonably request. SECTION 7 AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower agrees with the Banks that so long as this Agreement shall remain in effect or any of the Obligations shall remain unpaid or to be performed, or any Letter of Credit remains outstanding, it shall perform and comply with the affirmative covenants contained in this Section. 7.1 Use of Proceeds. The Borrower shall use the proceeds of the Loans only for the following purposes: (a) to refinance on the Closing Date existing indebtedness under the Borrower's senior secured credit facility, (b) to fund draws on the Letters of Credit, (c) to pay all or a portion of the purchase price of Permitted Acquisitions, (d) for Capital Expenditures, (e) for Capital Distributions permitted pursuant to Section 8.9, (f) to fund investments permitted pursuant to Section 8.11(g), and (g) for general corporate and working capital purposes. 7.2 Continued Existence; Maintenance of Rights and Licenses; Compliance with Law. The Borrower shall, and shall cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its corporate or partnership existence and its material rights and Licenses. Without limiting the generality of the foregoing, the Borrower shall, and shall cause each of its Subsidiaries to, maintain in full force and effect, until termination in accordance with their respective terms, any and all Licenses, Operating Agreements and other material contracts and other rights necessary to operate the Stations, not breach or violate the same in any material respect, and take all actions which may be required to comply in all material respects with all applicable laws, statutes, rules, regulations, orders and decrees - 69 - 76 now in effect or hereafter promulgated by any governmental authority. The Borrower shall, and shall cause each of its Subsidiaries to, obtain, renew and extend all of the foregoing rights, Licenses and the like which may be necessary for the continuance of the operation of the Stations. 7.3 Insurance. The Borrower shall, and shall cause each of its Subsidiaries to, keep its insurable properties insured to the full replacement cost thereof at all times by financially sound and reputable insurers reasonably acceptable to the Administrative Agent, and maintain such other insurance, to such extent and against such risks, including fire, lightning, vandalism, malicious mischief, flood (to the extent required by the Administrative Agent, if any of the Borrower's or any of its Subsidiaries' property is located in an identified flood hazard area, in which insurance has been made available pursuant to the National Flood Insurance Act of 1968) and other risks insured against by extended coverage, as is customary with companies in the broadcasting business. All such insurance shall be in amounts sufficient to prevent the Borrower or any of its Subsidiaries from becoming a coinsurer, shall name the Administrative Agent, for the benefit of the Banks, as loss payee and may contain loss deductible provisions which shall not exceed $100,000 (or, in the case of earthquake, flood and windstorm coverage, $250,000). The Borrower shall maintain, for itself and its Subsidiaries, in full force and effect liability insurance, business interruption insurance, errors and omissions insurance, general accident and public liability insurance and all other insurance as is usually carried by companies engaged in the same or similar businesses similarly situated against claims for personal or bodily injury, death or property damage occurring upon, in, about or in connection with the use or operation of any property or motor vehicles owned, occupied, controlled or used by the Borrower, its Subsidiaries and their employees or agents, or arising in any other manner out of the business conducted by the Borrower and its Subsidiaries. All of such insurance shall be in amounts reasonably satisfactory to the Administrative Agent and shall be obtained and maintained by means of policies with generally recognized, responsible insurance companies authorized to do business in such states as may be necessary depending upon the locations of the Borrower's and its Subsidiaries' assets and shall name the Administrative Agent, for the benefit of the Banks, as an additional insured or loss payee, as the case may - 70 - 77 be. The insurance to be provided may be blanket policies. Each policy of insurance shall be written so as not to be subject to cancellation or substantial modification without not less than thirty days advance written notice to the Administrative Agent. The Borrower shall furnish the Administrative Agent annually with certificates or other evidence satisfactory to the Administrative Agent that the insurance required hereby has been obtained and is in full force and effect and, prior to the expiration of any such insurance, the Borrower shall furnish the Administrative Agent with evidence satisfactory to the Administrative Agent that such insurance has been renewed or replaced. The Borrower shall, upon request of the Administrative Agent, furnish the Administrative Agent such information about such insurance as the Administrative Agent may from time to time reasonably request. 7.4 Obligations and Taxes. The Borrower shall, and shall cause each of its Subsidiaries to, pay or perform all of its material Indebtedness and other material liabilities and obligations in a timely manner in accordance with normal business practices and with the terms governing the same. The Borrower shall, and shall cause each of its Subsidiaries to, comply with the terms and covenants of all material agreements and all material leases of real or personal property and shall keep them all in full force and effect until termination thereof in accordance with their respective terms. The Borrower shall, and shall cause each of its Subsidiaries to, pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it or in respect of its property before the imposition of any penalty, as well as all lawful claims for labor, materials, supplies or other matters which, if unpaid, might become a Lien or charge upon such properties or any part thereof; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay and discharge any such tax, assessment, charge, levy or claim so long as (a) the validity thereof is being contested diligently and in good faith by appropriate proceedings and the enforcement thereof is stayed, pending the outcome of such proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves in accordance with GAAP with respect thereto, and (c) such contest will not endanger the Lien of the Administrative Agent or the Banks in any of the Borrower's or such Subsidiary's assets. - 71 - 78 7.5 Financial Statements and Reports. The Borrower shall, and shall cause each of its Subsidiaries to, maintain true and complete books and records of account in accordance with GAAP. The Borrower shall furnish to the Administrative Agent, for delivery to the Banks, the following financial statements and projections at the following times: (a) As soon as available, but in no event later than ninety days after the end of each fiscal year of the Borrower, the Borrower shall furnish (i) audited consolidated financial statements, including audited consolidated balance sheets and income and expense statements, of the Borrower and its Subsidiaries as of the close of such fiscal year reflecting the results of their operations during such fiscal year, and a consolidated statement of cash flows for such fiscal year, together with such additional statements, schedules and footnotes as are customary in a complete accountant's report; such financial statements shall be certified by independent certified public accountants selected by the Borrower and acceptable to the Administrative Agent, and the opinion of such accountants shall be unqualified; and (ii) a statement signed by such accountants to the effect that in connection with their examination of such financial statements they have reviewed the provisions of this Agreement and have no knowledge of any event or condition which constitutes an Event of Default or Possible Default or, if they have such knowledge, specifying the nature and period of existence thereof; provided, however, that in issuing such statement, such independent accountants shall not be required to go beyond normal auditing procedures conducted in connection with their opinion referred to above; (b) As soon as available, but in no event later than forty-five days after the end of each fiscal quarter of the Borrower (or, in the case of the last quarter of the Borrower's fiscal year, sixty days after the end of such quarter), the Borrower shall furnish unaudited consolidated and consolidating financial statements, including consolidated and consolidating balance sheets and income and expense statements, of the Borrower and its Subsidiaries as of the end of such period reflecting the results of their operations during such period and for the then elapsed portion of the fiscal year, and a consolidated statement of cash flows for the portion of the fiscal year ended with the last day of such quarter; all such financial statements shall be - 72 - 79 in form and detail satisfactory to the Administrative Agent, and shall be certified as to accuracy and completeness by a financial officer of the Borrower; (c) As soon as available, but in no event later than forty-five days after the end of each month (or, in the case of the last month of the Borrower's fiscal year, sixty days after the end of such month), the Borrower shall furnish unaudited statements of income and expense for each Station, which shall contain a comparison with the budget or projections for such period and a comparison to the comparable period for the prior year, and which shall be certified by a financial officer of the Borrower; such financial statements for the twelfth month of each fiscal year may be preliminary statements; (d) The financial statements required under (a) and (b) above shall be accompanied by a compliance certificate in the form attached hereto as Exhibit K of a financial officer of the Borrower (i) setting forth the computations showing compliance with the financial covenants set forth in Section 8 below, and (ii) certifying that no Possible Default or Event of Default has occurred, or if any Possible Default or Event of Default has occurred, stating the nature thereof and the actions the Borrower intends to take in connection therewith; (e) The Borrower shall furnish (i) no later than thirty days after the commencement of each fiscal year, an annual operating budget or fiscal projections for such fiscal year, and (ii) promptly upon preparation thereof, any material revisions of such annual budget or fiscal projections; (f) Promptly upon their becoming available, the Borrower shall furnish (i) copies of any periodic or special reports filed by the Borrower or any of its Subsidiaries with the FCC or any other federal, state or local governmental agency or authority if such reports indicate any material change in the ownership of the Borrower or such Subsidiary, or any materially adverse change in the business, operations, affairs or condition of the Borrower or such Subsidiary, and (ii) copies of any material notices and other material communications from the FCC or any other federal, state or local governmental agency or authority which specifically relate to the Borrower, any of its Subsidiaries, any Station or any material License, and the - 73 - 80 substance of which relates to a matter that could reasonably be expected to have a Material Adverse Effect; (g) The Borrower shall furnish (i) upon request, promptly after the filing thereof with the Internal Revenue Service, copies of each annual report with respect to each Plan established or maintained by the Borrower or any member of the Controlled Group for each plan year, including (A) where required by law, a statement of assets and liabilities of such Plan as of the end of such plan year and statements of changes in fund balance and in financial position, or a statement of changes in net assets available for plan benefits, for such plan year, certified by an independent public accountant satisfactory to the Administrative Agent, and (B) if prepared by or available to the Borrower, an actuarial statement of such Plan applicable to such plan year, certified by an enrolled actuary of recognized standing acceptable to the Administrative Agent; and (ii) promptly after receipt thereof, a copy of any notice the Borrower or a member of the Controlled Group may receive from the Department of Labor or the Internal Revenue Service with respect to any Plan (other than notices of general application) which could result in a material liability to the Borrower; the Borrower will promptly notify the Banks of any material taxes assessed, proposed to be assessed or which the Borrower has reason to believe may be assessed against the Borrower or any member of the Controlled Group by the Internal Revenue Service with respect to any Plan or Benefit Arrangement; and (h) Upon the Administrative Agent's written request, such other information about the financial condition, properties and operations of the Borrower or any of its Subsidiaries as any Bank may from time to time reasonably request. 7.6 Notices. The Borrower shall give the Administrative Agent, for distribution to the Banks, notice (a) within five days after its receipt of notice thereof, of any action, suit, investigation or proceeding by or against the Borrower or any of its Subsidiaries, which, if adversely determined, could reasonably be expected to have a Material Adverse Effect, including, without limitation, any material admonition, censure or adverse citation or order by the FCC or any other governmental authority or regulatory agency, (b) within three days after its receipt of notice thereof, (i) of any action or event constituting an event of default or violation of the Subordinated - 74 - 81 Purchase Agreement, or any License, Operating Agreement or other material contract to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any such Subsidiary is bound, and (ii) of any competing application, petition to deny or other opposition to any license renewal application filed by the Borrower or any of its Subsidiaries with the FCC, if such event of default, violation or other matter could reasonably be expected to have a Material Adverse Effect, (c) within three days after its receipt of notice thereof, of the occurrence of any Possible Default or Event of Default and the actions the Borrower intends to take in connection therewith, (d) within five days after its receipt of notice thereof, of any cancellation of or any material amendment to any of the insurance policies maintained in accordance with the requirements of this Agreement, except for cancellations and amendments that occur in the ordinary course of business, (e) promptly after the occurrence thereof, of any material, adverse change in the business or financial condition of the Borrower or any of its Subsidiaries, and (f) promptly after the occurrence thereof, of any material strike, labor dispute, slow down or work stoppage due to a labor disagreement (or any material development regarding any thereof) affecting the Borrower or any of its Subsidiaries. 7.7 Maintenance of Property. The Borrower shall, and shall cause each of its Subsidiaries to, at all times maintain and preserve its towers, machinery, equipment, motor vehicles, fixtures and other property in good working order, condition and repair, normal wear and tear excepted, and in compliance with all material applicable standards, rules or regulations imposed by any governmental authority or agency (including, without limitation, the FCC, the Federal Aviation Administration or any other Licensing Authority) or policy of insurance, except for such property which, in the judgment of the Borrower, is no longer necessary to the business of the Borrower or any of its Subsidiaries. 7.8 Information and Inspection. The Borrower shall furnish to the Administrative Agent and the Banks from time to time, promptly upon request, information reasonably requested by the Administrative Agent or any Bank pertaining to any covenant, provision or condition hereof, or to any matter connected with the books, records, operations, financial condition, properties, activities or business of the Borrower or of any of its - 75 - 82 Subsidiaries. At all reasonable times, the Borrower shall permit any authorized representative designated by any Bank to visit and inspect any of the properties of the Borrower or any of its Subsidiaries, and their books and records, and to take extracts therefrom and make copies thereof, and to discuss the Borrower's and its Subsidiaries' affairs, finances and accounts with the management of the Borrower and its Subsidiaries and with the Borrower's independent accountants. 7.9 Maintenance of Liens. The Borrower shall do all things necessary or requested by the Administrative Agent to preserve and perfect the Liens of the Administrative Agent, for the benefit of the Banks, arising pursuant hereto and pursuant to the Collateral Documents as first Liens, except for Permitted Liens, and to insure that the Administrative Agent, for the benefit of the Banks, has a Lien on substantially all of the personal property of the Borrower and its Subsidiaries. If the Borrower issues any capital stock prior to the termination of the Borrower Pledge Agreement pursuant to Section 8.10(c), it shall cause the holder of such stock to pledge such stock to the Administrative Agent, for the benefit of the Banks, as security for the Obligations pursuant to a pledge agreement in form and substance satisfactory to the Administrative Agent. If the Borrower or any of its Subsidiaries enters into a new Operating Agreement or other material contract which prohibits the assignment thereof or the granting of a security interest therein without the consent of the other party, the Borrower shall use its best efforts to obtain the written consent of such other party to the grant to the Administrative Agent, for the benefit of the Banks, of a security interest therein pursuant to the Security Agreements; provided, however, that the Borrower shall not be obligated to accept any material adverse change in any such agreement or contract or expend a material amount in attempting to obtain such consent. 7.10 Title To Property. The Borrower shall, and shall cause each of its Subsidiaries to, own and hold title to all of its assets in its own name and not in the name of any nominee. - 76 - 83 7.11 Environmental Compliance and Indemnity. (a) The Borrower shall, and shall cause each of its Subsidiaries to, comply in all material respects with any and all Environmental Laws, including, without limitation, all Environmental Laws in jurisdictions in which the Borrower or any of its Subsidiaries owns or operates a facility or site, arranges for disposal or treatment of Hazardous Materials, solid waste or other wastes, accepts for transport any Hazardous Materials, solid wastes or other wastes or holds any interest in real property or otherwise. Neither the Borrower nor any of its Subsidiaries shall cause or allow the Release of Hazardous Materials, solid waste or other wastes on, under or to any real property in which the Borrower or such Subsidiary holds any interest or performs any of its operations, in material violation of any Environmental Law. The Borrower shall notify the Banks promptly after its receipt of notice thereof, of any Environmental Claim which the Borrower receives involving any potential or actual material liability of the Borrower or any of its Subsidiaries arising in connection with any noncompliance with or violation of the requirements of any Environmental Law or a material Release or threatened Release of any Hazardous Materials, solid waste or other waste into the environment. The Borrower shall promptly notify the Banks (i) of any material Release of Hazardous Material on, under or from the real property in which the Borrower or any of its Subsidiaries holds or has held an interest, upon the Borrower's learning thereof by receipt of notice that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of such Release or that the Borrower or such Subsidiary has been identified as potentially responsible for, or is subject to investigation by any governmental authority relating to, such Release, and (ii) of the commencement or threat of any judicial or administrative proceeding alleging a violation of any Environmental Laws. (b) If the Administrative Agent at any time has a reasonable basis to believe that there may be a violation of any Environmental Law by, or any liability arising thereunder of, the Borrower or any of its Subsidiaries or related to any real property owned, leased or operated by the Borrower or any of its Subsidiaries or real property adjacent to such real property, which violation or liability could reasonably be expected to have a Material Adverse Effect, then the Borrower shall, upon request from the Administrative Agent, provide the Administrative Agent - 77 - 84 with such reports, certificates, engineering studies or other written material or data as the Administrative Agent may require so as to satisfy the Administrative Agent that the Borrower or such Subsidiary is in material compliance with all applicable Environmental Laws. (c) The Borrower shall defend, indemnify and hold the Agents and the Banks, and their respective officers, directors, shareholders, employees, agents, affiliates, successors and assigns harmless from and against all costs, expenses, claims, demands, damages, penalties and liabilities of every kind or nature whatsoever incurred by them (including reasonable attorneys fees) arising out of, resulting from or relating to (i) the noncompliance of the Borrower, any of its Subsidiaries or any property owned or leased by the Borrower or any of its Subsidiaries with any Environmental Law, or (ii) any investigatory or remedial action involving the Borrower, any of its Subsidiaries or any property owned or leased by the Borrower or any of its Subsidiaries and required by Environmental Laws or by order of any governmental authority having jurisdiction under any Environmental Laws, or (iii) any injury to any person whatsoever or damage to any property arising out of, in connection with or in any way relating to the breach of any of the environmental warranties or covenants contained in this Agreement or any facts or circumstances that cause any of the environmental representations or warranties contained in this Agreement to cease to be true, or (iv) the existence, treatment, storage, Release, generation, transportation, removal, manufacture or other handling of any Hazardous Material on or affecting any property owned or leased by the Borrower or any of its Subsidiaries, or (v) the presence of any asbestos-containing material or underground storage tanks, whether in use or closed, under or on any property owned or leased by the Borrower or any of its Subsidiaries; provided, however, that the foregoing indemnity shall not apply to any such costs, expenses, claims, demands, damages, penalties or liabilities that are determined in a final non-appealable order of a court of competent jurisdiction to have arisen solely out of the gross negligence or willful misconduct of the indemnified person. 7.12 Rate Hedging Obligations. The Borrower shall within forty-five days after the Closing enter into, and shall at all times thereafter maintain in full force and effect, agreements having an initial term of at least three years and in form and - 78 - 85 substance reasonably satisfactory to the Administrative Agent regarding Rate Hedging Obligations so that the sum of the notional amount subject to such agreements plus the outstanding principal amount of Indebtedness of the Borrower which bears interest at a fixed rate equals at all times at least 50% of the principal amount of Total Debt then outstanding. 7.13 FCC Consents. The Borrower acknowledges that certain transactions contemplated by this Agreement or the Collateral Documents, and certain actions which may be taken by the Administrative Agent or the Banks in the exercise of their rights under this Agreement or the Collateral Documents, may require the consent of the FCC. If counsel to the Administrative Agent determines that the consent of the FCC is required in connection with the execution, delivery and performance of any of the aforesaid documents or any documents delivered to the Administrative Agent or the Banks in connection therewith or as a result of any action which may be taken pursuant thereto, then the Borrower, at its sole cost and expense, shall use its best efforts, and shall cause its Subsidiaries to use their best efforts, to secure such consent and to cooperate with the Administrative Agent and the Banks in any action commenced by the Administrative Agent or the Banks to secure such consent. The Borrower shall not take any action, and shall not permit any of its Subsidiaries to take any action, which interferes with the exercise or completion of any such action taken by the Administrative Agent or the Banks. The Borrower further consents to the transfer of control or assignment of Licenses to a receiver or trustee or similar official or to any purchaser of the collateral securing the Loans pursuant to any public or private sale, judicial sale, foreclosure or exercise of other remedies available to the Administrative Agent or the Banks as permitted by applicable law upon the occurrence of an Event of Default. 7.14 Subordinated Purchase Agreement. The Borrower shall deliver to the Administrative Agent no later than October 31, 2003, a plan satisfactory to the Banks holding at least 66 2/3% of the Commitment, including the Agents, setting forth the method by which the Borrower intends either to raise funds sufficient to pay in full the Indebtedness outstanding under the Subordinated Purchase Agreement on its scheduled payment date or to restructure such Indebtedness so that its scheduled payment date is no earlier than six months after the Termination Date. Such - 79 - 86 plan shall be consistent with the terms and conditions of this Agreement. Such plan shall set forth the time periods within which the Borrower will have accomplished the various steps necessary to implement its plan, such as (a) the obtaining of a commitment from the Subordinated Lender to restructure such Indebtedness to have a final maturity no earlier than six months after the Termination Date or (b) receiving an executed subscription agreement pursuant to which a potential new stockholder agrees to purchase new shares of the Borrower or (c) receiving an executed contribution agreement pursuant to which an existing shareholder agrees to contribute to the capital of the Borrower. Thereafter, the Borrower shall perform in accordance with the time limits set forth in such plan, so that on the scheduled payment date, the Borrower will either have funds sufficient to pay such Indebtedness in full or will have restructured such Indebtedness in a manner acceptable to the Banks holding at least 66 2/3% of the Commitment, including the Agents. SECTION 8 NEGATIVE COVENANTS OF THE BORROWER. The Borrower agrees with the Banks that so long as this Agreement shall remain in effect or any of the Obligations shall remain unpaid or to be performed, or any Letter of Credit remains outstanding, the Borrower shall not, directly or indirectly, take any of the actions set out in this Section 8 nor permit any of the conditions set out herein to occur. 8.1 Indebtedness. The Borrower shall not, and shall not permit any of its Subsidiaries to, incur, create, assume or permit to exist any Indebtedness, except: (a) the Obligations; (b) Indebtedness permitted under Sections 8.4, 8.5 or 8.6 hereof and any other Indebtedness secured by a Permitted Lien; (c) unsecured trade accounts payable and other unsecured current Indebtedness incurred in the ordinary course of business (but excluding any Indebtedness for borrowed money); (d) Indebtedness for taxes, assessments, governmental charges, liens or similar claims to the extent that payment - 80 - 87 thereof shall not be required to be made by the provisions of Section 7.4; (e) Indebtedness incurred in respect of Rate Hedging Obligations required pursuant to Section 7.12; (f) Indebtedness of the Borrower owing to the Subordinated Lender incurred pursuant to the terms of the Subordinated Purchase Agreement as in effect on the date hereof; (g) Subordinated Debt of the Borrower so long as (i) no principal is payable on such Indebtedness prior to the date that is at least six months after the Termination Date, (ii) the aggregate principal amount of all Indebtedness incurred pursuant to this clause 8.1(g) does not exceed at any time $150,000,000, (iii) the terms and conditions of all agreements, documents and instruments evidencing or governing such Indebtedness, including the terms and conditions of subordination, shall be satisfactory to the Required Banks, (iv) the Borrower shall have delivered to the Administrative Agent and the Banks revised projections for the period from the incurrence of such Indebtedness through the Termination Date which shall be in form and substance reasonably satisfactory to the Administrative Agent and shall demonstrate the Borrower's ability to comply with the financial covenants contained in Section 8, and the Borrower shall have demonstrated to the satisfaction of the Administrative Agent that the Borrower will be in compliance with all of the covenants contained herein after giving effect to the incurrence of such Indebtedness, (v) no Possible Default or Event of Default exists at the time of incurrence of such Indebtedness or would exist after giving effect thereto, and (vi) the Borrower shall have delivered to the Administrative Agent a certificate of a financial officer of the Borrower in form and substance satisfactory to the Administrative Agent which shall contain calculations demonstrating on a pro forma basis the Borrower's compliance with the financial covenants set forth in this Section 8 after giving effect to the incurrence of such Indebtedness; (h) Indebtedness arising under the Sinclair Letter of Credit; and (i) existing Indebtedness listed on Exhibit F. - 81 - 88 8.2 Liens. The Borrower shall not, and shall not permit any of its Subsidiaries to, incur, create, assume or permit to exist any Lien of any nature whatsoever on any property or assets now owned or hereafter acquired by the Borrower or any of its Subsidiaries, other than Permitted Liens. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into or permit to exist any arrangement or agreement, other than pursuant to this Agreement or any Collateral Document, which directly or indirectly prohibits the Borrower or any of its Subsidiaries from creating or incurring any Lien on any of its assets, other than (a) leases and agreements regarding purchase money Indebtedness permitted pursuant to Section 8.4 (so long as such prohibition only relates to the asset which is subject to such lease or which secure such Indebtedness), (b) provisions in agreements which prohibit the assignment of such agreements and (c) restrictions on the creation of Liens contained in the Subordinated Purchase Agreement as in effect as of the date hereof. 8.3 Guaranties. The Borrower shall not, and shall not permit any of its Subsidiaries to, become a Guarantor for any Person, except with respect to (a) endorsements of negotiable instruments for collection in the ordinary course of business, (b) the Guaranty, and (c) contingent obligations incurred in the ordinary course of business with respect to surety and appeal bonds, performance and return-of-money bonds and other similar obligations not exceeding at any time outstanding $1,000,000 in aggregate liability. 8.4 Rental and Conditional Sale Obligations. The Borrower shall not, and shall not permit any of its Subsidiaries to, incur, create, assume or permit to exist, with respect to any personal property, any conditional sale obligation, any purchase money obligation, any rental obligation, any purchase money security interest or any other arrangement for the use of personal property of any other Person, which in any such case has an unexpired term of not less than one year, other than an arrangement constituting a Capitalized Lease Obligation, if the aggregate amount payable by the Borrower and its Subsidiaries pursuant to all such arrangements in any fiscal year would exceed the sum of $1,000,000 plus the amount of any such obligations incurred pursuant to a Permitted Acquisition. 82 89 8.5 Real Property Interests. The Borrower shall not, and shall not permit any of its Subsidiaries to, be obligated under, enter into, assume or permit to exist any lease or rental obligation for real property (other than any lease or rental obligation where the Borrower receives rent from sublessees in an amount in excess of the rents payable by the Borrower to the lessor) which has an unexpired term of not less than one year, if the aggregate amount payable in respect of all such arrangements by the Borrower and its Subsidiaries in any fiscal year would exceed the sum of $4,500,000 plus the amount of any such obligations incurred pursuant to a Permitted Acquisition. 8.6 Capitalized Lease Obligations. The Borrower shall not, and shall not permit any of its Subsidiaries to, incur, create, assume or permit to exist Capitalized Lease Obligations if the aggregate amount payable by the Borrower and its Subsidiaries in respect of all such Capitalized Lease Obligations in any fiscal year would exceed the sum of $2,000,000 plus the amount of any such obligations incurred pursuant to a Permitted Acquisition. 8.7 Capital Expenditures. The Borrower and its Subsidiaries shall not make Project Capital Expenditures (i) in fiscal year 1998 which exceed in the aggregate $8,000,000, or (ii) in any fiscal year thereafter which exceed in the aggregate $5,000,000 (the amount permitted in any year pursuant to this sentence being referred to as the "Base Amount" for such year). If the Base Amount for any year exceeds the aggregate amount of Project Capital Expenditures actually made by the Borrower and its Subsidiaries in such year (such excess being referred to as the "Excess Amount"), then the Borrower and its Subsidiaries may make Project Capital Expenditures in the immediately succeeding year (but not in any year thereafter) in excess of the Base Amount for such succeeding year in an amount not to exceed the Excess Amount for the prior year. 8.8 Notes, Accounts Receivable and Claims. The Borrower shall not, and shall not permit any of its Subsidiaries to, sell, discount or otherwise dispose of any note, account receivable or other right to receive payment, with or without recourse, except for collection in the ordinary course of business; or fail to timely assert any claim, cause of action or contract right which it possesses against any third party or agree to settle or compromise any such claim, cause of action or contract right except in any case in the exercise of good business judgment and - 83 - 90 except for settlements or compromises made in the reasonable exercise of business judgment in the ordinary course of business. 8.9 Capital Distributions; Restrictions on Payments to Stockholders. (a) The Borrower shall not, and shall not permit any of its Subsidiaries to, make, or declare or incur any liability to make, any Capital Distribution, except that: (i) any Subsidiary of the Borrower may make Capital Distributions to the Borrower or to a wholly owned Subsidiary of the Borrower; (ii) so long as the Borrower has not ceased to be treated as an "S corporation" under the Code, the Borrower may make Distributions to pay Tax Liabilities for the then current or immediately previous tax year of the Borrower (or any prior year that the Borrower was an "S corporation" if such Distribution is a result of an Internal Revenue Service audit adjustment) so long as: (A) prior to each such distribution, a financial officer of the Borrower has provided the Administrative Agent with a certificate in form and substance reasonably satisfactory to the Administrative Agent stating the amount of each Tax Liability for which a distribution is to be made (which certificate will also explain in reasonable detail the basis for and method of calculating the Tax Liability); (B) such distribution has been specifically approved by a written resolution of the Board of Directors of the Borrower; (C) no Possible Default or Event of Default arising under Section 9.1 exists at the time of making such distribution or would exist after giving effect thereto; and (D) such distributions shall not be made more frequently than four times in any four quarter period for state income taxes or more than five times in any four quarter period for federal income taxes; (iii) the Borrower may make Capital Distributions to its stockholders in any fiscal year in an aggregate amount which does not exceed $305,000 for such fiscal year, multiplied each year on the anniversary hereof by the percentage increase, if any, in the U.S. Department of Labor, Bureau of Labor Statistics Consumer Price Index (the "CPI") (if the CPI ceases to exist or is substantially changed, the Administrative Agent shall substitute a similar index), so long as: (A) the Borrower shall - 84 - 91 have demonstrated to the satisfaction of the Administrative Agent that the Borrower will be in compliance with all of the covenants contained herein after giving effect to such distribution; (B) no Possible Default or Event of Default exists at the time of making such distribution or would exist after giving effect thereto; (C) the Borrower shall have delivered to the Administrative Agent a certificate of a financial officer of the Borrower using the most recently available quarterly financial statements in form and substance satisfactory to the Administrative Agent which shall contain calculations demonstrating on a pro forma basis the Borrower's compliance with the financial covenants set forth in this Section 8 after giving effect to such distribution; and (D) such distributions shall not be made more frequently than once per year; and (iv) the Borrower may make Capital Distributions to its stockholders in any fiscal year, so long as: (A) the Leverage Ratio is less than 5.0 to 1.0 as of the end of the most recently ended fiscal year of the Borrower (as determined by the annual financial statements provided pursuant to Section 7.5(a)) and as of the date of any such distribution and after giving effect thereto; (B) such distributions shall not exceed an amount equal to the Excess Cash Flow as of the end of the immediately preceding year; (C) the Borrower shall have demonstrated to the satisfaction of the Administrative Agent that the Borrower will be in compliance with all of the covenants contained herein after giving effect to such distribution; (D) no Possible Default or Event of Default exists at the time of making such distribution or would exist after giving effect thereto; (E) the Borrower shall have delivered to the Administrative Agent a certificate of a financial officer of the Borrower in form and substance satisfactory to the Administrative Agent which shall contain calculations demonstrating on a pro forma basis the Borrower's compliance with the financial covenants set forth in this Section 8 after giving effect to such distribution; and - 85 - 92 (F) such distributions shall only be made once per year within the sixty day period commencing with the date on which the Administrative Agent receives the Borrower's annual financial statements for the fiscal year most recently ended prior to such distribution. (b) The Borrower shall not permit any of its Subsidiaries to agree to or to be subject to any restriction on its ability to make Capital Distributions or loans or other asset transfers to its stockholders other than restrictions imposed by applicable law and the restrictions set forth in this Section. 8.10 Disposal of Property; Mergers; Acquisitions; Reorganizations. (a) Except as provided in paragraphs (b) and (c) below, the Borrower shall not, and shall not permit any of its Subsidiaries to, (i) dissolve or liquidate; (ii) sell, lease, transfer or otherwise dispose of any material portion of its properties and assets to any Person, except for (A) the disposition of assets in the ordinary course of business in an aggregate amount not to exceed $2,000,000 in any transaction or related series of transactions, (B) the disposition of any asset which, in the good faith exercise of its business judgment, the Borrower determines is no longer useful in the conduct of its or its Subsidiaries' business, and (C) the exchange of a Station in connection with a Permitted Acquisition, subject to the satisfaction of the provisions of Section 2.6(b)(iii); (iii) be a party to any consolidation, merger, recapitalization or other form of reorganization; (iv) make any acquisition of all or substantially all the assets of any Person, or of a business division or line of business of any Person, or of any other assets constituting a going business; (v) create, acquire or hold any Subsidiary (other than the License Partnership), or (vi) be or become a party to any joint venture or other partnership except as set forth on Exhibit L attached hereto. (b) The Borrower may make the acquisitions contemplated in the Acquisition Agreements subject to its compliance with clauses (iv), (v), (vi), (vii) and (viii) below. In addition, the Borrower may make acquisitions of substantially all of the assets of any radio station or tower site or of all of the capital stock or other equity interests of a Person which - 86 - 93 owns a radio station or tower site, subject to the satisfaction of the following conditions (the acquisitions pursuant to the Acquisition Agreements and any other acquisition which satisfies all of the following conditions being referred to hereinafter as a "Permitted Acquisition"): (i) such radio station or tower site shall be located in a market in which the Borrower or a wholly owned Subsidiary of the Borrower owns a Station or in one of the 75 largest Metro Survey Areas, as determined by The Arbitron Company; (ii) the Borrower shall have given to the Administrative Agent notice of such acquisition at least five days prior to executing any binding commitment with respect thereto, which notice shall state the additional amounts, if any, by which the Borrower proposes to increase the dollar limitations set forth in Sections 8.4, 8.5 and 8.6; and the Agents and the Required Banks shall have received evidence satisfactory to them that the structure of the transaction shall satisfy all material, applicable legal and regulatory requirements relating to such acquisition; (iii) the Borrower shall have demonstrated to the satisfaction of the Administrative Agent that the Borrower will be in compliance with all of the covenants contained herein after giving effect to such acquisition and that no Event of Default or Possible Default then exists or would exist after giving effect to such acquisition, and the Borrower shall have delivered to the Administrative Agent within ten days prior to the consummation of such acquisition an acquisition report signed by an executive officer of the Borrower in form and substance satisfactory to the Administrative Agent which shall contain (A) calculations demonstrating on a pro forma basis the Borrower's compliance with the financial covenants set forth in this Section 8 after giving effect to such acquisition, and (B) projections for the Borrower for a five year period after the closing of such acquisition giving effect to the acquisition and including a statement of sources and uses of funds for such acquisition showing, among other things, the source of financing for the acquisition; (iv) all FCC Licenses acquired in connection with such acquisition shall be transferred immediately upon consummation of such acquisition to the License Partnership or to - 87 - 94 a direct wholly owned Subsidiary of the Borrower which shall have no other assets or liabilities; (v) the Borrower shall have delivered to the Administrative Agent UCC, judgment and tax lien searches for each relevant jurisdiction and shall have taken any actions as may be necessary or reasonably requested by the Administrative Agent to grant to the Administrative Agent, for the benefit of the Banks, perfected Liens in all personal property acquired by the Borrower or any of its Subsidiaries in such acquisition pursuant to the Collateral Documents, subject to no prior Liens except Permitted Liens; (vi) if the Borrower acquires a Subsidiary or creates a Subsidiary (including a License Subsidiary) pursuant to or in connection with such acquisition, (A) such Subsidiary shall be directly wholly owned by the Borrower; (B) the Borrower shall pledge to the Administrative Agent, for the benefit of the Banks, all of the stock or other securities or equity interests of such acquired or created Subsidiary pursuant to documentation in form and substance satisfactory to the Administrative Agent; and (C) such acquired or created Subsidiary shall execute and deliver to the Administrative Agent, for the benefit of the Banks, a guaranty of all of the Obligations of the Borrower, in form and substance satisfactory to the Administrative Agent, and shall grant to the Administrative Agent, for the benefit of the Banks, a first priority, perfected lien or security interest in substantially all of its personal property subject to no prior Liens except for Permitted Liens, pursuant to documentation in form and substance satisfactory to the Administrative Agent; (vii) the Borrower shall have delivered to the Administrative Agent evidence reasonably satisfactory to the Administrative Agent to the effect that all approvals, consents or authorizations required in connection with such acquisition (including the formation of any License Subsidiary and the transfer of FCC Licenses to such Subsidiary) from any Licensing Authority or other governmental authority shall have been - 88 - 95 obtained and, except as expressly permitted by the Administrative Agent, that any consent of the FCC shall have become a Final Order, and such opinions as the Administrative Agent may reasonably request as to the Liens granted to the Administrative Agent, for the benefit of the Banks, as required pursuant to this Section, as to any required regulatory approvals for such acquisition and as to such other matters as the Administrative Agent may reasonably request; and (viii) if the Borrower has consummated the reorganization contemplated by Section 8.10(c), the Borrower shall cause such acquisition to be consummated by a Subsidiary and not by it. (c) As of the date of this Agreement, all of the assets of each Station, other than the FCC Licenses, are owned by the Borrower, and all of the FCC Licenses of the Stations are owned by the License Partnership. The Borrower desires to create new Subsidiaries and contribute all of its operating assets relating to the Stations and all of the FCC Licenses held by the License Partnership to such Subsidiaries. The Borrower shall have the right to so reorganize subject to the satisfaction of all of the following conditions: (i) each new Subsidiary shall be directly and wholly owned by the Borrower; (ii) all of the FCC Licenses of the Stations shall be transferred to one or more of such newly created Subsidiaries which shall have no other assets or liabilities, and upon such transfer, the License Partnership shall be dissolved and liquidated; (iii) the Borrower shall pledge to the Administrative Agent, for the benefit of the Banks, all of the stock or other securities or equity interests of such acquired or created Subsidiaries pursuant to documentation in form and substance satisfactory to the Administrative Agent; and (iv) such acquired or created Subsidiaries shall execute and deliver to the Administrative Agent, for the benefit of the Banks, a guaranty of all of the Obligations of the Borrower, in form and substance satisfactory to the Administrative Agent, and shall grant to the Administrative - 89 - 96 Agent, for the benefit of the Banks, a first priority, perfected lien or security interest in substantially all of their personal property subject to no prior Liens except for Permitted Liens, pursuant to documentation in form and substance satisfactory to the Administrative Agent; and (v) the Borrower and its Subsidiaries shall take such other actions as the Administrative Agent may reasonably request in connection with such reorganization. Upon completion of such reorganization, so long as all operating assets and Licenses relating to all of the Stations have been contributed to such newly created Subsidiaries, the Administrative Agent shall terminate the Borrower Pledge Agreement and release the stock certificates held by it pursuant to that agreement. 8.11 Investments. The Borrower shall not, and shall not permit any of its Subsidiaries to, purchase or otherwise acquire, hold or invest in any stock or other securities or evidences of indebtedness of, or any interest or investment in, or make or permit to exist any loans or advances to, any other Person, except: (a) direct obligations of the United States Government maturing within one year; (b) certificates of deposit of a member bank of the Federal Reserve System having capital, surplus and undivided profits in excess of $2,000,000,000; (c) any investment in commercial paper which at the time of such investment is assigned the highest quality rating in accordance with the rating systems employed by either Moody's Investors Service, Inc. or Standard & Poor's Corporation; (d) money market funds; (e) securities received pursuant to a plan of reorganization adopted in an insolvency proceeding or otherwise in immaterial amounts in exchange for accounts receivable of the entity which is the subject of such insolvency proceeding generated in the ordinary course of the Borrower's or any of its Subsidiaries' business; - 90 - 97 (f) investments in the License Partnership and in Subsidiaries created pursuant to Section 8.10(b) and (c); and (g) investments having an aggregate cost for all investments made pursuant to this clause (g) of not to exceed $4,000,000, so long as: (i) no Event of Default or Possible Default exists as of the date of making any such investment or would exist after giving effect thereto, (ii) the Borrower shall have given notice to the Administrative Agent of each such investment at least fifteen days prior to making such investment, (iii) each such investment shall be structured so that it is non-recourse to the Borrower and its Subsidiaries and that neither the Borrower nor any of its Subsidiaries shall have any liability or obligation, contingent or otherwise, in respect of such investment, and (iv) each such investment shall be pledged to the Administrative Agent for the benefit of the Banks pursuant to documentation in form and substance satisfactory to the Administrative Agent as security for the Obligations. 8.12 Amendment of Governing Documents. The Borrower shall not, and shall not permit any of its Subsidiaries to, amend, modify or supplement its Certificate or Articles of Incorporation, By-Laws, Certificate of Limited Partnership, partnership agreement or other organizational or governing documents or any shareholders or security holders agreement, unless required by law, in any manner that is adverse to the interests of the Banks (as may be reasonably determined by the Banks). 8.13 Financial Covenants. (a) Total Leverage Ratio. The Borrower shall not permit the Leverage Ratio at any time during any period listed in Column A below to be greater than the ratio set forth in Column B below opposite such period:
Column A Column B - -------- -------- Period: Permitted Ratio: - ------- ---------------- Closing through March 31, 7.0:1.0 1999:
- 91 - 98 April 1, 1999, through March 6.5:1.0 31, 2000: April 1, 2000, through March 6.0:1.0 31, 2001: April 1, 2001, through March 5.5:1.0 31, 2002: April 1, 2002, through March 5.0:1.0 31, 2003: April 1, 2003, through March 4.5:1.0 31, 2004: April 1, 2004, and thereafter: 4.0:1.0
(b) Senior Leverage Ratio. The Borrower shall not permit the ratio of the outstanding principal amount of the Loans as of any date in any period listed in Column A below to Operating Cash Flow for the four quarter period then ended or then most recently ended (i) to be greater than the ratio set forth in Column B below opposite such period if at such time the Borrower has Subordinated Debt outstanding, or (ii) to be greater than the ratio set forth in Column C below opposite such period if at such time the Borrower has no Subordinated Debt outstanding:
Column A Column B Column C - -------- -------- -------- Period: Permitted Ratio if Permitted Ratio if Subordinated Debt: No Subordinated Debt: - ------- ------------------ ------------------ Closing through 6.0:1.0 6.5:1.0 March 31, 1999: April 1, 1999, 5.5:1.0 6.0:1.0 through March 31, 2000: April 1, 2000, 5.0:1.0 5.5:1.0 through March 31, 2001:
- 92 - 99 April 1, 2001, 4.5:1.0 5.0:1.0 through March 31, 2002: April 1, 2002, 4.0:1.0 4.5:1.0 through March 31, 2003: April 1, 2003, 3.5:1.0 4.0:1.0 through March 31, 2004: April 1, 2004, and 3.0:1.0 3.5:1.0 thereafter:
(c) Fixed Charge Coverage Ratio. The Borrower shall not permit the Fixed Charge Coverage Ratio as of the end of any fiscal quarter to be less than 1.05 to 1.00. (d) Operating Cash Flow to Interest Expense. The Borrower shall not permit the ratio of Operating Cash Flow for any four quarter period to Interest Expense for such four quarter period (the "Interest Coverage Ratio) to be less than 2.0 to 1.0. The Borrower shall not permit the Interest Coverage Ratio calculated on a pro forma basis as of the date of consummation of any Permitted Acquisition for the four quarter period then ended or most recently ended as if such acquisition had occurred on the first day of such four quarter period to be less than 1.75 to 1.00. (e) Broadcast Cash Flow Concentration. The Borrower shall not permit the Broadcast Cash Flow attributable to the Stations in any one market for any four quarter period to exceed 60% of the total Broadcast Cash Flow for such period. 8.14 Management Agreements and Fees. (a) Except for agreements permitted pursuant to Section 8.14(b), the Borrower shall not, and shall not permit any of its Subsidiaries to, make or enter into, or pay any management fees pursuant to, any so-called management or service agreement or joint operating agreement whereby management, supervision or control of its business, or any significant aspect thereof, shall be delegated to or placed in any Person other than the Borrower, - 93 - 100 an employee of the Borrower or any Subsidiary. The Borrower shall not, and shall not permit any of its Subsidiaries to, make or enter into, or receive any management fees pursuant to, any so-called management or service agreement or joint operating agreement whereby management, supervision or control of the business of any other Person (other than a Subsidiary of the Borrower), or any significant aspect thereof, shall be delegated to or placed in the Borrower or any of its Subsidiaries. (b) Without the prior written consent of the Administrative Agent, the Borrower shall not, and shall not permit any of its Subsidiaries to, enter into, or otherwise be obligated under any local marketing agreement (other than with respect to Stations being acquired pursuant to Permitted Acquisitions), time brokerage agreement, program service agreement, joint sales agreement, facilities leasing agreement or similar arrangement; provided, however, that the Borrower may enter into any such arrangements with respect to any AM Station owned by it upon written notice to the Administrative Agent. 8.15 Fiscal Year. The Borrower shall not, and shall not permit any Subsidiary to, change its fiscal year. 8.16 ERISA. Neither the Borrower nor any member of the Controlled Group shall fail to make any contributions which are required pursuant to the terms of any Plan or any Benefit Arrangement. Neither the Borrower nor any member of the Controlled Group shall contribute to or agree to contribute to any Plan which is (a) subject to the minimum funding requirements under ERISA Section 302 or Code Section 412; (b) a multiemployer plan (as defined in ERISA Section 4001(a)(3)); (c) a defined benefit plan (as defined under ERISA Section 3(35) or Code Section 414(j)); (d) a multiple employer plan (as defined in ERISA Section 4063); or (e) a multiple employer welfare arrangement (as defined in ERISA Section 3(40)). 8.17 Affiliates. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any transaction or agreement with any Affiliate of the Borrower or pay any compensation or salary to any such Person unless such transaction or agreement is in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrower or any of its Subsidiaries and the terms of such transaction or agreement are not substantially less favorable to the Borrower or such - 94 - 101 Subsidiary than could be obtained in an arms-length transaction with an unaffiliated third party or unless the amount paid to such person is not substantially in excess of the fair value of the services rendered by such person. 8.18 Change of Name, Identity or Structure. The Borrower shall not, and shall not permit any of its Subsidiaries to, change its name, identity or corporate or partnership structure without thirty days prior written notice to the Administrative Agent. 8.19 Amendments or Waivers. The Borrower shall not, and shall not permit any of its Subsidiaries to, amend, alter or modify, or consent to or suffer any amendment, alteration or modification of, the Subordinated Purchase Agreement or any notes or other documents or agreements issued or entered into pursuant to the Subordinated Purchase Agreement, or any Acquisition Agreement, License, Operating Agreement or other material contract to which the Borrower or such Subsidiary is a party without the prior written consent of all of the Banks if such amendment, alteration or modification imposes any significantly more onerous term or condition on the Borrower than is contained in such agreement, note, document, License or contract as of the date hereof or is otherwise materially adverse to the Banks, or without the prior written consent of the Required Banks if such amendment, alteration or modification does not impose any more onerous term or condition on the Borrower than is contained in such agreement, note, document, License or contract as of the date hereof and is not otherwise materially adverse to the Borrower or the Banks, in either case as reasonably determined by the Administrative Agent. 8.20 Issuance or Transfer of Capital Stock. The Borrower shall not permit any of its Subsidiaries to sell or issue any capital stock, partnership interests or other equity interests or any warrants, options or other securities convertible into or exercisable for any capital stock, partnership interests or other equity interests, and the Borrower shall not permit any of its Subsidiaries to permit the transfer of any capital stock, partnership interests or other such equity interests. 8.21 Change in Business. The Borrower shall not, and shall not permit any of its Subsidiaries to, change the nature of its business in any material respect. Neither the Borrower nor any - 95 - 102 of its Subsidiaries shall engage in any business other than the ownership and operation of radio stations and other activities incidental or related thereto. 8.22 Regulation U. The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, (a) apply any part of the proceeds of the Loans to the purchasing or carrying of any "margin stock" within the meaning of Regulations G, T, U or X of the Federal Reserve Board, or any regulations, interpretations or rulings thereunder, (b) extend credit to others for the purpose of purchasing or carrying any such margin stock, or (c) retire Indebtedness which was incurred to purchase or carry any such margin stock. 8.23 License Subsidiaries. The Borrower shall not, and shall not permit any Subsidiary (other than a License Subsidiary) to, hold any FCC Licenses, but rather shall cause all FCC Licenses relating to the Stations to be issued to and held by a License Subsidiary. The Borrower shall not permit the License Partnership or any other License Subsidiary to (a) incur, create, assume or permit to exist any Indebtedness other than pursuant to the Guaranty and the other Collateral Documents, (b) incur, create, assume or permit to exist any Lien of any nature whatsoever on any property or assets now owned or hereafter acquired by it except in favor of the Administrative Agent, for the benefit of the Banks, (c) make any Capital Expenditures, (d) acquire any assets other than the Licenses, (e) conduct any business, or (f) hire or engage any employees, except, in the case of the License Partnership, pursuant to the Management Agreement. 8.24 Subordinated Debt. The Borrower shall not redeem, discharge, pay, prepay or defease all or any portion of the principal of any Subordinated Debt prior to the payment in full in cash of all Obligations. The Borrower shall not redeem, discharge, pay, prepay or defease all or any portion of the principal or interest of any Indebtedness owing to the Subordinated Lender, prior to the payment in full in cash of all Obligations, except that (a) the Borrower may issue Redemption Notes and Put Notes in the forms attached to the Subordinated Purchase Agreement in effect as of the date hereof and (b) the Borrower may issue shares of common stock to the Subordinated Lender pursuant to the terms of the Convertible Subordinated Notes in the forms attached to the Subordinated Purchase - 96 - 103 Agreement in effect as of the date hereof so long as such shares of common stock are pledged to the Administrative Agent for the benefit of the Banks as security for the Obligations. The Borrower shall not, and shall not elect to, make any payment of principal on any Subordinated Debt, or any payment of principal or interest on any Indebtedness owing to the Subordinated Lender (including, without limitation, any payment of the Mandatory Redemption Obligations or the Put Obligation, as those terms are defined in the Subordinated Purchase Agreement), in cash. The Borrower shall not exercise any right of first offer or right of first refusal under Article X of the Subordinated Purchase Agreement. Except as expressly provided in a plan approved by the Banks pursuant to Section 7.14, the Borrower shall not take any action in violation of any of the provisions of Article XII of the Subordinated Purchase Agreement. The Borrower shall not, pursuant to clause (b) of the definition of the term "Senior Debt" in the Subordinated Purchase Agreement, designate any Indebtedness (other than the Obligations) as Senior Debt. SECTION 9 EVENTS OF DEFAULT. The occurrence of any one or more of the following events, whether voluntarily or involuntarily or by operation of law, shall constitute an Event of Default hereunder: 9.1 Non-Payment. The Borrower shall fail to pay when due, whether by acceleration of maturity or otherwise, any installment of principal due hereunder or under any Note or shall fail to pay within three days of the date when due, whether by acceleration of maturity or otherwise, any installment of interest due hereunder or under any Note or any fee or other payment obligation in respect of the Obligations. 9.2 Failure of Performance in Respect of Other Obligations. (a) The Borrower shall fail to observe, perform or be in compliance with any of the provisions of Section 8, Section 7.1, Section 7.3, Section 7.8 or the first sentence of Section 7.2; or (b) the Borrower, any of its Subsidiaries or any other party to a Collateral Document (other than the Administrative Agent or a Bank) shall fail to observe, perform or be in compliance with the terms of any Obligation, covenant or agreement (other than those referred to in Section 9.1, Section 8, Section 7.1, Section 7.3, Section 7.8 or the first sentence of Section 7.2) to be observed, performed or complied with by the Borrower, any of its - 97 - 104 Subsidiaries or such other party hereunder or under any Collateral Document and, provided that such failure is of a type which can be cured, such failure shall continue and not be cured for thirty days after: (i) written notice thereof from the Administrative Agent or a Bank; or (ii) the Administrative Agent or the Banks are notified thereof or should have been notified thereof pursuant to the provisions of Section 7.6 hereof, whichever is earlier. 9.3 Breach of Warranty. Any financial statement, representation, warranty, statement or certificate made or furnished by the Borrower, any of its Subsidiaries or any other party to a Collateral Document (other than the Administrative Agent or a Bank) in or in connection with this Agreement or any Collateral Document, or as an inducement to the Administrative Agent or the Banks to enter into this Agreement and the Collateral Documents, including, without limitation, those in Section 5 above, shall have been false, incorrect or incomplete when made or deemed made in any material respect. 9.4 Cross-Defaults. Any Change in Control or Event of Default, as those terms are defined in the Subordinated Purchase Agreement as in effect as of the date hereof, shall occur; or the Borrower or any of its Subsidiaries shall default in any payment due on any Total Debt in excess of $250,000 and such default shall continue for more than the period of grace, if any, applicable thereto; or the Borrower or any of its Subsidiaries shall default in the performance of or compliance with any term of any evidence of such Total Debt or of any mortgage, indenture or other agreement relating thereto, and any such default shall continue for more than the period of grace, if any, specified therein if such default causes, or permits the holder thereof to cause, the acceleration of such Total Debt. 9.5 Assignment for Benefit of Creditors. The Borrower or any of its Subsidiaries shall make an assignment for the benefit of its creditors, or shall admit its insolvency or shall fail to pay its debts generally as such debts become due. 9.6 Bankruptcy. Any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, shall be filed by or against the Borrower or any of its Subsidiaries or any proceeding shall be commenced by or against the Borrower or any of its Subsidiaries with respect to relief - 98 - 105 under the provisions of any other applicable bankruptcy, insolvency or other similar law of the United States or any State providing for the reorganization, winding-up or liquidation of Persons or an arrangement, composition, extension or adjustment with creditors; provided, however, that no Event of Default shall be deemed to have occurred if any such involuntary petition or proceeding shall be discharged within sixty days of its filing or commencement. 9.7 Appointment of Receiver; Liquidation. A receiver or trustee shall be appointed for the Borrower or any of its Subsidiaries or for any substantial part of its assets, and such receiver or trustee shall not be discharged within sixty days of his appointment; any proceedings shall be instituted for the dissolution or the full or partial liquidation of the Borrower or any of its Subsidiaries and such proceedings shall not be dismissed or discharged within sixty days of their commencement; or the Borrower or any of its Subsidiaries shall discontinue its business. 9.8 Judgments. The Borrower or any of its Subsidiaries shall incur non-appealable final judgments for the payment of money aggregating at any one time in excess of $1,000,000 (to the extent not covered by insurance) and shall not discharge (or make adequate provision for the discharge of) the same within a period of thirty days unless, pending further proceedings, execution thereon has been effectively stayed; or a non-monetary judgment or order shall be rendered against the Borrower or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect, and there shall be any period in excess of thirty consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. 9.9 Impairment of Collateral; Invalidation of any Loan Document. (i) A creditor of the Borrower or of any of its Subsidiaries shall obtain possession of any significant portion of the collateral for the Obligations by any means, including, without limitation, levy, distraint, replevin or self-help, or any creditor shall establish or obtain any right in such collateral which is equal or senior to a Lien of the Administrative Agent, for the benefit of the Banks, in such collateral; or (ii) any material damage to, or loss, theft or destruction of, any material collateral for the Loans shall - 99 - 106 occur, except to the extent such loss, damage or injury is covered by insurance; or (iii) subject to Section 8.10(c), the Administrative Agent, for the benefit of the Banks, shall cease to have a first priority perfected lien (except for Permitted Liens) in all of the issued and outstanding capital stock of the Borrower and each corporate Subsidiary of the Borrower, in all of the issued and outstanding partnership interests in the License Partnership held by the Borrower, in all of the issued and outstanding partnership interests or other equity interests in each other Subsidiary of the Borrower and in substantially all of the properties and assets of the Borrower and each Subsidiary; or (iv) any Lien granted or created or purported to be granted or created by this Agreement or any Collateral Document shall cease or fail to be perfected with respect to any significant portion of the collateral purported to be covered thereby; or (v) this Agreement, any Note or any Collateral Document ceases to be a legal, valid and binding agreement or obligation enforceable against any party thereto (including the Banks or the Administrative Agent) in accordance with its terms, or shall be terminated, invalidated, set aside or declared ineffective or inoperative and such cessation, termination, invalidity, set aside or declaration could reasonably be expected to have a Material Adverse Effect; or (vi) the Borrower, any Subsidiary or any member of the Field Family shall contest or deny the validity or enforceability of any Collateral Document to which it is a party or any lien, security interest or obligation purported to be created thereby. 9.10 Termination of License or Operating Agreement. The FCC or any other Licensing Authority shall (a) revoke, terminate, substantially and adversely modify or fail to renew any material License relating to a Station, or (b) designate any material License for hearing or commence proceedings to suspend, revoke, terminate or substantially and adversely modify any such License and such proceedings shall not be dismissed or discharged within sixty days; or the Borrower or the License Partnership shall be required pursuant to a final non-appealable order to sell or otherwise dispose of any Station; or any Operating Agreement or any other agreement which is necessary to the operation of a Station shall be revoked or terminated or materially, adversely modified and not replaced by a substitute acceptable to the Required Banks within thirty days of such revocation, termination or modification. - 100 - 107 9.11 Change of Control. Joseph M. Field and his immediate family, including his wife, his children, the spouses of his children and his grandchildren, or trusts created for the benefit of any of the foregoing, shall cease to own collectively 51% of the voting capital stock of the Borrower; or a period of ninety days shall elapse during which neither Joseph M. Field nor David J. Field nor a successor executive having expertise and experience in the broadcasting industry comparable to that of Joseph M. Field or David J. Field shall be the President and Chief Executive Officer of the Borrower; or the Borrower shall cease to own a 99% general partnership interest in the License Partnership (unless all the Licenses held by the License Subsidiary have been transferred to a wholly owned Subsidiary of the Borrower pursuant to Section 8.10(c) hereof). 9.12 Condemnation. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of any substantial portion of the assets of the Borrower or any of its Subsidiaries pursuant to a final, non-appealable order unless such taking could not reasonably be expected to have a Material Adverse Effect. 9.13 Cessation of Operations. The Borrower's on-the-air broadcast operations at any Station (other than a Station which has not, in the four quarter period most recently ended prior to the date of determination, contributed at least 5% to the Operating Cash Flow of the Borrower) shall be interrupted at any time for more than forty-eight hours, whether or not consecutive, during any period of five consecutive days, unless (a) 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 (b) the Borrower shall be receiving during such period of interruption insurance sufficient to assure that its per diem Operating Cash Flow during such period is a least equal to that which could reasonably have been expected during such period but for the interruption. 9.14 Subordination. The Borrower, the Subordinated Lender or any other obligee of Subordinated Debt shall fail to comply with the subordination provisions of the Subordinated Purchase Agreement, any other agreement or instrument governing or evidencing such Subordinated Debt or any separate subordination agreement, and the Administrative Agent shall have determined that such failure to comply could reasonably be expected to have - 101 - 108 a material adverse effect on the Borrower or on its ability to perform its obligations hereunder or under the Collateral Documents or on the rights and remedies of the Administrative Agent and the Banks hereunder or under the Collateral Documents. 9.15 Material Adverse Effect. Any event or circumstance shall occur or fail to occur or any action shall be taken or fail to be taken if the result of such occurrence or failure to occur or such action or failure to take action could reasonably be expected to have a material adverse effect on the ability of the Borrower to perform its obligations hereunder or under any of the Collateral Documents. SECTION 10 REMEDIES. Notwithstanding any contrary provision or inference herein or elsewhere, 10.1 Optional Defaults. If any Event of Default referred to in Section 9.1 through and including Section 9.4 or Section 9.8 through and including Section 9.15 shall occur, the Issuing Bank shall not be required to issue any additional Letters of Credit, and the Administrative Agent, with the consent of the Required Banks, upon written notice to the Borrower, may (a) terminate the Commitment and the credit hereby established and forthwith upon such election the obligations of the Banks to make any further Loans hereunder (other than Loans resulting from the funding of Letters of Credit) immediately shall be terminated, and/or (b) accelerate the maturity of the Loans and all other Obligations, whereupon all Obligations shall become and thereafter be immediately due and payable in full without any presentment or demand and without any further or other notice of any kind, all of which are hereby waived by the Borrower, and/or (c) demand the payment to the Issuing Bank of the aggregate stated amount of the outstanding Letters of Credit, which amount the Issuing Bank shall hold as security for the obligations incurred under the Letters of Credit. 10.2 Automatic Defaults. If any Event of Default referred to in Sections 9.5-9.7 shall occur, - 102 - 109 (a) the Commitment and the credit hereby established shall automatically and forthwith terminate, and the Banks thereafter shall be under no obligation to grant any further Loans hereunder (other than Loans resulting from the funding of Letters of Credit), and (b) the principal of and interest on the Notes, then outstanding, and all of the other Obligations shall thereupon become and thereafter be immediately due and payable in full, all without any presentment, demand or notice of any kind, which are hereby waived by the Borrower, and (c) the Issuing Bank shall not be required to issue any additional Letters of Credit, and the aggregate stated amount of the outstanding Letters of Credit shall be immediately payable by the Borrower to the Issuing Bank, which amount the Issuing Bank shall hold as security for the obligations incurred under the Letters of Credit. 10.3 Performance by the Banks. If at any time the Borrower or any of its Subsidiaries fails or refuses to pay or perform any material obligation or duty to any third Person, except for payments which are the subject of bona fide disputes in the ordinary course of business, the Administrative Agent or the Banks may, in their sole discretion, but shall not be obligated to, pay or perform the same on behalf of the Borrower or such Subsidiary, and the Borrower shall promptly repay all amounts so paid, and all costs and expenses so incurred. This repayment obligation shall become one of the Obligations of the Borrower hereunder and shall bear interest at the Default Interest Rate. 10.4 Other Remedies. Upon the occurrence of an Event of Default, the Administrative Agent and the Banks may exercise any other right, power or remedy as may be provided herein, in the Notes or in any other Collateral Document, or as may be provided at law or in equity, including, without limitation, the right to recover judgment against the Borrower for any amount due either before, during or after any proceedings for the enforcement of any security or any realization upon any security. 10.5 Enforcement and Waiver by the Banks. The Administrative Agent and the Banks shall have the right at all - 103 - 110 times to enforce the provisions of this Agreement and all Collateral Documents in strict accordance with the terms hereof and thereof, notwithstanding any conduct or custom on the part of the Administrative Agent or the Banks in refraining from so doing at any time, unless the Administrative Agent or the Banks shall have waived such enforcement in writing in respect of a particular instance. The failure of the Administrative Agent or the Banks at any time to enforce their rights under such provisions shall not be construed as having created a custom or course of dealing in any way contrary to the specific provisions of this Agreement or the Collateral Documents, or as having in any way modified or waived the same. All rights, powers and remedies of the Administrative Agent and the Banks are cumulative and concurrent and the exercise of one right, power or remedy shall not be deemed a waiver or release of any other right, power or remedy. SECTION 11 THE AGENTS. 11.1 Appointment. KCCI is hereby appointed documentation agent and administrative agent hereunder, and each of the Banks irrevocably authorizes KCCI to act as the documentation agent and administrative agent of such Bank. Bank of America National Trust and Savings Association is hereby appointed syndication agent hereunder, and each of the Banks irrevocably authorizes Bank of America National Trust and Savings Association to act as the syndication agent of such Bank. The Agents agree to act as such upon the express conditions contained in this Section 11. Neither the Administrative Agent nor the Syndication Agent shall have a fiduciary relationship in respect of any Bank by reason of this Agreement. 11.2 Powers. The Administrative Agent shall have and may exercise such powers hereunder as are specifically delegated to it by the terms hereof, together with such powers as are reasonably incidental thereto. The Administrative Agent shall not have any implied duties or any obligation to the Banks to take any action hereunder except any action specifically provided by this Agreement to be taken by the Administrative Agent. 11.3 General Immunity. Neither the Administrative Agent, nor the Syndication Agent nor any of their respective directors, officers, affiliates, agents or employees shall be liable to the Banks or any Bank for any action taken or omitted - 104 - 111 to be taken by it or them hereunder or in connection herewith except for its or their own gross negligence or wilful misconduct. Without limiting the foregoing, neither the Administrative Agent, nor the Syndication Agent nor any of their respective directors, officers, affiliates, agents or employees shall be responsible for, or have any duty to examine (a) the genuineness, execution, validity, effectiveness, enforceability, value or sufficiency of this Agreement, any Collateral Document, or any other document or instrument furnished pursuant to or in connection with this Agreement or any Collateral Document, (b) the collectibility of any amounts owed by the Borrower or any of its Subsidiaries, (c) any recitals, statements, reports, representations or warranties made in connection with this Agreement or any Collateral Document, (d) the performance or satisfaction by the Borrower or any Subsidiary of any covenant or agreement contained herein or in any Collateral Document, (e) any failure of any party to this Agreement to receive any communication sent, including any telegram, teletype, bank wire, cable, radiogram or telephone message sent or any writing, application, notice, report, statement, certificate, resolution, request, order, consent letter or other instrument or paper or communication entrusted to the mails or to a delivery service, or (f) the assets or liabilities or financial condition or results of operations or business or credit-worthiness of the Borrower or any of its Subsidiaries. The Administrative Agent shall not be bound to ascertain or inquire as to the performance or observance of any of the terms of this Agreement or any Collateral Document. 11.4 Action on Instructions of the Banks. The Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Banks (subject to Section 11.12 hereof), and such instructions shall be binding upon all the Banks and all holders of the Notes; provided, however, that the Administrative Agent shall not be required to take any action which exposes it to personal liability or which is contrary to this Agreement or applicable law. The foregoing provisions of this Section 11.4 shall not limit in any way the exercise by any Bank of any right or remedy granted to such Bank pursuant to the terms of this Agreement or any Collateral Document. Except as otherwise expressly provided herein, any reference in this Agreement to action by the Banks shall be deemed to be a reference to the Required Banks. - 105 - 112 11.5 Employment of Agents and Counsel. The Administrative Agent may execute any of its duties as Administrative Agent hereunder by or through employees, agents and attorneys-in-fact and shall not be answerable to the Banks, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. 11.6 Reliance on Documents; Counsel. The Administrative Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper, document or other communication believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, with respect to legal matters, upon the opinion of counsel selected by the Administrative Agent, which counsel may be employees of the Administrative Agent, concerning all matters pertaining to the agency hereby created and its duties hereunder. 11.7 Administrative Agent's Reimbursement and Indemnification. The Banks agree to reimburse and indemnify the Administrative Agent (which indemnification shall be shared by the Banks ratably in proportion to their respective Ratable Shares of the Loans) (a) for any amounts not reimbursed by the Borrower for which the Administrative Agent is entitled to reimbursement by the Borrower hereunder or under any Collateral Document, (b) for any other expenses reasonably incurred by the Administrative Agent on behalf of the Banks, in connection with the preparation, execution, delivery, administration, amendment or enforcement hereof or of any of the Collateral Documents and (c) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement, any Collateral Document or any other document related hereto or thereto or the transactions contemplated hereby or the enforcement of any of the terms hereof or thereof or of any such other documents, provided that no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Administrative Agent. - 106 - 113 11.8 Rights as a Bank. With respect to its Ratable Share of the Commitment, the Loans made by it, the Letters of Credit issued by the Issuing Bank and the Notes issued to it, each of the Administrative Agent and the Syndication Agent shall have the same rights and powers hereunder as any Bank and may exercise the same as though it were not the Administrative Agent or the Syndication Agent, as the case may be, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include the Administrative Agent and the Syndication Agent in their individual capacities. Each of the Administrative Agent and the Syndication Agent may accept deposits from, lend money to, and generally engage in any kind of banking or trust business with the Borrower or any of its Subsidiaries as if it were not the Administrative Agent or the Syndication Agent hereunder. 11.9 Bank Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Collateral Documents. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Collateral Documents. The Administrative Agent shall not be required to keep the Banks informed as to the performance or observance by the Borrower and its Subsidiaries of this Agreement or any other document referred to or provided for herein or to inspect the properties or books of the Borrower or any of its Subsidiaries. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of the Borrower or any of its Subsidiaries which may come into its possession. 11.10 Successor Administrative Agent. (a) The Administrative Agent may, without the consent of the Borrower or the other Banks, assign its rights and obligations as Administrative Agent hereunder and under the - 107 - 114 Collateral Documents to its parent or to any wholly owned subsidiary of its parent which has capital and retained earnings of at least $500,000,000, and upon such assignment, the former Administrative Agent shall be deemed to have retired, and such wholly owned subsidiary shall be deemed to be a successor Administrative Agent. (b) The Administrative Agent may resign at any time by giving written notice thereof to the Banks. Upon any such resignation, the Required Banks shall have the right to appoint a successor Administrative Agent with the consent of the Borrower so long as no Event of Default or Possible Default has occurred and is continuing. If no successor Administrative Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within thirty days after the notice of resignation, then the retiring Administrative Agent may appoint a successor Administrative Agent. Such successor Administrative Agent shall be a commercial bank having capital and retained earnings of at least $500,000,000. (c) Upon the acceptance of any appointment as the Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the assigning or retiring Administrative Agent, and the assigning or retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any assigning or retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of this Section 11 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder. 11.11 Ratable Sharing. All principal and interest payments on Loans and commitment fees received by the Administrative Agent shall be remitted to the Banks in accordance with their Ratable Shares. Any amounts received by the Administrative Agent or any other Bank upon the sale of any collateral for the Loans or upon the exercise of any remedies hereunder or under any of the Collateral Documents or upon the exercise of any right of setoff shall be remitted to the Banks in accordance with their Ratable Shares of the Loans; provided, however, that, solely for purposes of the sharing of any amounts received by the Administrative Agent or any other Bank, if at the - 108 - 115 time of any such receipt the Borrower has defaulted under any agreements regarding Rate Hedging Obligations entered into pursuant to Section 7.12 with any Bank or any Affiliate of any Bank, then the Ratable Share of the affected Bank shall be proportionately increased and the Ratable Shares of the other Banks shall be proportionately decreased based upon the amount due to the affected Bank (or such Bank's Affiliate) pursuant to such agreements. If any Bank shall obtain any payment hereunder (whether voluntary, involuntary, through exercise of any right of set-off or otherwise) in excess of its Ratable Share, then such Bank shall immediately remit such excess to the other Banks pro rata. 11.12 Actions by the Administrative Agent and the Banks. The Administrative Agent shall take formal action following the occurrence of a Possible Default or an Event of Default only upon the agreement of the Required Banks; provided, however, that if the Administrative Agent gives notice to the Banks of a Possible Default or an Event of Default, and the Required Banks cannot agree (which agreement shall not be unreasonably withheld) on a mutual course of action within thirty days following such notice, the Administrative Agent may (but shall not be required to) pursue such legal rights and remedies against the Borrower as it deems necessary and appropriate to protect the Banks and any collateral under the circumstances; provided, further, however, that nothing in this Section shall permit the Administrative Agent to take any action which pursuant to Section 12.12 would require the consent of all of the Banks without such consent of all of the Banks. SECTION 12 MISCELLANEOUS. 12.1 Construction. The provisions of this Agreement shall be in addition to those of the Collateral Documents and to those of any other guaranty, security agreement, note or other evidence of the liability relating to the Borrower held by the Banks, all of which shall be construed as complementary to each other. Nothing contained herein shall prevent the Administrative Agent or the Banks from enforcing any or all of such instruments in accordance with their respective terms. Each right, power or privilege specified or referred to in this Agreement or in any Collateral Document is in addition to any other rights, powers or privileges that the Administrative Agent or the Banks may otherwise have or acquire by operation of law, by other contract - 109 - 116 or otherwise. No course of dealing in respect of, nor any omission or delay in the exercise of, any right, power or privilege by the Administrative Agent or the Banks shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any further or other exercise thereof or of any other, as each right, power or privilege may be exercised independently or concurrently with others and as often and in such order as the Administrative Agent or the Banks may deem expedient. Notwithstanding any other provision of this Agreement, the Borrower shall not be required to pay any amount of interest pursuant hereto which is in excess of the maximum amount permitted by law. 12.2 Further Assurance. From time to time, the Borrower shall, and shall cause its Subsidiaries to, execute and deliver to the Banks such additional documents and take such actions as the Administrative Agent may reasonably require to carry out the purposes of this Agreement or any of the Collateral Documents, or to preserve and protect the rights of the Administrative Agent and the Banks hereunder or thereunder. 12.3 Expenses of the Administrative Agent and the Banks; Indemnification. (a) Whether or not the transactions contemplated by this Agreement are consummated, the Borrower shall pay the costs and expenses, including the reasonable fees and disbursements of the Administrative Agent's special counsel, incurred by the Administrative Agent and the Banks in connection with (i) the negotiation, preparation, amendment or enforcement of this Agreement and the Collateral Documents and any amendment or modification thereof and the closing of the transactions contemplated hereby and thereby; (ii) the perfection of the Liens granted pursuant hereto and pursuant to the Collateral Documents; (iii) the making of the Loans and issuance of the Letters of Credit hereunder; (iv) the negotiation, preparation or enforcement of any other document in connection with this Agreement, the Collateral Documents or the Loans made hereunder; (v) any proceeding brought or formal action taken by the Administrative Agent or the Banks to enforce any provision of this Agreement or any Collateral Document, or to enforce or exercise any right, power or remedy hereunder or thereunder; or (vi) any action which may be taken or instituted by any Person against the Administrative Agent or any Bank as a result of any - 110 - 117 of the foregoing; provided, however, that notwithstanding the foregoing, the Borrower shall not be responsible for the costs and expenses, including legal fees, of any Bank other than the Administrative Agent in respect of any period prior to the occurrence of a Possible Default. The estimated fees and expenses of the Administrative Agent's special counsel through the Closing shall be paid on the Closing Date. (b) The Borrower hereby indemnifies and holds harmless each Agent and each Bank and their respective directors, officers, employees, agents, counsel, subsidiaries and affiliates (the "Indemnified Persons") from and against any and all claims, losses, liabilities, obligations, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, reasonable attorneys fees) which may be imposed on, incurred by, or asserted against any Indemnified Person in any way relating to or arising out of this Agreement, the Collateral Documents, or any of them, or the Loans made pursuant hereto, or the Letters of Credit issued pursuant hereto, or the use of the proceeds of the Loans or any of the transactions contemplated hereby or thereby or the ownership or operation of the Stations or any of the other assets of the Borrower or its Subsidiaries or the breach by the Borrower or any of its Subsidiaries of any of the representations, warranties, covenants and agreements contained herein or in any Collateral Document; provided, however, that the Borrower shall not be liable to any Indemnified Person, if there is a final judicial determination that such claims, losses, liabilities, obligations, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulted solely from the gross negligence or willful misconduct of such Indemnified Person; and provided, further, that notwithstanding the foregoing, the Borrower shall not be responsible for the costs and expenses, including legal fees, of any Bank other than the Administrative Agent in respect of any period prior to the occurrence of a Possible Default which legal fees are incurred by such Bank in connection with the negotiation, preparation, amendment or modification of this Agreement and the Collateral Documents and the closing of the transactions contemplated hereby and thereby. 12.4 Notices. Except as otherwise expressly provided herein, all notices, demands and requests required or permitted to be given under the provisions of this Agreement shall be in writing and shall be deemed to have been duly delivered and - 111 - 118 received (a) on the date of personal delivery, (b) on the date of receipt (as shown on the return receipt) if mailed by registered or certified mail, postage prepaid and return receipt requested, (c) on the next business day after delivery to a courier service that guarantees delivery on the next business day if the conditions to the courier's guarantee are complied with, or (d) on the date of receipt by telecopy, in each case addressed as follows: TO THE ADMINISTRATIVE AGENT: Key Corporate Capital Inc. 127 Public Square M/C OH-01-127-0602 Cleveland, Ohio 44114-1306 Attention: Media and Telecommunications Finance Division Telecopy: 216-689-4666 Copy to: Timothy J. Kelley, Esq. Dow, Lohnes & Albertson, PLLC 1200 New Hampshire Ave., N.W., Suite 800 Washington, D.C. 20036 Telecopy: 202-776-2222 TO THE SYNDICATION AGENT: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION 555 South Flower Street Los Angeles, California 90071 Attention: Matthew Koenig Telecopy: 213-228-2641 TO THE BANKS, AT THE ADDRESSES LISTED ON THE SIGNATURE PAGES HEREOF OR IN THE ASSIGNMENT INSTRUMENT DELIVERED PURSUANT TO SECTION 12.7(b) - 112 - 119 TO THE BORROWER OR ANY OF ITS SUBSIDIARIES: Entertainment Communications, Inc. 401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 Attention: David J. Field, Senior Vice President Telecopy: 610-660-5620 Copy to: John C. Donlevie, Esq. Executive Vice President and General Counsel Entertainment Communications, Inc. 401 City Avenue, Suite 409 Bala Cynwyd, Pennsylvania 19004 Telecopy: 610-660-5620 or to such other address or addresses as the party to which such notice is directed may have designated in writing to the other parties hereto. 12.5 Waiver and Release by the Borrower. Neither the Administrative Agent, nor the Syndication Agent, nor any Bank, nor any Affiliate, officer, director, employee, attorney, or agent of the Administrative Agent, the Syndication Agent or any Bank shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue any of them upon, any claim for any special, indirect, incidental or consequential damages suffered or incurred by the Borrower or any of its Subsidiaries in connection with, arising out of, or in any way related to, this Agreement or any of the Collateral Documents, or any of the transactions contemplated by this Agreement or any of the Collateral Documents, unless arising from the gross negligence or willful misconduct of such Person as determined by a final judgment of a court of competent jurisdiction. 12.6 Right of Set Off. Upon the occurrence and during the continuance of any Event of Default, each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Bank or an Affiliate of such Bank to or for the credit or the account of the Borrower or any of its Subsidiaries against - 113 - 120 any and all of the obligations of the Borrower or any of its Subsidiaries now or hereafter existing hereunder or under any Collateral Document, irrespective of whether or not such Bank shall have made any demand hereunder or under any Collateral Document and although such obligations may be unmatured. Such Bank agrees promptly to notify the Administrative Agent and the Borrower after any such set-off and application made by such Bank; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Banks under this Section are in addition to other rights and remedies (including without limitation, other rights of set-off) which the Banks may have. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in the Notes may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower or any of its Subsidiaries in the amount of such participation. 12.7 Successors and Assigns; Participations. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; provided, however, that the Borrower may not assign or transfer any of its rights or obligations hereunder or under the Notes without the prior written consent of all of the Banks and the Administrative Agent. (b) Each Bank may assign all or any part of any of its Loans, its Notes, and its share of the Commitment and the Letters of Credit with the consent of the Borrower and the Administrative Agent, which consent shall not be unreasonably withheld; provided that (i) no such consent by the Borrower shall be required (A) for any such assignment by any Bank to an Affiliate of such Bank, (B) if, at the time of such assignment, an Event of Default or Possible Default has occurred and is continuing, (C) in the case of any assignment to another branch or a principal office of a Bank, or (D) for any such assignment to another Bank or an Affiliate of another Bank; (ii) any such partial assignment shall be in an amount at least equal to $5,000,000; and (iii) each such assignment shall be made by a Bank in such manner that the same portion of its Loans, its Notes, its share of the Commitment and its participation in the Letters of Credit is assigned to the assignee. Upon execution - 114 - 121 and delivery by the assignor and the assignee to the Borrower and the Administrative Agent of an instrument in writing pursuant to which such assignee agrees to become a "Bank" hereunder (if not already a Bank) having the share of the Commitment, the Loans and the Letters of Credit specified in such instrument, and upon consent thereto by the Administrative Agent and the Borrower (to the extent required), the assignee shall have, to the extent of such assignment (unless otherwise provided in such assignment with the consent of the Administrative Agent), the obligations, rights and benefits of a Bank hereunder holding the share of the Commitment, the Loans and the Letters of Credit (or portions thereof) assigned to it (in addition to the share of the Commitment, the Loans and the Letters of Credit, if any, theretofore held by such assignee) and the assigning Bank shall, to the extent of such assignment, be released from the share of the Commitment and the obligations hereunder so assigned. (c) Upon its receipt of an assignment pursuant to Section 12.7(b) above duly executed by an assigning Bank and the assignee, together with any Notes subject to such assignment and the Administrative Agent's standard processing and recordation fee of $3,500, the Administrative Agent shall, if such assignment has been completed, accept such assignment. Within five business days after receipt of such notice, the Borrower, at the Borrower's own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Notes new Notes to the order of the assignee in an amount equal to the share of the Commitment, the Loans and the Letters of Credit assumed by the assignee and, if the assigning Bank has retained a portion of the Commitment, the Loans and the Letters of Credit hereunder, new Notes to the order of the assigning Bank in an amount equal to the share of the Commitment and the Loans retained by it hereunder. Such new Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Notes, shall be dated the effective date of such assignment and shall otherwise be in substantially the form of Exhibit A hereto. Cancelled Notes shall be returned to the Borrower. (d) A Bank may sell or agree to sell to one or more other Persons (each, a "Participant") a participation in all or any part of any Loans held by it, or in its share of the Commitment and the Letters of Credit. Except as otherwise provided in the last sentence of this Section 12.7(d), no - 115 - 122 Participant shall have any rights or benefits under this Agreement or any Note or any other Collateral Documents (the Participant's rights against such Bank in respect of such participation to be those set forth in the agreements executed by such Bank in favor of the Participant). All amounts payable by the Borrower to any Bank under Section 2 hereof in respect of Loans held by it, and its share of the Commitment and of the Letters of Credit, shall be determined as if such Bank had not sold or agreed to sell any participations in such Loans and share of the Commitment, and as if such Bank were funding each of such Loans and its share of the Commitment in the same way that it is funding the portion of such Loans and its share of the Commitment in which no participations have been sold. In no event shall a Bank that sells a participation agree with the Participant to take or refrain from taking any action hereunder or under any other Collateral Document except that such Bank may agree with the Participant that it will not, without the consent of the Participant, agree to any modification, supplement or waiver hereof or of any of the other Collateral Documents to the extent that the same, under Section 12.12 hereof, requires the consent of each Bank. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.7 through 2.14 and Section 12.6 with respect to its participating interest. (e) In addition to the assignments and participations permitted under the foregoing provisions of this Section 12.7, any Bank may assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Bank from its obligations hereunder. (f) A Bank may furnish any information concerning the Borrower and its Subsidiaries in the possession of such Bank from time to time to assignees and participants (including prospective assignees and participants). (g) Anything in this Section 12.7 to the contrary notwithstanding, no Bank may assign or participate any interest in any Loan held by it hereunder to the Borrower or any of its Affiliates without the prior written consent of all of the Banks. - 116 - 123 12.8 Applicable Law. This Agreement and the Collateral Documents, and the duties, rights, powers and remedies of the parties hereto and thereto, shall be construed in accordance with, and governed by, the laws of the State of Ohio, without regard to the conflicts of laws provisions thereof, except to the extent that any Collateral Document provides that the local law of another jurisdiction governs the grant, perfection or enforcement of the Liens granted pursuant to such Collateral Document. 12.9 Binding Effect and Entire Agreement. This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and permitted assigns of the parties hereto. This Agreement, the Schedules and Exhibits hereto, which are hereby incorporated in this Agreement, and the Collateral Documents constitute the entire agreement among the parties on the subject matter hereof. 12.10 Counterparts. This Agreement may be executed in any number of counterparts or duplicate originals, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 12.11 Survival of Agreements. All covenants, agreements, representations and warranties made herein or in any Collateral Document shall survive any investigation and the Closing and shall continue in full force and effect so long as any of the Obligations remain to be performed or paid or the Banks have any obligation to advance sums or issue Letters of Credit hereunder or any Letter of Credit remains outstanding. 12.12 Modification. Any term of this Agreement or of the Notes may be amended and the observance of any term of this Agreement or of the Notes may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Borrower and the Required Banks; provided, however, that no such amendment or waiver or other action shall, without the prior written consent of all of the Banks or the holders of all of the Notes at the time outstanding, (a) extend the maturity or reduce the principal amount of, or reduce the rate or extend the time of payment of interest on, or reduce the amount or extend the time of payment of any principal installment of, any Note, (b) reduce the amount or extend the time of payment of the commitment fees or the fees - 117 - 124 shared by the Banks and payable in respect of Letters of Credit, (c) change the Commitment or the Ratable Share of any Bank (other than any change in Commitment or Ratable Share resulting from (i) the sale of a participation in or assignment of any Bank's interest in the Commitment and Loans in accordance with subsection 12.7 or (ii) an increase in the Commitment pursuant to Section 2.15), (d) change the percentage referred to in the definition of "Required Banks" contained in Section 1.1, (e) amend this Section 12.12, (f) amend or waive compliance with Section 2.1(b) or 2.6(b), or (g) release any collateral for the Loans except in connection with a sale or other disposition permitted pursuant to Section 8.10; and provided, further, that notwithstanding the foregoing provisions of this Section 12.12, this Agreement and the Notes may be amended or modified in the manner contemplated by Section 12.7 for the purpose of permitting any Bank to assign its interest, rights and obligations hereunder to another Person if the appropriate assignment agreement or counterparts thereof are executed by the Borrower (to the extent required), the Administrative Agent and the appropriate Bank assignor and assignee. Any amendment or waiver effected in accordance with this Section 12.12 shall be binding upon each holder of any Note at the time outstanding, each future holder of any Note and the Borrower. 12.13 Separability. If any one or more of the provisions contained in this Agreement or any Collateral Document should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of all remaining provisions shall not in any way be affected or impaired. 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. 12.14 Section Headings. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 12.15 Enforcement. The Borrower (a) hereby irrevocably submits to the jurisdiction of the state courts of the State of Ohio and to the jurisdiction of the United States District Court for the Northern District of Ohio, for the purpose - 118 - 125 of any suit, action or other proceeding arising out of or based upon this Agreement or any Collateral Document or the subject matter hereof or thereof brought by the Administrative Agent or the Banks or their successors or assigns and (b) hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or any Collateral Document or the subject matter hereof or thereof may not be enforced in or by such court, and (c) hereby waives and agrees not to seek any review by any court of any other jurisdiction which may be called upon to grant an enforcement of the judgment of any such Ohio state or federal court. The Borrower hereby consents to service of process by registered mail at the address to which notices are to be given. The Borrower agrees that its submission to jurisdiction and its consent to service of process by mail is made for the express benefit of the Administrative Agent and the Banks. Final judgment against the Borrower in any such action, suit or proceeding may be enforced in other jurisdictions by suit, action or proceeding on the judgment, or in any other manner provided by or pursuant to the laws of such other jurisdiction; provided, however, that the Administrative Agent or the Banks may at their option bring suit, or institute other judicial proceedings, against the Borrower or any of its assets in any state or federal court of the United States or of any country or place where the Borrower, or such assets, may be found. 12.16 Termination. This Agreement shall terminate when all amounts due hereunder, under the Notes and under each Collateral Document shall have been indefeasibly paid in full in cash and all other Obligations hereunder or thereunder shall have been fully performed, so long as no Letters of Credit are then outstanding and the Banks have no further obligation to advance sums or issue Letters of Credit hereunder. Upon such termination, at the request of the Borrower, the Administrative Agent and the Banks shall release all Liens granted herein or in any Collateral Document at the Borrower's expense and return all collateral held pursuant hereto or to any Collateral Document without recourse or representation. Notwithstanding anything to the contrary contained herein, each expense reimbursement and - 119 - 126 indemnification provision in this Agreement or in any Collateral Document shall survive the repayment in full of the Loans and the termination of this Agreement. 12.17 FCC Compliance. (a) Notwithstanding anything herein or in any of the Collateral Documents to the contrary, but without limiting or waiving the Borrower's or any of its Subsidiaries' obligations hereunder or under any of the Collateral Documents, the Administrative Agent's and the Banks' remedies hereunder and under the Collateral Documents are subject to compliance with the Communications Act of 1934, as amended, and to all applicable rules, regulations and policies of the FCC, and neither the Administrative Agent nor the Banks will take any action pursuant to this Agreement or any of the Collateral Documents that will constitute or result in any assignment of a License issued by the FCC or any change of control of the Borrower or any of its Subsidiaries which owns any FCC License if such assignment of License or change of control would require under then existing law (including the written rules and regulations promulgated by the FCC), the prior approval of the FCC, without first obtaining such approval of the FCC. This Agreement, the Collateral Documents and the transactions contemplated hereby and thereby do not and will not constitute, create, or have the effect of constituting or creating, directly or indirectly, actual or practical ownership of the Borrower or any of its Subsidiaries by the Administrative Agent or the Banks or control, affirmative or negative, direct or indirect, of the Borrower or any of its Subsidiaries by the Administrative Agent or the Banks, over the management or any other aspect of the operation of the Borrower or any of its Subsidiaries, which ownership and control remain exclusively and at all times in the stockholders and directors of the Borrower and its Subsidiaries until such time as the Administrative Agent and the Banks have complied with such law, rules, regulations and policies. (b) Furthermore, the parties acknowledge their intent that, upon the occurrence of an Event of Default, the Banks shall receive, to the fullest extent permitted by applicable law and governmental policy (including, without limitation, the rules, regulations and policies of the FCC), all rights necessary or desirable to obtain, use or sell the Licenses and the collateral securing the Loans, and to exercise all remedies available to - 120 - 127 them under this Agreement, the Collateral Documents, the Uniform Commercial Code or other applicable law. Therefore, the parties agree that, in the event of changes in law or governmental policy occurring after the date hereof that affect in any manner the Administrative Agent's or the Banks' rights of access to, or use or sale of, the Licenses or such collateral, or the procedures necessary to enable the Administrative Agent or the Banks to obtain such rights of access, use or sale, the Administrative Agent, the Banks and the Borrower shall amend this Agreement and the Collateral Documents in such manner as the Administrative Agent shall reasonably request, in order to provide the Administrative Agent and the Banks such rights to the greatest extent possible consistent with then applicable law and governmental policy. 12.18 Jury Trial Waiver. THE BORROWER, THE AGENTS AND THE BANKS EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN THE BANKS AND THE BORROWER ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR THE NOTES OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE BORROWER, THE AGENTS AND THE BANKS ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE BORROWER, THE AGENTS AND THE BANKS FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (UNLESS EXPRESSLY MODIFIED IN WRITING BY ALL PARIES HERETO), AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, THE COLLATERAL DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. - 121 - 128 12.19 Sale as a Going Concern. Notwithstanding anything to the contrary in this Agreement, the Security Agreements, the Pledge Agreements or any other Collateral Document, the Administrative Agent and the Banks acknowledge that the value of each Station as a going concern is, as of the date hereof, significantly greater than the sum of the values of the individual collateral used in the operation of that Station in which the Administrative Agent, for the benefit of the Banks, has been granted a lien or security interest. Therefore, the Administrative Agent and the Banks agree that upon any foreclosure of their liens or security interests in the assets of such Station pursuant to the Collateral Documents, they shall first attempt to sell such Station as a going concern and that they shall not sell such collateral separately unless (a) the Borrower or any of its Subsidiaries (or any of their respective agents, representatives or employees) has refused to cooperate fully in connection with the Administrative Agent's or the Banks' exercise of their remedies hereunder, (b) the Administrative Agent has attempted to sell such Station as a going concern and, after reasonable efforts, has not been able to do so, or (c) the Administrative Agent determines in its sole discretion that selling such Station as a going concern is not feasible for any reason or is not likely to permit the Administrative Agent or the Banks to raise sufficient funds to pay in full the Obligations secured by the Collateral Documents. Notwithstanding anything herein to the contrary, the Administrative Agent and the Banks shall have the right, in their sole discretion, but subject to the terms and conditions of the Collateral Documents, (i) to sell any Station or group of Stations individually without being required to sell all of the Stations in one transaction, and (ii) to exercise their remedies under the Pledge Agreements prior to any exercise of remedies under the other Collateral Documents provided that anything to the contrary herein notwithstanding the exercise of such remedies shall be conducted in a commercially reasonable manner. 12.20 Marshaling; Payments Set Aside. Subject to Section 12.19, the Administrative Agent and the Banks shall not be under any obligation to marshal any assets in favor of the Borrower or any other Person or against or in payment of any or all of the Obligations. To the extent that the Borrower or any of its Subsidiaries makes a payment or payments to the Administrative Agent or the Banks or the Administrative Agent or - 122 - 129 any Bank enforces its security interest or exercises its rights of setoff, and such payment or payments or the process of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy or insolvency law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement had not occurred. [SIGNATURE PAGES FOLLOW] - 123 - 130 TO WITNESS THE ABOVE, the Borrower, the Banks and the Agents have caused this Loan Agreement to be executed by their respective representatives thereunto duly authorized as of the date first above written. BORROWER: ENTERTAINMENT COMMUNICATIONS, INC. By:___________________________ Name:_________________________ Title:________________________ BANKS: KEY CORPORATE CAPITAL INC. By:___________________________ Name: Kristen K. St. Pierre Title: Vice President Address: 127 Public Square Cleveland, Ohio 44114-1306 Attention: Media and Telecommunications Finance Division BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION By:___________________________ Name:_________________________ Title:________________________ Address: 555 South Flower Street, 10th Floor Los Angeles, California 90071 Attention: Matthew Koenig 131 CIBC OPPENHEIMER CORP. By:___________________________ Name:_________________________ Title:________________________ Address: 425 Lexington Avenue New York, New York 10017 Attention: Pam Poutre FIRST UNION NATIONAL BANK By:___________________________ Name:_________________________ Title:________________________ Address: One First Union Center DC5-NC 0735 301 South College Street Charlotte, North Carolina 28288-0735 Attention: Russ Herakovich FLEET BANK, N.A. By:___________________________ Name:_________________________ Title:________________________ Address: Media & Communications Group 1185 Avenue of the Americas, 16th Floor Mailstop: NY/NY/S16K New York, New York 10036 Attention: Eric Meyer 132 U.S. BANK, N.A. By:___________________________ Name:_________________________ Title:________________________ Address: 1420 Fifth Avenue, 10th Floor Seattle, Washington 98101 Attention: Matthew S. Thoreson BANK OF MONTREAL By:___________________________ Name:_________________________ Title:________________________ Address: 430 Park Avenue New York, New York 10022 Attention: Ola Anderssen COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By:___________________________ Name:_________________________ Title:________________________ By:___________________________ Name:_________________________ Title:________________________ Address: 520 Madison Avenue, 37th Floor New York, New York 10022 Attention: Brian O'Leary 133 FIRST HAWAIIAN BANK By:___________________________ Name:_________________________ Title:________________________ Address: Media Finance Division 999 Bishop St., 11th Floor Honolulu, Hawaii 96813 Attention: Jim Polk SUNTRUST BANK, CENTRAL FLORIDA, N.A. By:___________________________ Name:_________________________ Title:________________________ Address: 200 South Orange Avenue Mail Code SOAB4 Orlando, Florida 32802 Attention: David Miller UNION BANK OF CALIFORNIA, N.A. By:___________________________ Name:_________________________ Title:________________________ Address: 445 South Figueroa Street Los Angeles, California 90071 Attention: Kevin Sampson ISSUING BANK: KEY CORPORATE CAPITAL INC. By:___________________________ Name: Kristen K. St. Pierre Title: Vice President 134 ADMINISTRATIVE AGENT: KEY CORPORATE CAPITAL INC. By:___________________________ Name: Kristen K. St. Pierre Title: Vice President SYNDICATION AGENT: BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION By:___________________________ Name: ________________________ Title: _______________________ 135 LIST OF SCHEDULES AND EXHIBITS Schedule 1.1 Ratable Shares of the Banks Exhibit A Form of Note Exhibit B Financial Statements Exhibit C Projections Exhibit D Capitalization Exhibit E Proceedings, Litigation, Non- Compliance with Law; Tax Matters Exhibit F Liens and Indebtedness Exhibit G Schedule of Contracts, Commitments, Material Agreements, licenses and Consents Exhibit H ERISA Liabilities and Plans Exhibit I Real Estate Exhibit J Environmental Matters Exhibit K Form of Compliance Certificate Exhibit L Existing Interests in Partnerships and Joint Ventures Exhibit M Potential Material Adverse Contracts Exhibit N Material Labor Disputes Exhibit O Request for Borrowing 136 SCHEDULE 1.1 Ratable Shares
Bank: Ratable Share of Commitment - ----- and Loans: --------------------------- KEY CORPORATE CAPITAL INC. 13.3333% BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION 13.3333% CIBC INC. 11.2500% FIRST UNION NATIONAL BANK 11.2500% FLEET BANK, N.A. 11.2500% BANK OF MONTREAL 11.2500% COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE 6.6667% SUNTRUST BANK, CENTRAL FLORIDA, N.A. 6.6667% UNION BANK OF CALIFORNIA, N.A. 6.6667% U.S. BANK, N.A. 5.0000% FIRST HAWAIIAN BANK 3.3333% -------- Total: 100.000% =======
137 EXHIBIT A FORM OF AMENDED AND RESTATED REDUCING REVOLVING CREDIT NOTE $______________ October 8, 1998 FOR VALUE RECEIVED, ENTERCOM COMMUNICATIONS CORP., a Pennsylvania corporation (the "Maker"), hereby promises to pay to the order of [BANK] (the "Payee"), on or before February 13, 2006, in the manner and at the place provided in the Loan Agreement, as that term is defined below, the principal sum of $______________, or if less, the outstanding balance of the Loans, as that term is defined in the Loan Agreement described below, made by the Payee. The unpaid principal balance of this Note shall bear interest prior to maturity at the rates determined in accordance with the provisions of that certain Loan Agreement dated as of February 13, 1998, as amended by the First Amendment to Loan Agreement, dated as of October 8, 1998, among the Maker, Key Corporate Capital Inc., as Administrative Agent, Bank of America National Trust and Savings Association, as Syndication Agent, the Payee and the other financial institutions as may from time to time be parties thereto (as the same may be further amended, modified, extended or restated from time to time, the "Loan Agreement"). Interest accrued on each Base Rate Loan shall be paid quarterly in arrears on each Quarterly Date after the date hereof until such Loan is paid in full, and interest accrued on each LIBOR Loan shall be paid on the last day of the Interest Period thereof and, in addition, if such Interest Period is more than three months, on the day that would have been the last day of such Interest Period if such Interest Period had been three months. This Note is an amendment and restatement of the Reducing Revolving Credit Note dated February 13, 1998, of the Maker to the Payee (the "Original Note") and not a replacement, substitution or repayment thereof. The indebtedness and liabilities of the Maker under the Original Note evidenced hereby 138 remain in full force and effect as amended, renewed and extended hereby. This Note is subject to voluntary and mandatory prepayment in whole or in part at the times and in the manner specified in the Loan Agreement. The Payee may enter all amounts of principal borrowed, paid or prepaid at any time on the grid annexed hereto or on any separate record thereof maintained by the Payee. This Note evidences indebtedness of the Maker to the Payee arising under the Loan Agreement, to which reference is hereby made for a statement of the rights of the Payee and the duties and obligations of the Maker in relation thereto, but neither this reference to the Loan Agreement nor any provision thereof shall affect or impair the absolute and unconditional obligation of the Maker to pay the principal of and interest on this Note when due. The principal of and all interest on this Note shall be paid as provided in the Loan Agreement in immediately available funds constituting lawful money of the United States of America, not later than 11:00 A.M. (Cleveland time) on the day when due. Upon the occurrence of any Event of Default, the entire outstanding principal amount of this Note and (to the extent permitted by law) unpaid interest shall bear interest from the date of occurrence of such Event of Default until the earlier of the date such amount is paid in full and the date on which such Event of Default is cured or waived in writing at the Default Interest Rate which shall be payable on demand. Subject to the provisions of Section 10 of the Loan Agreement, the entire unpaid principal balance of this Note, together with all interest accrued thereon, shall become immediately due and payable upon the occurrence of an Event of Default. Upon the occurrence of any Event of Default, the holder hereof shall have all of the rights, powers and remedies provided in the Loan Agreement or in any Collateral Document or at law or in equity. Failure of the Payee or any holder of this Note to exercise any such right or remedy available hereunder or under the Loan Agreement or any Collateral Document or at law or in - 2 - 139 equity shall not constitute a waiver of the right to exercise subsequently such option or such other right or remedy. The payment of this Note is secured by certain Security Agreements, certain Pledge Agreements and a Guaranty, all as more fully identified in the Loan Agreement. To the extent permitted by law, the Maker and each endorser of this Note, and their respective heirs, successors, legal representatives and assigns, hereby severally waive presentment; protest and demand; notice of protest, demand, dishonor and nonpayment; and diligence in collection, and agree to the application of any bank balance as payment or part payment of this Note or as an offset hereto as provided in the Loan Agreement, and further agree that the holder hereof may release all or any part of the collateral given as security for this Note or any rights of the holder thereunder and may amend this Note (with the consent of the Maker), without notice to, and without in any way affecting the liability of, the Maker or any endorser of this Note, and their respective heirs, successors, legal representatives and assigns. If at any time the indebtedness evidenced by this Note is collected through legal proceedings or this Note is placed in the hands of attorneys for collection, the Maker and each endorser of this Note, and their respective heirs, successors, legal representatives and assigns, hereby jointly and severally agree to pay all costs and expenses (including reasonable attorneys' fees if permitted by law) incurred by the holder of this Note in collecting or attempting to collect such indebtedness. The rate of interest payable on this Note from time to time shall in no event exceed the maximum rate permissible under applicable law. If the rate of interest payable on this Note is ever reduced as a result of the preceding sentence and at any time thereafter the maximum rate permitted by applicable law shall exceed the rate of interest provided for on this Note, then the rate provided for on this Note shall be increased to the maximum rate permitted by applicable law for such period as is required so that the total amount of interest received by the Payee is that which would have been received by the Payee but for the operation of the preceding sentence. - 3 - 140 THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE PROVISIONS OF, THE LAW OF THE STATE OF OHIO, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Loan Agreement. ENTERCOM COMMUNICATIONS CORP. By:___________________________ Name:_________________________ Title:________________________ - 4 - 141 REVOLVING CREDIT GRID _____________________ ________________________________________________________________________________ AMOUNT AMOUNT UNPAID OFFICER'S DATE BORROWED PAID BALANCE INITIALS ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ - 5 - 142 EXHIBIT D TO LOAN AGREEMENT AMONG ENTERCOM COMMUNICATIONS CORP., KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS SYNDICATION AGENT, AND THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO Capitalization of the Borrower Loan Agreement Section 5.5 Authorized Shares: Voting Common Stock 180,000 Non-Voting Common Stock 180,000 ------- Total 360,000 Issued and Outstanding Shares: Voting Common Stock 72,750 Non-Voting Common Stock 43,650 ------- Total 116,400 Capitalization of the License Partnership: Interests Held By 99% General Partnership Interest The Borrower 1% Limited Partnership Interest ECI Investors Corporation 143 Commitments: The Borrower has committed to issue shares of the capital stock of the Borrower pursuant to the terms of the Subordinated Purchase Agreement and documents executed in connection therewith. 144 EXHIBIT E TO LOAN AGREEMENT AMONG ENTERCOM COMMUNICATIONS CORP., KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS SYNDICATION AGENT, AND THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO Litigation; Proceedings; Compliance; Tax Matters Loan Agreement Section 5.7, 5.8 and 5.11 The following litigation, proceedings and non-compliance with law are disclosed pursuant to Section 5.7 and 5.11 of the Loan Agreement: 1 Complaint of gender-based discrimination filed by Karen Szabo in the United States District Court for the Western District of Pennsylvania on January 14, 1997. The Borrower has answered the Complaint, denying the allegations, discovery has concluded and Borrower's Motion for Summary Judgment has been filed. The Borrower does not anticipate an outcome from this claim that would have a Material Adverse Effect on the Borrower. 2 Complaint of gender-based discrimination filed by Cassidy Haus with the Equal Employment Opportunity Commission ("EEOC") on January 25, 1995. The EEOC dismissed her complaint and provided Ms. Haus with notice of her right to sue, but she has not yet exercised such right. The Borrower does not anticipate an outcome from this claim that would have a Material Adverse Effect on the Borrower. 3 Various Workers' Compensation claims which are being handled by Borrower's insurance company. 4 The FCC recently denied a Petition for Review of Staff Action relating to the license renewal by the FCC of Station KISW, 145 which Petition had been filed on November 13, 1996 by Vincent L. Hoffart, Sr. The Petition has the effect of preventing the granted license renewal for KISW from becoming a Final Order. The time for filing an appeal to the United States Court of Appeals for the D.C. Circuit has not expired. In addition, Borrower's FCC counsel received in the mail an informal objection purportedly filed by Mr. Hoffart against the 1997 application for renewal of the license for Station KISW, which application has been granted by the FCC. The staff of the FCC has informally advised Borrower's FCC counsel that the FCC has no record of the filing of Mr. Hoffart's latest objection. 5 The Borrower from time to time may be exposed to claims by government entities for escheat claims and for sales, excise, and similar taxes. 6 The Borrower received a notice from the Kansas City office of the United States Environmental Protection Agency ("EPA") regarding liability for 61 pounds of PCB containing materials disposed of by the Borrower in the early 1980's, originating at a Station in Minnesota which Borrower sold in 1995, at a licensed incinerator disposal facility in Kansas City. The site is the subject of an EPA cleanup and cost recovery operation. EPA has verbally informed the Borrower's counsel that the Borrower will likely qualify for de minimis status, and that the Borrower's liability should be less than $10,000. The Borrower has also been verbally informed that the total cleanup cost for this site is estimated to be between $12,000,000 to $15,000,000. 7 A complaint alleging race discrimination filed by Ruby Aquino with the EEOC on April 1, 1998. The EEOC dismissed the complaint on August 6, 1998. Ms. Aquino has ninety (90) days from that date to file a law suit in a state or federal court. 8 A complaint alleging gender and age discrimination filed by Rick Bauman in the Superior Court of Washington for King County on July 23, 1998. The case was removed to the United States District Court for the Western District of Washington at Seattle and Borrower has filed an answer with that Court denying the substantive allegations asserted. Discovery is ongoing. The matter is covered under the Borrower's - 2 - 146 Employment Practices Liability Insurance policy, which has a $50,000 deductible. The Borrower does not anticipate an outcome from this claim that would have a Material Adverse Effect on the Borrower. 9 A complaint alleging defamation filed by Terry Reed, Janis Reed, and Ann Funk, on behalf of themselves and others similarly situated in the United States District Court for the Western District of Missouri Southern Division on August 7, 1998. The Borrower intends to file an answer with the District Court denying the substantive allegations asserted. The matter is covered under the Borrower's Broadcasters Errors and Omissions Insurance policy, which has a $10,000 deductible. The Borrower does not anticipate an outcome from this claim that would have a Material Adverse Effect on the Borrower. 10 A complaint alleging gender discrimination filed by Alison Miller in the Superior Court of California for Sacramento County on August 19, 1998. The case was removed to the United States District Court for the Eastern District of California on September 16, 1998. The Borrower intends to file an answer with the District Court denying the substantive allegations asserted. The matter is covered under the Borrower's Employment Practices Liability Insurance policy, which has a $50,000 deductible. The Borrower does not anticipate an outcome from this claim that would have a Material Adverse Effect on the Borrower. 11 In June, 1998, the Borrower received a letter from an attorney representing Scott Stone, who claims to have been injured at a concert sponsored by the Borrower's station KNDD in Seattle. No amount has been demanded and the matter has been turned over to the Borrower's insurance company, who will provide coverage for this claim. The Borrower does not anticipate an outcome from this claim that would have a Material Adverse Effect on the Borrower. - 3 - 147 EXHIBIT F TO LOAN AGREEMENT AMONG ENTERCOM COMMUNICATIONS CORP., KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS SYNDICATION AGENT, AND THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO Indebtedness; Liens Loan Agreement Sections 1.1, 5.10, and 8.1 In addition to Permitted Liens and Liabilities disclosed elsewhere in this Loan Agreement, Entercom's Assets are subject to liens and the Borrower has incurred liabilities as follows: The following liabilities which the Borrower has or will from time to time incur are disclosed pursuant to Section 5.10 of the Loan Agreement: (i) all material leases and contracts which have been disclosed in this Agreement; (ii) On February 8, 1996 the Borrower entered into a preliminary agreement for the Borrower to acquire the assets of radio station KWOD-FM, Sacramento, California, subject to approval by the Borrower's Board of Directors and lenders and the FCC, for the purchase price of $25,000,000; (iii) all other obligations and liabilities disclosed in this Loan Agreement and the exhibits and schedules hereto; (iv) Management and License Agreement with ECI License Company, L.P., a limited partnership dated December 23, 1992, as amended April 13, 1993, March 3, 1994, June 1, 1994, April 18, 1995, September 1, 1995, March 6, 1996, and August 1, 1996; (v) Interest Rate Agreement with Society National Bank dated May 12, 1995; (vi) employment agreement with Joseph M. Field dated as of January 1, 1989; (vii) contracts relating to the operation of the stations in the ordinary course of business including without limitation contracts for: (a) Arbitron and similar services; (b) Tapscan, Strata and similar computer ratings programming licenses; (c) AP, UPI and similar news services; (d) station traffic and accounting software licenses; (e) employment agreements with on-air talent; - 4 - 148 (f) ASCAP, BMI, SESAC and similar music licensing agreements; (g) Metro Traffic and similar traffic and information services; (h) Unistar, ABC, Westwood One and similar news network affiliation agreements; (i) national sales representation agreements; (j) contracts for television, direct mail, outdoor and other advertising type services promoting the stations; (k) contracts for audience, market and music research relating to the operation of the stations; and (l) contracts for sports broadcast rights. - 5 - 149 EXHIBIT G TO LOAN AGREEMENT AMONG ENTERCOM COMMUNICATIONS CORP., KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS SYNDICATION AGENT, AND THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO Material Contracts and Commitments; Licenses and Operating Agreements Loan Agreement Sections 5.14 and 5.16 The following material contracts and commitments, licenses and operating agreements are disclosed pursuant to paragraph 5.14 and 5.16 of the Loan Agreement: 1. All agreements and leases disclosed elsewhere in this Loan Agreement. 2. The FCC licenses listed in the attachment to this Exhibit G. 3. The Entercom 401(k) Savings and Retirement Plan. 4. Management and License Agreement between ECI License Company, L.P., a Pennsylvania limited partnership and Entertainment Communications, Inc., dated December 23, 1992, as amended April 13, 1993, March 3, 1994, June 1, 1994, September 1, 1995, March 6, 1996, and August 1, 1996. 5. West Tiger Mountain Master Antenna Owners Operating Agreement, dated July 26, 1988, Station Five Addition dated December 23, 1991, Station Six Addition, dated June 4, 1992, Station Seven Addition, dated January 16, 1997, Station Eight Addition, dated January 16, 1997, and Station Nine Addition, dated January 16, 1997. 150 6. The Borrower has entered into construction contracts relating to studio expansion projects in Seattle and Gainesville. In connection therewith, the Borrower has ordered substantial amounts of equipment to be installed in the expanded studios. All of the costs relating to this construction and equipment have been estimated and are included in the capital budgets provided to the Banks. 7. Asset Purchase Agreement, dated August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc. and Borrower pursuant to which Borrower and License Partnership will acquire substantially all of the assets relating to radio stations WEEI and WRKO, Boston, Massachusetts ("Boston I Transaction"). 8. Asset Purchase Agreement, dated August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc. and Borrower pursuant to which Borrower and License Partnership will acquire substantially all of the assets relating to radio stations WAAF and WWTM, Worcester, Massachusetts and WEGQ, Lawrence, Massachusetts ("Boston II Transaction"). 9. Asset Purchase Agreement, dated August 13, 1998, among CBS Radio, Inc., CBS Radio License, Inc. and Borrower pursuant to which Borrower and License Partnership will sell substantially all of the assets relating to radio stations WYUU, Safety Harbor, Florida and WLLD, Holmes Beach, Florida ("Tampa Transaction"). 10. Agreement, dated February 1, 1995, with Football Northwest, LLC (Seattle Seahawks) whereby Borrower is granted radio broadcast rights for the Seattle Seahawks franchise of the National Football League. 11. Interim Agreement, dated February 28, 1997, with the Kansas City Local of the American Federation of Television and Radio Artists ("AFTRA"). Negotiations for final collective bargaining agreement are ongoing. 12. Interim Agreement, dated February 28, 1997, with the Seattle Local of the AFTRA. Negotiations for final collective bargaining agreement are ongoing. - 2 - 151 13. Radio Broadcast Rights Agreement, dated March 5, 1998, with Kansas City Royals Baseball Corporation whereby Borrower is granted radio broadcast rights for the Kansas City Royals franchise of Major League Baseball. 14. Mariners/KIRO Radio Agreement, dated March 6, 1998, with The Baseball Club of Seattle, L.P. d/b/a Seattle Mariners Baseball Club whereby Borrower is granted radio broadcast rights for the Seattle Mariners franchise of Major League Baseball. 15. Agreement, dated January 26, 1998, with Madison Square Garden Network whereby Borrower is granted radio broadcast rights for New York Yankees franchise of Major League Baseball. [To be acquired from CBS in Boston II Transaction.] 16. Agreement, dated March 14, 1994, with Boston Celtics whereby Borrower is granted radio broadcast rights for Boston Celtics franchise of National Basketball Association. [To be acquired from CBS in Boston I Transaction.] 17. Agreement, dated December 14, 1994, with Boston College whereby Borrower is granted radio broadcast rights for Boston College football, basketball and hockey games. [To be acquired from CBS in Boston I Transaction.] 18. Agreement, dated April, 1997, with Boston Red Sox whereby Borrower is granted radio broadcast rights for Boston Red Sox franchise of Major League Baseball. [To be acquired from CBS in Boston I Transaction.] 19. Agreement, undated, with New England Patriots whereby Borrower is granted radio broadcast rights for New England Patriots franchise of National Football League. (Currently being renegotiated for new three season term). [To be acquired from CBS in Boston I Transaction.] 20. Asset Purchase Agreement, dated September 30, 1998, with Pinnacle Towers, Inc., pursuant to which Borrower will sell its interests in the communications tower located in Bradenton, Florida (formerly WLLD's main transmitter site) for the sum of $300,000 ("Pinnacle Transaction"). - 3 - 152 EXHIBIT H TO LOAN AGREEMENT AMONG ENTERCOM COMMUNICATIONS CORP., KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS SYNDICATION AGENT, AND THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO ERISA Liabilities and Plans Loan Agreement Section 5.15 The following are the Employee Benefit Plans disclosed pertaining to Section 5.15 of the Loan Agreement (for a more complete description, please see the attached Entercom Employee Handbook): 1. The Borrower maintains a medical, dental, life, and LTD insurance plan for its employees and certain employees' dependents. 2. The Borrower's termination policy. 3. The Borrower's vacation policy. 4. The Borrower's leave policy. 5. Borrower's 401(k) Savings and Retirement Plan, a copy of the summary booklet describing this plan is attached. 6. Borrower's Section 125 Medical Spending Account Plan and Dependent Care Spending Account Plan. 153 EXHIBIT I TO LOAN AGREEMENT AMONG ENTERCOM COMMUNICATIONS CORP., KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS SYNDICATION AGENT, AND THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO Real Estate Loan Agreement Section 5.21 A. The following is the real estate owned by Borrower: California 1 KSEG transmitter site at 701 North Market Boulevard, Sacramento, Sacramento County, California. 2 KCTC nighttime transmitter site at 7907 Antelope North Road, Sacramento County, California. Florida 3 WYUU main transmitter site at 12700 Park Boulevard, Seminole, Pinellas County, Florida. [This property is to be sold to CBS in the Tampa Transaction.] 4 WKTK studio site at 1440 N.E. Waldo Road, Gainesville, Alachua County, Florida. 5 WKTK main transmitter site at Route 1, Morriston, Levy County, Florida. 6 WKTK transmitter site at County Road 343, Gulf Hammock, Levy County, Florida. 154 Kansas 7 KCMO/KLTH/KMBZ studio and KMBZ transmitter site at 4935 Belinder Road, Westwood, Johnson County, Kansas. 8 WDAF transmitter site at 8105 Mission Road, Prairie Village, Johnson County, Kansas. Massachusetts 9 WEEI transmitter site at 1555 Central Avenue, Needham, Norfolk County, Massachusetts. [To be acquired in Boston I Transaction.] 10 WRKO transmitter site at 8 Great Meadow Road, Burlington, Middlesex County, Massachusetts. [To be acquired in Boston I Transaction.] 11 WWTM transmitter site at 181 Moreland Street, Worcester, Worcester County, Massachusetts. [To be acquired in Boston II Transaction.] Missouri 12 Approximately 50 acres of undeveloped land (adjacent to former KCMO transmitter site) at 400 N.E. Cookingham Road, Kansas City, Clay County, Missouri. 13 KCMO transmitter site at 12416 North Eastern Road, Kansas City, Clay County, Missouri. New York 14 WBBF transmitter site at 2670 South Clinton Avenue, Rochester, Monroe County, New York. Oregon 15 KFXX transmitter site at 15351 S.E. Johnson Road, Clackamas, Clackamas County, Oregon. - 2 - 155 Pennsylvania 16 Easement for Spring Hill tower site at 2500 East Lane, Pittsburgh, Allegheny County, Pennsylvania. Washington 17 KEDO transmitter site at 3379 Olive Way, Longview, Cowlitz County, Washington. 18 KLYK transmitter site at 3684 Mt. Brynion Road, Kelso, Cowlitz County, Washington. 19 KEDO/KLYK studios at 1130 14th Avenue, Longview, Cowlitz County, Washington. 20 KNDD transmitter site at Cougar Mountain, 6501 173rd Avenue, S.E., Issaquah, Washington. 21 KNWX transmitter site at 22841 Dockton Road, S.W., Vashon, King County, Washington. 22 KIRO transmitter site at 23410 Dockton Road, S.W., Vashon, King County, Washington. 23 Easement for KIRO transmitter site at Queen Anne Hill, Seattle, King County, Washington. 24 KISW studio at 712 Aurora Avenue North, Seattle, King County, Washington. 25 KISW transmitter site at 9201 Roosevelt Way North, Seattle, King County, Washington. 26 KBAM transmitter site at 966 Lone Oak Road, Seattle, Cowlitz County, Washington. B. The following are all of the real estate sites (excluding sales offices, news bureau offices, storage warehouses, and parking lots) leased by Borrower: California - 3 - 156 1 KXOA transmitter site at 820 West Delano Street, Sacramento County, California leased pursuant to Lease with California State University at Sacramento, dated March 7, 1985. 2 KRXQ/KDND/KSEG/KCTC/KSSJ studios at 5345 Madison Avenue, Sacramento, California, Suite 100 leased pursuant to Lease with DeMartini Joint Account, dated November 1, 1988, as amended, and Suite 300 leased pursuant to Lease with DeMartini Joint Account, dated March 13, 1995, as amended. 3 KBYA transmitter site at 5831 Rosebud Lane, Sacramento, California pursuant to Lease with American Tower Systems, L. P., dated June 23, 1997. 4 KCTC daytime transmitter site at 3802 Garden Highway, Sacramento County, California leased pursuant to Lease with American Tower Systems Corporation, dated January 1, 1998. 5 KRXQ transmitter site at 14600 Clarkesville Road, Folsom, Sacramento County, California leased pursuant to Lease with American Tower Systems, L.P., dated September 16, 1998. Florida 6 WYUU studio at 9721 Executive Center Drive, St. Petersburg, Pinellas County, Florida, leased pursuant to Lease with Koger Management, Inc., dated April 24, 1995, as amended. 7 WYUU auxiliary transmitter site at 10608 Gandy Boulevard, St. Petersburg, Pinellas County, Florida leased pursuant to Lease with Lodestar Site Management, Inc., dated November 1, 1993. 8 WISP main transmitter site at 4301 32nd Street, N.W., Bradenton, Manatee County, Florida land leased pursuant to Ground Lease with Steven A. Wilson and Maureen B. Wilson, dated December 1, 1989. - 4 - 157 9 WSKY studio at Budd Office Park, 900 N.W. Eighth Avenue, Gainesville, Alachua County, Florida leased pursuant to Lease with Harvey M. Budd, commencing November 1, 1991, as amended. 10 WSKY studio at Centroplex Office Park, 3600 N.W. 43rd Street, Gainesville, Alachua County, Florida leased pursuant to Lease with Cameo Homes of Florida, Inc., commencing November 15, 1998. 11 WRRX transmitter site at Alachua County, Florida leased pursuant to Lease with Tower Properties of Florida, Inc., dated December 22, 1995. 12 WRRX transmitter site at Alachua County, Florida leased pursuant to Lease with Tower Properties of Florida, Inc., dated March, 1996. Kansas 13 KUDL auxiliary transmitter site at 6230 Eby Street, Merriam, Johnson County, Kansas leased pursuant to Lease with TeleCom Towers Mid-Atlantic, L.P., dated July 24, 1990. Massachusetts 14 WEEI/WRKO/WEGQ studio site at 116 Huntington Avenue, Boston, Suffolk County, Massachusetts leased pursuant to Lease with JMB/Urban Huntington Limited Partnership, dated September 30, 1993, as amended. [To be acquired in Boston I Transaction.] 15 WAAF/WWTM studio site at Two Westborough Business Park, 200 Friberg Parkway, Westborough, Worcester County, Massachusetts leased pursuant to Lease with Westboro Two Trust, dated May 26, 1995, as amended. [To be acquired in Boston II Transaction.] 16 WAAF tower site (ground) at Asnebumskit Hill, Paxton, Worcester County, Massachusetts leased pursuant to Lease with Radio Tower Communications Corp., dated January 1, 1996. [To be acquired in Boston II Transaction.] - 5 - 158 17 WAAF tower site at Asnebumskit Hill, Paxton, Worcester County, Massachusetts leased pursuant to Lease with Paul and Eileen Flynn, dated February 18, 1982. [To be acquired in Boston II Transaction.] 18 WEGQ tower site at 100 Lakeland Park Drive, Peabody, Essex County, Massachusetts leased pursuant to Lease with American Tower Systems, L. P., dated August 8, 1996. [To be acquired in Boston II Transaction.] Missouri 19 KYYS tower site at 23rd Street and Topping Avenue, Kansas City, Jackson County, Missouri leased pursuant to Lease with KMBC Division of the Hearst Corporation, dated October 9, 1989. 20 KCMO(AM) tower site at 125 East 32nd Street, Kansas City, Jackson County, Missouri leased pursuant to Lease with Meredith Corporation, dated June 21, 1983. 21 KUDL transmitter site land at 2800 Wallace, Kansas City, Jackson County, Missouri leased pursuant to Ground Lease with Bonanza Gardens Investments, Inc., dated June 23, 1986, as amended. 22 WDAF RPU antenna site at 3030 Summit, Kansas City, Jackson County, Missouri leased pursuant to Lease with CBS Radio, Inc., dated January 1, 1998. New York 23 WBEE transmitter site at 1427 Five Mile Line Road, Penfield, Monroe County, New York leased pursuant to Lease with Vincent A. Lopopolo, dated May 13, 1980, which includes an option to purchase. 24 WBEE/WBBF/WKLX studios at Suite 500, B. Forman Building, Midtown Plaza, Rochester, Monroe County, New York leased pursuant to Lease with McCurdy & Company, Inc., dated July 1, 1983, as amended. - 6 - 159 25 WQRV studio at 5620 South Lima Road, Avon, Livingston County, New York, leased pursuant to Lease with Radio Livingston, L.P., dated December 26, 1996. 26 WKLX transmitter site at 281 Colfax Street, Rochester, Monroe County, New York leased pursuant to Lease with Sky Broadcasting of Rochester, Inc., dated August 3, 1987. 27 WQRV transmitter (land) site at 6425 East Avon-Lima Road, Avon, Livingston County, New York leased pursuant to Ground Lease with Alfred B. Ulrop, dated June 2, 1992. 28 WQRV transmitter (tower) site at 6425 East Avon-Lima Road, Avon, Livingston County, New York leased pursuant to Lease with Genesee County Video Corp., dated July 1, 1993. Oregon 29 KGON/KNRK/KFXX studios at 706 S.W. Bancroft Street, Multnomah County, Portland, Oregon pursuant to Lease with T & E Investments, dated May 5, 1997. 30 KNRK transmitter site at Mt. Scott, 9790 S.E. East View Drive, Happy Valley, Clackamas County, Oregon leased pursuant to Lease with Portland General Electric Company, dated October 8, 1992, as amended. 31 KGON transmitter site at S.W.19th Avenue and Seymour Street, Portland, Multnomah County, Oregon leased pursuant to Lease with KSGO/KGON, Inc., dated October 15, 1992. 32 KNRK auxiliary transmitter site at Mt. Scott, Mt. Scott Water Tower, S.E. Ridgeway Drive, Happy Valley, Clackamas County, Oregon leased pursuant to Lease with American Radio Systems Corporation, dated November 14, 1997. 33 KKSN(AM/FM)/KRSK studios at 888 S.W. Fifth Avenue, Portland, Multnomah County, Oregon leased pursuant to - 7 - 160 Lease with Pioneer Office Limited Partnership, dated February 22, 1993, as amended. 34 KRSK transmitter (land) site at High Camp Road, Mollala, Clackamas County, Oregon leased pursuant to Ground Lease with Cavenham Forest Industries, Inc., dated September 1, 1986, as amended. 35 KKSN(FM) transmitter (tower) site at 4700 Council Crest Drive, Portland, Multnomah County, Oregon leased pursuant to Lease with KSGO/KGON, Inc., dated October 16, 1989. 36 KKSN(AM) transmitter (land) site at 4618 N.E. 158th Street, Portland, Multnomah County, Oregon leased pursuant to Ground Lease with Don W. Burden, dated January 18, 1980, as amended. Pennsylvania 37 Borrower's corporate offices at 401 City Avenue, Suite 409, Bala Cynwyd, Montgomery County, Pennsylvania leased pursuant to Lease with The Equitable Life Assurance Company of the United States, dated July 24, 1995, as amended. Washington 38 KBSG/KMTT/KNDD/KIRO transmitter (land) site at West Tiger Mountain, Issaquah, Washington leased pursuant to Permit with Weyerhaeuser Company, dated January 1, 1988, as amended. 39 KMTT/KNDD/KIRO transmitter (antenna) site at West Tiger Mountain, Issaquah, Washington used pursuant to Master Antenna Owners Agreement, dated July 26, 1988, as amended. 40 KNDD/KMTT studios at Metropolitan Park West, 1100 Olive Way, Seattle, Washington pursuant to Lease with Benaroya Capital Corporation, dated August 29, 1984, as amended. - 8 - 161 41 KBSG studio at Metropolitan Park East, 1730 Minor Avenue, Seattle, Washington leased pursuant to Lease with Benaroya Capital Company, LLC, dated August 7, 1998, as amended. 42 KRQT studio site at Advocate Building, 21 Cowlitz West, Castle Rock, Washington leased pursuant to Lease with Gary and Valorie Kennedy, dated September 1, 1993. 43 KIRO/KNWX studios at 1820 Eastlake Avenue, Seattle, King County, Washington leased pursuant to Lease with Barnard Family Limited Partnership, dated May 26, 1995, as amended. 44 KMTT (FM) auxiliary transmitter site at 8971 S.E. View Park, Port Orchard, Kitsap County, Washington pursuant to Lease with Pacific Lutheran University, dated February 28, 1991. 45 KMTT translator site at 413 Lilly Road, N.E., Olympia, Thurston County, Washington leased pursuant to Lease with Sisters of Providence in Washington d/b/a St. Peter Hospital, dated July 1, 1993. 46 KBSG(AM) transmitter (daytime) (land) site at 1408 West Main Street, Auburn, Washington leased pursuant to Ground Lease with Garre Family Trust, dated November 2, 994. 47 KBSG(AM) transmitter (nighttime) (land) site at 3102 Black Diamond Road, Auburn, Washington leased pursuant to Ground Lease with Dennis Garre & Robert Barkshire, dated June 19, 1989. 48 KBSG(FM) transmitter site at Indian Hill, Tacoma, Pierce County, Washington leased pursuant to Lease with Western Tele-Communications, Inc., dated April 8, 1987. 49 KBSG RPU site at Bremerton, Kitsap County, Washington leased pursuant to Lease with Kelly Television Company, dated October 26, 1995. - 9 - 162 50 KNDD transmitter (standby license to use road) site at Cougar Mountain, Issaquah, King County, Washington access pursuant to License with Ratelco Properties Corp., dated August 1, 1996. 51 KNDD transmitter (access road) site at Cougar Mountain, Issaquah, Washington access pursuant to Grant of Easement for Access and Power Lines with U.S. West Communications, Inc., dated August 28, 1998. 52 KISW transmitter site at Cougar Mountain, Issaquah, Washington leased pursuant to Lease with Ratelco Properties Corporation, dated October 1, 1995. 53 KISW translator site at 2724 Alki Avenue, S.W., Seattle, Washington leased pursuant to Lease with Les D. Pritchett, dated July 8, 1996. 54 KISW translator site at 3440 Belvidere S.W. Seattle, Washington leased pursuant to Lease with Gary Crow, dated May 30, 1997. 55 KRQT transmitter (land) site at Abernathy Mountain, Cowlitz County, Washington leased pursuant to Ground Lease with Mid-Valley Resources, Inc., dated May 1, 1993. 56 KRQT transmitter site at 3701 Mt. Brynion Road, Kelso, Washington leased pursuant to Lease with Northwest Tower Systems, dated December 7, 1993. - 10 - 163 EXHIBIT J TO LOAN AGREEMENT AMONG ENTERCOM COMMUNICATIONS CORP., KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS SYNDICATION AGENT, AND THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO Environmental Compliance Loan Agreement Section 5.25 1. All matters disclosed in Environmental audits and reports supplied to Administrative Agent, including small amounts of asbestos at several sites recently acquired by the Borrower. 2. Borrower was the Lessee of a transmitter site on Three Sisters Mountain, Pierce County, Washington, where two underground diesel oil storage tanks were located. As part of Borrower's vacation of this site in 1993 and sale of its tower and building to Motorola, Borrower removed these tanks. In the process of the removal and certification of these tanks minor soil contamination from overfill spillage over the years was discovered. This contamination was remedied and all necessary governmental certifications of the site were obtained prior to the turnover to Motorola. 3. During the period 1986 through approximately 1990 the Borrower conducted a program to remove all PCB's from the Borrower's transmission equipment. This process was completed using licensed transporters and incineration facilities. Certificates of destruction for all removed material were obtained. No spills were involved. 4. Borrower maintains an underground storage tank at its West Tiger Mountain transmitter site near Issaquah, Washington. This tank holds diesel fuel for the emergency generator, is a 164 double-walled tank and is in full compliance with all laws and regulations relating to underground tanks. 5. The KIRO-AM transmitter site located in King County, Washington contains an underground storage tank. The tank belongs to the Federal Emergency Management Agency (FEMA), which is responsible for the tank. The tank stores diesel fuel for the FEMA emergency generator made available to KIRO-AM. 6. The Army Corps. of Engineers recently removed, on behalf of FEMA, an underground storage tank located at the KFXX transmitter site in Oregon City, Oregon. The tank belonged to FEMA, who was responsible for the tank. The tank stored diesel fuel for the FEMA emergency generator made available to KFXX. Soil testing at the site of removal did not indicate any contamination. 7. Bonneville International Corporation, prior owner of KMBZ removed a 300 gallon underground diesel fuel storage tank located at the KMBZ studio and transmitter site in Westwood, Kansas and replaced it with a new double-walled tank complying with all laws and regulations relating to underground tanks. No soil contamination was observed during this process. 8. The Borrower received a notice from the Kansas City office of the United States Environmental Protection Agency ("EPA") regarding liability for 61 pounds of PCB containing materials disposed of by the Borrower in the early 1980's, originating at a Station in Minnesota which Borrower sold in 1995, at a licensed incinerator disposal facility in Kansas City. The site is the subject of an EPA cleanup and cost recovery operation. EPA has verbally informed the Borrower that it will likely qualify for de minimis status, in which case, the Borrower's liability should be less that $10,000. The Borrower has also been verbally informed that the total cleanup cost for this site is estimated to be between $12,000,000 to $15,000,000. 9. Several years ago, a leaking underground storage tank ("LUST") was removed from the WDAF transmitter site at 8105 - 2 - 165 Mission Road, Prairie Village, Kansas. The contaminated soil surrounding the LUST was also removed. However, the Kansas Department of Environmental Protection has not issued a closure certification for the site and may require further soil remediation. The prior owner of the site, Citicasters Co. ("Citicasters"), is pursuing closure of the site with the State of Kansas and American Radio Systems Corporation ("ARS") remains liable to pay any remediation costs imposed upon Borrower in connection therewith. 10. Asbestos containing materials ("ACM") which had been identified inside the transmitter building at the WDAF transmitter site at 8105 Mission Road, Prairie Village, Kansas have been removed by a licensed remediation firm. ARS, pursuant to its contractual obligation, has reimbursed Borrower for the full cost of such remediation. 11. A LUST also exists at a secondary WDAF tower site at 3030 Summit, Kansas City, Missouri. WDAF's presence at the site is de minimis (two RPU's are located on the tower and no WDAF owned equipment is present in any buildings at the site) and ARS remains liable for the costs of any remediation which might be imposed upon Borrower in connection therewith. 12. An underground storage tank and a leaking aboveground storage tank were removed, in the mid 1990's, from the WBBF transmitter site located at 2670 South Clinton Avenue, Rochester, New York. Some soil contamination was noted and removed at the time the tanks were removed. The New York Department of Environmental Conservation ("NYDEC") did not require remediation. The Borrower has been verbally advised by Heritage Media Corporation, prior owner of WBBF, that the site has now been removed by NYDEC from a list of potential contaminated sites, however, no documents confirming that assertion have been received by Borrower. 13. Various environmental conditions at the WEEI transmitter site at 1555 Central Avenue, Needham, Massachusetts have been identified in Phase I Environmental Site Assessment Report delivered to Borrower in connection with the - 3 - 166 Boston I Transaction ("WEEI Report"). The WEEI Report recommends: (a) sampling and analysis of on-site well water for contaminants associated with an adjacent on-site septic system leach field; (b) cleanup of lubricating oil stain on concrete pad beneath emergency generator located in transmitter building; (c) further analysis of tower paint, and soil beneath tower, for lead content, and, if necessary, remediation of same; (d) sampling and analysis of suspected asbestos containing materials in thermal pipe wrap in boiler room of transmitter building, and, if necessary, remediation of same; and (e) sampling and analysis of soil around Boston Edison substation transformer for PCBs, and if necessary, remediation of same (unless Boston Edison informs environmental consultant that such transformer never contained PCBs). 14. Various environmental conditions at the WRKO transmitter site at 8 Great Meadow Road, Burlington, Massachusetts have been identified in Phase I Environmental Site Assessment Reports delivered to Borrower in connection with the Boston I Transaction ("WRKO Reports"). The WRKO Reports recommend: (a) further analysis of tower paint for lead content, and, if necessary, remediation of same; (b) further analysis of suspected asbestos containing materials in thermal pipe wrap inside transmitter building, and, if necessary, remediation of same; and (c) further analysis of subsurface soil and groundwater due to down gradient position of transmitter site and close proximity to several hazardous waste and CERCLIS list sites in area. 15. Various environmental conditions at the WWTM transmitter site at 181 Moreland Street, Worcester, Massachusetts have been identified in Phase I Environmental Site Assessment Reports delivered to Borrower in connection with the Boston II Transaction ("WWTM Reports"). The WWTM Reports recommend: (a) further analysis of tower paint for lead content, and, if necessary, remediation of same; and (b) further analysis of suspected asbestos containing materials in floor tile and mastic inside transmitter building, and, if necessary, remediation of same. - 4 - 167 EXHIBIT L TO LOAN AGREEMENT AMONG ENTERCOM COMMUNICATIONS CORP., KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS SYNDICATION AGENT, AND THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO Existing Interests in Partnerships and Joint Ventures Loan Agreement Section 8.10 The following Partnerships, Joint Ventures and other agreements are permitted under this Loan Agreement: 1. All Partnerships and Joint Venture type agreements disclosed elsewhere in this Loan Agreement and the Exhibits hereto. 2. Any Partnership or Joint Venture Agreements for the operation of a multiplexed or common antenna facility similar to those disclosed on Exhibit G hereto. 3. Local Marketing Agreements, Time Brokerage Agreements and similar agreements for the operation of any Station to the extent permitted pursuant to Section 8.14(b), including without limitation the Time Brokerage Agreements with CBS Radio, Inc. relating to the operation of the Stations to be acquired by Borrower in the Boston I Transaction and Boston II Transaction, and relating to the Stations to be sold by Borrower in the Tampa Transaction. 4. Joint Sales Agreements and similar agreements with other broadcasters for the sale of broadcast advertising time, including without limitation the Joint Sales Agreement with Classic Radio, Inc., dated May 20, 1997, relating to KING(FM), Seattle, Washington. 168 EXHIBIT N TO LOAN AGREEMENT AMONG ENTERCOM COMMUNICATIONS CORP., KEY CORPORATE CAPITAL INC., AS ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS SYNDICATION AGENT, AND THE FINANCIAL INSTITUTIONS WHICH ARE A PARTY THERETO Material Labor Disputes Loan Agreement Section 5.24 The following labor matters are disclosed pursuant to Section 5.24 of the Loan Agreement: 1. Karen Szabo filed a complaint of gender-based discrimination in the United States District Court for the Western District of Pennsylvania on January 14, 1997. The Borrower has answered the Complaint, denying the allegations, discovery has concluded, and Borrower's Motion for Summary Judgment has been filed. The Borrower does not anticipate an outcome from this claim that would have a material adverse effect on the Borrower. 2. Cassidy Haus filed a complaint of gender-based discrimination with the Equal Employment Opportunity Commission ("EEOC") on January 25, 1995. The EEOC dismissed her complaint and provided Ms. Haus with notice of her right to sue, but she has no yet exercised such right. The Borrower does not anticipate an outcome from this claim that would have a material adverse effect on the Borrower. 3. Ruby Aquino filed a complaint of race-based discrimination with the EEOC on April 1, 1998. The EEOC dismissed the complaint on August 6, 1998. 169 4. Rick Bauman filed a complaint alleging gender and age discrimination in the Superior Court of Washington for King County on July 23, 1998. The case was removed to the United States District Court for the Western District of Washington at Seattle and Borrower has filed an answer with that Court denying the substantive allegations asserted. Discovery is ongoing. The Borrower does not anticipate an outcome from this claim that would have a material adverse effect on the Borrower. 5. Alison Miller filed a complaint alleging gender discrimination in the Superior Court of California for Sacramento County on August 19, 1998. The case was removed to the United States District Court for the Eastern District of California on September 16, 1998. The Borrower intends to file an answer with the District Court denying the substantive allegations asserted. The Borrower does not anticipate an outcome from this claim that would have a material adverse effect on the Borrower. 6. Borrower has been negotiating for sometime with AFTRA regarding the terms of a collective bargaining agreement for the programming employees at KIRO(AM/FM) and KNWX(AM), Seattle, Washington. AFTRA has begun a publicity campaign to try to force the Borrower to change its position on certain issues. Although talk of a strike has circulated, no formal strike vote has been taken. - 2 - 170 ACKNOWLEDGMENT AND AGREEMENT OF STOCKHOLDERS Each of the undersigned hereby certifies that it is a stockholder of Entercom Communications Corp., a Pennsylvania corporation (the "Borrower"), and consents to the execution and delivery by the Borrower of the foregoing First Amendment to Loan Agreement and the Amended Notes described therein and acknowledges and agrees that the Borrower Pledge Agreement and each other Collateral Document (as those terms are defined in the Loan Agreement, and as such documents may be amended from time to time) to which it is a party, and all of its respective obligations thereunder, remain in full force and effect, and that the security interests granted pursuant to the Borrower Pledge Agreement secure all of the Obligations, as increased pursuant to the First Amendment to Loan Agreement. STOCKHOLDERS: JOSEPH M. FIELD MARIE H. FIELD S. GORDON ELKINS TRUSTEE, U/D/T DATED OCTOBER 9, 1992 FBO MARIE H. FIELD DAVID J. FIELD MARIE H. FIELD & NANCY E. FIELD, TRUSTEES U/I 12/23/76 FOR DAVID J. FIELD S. GORDON ELKINS AND DAVID J. FIELD, TRUSTEES U/D/T OF JOSEPH M. FIELD DTD 9/30/92 FBO DAVID J. FIELD NANCY E. FIELD MARIE H. FIELD & DAVID J. FIELD, TRUSTEES U/I DATED 12/23/76 FOR NANCY E. FIELD S. GORDON ELKINS AND NANCY E. FIELD, TRUSTEES U/D/T OF JOSEPH M. FIELD DTD 9/30/92 FBO NANCY E. FIELD HERBERT KEAN MARJORIE K. FRADIN JON SAMUEL KEAN THOMAS H. GINLEY, JR., JT, WROS EMMA F. GINLEY, JT, WROS IRENE K. BARBIERI DANIEL M. KRAUS AGNES G. AYELLA DAVID J. FIELD AND S. GORDON ELKINS, TRUSTEES U/D/T OF JOSEPH M. FIELD DATED APRIL 24, 1998, F/B/O THE ISSUE OF DAVID J. FIELD 171 DAVID J. FIELD AND S. GORDON ELKINS, TRUSTEES U/D/T OF JOSEPH M. FIELD DATED APRIL 24, 1998, F/B/O THE ISSUE OF NANCY E. FIELD JOSEPH M. FIELD, TRUSTEE U/D/T OF DANIEL M. KRAUS DATED JULY 21, 1998, F/B/O SIDONIE KAZENEL JOHN SAMUEL KEAN AND MARJORIE KEAN FRADIN TRUSTEES U/D/T OF HERBERT KEAN DATED JULY 14, 1998, FBO THE ISSUE OF HERBERT KEAN BY:__________________________________ John C. Donlevie, By Power of Attorney from each of such Stockholders 172 ACKNOWLEDGMENT AND AGREEMENT OF SUBSIDIARIES Each of the undersigned hereby certifies that it is a Subsidiary of Entercom Communications Corp. (the "Borrower") and hereby consents to the execution and delivery by the Borrower of the foregoing First Amendment to Loan Agreement and the Amended Notes described therein and acknowledges and agrees that the Subsidiary Guaranty, the Subsidiary Security Agreement and each other Collateral Document (as those terms are defined in the Loan Agreement, as such documents may be amended from time to time) to which it is a party, and all of its respective obligations thereunder, remain in full force and effect, that the security interests granted pursuant to the Subsidiary Security Agreement secure all of the Obligations, as increased pursuant to the First Amendment to Loan Agreement, and that all such Obligations shall be Guaranteed Obligations for all purposes of the Subsidiary Guaranty. ECI LICENSE COMPANY, L.P. By:___________________________ Name:_________________________ Title:________________________ ECI LICENSE COMPANY, LP By:___________________________ Name:_________________________ Title:________________________ ENTERCOM ROCHESTER, INC. By:___________________________ Name:_________________________ Title:________________________ ENTERCOM BOSTON, INC. 173 By:___________________________ Name:_________________________ Title:________________________ ENTERCOM BOSTON, LLC By:___________________________ Name:_________________________ Title:________________________ ENTERCOM BOSTON LICENSE, LLC By:___________________________ Name:_________________________ Title:________________________ ENTERCOM PORTLAND, LLC By:___________________________ Name:_________________________ Title:________________________ ENTERCOM PORTLAND LICENSE, LLC By:___________________________ Name:_________________________ Title:________________________ - 2 - 174 ACKNOWLEDGMENT AND AGREEMENT OF PARTNERS Each of the undersigned hereby certifies that it is a partner of ECI License Company, L.P., a Pennsylvania limited partnership (the "License Partnership"), and consents to the execution and delivery by the Borrower of the foregoing First Amendment to Loan Agreement and the Amended Notes described therein and acknowledges and agrees that the Subsidiary Pledge Agreement and each other Collateral Document (as those terms are defined in the Loan Agreement, as such documents may be amended from time to time) to which it is a party, and all of its respective obligations thereunder, remain in full force and effect, and that the security interests granted pursuant to the Subsidiary Pledge Agreement secure all of the Obligations, as increased pursuant to the First Amendment to Loan Agreement. ECI INVESTORS CORPORATION By:___________________________ Name:_________________________ Title:________________________ ENTERCOM COMMUNICATIONS CORP. By:___________________________ Name:_________________________ Title:________________________ 175 FIRST AMENDMENT TO LOAN AGREEMENT This FIRST AMENDMENT TO LOAN AGREEMENT is made and entered into as of October 8, 1998, by and among ENTERCOM COMMUNICATIONS CORP., a Pennsylvania corporation formerly known as "Entertainment Communications, Inc." (the "Borrower"), the FINANCIAL INSTITUTIONS listed on the signature pages hereof (the "Banks"), KEY CORPORATE CAPITAL INC., as Administrative Agent and Documentation Agent (the "Administrative Agent"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Syndication Agent. RECITALS A. The Borrower, the Agents and the Banks entered into a Loan Agreement dated as of February 13, 1998 (the "Original Agreement"), pursuant to which the Banks agreed to make available to the Borrower loans of up to $300,000,000 on a reducing revolving credit basis. The Original Agreement, as amended hereby, may be referred to hereinafter as the "Loan Agreement." Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Loan Agreement. B. The Borrower desires to increase the amount of the Commitment to $350,000,000 pursuant to Section 2.15 of the Original Agreement, and add additional Banks. In addition, the Borrower has requested that if it consummates an initial public offering, (i) it be permitted to make a distribution to its existing shareholders in the amount of approximately $95,000,000, (ii) it not be required to make a mandatory prepayment of any portion of the proceeds of such offering, and (iii) certain other changes be made to the Original Agreement. Subject to the terms and conditions of this Amendment, the Agents and the Banks have agreed to such requests. AGREEMENTS 176 In consideration of the foregoing Recitals and of the covenants and representations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Agents and the Banks agree as follows: 1. Amendments. Subject to the satisfaction of the conditions set forth in Section 2 of this Amendment, the Original Agreement shall be amended as follows: (a) The definition of the term "Excess Cash Flow" in Section 1.1 shall be amended by adding the phrase "(excluding deferred income taxes)" after the words "income taxes" in clause (e) thereof. (b) The definition of the term "Fixed Charge Coverage Ratio" in Section 1.1 shall be amended (i) by adding the phrase "(excluding deferred income taxes)" after the words "income taxes" in clause (c) thereof and (ii) by deleting the current text of clause (d) thereof and replacing it with the following: "(d) any Capital Distributions (including, without limitation, Distributions to Pay Tax Liabilities, but excluding the Capital Distribution made pursuant to Section 8.9(a)(v)) made by the Borrower in such four quarter period". (c) The definition of the term "Leverage Ratio" in Section 1.1 shall be amended in its entirety to read as follows: "Leverage Ratio", as of any date, means the ratio of Total Debt as of such date to Operating Cash Flow for the four quarter period then ended or most recently ended; provided, however, that in calculating the Leverage Ratio, Total Debt shall be reduced by an amount equal to the QI Proceeds. (d) The definition of the term "Operating Cash Flow" in Section 1.1 shall be amended in its entirety to read as follows: "Operating Cash Flow" means, during any period, the consolidated Net Earnings of the Borrower for such period (excluding, to the extent included in Net Earnings, (i) the effect of any - 2 - 177 exchange of advertising time for non-cash consideration, such as merchandise or services, (ii) any other non-cash income or expense (including the cumulative effect of a change in accounting principles and extraordinary items), and (iii) any gains or losses net of taxes from sales, exchanges and other dispositions of property not in the ordinary course of business, including non-recurring charges relating to such exchanges or dispositions), minus any non- operating income (other than interest income and investment income), plus the sum of (a) depreciation on or obsolescence of fixed or capital assets and amortization of intangibles and leasehold improvements for such period, plus (b) Interest Expense incurred in such period plus interest incurred on the Indebtedness under the Subordinated Purchase Agreement, plus (c) federal, state and local income taxes incurred in such period to the extent deducted in calculating Net Earnings in such period (other than any such taxes resulting from any gains from sales and exchanges and other distributions not in the ordinary course of business), plus (d) the costs relating to discontinued operations, all on a consolidated basis and computed on the accrual method. For purposes of calculating Operating Cash Flow in any period (other than for purposes of calculating Excess Cash Flow): (A) any acquisition of any Station, and any sale or other disposition of any Station, which occurs during such period shall be deemed to have occurred on the first day of such period; (B) Operating Cash Flow shall be increased by the difference, if positive, of $802,000 minus the product of $66,833 times the number of months in the period from March 1, 1998, through the end of the period for which Operating Cash Flow is being calculated; - 3 - 178 (C) Operating Cash Flow shall be increased by the difference, if positive, of $323,000 minus the product of $26,917 times the number of months in the period from May 1, 1998, through the end of the period for which Operating Cash Flow is being calculated; (D) Operating Cash Flow for any period that includes May 31, 1998, shall be increased by an amount equal to $550,000; (E) Operating Cash Flow shall be increased by the difference, if positive, of $250,000 minus the product of $20,833 times the number of months in the period from the date of closing of the acquisition by the Borrower or any of its Subsidiaries of radio stations WAAF(FM), WWTM(AM) and WEGQ(FM) from CBS Radio, Inc., CBS Radio License, Inc. and ARS Acquisition II, Inc. (collectively, the "Boston II Sellers") pursuant to the Asset Purchase Agreement, dated as of August 13, 1998, among the Boston II Sellers and the Borrower, through the end of the period for which Operating Cash Flow is being calculated; (F) Due to sports rights losses attributable to the radio stations to be acquired pursuant to the Boston I Purchase Agreement, Operating Cash Flow for any period which includes any of the twelve full months prior to the consummation of the transactions contemplated by the Boston I Purchase Agreement shall be increased by an amount per month for each such month in such period which amount per month shall be set forth in a statement presented to the Administrative Agent at the closing of such acquisition, which statement shall be certified by the Borrower's chief financial officer and acceptable to the Administrative Agent; and (G) Operating Cash Flow shall be calculated as if the License Partnership were a wholly owned Subsidiary of the Borrower. - 4 - 179 (e) The definition of the term "Ratable Share" in Section 1.1 shall be amended in its entirety to read as follows: "Ratable Share" means, with respect to any Bank, its pro rata share of the Commitment, the Letters of Credit or the Loans, as such pro rata share may be modified by assignment pursuant to Section 12.7. As of the date of the First Amendment, the Ratable Shares of the Banks shall be as listed on Schedule 1.1 attached to the First Amendment. (f) Section 1.1 shall be amended by adding thereto the following new definitions in the proper alphabetical order: "Boston I Purchase Agreement" means the Asset Purchase Agreement, dated as of August 13, 1998, among the Borrower, CBS Radio, Inc. and CBS Radio License, Inc., pursuant to which the Borrower or one of its Subsidiaries will acquire radio stations WEEI(AM) and WRKO(AM). "First Amendment" means the First Amendment to Loan Agreement dated as of October 8, 1998, among the Borrower, the Agents and the Banks. "QI Proceeds" means, as of any date of determination, an amount equal to the difference of (a) the amount, if any, that the Borrower on such date has on deposit with a Qualified Intermediary (as that term is defined in Section 2.6(b)(iii)(B)) from the proceeds of a disposition of a Station permitted pursuant to Section 8.10, minus (b) the amount of tax liability that would have resulted, based on the Borrower's good faith estimate reasonably satisfactory to the Administrative Agent, had such disposition not been structured as a Like-Kind Exchange (as that term is defined in Section 2.6(b)(iii)(B)). "Qualified IPO" means an underwritten public offering of the Borrower's common stock that (a) - 5 - 180 is led by a nationally recognized underwriter, (b) is pursuant to a registration statement filed in accordance with the Securities Act of 1933, as amended, (c) occurs on or before March 31, 1999, and (d) yields gross aggregate proceeds to the Borrower of at least $50,000,000. "Tampa Purchase Agreement" means the Asset Purchase Agreement dated as of August 13, 1998, among the Borrower, CBS Radio, Inc. and CBS Radio License, Inc. relating to the sale by the Borrower of Stations WYUU(FM) and WLLD(FM). (g) Subsection 2.1(a) shall be amended in its entirety to read as follows: 2.1 The Revolving Commitment and the Revolving Loans. (a) Subject to the terms and conditions hereof, during the period from the Closing Date up to but not including the Termination Date, the Banks severally, but not jointly, shall make loans to the Borrower in such amounts as the Borrower may from time to time request but not exceeding in aggregate principal amount at any one time outstanding $350,000,000 (as such amount may be reduced pursuant to Section 2.1(d), 2.6 or any other provision of this Agreement, from time to time, the "Commitment"); provided, however, that in no event shall the aggregate principal amount of such loans plus the aggregate stated amount of the Letters of Credit exceed the Commitment. All amounts borrowed by the Borrower pursuant to this Section 2.1(a) and all amounts drawn under any Letter of Credit and not repaid may be referred to hereinafter collectively as the "Loans." Each Loan requested by the Borrower shall be funded by the Banks in accordance with their Ratable Shares of the requested Loan. A Bank shall not be obligated hereunder to make any additional Loan if immediately after making such Loan, the aggregate principal balance of all Loans made by such Bank - 6 - 181 plus such Bank's Ratable Share of any outstanding Letters of Credit would exceed such Bank's Ratable Share of the Commitment. The Loans may be comprised of Base Rate Loans or LIBOR Loans, as provided in Section 2.3. (h) Sections 2.6(b)(iii)(A) and (B) shall be amended by adding the phrase ", so long as the Borrower has not ceased to be treated as an 'S corporation' under the Code," after the phrase "or its stockholders" in the 8th, 29th and 35th lines of Section 2.6(b)(iii)(A) and in the last sentence of Section 2.6(b)(iii)(B). (i) Section 2.6(b)(v) shall be amended by adding the language "(other than pursuant to a Qualified IPO")" in the fourth line thereof after the word "interests." (j) Section 2.15 is hereby amended by deleting the text thereof and replacing it with the language: "[Intentionally Omitted]." (k) Section 3.1(b) shall be amended by adding the following language at the end of the first sentence thereof: ; provided, however, that the Applicable Margin shall also be determined on the date of closing of the transactions contemplated by the Tampa Purchase Agreement on the basis of information certified by the Borrower and acceptable to the Administrative Agent and presented to it on such date. (l) Section 7.12 shall be amended by adding the following language at the end thereof: ; provided, however, that in calculating Total Debt for purposes of this Section 7.12, (a) the principal amount of Loans made to the Borrower on the date of the consummation of the transactions contemplated by the Boston I Purchase Agreement and used by the Borrower to pay the purchase price thereunder shall be excluded for a period of time ending on the first to occur of the date that is - 7 - 182 thirty days after such consummation and the date on which funds are deposited with a Qualified Intermediary (as that term is defined in Section 2.6(b)(iii)(B)) from the proceeds of the sale contemplated by the Tampa Purchase Agreement (the "Tampa Contribution Date") and (b) the total amount contributed to such Qualified Intermediary from the proceeds of the sale contemplated by the Tampa Purchase Agreement shall be excluded for so long as such proceeds are held by such Qualified Intermediary. (m) Section 8.9(a) shall be amended by adding a new subsection (v) at the end thereof, which shall read as follows: (v) if the Borrower consummates a Qualified IPO, the Borrower may make a Capital Distribution to its stockholders no later than six months after such consummation in an aggregate amount which does not exceed the lesser of $95,000,000 and the net proceeds to the Borrower from such Qualified IPO, so long as: (A) the Borrower shall have demonstrated to the satisfaction of the Administrative Agent that the Borrower will be in compliance with all of the covenants contained herein after giving effect to such distribution; (B) no Possible Default or Event of Default exists at the time of making such distribution or would exist after giving effect thereto; and (C) the Borrower shall have delivered to the Administrative Agent a certificate of a financial officer of the Borrower using the most recently available quarterly financial statements in form and substance satisfactory to the Administrative Agent which shall contain calculations demonstrating on a pro forma basis the Borrower's compliance with the financial covenants set forth in this Section 8 after giving effect to such distribution. - 8 - 183 (n) The first paragraph of Section 8.10(c) and Sections 8.10(c)(i) and (ii) shall be amended in their entirety to read as follows: (c) As of the date of this Agreement, all of the assets of each Station, other than the FCC Licenses, are owned by the Borrower, and all of the FCC Licenses of the Stations are owned by the License Partnership. The Borrower desires (y) to create new Subsidiaries and contribute all of its operating assets relating to the Stations to such Subsidiaries and (z) either to acquire all of the outstanding capital stock and other equity interests of ECI Investors Corporation, so that the License Partnership becomes a wholly owned subsidiary of the Borrower or to create new Subsidiaries and contribute all of the FCC Licenses held by the License Partnership to such Subsidiaries. The Borrower shall have the right to so reorganize subject to the satisfaction of all of the following conditions: (i) each new Subsidiary shall be wholly owned by the Borrower; (ii) the License Partnership shall be wholly owned by the Borrower or all of the FCC Licenses of the Stations shall be transferred to one or more of such newly created wholly owned Subsidiaries which shall have no other assets or liabilities, and upon such transfer, the License Partnership shall be dissolved and liquidated; (o) Section 8.13(b) shall be amended (i) by adding the phrase "plus the stated amount of all outstanding Letters of Credit, minus the amount, if any, of QI Proceeds" after the word "Loans" in the second line thereof and (ii) by adding the following language at the end thereof: "provided, however, that for the period of time which is the lesser of thirty days and the period of time between the closing of the transactions contemplated by the Boston I Purchase Agreement - 9 - 184 and the closing of the transactions contemplated by the Tampa Purchase Agreement, the first ratio in Column C above (for the period from Closing through March 31, 1999) shall be 7.0:1.0 rather than 6.5:1.0." (p) Section 8.15 shall be amended in its entirety to read as follows: 8.15 "Fiscal Year" The Borrower shall not, and shall not permit any Subsidiary to, change its fiscal year; provided, however, that the Borrower may change its fiscal year and the fiscal year of its Subsidiaries to the calendar year. (q) The second sentence of Section 8.24 shall be amended by adding the phrase "if such issuance occurs prior to the termination of the Borrower Pledge Agreement pursuant to Section 8.10(c)" at the end thereof. (r) Section 9.11 shall be amended (i) by deleting the phrase "voting capital stock" in the fifth line thereof and replacing it with the phrase "voting power of the capital stock" and (ii) by deleting the period at the end of that Section and adding a new clause at the end thereof which shall read as follows: ; or the Borrower shall cease to own, directly or indirectly, all of the issued and outstanding capital stock, partnership interests or other equity interests of each License Subsidiary. (s) Section 12.4 shall be amended by deleting each reference to "Entertainment Communications, Inc." and replacing it with a reference to "Entercom Communications Corp." (t) Clause (c) of Section 12.12 shall be amended in its entirety to read as follows: (c) change the Commitment or the Ratable Share of any Bank (other than any change in Commitment or Ratable Share resulting from the sale of a participation in or assignment of any Bank's - 10 - 185 interest in the Commitment and Loans in accordance with subsection 12.7, (u) Schedule 1.1 and Exhibits D, E, F, G, H, I, J, L and N to the Original Agreement shall be deleted and replaced with Schedule I attached hereto. 2. Conditions to Effectiveness. The amendments set forth in Section 1 shall be effective on such date on which all of the following conditions are satisfied: (a) The Borrower shall have executed and delivered to each Bank an Amended and Restated Reducing Revolving Credit Note (collectively, the "Amended Notes") in the form attached hereto as Exhibit A. (b) The Borrower shall have paid all fees of the Agents and the Banks and payable pursuant to the terms of the Loan Agreement and the Fee Letters. (c) The Borrower shall have delivered to the Administrative Agent a certified copy of resolutions of the Board of Directors of the Borrower evidencing approval of the execution, delivery and performance of this Amendment, the Amended Notes and the other documents and instruments required pursuant hereto. (d) The stockholders of the Borrower, the License Partnership and the partners of the License Partnership shall have executed the Acknowledgments and Agreements attached hereto. (e) The Borrower shall have delivered to the Administrative Agent such other documents, instruments and opinions as the Administrative Agent or any Bank may reasonably request. 3. Representations, Warranties and Events of Default. (a) Except as amended hereby, the terms, provisions, conditions and agreements of the Original Agreement are hereby ratified and confirmed and shall remain in full force and effect. Each and every representation and warranty of the Borrower set forth in the Original Agreement (other than those - 11 - 186 which by their terms are limited to a specific date) is hereby confirmed and ratified in all material respects, and such representations and warranties as so confirmed and ratified shall be deemed to have been made and undertaken as of the date of this Amendment as well as at the time they were made and undertaken, except to the extent such representations and warranties have been affected by events contemplated by or permitted pursuant to the Loan Agreement or as previously disclosed to the Banks in writing. (b) The Borrower represents and warrants that: i) No Event of Default or Possible Default now exists or will exist immediately following the execution hereof or after giving effect to the transactions contemplated hereby. ii) All necessary corporate or stockholder actions on the part of the Borrower and the stockholders of the Borrower to authorize the execution, delivery and performance of this Amendment, the Amended Notes and all other documents or instruments required pursuant hereto or thereto have been taken; this Amendment, the Amended Notes and each such other document or instrument have been duly and validly executed and delivered and are legally valid and binding upon the Borrower and enforceable in accordance with their respective terms, except to the extent that the enforceability thereof may be limited by bankruptcy, insolvency or like laws or by general equitable principles. iii) The execution, delivery and performance of this Amendment, the Amended Notes and all other documents and instruments required pursuant hereto or thereto, and all actions and transactions contemplated hereby and thereby will not (A) violate, be in conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under (I) any provision of the Articles of Incorporation, By-Laws, partnership agreement, certificate of limited partnership, operating agreement, certificate of formation or any other governing document of the Borrower or any Subsidiary, (II) any arbitration award or any order of any court or of any other governmental agency or authority, (III) any license, permit or authorization granted to the Borrower or any Subsidiary or under which the Borrower or any Subsidiary operates, or (IV) any - 12 - 187 applicable law, rule, order or regulation, indenture, agreement or other instrument to which the Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary or any of their respective properties is bound and which has not been waived or consented to, or (B) result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever, except as expressly permitted in the Loan Agreement, upon any of the properties of the Borrower or any Subsidiary. iv) No consent, approval or authorization of, or filing, registration or qualification with, any governmental authority (including, without limitation, the FCC and any other Licensing Authority) is required to be obtained by the Borrower or any Subsidiary in connection with the execution, delivery or performance of this Amendment, the Amended Notes or any document or instrument required in connection herewith or therewith which has not already been obtained or completed. v) The Borrower is taking such actions and devoting such resources that, in the good faith exercise of its business judgment, it believes to be reasonably necessary to permit the proper functioning, in and following the year 2000, of the computer systems of the Borrower and its Subsidiaries and equipment containing embedded microchips (including systems and equipment supplied by others or with which the systems of the Borrower or its Subsidiaries interface). The Borrower believes that the cost to the Borrower and its Subsidiaries of such actions and of the reasonably foreseeable consequences of year 2000 to the Borrower and its Subsidiaries (including, without limitation, reprogramming errors and the failure of others' systems or equipment) will not result in an Event of Default or a Material Adverse Effect. The Borrower believes that, subject to completion of the actions referred to above, the computer and management information systems of the Borrower and its Subsidiaries are and, with ordinary course upgrading and maintenance, will continue to be, sufficient to permit the Borrower and its Subsidiaries to conduct their business without Material Adverse Effect. 4. Affirmation of the Borrower. The Borrower has executed this Amendment to consent to the amendments to the Original Agreement made pursuant hereto and to acknowledge that the security interests and liens granted by the Borrower to the - 13 - 188 Administrative Agent, for the benefit of the Banks, pursuant to the Borrower Security Agreement, the Subsidiary Pledge Agreement and the other Collateral Documents to which the Borrower is a party remain in full force and effect and shall continue to secure all Obligations, as increased pursuant hereto. 5. Fees and Expenses. As required under the Original Agreement, the Borrower will reimburse the Administrative Agent upon demand for all out-of-pocket costs, charges and expenses of the Administrative Agent (including reasonable fees and disbursements of special counsel to the Administrative Agent) in connection with the preparation, negotiation, execution and delivery of this Amendment and the other agreements or documents relating hereto or required hereby. 6. Counterparts. This Amendment may be executed in as many counterparts as may be convenient and shall become binding when the Borrower, the Agents and each Bank have executed at least one counterpart. 7. Governing Law. This Amendment shall be a contract made under and governed by the laws of the State of Ohio, without regard to the conflicts of law provisions thereof. 8. Binding Effect. This Amendment shall be binding upon and shall inure to the benefit of the Borrower, the Agents, the Banks and their respective successors and assigns. 9. Reference to Original Agreement. Except as amended hereby, the Original Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects. On and after the effectiveness of the amendments to the Original Agreement accomplished hereby, each reference in the Original Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import, and each reference to the Original Agreement or the original notes evidencing the Revolving Loans issued pursuant thereto in any Note or other Collateral Document, or other agreement, document or instrument executed and delivered pursuant to the Original Agreement, shall be deemed a reference to the Original Agreement, as amended hereby, or the Amended Notes, as the case may be. - 14 - 189 10. No Other Modifications; Same Indebtedness. The modifications effected by this Amendment and by the other documents and instruments contemplated hereby shall not be deemed to provide for or effect a repayment and re-advance of any of the Loans now outstanding, it being the intention of the Borrower, the Agents and the Banks that the Loans outstanding under the Original Agreement, as amended by this Amendment, be and are the same Indebtedness as that owing under the Original Agreement immediately prior to the effectiveness hereof. - 15 - 190 IN WITNESS WHEREOF, the parties have executed this First Amendment to Loan Agreement as of the date first above written. BORROWER: ENTERCOM COMMUNICATIONS CORP. By:___________________________ Name:_________________________ Title:________________________ BANKS: KEY CORPORATE CAPITAL INC. By:___________________________ Name: Kristen K. St. Pierre Title: Vice President BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION By:___________________________ Name:_________________________ Title:________________________ CIBC INC. By:___________________________ Name:_________________________ Title:________________________ FIRST UNION NATIONAL BANK - 16 - 191 By:___________________________ Name:_________________________ Title:________________________ FLEET BANK, N.A. By:___________________________ Name:_________________________ Title:________________________ U.S. BANK, N.A. By:___________________________ Name:_________________________ Title:________________________ BANK OF MONTREAL By:___________________________ Name:_________________________ Title:________________________ COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By:___________________________ Name:_________________________ Title:________________________ By:___________________________ Name:_________________________ Title:________________________ FIRST HAWAIIAN BANK - 17 - 192 By:___________________________ Name:_________________________ Title:________________________ SUNTRUST BANK, CENTRAL FLORIDA, N.A. By:___________________________ Name:_________________________ Title:________________________ UNION BANK OF CALIFORNIA, N.A. By:___________________________ Name:_________________________ Title:________________________ PROVIDENT BANK OF MARYLAND By:___________________________ Name:_________________________ Title:________________________ PNC BANK, NATIONAL ASSOCIATION By:___________________________ Name:_________________________ Title:________________________ SUMMIT BANK By:___________________________ Name:_________________________ - 18 - 193 Title:________________________ ISSUING BANK: KEY CORPORATE CAPITAL INC. By:___________________________ Name: Kristen K. St. Pierre Title: Vice President ADMINISTRATIVE AGENT: KEY CORPORATE CAPITAL INC. By:___________________________ Name: Kristen K. St. Pierre Title: Vice President SYNDICATION AGENT: BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION By:___________________________ Name: ________________________ Title: _______________________ - 19 - 194 SCHEDULE I TO FIRST AMENDMENT TO LOAN AGREEMENT SCHEDULE 1.1 Ratable Shares Ratable Share of Commitment Bank and Loans: KEY CORPORATE CAPITAL INC. 12.85714286% BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION 12.85714286% CIBC INC. 9.64285714% FIRST UNION NATIONAL BANK 6.78571429% FLEET BANK, N.A. 9.64285714% BANK OF MONTREAL 9.64285714% COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE 5.71428571% SUNTRUST BANK, CENTRAL FLORIDA, N.A. 5.71428571% UNION BANK OF CALIFORNIA, N.A. 5.71428571% U.S. BANK, N.A. 7.14285714% FIRST HAWAIIAN BANK 2.85714286% PROVIDENT BANK OF MARYLAND 2.85714286% PNC BANK, NATIONAL ASSOCIATION 5.71428571% SUMMIT BANK 2.85714286% Total: 100.000% ========== EX-10.10 14 ASSET PURCHASE AGREEMENT CBS RADIO 1 EXHIBIT 10.12 ASSET PURCHASE AGREEMENT BY AND AMONG ENTERCOM COMMUNICATIONS CORP., CBS RADIO, INC., AND CBS RADIO LICENSE, INC. DATED AS OF AUGUST 13, 1998 2 TABLE OF CONTENTS PAGE ARTICLE I. - DEFINITIONS......................................................1 1.1 DEFINITIONS.............................................1 ARTICLE II. - PURCHASE OF ASSETS..............................................5 2.1. PURCHASE AND SALE OF ASSETS.............................5 2.2. ALLOCATION OF VALUES....................................5 2.3. NON-ASSIGNABLE CONTRACTS................................6 ARTICLE III. - LIABILITIES....................................................7 3.1. ASSUMPTION OF LIABILITIES BY CBS........................7 3.2. OTHER LIABILITIES.......................................7 ARTICLE IV. - REPRESENTATIONS AND WARRANTIES..................................8 4.1. BY ENTERCOM.............................................8 4.2. BY CBS.................................................15 ARTICLE V. - CONDITIONS......................................................16 5.1. MUTUAL CONDITIONS......................................16 5.2. CONDITIONS OF CBS......................................17 5.3. CONDITIONS OF ENTERCOM.................................17 5.4. EFFECT OF TIME BROKERAGE AGREEMENT ON CLOSING CONDITIONS..............................17 ARTICLE VI. - COVENANTS AND OPERATIONS PRIOR TO CLOSING......................18 6.1. COVENANTS OF ENTERCOM..................................18 6.2. NEGATIVE COVENANTS OF ENTERCOM.........................20 6.3. NO CONTROL.............................................21 6.4. NO SOLICITATION OR HIRE OF EMPLOYEES...................21 6.5. COVENANT OF CBS........................................21 6.6. REAL PROPERTY SURVEYS..................................22 (i) 3 ARTICLE VII. - ACTIONS PRIOR TO CLOSING......................................23 7.1. APPLICATION TO COMMISSION..............................23 7.2. HART-SCOTT-RODINO NOTIFICATION.........................23 7.3. INSPECTION.............................................23 7.4. CONFIDENTIALITY........................................24 ARTICLE VIII. - CLOSING......................................................24 8.1. CLOSING................................................24 8.2. PRORATIONS.............................................25 8.3. CLOSING DELIVERIES TO CBS..............................26 8.4. CLOSING DELIVERIES TO ENTERCOM.........................27 8.5. COVENANTS OF FURTHER ASSURANCES; AVAILABILITY OF RECORDS............................28 8.6. RISK OF LOSS; DAMAGE TO PROPERTY.......................28 8.7. TAXES ON TRANSACTION...................................28 ARTICLE IX. - TERMINATION, DEFAULT AND INDEMNIFICATION.......................28 9.1. TERMINATION............................................28 9.2. EFFECT OF TERMINATION..................................29 9.3. REMEDIES...............................................29 9.4. INDEMNIFICATION........................................29 ARTICLE X. - ASSET EXCHANGE..................................................32 10.1. POSSIBLE ENTERCOM SECTION 1031 ASSET EXCHANGE..........32 10.2. POSSIBLE CBS SECTION 1031 ASSET EXCHANGE...............32 10.3. INDEPENDENT TRANSACTIONS...............................32 ARTICLE XI. - GENERAL PROVISIONS.............................................33 11.1. EXPENSES OF THE PARTIES................................33 11.2. BROKERS................................................33 11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS, AND WARRANTIES.....................................33 11.4. CONFIDENTIALITY........................................34 11.5. AMENDMENT AND WAIVER...................................34 11.6. EFFECT OF THIS AGREEMENT...............................34 11.7. TERMS GENERALLY........................................34 11.8. HEADINGS...............................................35 11.9. COUNTERPARTS...........................................35 (ii) 4 11.10. GOVERNING LAW; JURISDICTION............................35 11.11. BULK SALES LAWS........................................35 11.12. ASSIGNMENT.............................................35 11.13. NOTICES................................................35 11.14. ATTORNEYS' FEES........................................37 (iii) 5 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT MADE AND ENTERED INTO THIS 13TH DAY OF AUGUST, 1998, BY AND AMONG ENTERCOM COMMUNICATIONS CORP., A PENNSYLVANIA CORPORATION (HEREINAFTER "ENTERCOM"), CBS RADIO, INC., A DELAWARE CORPORATION (HEREINAFTER "CRI"), AND CBS RADIO LICENSE, INC., A DELAWARE CORPORATION (HEREINAFTER "CRLI") (CRI AND CRLI, COLLECTIVELY, "CBS"). RECITALS WHEREAS, pursuant to the Station Authorizations, Entercom owns and operates (directly or indirectly through one or more subsidiaries) radio stations WYUU(FM), Safety Harbor, Florida, and WLLD(FM), Holmes Beach, Florida (collectively, the "Stations"), and owns all of the Assets relating to the Stations; and WHEREAS, Entercom desires to sell the Station Assets, or at its election relinquish such assets in a transaction qualifying in whole or in part as a deferred like-kind exchange; and WHEREAS, Entercom and CBS have agreed, subject to prior approval by the Commission and certain other conditions, that Entercom shall sell, assign, transfer and convey the Assets to CBS or one or more Affiliates designated by CBS, in the manner and for the consideration described in this Agreement; and NOW, THEREFORE, in consideration of the mutual promises herein contained and of the representations and warranties hereinafter set forth and for other good and valuable consideration, the parties, intending to be legally bound hereby, agree as follows: ARTICLE I. DEFINITIONS 1.1 DEFINITIONS. As used herein, the following terms shall have the following respective meanings: "ADJUSTMENT TIME" shall mean with respect to each Station, 12:01:00 a.m. Eastern Standard or Daylight Time, as appropriate, on the Closing Date. "AFFILIATE" shall mean, with respect to any person or entity, a person or entity controlling, controlled by or under common control with such person or entity. "AGREEMENT" shall mean this Asset Purchase Agreement. "APPRAISAL" shall have the meaning set forth in Section 2.2.1 hereof. 6 "ASSETS" shall mean the Property and all of the Authorizations relating to the Stations. "ASSIGNMENT APPLICATIONS" shall have the meaning set forth in Section 7.1 hereof. "AUTHORIZATIONS" shall mean all of the licenses, permits, and authorizations granted by the Commission with respect to the operation of the Stations and all applications for Authorizations for the Stations pending before the Commission. "BARTER AGREEMENTS" shall mean contracts for the sale of time on the Stations in exchange for programming. "BOSTON I AGREEMENT" shall mean that certain Asset Purchase Agreement by and among CRI, CRLI, and Entercom for the sale and purchase of radio stations WRKO(AM) and WEEI(AM), dated as of August 13, 1998. "BOSTON II AGREEMENT" shall mean that certain Asset Purchase Agreement by and among CRI, CRLI, ARS Acquisition II, Inc., and Entercom for the sale and purchase of radio stations WAAF(FM), WWTM(AM), and WEGQ(FM), dated as of August 13, 1998. "CBS" shall mean the corporations identified as such in the Preamble of this Agreement. "CLOSING" shall mean the event of consummation of the transactions contemplated by this Agreement as more fully described in Article VIII of this Agreement. "CLOSING DATE" shall mean the date that the Closing occurs. "CODE" shall mean the Internal Revenue Code of 1986, as amended, and the applicable regulations issued thereunder. "COMMISSION" shall mean the Federal Communications Commission. "CONTAMINANT" shall mean and include any pollutant, contaminant, hazardous material (as defined in any of the Environmental Laws), toxic substances (as defined in any of the Environmental Laws), asbestos or asbestos-containing material, urea formaldehyde, polychlorinated biphenyls, regulated substances and wastes, radioactive materials, and petroleum or petroleum by-products, including crude oil or any fraction thereof, except that "Contaminant" shall not include small quantities of maintenance, cleaning and emergency generator fuel supplies customary for the operation of radio stations and maintained in compliance with all Environmental Laws in the Ordinary Course of Business. 2 7 "CONTRACTS" shall mean all agreements, arrangements, commitments, and undertakings, written or oral, expressed or implied, relating to the present or future operation of the Stations except for any Leases, including without limitation, Time Sales Agreements, Trade Agreements, Barter Agreements and Miscellaneous Contracts. "DEFAULT" shall mean the material default by a party hereto in the performance of its obligations under this Agreement. "ENTERCOM" shall mean the corporation identified as such in the Preamble of this Agreement. "ENVIRONMENTAL LAWS" shall mean any applicable federal, state or local law, statute, charter, ordinance, rule, or regulation or any governmental agency interpretation, or policy, including, without limitation, applicable safety/environmental/health laws such as, but not limited to, the Resource Conservation and Recovery Act of 1976, Comprehensive Environmental Response Compensation and Liability Act, Federal Emergency Planning and Community Right to Know Law, the Clean Air Act, the Clean Water Act, the Toxic Substance Control Act, and the Occupational Safety and Health Act, as any of the foregoing have been amended, and any permit, order, directive, court ruling or order, or consent decree applicable to or affecting the Property or any other property (real or personal) used by or relating to the Station in question promulgated or issued pursuant to any Environmental Laws which pertains to, governs, or controls the generation, storage, remediation, or removal of Contaminants or otherwise regulates the protection of health and the environment including, but not limited to, any of the following activities, whether on site or off site: (i) the emission, discharge, release, spilling, or dumping of any Contaminant into the air, surface water, ground water, soil, or substrata; or (ii) the use, generation, processing, sale, recycling, treatment, handling, storage, disposal, transportation, labeling, or any other management of any Contaminant. "FINAL ORDER" shall mean an order or action of the Commission that, by reason of expiration of time or exhaustion of remedies, is no longer subject to administrative or judicial reconsideration or review. "LEASES" shall mean all agreements, arrangements, or commitments and undertakings, written or oral, express or implied, for the use or occupation of any real or personal property used in the operation of the Stations. "LOSS" shall have the meaning set forth in Section 9.4.1 hereof. "MISCELLANEOUS CONTRACTS" shall mean Contracts and Leases entered into in the Ordinary Course of Business, which involve less than Twenty-Five Thousand Dollars ($25,000.00) individually and less than One Hundred Fifty-Thousand Dollars ($150,000.00) for all of the Stations in the aggregate, and which are not included in Schedule 4.1.6. 3 8 "NON-CONTINUING EMPLOYEES" shall have the meaning set forth in Section 6.5.1. "ORDINARY COURSE OF BUSINESS" shall mean the routine conduct of the business of the Station in question (excluding extraordinary, irregular, or abnormal transactions) on a basis consistent with the regular practice of such Station since January 1, 1998. "PERMITTED ENCUMBRANCES" shall mean: (i) encumbrances for taxes, assessments, or governmental charges or levies which are not yet due and payable, or that, subject to adequate security for payment, are being contested; (ii) easements, rights of way, or other encumbrances disclosed in this Agreement; (iii) easements, rights of way or other encumbrances that do not have a material adverse effect on the Assets or the operation of the Stations as currently operated; (iv) encumbrances imposed by law, such as materialmen's, mechanic's, carrier's, workmen's, or repairmen's liens or other similar encumbrances arising in the Ordinary Course of Business, securing obligations that are not overdue; (v) encumbrances securing indebtedness, which will be removed prior to or at the Closing; (vi) encumbrances pursuant to Contracts and Leases to be assumed by CBS pursuant to Section 3.1; and (vii) encumbrances listed on Schedule 4.1.8. "PROPERTY" shall mean all of the tangible and intangible property (other than the Authorizations), located at the Stations (including at the transmitter sites of the Stations), whether real, personal, or mixed, and all rights and interests which are used or held by Entercom or any of its Affiliates and necessary for use primarily in the operation of the Stations as presently conducted, including: (i) all of the rights, titles, and interests under the Leases and the Contracts relating to the Stations; (ii) the call letters, copyrights, trademarks, and other intellectual property associated with the Stations; (iii) originals or, if unavailable, photocopies, of all files, records, studies, data, lists, filings, general accounting records, books of account, computer programs and software, and logs, of every kind, relating to the operations or business of the Stations; and (iv) all of Entercom's or any of its Affiliates' rights under manufacturers' and vendors' warranties relating to items included in the Assets of the Stations; but excluding therefrom those assets listed on Schedules attached hereto respectively as "Excluded Property." "PURCHASE PRICE" shall have the meaning set forth in Section 2.1.2. "REQUIRED CONSENTS" shall mean the consents of third parties to the Leases and Contracts that are required for the assignment thereof and that are identified on the Schedules hereto as "Material Leases (or Contracts)-Consent to Assign Required." "REQUIRED CURE EXPENSE" shall mean the sum of the amounts required to be spent by Entercom under Sections 6.1.4, 6.1.5 and 6.6.3 hereof. "STATIONS" shall collectively mean the following radio broadcast stations: WYUU(FM), Safety Harbor, Florida and WLLD(FM), Holmes Beach, Florida or, in the singular form, any one of them. 4 9 "STATION EMPLOYEES" shall have the meaning set forth in Section 6.5.1. "TBA COMMENCEMENT DATE" shall mean the date that the Time Brokerage Agreement shall become effective. "TIME BROKERAGE AGREEMENT" shall mean the Time Brokerage Agreement entered into between Entercom and CBS simultaneously with the execution of this Agreement relating to the sale to CBS of substantially all of the broadcast time on the Stations. "TIME SALES AGREEMENTS" shall mean contracts for the sale of time on the Stations for cash. "TRADE AGREEMENTS" shall mean contracts for the sale of time on the Stations in exchange for merchandise or services used or useful for the benefit of the Stations, excluding Barter Agreements. "TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section 6.5. "UPSET DATE" shall have the meaning set forth in Section 9.1.1. ARTICLE II. PURCHASE OF ASSETS 2.1. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions set forth in this Agreement, at the Closing: 2.1.1. Entercom shall sell, convey, transfer, assign, and deliver or cause to be sold, conveyed, transferred, assigned, and delivered to CBS the Assets free and clear of all liens and encumbrances other than Permitted Encumbrances, and CBS shall acquire and receive same from Entercom. 2.1.2. CBS shall deliver to Entercom cash in the amount of Seventy-Five Million Dollars ($75,000,000.00) (the "Purchase Price") and Entercom shall receive same from CBS. The Purchase Price shall be paid by wire transfer at Closing to the account designated by Entercom in writing at least two (2) days prior to the Closing. 2.2. ALLOCATION OF VALUES. 2.2.1. The fair market value of the Assets shall be determined and allocated on the basis of an appraisal (the "Appraisal") prepared by Bond & Pecaro, or another firm reasonably acceptable to CBS and Entercom, whose fees and expenses shall be borne equally by Entercom and CBS. The parties shall use their reasonable best efforts to cause Bond & Pecaro to deliver 5 10 the Appraisal 10 days before the Closing Date, or failing compliance with such deadline, as soon thereafter as is practicable, but in all events no later than 30 days after the Closing Date. The Appraisal shall set forth the fair market value of each material asset included in the Assets. 2.2.2. Each party, as necessary, shall prepare such IRS Forms as are required by law to be filed with the Internal Revenue Service reflecting the fair market value of the Assets as determined in accordance with the values set forth in the Appraisal and the above provisions and shall forward such forms to the other parties within thirty (30) days after the Closing. Each party, as necessary, shall file with their respective federal income tax returns for the tax year in which the Closing occurs such IRS Forms as prepared in accordance with the foregoing. Each party shall deliver to the other parties hereto a copy of such IRS Forms as filed with their respective federal income tax return within thirty (30) days of the filing of such return. The parties hereto hereby covenant and agree with each other that they will not take a position on any income tax return that is in any way inconsistent with the terms of this Section 2.2. 2.3. NON-ASSIGNABLE CONTRACTS. 2.3.1. Without limiting or otherwise affecting the rights of any party hereto, to the extent that any Contract or Lease to be assigned pursuant to this Agreement is not capable of being assigned without the consent, approval, or waiver of a third person or entity, nothing in this Agreement will constitute an assignment or require the assignment thereof except to the extent provided in this Section 2.3. 2.3.2. With respect to all consents, approvals, and waivers referenced in Section 2.3.1, Entercom shall use its reasonable best efforts to obtain all such consents, approvals, and waivers prior to and, if the Closing occurs, as promptly as practicable after the Closing Date; provided that Entercom shall not be obligated to pay money to any other contracting party to obtain any such consent, approval or waiver other than reasonable expenses of the party for any legal documentation related to the assignment of the Contract or Lease in question. If the consents, approvals, and waivers are not obtained prior to Closing, the parties shall use their reasonable best efforts in good faith to cooperate, and to cause each of their respective Affiliates to cooperate, in effecting any lawful arrangement to provide to CBS the economic benefits of the Contracts and Leases for which consents, approvals, and waivers are being sought after Closing, and to have CBS assume and discharge the obligations under the Contracts and Leases from and after the Closing Date. 6 11 ARTICLE III. LIABILITIES 3.1. ASSUMPTION OF LIABILITIES BY CBS. Except as otherwise provided in the Time Brokerage Agreement, from and after the Closing Date, CBS shall assume and pay, perform, and discharge the following liabilities and obligations relating to the Stations: 3.1.1. The liabilities and obligations arising with respect to events occurring after the Adjustment Time or accruing after the Adjustment Time with respect to any Leases included in the Assets that are specifically identified on Schedule 4.1.5 as being assumed by CBS, and such additional Leases as are permitted to be entered into by Entercom and its Affiliates pursuant to Article VI hereof; 3.1.2. The liabilities and obligations arising with respect to events occurring after the Adjustment Time or accruing after the Adjustment Time with respect to any (a) Contracts included in the Assets that are specifically identified on Schedule 4.1.6 as being assumed by CBS, (b) Miscellaneous Contracts, (c) Time Sales Agreements, Trade Agreements, and Barter Agreements entered into in the Ordinary Course of Business, and (d) such additional contracts as are permitted to be entered into by Entercom and its Affiliates pursuant to Article VI hereof; 3.1.3. The liabilities and obligations which arise with respect to events occurring after the Adjustment Time or which accrue after the Adjustment Time with respect to the Assets and to the operation of the Stations by CBS; and 3.1.4. All taxes and assessments (other than income and franchise taxes of Entercom and its Affiliates) that accrue on or with respect to the Assets or the operation of the Stations after the Adjustment Time. 3.2. OTHER LIABILITIES. 3.2.1. Except as expressly set forth in this Agreement, Entercom shall be solely responsible for all salaries, benefits and other compensation which will or may become payable to any Station Employee in respect of any period of employment prior to the earlier of the TBA Commencement Date or the Adjustment Time, other than accrued vacation time for Transferred Employees, for which CBS shall be responsible and for which it will receive a proration credit under Section 8.2.1. CBS shall be solely responsible for any salaries and other compensation which will or may become payable to any Transferred Employee in respect of any period thereafter. CBS will not assume any obligations under existing leave or severance policies or otherwise have any liability or obligation for severance pay or other termination benefits of Station Employees, except for obligations set forth in Contracts to be assumed by CBS pursuant to this Agreement. 7 12 3.2.2. Except as specifically assumed by CBS pursuant to Section 3.1 and Section 3.2.1 hereof or pursuant to the Time Brokerage Agreement, neither CBS nor any of its Affiliates shall assume or undertake to pay, satisfy, or discharge any liabilities, obligations, commitments, or responsibilities of Entercom or any of its Affiliates. ARTICLE IV. REPRESENTATIONS AND WARRANTIES 4.1. BY ENTERCOM. Entercom hereby represents and warrants to CBS that: 4.1.1. CORPORATE STANDING. Entercom is a corporation, duly organized, validly existing and in good standing under the laws of the State of Pennsylvania and is qualified to do business in the State of Florida. Entercom has full power and authority to engage in the business in which it is presently engaged and to make and perform this Agreement according to its terms. 4.1.2. AUTHORIZATION OF AGREEMENT; NO BREACH. Entercom has the necessary corporate power and authority to execute, deliver and perform this Agreement, the Time Brokerage Agreement, and such other agreements as are necessary to consummate the transactions contemplated hereby, and, subject to the receipt of the consents and approvals required elsewhere herein, this Agreement and the Time Brokerage Agreement constitute the valid and binding obligation of Entercom enforceable against it in accordance with their terms, except as limited by bankruptcy and insolvency laws and by laws affecting the enforcement of creditors' rights generally or equitable principles. Assuming said consents and approvals are obtained, neither such execution, delivery, and performance nor compliance by Entercom with the terms and provisions of this Agreement and the Time Brokerage Agreement will conflict with or result in a breach of any of the terms, conditions, or provisions of the Articles of Incorporation or By-Laws of Entercom or its Affiliates or any judgment, order, injunction, decree, regulation, or ruling of any court or any other governmental authority to which Entercom or any of its Affiliates is subject or any material agreement or contract to which Entercom or any of its Affiliates is a party or to which it is subject, or constitute a material default thereunder. 4.1.3. QUALIFICATION. An Affiliate of Entercom to be designated as assignor on the Assignment Applications is qualified as a licensee of the Commission and is, or at the time of filing the Assignment Applications will be, qualified as the assignor of the Authorizations to receive a grant of the Assignment Applications by the Commission. Entercom knows of no facts which 8 13 could reasonably be expected to cause Commission approval of the Assignment Applications to be denied or materially delayed or which could reasonably be expected to lead to the filing of a material objection to such Applications. 4.1.4. ENTERCOM ASSETS. The Assets, taken as a whole, constitute all of the material property, whether real, personal, or mixed, tangible or intangible, used by Entercom or its Affiliates in the operation of the Stations except for (i) property replaced in the Ordinary Course of Business and (ii) those assets specifically listed on Schedule 4.1.4 under the heading "Excluded Property." 4.1.5. ENTERCOM LEASES. Except as set forth in Schedule 4.1.5, Entercom has delivered to CBS true and correct copies of all Leases listed on Schedule 4.1.5 hereto. There are no other material leases for any items or interests for the use of real or personal property associated with the Assets or the present operation of the Stations other than those disclosed on Schedule 4.1.5 hereto. 4.1.6. ENTERCOM CONTRACTS. Schedule 4.1.6 contains a list of all Contracts now in effect, written or oral, express or implied, relating to the Assets or the present or future operation of the Stations, other than as disclosed on Schedule 4.1.5 hereto or other Schedules attached to this Agreement, except for Time Sales Agreements, Barter Agreements, Trade Agreements, Miscellaneous Agreements and Contracts that relate solely to Excluded Property. Except as indicated on Schedule 4.1.6 hereto, Entercom has delivered to CBS true and correct copies of all Contracts listed on Schedule 4.1.6 hereto. 4.1.7. INTELLECTUAL PROPERTY. Schedule 4.1.7 hereto lists all material trademarks and copyrights relating to the operation of the Stations which have been registered with Federal or State governmental agencies. To Entercom's knowledge, the operation of the Stations as now conducted does not conflict with any valid patents, trademarks, trade names, service marks, or copyrights of others in any way that is reasonably likely to have a material adverse effect on the operation of the Stations. 4.1.8. TITLE TO PROPERTY. Except for (i) Permitted Encumbrances, (ii) as disclosed on Schedule 4.1.8 hereto, and (iii) as provided in the immediately succeeding two sentences, Entercom has good ownership, right, title, and interest to the Property including the right to transfer such assets. Entercom has a valid leasehold interest in all Property leased and used or held for use in 9 14 connection with the operation of the Stations. Entercom has good and marketable title to the owned real property to be conveyed hereunder, except for Permitted Encumbrances. Except for Permitted Encumbrances and items disclosed on Schedule 4.1.8 (which Schedule reflects, where appropriate, the Station to which the disclosed item relates), none of the Property or any of the income or revenue therefrom is subject to any mortgage, conditional sale agreement, security interest, lease, lien, hypothecation, pledge, encumbrance, restriction, liability, charge, claim, or imperfection of title that would materially adversely affect the continued use of the Property as currently used. 4.1.9. NO DEFAULTS. Entercom and its Affiliates have complied in all material respects with all of the terms of the Contracts and the Leases and such Contracts and Leases are enforceable by Entercom in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy and similar laws affecting the enforcement of creditors' rights and general equitable principles affecting the enforcement of equitable remedies (including within said equitable remedies without limitation the remedy of specific performance). No event has occurred which with the passage of time or the giving of notice or both would constitute a material default by Entercom or any of its Affiliates thereunder. To the knowledge of Entercom, all other parties to the Contracts and Leases have complied in all material respects with the provisions thereof and no event has occurred which with the passage of time or the giving of notice or both would constitute a material default by any such other party thereunder. 4.1.10. AUTHORIZATIONS AND APPLICATIONS. Except as disclosed on Schedule 4.1.10, all Authorizations necessary to the lawful operations of the Stations have been granted and issued by the Commission to Entercom and are listed on Schedule 4.1.10 attached hereto and are now in full force and effect. There are no applications of Entercom or any of its Affiliates relating to the Stations pending with the Commission except as listed on such Schedule 4.1.10. Entercom and its Affiliates have performed and complied in all material respects with all of the terms and conditions of said Authorizations, the Communications Act of 1934, as amended (the "Communications Act") and all applicable rules, regulations, requirements, and policies of the Commission relating to the operation of the Stations. Except as listed on Schedule 4.1.10, no proceedings are pending or, to the knowledge of any officer of Entercom or any of its Affiliates, threatened, which may result in the revocation, modification, non-renewal, or suspension of any of said Authorizations, the denial of any pending applications, the issuance of a cease and desist order, or the imposition of any other sanction by the Commission to which the Stations or the Assets are or may be subject. None of Entercom or any of its Affiliates has reason to believe that the Commission will not renew the Authorizations of any of the Stations in the ordinary course for a full term without material qualifications. No renewal of the Authorizations of the Stations would constitute a major environmental action under the rules of the Commission in effect as of the date of this Agreement. All ownership reports, renewal applications, and other material reports and 10 15 documents required to be filed by Entercom and its Affiliates with the Commission relating to the operation of the Stations have been filed, and all such reports, applications and documents are true and correct in all material respects. The Stations are identified by their presently assigned call letters and, unless otherwise validly authorized by the Commission and disclosed on Schedule 4.1.10, are operated on their assigned frequencies at the powers and heights authorized by the Commission. The public inspection files for the Stations are in substantial compliance with the regulations of the Commission relating thereto. 4.1.11. PERMITS AND LICENSES. In addition to the Authorizations, Entercom has obtained and/or holds, or at Closing will hold, all other governmental permits and licenses necessary for the lawful operation of the respective Stations. All terms, restrictions, and requirements of such permits and licenses have been complied with in all material respects and none of Entercom or any of its Affiliates is in default of any of same. 4.1.12. COMPLIANCE WITH LAWS. Entercom and its Affiliates have complied in all material respects with all orders (to which Entercom or any of its Affiliates is a party or is subject) and applicable laws, rules, and regulations of all federal, state and local authorities with respect to the Assets and operation of the Stations. With respect to the operations of the Stations, none of Entercom or any of its Affiliates is in default with respect to or in violation of: (a) any judgment, order, injunction or decree to which Entercom or any of its Affiliates is a party or is subject; or (b) any rule or regulation of any court, administrative agency or other governmental authority, in either case in any respect material to this transaction. All material reports, returns and other documents which relate in any way to the Assets and which were filed by Entercom or any of its Affiliates with any administrative agency or governmental authority are true, correct and complete in all material respects. 4.1.13. LITIGATION AND CLAIMS. Except as disclosed in Schedule 4.1.13 hereto and except for rulemaking proceedings applicable to radio broadcast stations generally, no litigation, proceeding or controversy is pending or, to the knowledge of any officer of Entercom or any of its Affiliates, threatened against Entercom or any of its Affiliates, which might materially and adversely affect any material portion of the Assets, Entercom's or any of its Affiliates' right or power to transfer the same, the ownership, possession, use or resale of any material portion of the Assets, or the operation of the Stations by CBS or any assignee thereof and there is no basis known to Entercom or any of its Affiliates for any such litigation, proceeding, controversy or claim. No claim has been made or asserted against Entercom or any of its Affiliates material to this transaction. 11 16 4.1.14. EMPLOYEES. Set forth on Schedule 4.1.14 is a listing, by department, of the name, salary or compensation, all other compensation arrangements, and job title of all employees of Entercom and its Affiliates employed at the Stations as of August 1, 1998 and whether each such employee is full-time or part-time. Except as disclosed on Schedule 4.1.14, there are no written contracts for the employment of any personnel at the Stations. Except as disclosed on Schedule 4.1.14, all employees of Entercom and its Affiliates employed at the Stations are employed on an "at will" basis. 4.1.15. EMPLOYEE BENEFIT AND RETIREMENT PLANS. Listed on Schedule 4.1.15 are the material "employee pension benefit plans" and "employee welfare benefit plans" (as defined respectively in Sections 3(2) and 3(l) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), which Entercom and its Affiliates maintain on behalf of their employees at the Stations. In all respects material to this transaction, all "employee pension benefit plans" and "employee welfare benefit plans" listed on Schedule 4.1.15 hereto comply in all material respects with all applicable requirements of law and regulation. None of Entercom or any of its Affiliates has incurred or reasonably expects to incur (either directly or indirectly, including as a result of any of the transactions contemplated hereby or any indemnification obligation) any liability (including, without limitation, withdrawal liability) that could become a liability of CBS, under or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and several liability provisions of the Code relating to employee benefit plans and no event, transaction or condition has occurred or exists which could result in any such liability. Entercom and its Affiliates have made all required contributions to all multi-employer plans within the meaning of Section 3(37) of ERISA. 4.1.16. LABOR RELATIONS. In all respects material to this transaction, Entercom and its Affiliates have complied with all applicable laws, rules and regulations pertaining to the employment of labor, including those relating to wages, hours, collective bargaining and the payment of or withholding of taxes with respect to the operations of the Stations, and Entercom and its Affiliates have withheld all amounts required by law or agreement to be withheld from the wages or salaries of their employees and are not liable for any arrears of wages or any tax or withholding or any penalties or interest for failure to comply with any of the foregoing. Except as disclosed on Schedule 4.1.16, there are no collective bargaining agreements relating to any employee of Entercom or any of its Affiliates at the Stations. In addition, except as disclosed on Schedule 4.1.16, none of Entercom or any of its Affiliates has knowledge of any union organizing activities in the one year period preceding the date of this Agreement involving or targeting any employees of Entercom or any of its Affiliates at the Stations. 12 17 4.1.17. INSURANCE. Entercom has in force adequate fire and other risk insurance covering the full replacement value of tangible personal property that is part of the Property and shall cause such insurance to be maintained in full force until the Closing Date. Entercom also shall maintain in full force until the Closing Date, adequate workers compensation and general public liability insurance for the respective Stations in amounts consistent with broadcasting industry standards for similar stations. As of the date of this Agreement, none of the Property currently suffers in any way as a result of fire, explosion, earthquake, accident, fraud, rain, storm, drought, Act of God or public enemy or any other casualty, whether or not covered by insurance. 4.1.18. BROADCASTING CONTRACTS. The total value of all unfulfilled obligations in respect of Trade Agreements and Barter Agreements to be assumed by CBS, whether or not the Stations have received consideration therefor, shall not be in excess of Five Hundred Thousand Dollars ($500,000.00) as of the Closing Date. To the extent that, as of the Closing Date, the excess of the value of unfulfilled obligations under Trade or Barter Agreements, including any "time bank" provision thereof, over the value of consideration to be received by the Stations (determined as of the Closing Date) exceeds One Hundred Thousand Dollars ($100,000.00), CBS shall be entitled to a positive cash adjustment pursuant to Section 8.2 hereof. 4.1.19. ENVIRONMENTAL COMPLIANCE, POLYCHLORINATED BIPHENYLS, ASBESTOS AND OTHER TOXIC OR HAZARDOUS SUBSTANCES. Except as disclosed on Schedule 4.1.19, none of the Property contains: (i) any asbestos, polychlorinated biphenyls ("PCBs") or any PCB contaminated oil; (ii) any Contaminants; or (iii) any underground storage tanks. All of the Property is in substantial compliance with all applicable Environmental Laws. 4.1.20. FINANCIAL AND OTHER INFORMATION. Entercom has furnished CBS with profit and loss statements for calendar year 1997 and the months January through June of 1998 (the "Financial Statements"). All Financial Statements provided to CBS are true and correct in all material respects and such Financial Statements fairly present the results of operation of the Stations for the respective period then ended. There are no material liabilities, whether known or unknown, contingent or fixed, or otherwise, associated with the Stations that have not been otherwise disclosed to CBS to the extent this Agreement requires the disclosure thereof. 13 18 4.1.21. NO INSOLVENCY. No insolvency proceedings of any character, including without limitation, bankruptcy, receivership, reorganization, composition, or arrangement with creditors, voluntary or involuntary, affecting Entercom or any of its Affiliates or any of their assets or properties are, or within three years prior to the date hereof have been, pending or, to the best of the knowledge of Entercom and its Affiliates, threatened, and, within three years prior to the date hereof, none of Entercom or any of its Affiliates has made an assignment for the benefit of creditors, nor has Entercom or any of its Affiliates taken any action with a view to, or which would constitute the basis for, the institution of any such insolvency proceedings. 4.1.22. CONDITION OF EQUIPMENT. Except as disclosed on Schedule 4.1.22, the transmission and studio equipment and other equipment (mechanical and electrical) included within the Property is, and will be as of the Closing Date, in good repair and working condition, ordinary wear and tear excepted, and is in material compliance with all current FCC requirements. 4.1.23. REAL PROPERTY. Schedule 4.1.23 contains a true and complete list of all real property used in the operation of the Stations, setting forth the nature of the interest, the address, and legal description for each parcel of real property other than leased real property, and whether such parcel is owned or leased. Except as set forth on Schedule 4.1.23, there are no outstanding options or rights of first refusal to purchase or lease the owned real property or any portion thereof or interest therein, there are no outstanding options or rights of first refusal to sublease the leased real property or any portion thereof or interest therein, and no other parties are in possession of any such real property. The real property identified on Schedule 4.1.23 has vehicular access to a road and is supplied with utilities and other services necessary for the operation of that portion of the operation of the Stations conducted there. No real property other than that listed on Schedule 4.1.23 or listed on such schedule as Excluded Property is used in, held for use in connection with or necessary for the conduct of, the business or operations of the Stations. To the knowledge of Entercom and its Affiliates, (i) the improvements of Entercom and its Affiliates upon such real property and the current use and operation on such premises by Entercom and its Affiliates conform in all material respects to all restrictive covenants, conditions, easements, building, subdivision and similar codes and federal, state and local laws, regulations, rules, orders and ordinances and none of Entercom or any of its Affiliates has received any notice of any violation or claimed violation of any such restrictive covenant, condition or easement, or any building, subdivision or similar code, or any federal, state or local law, regulation, rule, order or ordinance which, either individually or in the aggregate, could have a material adverse effect on the assets, business or financial condition of the Stations, provided that any lawfully grandfathered condition shall not be deemed to be a material adverse effect for purposes of this subsection (i); 14 19 (ii) there is no plan, study or effort by any governmental authority or agency which could reasonably be expected to have a material adverse effect on the Assets or financial condition of the Stations; and (iii) there are no latent defects in the real property that could reasonably be expected to have a material adverse effect on the Assets or financial condition of the Stations. The improvements of Entercom and its Affiliates upon the real property identified on Schedule 4.1.23 are in good operating condition and repair, normal wear and tear excluded. None of Entercom or any of its Affiliates has knowledge or received notice (i) of any pending, threatened, or contemplated action to take by eminent domain or otherwise to condemn any portion of the real property or interest therein or (ii) of any levied, threatened or proposed assessments for public improvements with respect to the real property. 4.1.24. PAYMENT OF TAXES. Entercom and its Affiliates have, and as of the Closing Date, will have, paid and discharged all taxes, assessments, excises and other levies which are due, including but not limited to any such taxes, assessments, excises, and levies which, if due and not paid, would interfere with CBS's enjoyment or use of the Assets or result in a lien, charge, or encumbrance thereon, excepting such taxes, assessments, and other levies which will not be due until or after the Closing Date, and which are either to be prorated between the parties pursuant to the provisions of Section 8.2 hereof or paid or contested by Entercom pursuant to Section 6.1.6. 4.1.25. REQUIRED CONSENTS. The only material approvals or consents of persons or entities not a party to this Agreement that are legally or contractually required to be obtained by Entercom in connection with the consummation of the transactions contemplated by this Agreement are those that are (i) set forth on Schedules 4.1.5 and 4.1.6 hereto and (ii) those contemplated by Section 5.1. 4.2. BY CBS. CBS hereby represents and warrants that: 4.2.1. CORPORATE STANDING. CRI and CRLI are corporations, duly organized, validly existing and in good standing under the laws of the State of Delaware. CRLI is or will be at Closing, qualified to do business in the State of Florida. CRI and CRLI have full power and authority to engage in the businesses in which they are presently engaged and to make and perform this Agreement according to its terms. 15 20 4.2.2. AUTHORIZATION OF AGREEMENT; NO BREACH. CBS has the necessary corporate power and authority, on behalf of itself, to execute, deliver and perform this Agreement, the Time Brokerage Agreement and such other agreements as are necessary to consummate the transactions contemplated hereby, and, subject to the receipt of the consents and approvals required elsewhere herein, this Agreement and the Time Brokerage Agreement constitute the valid and binding obligation of CBS, enforceable against it in accordance with their terms, except as limited by bankruptcy and insolvency laws and by laws affecting the enforcement of creditors rights generally or equitable principles. Assuming said consents and approvals are obtained, neither such execution, delivery, and performance nor compliance by CBS with the terms and provisions of this Agreement and the Time Brokerage Agreement will conflict with or result in a breach of any of the terms, conditions, or provisions of the Articles of Incorporation or Bylaws of CBS, or any judgment, order, injunction, decree, regulation, or ruling of any court or any other governmental authority to which CBS is subject or any material agreement or contract to which CBS is a party or to which it is subject, or constitute a material default thereunder. 4.2.3. QUALIFICATION. CRLI is qualified as a licensee of the Federal Communications Commission and is qualified as the assignee of the Authorizations to receive Commission approval of the Assignment Applications. CBS knows of no facts relating to CBS or any of its Affiliates that could reasonably be expected to cause Commission approval of the Assignment Applications to be denied or materially delayed or which could reasonably be expected to lead to the filing of a material objection to such Applications. 4.2.4. LITIGATION AND CLAIMS. Except as disclosed in Schedule 4.2.4 hereto, no litigation, proceeding, or controversy is pending or, to the knowledge of any officer of CBS, threatened, which might affect the ability of CBS to perform its obligations hereunder, and there is no basis known to CBS for any such litigation, proceeding, controversy, or claim. No claim has been made or asserted against CBS material to this transaction. ARTICLE V. CONDITIONS 5.1. MUTUAL CONDITIONS. Performance of the obligations of the parties with respect to the Stations under this Agreement and the Closing, are and shall be subject to the occurrence and concurrence of the express conditions precedent that (i) the Commission has granted its consent and approval in 16 21 writing to the assignment to CBS of the Authorizations issued by the Commission as contemplated hereby without any materially adverse condition and any condition as to the timing of consummation of the transactions contemplated hereby set forth in such consent shall have been satisfied; and (ii) the waiting periods (as they may be extended) applicable to the transfer of the Assets under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have expired or been earlier terminated. 5.2. CONDITIONS OF CBS. Performance of the obligations of CBS under this Agreement and the Closing of the transactions provided for herein are and shall be subject to the occurrence and concurrence of the express conditions precedent, any of which may be waived by CBS, that: 5.2.1. All Required Consents have been obtained from the other parties to the Leases and the Contracts identified on Schedules 4.1.5 and 4.1.6 respectively as "Material Leases (or Contracts)-Consent to Assign Required." 5.2.2. No order, decree or judgment of any court, agency or other governmental authority shall have been issued based on or arising out of the conduct, action, inaction, qualifications or status of Entercom or any of its Affiliates, which would render it unlawful as of the Closing Date to effect the transactions contemplated by this Agreement in accordance with its terms. 5.3. CONDITIONS OF ENTERCOM. Performance of the obligations of Entercom under this Agreement and the Closing of the transactions provided for herein are and shall be subject to the occurrence and concurrence of the express conditions precedent, any of which may be waived by Entercom, that: 5.3.1. No order, decree or judgment of any court, agency or other governmental authority shall have been issued based on or arising out of the conduct, action, inaction, qualifications or status of CBS or any of its Affiliates, which would render it unlawful as of the Closing Date to effect the transactions contemplated by this Agreement in accordance with its terms. 5.4. EFFECT OF TIME BROKERAGE AGREEMENT ON CLOSING CONDITIONS. To the extent that any party hereto is unable to fulfill any condition to Closing under this Agreement that could have been fulfilled solely but for (i) an action taken by another party either pursuant to this Agreement or the Time Brokerage Agreement or in breach of this Agreement or the Time Brokerage Agreement or (ii) a failure to take any action that another party was obligated to take, or, in the exercise of commercial reasonableness, should have taken, 17 22 pursuant to this Agreement or the Time Brokerage Agreement, such condition to Closing shall be deemed waived. ARTICLE VI. COVENANTS AND OPERATIONS PRIOR TO CLOSING. 6.1. COVENANTS OF ENTERCOM. Except as otherwise provided in the Time Brokerage Agreement, during the period from the date of this Agreement to the Closing Date, Entercom and/or one or more of its Affiliates shall: 6.1.1. Conduct the business and operations of the Stations in the Ordinary Course of Business and in accordance with all requirements of law and regulation and, to the extent consistent with the foregoing, in the same manner in which the same have heretofore been conducted with the intent of preserving the ongoing operations and business of the Stations. 6.1.2. Cooperate with CBS in connection with its review, analysis, and monitoring of the Assets and the operation of the Stations to the end that an efficient transfer of the Assets may be made at Closing and the business of the Stations and the operation of the Assets may continue on an uninterrupted basis. In addition to providing information required hereunder or reasonably requested by the other parties hereto, Entercom agrees to promptly notify the other parties of any unusual problems or developments of which Entercom becomes aware with respect to the Assets or the business of the Stations. 6.1.3. Consult with CBS regarding any proposed material changes to the operation of the Stations to insure continued operation of the Stations as they are now operated and cooperate with CBS to insure a smooth transfer of ownership and continuity of operations at Closing. 6.1.4. Obtain and deliver to CBS within ten (10) days hereof at its expense and permit CBS to obtain within twenty (20) days hereof at its expense, Phase I Environmental Assessments of all or any of the Property to be conveyed hereunder and any real property used by the Stations in their operations or for which CBS could be held responsible under any Environmental Laws. In the event such Phase I Environmental Assessments disclose any conditions contrary to the representations and warranties contained in Section 4.1.19, or any potential that such conditions may exist, then CBS may conduct or have conducted at its expense additional testing to confirm or negate the existence of any such conditions. If any such Phase I Environmental Assessment or additional testing confirms the existence of any such conditions without reference to matters disclosed on Schedule 4.1.19, Entercom will cause the conditions to be remedied as quickly as is reasonably possible to the extent required to comply with applicable Environmental Laws; provided, however, that such remedial action does not cost in the aggregate in excess of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). In the event that such remedial action does cost in the aggregate in excess of One Million Dollars ($1,000,000.00) 18 23 (subject to the last sentence of Section 11.1), Entercom may elect not to take such remedial action.. In such event, CBS may require Entercom to proceed to Closing and CBS shall receive a proration at Closing, in the amount of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). Alternatively, CBS may terminate this Agreement and Entercom shall have no liability to CBS as a result of such termination. Entercom has furnished to CBS copies of any environmental reports, title reports, and title insurance policies in its possession previously prepared for any of the Property which Entercom has been able to locate through the date hereof, and from the date hereof through Closing, Entercom shall forward to CBS any additional such reports or policies it receives or locates. Notwithstanding any other provision of this Agreement, Entercom shall have no further liability to CBS for any environmental condition to the extent such condition is disclosed on Schedule 4.1.19 or any Phase I Environmental Assessment or other testing conducted pursuant to this Section 6.1.4, except as set forth in this Section 6.1.4. 6.1.5. Obtain within 10 days hereof at its expense and deliver to CBS, commitments from a reputable title insurance company to issue extended coverage policies of title insurance (ATLA Form 1970 or other form reasonably acceptable to CBS) with respect to each parcel of real property to be conveyed hereunder, insuring good and marketable title to such real property (the "Title Commitments"). In the event CBS notifies Entercom within 10 business days of receipt of the Title Commitments that the Title Commitments disclose any rights of way, easements, exceptions or other matters which do not constitute Permitted Encumbrances and which materially and adversely interfere with the continued use of such real property as currently used, Entercom will cause the conditions to be remedied as quickly as is reasonably possible; provided, however, that such remedial action(s) does not cost in the aggregate in excess of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). In the event that such remedial action does cost in the aggregate in excess of One Million Dollars ($1,000,000.00), Entercom may elect not to take such remedial action, and, notwithstanding any other provision of this Agreement, Entercom shall have no further liability to CBS for any title defect. In such event, CBS may require Entercom to proceed to Closing and CBS shall receive a proration at Closing, in the amount of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). Alternatively, CBS may terminate this Agreement and Entercom shall have no liability to CBS as a result of such termination. 6.1.6. Cooperate with CBS, with respect to the Stations, in its efforts to employ after the Closing or TBA Commencement Date, as the case may be, any of the current employees of Entercom and its Affiliates who are employed at the Stations (the "Station Employees"), including without limitation, allowing CBS to meet privately with the Station Employees other than Non-Continuing Employees (as defined in Section 6.5). Entercom and its Affiliates will not interfere with or attempt to undermine in any way the efforts of CBS to employ such employees. 6.1.7. Pay and discharge when due all taxes due after Closing accrued or accruing with respect to periods ending on or before the Closing Date, to the extent such taxes could reasonably be expected to result in a lien or otherwise interfere with the use or enjoyment of the Station 19 24 Assets; provided, that any such tax may be contested by Entercom in good faith by appropriate proceedings; provided further that Entercom shall pay any such taxes found to be due and owing upon completion of such proceedings. 6.2. NEGATIVE COVENANTS OF ENTERCOM. Unless CBS has given its consent in writing, which consent shall not be unreasonably withheld, Entercom and it Affiliates shall not, directly or indirectly, during the period from the date hereof to the Closing Date: 6.2.1. Except as specifically provided in this Agreement, cancel, amend, modify adversely, assign, encumber, or in any way discharge or terminate any of the Leases or Contracts other than in the Ordinary Course of Business (provided, however, that Entercom shall notify CBS in writing of any such actions involving a contract that would need to be identified on Schedule 4.1.6). 6.2.2. By any act or omission, surrender, modify adversely, forfeit, or fail to renew on regular terms any Authorizations for the Stations or take or omit any action which might result in the Commission instituting any proceedings for the revocation, suspension or modification of any such Authorizations. 6.2.3. Except in the Ordinary Course of Business, sell or dispose of any of the Assets; provided that any Assets so disposed of in the Ordinary Course of Business (other than Assets that are obsolete, worn beyond repair, or otherwise not suitable for use in either of the Stations and that are not in use) are replaced with assets of comparable or better functionality. 6.2.4. Suffer or permit the creation of any mortgage, conditional sale agreement, security interest, lease, lien, hypothecation, pledge, encumbrance, restriction, liability, charge, claim, or imperfection of title on or with respect to any of the Assets other than Permitted Encumbrances and those identified on Schedule 4.1.8 hereto; 6.2.5. Enter into, renew, or modify any Contract relating to the Stations with an individual value of over Fifty Thousand Dollars ($50,000.00) or in the aggregate over Two Hundred and Fifty Thousand Dollars ($250,000.00); other than for Time Sales Agreements, Trade Agreements or Barter Agreements. The amounts set forth in the preceding sentence shall have no bearing on any determination as to what constitutes "material" for purposes of this Agreement. 6.2.6. Fail to take any reasonable actions necessary to maintain the Stations' continuous broadcast operations from their respective main antennae. 6.2.7. Fail to take any reasonable actions necessary to avoid the happening of or to cure the existence of any material damage to or impairment of any of the Assets. 20 25 6.2.8. Fail to operate the Stations in conformity in all material respects with all of the applicable requirements of law and regulation. 6.2.9. Take any action which is materially inconsistent with its obligations under this Agreement, or that could hinder or delay the consummation of the transactions contemplated hereby. Any notification or consent given under this Article VI will not mitigate, detract from, or otherwise affect the representations, warranties, or obligations under this Agreement and the consequences of the other party's acting on any such notification or consent will be solely such other party's responsibility, except to the extent inherent in the nature of any notification or consent, or otherwise set forth in the terms thereof. 6.3. NO CONTROL. Nothing contained in this Agreement or in the Time Brokerage Agreement shall give CBS any right to control the operations of the Stations prior to the Closing Date. 6.4. NO SOLICITATION OR HIRE OF EMPLOYEES. During the period beginning the date of this Agreement and ending the earlier of eighteen (18) months after the Closing Date, or, as to any particular Station, upon consummation of any transaction requiring the prior consent of the Commission on FCC Form 314 or 315, Entercom shall be prohibited from soliciting or hiring any Transferred Employee (as defined in Section 6.5); provided, however, that this prohibition shall not apply to any Transferred Employee hired by CBS and subsequently terminated by CBS without cause. 6.5. COVENANT OF CBS. 6.5.1. Prior to the earlier of the TBA Commencement Date, or the Closing Date, CBS or its designated Affiliate shall offer employment commencing on the earlier of the TBA Commencement Date, or the Closing Date to each of the employees employed by Entercom or its Affiliates at the Stations on such date (the "Station Employees"), other than those employees specified on Schedule 6.5 (the "Non-Continuing Employees"). The Station Employees accepting such offers shall be referred to as the "Transferred Employees." "Station Employees" shall also include any employee of the Station who is on a short-term disability or other authorized temporary leave from employment by Entercom not in excess of 6 months, and CBS or its designated Affiliate shall offer employment to such person at such time the person is capable and ready to return to active status, provided that such person actually returns to active status within such six (6) month period. Except for any Transferred Employees whose employment contracts are assumed by CBS under the terms hereof, the terms and conditions of CBS' employment of the Transferred Employees shall be at-will employment in at least the same positions, for at least the same direct cash compensation, with medical insurance effective as of the earlier of the TBA 21 26 Commencement Date or the Closing Date and including coverage for any preexisting health conditions that would have been covered by the health plan in which the employee was a participant immediately prior to the earlier of the TBA Commencement Date or the Closing Date and give effect, in determining any periodic deductible and maximum out-of-pocket limitations, to claims incurred and paid by, and amounts reimbursed to, such Transferred Employees prior to the earlier of the TBA Commencement Date or the Closing Date. For purposes of determining the amount of any entitlement of any Transferred Employee under CBS' benefit and vacation plans, CBS will take into account and credit such Transferred Employee under CBS' benefit and vacation plans with the credit for service the Transferred Employee received from Entercom immediately prior to the earlier of the TBA Commencement Date or the Closing Date. With respect to any welfare benefit plan (as defined in Section 3(1) of ERISA) of CBS for the benefit of Transferred Employees, CBS shall cause all Transferred Employees who actively participated in similar plans of Entercom to become a participant in such welfare benefit plan of CBS as of the earlier of the TBA Commencement Date or the Closing Date. No provisions of this Agreement shall create any third party beneficiary rights of any employee or former employee (including any beneficiary or dependent thereof) of Entercom in respect of continued employment (or resumed employment) with Entercom or CBS or in respect of any other matter. 6.5.2 Without the prior written consent of Entercom, which shall not be withheld unreasonably, from and after the date hereof, neither CBS nor any of its Affiliates shall take any action inconsistent with its obligations under this Agreement, or that could hinder or delay the consummation of the transactions contemplated hereby. 6.6. REAL PROPERTY SURVEYS. 6.6.1. Within 30 days of the date hereof, CBS may procure, at its expense, with respect to each parcel of real property owned by Entercom and used in connection with the operation of the Stations, a current survey of each such parcel of real property, prepared by a licensed surveyor, and conforming to current ATLA Minimum Detail Requirements for Land Title Surveys, disclosing the location of all improvements, easements, party walls, sidewalks, roadways, utility lines, transmitting towers, tower guy anchors and other matters customarily shown on such surveys, and showing vehicular access affirmatively to public streets and roads (the "Survey"). 6.6.2. Within ten (10) business days of receipt of the Surveys, CBS shall give Entercom copies of the Surveys and notice of any exceptions to matters revealed by the Surveys that would materially and adversely affect the Stations as currently operated (the "Objectionable Exceptions"). If CBS fails to give such notice in a timely manner, CBS shall be deemed to have accepted matters revealed by the Surveys other than the Objectionable Exceptions expressly set forth in the notice. 6.6.3. Entercom shall cure or remove any Objectionable Exception within thirty (30) days from the date of CBS' notice; provided, however, that if Entercom reasonably determines 22 27 that the cost of removing such Objectionable Exception would exceed One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1) or that Entercom through the expenditure of up to One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1) will be unable to cure or remove an Objectionable Exception within such 30-day period, then Entercom shall notify CBS within three (3) business days after such determination, whereupon CBS shall have the right, exercisable by written notice given to Entercom within three (3) business days after receipt of Entercom's notice, to elect (i) to agree to accept the real property covered by such Survey, subject to such of the Objectionable Exceptions, together with a payment of such sum as is necessary to remove the Objectionable Exception not to exceed One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1), or (ii) to terminate this Agreement. If CBS fails to elect option (i) or (ii) above, then CBS shall be deemed to have elected option (i). ARTICLE VII. ACTIONS PRIOR TO CLOSING. 7.1. APPLICATION TO COMMISSION. The parties hereby bind themselves to use their best efforts, and to cooperate with each other, in seeking the consent and approval of the Commission to the assignment of all Authorizations heretofore granted and issued in connection with the Stations as herein provided; diligently and promptly to prepare, sign, and file with the Commission within five (5) business days from the date of this Agreement any and all applications requisite or desirable to procure such consents and approvals (the "Assignment Applications"); and diligently and promptly to prepare and submit to the Commission all information, data, exhibits, amendments, resolutions, statements, and other material necessary or proper in connection with the Assignment Applications; and diligently to pursue the grant of a Final Order approving such Assignment Applications. 7.2. HART-SCOTT-RODINO NOTIFICATION. As promptly as practicable and no later than ten (10) days after the date hereof, the parties hereto shall take all steps reasonably necessary to file and shall participate in the filing of all requisite documents and notifications required to be filed pursuant to the HSR Act. All filing fees in connection with such notifications shall be paid one-third by CBS and two-thirds by Entercom. The parties agree to diligently take and fully cooperate in the taking of all necessary and proper steps, and provide any additional information reasonably requested in order to obtain promptly the early termination of the waiting period under the HSR Act. 7.3. INSPECTION. During the period from the date of this Agreement to the Closing Date, Entercom shall, upon reasonable request, afford, or cause to be afforded, engineers, attorneys, accountants, 23 28 and other consultants and/or representatives of CBS free access in a reasonable manner during normal business hours to the employees, offices, studios, transmitter sites, equipment, records, and other documents pertaining to the Stations and furnish or cause to be furnished CBS with all information concerning the Stations' affairs as CBS may reasonably request, including but not limited to applications and other documents filed with the Commission. For purposes of the foregoing, records shall include, without limitation, any sales, research, consulting, and ratings reports relating to the Stations. 7.4. CONFIDENTIALITY. Each party hereby covenants and agrees that in the event the transactions contemplated by this Agreement are not consummated for any reason whatsoever, they will, upon request, return to the other party within ten (10) days from the date of such request, all versions, including copies, of all information furnished to that party by another party hereto or its representatives or Affiliates, regardless of whether the same is marked "confidential" or "proprietary," together with any and all notes, memoranda, analyses, compilations, studies, or other documents (whether in hard copy or electronic media) prepared by the receiving party, its directors, officers, partners, employees, agents, or other representatives (including advisors, attorneys, accountants, financial advisors, and potential financing sources) which contain or otherwise reflect such information (the "Confidential Information"). Each party hereby covenants and agrees to use reasonable efforts to hold all Confidential Information in confidence and not to disclose, or cause any representative, agent, or employee to disclose to any third party any portion of the Confidential Information except as may be required by law or judicial process, and not to use any portion of the Confidential Information for its own benefit without the written consent of the providing party. Should a party receive a request or be required by applicable law to disclose to a court or other tribunal all or any part of the Confidential Information received from another party hereto, Entercom and CBS confirm that each will adhere to the terms and conditions set forth in paragraph 5 of the Confidentiality Agreement, dated June 9, 1998, between Entercom and CBS. Nothing shall be deemed to be Confidential Information that: (a) is or becomes generally available to the public other than as a result of a disclosure by the receiving party or its representatives; or (b) is or becomes available to the receiving party on a non- confidential basis from a source rightfully in possession of the information and which is under no legal, contractual or fiduciary obligation to keep it confidential. ARTICLE VIII. CLOSING 8.1. CLOSING. Unless otherwise agreed by the parties, the Closing shall take place at the offices of Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Suite 1300, Washington, D.C. 20004, at 10:00 a.m. on the Closing Date. The Closing Date shall be the date selected by CBS on at least five (5) business days' notice to Entercom, which date shall be within six (6) months after 24 29 the satisfaction of the conditions to Closing set forth in Section 5.1, Section 5.2.2 and Section 5.3.1 hereof (the "Outside Closing Date"); provided that once such conditions are satisfied, if Closing has not occurred prior to the date of closing under the Boston I Agreement, then Closing will occur on the earlier of five (5) business days after the closing under the Boston I Agreement or the Outside Closing Date. 8.2. PRORATIONS. Within ninety (90) days after Closing, an accounting for each Station shall be made as follows: 8.2.1. All prepaid income, prepaid expenses, prepayments on any Contracts and Leases assumed, accrued income, property taxes, and accrued expenses, including without limitation any accrued expenses for Transferred Employees (such as accrued vacation time) assumed by CBS up to the Adjustment Time shall, except as otherwise expressly provided herein or in the Time Brokerage Agreement, be adjusted and allocated between Entercom and CBS to reflect the principle that all expenses and income arising from the operation of the Station up through the Adjustment Time shall be for the account of Entercom, and all expenses and income arising from the operation of the Station or portion thereof acquired by CBS after the Adjustment Time shall be for the account of CBS. Trade and Barter Agreements shall be subject to adjustment or proration only to the extent provided in Section 4.1.18. Any appropriate proration required to be made (i) pursuant to Leases referred to in Section 4.1.5, (ii) pursuant to Contracts referred to in Section 4.1.6, (iii) pursuant to Section 6.1.4, and (iv) pursuant to Section 4.1.18 shall also be reflected in such accounting. Any amount not paid when due shall bear interest at the rate of ten percent (10%) per annum. 8.2.2. As soon as practicable following the Closing Date, and in any event within ninety (90) days thereafter, or at such other time as the parties agree, CBS shall deliver to Entercom CBS's certificate, setting forth as of the Adjustment Time, all adjustments to be made as provided in Section 8.2.1 above as to each Station. CBS shall provide Entercom or its representatives access to copies of such portions of books and records Entercom may reasonably request solely for purposes of verifying such adjustments. CBS's certificate shall be final and conclusive unless objected to by Entercom in writing within thirty (30) days after delivery. CBS and Entercom shall attempt jointly to reach agreement as to the amount of the adjustments to be made hereunder within sixty (60) days after receipt of such written objection, which agreement, if achieved, shall be binding upon all parties to this Agreement and not subject to dispute or review. 8.2.3. In the event of a disagreement between CBS and Entercom with respect to the accounting to be made hereunder, the parties agree that a public accounting firm chosen jointly by CBS and Entercom shall be the final arbiter of such disagreement. 25 30 8.2.4. Any amounts due for the adjustments provided for herein shall be paid within ten (10) business days after final determination. 8.3. CLOSING DELIVERIES TO CBS. At or before the Closing, Entercom shall deliver or cause to be delivered to CBS the following items and documents in form reasonably satisfactory to counsel for CBS and properly executed, unless CBS shall waive in whole or in part in writing such delivery and then only to the extent of such waiver: 8.3.1. Entercom shall deliver to CBS such Bills of Sale and assignments and other instruments of transfer and conveyance, transferring to CBS the Property to be sold, transferred or assigned hereunder and the rights and interests under the Leases and Contracts being assigned to CBS hereunder, to the extent such rights and interests under such leases and contracts have not previously been assigned to and assumed by CBS under the Time Brokerage Agreement. 8.3.2. Entercom shall deliver to CBS one or more Special Warranty Deeds in recordable form transferring to CBS a fee simple interest in each parcel of owned real property being conveyed to CBS hereunder. 8.3.3. Entercom shall deliver to CBS an assignment of all right, title and interest of Entercom in and to the Authorizations. 8.3.4. Entercom shall deliver to CBS all keys to and actual possession of all of the Assets, in the same condition as the same now are, except for ordinary wear and tear thereof and except as permitted under the Agreement. 8.3.5. Entercom shall deliver to CBS certified copies of resolutions of the Board of Directors of each Entercom entity, duly authorizing the execution, delivery, and performance of this Agreement and all documents to be executed and delivered by Entercom at the Closing, and thereafter. 8.3.6. Entercom shall deliver to CBS certificates signed by an authorized officer to the effect (a) that no act or omission of Entercom or any of its Affiliates, or state of facts contrary to the agreements, representations, and warranties of such party contained herein has been taken or has occurred and that said representations and warranties of such party, to the extent they do not speak as of a specific time, are true and correct as of the Closing Date, with the same effect as if made as of the time of Closing, except to the extent otherwise permitted hereunder or to the extent such act, omission, state of facts, untruth or inaccuracy would not have a material adverse effect on CBS's continued operation of the Stations as currently operated and (b) that all covenants and agreements contained herein of Entercom have been complied with in all material respects. 26 31 8.3.7. Entercom shall deliver to CBS the Required Consents relating to the Leases and Contracts, to the extent not previously delivered under the Time Brokerage Agreement. 8.3.8. Entercom shall deliver to CBS evidence of the release of all liens and encumbrances on the Assets to be released at Closing. 8.3.9. Entercom shall deliver to CBS one or more opinions of counsel to Entercom, dated the Closing Date, in form and substance reasonably satisfactory to CBS. 8.4. CLOSING DELIVERIES TO ENTERCOM. At or before the Closing, CBS or an Affiliate of CBS, as appropriate, shall deliver to Entercom or cause to be delivered the following items and documents in form reasonably satisfactory to counsel for Entercom and properly executed, unless Entercom shall waive in whole or in part in writing such delivery and then only to the extent of such waiver: 8.4.1. CBS shall pay to Entercom the Purchase Price by wire transfer of immediately available funds. 8.4.2. CBS shall deliver to Entercom certified copies of resolutions of the Board of Directors of each CBS entity duly authorizing the execution, delivery, and performance of this Agreement and all documents to be executed and delivered by such CBS entity at the Closing and thereafter. 8.4.3. CBS shall deliver to Entercom certificates signed by an authorized officer of each CBS entity to the effect that no act or omission of such CBS entity or state of facts contrary to the agreements, representations, and warranties of CBS contained herein has been taken or has occurred and that said representations and warranties of CBS to the extent they do not speak as of a specific time are true and correct as of the Closing Date, with the same effect as if made as of the time of Closing, and that all covenants and agreements contained herein of CBS have been complied with. 8.4.4. CBS shall deliver to Entercom one or more agreements whereby CBS assumes and agrees to pay when due any liabilities of Entercom relating to the Stations specifically assumed by CBS hereunder, including without limitation those liabilities accruing after the Adjustment Time with respect to those Leases and Contracts being assumed by CBS hereunder, to the extent such rights and interests under such liabilities have not previously been and assumed by CBS under the Time Brokerage Agreement. 8.4.5. CBS shall deliver to Entercom one or more opinions of counsel to CBS dated the Closing Date, in form and substance reasonably satisfactory to Entercom. 27 32 8.5. COVENANTS OF FURTHER ASSURANCES; AVAILABILITY OF RECORDS. At and after the time of Closing, upon request, each party shall take such action and deliver to the other party such further instruments of assignment, conveyance, or transfer or other documents of further assurance as may be reasonably necessary to evidence the full and effective transfer, conveyance, and assignment of the Assets and possession thereof to the respective parties, their successors and assigns, and to assure complete performance of this Agreement in all respects. After the Closing, for a period of three (3) years, upon request, Entercom shall provide CBS copies of or access to records relating to the Stations that are needed by CBS for accounting, tax, or other purposes. 8.6. RISK OF LOSS; DAMAGE TO PROPERTY. The risk of loss or damage from fire, theft, storm or other act beyond the control of Entercom to any of the Assets prior to Closing shall be upon Entercom. If, at the time of Closing, the tangible property to be sold hereunder shall have suffered such loss or damage to an extent that affects the value thereof and Entercom shall not have repaired, replaced, or restored same with property of like kind, quality, and value, CBS shall complete the purchase and Closing, in which event it shall be entitled to a payment equal to the greater of (a) the amount necessary to repair, replace, or restore such damaged property with property of like kind, quality, and value or (b) the amount of any and all insurance proceeds available to Entercom, if any, collectible by reason of such loss or damage. 8.7. TAXES ON TRANSACTION. All sales, purchase, transfer, use, or documentary taxes, if any, payable by reason of this Agreement or any of the transactions contemplated hereby or the sale, transfer, or delivery of any of the Assets hereunder, whether or not imposed on a particular party, shall be paid and borne equally by Entercom or CBS, either by payment thereof or by reimbursement to the other party. ARTICLE IX. TERMINATION, DEFAULT AND INDEMNIFICATION 9.1. TERMINATION. This Agreement may be terminated by a party hereto not then in default hereunder upon written notice to the other parties upon occurrence of any of the following: (i) the Closing has not occurred by the date that is one year after the date of this Agreement (the "Upset Date"); (ii) the Commission denies by Final Order or designates for hearing any of the Assignment Applications or any portion thereof, (iii) by either party as provided in Section 7.2; or (iv) any of the conditions set forth in Article V of this Agreement are not waived by such party and such 28 33 conditions shall not have been satisfied on or before the Upset Date, or shall have become incapable of satisfaction. This Agreement may be terminated by CBS as provided in Section 6.1.4, Section 6.1.5 and Section 6.6.3, provided CBS is not then in default hereunder. 9.2. EFFECT OF TERMINATION. The termination of this Agreement under Section 9.1 shall not relieve any party of any liability for breach of this Agreement prior to the date of termination. 9.3. REMEDIES. Entercom recognizes that, in the event of a Default by Entercom, monetary damages alone will not be adequate. Therefore, in the event of a Default by Entercom, unless CBS is in Default, CBS shall be entitled, in addition to indemnification pursuant to Section 9.4, to obtain specific performance of the terms of this Agreement. In any action to enforce specifically the performance of this Agreement under this Section 9.3, Entercom shall waive the defense that there is another adequate remedy at law or equity and agrees that CBS shall have the right to obtain specific performance of Entercom's obligations under the terms of this Agreement without being required to prove actual damages, post bond, or furnish other security. 9.4. INDEMNIFICATION. 9.4.1. BY ENTERCOM. Entercom shall indemnify, defend, and hold CBS and its officers, directors, partners, employees, and Affiliates harmless from, against, and with respect to any and all loss, damage, claim, obligation, assessment, cost, liability, and expense (including, without limitation, reasonable attorneys' fees and costs and expenses incurred in investigating, preparing, defending against or prosecuting any litigation or claim, action, suit, proceeding or demand) of any kind or character (a "Loss") (including without limitation the loss of any of the Authorizations resulting from any failure by the Commission to renew such Authorizations as a result of events occurring prior to the Closing Date) incurred, suffered, sustained, or required to be paid by any of them and resulting from, related to or arising out of: (a) any breach of any of the covenants, representations or warranties made by Entercom in or pursuant to this Agreement, or in any agreement, document, or instrument executed and delivered pursuant hereto; (b) any failure by Entercom to perform or observe, or to have performed or observed, in full, any covenant, agreement, or condition to be performed or observed by it pursuant to this Agreement or in any agreement, document, or instrument executed and delivered by or on behalf of it pursuant hereto; 29 34 (c) any and all obligations of Entercom, except for obligations assumed or required to be assumed by CBS under the terms of this Agreement or in the Time Brokerage Agreement; (d) the operation or ownership of the Assets prior to the Adjustment Time by Entercom and its Affiliates, except for obligations and liabilities assumed by CBS under the Time Brokerage Agreement; or (e) Closing by CBS or any of its Affiliates prior to the grants of the Assignment Applications becoming Final Orders, if the failure of the grants of the Assignment Applications to become Final Orders is attributable to any issue raised regarding Entercom or any of its Affiliates. In addition to the foregoing, in the event that Section 1031(a)(3) of the Code does not apply to the relinquishment of the Assets (as defined in the Boston I Agreement) and the acquisition of the Assets, solely due to the fact that Closing does not occur for reasons unrelated to CBS or its Affiliates by a date that is no more than 180 days after the date of closing under the Boston I Agreement, then provided CBS is not in breach hereof, Entercom shall make CBS whole for the loss sustained from the inapplicability of Section 1031(a)(3) of the Code to the relinquishment of the Assets (as defined in the Boston Agreement) and the acquisition of the Assets. 9.4.2. BY CBS. CBS shall indemnify, defend, and hold Entercom and its officers, directors, partners, employees, and Affiliates harmless from, against and with respect to any and all items of Loss incurred, suffered, sustained, or required to be paid by any of them and resulting from, related to or arising out of: (a) any breach of any of the covenants, representations, or warranties made by CBS in or pursuant to this Agreement, or in any agreement, document, or instrument executed and delivered pursuant hereto; (b) any failure by CBS to perform or observe, or to have performed or observed, in full, any covenant, agreement, or condition to be performed or observed by it pursuant to this Agreement or in any agreement, document, or instrument executed and delivered by or on behalf of it pursuant hereto; or (c) CBS's operation or ownership of the Station Assets after the Adjustment Time; or (d) any obligations under any Contracts or Leases assumed by CBS under Section 3.1 hereof. 30 35 9.4.3. NOTICE AND PROCEDURE IN CONNECTION WITH THIRD PARTY CLAIMS. If any party has a claim for indemnification hereunder (such party, an "Indemnitee") arising out of any claim or liability which is asserted or threatened against it, or any action, suit or proceeding is commenced by any third party against any Indemnitee which might result in any indemnification obligations hereunder on behalf of any other party (such other party, an "Indemnitor"), such Indemnitee shall, within twenty (20) business days from the receipt of same, give written notice thereof to each such Indemnitor together with a brief statement of the basis of the claim and a copy of any complaint or other documents relating to such claim, provided, however, that failure to give such notice within such twenty (20) business day period shall not affect the liability of Indemnitor hereunder unless the failure to give such notice within such period materially and adversely affects Indemnitor's ability to defend against the claim giving rise to Indemnitee's claim for indemnification or to cure the default giving rise to such claim. Within twenty (20) days from receipt of such notice, the Indemnitor shall give the Indemnitee written notice as to whether the Indemnitor elects to contest any such claim or liability; provided, however, that during the interim, the Indemnitee shall be entitled to take reasonable action (which shall not include settlement) with respect to such claim which it deems necessary to protect against further damage or default with respect thereto. If an Indemnitor elects to contest any such claim or liability, it shall be at the cost and expense of the Indemnitor and using professionals chosen by the Indemnitor. The Indemnitee may participate in the defense of any claim or liability that an Indemnitor has elected to contest, but such participation shall be at its own expense. If the Indemnitor does not elect to assume control or otherwise participate in the defense of any third party claim, it shall be bound by the results obtained by the Indemnitee with respect to such claim, including any settlement, subject to the Indemnitor's right to contest the underlying obligation to indemnify the Indemnitee. 9.4.4. EXCLUSIVITY. Except as provided in Section 9.1 concerning termination of this Agreement and Section 9.3 concerning the rights of CBS to specific performance, subsequent to Closing the right to indemnification hereunder shall be the exclusive remedy for all claims of damages of any party in connection with any breach by any other party of its representations, warranties, or covenants. Subsequent to Closing, the parties hereto agree that no party will be entitled to consequential or punitive damages as a result of a breach hereof by any party hereto. 9.4.5. LIMITATIONS. Except as otherwise provided in this Article IX, any claim asserted for damages or indemnification hereunder must be submitted to the Indemnitor in writing within the time periods set forth in Section 11.3 of this Agreement and any such claim not so asserted shall be waived and barred. No party shall be entitled to indemnification hereunder unless the aggregate 31 36 amount of its claims for indemnification exceeds One Hundred Thousand Dollars ($100,000) per Station, in which event such party shall be indemnified for the entire amount owed. This amount shall have no bearing on any determination as to what constitutes "material" for purposes of this Agreement. No party shall be entitled to indemnification hereunder for amount in the aggregate greater than the Purchase Price. ARTICLE X. ASSET EXCHANGE 10.1. POSSIBLE ENTERCOM SECTION 1031 ASSET EXCHANGE. Entercom may elect to effect the transfer and conveyance of the Assets as part of a deferred like-kind exchange under Section 1031(a)(3) of the Code in which the Assets are relinquished and other like-kind assets are identified and acquired with the Purchase Price subsequent to the Closing. Entercom may at any time at or prior to Closing notify CBS of its election to effect a deferred like-kind exchange and assign its rights under this Agreement to a "qualified intermediary" as defined in Treas. Reg. Section 1.1031(k)-1(g)(4), subject to all of CBS's rights and obligations hereunder, and shall promptly provide written notice of such assignment to all parties hereto. In the event Entercom assigns its rights hereunder to a "qualified intermediary," CBS shall acknowledge in writing the notification by Entercom of the assignment to the "qualified intermediary" of its rights hereunder, and CBS shall pay the Purchase Price at Closing to the "qualified intermediary" rather than to Entercom, which payment shall discharge the obligation of CBS to make payment for the Assets hereunder. 10.2. POSSIBLE CBS SECTION 1031 ASSET EXCHANGE. CBS may elect to effect the acquisition of the Assets as part of a deferred like-kind exchange under Section 1031(a)(3) of the Code, in lieu of buying such assets hereunder. If CBS so elects, it shall provide notice to Entercom of its election, and thereafter (i) may at any time at or prior to Closing assign its rights under this Agreement to a "qualified intermediary" as defined in Treas. Reg. Section 1.1031(k)-1(g)(4), subject to all of Entercom's rights and obligations hereunder and (ii) shall promptly provide written notice of such assignment to all parties hereto. If CBS has given notice of its intention to effect the acquisition of the Assets as part of an exchange under Section 1031 of the Code, Entercom shall (i) promptly provide CBS with written acknowledgment of such notice and (ii) at Closing, accept payment for the Assets from the "qualified intermediary" rather than from CBS, which payment shall discharge the obligation of CBS to make payment for the Assets hereunder and transfer, assign and convey the Assets to CBS or its designated Affiliates. 10.3. INDEPENDENT TRANSACTIONS. The parties acknowledge and agree that the transactions contemplated by this Agreement are not contractually interdependent or otherwise mutually dependent in any way on 32 37 or with the transactions contemplated by either the Boston I Agreement or the Boston II Agreement. The parties further acknowledge that neither the Closing nor any of the rights or obligations of the parties set forth herein are dependent or conditional on the closing or failure to close the transactions contemplated by either the Boston I Agreement or the Boston II Agreement, and that neither the closing of the Boston I or the Boston II Agreement nor any of the rights or obligations of the parties to such agreements are dependent or conditional on the occurrence of the Closing or the failure of occurrence of the Closing. ARTICLE XI. GENERAL PROVISIONS 11.1. EXPENSES OF THE PARTIES. Except as otherwise specifically provided herein, all expenses involved in the preparation, authorization, and consummation of this Agreement including, without limitation, all fees and expenses of agents, representatives, counsel, and accountants in connection therewith and in connection with applications to the Commission hereunder, shall be borne solely by the party who shall have incurred the same, and the other party shall have no liability in respect thereof. The foregoing notwithstanding, the parties agree that any filing fees of the Commission relating to the filing of the Assignment Applications shall be divided equally between Entercom and CBS. The parties agree that the Required Cure Expense shall not exceed One Million Dollars ($1,000,000.00). 11.2. BROKERS. Each party hereto represents and warrants to the other parties hereto that it has not incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents commissions or other like payment in connection with this Agreement or the transactions contemplated hereby for which the other parties will have any liability, and each party hereto agrees to indemnify and hold the other parties hereto harmless against and in respect of any such obligation or liability based in any way on any agreement, arrangement, or understanding claimed to have been made by such party with any third party. 11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS, AND WARRANTIES. The provisions hereof which by their terms are to be performed and observed after the Closing Date, and the several representations, warranties, indemnities, and agreements of the parties herein contained, shall survive the Closing Date hereunder for a period of eighteen (18) months and shall remain effective and unaltered or unimpaired for such period by any investigation that may have been or may be made at any time prior to Closing by or on behalf of any party, except that the representations concerning title, ERISA, environmental matters, and taxes contained in Sections 4.1.8, 4.1.15, 4.1.19 (other than as provided in Section 6.1.4), and 4.1.24 shall survive until ninety (90) days after the expiration of the applicable statutes of 33 38 limitation, and the provisions of Sections 2.2 and Article X shall survive the Closing without limitation. 11.4. CONFIDENTIALITY. Each party agrees, except as otherwise required by law or the rules of the New York Stock Exchange (the "NYSE"), until such time as this Agreement is made public by filing with the Commission, that it will not disclose to any third party the fact of or content of this agreement or the possible exchange of the radio stations involved without the express prior consent of the other parties. Should a party be required to disclose information regarding the agreement prior to filing with the Commission because of a requirement of law or a rule of the NYSE, it will advise the other parties with reasonable advance notice in writing prior to disclosure. 11.5. AMENDMENT AND WAIVER. This Agreement cannot be changed or terminated orally. Any amendment or modification hereof must be in writing signed by the party against whom enforcement is sought. No waiver of compliance with any provision or condition hereof, and no consent provided for herein, shall be effective unless evidenced by an instrument in writing duly executed by the party sought to be charged with such waiver or consent. 11.6. EFFECT OF THIS AGREEMENT. This Agreement and the Time Brokerage Agreement set forth the entire understanding of the parties and supersedes any and all prior written or oral agreements, arrangements, or understandings relating to the subject matter hereof. No representation, promise or inducement has been made by either party which is not embodied in this Agreement, and neither party shall be bound by, or be liable for, any alleged representation, promise, inducement, or statement of intention not embodied herein unless same shall have been made subsequent hereto, shall be in writing, and shall be signed by the party to be charged therewith. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 11.7. TERMS GENERALLY. (a) Words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other genders as the context requires; (b) the terms "hereof," "herein," and "herewith" or words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all Schedules hereto) and not to any particular provision of this Agreement, and Article, Section, Paragraph, and Schedule references are to be Articles, Sections, Paragraphs, and Schedules to this Agreement unless 34 39 otherwise specified; and (c) the word "or" shall not be exclusive, except where the context otherwise requires. 11.8. HEADINGS. The article or section headings of this Agreement are for convenience of reference only and do not form a part of and do not in any way modify, interpret, or construe the intention of the parties. 11.9. COUNTERPARTS. This Agreement may be executed in one or more counterparts and all such counterparts shall be construed as one and the same instrument. Executed documents transmitted by telecopier shall be valid and binding. 11.10. GOVERNING LAW; JURISDICTION. The construction and performance of this Agreement shall be governed by the laws of the State of New York without reference to its conflict of law rules. The parties hereto expressly waive and agree to waive any right to a jury trial in any controversy or claim arising out of or relating to this Agreement. 11.11. BULK SALES LAWS. CBS and its Affiliates waive compliance by Entercom and its Affiliates with the provisions of the "bulk sales" or similar laws of any state. Entercom agrees to indemnify CBS and its Affiliates and hold them harmless from any and all loss, cost, damages, and expenses (including but not limited to reasonable attorney's fees) sustained by the indemnified parties as a result of any failure of the indemnifying party to comply with any "bulk sales" or similar laws. 11.12. ASSIGNMENT. This Agreement and the rights and obligations hereunder may not be assigned by any party hereto without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld; provided however, that (x) Entercom may make a collateral assignment of its rights hereunder for the benefit of its senior lenders and (y) any party may assign all or any part of this Agreement or the rights and obligations hereunder to an Affiliate, provided that such assignment shall not relieve such party of its obligations hereunder. 11.13. NOTICES. Any notice, report, demand, waiver, or consent required or permitted hereunder shall be in writing and shall be given by hand delivery, by prepaid registered or certified mail, 35 40 with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery or by telecopy addressed as follows: If to Entercom: Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Attention: Mr. Joseph M. Field, President Telecopier Number: 610-660-5641 with copies to: John C. Donlevie, Esq., Executive Vice President and General Counsel Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopier Number: 610-660-5620 and Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, DC 20004 Attention: Joseph D. Sullivan, Esq. Telecopier Number: 202-637-2201 If to CBS: CBS Radio 40 West 57th Street 14th Floor New York, NY 10019 Attention: Mr. Mel Karmazin Telecopier Number: 212-314-9229 with copies to: General Counsel CBS Corporation 51 West 52nd Street New York, NY 10019-6188 Telecopier Number: 212-975-2185 36 41 and Leventhal Senter & Lerman, P.L.L.C. 2000 K Street, N.W. Suite 600 Washington, D.C. 20006 Attention: Steven A. Lerman, Esq. Telecopier Number: 202-293-7783 The date of any such notice and service thereof shall be deemed to be: (i) the day of delivery if hand delivered or delivered by overnight courier; (ii) the day of delivery as indicated on the return receipt if dispatched by mail, or (iii) the date of telecopy transmission as indicated on the telecopier transmission report, provided that any telecopy transmission shall not be effective unless a paper copy is sent by overnight courier on the date of the telecopy transmission. Any party may change its address for the purpose of notice by giving notice of such change in accordance with the provisions of this Section. 11.14. ATTORNEYS' FEES. In the event of a dispute between or among the parties hereto arising out of or related to this Agreement or the interpretation or enforcement of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and expenses from the other party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized corporate officers and their respective corporate seals thereunto affixed on this the date first written above. ENTERCOM COMMUNICATIONS CORP. By:_______________________________________ Title:____________________________________ CBS RADIO, INC. By:_______________________________________ Title:____________________________________ 37 42 CBS RADIO LICENSE, INC. By:_______________________________________ Title:____________________________________ 38 EX-10.11 15 TIME BROKERAGE AGREEMENT CBS RADIO 1 EXHIBIT 10.11 - -------------------------------------------------------------------------------- TIME BROKERAGE AGREEMENT BY AND AMONG CBS RADIO, INC., CBS RADIO LICENSE, INC., AND ENTERCOM COMMUNICATIONS CORP. DATED AS OF AUGUST 13, 1998 - -------------------------------------------------------------------------------- 2 TABLE OF SCHEDULES AND EXHIBITS SCHEDULE 1.1 Programming SCHEDULE 1.2 Compensation SCHEDULE 2.1 Programming Policy Statement SCHEDULE 4.1 Time Sales Agreements and Contracts (i) 3 TABLE OF CONTENTS PAGE ARTICLE I. - SALE OF TIME......................................................1 Section 1.1. Broadcast of Programming..................................1 Section 1.2. Payment...................................................1 Section 1.3. Term......................................................1 ARTICLE II. - PROGRAMMING AND OPERATING STANDARDS AND PRACTICES................2 Section 2.1. Compliance with Standards.................................2 Section 2.2. Political Broadcasts......................................2 Section 2.3. Handling of Communications................................2 Section 2.4. Preemption................................................3 Section 2.5. Broadcasting Obligations of Licensee......................3 Section 2.6. "Payola" and "Plugola"....................................4 Section 2.7. Advertising and Programming...............................4 Section 2.8. Compliance with Laws......................................5 Section 2.9. Certifications............................................5 ARTICLE III. - RESPONSIBILITY FOR EMPLOYEES AND EXPENSES.......................5 Section 3.1. Time Broker's Employees...................................5 Section 3.2. Licensee's Employees......................................5 Section 3.3. Time Broker's Expenses....................................6 Section 3.4. Operating Expenses........................................6 Section 3.5. Time Broker's Insurance...................................6 ARTICLE IV. - ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS......................7 Section 4.1. Assignment................................................7 Section 4.2. Proration.................................................7 Section 4.3. Accounts Receivable.......................................8 ARTICLE V. - OPERATION OF STATION..............................................9 ARTICLE VI. - GRANT OF LICENSES................................................9 Section 6.1. License to Use Stations Facilities........................9 Section 6.2. License of Intellectual Property.........................10 (i) 4 ARTICLE VII. - INDEMNIFICATION................................................10 Section 7.1. Indemnification Rights...................................10 Section 7.2. Procedures...............................................10 ARTICLE VIII. - DEFAULT.......................................................11 Section 8.1. Time Broker Events of Default............................11 Section 8.2. Licensee's Events of Default.............................12 Section 8.3. Cure Periods.............................................12 Section 8.4. Other Defaults...........................................13 ARTICLE IX. - TERMINATION.....................................................13 Section 9.1. Termination Upon Default.................................13 Section 9.2. Termination Upon Change in FCC Rules.....................13 Section 9.3. Certain Matters Upon Termination.........................13 ARTICLE X. - REMEDIES.........................................................14 ARTICLE XI. - CERTAIN REPRESENTATIONS AND WARRANTIES OF THE PARTIES..................................................15 Section 11.1. Representations and Warranties of Time Broker............15 Section 11.2. Representations, Warranties and Covenants of Operator and CRLI........................................16 ARTICLE XII. - MISCELLANEOUS..................................................17 Section 12.1. Modification and Waiver..................................17 Section 12.2. No Waiver; Remedies Cumulative...........................18 Section 12.3. Construction.............................................18 Section 12.4. Headings.................................................18 Section 12.5. Successors and Assigns...................................18 Section 12.6. Force Majeure............................................18 Section 12.7. Broker...................................................19 Section 12.8. Counterpart Signatures...................................19 Section 12.10. Entire Agreement.........................................20 Section 12.11. Severability.............................................21 Section 12.12. No Joint Venture.........................................21 Section 12.13. Damage to Stations.......................................21 Section 12.14. Noninterference..........................................21 (ii) 5 Section 12.15. Regulatory Changes.......................................21 Section 12.16. Attorneys' Fees..........................................22 (iii) 6 TIME BROKERAGE AGREEMENT This Time Brokerage Agreement (this "Agreement") is made as of the 13th day of August 1998, by and among CBS Radio, Inc., a Delaware corporation ("Operator"), CBS Radio License, Inc., a Delaware Corporation ("CRLI") (Operator and CRLI are collectively referred to herein as "Licensee") and Entercom Communications Corp., a Pennsylvania corporation ("Entercom" or "Time Broker"). CRLI is the licensee of broadcast stations WEEI(AM) and WRKO(AM), Boston, Massachusetts (collectively, the "Stations"). Concurrently with the execution of this Agreement, Time Broker, Operator and CRLI are entering into an Asset Purchase Agreement (the "Purchase Agreement") providing for the purchase by Time Broker of the Stations, upon the terms and conditions set forth therein. Time Broker and Licensee desire to enter into an agreement providing for the sale of substantially all of the broadcast time of the Stations to Time Broker, subject to and in compliance with the rules and policies of the Federal Communications Commission (the "FCC"). Accordingly, in consideration of the foregoing and of the mutual promises, covenants, and conditions set forth below, the parties agree as follows: ARTICLE I. SALE OF TIME Section 1.1. Broadcast of Programming. Effective as of five (5) business days after the expiration or early termination of any waiting period applicable to the transfer of the Stations to Time Broker under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") (the "Commencement Date"), Licensee shall broadcast on the Stations, or cause to be broadcast on the Stations, programs which are presented to it by Time Broker as described in greater detail on Schedule 1.1 (the "Programming"). Section 1.2. Payment. Time Broker shall pay Licensee for broadcast of the Programming the amounts set forth in Schedule 1.2 (the "Monthly Payment"), subject to adjustment as set forth in Section 2.4 below. All payments shall be made by wire transfer of immediately-available funds by the last business day of each calendar month, in arrears, to which such payment pertains. Any amount not paid when due shall bear interest at the rate of ten percent (10%) per annum. Section 1.3. Term. This Agreement shall commence on the Commencement Date and shall terminate on the earlier of (i) 12:01 a.m. on the Closing Date under the Purchase Agreement, (ii) the date 7 the Purchase Agreement is terminated, or (iii) the date this Agreement is terminated pursuant to Section 9.1 hereof. ARTICLE II. PROGRAMMING AND OPERATING STANDARDS AND PRACTICES Section 2.1. Compliance with Standards. All Programming delivered by Time Broker and all programming supplied by Licensee during the term of this Agreement shall be in accordance with applicable statutes, FCC requirements and the programming policies set forth on Schedule 2.1. Licensee reserves the right to refuse to broadcast any Programming containing matter which the Licensee believes is unsuitable or not consistent with the needs and interests of its service area or may be violative of any right of any third party, or which may constitute a "personal attack" as that term is and has been defined by the FCC or which Licensee reasonably determines is, or in the reasonable opinion of Licensee may be deemed to be, indecent (and not broadcast during the safe harbor for indecent programming established by the FCC) or obscene by the FCC or any court or other regulatory body with authority over Licensee or the Stations. If Time Broker does not adhere to the foregoing requirements, Licensee may suspend or cancel any specific program not so in compliance, without any reduction or offset in the payments due Licensee under this Agreement. Section 2.2. Political Broadcasts. Time Broker shall maintain and deliver to Licensee all records and information required by the FCC to be placed in the public inspection files of the Stations pertaining to the broadcast of political programming and advertisements, in accordance with the provisions of Sections 73.1940 and 73.3526 of the FCC's rules, and agrees to broadcast sponsored programming addressing political issues or controversial subjects of public importance, in accordance with the provisions of Section 73.1212 of the FCC's rules. Time Broker shall consult and cooperate with Licensee and adhere to all applicable statutes and the rules, regulations and policies of the FCC, as announced from time to time, with respect to the carriage of political advertisements and programming (including, without limitation, the rights of candidates and, as appropriate, others to "equal opportunities" and the carriage of contrasting points of view as mandated by any "fairness" rule with respect to such "issue-oriented" advertising or programming as may be broadcast) and the charges permitted therefor. Time Broker shall promptly provide to Licensee such documentation relating to such programming as Licensee is required to maintain in its public inspection files or as Licensee shall reasonably request. Licensee shall be responsible for the maintenance of the public inspection files of the Stations. Section 2.3. Handling of Communications. Time Broker shall cooperate with Licensee in promptly responding to all mail, cables, telegrams or telephone calls directed to the Stations in connection with the Programming 2 8 provided by Time Broker or any other matter relevant to its responsibilities hereunder. Promptly upon receipt, Time Broker shall provide copies of all such correspondence to Licensee. Time Broker shall promptly advise Licensee of any public or FCC complaint or inquiry known to Time Broker concerning such Programming, and shall provide Licensee with copies of any letters to Time Broker from the public, including complaints concerning such Programming. Upon Licensee's request, Time Broker shall broadcast material responsive to such complaints and inquiries. Notwithstanding the foregoing, Licensee shall handle all matters or inquiries relating to FCC complaints and any other matters required to be handled by Licensee under the rules and regulations of the FCC. Section 2.4. Preemption. Licensee may, from time to time, preempt portions of the Programming to broadcast emergency information or programs it deems would better serve the public interest. Time Broker shall be notified at least one week in advance of any preemption of any of the Programming for the purpose of broadcasting programs Licensee deems necessary to serve the public interest unless such advance notice is impossible or impractical, in which case Licensee shall notify Time Broker promptly upon making such determination. In the event of any such preemption, Time Broker shall be entitled to full reimbursement of damages suffered as a result of such preemption, except in the case of preemption to cover breaking news or to broadcast emergency information. Licensee represents and covenants that preemption pursuant to this Section 2.4 shall only occur to the extent Licensee deems necessary to carry out its obligations as an FCC licensee, and expressly agrees that its right of preemption shall not be exercised in an arbitrary manner or for the commercial advantage of Licensee or others. Section 2.5. Broadcasting Obligations of Licensee. During the term of this Agreement, except as set forth in Sections 2.1 and 2.4, Licensee will broadcast the Programming in its entirety (including commercials), without interruption, deletion or addition of any kind, except as set forth below: Licensee may temporarily refrain from broadcasting the Programming between the hours of 12:30 a.m. and 5:30 a.m. (or at such other time in the event that weather conditions or contractual arrangements relating to transmitter sites dealing with the exposure of humans to RF radiation so require) in order to perform normal, customary and routine maintenance on the Stations' transmitting facilities; provided that Licensee shall provide written notice to Time Broker of its intent to refrain from broadcasting the Programming at least forty-eight (48) hours in advance, except when an emergency requires such suspension, and provided further that Licensee shall use its best efforts to minimize the frequency and duration of such interruptions: (a) Licensee may temporarily cease broadcasting the Programming as a result of a natural disaster, act of public enemy, act of God or other event beyond Licensee's control; provided that in any such case, Licensee 3 9 will act expediently and use its best efforts to resume the broadcast of the Programming as quickly as the applicable circumstances will allow; and (b) Licensee may temporarily refrain from broadcasting the Programming on the Stations as a result of a technical problem with the Stations' transmitting equipment which is beyond Licensee's control and which is not directly or indirectly the result of any act or omission of Licensee or any of its employees or agents; provided that in such case, Licensee will act expediently and use its best efforts to resume the broadcast of the Programming as quickly as the applicable circumstances will allow. Section 2.6. "Payola" and "Plugola". Time Broker agrees that it will not accept any gift, gratuity or other consideration, including, but not limited to, a commission, discount, bonus, material supplies or other merchandise, services or labor (collectively, the "Consideration"), directly or indirectly, from any person or company for the playing of records, the presentation of any programming or the broadcast of any commercial announcement over the Stations unless the payor is identified in the program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act of 1934, as amended (the "Communications Act") and the FCC requirements. It is further understood and agreed that no commercial message, plugs, or undue reference shall be made in programming presented over the Stations to any business venture, profit-making activity or other interest (other than non-commercial announcements for bona fide charities, church activities or other public service activities) unless the payor is identified in the program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act and the FCC requirements. In addition, Time Broker agrees that it will take steps, including the continuation of Licensee's system for periodic execution of affidavits, reasonably designed to assure that it, its employees and agents comply with this Section 2.7. Section 2.7. Advertising and Programming. Beginning with the Commencement Date, Time Broker shall be solely responsible for any expenses incurred in connection with and shall be entitled to all revenue from the sale of advertising or program time on the Stations. Except as otherwise provided herein, Time Broker does not assume any obligation of Licensee under any contract or advertising arrangement entered into by Licensee on or after the Commencement Date. Time Broker will advise Licensee of its lowest unit charge for political advertising, and Licensee shall not do anything that would lower Time Broker's lowest unit charge. 4 10 Section 2.8. Compliance with Laws. At all times during the term of this Agreement, Time Broker and Licensee shall comply in all material respects with all applicable federal, state and local laws, rules and regulations, including the use of FCC-licensed operators where such are required. Section 2.9. Certifications. Pursuant to Section 73.3555(a)(3)(ii) of the FCC's rules, Licensee certifies that it maintains ultimate control over the Stations' facilities, including specifically control over station finances, personnel and programming, and Time Broker certifies that this Agreement complies with the provisions of Sections 73.3555 of the FCC's rules. ARTICLE III. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES Section 3.1. Time Broker's Employees. (a) Time Broker shall employ and be responsible for the payment of salaries, taxes, insurance and all other costs related to all personnel used in the production of the Programming. Time Broker will not incur any liability on account of Licensee's employees arising and accruing prior to the Commencement Date including, without limitation, any such liability on account of unemployment insurance contributions, termination and severance payments, accrued sick leave or accrued vacation. (b) Time Broker's and Licensee's obligations with regard to the hiring by Time Broker of Licensee's employees at the Stations shall be as set forth in Section 3.2.2 and Section 6.5.1 of the Purchase Agreement, except as provided herein. As of the Commencement Date, Licensee shall terminate all of its employees to whom Time Broker will extend offers of employment, except for those personnel necessary to fulfill Licensee's obligations under the Communications Act, the rules of the FCC and other applicable laws and Non-Continuing Employees (as defined in the Purchase Agreement), if any. Time Broker shall offer employment to such terminated employees of Licensee as provided in Section 6.5.1 of the Purchase Agreement. Section 3.2. Licensee's Employees. Licensee shall employ and be responsible for the payment of salaries, employment taxes, insurance and all other costs related to the personnel necessary to fulfill its obligations as Licensee and to transmit the Programming. Time Broker shall have no authority and shall not 5 11 supervise persons in the employ of Licensee after the Commencement Date. Licensee acknowledges that its employees may have access to certain confidential information of Time Broker. Licensee shall, therefore, inform its employees of the confidential nature of such information and require that each such employee keep such information confidential. Section 3.3. Time Broker's Expenses. Time Broker shall pay for all costs associated with the production and delivery of the Programming, including but not limited to (i) all ASCAP, BMI, SESAC and other copyright fees, (ii) any expenses incurred in connection with its sale of advertising time hereunder (including without limitation sales commissions) in connection with the Programming, (iii) the salaries, employment taxes, insurance and related costs for all personnel used in the production of the Programming and all sales personnel (including salespeople, traffic personnel, and programming staff), and (iv) maintenance, repairs and capital expense (to the extent Licensee is not covered by insurance) of the Stations' studio equipment; provided however, that if this Agreement is terminated other than through closing of the Purchase Agreement, Time Broker will be reimbursed for any capital expenditures made during the term of this Agreement. Section 3.4. Operating Expenses. Except as provided in Section 3.3, Licensee shall be responsible for the payment when due of all fees and expenses relating to operation and maintenance of the Stations to the extent necessary for Licensee to maintain the licensed transmitting capability of the Stations and to fulfill its obligations as an FCC Licensee, including, without limitation, salaries, benefits and similar expenses for Licensee's employees, Licensee's federal, state and local taxes, rent, utilities (excluding telephone), maintenance and repairs at the Stations' transmitter sites, any capital expense at the Stations' transmitter and studio sites, insurance on the Stations' equipment, insurance deductibles on claims on the Stations' equipment, and ad valorem property taxes. Section 3.5. Time Broker's Insurance. At all times while this Agreement remains in effect, Time Broker shall maintain Broadcaster's Liability Insurance with coverage of at least One Million Dollars ($1,000,000.00) per occurrence, Workers Compensation insurance and Commercial General Liability insurance with a combined single limit amount of Five Million Dollars ($5,000,000.00) with insurance companies that have a Best rating of A or better. Time Broker shall deliver certificates of insurance periodically to Licensee evidencing that such insurance remains in effect and such policies shall name Licensee as an additional insured. 6 12 ARTICLE IV. ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS Section 4.1. Assignment. On the Commencement Date, Licensee shall assign to Time Broker title to all vehicles that are part of the Property (as defined in the Purchase Agreement) and all Time Sales Agreements, Trade Agreements and Barter Agreements (as such agreements are defined in the Purchase Agreement), together with those contracts and other agreements identified on Schedule 4.1 (collectively, the "Contracts"). Time Broker shall, on and as of the Commencement Date, assume and become fully liable and responsible for all liabilities and obligations of Licensee accruing after the Commencement Date under the Contracts. Except as set forth in the Purchase Agreement, Licensee has provided Time Broker with true and complete copies, including amendments, of the Contracts. The Contracts are freely assignable, or, if consent of the other contracting party to the assignment is required, Licensee shall use its reasonable best efforts to obtain such consent as promptly as practicable; provided that CBS shall not be obligated to pay money to any other contracting party to obtain any such consent, other than reasonable expenses of the party for any legal documentation related to the assignment of the Contract in question. If Licensee is unable to obtain any consent necessary to permit the valid assignment of a Contract, Licensee shall act as Time Broker's agent in connection with such Contract and the parties shall cooperate to cause Time Broker to receive the benefit of the Contract in exchange for performance by Time Broker of all of Licensee's obligations under such Contract (including but not limited to the payment to Licensee of all amounts due under the Contract on or after the Commencement Date for services provided by Licensee). Section 4.2. Proration. All expenses and income arising under the Contracts shall be prorated between Licensee and Time Broker as of the Commencement Date in a manner such that the costs and benefits thereunder through the date before the Commencement Date shall be for the account of Licensee and, thereafter, during the term of this Agreement, for the account of Time Broker. Such proration shall include an adjustment to the extent that the excess of the value of unfulfilled obligations under Trade Agreements and Barter Agreements (as defined in the Purchase Agreement), including any "time bank" provisions thereof, over the value of consideration to be received by the Stations (in each case determined as of the Commencement Date) (the "Net Negative Trade Balance") exceeds Fifty Thousand Dollars ($50,000.00) The total value of all unfulfilled obligations in respect of Trade Agreements and Barter Agreements to be assumed by Entercom, whether or not the Stations have received consideration therefor, shall not be in excess of One Million Four Hundred Thousand Dollars ($1,400,000.00) as of the Closing Date. It is agreed and understood that the proration required hereby shall include an adjustment for any accrued but unpaid vacation of Licensee's employees that are hired by Time Broker pursuant to the provisions of Section 3.1(b) hereof. It is further agreed and understood that such proration shall not include an adjustment for any termination or severance payments or benefits obligations 7 13 that Licensee is required to pay as a result of the termination of its employees pursuant to Section 3.1(b) or any sick leave or other similar benefit, and that Time Broker shall not be responsible for any such termination or severance payments or benefits obligations except for those incurred on account of employees hired by Time Broker on or after the Commencement Date pursuant to Time Broker's severance policy, if any, after the Commencement Date. Such prorations shall be completed and any necessary payments on account of such prorations paid within sixty (60) days of the Commencement Date. If any disagreement with respect to the proration of such income and expenses cannot be resolved by the parties, Licensee and Time Broker will select a certified public accountant knowledgeable in the broadcast industry to resolve the dispute. The parties will use their best efforts in good faith to cause to occur as expeditiously as possible the appointment of the certified public accountant, and once appointed, the resolution of the dispute. The resolution of such accountant shall be binding on the parties and subject to judicial enforcement. Payment of the cost of the accountant shall be shared equally between Time Broker and Licensee. Section 4.3. Accounts Receivable. All cash accounts receivable for broadcasts on the Stations which occur prior to the Commencement Date (the "Accounts Receivable") shall belong to Licensee and for broadcasts which occur thereafter shall belong to Time Broker. Within ten (10) days following the Commencement Date, Licensee shall deliver to Time Broker a schedule of Cash Accounts Receivable for the Stations as of the Commencement Date (the "Schedule of Accounts Receivable"). Time Broker agrees to collect for Licensee its Accounts Receivable as shown on the Schedule of Accounts Receivable delivered by Licensee for a period of one hundred fifty (150) days following the Commencement Date. Licensee will provide Time Broker a power of attorney or other required authorization for the limited purpose of allowing Time Broker to endorse and deposit checks and other instruments received in payment of such Accounts Receivable. All payments received by Time Broker from any customer whose name appears in the Schedule of Accounts Receivable and who is also a customer of Time Broker shall be credited as payment of the account or invoice designated by such customer. In the absence of any such designation by the customer, payments shall be first credited to the oldest invoice which is not disputed by said customer. Time Broker shall keep accurate records of the payment received by it on such Accounts Receivable and Licensee shall have access at reasonable times to Time Broker's records to verify such status of the Accounts Receivable. Time Broker shall remit to Licensee on a weekly basis, one week in arrears, amounts previously collected by Time Broker on such Accounts Receivable, along with a written accounting of same, including without limitation, to the extent Licensee's traffic and billing system can produce same, a detailed open Accounts Receivable report reflecting payments remitted therewith. Any Accounts Receivable that have not been collected within such one hundred fifty (150) day period shall be returned to Licensee, together with all records in connection therewith, including without limitation, to the extent Licensee's traffic and billing system can produce same, a detailed open Accounts Receivable report reflecting payments remitted therewith, whereupon Licensee may pursue collection thereof in such manner as it, in its sole discretion, may determine. Time Broker shall 8 14 not have the right to compromise, settle or adjust the amounts of any such Accounts Receivable without Licensee's prior written consent. Except to remit collected Accounts Receivable in accordance herewith, Time Broker shall have no liability or obligation to Licensee with respect to the collection of its accounts and shall not be obligated to take any action to collect such accounts. ARTICLE V. OPERATION OF STATION Notwithstanding any provision of this Agreement to the contrary, Licensee shall retain full authority and power with respect to the management and operation of the Stations during the term of this Agreement. The parties agree and acknowledge that Licensee's continued control of the Stations and their premises is an essential element of the continuing validity and legality of this Agreement. Accordingly, Licensee shall employ the General Manager of the Stations and such other personnel as Licensee determines may be necessary to fulfill its obligations as a licensee under the Communications Act and its obligations in accordance with Section 3.2 hereof. Licensee shall retain full authority and control over the policies, programming and operations of the Stations, including, without limitation, the decision whether to preempt Programming in accordance with Section 2.4 hereof. Licensee shall have ultimate responsibility to effectuate compliance with the Communications Act and with FCC rules, regulations and policies. In no event shall Time Broker or its employees represent, depict, describe or portray Time Broker as the licensee of the Stations. ARTICLE VI. GRANT OF LICENSES Section 6.1. License to Use Stations Facilities. Effective as of the Commencement Date, Licensee grants Time Broker a license to access and use all of the Stations' studio and office space and other facilities ("Stations Facilities") and all equipment and furnishings contained therein ("Stations Equipment") in the production and broadcasting of the Programming and sales and administration relating thereto, in accordance with the terms set forth in this Section 6 (the "Time Broker License"). The Time Broker License shall have a term coterminous with this Agreement. Time Broker shall not remove from the Stations Facilities or modify any Stations Equipment in the Stations Facilities owned by or leased or licensed to Licensee without Licensee's prior written consent, such consent not to be unreasonably withheld. Licensee shall not license the use of the Stations Facilities to any other party during the term of the Time Broker License; and Time Broker's use of the Stations Facilities shall be exclusive except for Licensee's right to use such facilities as it deems appropriate in connection with the satisfaction of its obligations as the Licensee of the Stations, including the use of such facilities and adequate office space for the employees of Licensee that are required for Licensee to comply with its obligations under Section 3.2 and 5 hereof. Time Broker shall use due care in the use of any property of Licensee. Time Broker shall 9 15 indemnify Licensee for any damage (normal wear and tear excepted) to Licensee's property caused by Time Broker or any employee, contractor, agent or guest of Time Broker. Section 6.2. License of Intellectual Property. Effective as of the Commencement Date, Licensee licenses to Time Broker the exclusive right to use (or, to the extent Licensee does not hold exclusive rights, the non-exclusive right to use) all intellectual property owned by or licensed to Licensee and used solely in the operation of the Stations (including, but not limited to, logos, jingles, promotional materials, call signs and goodwill) (the "IP License"). In the event of termination of this Agreement, the IP License shall terminate; provided, however, that Licensee shall own all trademarks, service marks, trade names, characters, formats, jingles, promotional materials, logos and positioning statements which Time Broker develops for the Programming during the term of this Agreement. ARTICLE VII. INDEMNIFICATION Section 7.1. Indemnification Rights. Each party will indemnify and hold harmless the other party, and the directors, officers, partners, employees, agents and affiliates of such other party, from and against any and all liability, including without limitation reasonable attorneys' fees arising out of or incident to (i) any breach by such party of a representation, warranty or covenant made herein, (ii) the programming produced or furnished by such party hereunder, or (iii) the conduct of such party, its employees, contractors or agents (including negligence) in performing its or their obligations hereunder. Without limiting the generality of the foregoing, each party will indemnify and hold harmless the other party, and the directors, officers, partners, employees, agents and affiliates of such other party, from and against any and all liability for libel, slander, infringement of trademarks, trade names, or program titles, violation of rights of privacy, and infringement of copyrights and proprietary rights resulting from the programming produced or furnished by it hereunder. The parties' indemnification obligations hereunder shall survive any termination or expiration of this Agreement. Section 7.2. Procedures. If any party has a claim for indemnification hereunder (such party, an "Indemnitee") arising out of any claim or liability which is asserted or threatened against it, or any action, suit or proceeding is commenced by any third party against any Indemnitee which might result in any indemnification obligations hereunder on behalf of any other party (such other party, an "Indemnitor"), such Indemnitee shall, within twenty (20) business days from the receipt of same, give written notice thereof to each such Indemnitor together with a brief statement of the basis of the claim and a copy of any complaint or other documents relating to such claim, provided, however, that failure to give such notice within such twenty (20) business 10 16 day period shall not affect the liability of Indemnitor hereunder unless the failure to give such notice within such period materially and adversely affects Indemnitor's ability to defend against the claim giving rise to Indemnitee's claim for indemnification or to cure the default giving rise to such claim. Within twenty (20) days from receipt of such notice, the Indemnitor shall give the Indemnitee written notice as to whether the Indemnitor elects to contest any such claim or liability; provided, however, that during the interim, the Indemnitee shall be entitled to take reasonable action (which shall not include settlement) with respect to such claim which it deems necessary to protect against further damage or default with respect thereto. If an Indemnitor elects to contest any such claim or liability, it shall be at the cost and expense of the Indemnitor and using professionals chosen by the Indemnitor. The Indemnitee may participate in the defense of any claim or liability that an Indemnitor has elected to contest, but such participation shall be at its own expense. If the Indemnitor does not elect to assume control or otherwise participate in the defense of any third party claim, it shall be bound by the results obtained by the Indemnitee with respect to such claim. ARTICLE VIII. DEFAULT Section 8.1. Time Broker Events of Default. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be an Event of Default by Time Broker under this Agreement: (a) Time Broker's failure to timely pay any of the Monthly Payment provided for in Section 1.2 or other payments required hereunder; (b) except as otherwise provided for in this Agreement, the failure of Time Broker to supply the Programming; (c) any termination of this Agreement by Time Broker other than as permitted in Section 9.1; or (d) the occurrence of any of the following which arises out of, relates to or is attributable to the acts or omissions of Time Broker: (i) the issuance by the FCC of a Show Cause Order designating any of the Stations' FCC authorizations for revocation; (ii) the issuance by the FCC of an order designating for an evidentiary hearing the Stations' applications for renewal of the FCC authorizations; (iii) the issuance by the FCC of an order designating for an evidentiary hearing an application for the assignment of the Stations' FCC authorizations to Time Broker; (iv) breach of any covenant of Time Broker which would reasonably be expected to lead or to the revocation or non-renewal of the FCC authorizations of any of the Stations; or 11 17 (v) a continuing, uncured material breach of any covenant of Time Broker. Section 8.2. Licensee's Events of Default. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be an Event of Default by Licensee under this Agreement: (a) except as otherwise provided for in this Agreement, the failure of Licensee to broadcast the Programming; (b) any termination of this Agreement by Licensee other than as permitted in Section 9.1; (c) the issuance by the FCC of an order designating for an evidentiary hearing an application for the assignment of the Stations' FCC authorizations to Time Broker which arises out of, relates to or is attributable to the acts or omissions of Licensee but excluding issues which are based upon Time Broker's conduct hereunder for which Licensee may be held responsible; or (d) a continuing, uncured material breach of any covenant of the Licensee. Section 8.3. Cure Periods. The cure periods before any event listed in Sections 8.1 or 8.2 shall become an Event of Default are as follows: (a) Payment by Time Broker. The Monthly Payment or other payments required hereunder to be paid to Licensee must be received by Licensee within five (5) days after Licensee gives written notice of non-payment to Time Broker. (b) Certain Matters. There shall be no cure period for (i) the matters relating to the FCC set forth in Sections 8.1(d) or 8.2(c) hereof, (ii) a termination by Time Broker described in Section 8.1(c); or (iii) a termination by Licensee described in Section 8.2(b) hereof. (c) Programs and Broadcast Matters. With respect to Time Broker's failure to provide the Programming referred to in Section 8.1(b) hereof or Licensee's failure to broadcast the Programming referred to in Section 8.2(a) hereof, the period allowed for cure shall be three business days from the giving of written notice of such failure to the defaulting party by the non-defaulting party. (d) Other Matters. With respect to all matters capable of being cured other than those described in Sections 8.3(a), 8.3(b) or 8.3(c) above, the cure period shall be ten (10) days after written notice to the defaulting party is given by the non-defaulting party or, with respect to matters that through the exercise of reasonable diligence cannot be cured within such ten (10) day period, such longer period not to exceed ninety (90) days as is reasonably necessary to effect such cure through the exercise of reasonable diligence. 12 18 Section 8.4. Other Defaults. For any other breach of a representation, warranty or covenant made herein that is not listed in Sections 8.1 or 8.2, a party's sole remedy shall be indemnification pursuant to Article VII hereof. ARTICLE IX. TERMINATION This Agreement shall automatically terminate upon the expiration of the term of this Agreement as set forth in Section 1.3. In addition, this Agreement shall terminate as provided below. Section 9.1. Termination Upon Default. In addition to other remedies available at law or equity, this Agreement may be terminated by either Licensee or Time Broker by written notice to the other, specifying an effective date of termination which is not less than seven (7) days nor more than ninety (90) days from the date such notice is given, if the party seeking to terminate is not then in material default or breach hereof, upon an uncured Event of Default. In the event that the non-defaulting party does not exercise such right of termination by giving such written notice within sixty (60) days of the occurrence of an uncured Event of Default, then the Event of Default giving rise to such right of termination shall be deemed waived and the Agreement shall continue in full force and effect. Section 9.2. Termination Upon Change in FCC Rules. In addition to other remedies available at law or equity, this Agreement may be terminated by either Licensee or Time Broker by written notice to the other, specifying an effective date of termination which is not less than seven (7) days nor more than thirty (30) days from the date such notice is given, in the event of a change in FCC rules, policies, or precedent that would cause this Agreement to be in violation thereof and such change is final, in effect, and has not been stayed, and the parties have been unable, after negotiating in good faith for at least thirty (30) days, to modify this Agreement to comply with the change in FCC rules, policies, or precedent. Section 9.3. Certain Matters Upon Termination. (a) Upon any termination of this Agreement, Licensee shall have no further obligation to provide to Time Broker any broadcast time or broadcast transmission facilities and Time Broker shall have no further obligations to make any payments to Licensee under Section 1.2 hereof. Upon any termination, Time Broker shall be responsible for all debts and obligations of 13 19 Time Broker to third parties based upon the purchase of air time and use of Licensee's transmission facilities including, without limitation, accounts payable, barter agreements and unaired advertisements, but not for Licensee's federal, state and local income and business franchise tax liabilities or taxes levied upon Licensee's personal property. Notwithstanding anything herein to the contrary, to the extent that any invoice, bill or statement submitted to Licensee after the termination of this Agreement or any payment made by Time Broker prior to the termination of this Agreement relates to expenses incurred in operating the Stations, for periods both before and after the termination of this Agreement, such expenses shall be prorated between Licensee and Time Broker in accordance with the principle that Time Broker shall be responsible for expenses allocable to the period prior to the termination of this Agreement and Licensee shall be responsible for expenses allocable to the period on and after the termination of this Agreement. Such proration shall include an adjustment for Time Broker's Trade Agreements only to the extent that Time Broker's Net Negative Trade Balance exceeds Fifty Thousand Dollars ($50,000.00). Each party agrees to reimburse the other party for expenses paid by the other party to the extent appropriate to implement the proration of expenses pursuant to the preceding sentence. (b) If this Agreement terminates other than as a result of the Closing (as defined in the Purchase Agreement), Time Broker shall (i) assign to Licensee and Licensee shall assume all Contracts (including those employment contracts assumed by Time Broker pursuant to this Agreement) and all renewals, replacements or other contracts entered in the ordinary course of business relating to the Stations between the Commencement Date and the date of termination of this Agreement ("Supplemental Contracts") in effect on the date of such termination or expiration; (ii) assign to Licensee title to vehicles assigned to Time Broker under Section 4.1; and (iii) be responsible for only those obligations under the Contracts and Supplemental Contracts arising on or after the Commencement Date and prior to the termination of this Agreement. (c) Notwithstanding anything in Section 7.1 to the contrary, no expiration or termination of this Agreement shall terminate the obligation of each party to indemnify the other for claims under Section 7 hereof or limit or impair any party's rights to receive payments due and owing hereunder on or before the date of such termination. ARTICLE X. REMEDIES In addition to a party's rights of termination hereunder (and in addition to any other remedies available to it or provided under law), in the event of an uncured Event of Default 14 20 with respect to either party, the other may seek specific performance of this Agreement, in which case the defaulting party shall waive the defense in any such suit that the other party has an adequate remedy at law and interpose no opposition, legal or otherwise, as to the propriety of specific performance as a remedy hereunder, and agrees that the other party shall have the right to obtain specific performance of the defaulting party without being required to prove actual damages, post bond, or furnish other security. ARTICLE XI. CERTAIN REPRESENTATIONS AND WARRANTIES OF THE PARTIES Section 11.1. Representations and Warranties of Time Broker. Time Broker hereby represents and warrants to Licensee as follows: 11.1.1. Corporate Organization. Time Broker is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, is duly qualified to do business in the Commonwealth of Massachusetts and has full power and authority to conduct its business as currently conducted. 11.1.2. Authorization; Enforceability. This Agreement has been duly executed and delivered by Time Broker, and is valid, binding and enforceable against Time Broker in accordance with its terms. Time Broker has full right, power, authority and legal capacity to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery and performance of this Agreement and the consummation of the transactions provided for hereby have been duly authorized by all necessary action on the part of Time Broker, and no other organizational or other proceedings on the part of Time Broker are necessary to authorize the execution or delivery of this Agreement or the transactions contemplated hereby. 11.1.3. No Consent. Except to the extent any of the Contracts require consent to assignment, no consent of any other party and no consent, license, approval or authorization of, or exemption by, or filing, restriction or declaration with, any governmental authority, bureau, agency or regulatory authority, other than the filing of this Agreement with the FCC and the expiration or early termination of any applicable waiting period under the HSR Act, if applicable, is required in connection with the execution, delivery or performance of this Agreement by Time Broker or will effect the validity or performance of this Agreement. 11.1.4. No Breach. Neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby will constitute or result in the breach of any term, condition or provision of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of Time Broker pursuant to the organizational documents of Time Broker, any agreement or other instrument to which 15 21 Time Broker is a party or by which any part of its property is bound, or violate any law, regulation, judgment or order binding upon Time Broker. 11.1.5. Actions and Proceedings. There is no judgment outstanding and no litigation, claim, investigation or proceeding pending against Time Broker or, to the knowledge of Time Broker, threatened before any court or governmental agency to restrain or prohibit, or to obtain damages, or other relief in connection with, this Agreement, the Purchase Agreement or the consummation of the transactions contemplated hereby or thereby or that might adversely affect Time Broker's performance under this Agreement. 11.1.6. Qualifications. Time Broker is qualified in accordance with the Communications Act of 1934, as amended, and the rules and policies of the FCC to enter into this Agreement and provide programming on the Stations in accordance with its terms. Between the date hereof and the termination of this Agreement, either by the Closing of the Purchase Agreement or the earlier termination in accordance with Article 9 hereof, Time Broker will not take any action that Time Broker knows, or has reason to believe, would disqualify it from providing programming on the Stations pursuant to this Agreement. Section 11.2. Representations, Warranties and Covenants of Operator and CRLI. Operator and CRLI hereby represent, warrant and covenant to Time Broker as follows: 11.2.1. Corporate Organization. Operator is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, is duly qualified to do business in the Commonwealth of Massachusetts and has full power and authority to conduct its business as currently conducted. CRLI is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, is duly qualified to do business in the Commonwealth of Massachusetts and has full power and authority to conduct its business as currently conducted. 11.2.2. Authorization; Enforceability. This Agreement has been duly executed and delivered by each of Operator and CRLI, and is valid, binding and enforceable against each of them in accordance with its terms. Each of Operator and CRLI has full right, power, authority and legal capacity to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions provided for hereby have been duly authorized by all necessary action on the part of each of Operator and CRLI, and no other organizational or other proceedings on the part of Operator or CRLI are necessary to authorize the execution or delivery of this Agreement or the transactions contemplated hereby. 16 22 11.2.3. No Consent. Except to the extent any of the Contracts require consent to assignment, no consent, license, approval or authorization of or exemption by, or filing, restriction or declaration with, any governmental authority, bureau, agency or regulatory authority, other than the filing of this Agreement with the FCC and the expiration or early termination of any applicable waiting period under the HSR Act, if applicable, is required in connection with the execution, delivery or performance of this Agreement or will affect the validity or enforceability of this Agreement. 11.2.4. No Breach. Except to the extent any of the Contracts require consent to assignment, neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby will constitute or result in the breach of any term, condition or provision of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of Operator or CRLI pursuant to the organizational documents of Operator or CRLI, any agreement or other instrument to which Operator or CRLI is a party or by which any part of their property is bound, or violate any law, regulation, judgment or order binding upon Operator or CRLI. 11.2.5. Actions and Proceedings. There is no judgment outstanding and no litigation, claim, investigation or proceeding pending against Operator or CRLI or, to the knowledge of Operator or CRLI, threatened before any court or governmental agency to restrain or prohibit, or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. 11.2.6. Maintenance of Current Operations. The Stations' transmission equipment shall be maintained by Operator and CRLI in a condition consistent with good engineering practices and in compliance in all material respects with the Communications Act and all other applicable rules, regulations and technical standards of the FCC. 11.2.7. Other Agreements. During the term of this Agreement, Operator and CRLI will not enter into any other time brokerage, program provision, local management or similar agreement with any third party with respect to the Stations. ARTICLE XII. MISCELLANEOUS Section 12.1. Modification and Waiver. No modification or waiver of any provision of this Agreement shall in any event be effective unless the same shall be in writing signed by the party against whom the waiver is sought to be enforced, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. 17 23 Section 12.2. No Waiver; Remedies Cumulative. No failure or delay on the part of Licensee or Time Broker in exercising any right or power hereunder shall operate as a waiver thereof, nor any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensee and Time Broker herein provided are cumulative and are not exclusive of any rights or remedies which they may otherwise have. Section 12.3. Construction. This Agreement shall be construed in accordance with the laws of the State of New York without reference to conflict of laws principles, and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations now or hereafter in force and to the regulations of the FCC and all other governmental bodies or authorities presently or hereafter duly constituted. The parties hereto expressly waive and agree to waive any right to a jury trial in any controversy or claim arising out of or relating to this Agreement. Section 12.4. Headings. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. Section 12.5. Successors and Assigns. Any party may assign all or any part of this Agreement or the rights and obligations hereunder to a person or entity controlling, controlled by or under common control with such party, provided that any such assignment shall not relieve such party of its obligations hereunder. Except as otherwise provided herein, this Agreement and the rights and obligations hereunder may not be assigned by any party hereto without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Section 12.6. Force Majeure. The parties acknowledge and agree that a party will not be liable for any failure to timely perform any of its obligations under this Agreement if such failure is due, in whole or in part, directly or indirectly, to accidents, fires, floods, governmental actions, war, civil disturbances, other causes beyond such party's control or any other occurrence which would generally be considered an event of force majeure. 18 24 Section 12.7. Broker. The parties agree to indemnify and hold each other harmless against any claims from any broker or finder based upon any agreement, arrangement, or understanding alleged to have been made by the indemnifying party. Section 12.8. Counterpart Signatures. This Agreement may be signed in one or more counterparts. Section 12.9. Notices. Any notice, report, demand, waiver or consent required or permitted hereunder shall be in writing and shall be given by hand delivery, by prepaid registered or certified mail, with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery or by telecopy addressed as follows: If the notice is to Time Broker: Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Attention: Mr. Joseph M. Field, President Telecopier Number: 610-660-5641 With a copy to: John C. Donlevie, Esq. General Counsel Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopier Number: 610-660-5620 and Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, D.C. 20004 Attention: Joseph D. Sullivan, Esq. Telecopier Number: 202-637-2201 19 25 If the notice is to Licensee: CBS Radio 40 West 57th Street 14th Floor New York, NY 10019 Attention: Mr. Mel Karmazin Telecopier Number: 212-314-9229 With copies to: General Counsel CBS Corporation 51 West 52nd Street New York, NY 10019-6188 Telecopier Number: 212-975-2185 and Leventhal Senter & Lerman, P.L.L.C. 2000 K Street, N.W. Suite 600 Washington, D.C. 20006 Attention: Steven A. Lerman, Esq. Telecopier Number: 202-293-7783 The date of any such notice and service thereof shall be deemed to be: (i) the day of delivery if hand delivered or delivered by overnight courier; (ii) the day of delivery as indicated on the return receipt if dispatched by mail; or (iii) the date of telecopy transmission as indicated on the telecopier transmission report provided that any telecopy transmission shall not be effective unless a paper copy is sent by overnight courier on the date of the telecopy transmission. Either party may change its address for the purpose of notice by giving notice of such change in accordance with the provisions of this Section. Section 12.10. Entire Agreement. This Agreement, the letter agreements between the parties dated of even date herewith and the Purchase Agreement (including all attachments, exhibits and schedules) embody the entire agreement between the parties and there are no other agreements, representations, warranties, or understandings, oral or written, between them with respect to the subject matter hereof. 20 26 Section 12.11. Severability. Except as expressly set forth in Section 12.15, if any provision contained in this Agreement is held to be invalid, illegal or unenforceable in any respect by any court or other authority, then such provision shall be deemed limited to the extent that such court or other authority deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court or other authority shall deem any such provision wholly unenforceable, this shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had not been contained herein. Section 12.12. No Joint Venture. The parties agree that nothing herein shall constitute a joint venture between them. The parties acknowledge that call letters, trademarks and other intellectual property shall at all times remain the property of the respective parties and that neither party shall obtain any ownership interest in the other party's intellectual property by virtue of this Agreement (subject to the IP License set forth in Section 6.2). Section 12.13. Damage to Stations. In the event of damage or destruction to the Stations (other than damage or destruction caused by Time Broker), Licensee shall proceed to repair, replace or restore the Stations to its former condition as promptly as is commercially reasonable. Section 12.14. Noninterference. During the term of this Agreement, neither Licensee nor any of their employees shall take any actions that might impair the operations of Time Broker conducted hereunder, except to the extent expressly contemplated by this Agreement or as otherwise required by law. Section 12.15. Regulatory Changes. In the event of any order or decree of an administrative agency or court of competent jurisdiction, including without limitation any material change or clarification in FCC rules, policies, or precedent, that would cause this Agreement to be invalid or violate any applicable law, and such order or decree has become effective and has not been stayed, the parties will use their respective best efforts and negotiate in good faith to modify this Agreement to the minimum extent necessary so as to comply with such order or decree without material economic detriment to either party, and this Agreement, as so modified, shall then continue in full force and effect. In the event that the parties are unable to agree upon a modification of this 21 27 Agreement so as to cause it to comply with such order or decree without material economic detriment to either party, then this Agreement shall be terminated. Section 12.16. Attorneys' Fees. In the event of a dispute between or among the parties hereto arising out of or related to this Agreement or the interpretation or enforcement of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and expenses from the other party. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. CBS RADIO, INC. By:_______________________ Title:____________________ CBS RADIO LICENSE, INC. By:_______________________ Title:____________________ ENTERCOM COMMUNICATIONS CORP. By:_______________________ Title:____________________ 22 28 SCHEDULE 1.1 PROGRAMMING The Programming shall consist of one hundred sixty-four (164) hours per week on the Stations in an entertainment format to be chosen by Time Broker, subject to Section 2 of this Agreement. The Programming shall include (a) news and weather information; (b) public service announcements (including, at Licensee's directive from time to time, a reasonable number of public service announcements of local interest supplied by Licensee or produced by Time Broker under Licensee's supervision); (c) an announcement in form sufficient to meet the station identification requirements of the FCC at the beginning of each hour; (d) an announcement at the beginning of each segment of Programming to indicate that program time has been purchased by Time Broker; and (e) any other announcement that may be required by applicable law or regulation (including but not limited to EAS tests). Time Broker shall maintain and deliver to Licensee copies of all operating and programming information including without limitation information concerning portions of the Programming that are responsive to issues of public importance identified to Time Broker by Licensee, EAS announcements, and station operating logs, necessary for Licensee to maintain its FCC Public File, and all other records required to be kept by FCC rule or policy. Time Broker shall have the sole and exclusive right to sell advertising to be included in the Programming and shall be entitled to retain all the revenues derived from the sale thereof, provided, however, that Licensee shall be entitled to sell such time as it deems necessary to comply with the political advertising rules of the FCC in the event the Programming does not comply with such rules. Notwithstanding any other provision of this Agreement, Time Broker recognizes that Licensee has certain obligations to broadcast programming to meet the needs and interests of the community of license for the Stations. Licensee shall have the right to air specific programming on issues of local importance to the community. Nothing in this Agreement shall abrogate the unrestricted authority of Licensee to discharge its obligations to the public and to comply with the laws, rules and policies of the FCC with respect to meeting the ascertained needs and interests of the public. Accordingly, Licensee may air or cause Time Broker to produce and present under Licensee's supervision for not less than two (2) nor more than four (4) hours per week on the Stations such public affairs programming that responds to the needs and interests of listeners in the Stations' community of license. Such public affairs programming shall be presented between 6:00 a.m. and 9:00 a.m. on Saturdays and/or Sundays or at such other times as the public interest may require. Time Broker will not change the format of the Stations, and Time Broker shall maintain the Rush Limbaugh show and Dr. Laura Schlessinger show as part of the programming of WRKO-AM. 1 29 SCHEDULE 1.2 COMPENSATION Beginning on the Commencement Date, for each month during which this Agreement until this Agreement is terminated, Time Broker shall pay a monthly fee equal to One Hundred Ninety-Five Thousand Dollars ($195,000.00) per month (the "Monthly Fee"). In the event that the Commencement Date occurs on a day other than the first day of a month, the initial monthly payment made by Time Broker shall be an amount equal to the Monthly Fee as determined above multiplied by a ratio, the numerator of which is the number of days between the Commencement Date and the end of the month in which the Commencement Date occurs and the denominator of which is the number of days in the month in which the Commencement Date occurs; and in the event that the last day of the TBA Payment Period occurs other than on the last day of a month, the Monthly Payment for the month in which such day occurs shall be similarly prorated. 2 30 SCHEDULE 2.1 PROGRAMMING POLICY STATEMENT Time Broker agrees to cooperate with Licensee in the broadcasting of programs of the highest possible standard of excellence and for this purpose to observe the following regulations in the preparation, writing and broadcasting of its programs. Further, Time Broker agrees that all material broadcast on the Stations shall comply with all federal, state and local applicable laws, rules and regulations. No Plugola or Payola. The broadcast of any material for which any money, service or other valuable consideration is directly or indirectly paid, or promised to or charged or accepted by, the Time Broker, from any person, shall be prohibited, unless, at the time the same is broadcast, it is announced as paid for or furnished by such person. Political Broadcasting. Within thirty (30) days of the Commencement Date, Time Broker shall provide Licensee with a written political advertising disclosure statement which fully and accurately discloses how the Time Broker sells programming and advertising time and which makes parties purchasing political programming and advertising time fully aware of the lowest unit charge provisions of Section 315 of the Communications Act. In addition, at least thirty (30) days before the start of any primary or election campaign, Time Broker will clear with the Stations' general manager the rate Time Broker will charge for the time to be sold to candidates to make certain that the rate charged is in conformance with the applicable law and station policy. Required Announcements. Time Broker shall broadcast (i) announcements in a form satisfactory to Licensee at the beginning of each hour to identify the Stations and (ii) any other announcements that may be required by law, regulation, or Licensee's station policy. No Illegal Announcements. No announcements, broadcasts or promotions prohibited by federal, state or local law shall be made over the Stations. This prohibition specifically includes, but is not limited to, any and all programming or other broadcast material concerning tobacco or alcohol related products which are unlawful. The airing of any broadcast material concerning contests, lotteries or games must be conducted in accordance with all applicable law, including FCC rules and regulations. Any obscene, indecent, or fraudulent programming is prohibited. All sponsored programming or other broadcast material must be identified in accordance with applicable law, including FCC rules and regulations. 1 31 Licensee Discretion Paramount. In accordance with the Licensee's responsibility under the Communications Act and the rules and regulations of the FCC, Licensee reserves the right to reject or terminate any programming (including advertising) proposed to be presented or being presented over the Stations which is in conflict with station policy or which in Licensee's or its general manager's reasonable judgment would not serve the public interest. In any case where questions of policy or interpretation arise, Time Broker should submit the same to Licensee for decision before making any commitments in connection therewith. 2 32 SCHEDULE 4.1 TIME SALES AGREEMENTS AND CONTRACTS All Contracts to be assumed by Entercom under the Purchase Agreement other than Leases (as defined in the Purchase Agreement) and contracts relating to operation at the transmitter site for the Stations and employment contracts with the Licensee's retained employees under Sections 3.1 and 3.2. 1 EX-10.12 16 ASSET PURCHASE AGREEMENT CBS RADIO 1 EXHIBIT 10.12 ================================================================================ ASSET PURCHASE AGREEMENT BY AND AMONG CBS RADIO, INC., CBS RADIO LICENSE, INC., AND ENTERCOM COMMUNICATIONS CORP. DATED AS OF AUGUST 13, 1998 ================================================================================ 2 TABLE OF CONTENTS PAGE ARTICLE I. - DEFINITIONS 1.1 DEFINITIONS....................................................2 ARTICLE II. - PURCHASE OF ASSETS.............................................6 2.1. PURCHASE AND SALE OF ASSETS....................................6 2.2. ALLOCATION OF VALUES...........................................6 2.3. NON-ASSIGNABLE CONTRACTS.......................................7 ARTICLE III. - LIABILITIES...................................................7 3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM..........................7 3.2. OTHER LIABILITIES..............................................8 ARTICLE IV. - REPRESENTATIONS AND WARRANTIES.................................8 4.1. BY CBS.........................................................8 4.2. BY ENTERCOM...................................................16 ARTICLE V. - CONDITIONS.....................................................17 5.1. MUTUAL CONDITIONS.............................................17 5.2. CONDITIONS OF ENTERCOM........................................18 5.3. CONDITIONS OF CBS.............................................18 5.4. EFFECT OF TIME BROKERAGE AGREEMENT ON CLOSING CONDITIONS..................................................18 ARTICLE VI. - COVENANTS AND OPERATIONS PRIOR TO CLOSING.....................19 6.1. COVENANTS OF CBS..............................................19 6.2. NEGATIVE COVENANTS OF CBS.....................................21 6.3. NO CONTROL....................................................22 6.4. NO SOLICITATION OR HIRE OF EMPLOYEES AND PROGRAMMING.............................................22 6.5. COVENANTS OF ENTERCOM.........................................23 6.6. REAL PROPERTY SURVEYS.........................................24 ARTICLE VII. - ACTIONS PRIOR TO CLOSING.....................................25 (i) 3 7.1. APPLICATION TO COMMISSION.....................................25 7.2. COMPLIANCE WITH CBS FINAL JUDGMENT............................25 7.3. HART-SCOTT-RODINO NOTIFICATION................................25 7.4. INSPECTION....................................................26 7.5. CONFIDENTIALITY...............................................26 ARTICLE VIII. - CLOSING.....................................................27 8.1. CLOSING.......................................................27 8.2. PRORATIONS....................................................27 8.3. CLOSING DELIVERIES TO ENTERCOM................................28 8.4. CLOSING DELIVERIES TO CBS.....................................29 8.5. COVENANTS OF FURTHER ASSURANCES; AVAILABILITY OF RECORDS.....................................................30 8.6. RISK OF LOSS; DAMAGE TO PROPERTY..............................30 8.7. TAXES ON TRANSACTION..........................................30 ARTICLE IX. - TERMINATION, DEFAULT AND INDEMNIFICATION......................31 9.1. TERMINATION...................................................31 9.2. EFFECT OF TERMINATION.........................................31 9.3. REMEDIES......................................................31 9.4. INDEMNIFICATION...............................................31 ARTICLE X. - INTENTIONS OF THE PARTIES AS TO FORM OF TRANSACTION............34 10.1. CBS' INTENTION................................................34 10.2. ENTERCOM'S INTENTION..........................................34 10.3. INDEPENDENT TRANSACTIONS......................................34 ARTICLE XI. - GENERAL PROVISIONS............................................35 11.1. EXPENSES OF THE PARTIES.......................................35 11.2. BROKERS.......................................................35 11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS, AND WARRANTIES..............................................35 11.4. CONFIDENTIALITY...............................................36 11.5. AMENDMENT AND WAIVER..........................................36 11.6. EFFECT OF THIS AGREEMENT......................................36 11.7. TERMS GENERALLY...............................................36 11.8. HEADINGS......................................................37 11.9. COUNTERPARTS..................................................37 (ii) 4 11.10. GOVERNING LAW; JURISDICTION...................................37 11.11. BULK SALES LAWS...............................................37 11.12. ASSIGNMENT....................................................37 11.13. NOTICES.......................................................37 11.14. ATTORNEYS' FEES...............................................39 11.15. TEMPORARY SUBLEASE FOR WBMX...................................39 (iii) 5 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT MADE AND ENTERED INTO THIS 13TH DAY OF AUGUST, 1998, BY AND AMONG CBS RADIO, INC., A DELAWARE CORPORATION ("CRI"), CBS RADIO LICENSE, INC., A DELAWARE CORPORATION ("CRLI"), (CRI AND CRLI, COLLECTIVELY, "CBS"), AND ENTERCOM COMMUNICATIONS CORP., A PENNSYLVANIA CORPORATION ("ENTERCOM"). RECITALS WHEREAS, pursuant to the Authorizations, CBS owns and operates (directly or indirectly through one or more subsidiaries) radio stations WEEI(AM) and WRKO(AM), Boston, Massachusetts (collectively, the "Stations"), and owns all of the Assets relating to the Stations; WHEREAS, Entercom desires to purchase the Assets from CBS; WHEREAS, CBS is willing to sell the Assets to Entercom; WHEREAS, CBS and Entercom have agreed, subject to prior approval by the Commission and certain other conditions, that CBS shall sell, assign, transfer and convey the Assets to Entercom or one or more Affiliates designated by Entercom, in the manner and for the consideration described in this Agreement; and WHEREAS, CBS is required to notify the United States Department of Justice ("DOJ") of this Agreement, pursuant to the final judgment in United States v. CBS Corporation and American Radio Systems Corporation, Civ. No. 98-0819 (D.D.C. filed March 31, 1998) (the "CBS Final Judgment"), and CBS may not consummate the sale contemplated hereby unless CBS has received written notification from DOJ that DOJ does not object to the sale or, in the event that DOJ objects, until the sale has been approved by the United States District Court for the District of Columbia (the "Court"). Pursuant to the CBS Final Judgment, CBS is required to take all steps necessary to operate the Stations as separate, independent, ongoing, economically viable and active competitors to the other stations owned by CBS and its Affiliates in the Boston area and must take all steps necessary to insure that the management of such stations is kept separate and apart from CBS. NOW, THEREFORE, in consideration of the mutual promises herein contained and of the representations and warranties hereinafter set forth and for other good and valuable consideration, the parties, intending to be legally bound hereby, agree as follows: 6 ARTICLE I. DEFINITIONS 1.1 DEFINITIONS. As used herein, the following terms shall have the following respective meanings: "ADJUSTMENT TIME" shall mean with respect to each Station, 12:01:00 a.m. Eastern Standard or Daylight Time, as appropriate, on the Closing Date. "AFTRA CONTRACT" shall have the meaning set forth in Section 3.1.5. "AFFILIATE" shall mean, with respect to any person or entity, a person or entity controlling, controlled by or under common control with such person or entity. "AGREEMENT" shall mean this Asset Purchase Agreement. "APPRAISAL" shall have the meaning set forth in Section 2.2.1 hereof. "ASSETS" shall mean the Property and all of the Authorizations relating to the Stations. "ASSIGNMENT APPLICATIONS" shall have the meaning set forth in Section 7.1 hereof. "AUTHORIZATIONS" shall mean all of the licenses, permits, and authorizations granted by the Commission with respect to the operation of the Stations and all applications for Authorizations for the Stations pending before the Commission. "BARTER AGREEMENTS" shall mean contracts for the sale of time on the Stations in exchange for programming. "BOSTON II AGREEMENT" shall mean that certain Asset Purchase Agreement by and among Entercom and CBS and ARS Acquisition II, Inc. for the sale and purchase of radio stations WAAF(FM), WWTM(AM), and WEGQ(FM), dated as of August 13, 1998. "CBS" shall mean the corporations identified as such in the Preamble of this Agreement. "CLOSING" shall mean the event of consummation of the transactions contemplated by this Agreement as more fully described in Article VIII of this Agreement. "CLOSING DATE" shall mean the date that the Closing occurs. 2 7 "CODE" shall mean the Internal Revenue Code of 1986, as amended, and the applicable regulations issued thereunder. "COMMISSION" shall mean the Federal Communications Commission. "CONTAMINANT" shall mean and include any pollutant, contaminant, hazardous material (as defined in any of the Environmental Laws), toxic substances (as defined in any of the Environmental Laws), asbestos-or asbestos-containing material, urea formaldehyde, polychlorinated biphenyls, regulated substances and wastes, radioactive materials, and petroleum or petroleum by-products, including crude oil or any fraction thereof, except that "Contaminant" shall not include small quantities of maintenance, cleaning and emergency generator fuel supplies customary for the operation of radio stations and maintained in compliance with all Environmental Laws in the Ordinary Course of Business. "CONTRACTS" shall mean all agreements, arrangements, commitments, and undertakings, written or oral, expressed or implied, relating to the present or future operation of the Stations except for any Leases, including without limitation, Time Sales Agreements, Trade Agreements, Barter Agreements and Miscellaneous Contracts. "CONTRACT REIMBURSEMENT" shall mean cash in the amount of Five Million Dollars ($5,000,000.00) as reimbursement paid to Entercom by CBS for assumption of certain Contracts specified in Schedule 8.3.1. "DEFAULT" shall mean the material default by a party hereto in the performance of its obligations under this Agreement. "ENTERCOM" shall mean the corporation identified as such in the Preamble of this Agreement. "ENVIRONMENTAL LAWS" shall mean any applicable federal, state or local law, statute, charter, ordinance, rule, or regulation or any governmental agency interpretation or policy, including, without limitation, applicable safety/environmental/health laws such as, but not limited to, the Resource Conservation and Recovery Act of 1976, Comprehensive Environmental Response Compensation and Liability Act, Federal Emergency Planning and Community Right to Know Law, the Clean Air Act, the Clean Water Act, the Toxic Substance Control Act, and the Occupational Safety and Health Act, as any of the foregoing have been amended, and any permit, order, directive, court ruling or order, or consent decree applicable to or affecting the Property or any other property (real or personal) used by or relating to the Station in question promulgated or issued pursuant to any Environmental Laws which pertains to, governs, or controls the generation, storage, remediation, or removal of Contaminants or otherwise regulates the protection of health and the environment including, but not limited to, any of the following activities, whether on site or off site: (i) the emission, discharge, release, spilling, or dumping of any Contaminant into the air, surface water, ground water, soil, or 3 8 substrata; or (ii) the use, generation, processing, sale, recycling, treatment, handling, storage, disposal, transportation, labeling, or any other management of any Contaminant. "FINAL ORDER" shall mean an order or action of the Commission that, by reason of expiration of time or exhaustion of remedies, is no longer subject to administrative or judicial reconsideration or review. "IBEW CONTRACT" shall have the meaning set forth in Section 3.1.5. "LEASES" shall mean all agreements, arrangements, or commitments and undertakings, written or oral, express or implied, for the use or occupation of any real or personal property used in the operation of the Stations. "LOSS" shall have the meaning set forth in Section 9.4.1 hereof. "MISCELLANEOUS CONTRACTS" shall mean Contracts and Leases entered into in the Ordinary Course of Business, which involve less than Twenty Five Thousand Dollars ($25,000.00) individually and less than One Hundred Fifty Thousand Dollars ($150,000.00) for all of the Stations in the aggregate, and which are not included in Schedule 4.1.6. "NON-CONTINUING EMPLOYEES" shall have the meaning set forth in Section 6.5.1. "ORDINARY COURSE OF BUSINESS" shall mean the routine conduct of the business of the Station in question (excluding extraordinary, irregular, or abnormal transactions) on a basis consistent with the regular practice of such Station since January 1, 1998; provided that any conflict between what is required of CBS by the definition set forth in the immediately preceding clause as applied herein and the CBS Final Judgment shall be resolved in favor of the latter. "PERMITTED ENCUMBRANCES" shall mean: (i) encumbrances for taxes, assessments, or governmental charges or levies which are not yet due and payable, or that, subject to adequate security for payment, are being contested; (ii) easements, rights of way, or other encumbrances disclosed in this Agreement; (iii) easements, rights of way or other encumbrances that do not have a material adverse effect on the Assets or the operation of the Stations as currently operated; (iv) encumbrances imposed by law, such as materialmen's, mechanic's, carrier's, workmen's, or repairmen's liens or other similar encumbrances arising in the Ordinary Course of Business, securing obligations that are not overdue; (v) encumbrances securing indebtedness, which will be removed prior to or at the Closing; (vi) encumbrances pursuant to Contracts and Leases to be assumed by Entercom pursuant to Section 3.1; and (vii) encumbrances listed on Schedule 4.1.8. "PROPERTY" shall mean all of the tangible and intangible property (other than the Authorizations) located at the Stations (including at the transmitter sites of the Stations), whether real, personal, or mixed, and all rights and interests which are used or held by CBS or any of its 4 9 Affiliates and necessary for use primarily in the operation of the Stations as presently conducted, including: (i) all of the rights, titles, and interests under the Leases and the Contracts relating to the Stations; (ii) the call letters, copyrights, trademarks, and other intellectual property associated with the Stations; (iii) originals or, if unavailable, photocopies, of all files, records, studies, data, lists, filings, general accounting records, books of account, computer programs and software, and logs, of every kind, relating to the operations or business of the Stations; and (iv) all of CBS's or any of its Affiliates' rights under manufacturers' and vendors' warranties relating to items included in the Assets of the Stations; but excluding therefrom those assets listed on Schedules attached hereto respectively as "Excluded Property." "PURCHASE PRICE" shall have the meaning set forth in Section 2.1.2. "REQUIRED CONSENTS" shall mean the consents of third parties to the Leases and Contracts that are required for the assignment thereof and that are identified on the Schedules hereto as "Material Leases (or Contracts)-Consent to Assign Required." "REQUIRED CURE EXPENSE" Shall mean the sum of the amounts required to be spent by CBS under Sections 6.1.4, 6.1.5 and 6.6.3 of this Agreement and the Boston II Agreement. "STATIONS" shall collectively mean the following radio broadcast stations: WEEI(AM), and WRKO(AM), Boston, Massachusetts, or, in the singular form, any one of them. "STATION EMPLOYEES" shall have the meaning set forth in Section 6.5.1. "TAMPA AGREEMENT" shall mean that certain Asset Purchase Agreement by and among Entercom and CBS for the sale and purchase of radio stations WYUU (FM) and WLLD (FM), dated as of August 13, 1998. "TBA COMMENCEMENT DATE" shall mean the date that the Time Brokerage Agreement shall become effective. "TIME BROKERAGE AGREEMENT" shall mean the Time Brokerage Agreement entered into between CBS and Entercom simultaneously with the execution of this Agreement relating to the sale to Entercom of substantially all of the broadcast time on the Stations. "TIME SALES AGREEMENTS" shall mean contracts for the sale of time on the Stations for cash. "TRADE AGREEMENTS" shall mean contracts for the sale of time on the Stations in exchange for merchandise or services used or useful for the benefit of the Stations, excluding Barter Agreements. 5 10 "TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section 6.5. "UPSET DATE" shall have the meaning set forth in Section 9.1.1. ARTICLE II. PURCHASE OF ASSETS 2.1. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions set forth in this Agreement, at the Closing: 2.1.1. CBS shall sell, convey, transfer, assign, and deliver or cause to be sold, conveyed, transferred, assigned, and delivered to Entercom, or to such Affiliates as Entercom shall designate, the Assets free and clear of all liens and encumbrances other than Permitted Encumbrances, and Entercom or such designated Affiliates shall acquire and receive same from CBS. 2.1.2. Entercom shall deliver to CBS cash in the amount of Eighty-Two Million Dollars ($82,000,000.00) (the "Purchase Price") and CBS shall receive same from Entercom. The Purchase Price shall be paid by wire transfer at Closing to the account designated by CBS in writing at least two (2) days prior to the Closing. 2.2. ALLOCATION OF VALUES. 2.2.1. The fair market value of the Assets shall be determined and allocated on the basis of an appraisal (the "Appraisal") prepared by Bond & Pecaro, or another firm reasonably acceptable to CBS and Entercom, whose fees and expenses shall be borne equally by CBS and Entercom. The parties shall use their reasonable best efforts to cause Bond & Pecaro to deliver the Appraisal 10 days before the Closing Date, or failing compliance with such deadline, as soon thereafter as is practicable, but in all events no later than 30 days after the Closing Date. The Appraisal shall set forth the fair market value of each material asset included in the Assets. 2.2.2. Each party, as necessary, shall prepare such IRS Forms as are required by law to be filed with the Internal Revenue Service reflecting the fair market value of the Assets as determined in accordance with the values set forth in the Appraisal and the above provisions and shall forward such forms to the other parties within thirty (30) days after the Closing. Each party, as necessary, shall file with their respective federal income tax returns for the tax year in which the Closing occurs such IRS Forms as prepared in accordance with the foregoing. Each party shall deliver to the other parties hereto a copy of such IRS Forms as filed with their respective federal income tax return within thirty (30) days of the filing of such return. The parties hereto hereby covenant and agree with each other that they will not take a position on any income tax return that is in any way inconsistent with the terms of this Section 2.2. 6 11 2.3. NON-ASSIGNABLE CONTRACTS. 2.3.1. Without limiting or otherwise affecting the rights of any party hereto, to the extent that any Contract or Lease to be assigned pursuant to this Agreement is not capable of being assigned without the consent, approval, or waiver of a third person or entity, nothing in this Agreement will constitute an assignment or require the assignment thereof except to the extent provided in this Section 2.3. 2.3.2. With respect to all consents, approvals, and waivers referenced in Section 2.3.1, CBS shall use its reasonable best efforts to obtain all such consents, approvals, and waivers prior to and, if the Closing occurs, as promptly as practicable after the Closing Date; provided that CBS shall not be obligated to pay money to any other contracting party to obtain any such consent, approval or waiver, other than reasonable expenses of the party for any legal documentation related to the assignment of the Contract or Lease in question. If the consents, approvals, and waivers are not obtained prior to Closing, the parties shall use their reasonable best efforts in good faith to cooperate, and to cause each of their respective Affiliates to cooperate, in effecting any lawful arrangement to provide to Entercom or its designated Affiliates the economic benefits of the Contracts and Leases for which consents, approvals, and waivers are being sought after Closing, and to have Entercom or its designated Affiliates assume and discharge the obligations under the Contracts and Leases from and after the Closing Date. ARTICLE III. LIABILITIES 3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM. Except as otherwise provided in the Time Brokerage Agreement, from and after the Closing Date, Entercom shall assume and pay, perform, and discharge the following liabilities and obligations relating to the Stations: 3.1.1. The liabilities and obligations arising with respect to events occurring after the Adjustment Time or accruing after the Adjustment Time with respect to any Leases included in the Assets that are specifically identified on Schedule 4.1.5 as being assumed by Entercom, and such additional Leases as are permitted to be entered into by CBS and its Affiliates pursuant to Article VI hereof. 3.1.2. The liabilities and obligations arising with respect to events occurring after the Adjustment Time or accruing after the Adjustment Time with respect to any (a) Contracts included in the Assets that are specifically identified on Schedule 4.1.6 as being assumed by Entercom; (b) Miscellaneous Contracts; (c) Time Sales Agreements, Trade Agreements, and Barter Agreements entered into in the Ordinary Course of Business; and (d) such additional contracts as are permitted to be entered into by CBS and its Affiliates pursuant to Article VI hereof; 7 12 3.1.3. The liabilities and obligations which arise with respect to events occurring after the Adjustment Time or which accrue after the Adjustment Time with respect to the Assets and to the operation of the Stations by Entercom and/or its designated Affiliates; 3.1.4. All taxes and assessments (other than income and franchise taxes of CBS and its Affiliates) that accrue on or with respect to the Assets or the operation of the Stations after the Adjustment Time; 3.1.5. The liabilities and obligations of CBS with respect to the Stations under (a) the Agreement for Radio Announcers and Artists, June 15, 1996 - - June 14, 1999, between the American Federation of Radio and Television Artists and American Radio Systems, Inc. (the "AFTRA Contract") from and after the TBA Commencement Date; and (b) the Agreement, as of May 1, 1997, between American Radio Systems Corporation and Local 1228 of the International Brotherhood of Electrical Workers (the "IBEW Contract"). Neither Entercom nor any of its Affiliates shall assume any obligations under any collective bargaining agreements other than the AFTRA Contract and the IBEW Contract. 3.2. OTHER LIABILITIES. 3.2.1. Except as expressly set forth in this Agreement, CBS shall be solely responsible for all salaries, benefits and other compensation which will or may become payable to any Station Employee in respect of any period of employment prior to the earlier of the TBA Commencement Date or the Adjustment Time, other than accrued vacation time for Transferred Employees, for which Entercom shall be responsible and for which it will receive a proration credit under Section 8.2.1. Entercom shall be solely responsible for any salaries and other compensation which will or may become payable to any Transferred Employee in respect of any period thereafter. Entercom will not assume any obligations under existing leave or severance policies or otherwise have any liability or obligation for severance pay or other termination benefits of Station Employees, except for obligations set forth in Contracts to be assumed by Entercom pursuant to this Agreement. 3.2.2. Except as specifically assumed by Entercom pursuant to Section 3.1 and Section 3.2.1 hereof or pursuant to the Time Brokerage Agreement, neither Entercom nor any of its Affiliates shall assume or undertake to pay, satisfy, or discharge any liabilities, obligations, commitments, or responsibilities of CBS or any of its Affiliates. ARTICLE IV. REPRESENTATIONS AND WARRANTIES 4.1. BY CBS. CBS hereby represents and warrants to Entercom that: 8 13 4.1.1. CORPORATE STANDING. CRI and CRLI are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware and are qualified to do business in the Commonwealth of Massachusetts. CRI and CRLI have full power and authority to engage in the businesses in which they are presently engaged and to make and perform this Agreement according to its terms. 4.1.2. AUTHORIZATION OF AGREEMENT; NO BREACH. CBS has the necessary corporate power and authority to execute, deliver and perform this Agreement, the Time Brokerage Agreement, and such other agreements as are necessary to consummate the transactions contemplated hereby, and, subject to the receipt of the consents and approvals required elsewhere herein, this Agreement and the Time Brokerage Agreement constitute the valid and binding obligation of CBS enforceable against it in accordance with their terms, except as limited by bankruptcy and insolvency laws and by laws affecting the enforcement of creditors' rights generally or equitable principles. Assuming said consents and approvals are obtained, neither such execution, delivery, and performance nor compliance by CBS with the terms and provisions of this Agreement and the Time Brokerage Agreement will conflict with or result in a breach of any of the terms, conditions, or provisions of the Articles of Incorporation or By-Laws of CBS or its Affiliates or any judgment, order, injunction, decree, regulation, or ruling of any court or any other governmental authority to which CBS or any of its Affiliates is subject or any material agreement or contract to which CBS or any of its Affiliates is a party or to which it is subject, or constitute a material default thereunder. 4.1.3. QUALIFICATION. CRLI is qualified as a licensee of the Commission and is qualified as the assignor of the Authorizations to receive a grant of the Assignment Applications by the Commission. CBS knows of no facts which could reasonably be expected to cause Commission approval of the Assignment Applications to be denied or materially delayed or which could reasonably be expected to lead to the filing of a material objection to such Applications. 4.1.4. CBS ASSETS. The Assets, taken as a whole, constitute all of the material property, whether real, personal, or mixed, tangible or intangible, used by CBS or its Affiliates in the operation of the Stations except for (i) property replaced in the Ordinary Course of Business and (ii) those assets specifically listed on Schedule 4.1.4 under the heading "Excluded Property." To the knowledge of CBS, none of the assets listed on Schedule 4.1.4 as pertaining to radio station WBMX(FM) is used primarily in the operation of any or all of the Stations. 9 14 4.1.5. CBS LEASES. Except as set forth in Schedule 4.1.5, CBS has delivered to Entercom true and correct copies of all Leases listed on Schedule 4.1.5 hereto. There are no other material leases for any items or interests for the use of real or personal property associated with the Assets or the present operation of the Stations other than those disclosed on Schedule 4.1.5 hereto. 4.1.6. CBS CONTRACTS. Schedule 4.1.6 contains a list of all Contracts now in effect, written or oral, express or implied, relating to the Assets or the present or future operation of the Stations, other than those disclosed on Schedule 4.1.5 hereto or other Schedules attached to this Agreement, except for Time Sales Agreements, Barter Agreements, Trade Agreements, Miscellaneous Agreements and Contracts that relate solely to Excluded Property. Except as indicated on Schedule 4.1.6 hereto, CBS has delivered to Entercom true and correct copies of all Contracts listed on Schedule 4.1.6 hereto, 4.1.7. INTELLECTUAL PROPERTY. Schedule 4.1.7 hereto lists all material trademarks and copyrights relating to the operation of the Stations which have been registered with Federal or State governmental agencies. To CBS's knowledge, the operation of the Stations as now conducted does not conflict with any valid patents, trademarks, trade names, service marks, or copyrights of others in any way that is reasonably likely to have a material adverse effect on the operation of the Stations. 4.1.8. TITLE TO PROPERTY. Except for (i) Permitted Encumbrances, (ii) as disclosed on Schedule 4.1.8 hereto and (iii) as provided in the immediately succeeding two sentences, CBS has good ownership, right, title, and interest to the Property including the right to transfer such assets. CBS has a valid leasehold interest in all Property leased and used or held for use in connection with the operation of the Stations. CBS has good and marketable title to the owned real property to be conveyed hereunder, except for Permitted Encumbrances. Except for Permitted Encumbrances and items disclosed on Schedule 4.1.8 (which Schedule reflects, where appropriate, the Station to which the disclosed item relates), none of the Property or any of the income or revenue therefrom is subject to any mortgage, conditional sale agreement, security interest, lease, lien, hypothecation, pledge, encumbrance, restriction, liability, charge, claim, or imperfection of title that would materially adversely affect the continued use of the Property as currently used. 4.1.9. NO DEFAULTS. CBS and its Affiliates have complied in all material respects with all of the terms of the Contracts and the Leases and such Contracts and Leases are enforceable by CBS in 10 15 accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy and similar laws affecting the enforcement of creditors' rights and general equitable principles affecting the enforcement of equitable remedies (including within said equitable remedies without limitation the remedy of specific performance). No event has occurred which with the passage of time or the giving of notice or both would constitute a material default by CBS or any of its Affiliates thereunder. To the knowledge of CBS, all other parties to the Contracts and Leases have complied in all material respects with the provisions thereof and no event has occurred which with the passage of time or the giving of notice or both would constitute a material default by any such other party thereunder. 4.1.10. AUTHORIZATIONS AND APPLICATIONS. Except as disclosed on Schedule 4.1.10, all Authorizations necessary to the lawful operations of the Stations have been granted and issued by the Commission to CBS and are listed on Schedule 4.1.10 attached hereto and are now in full force and effect. There are no applications of CBS or any of its Affiliates relating to the Stations pending with the Commission except as listed on such Schedule 4.1.10. CBS and its Affiliates have performed and complied in all material respects with all of the terms and conditions of said Authorizations, the Communications Act of 1934, as amended (the "Communications Act") and all applicable rules, regulations, requirements, and policies of the Commission relating to the operation of the Stations. Except as listed on Schedule 4.1.10, no proceedings are pending or, to the knowledge of any officer of CBS or any of its Affiliates, threatened, which may result in the revocation, modification, non-renewal, or suspension of any of said Authorizations, the denial of any pending applications, the issuance of a cease and desist order, or the imposition of any other sanction by the Commission to which the Stations or the Assets are or may be subject. None of CBS or any of its Affiliates has reason to believe that the Commission will not renew the Authorizations of any of the Stations in the ordinary course for a full term without material qualifications. No renewal of the Authorizations of the Stations would constitute a major environmental action under the rules of the Commission in effect as of the date of this Agreement. All ownership reports, renewal applications, and other material reports and documents required to be filed by CBS and its Affiliates with the Commission relating to the operation of the Stations have been filed, and all such reports, applications and documents are true and correct in all material respects. The Stations are identified by their presently assigned call letters and, unless otherwise validly authorized by the Commission and disclosed on Schedule 4.1.10, are operated on their assigned frequencies at the powers and heights authorized by the Commission. The public inspection files for the Stations are in substantial compliance with the regulations of the Commission relating thereto. 4.1.11. PERMITS AND LICENSES. In addition to the Authorizations, CBS has obtained and/or holds, or at Closing will hold, all other governmental permits and licenses necessary for the lawful operation of the respective Stations. All terms, restrictions, and requirements of such permits and licenses have 11 16 been complied with in all material respects and none of CBS or any of its Affiliates is in default of any of same. 4.1.12. COMPLIANCE WITH LAWS. CBS and its Affiliates have complied in all material respects with all orders (to which CBS or any of its Affiliates is a party or is subject) and applicable laws, rules, and regulations of all federal, state and local authorities with respect to the Assets and operation of the Stations. With respect to the operations of the Stations, none of CBS or any of its Affiliates is in default with respect to or in violation of: (a) any judgment, order, injunction or decree to which CBS or any of its Affiliates is a party or is subject; or (b) any rule or regulation of any court, administrative agency or other governmental authority, in either case in any respect material to this transaction. All material reports, returns and other documents which relate in any way to the Assets and which were filed by CBS or any of its Affiliates with any administrative agency or governmental authority are true, correct and complete in all material respects. 4.1.13. LITIGATION AND CLAIMS. Except as disclosed in Schedule 4.1.13 hereto and except for rulemaking proceedings applicable to radio broadcast stations generally, no litigation, proceeding or controversy is pending or, to the knowledge of any officer of CBS or any of its Affiliates, threatened against CBS or any of its Affiliates, which might materially and adversely affect any material portion of the Assets, CBS's or any of its Affiliates' right or power to transfer the same, the ownership, possession, use or resale of any material portion of the Assets, or the operation of the Stations by Entercom or any assignee thereof and there is no basis known to CBS or any of its Affiliates for any such litigation, proceeding, controversy or claim. No claim has been made or asserted against CBS or any of its Affiliates material to this transaction. 4.1.14. EMPLOYEES. Set forth on Schedule 4.1.14 is a listing, by department, of the name, salary or compensation, all other compensation arrangements, and job title of all employees of CBS and its Affiliates employed at the Stations as of August 1, 1998, and whether each such employee is (i) full-time or part-time, (ii) union or non-union, and (iii) whether such employee's services are shared between any of the Stations and any other station to be retained by CBS. Except as disclosed on Schedule 4.1.14, there are no written contracts for the employment of any personnel at the Stations. Except as disclosed on Schedule 4.1.14, all employees of CBS and its Affiliates employed at the Stations are employed on an "at will" basis. 4.1.15. EMPLOYEE BENEFIT AND RETIREMENT PLANS. Listed on Schedule 4.1.15 are the material "employee pension benefit plans" and "employee welfare benefit plans" (as defined respectively in Sections 3(2) and 3(l) of the 12 17 Employee Retirement Income Security Act of 1974, as amended ("ERISA")), which CBS and its Affiliates maintain on behalf of their employees at the Stations. In all respects material to this transaction, all "employee pension benefit plans" and "employee welfare benefit plans" listed on Schedule 4.1.15 hereto comply in all material respects with all applicable requirements of law and regulation. None of CBS or any of its Affiliates has incurred or reasonably expects to incur (either directly or indirectly, including as a result of any of the transactions contemplated hereby or any indemnification obligation) any liability (including, without limitation, withdrawal liability) that could become a liability of Entercom, under or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and several liability provisions of the Code relating to employee benefit plans and no event, transaction or condition has occurred or exists which could result in any such liability. CBS and its Affiliates have made all required contributions to all multi-employer plans within the meaning of Section 3(37) of ERISA. 4.1.16. LABOR RELATIONS. In all respects material to this transaction, CBS and its Affiliates have complied with all applicable laws, rules and regulations pertaining to the employment of labor, including those relating to wages, hours, collective bargaining and the payment of or withholding of taxes with respect to the operations of the Stations, and CBS and its Affiliates have withheld all amounts required by law or agreement to be withheld from the wages or salaries of their employees and are not liable for any arrears of wages or any tax or withholding or any penalties or interest for failure to comply with any of the foregoing. Except as disclosed on Schedule 4.1.16, there are no collective bargaining agreements relating to any employee of CBS or any of its Affiliates at the Stations. In addition, except as disclosed on Schedule 4.1.16, none of CBS or any of its Affiliates has knowledge of any union organizing activities in the one year period preceding the date of this Agreement involving or targeting any employees of CBS or any of its Affiliates at the Stations not already covered by a collective bargaining agreement. 4.1.17. INSURANCE. CBS has in force adequate fire and other risk insurance covering the full replacement value of tangible personal property that is part of the Property and shall cause such insurance to be maintained in full force until the Closing Date. CBS also shall maintain in full force until the Closing Date, adequate workers compensation and general public liability insurance for the respective Stations in amounts consistent with broadcasting industry standards for similar stations. As of the date of this Agreement, none of the Property currently suffers in any way as a result of fire, explosion, earthquake, accident, fraud, rain, storm, drought, Act of God or public enemy or any other casualty, whether or not covered by insurance. 4.1.18. BROADCASTING CONTRACTS. The total value of all unfulfilled obligations in respect of Trade Agreements and Barter Agreements to be assumed by Entercom, whether or not the Stations have received 13 18 consideration therefor, shall not be in excess of One Million Four Hundred Thousand Dollars ($1,400,000.00) as of the Closing Date. To the extent that, as of the Closing Date, the excess of the value of unfulfilled obligations under Trade or Barter Agreements, including any "time bank" provision thereof, over the value of consideration to be received by the Stations (determined as of the Closing Date) exceeds Fifty Thousand Dollars ($50,000.00), Entercom shall be entitled to a positive cash adjustment pursuant to Section 8.2 hereof. 4.1.19. ENVIRONMENTAL COMPLIANCE, POLYCHLORINATED BIPHENYLS, ASBESTOS AND OTHER TOXIC OR HAZARDOUS SUBSTANCES. Except as disclosed on Schedule 4.1.19, none of the Property contains: (i) any asbestos, polychlorinated biphenyls ("PCBs") or any PCB contaminated oil; (ii) any Contaminants; or (iii) any underground storage tanks. All of the Property is in substantial compliance with all applicable Environmental Laws, except as disclosed on Schedule 4.1.19. 4.1.20. FINANCIAL AND OTHER INFORMATION. CBS has furnished Entercom with profit and loss statements for calendar year 1997 and the months January through June of 1998 (the "Financial Statements"). All Financial Statements provided to Entercom are true and correct in all material respects and such Financial Statements fairly present the results of operation of the Stations for the respective period then ended. There are no material liabilities, whether known or unknown, contingent or fixed, or otherwise, associated with the Stations that have not been otherwise disclosed to Entercom to the extent this Agreement requires the disclosure thereof. 4.1.21. NO INSOLVENCY. No insolvency proceedings of any character, including without limitation, bankruptcy, receivership, reorganization, composition, or arrangement with creditors, voluntary or involuntary, affecting CBS or any of its Affiliates or any of their assets or properties are, or within three years prior to the date hereof have been, pending or, to the best of the knowledge of CBS and its Affiliates, threatened, and, within three years prior to the date hereof, none of CBS or any of its Affiliates has made an assignment for the benefit of creditors, nor has CBS or any of its Affiliates taken any action with a view to, or which would constitute the basis for, the institution of any such insolvency proceedings. 4.1.22. CONDITION OF EQUIPMENT. Except as disclosed on Schedule 4.1.22, the transmission and studio equipment and other equipment (mechanical and electrical) included within the Property is, and will be as of the Closing Date, in good repair and working condition, ordinary wear and tear excepted, and is in material compliance with all current FCC requirements. 14 19 4.1.23. REAL PROPERTY. Schedule 4.1.23 contains a true and complete list of all real property used in the operation of the Stations, setting forth the nature of the interest, the address, and legal description for each parcel of real property (other than leased real property), and whether such parcel is owned or leased. Except as set forth on Schedule 4.1.23, there are no outstanding options or rights of first refusal to purchase or lease the owned real property or any portion thereof or interest therein, there are no outstanding options or rights of first refusal to sublease the leased real property or any portion thereof or interest therein, and no other parties are in possession of any such real property. The real property identified on Schedule 4.1.23 has vehicular access to a road and is supplied with utilities and other services necessary for the operation of that portion of the operation of the Stations conducted there. No real property other than that listed on Schedule 4.1.23 or listed on such schedule as Excluded Property is used in, held for use in connection with or necessary for the conduct of, the business or operations of the Stations. To the knowledge of CBS and its Affiliates, (i) the improvements of CBS and its Affiliates upon such real property and the current use and operation on such premises by CBS and its Affiliates conform in all material respects to all restrictive covenants, conditions, easements, building, subdivision and similar codes and federal, state and local laws, regulations, rules, orders and ordinances and none of CBS or any of its Affiliates has received any notice of any violation or claimed violation of any such restrictive covenant, condition or easement, or any building, subdivision or similar code, or any federal, state or local law, regulation, rule, order or ordinance which, either individually or in the aggregate, could have a material adverse effect on the assets, business or financial condition of the Stations, provided that any lawfully grandfathered condition shall not be deemed to be a material adverse effect for purposes of this subsection (i); (ii) there is no plan, study or effort by any governmental authority or agency which could reasonably be expected to have a material adverse effect on the Assets or financial condition of the Stations; and (iii) there are no latent defects in the real property that could reasonably be expected to have a material adverse effect on the Assets or financial condition of the Stations. Except as disclosed on Schedule 4.1.23, the improvements of CBS and its Affiliates upon the real property identified on Schedule 4.1.23 are in good operating condition and repair, normal wear and tear excluded. None of CBS or any of its Affiliates has knowledge or received notice (i) of any pending, threatened, or contemplated action to take by eminent domain or otherwise to condemn any portion of the real property or interest therein or (ii) of any levied, threatened or proposed assessments for public improvements with respect to the real property. 4.1.24. PAYMENT OF TAXES. CBS and its Affiliates have, and as of the Closing Date, will have, paid and discharged all taxes, assessments, excises and other levies which are due, including but not limited to any such taxes, assessments, excises, and levies which, if due and not paid, would interfere with Entercom's enjoyment or use of the Assets or result in a lien, charge, or encumbrance thereon, excepting such taxes, assessments, and other levies which will not be due 15 20 until or after the Closing Date, and which are either to be prorated between the parties pursuant to the provisions of Section 8.2 hereof or paid or contested by CBS pursuant to Section 6.1.6. 4.1.25. REQUIRED CONSENTS. The only material approvals or consents of persons or entities not a party to this Agreement that are legally or contractually required to be obtained by CBS in connection with the consummation of the transactions contemplated by this Agreement are those that are (i) set forth on Schedules 4.1.5 and 4.1.6 hereto and (ii) those contemplated by Section 5.1. 4.1.26. EVIDENCE OF FINANCIAL CAPABILITY OF ENTERCOM. CBS acknowledges that Entercom has delivered to it satisfactory proof of its financial capability to consummate the transactions contemplated hereby. 4.2. BY ENTERCOM. Entercom hereby represents and warrants that: 4.2.1. CORPORATE STANDING. Entercom is a corporation, duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Entercom or one or more Affiliates to which Entercom's rights hereunder are assigned pursuant to Section 11.13 is, or will be at Closing, qualified to do business in the Commonwealth of Massachusetts. Entercom has full power and authority to engage in the business in which it is presently engaged and to make and perform this Agreement according to its terms. 4.2.2. AUTHORIZATION OF AGREEMENT; NO BREACH. Entercom has the necessary corporate power and authority, on behalf of itself, to execute, deliver and perform this Agreement, the Time Brokerage Agreement and such other agreements as are necessary to consummate the transactions contemplated hereby, and, subject to the receipt of the consents and approvals required elsewhere herein, this Agreement and the Time Brokerage Agreement constitute the valid and binding obligation of Entercom, enforceable against it in accordance with their terms, except as limited by bankruptcy and insolvency laws and by laws affecting the enforcement of creditors rights generally or equitable principles. Assuming said consents and approvals are obtained, neither such execution, delivery, and performance nor compliance by Entercom with the terms and provisions of this Agreement and the Time Brokerage Agreement will conflict with or result in a breach of any of the terms, conditions, or provisions of the Articles of Incorporation or Bylaws of Entercom, or any judgment, order, injunction, decree, regulation, or ruling of any court or any other governmental 16 21 authority to which Entercom is subject or any material agreement or contract to which Entercom is a party or to which it is subject, or constitute a material default thereunder. 4.2.3. QUALIFICATION. Entercom's Affiliate which will be designated as the assignee of the Authorizations in the Assignment Applications is or upon the filing of the Assignment Applications will be qualified as a licensee of the Federal Communications Commission and is or at the time of filing of the Assignment Applications will be qualified as the assignee of the Authorizations to receive Commission approval of the Assignment Applications. Entercom knows of no facts relating to Entercom or any of its Affiliates that could reasonably be expected to cause Commission approval of the Assignment Application to be denied or materially delayed or which could reasonably be expected to lead to the filing of a material objection to such Applications. 4.2.4. LITIGATION AND CLAIMS. Except as disclosed in Schedule 4.2.4 hereto, no litigation, proceeding, or controversy is pending or, to the knowledge of any officer of Entercom, threatened, which might affect the ability of Entercom to perform its obligations hereunder, and there is no basis known to Entercom for any such litigation, proceeding, controversy, or claim. No claim has been made or asserted against Entercom material to this transaction. ARTICLE V. CONDITIONS 5.1. MUTUAL CONDITIONS. Performance of the obligations of the parties with respect to the Stations under this Agreement and the Closing, are and shall be subject to the occurrence and concurrence of the express conditions precedent that (i) the Commission has granted its consent and approval in writing to the assignment to a designated Affiliate of Entercom of the Authorizations issued by the Commission as contemplated hereby without any materially adverse condition and any condition as to the timing of consummation of the transactions contemplated hereby set forth in such consent shall have been satisfied; (ii) the waiting periods (as they may be extended) applicable to the transfer of the Assets under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have expired or been earlier terminated; and (iii) any approval required under the CBS Final Judgment to consummate the transactions contemplated hereby shall have been received. 17 22 5.2. CONDITIONS OF ENTERCOM. Performance of the obligations of Entercom under this Agreement and the Closing of the transactions provided for herein are and shall be subject to the occurrence and concurrence of the express conditions precedent, any of which may be waived by Entercom, that: 5.2.1. All Required Consents have been obtained from the other parties to the Leases and the Contracts identified on Schedules 4.1.5 and 4.1.6 respectively as "Material Leases (or Contracts)-Consent to Assign Required." 5.2.2. No order, decree or judgment of any court, agency or other governmental authority shall have been issued based on or arising out of the conduct, action, inaction, qualifications or status of CBS or any of its Affiliates, which would render it unlawful as of the Closing Date to effect the transactions contemplated by this Agreement in accordance with its terms. 5.3. CONDITIONS OF CBS. Performance of the obligations of CBS under this Agreement and the Closing of the transactions provided for herein are and shall be subject to the occurrence and concurrence of the express conditions precedent, any of which may be waived by CBS, that: 5.3.1. No order, decree or judgment of any court, agency or other governmental authority shall have been issued based on or arising out of the conduct, action, inaction, qualifications or status of Entercom or any of its Affiliates, which would render it unlawful as of the Closing Date to effect the transactions contemplated by this Agreement in accordance with its terms. 5.4. EFFECT OF TIME BROKERAGE AGREEMENT ON CLOSING CONDITIONS. To the extent that any party hereto is unable to fulfill any condition to Closing under this Agreement that could have been fulfilled solely but for (i) an action taken by another party either pursuant to this Agreement or the Time Brokerage Agreement or in breach of this Agreement or the Time Brokerage Agreement or (ii) a failure to take any action that another party was obligated to take, or, in the exercise of commercial reasonableness, should have taken, pursuant to this Agreement or the Time Brokerage Agreement, such condition to Closing shall be deemed waived. 18 23 ARTICLE VI. COVENANTS AND OPERATIONS PRIOR TO CLOSING. 6.1. COVENANTS OF CBS. Except as otherwise provided in the Time Brokerage Agreement and in the CBS Final Judgment, during the period from the date of this Agreement to the Closing Date, CBS and/or one or more of its Affiliates shall: 6.1.1. Conduct the business and operations of the Stations in the Ordinary Course of Business and in accordance with all requirements of law and regulation and, to the extent consistent with the foregoing, in the same manner in which the same have heretofore been conducted with the intent of preserving the ongoing operations and business of the Stations. 6.1.2. Cooperate with Entercom in connection with its review, analysis, and monitoring of the Assets and the operation of the Stations to the end that an efficient transfer of the Assets may be made at Closing, and the business of the Stations and the operation of the Assets may continue on an uninterrupted basis. In addition to providing information required hereunder or reasonably requested by the other parties hereto, CBS agrees to promptly notify the other parties of any unusual problems or developments of which CBS becomes aware with respect to the Assets or the business of the Stations. 6.1.3. Consult with Entercom regarding any proposed material changes to the operation of the Stations to insure continued operation of the Stations as they are now operated and cooperate with Entercom to insure a smooth transfer of ownership and continuity of operations at Closing. 6.1.4. Obtain and deliver to Entercom within 10 days hereof at its expense, and permit Entercom to obtain within 20 days hereof at its expense, Phase I Environmental Assessments of all or any of the Property to be conveyed hereunder and any real property used by the Stations in their operations or for which Entercom could be held responsible under any Environmental Laws. In the event such Phase I Environmental Assessments disclose any conditions contrary to the representations and warranties contained in Section 4.1.19, or any potential that such conditions may exist, then Entercom may conduct or have conducted at its expense additional testing to confirm or negate the existence of any such conditions. If any such Phase I Environmental Assessment or additional testing confirms the existence of any such conditions without reference to matters disclosed on Schedule 4.1.19, CBS will cause the conditions to be remedied as quickly as is reasonably possible to the extent required to comply with applicable Environmental Laws; provided, however, that CBS shall have no obligation for remedial action with respect to PCB-containing electrical components at the WRKO transmitter site or to obtain site closure certification for the underground fuel storage tank removed from the WRKO transmitter site; and provided further that such remedial action(s) does not cost in the aggregate in excess of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). 19 24 In the event that such remedial action(s) does cost in the aggregate in excess of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1), CBS may elect not to take such remedial action. In such event, Entercom may require CBS to proceed to Closing and Entercom shall receive a proration at Closing, in the amount of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). Alternatively, Entercom may terminate this Agreement and CBS shall have no liability to Entercom as a result of such termination. CBS has furnished to Entercom copies of any environmental reports, title reports, and title insurance policies in its possession previously prepared for any of the Property which CBS has been able to locate through the date hereof, and from the date hereof through Closing, CBS shall forward to Entercom any additional such reports or policies it receives or locates. Notwithstanding any other provision of this Agreement, CBS shall have no further liability to Entercom for any environmental condition to the extent such condition is disclosed on Schedule 4.1.19 or any Phase I Environmental Assessment or other testing conducted pursuant to this Section 6.1.4, except as provided in this Section 6.1.4. 6.1.5. Obtain within 10 days hereof at its expense and deliver to Entercom, commitments from a reputable title insurance company to issue extended coverage policies of title insurance (ALTA Form 1970 or other form reasonably acceptable to Entercom) with respect to each parcel of real property to be conveyed hereunder, insuring good and marketable title to such real property (the "Title Commitments"). In the event Entercom notifies CBS within 10 business days of receipt of the Title Commitments that the Title Commitments disclose any rights of way, easements, exceptions or other matters which do not constitute Permitted Encumbrances and which materially and adversely interfere with the continued use of such real property as currently used, CBS will cause the conditions to be remedied as quickly as is reasonably possible; provided, however, that such remedial action(s) does not cost in the aggregate in excess of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). In the event that such remedial action(s) does cost in the aggregate in excess of One Million Dollars ($1,000,000.00), CBS may elect not to take such remedial action, and, notwithstanding any other provision of this Agreement, CBS shall have no further liability to Entercom for any title defect. In such event, Entercom may require CBS to proceed to Closing and Entercom shall receive a proration at Closing, in the amount of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). Alternatively, Entercom may terminate this Agreement and CBS shall have no liability to Entercom as a result of such termination. 6.1.6. Cooperate with Entercom, with respect to the Stations, in its efforts to employ after the Closing, or TBA Commencement Date, as the case may be, any of the current employees of CBS and its Affiliates who are employed at the Stations (the "Station Employees"), including without limitation, allowing Entercom to meet privately with the Station Employees, other than Non-Continuing Employees (as defined in Section 6.5). CBS and its Affiliates will not interfere with or attempt to undermine in any way the efforts of Entercom to employ such employees. 20 25 6.1.7. Pay and discharge when due all taxes due after Closing accrued or accruing with respect to periods ending on or before the Closing Date, to the extent such taxes could reasonably be expected to result in a lien or otherwise interfere with the use or enjoyment of the Assets; provided, that any such tax may be contested by CBS in good faith by appropriate proceedings; provided further that CBS shall pay any such taxes found to be due and owing upon completion of such proceedings. 6.1.8. Prosecute any renewal application filed by it with the Commission with respect to any of the Stations that are the subject of this Agreement; (ii) diligently defend against any petition to deny or other filing seeking denial of such application or against any matter raised sua sponte by the Commission, and (iii) diligently defend against any petition for reconsideration, application for review, or other post-grant objection to such renewal application, in each case with respect to events occurring or accruing prior to the Closing Date, during the period when the Station in question was owned by CBS or any of its Affiliates. 6.1.9. Use its reasonable best efforts to determine in cooperation with Entercom whether any of the assets listed on Schedule 4.1.4 as pertaining to WBMX(FM) are used or intended for use primarily in the operation of any or all of the Stations. Upon determining that any such assets are so used or so intended for use, such assets will become part of the Property to be conveyed hereunder. 6.2. NEGATIVE COVENANTS OF CBS. Unless Entercom has given its consent in writing, which consent shall not be unreasonably withheld, CBS and it Affiliates shall not, directly or indirectly, during the period from the date hereof to the Closing Date: 6.2.1. Except as specifically provided in this Agreement, cancel, amend, modify adversely, assign, encumber, or in any way discharge or terminate any of the Leases or Contracts other than in the Ordinary Course of Business (provided, however, that CBS shall notify Entercom in writing of any such actions involving a contract that would need to be identified on Schedule 4.1.6). 6.2.2. By any act or omission, surrender, modify adversely, forfeit, or fail to renew on regular terms any Authorizations for the Stations or take or omit any action which might result in the Commission instituting any proceedings for the revocation, suspension or modification of any such Authorizations. 6.2.3. Except in the Ordinary Course of Business, sell or dispose of any of the Assets; provided that any Assets so disposed of in the Ordinary Course of Business (other than Assets that are obsolete, worn beyond repair, or otherwise not suitable for use in any of the Stations and that are not in use) are replaced with assets of comparable or better functionality 21 26 6.2.4. Suffer or permit the creation of any mortgage, conditional sale agreement, security interest, lease, lien, hypothecation, pledge, encumbrance, restriction, liability, charge, claim, or imperfection of title on or with respect to any of the Assets other than Permitted Encumbrances and those identified on Schedule 4.1.8 hereto; 6.2.5. Enter into, renew, or modify any Contract relating to the Stations with an individual value of over Fifty Thousand Dollars ($50,000.00) or in the aggregate over Two Hundred and Fifty Thousand Dollars ($250,000.00); other than for Time Sales Agreements, Trade Agreements or Barter Agreements, provided, however, that this restriction shall not apply to renewal or modification of any collective bargaining agreement governing employees at any of the Stations, to the extent that such action would constitute a breach of the terms of such agreement or a violation of applicable law. The amounts set forth in the preceding sentence shall have no bearing on any determination as to what constitutes "material" for purposes of this Agreement. 6.2.6. Fail to take any reasonable actions necessary to maintain the Stations' continuous broadcast operations from their respective main antennae. 6.2.7. Fail to take any reasonable actions necessary to avoid the happening of or to cure the existence of any material damage to or impairment of any of the Assets. 6.2.8. Fail to operate the Stations in conformity in all material respects with all of the applicable requirements of law and regulation. 6.2.9. Take any action which is materially inconsistent with its obligations under this Agreement, or that could hinder or delay the consummation of the transactions contemplated hereby. Any notification or consent given under this Article VI will not mitigate, detract from, or otherwise affect the representations, warranties, or obligations under this Agreement and the consequences of the other party's acting on any such notification or consent will be solely such other party's responsibility, except to the extent inherent in the nature of any notification or consent, or otherwise set forth in the terms thereof. 6.3. NO CONTROL. Nothing contained in this Agreement or in the Time Brokerage Agreement shall give Entercom any right to control the operations of the Stations prior to the Closing Date. 6.4. NO SOLICITATION OR HIRE OF EMPLOYEES AND PROGRAMMING. During the period beginning the date of this Agreement and ending the earlier of eighteen (18) months after the Closing Date or, as to any particular Station, upon consummation 22 27 of any transaction requiring the prior consent of the Commission on FCC Form 314 or 315, CBS shall be prohibited from: (i) soliciting or hiring any Transferred Employee (as defined in Section 6.5); provided, however, that this prohibition shall not apply to any Transferred Employee hired by Entercom and subsequently terminated by Entercom without cause; (ii) contracting for, negotiating for, or soliciting any of the rights relating to the programming content on or promotional materials related to the Stations listed on Schedule 6.4. 6.5. COVENANTS OF ENTERCOM. 6.5.1. Prior to the earlier of the TBA Commencement Date or the Closing Date, Entercom or its designated Affiliate shall offer employment commencing on the earlier of the TBA Commencement Date or the Closing Date to each of the employees employed by CBS or its Affiliates at the Stations on such date (the "Station Employees"), other than those employees specified on Schedule 6.5 (the "Non-Continuing Employees"). The Station Employees accepting such offers shall be referred to as the "Transferred Employees." "Station Employees" shall also include any employee of the Station who is on a short-term disability or other authorized temporary leave from employment by CBS not in excess of 6 months, and Entercom or its designated Affiliate shall offer employment to such person at such time the person is capable and ready to return to active status, provided that such person actually returns to active status within such six (6) month period. Except for any Transferred Employees whose employment contracts are assumed by Entercom under the terms hereof, the terms and conditions of Entercom's employment of the Transferred Employees shall be at-will employment in at least the same positions, for at least the same direct cash compensation, with medical insurance effective as of the earlier of the TBA Commencement Date or the Closing Date and including coverage for any preexisting health conditions that would have been covered by the health plan in which the employee was a participant immediately prior to the earlier of the TBA Commencement Date or the Closing Date and give effect, in determining any periodic deductible and maximum out-of-pocket limitations, to claims incurred and paid by, and amounts reimbursed to, such Transferred Employees prior to the earlier of the TBA Commencement Date or the Closing Date. For purposes of determining the amount of any entitlement of any Transferred Employee under Entercom's benefit and vacation plans, Entercom will take into account and credit such Transferred Employee under Entercom's benefit and vacation plans with the credit for service the Transferred Employee received from CBS immediately prior to the earlier of the TBA Commencement Date or the Closing Date. With respect to any welfare benefit plan (as defined in Section 3(1) of ERISA) of Entercom for the benefit of Transferred Employees, Entercom shall cause all Transferred Employees who actively participated in similar plans of CBS to become a participant in such welfare benefit plan of Entercom as of the earlier of the TBA Commencement Date or the Closing Date. No provisions of this Agreement shall create any third party beneficiary rights of any employee or former employee (including any beneficiary or dependent thereof) of CBS in respect of continued employment (or resumed employment) with CBS or Entercom or in respect of any other matter. 23 28 6.5.2. Without the prior written consent of CBS, which shall not be withheld unreasonably, from and after the date hereof, neither Entercom nor any of its Affiliates shall take any action inconsistent with its obligations under this Agreement, or that could hinder or delay the consummation of the transactions contemplated hereby. 6.6. REAL PROPERTY SURVEYS. 6.6.2. Within 30 days of the date hereof, Entercom may procure, at its expense, with respect to each parcel of real property owned by CBS and used in connection with the operation of the Stations, a current survey of each such parcel of real property, prepared by a licensed surveyor, and conforming to current ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location of all improvements, easements, party walls, sidewalks, roadways, utility lines, transmitting towers, tower guy anchors and other matters customarily shown on such surveys, and showing vehicular access affirmatively to public streets and roads (the "Survey"). 6.6.3. Within 10 business days of receipt of the Surveys, Entercom shall give CBS copies of the Surveys and notice of any exceptions to matters revealed by the Survey that would materially and adversely affect the Stations as currently operated (the "Objectionable Exceptions"). If Entercom fails to give such notice in a timely manner, Entercom shall be deemed to have accepted matters revealed by the Surveys other than the Objectionable Exceptions expressly set forth in the notice. 6.6.4. CBS shall cure or remove any Objectionable Exception within 30 days from the date of Entercom's notice; provided, however, that if CBS reasonably determines that the cost of removing such Objectionable Exception would exceed One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1) or that CBS through the expenditure of up to One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1) will be unable to cure or remove an Objectionable Exception within such 30-day period, then CBS shall notify Entercom within 3 business days after such determination, whereupon Entercom shall have the right, exercisable by written notice given to CBS within 3 business days after receipt of CBS's notice, to elect (i) to agree to accept the real property covered by such Survey, subject to such of the Objectionable Exceptions, together with a payment of such sum as is necessary to remove the Objectionable Exception not to exceed One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1) or (ii) to terminate this Agreement. If Entercom fails to elect option (i) or (ii) above, then Entercom shall be deemed to have elected option (i). 24 29 ARTICLE VII. ACTIONS PRIOR TO CLOSING. 7.1. APPLICATION TO COMMISSION. The parties hereby bind themselves to use their best efforts, and to cooperate with each other, in seeking the consent and approval of the Commission to the assignment of all Authorizations heretofore granted and issued in connection with the Stations as herein provided; diligently and promptly to prepare, sign, and file with the Commission within five (5) business days from the date of this Agreement any and all applications requisite or desirable to procure such consents and approvals (the "Assignment Applications"); and diligently and promptly to prepare and submit to the Commission all information, data, exhibits, amendments, resolutions, statements, and other material necessary or proper in connection with the Assignment Applications; and diligently to pursue the grant of a Final Order approving such Assignment Applications. 7.2. COMPLIANCE WITH CBS FINAL JUDGMENT. Entercom acknowledges that CBS has provided it with a copy of the CBS Final Judgment. Within two (2) business days of the date of this Agreement, CBS shall comply with the notification provisions of Section VII of the CBS Final Judgment, and both parties shall thereafter comply in all material respects with all requests for additional information by the DOJ under the CBS Final Judgment. The parties will attempt in good faith to persuade the DOJ to provide written notice of no objection to this Agreement. If the DOJ does not provide written notice of no objection under the CBS Final Judgment, then CBS may, but shall be under no obligation to, seek the Court's approval of this Agreement pursuant to Section VII of the CBS Final Judgment. If CBS decides not to seek Court approval, or if DOJ has not provided written notice of no objection or the Court's approval has not been obtained by the Upset Date (as defined in Section 9.1.1.), then either party shall be permitted to terminate this Agreement as provided in Section 9.1. 7.3. HART-SCOTT-RODINO NOTIFICATION. As promptly as practicable and no later than ten (10) days after the date hereof, the parties hereto shall take all steps reasonably necessary to file and shall participate in the filing of all requisite documents and notifications required to be filed pursuant to the HSR Act. All filing fees in connection with such notifications shall be paid by one-third by CBS and two-thirds by Entercom. The parties agree to diligently take and fully cooperate in the taking of all necessary and proper steps, and provide any additional information reasonably requested in order to obtain promptly the early termination of the waiting period under the HSR Act. 25 30 7.4. INSPECTION. During the period from the date of this Agreement to the Closing Date, CBS shall, upon reasonable request, afford, or cause to be afforded, engineers, attorneys, accountants, and other consultants and/or representatives of Entercom free access in a reasonable manner during normal business hours to the employees, offices, studios, transmitter sites, equipment, records, and other documents pertaining to the Stations and furnish or cause to be furnished Entercom with all information concerning the Stations' affairs as Entercom may reasonably request, including but not limited to applications and other documents filed with the Commission. For purposes of the foregoing, records shall include, without limitation, any sales, research, consulting, and ratings reports relating to the Stations. 7.5. CONFIDENTIALITY. Each party hereby covenants and agrees that in the event the transactions contemplated by this Agreement are not consummated for any reason whatsoever, they will, upon request, return to the other party within ten (10) days from the date of such request, all versions, including copies, of all information furnished to that party by another party hereto or its representatives or Affiliates, regardless of whether the same is marked "confidential" or "proprietary," together with any and all notes, memoranda, analyses, compilations, studies, or other documents (whether in hard copy or electronic media) prepared by the receiving party, its directors, officers, partners, employees, agents, or other representatives (including advisors, attorneys, accountants, financial advisors, and potential financing sources) which contain or otherwise reflect such information (the "Confidential Information"). Each party hereby covenants and agrees to use reasonable efforts to hold all Confidential Information in confidence and not to disclose, or cause any representative, agent, or employee to disclose to any third party any portion of the Confidential Information except as may be required by law or judicial process, and not to use any portion of the Confidential Information for its own benefit without the written consent of the providing party. Should a party receive a request or be required by applicable law to disclose to a court or other tribunal all or any part of the Confidential Information received from another party hereto, CBS and Entercom confirm that each will adhere to the terms and conditions set forth in paragraph 5 of the Confidentiality Agreement, dated June 9, 1998, between CBS and Entercom. Nothing shall be deemed to be Confidential Information that: (a) is or becomes generally available to the public other than as a result of a disclosure by the receiving party or its representatives; or (b) is or becomes available to the receiving party on a non- confidential basis from a source rightfully in possession of the information and which is under no legal, contractual or fiduciary obligation to keep it confidential. 26 31 ARTICLE VIII. CLOSING 8.1. CLOSING. Unless otherwise agreed by the parties, the Closing shall take place at the offices of Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Suite 1300, Washington, D.C. 20004 at 10:00 a.m., on the Closing Date, which shall be the date five business days after the satisfaction of the conditions to Closing set forth in Section 5.1, Section 5.2.2 and Section 5.3.1 hereof. 8.2. PRORATIONS. Within ninety (90) days after Closing, an accounting for each Station shall be made as follows: 8.2.1. All prepaid income, prepaid expenses, prepayments on any Contracts and Leases assumed, accrued income, property taxes, and accrued expenses, including without limitation any accrued expenses for Transferred Employees (such as accrued vacation time) assumed by Entercom up to the Adjustment Time shall, except as otherwise expressly provided herein or in the Time Brokerage Agreement, be adjusted and allocated between CBS and Entercom to reflect the principle that all expenses and income arising from the operation of the Station up through the Adjustment Time shall be for the account of CBS, and all expenses and income arising from the operation of the Station or portion thereof acquired by Entercom after the Adjustment Time shall be for the account of Entercom. Trade and Barter Agreements shall be subject to adjustment or proration only to the extent provided in Section 4.1.18. Any appropriate proration required to be made (i) pursuant to Leases referred to in Section 4.1.5, (ii) pursuant to Contracts referred to in Section 4.1.6, (iii) pursuant to Section 6.1.4, and (iv) pursuant to Section 4.1.18 shall also be reflected in such accounting. Any amount not paid when due shall bear interest at the rate of ten percent (10%) per annum. 8.2.2. As soon as practicable following the Closing Date, and in any event within ninety (90) days thereafter, or at such other time as the parties agree, Entercom shall deliver to CBS Entercom's certificate, setting forth as of the Adjustment Time, all adjustments to be made as provided in Section 8.2.1 above as to each Station. Entercom shall provide CBS or its representatives access to copies of such portions of books and records CBS may reasonably request solely for purposes of verifying such adjustments. Entercom's certificate shall be final and conclusive unless objected to by CBS in writing within thirty (30) days after delivery. Entercom and CBS shall attempt jointly to reach agreement as to the amount of the adjustments to be made hereunder within sixty (60) days after receipt of such written objection, which agreement, if achieved, shall be binding upon all parties to this Agreement and not subject to dispute or review. 27 32 8.2.3. In the event of a disagreement between Entercom and CBS with respect to the accounting to be made hereunder, the parties agree that a public accounting firm chosen jointly by Entercom and CBS shall be the final arbiter of such disagreement. 8.2.4. Any amounts due for the adjustments provided for herein shall be paid within ten (10) business days after final determination. 8.3. CLOSING DELIVERIES TO ENTERCOM. At or before the Closing, CBS shall deliver or cause to be delivered to Entercom the following items and documents in form reasonably satisfactory to counsel for Entercom and properly executed, unless Entercom shall waive in whole or in part in writing such delivery and then only to the extent of such waiver: 8.3.1. CBS shall pay to Entercom or its designee by wire transfer of immediately available funds the CBS Contract Reimbursement. 8.3.2. CBS shall deliver to Entercom such Bills of Sale and assignments and other instruments of transfer and conveyance, transferring to Entercom the Property to be sold, transferred or assigned hereunder and the rights and interests under the Leases and Contracts being assigned to Entercom hereunder, to the extent such rights and interests under such leases and contracts have not previously been assigned to and assumed by Entercom under the Time Brokerage Agreement. 8.3.3. CBS shall deliver to Entercom one or more Special Warranty Deeds in recordable form transferring to Entercom a fee simple interest in each parcel of owned real property being conveyed to Entercom hereunder. 8.3.4. CBS shall deliver to Entercom an assignment of all right, title and interest of CBS in and to the Authorizations. 8.3.5. CBS shall deliver to Entercom all keys to and actual possession of all of the Assets, in the same condition as the same now are, except for ordinary wear and tear thereof and except as permitted under the Agreement. 8.3.6. CBS shall deliver to Entercom certified copies of resolutions of the Board of Directors of each CBS entity, duly authorizing the execution, delivery, and performance of this Agreement and all documents to be executed and delivered by CBS at the Closing, and thereafter. 8.3.7. CBS shall deliver to Entercom certificates signed by an authorized officer to the effect (a) that no act or omission of CBS or any of its Affiliates, or state of facts contrary to the agreements, representations, and warranties of such party contained herein has been taken or has 28 33 occurred and that said representations and warranties of such party, to the extent they do not speak as of a specific time, are true and correct as of the Closing Date, with the same effect as if made as of the time of Closing, except to the extent otherwise permitted hereunder or to the extent such act, omission, state of facts, untruth or inaccuracy would not have a material adverse effect on Entercom's continued operation of the Stations as currently operated and (b) that all covenants and agreements contained herein of CBS have been complied with in all material respects. 8.3.8. CBS shall deliver to Entercom the Required Consents relating to the Leases and Contracts, to the extent not previously delivered under the Time Brokerage Agreement. 8.3.9. CBS shall deliver to Entercom evidence of the release of all liens and encumbrances on the Assets to be released at Closing. 8.3.10. CBS shall deliver to Entercom one or more opinions of counsel to CBS, dated he Closing Date, in form and substance reasonably satisfactory to Entercom. 8.4. CLOSING DELIVERIES TO CBS. At or before the Closing, Entercom or an Affiliate of Entercom, as appropriate, shall deliver to CBS or cause to be delivered the following items and documents in form reasonably satisfactory to counsel for CBS and properly executed, unless CBS shall waive in whole or in part in writing such delivery and then only to the extent of such waiver: 8.4.1. Entercom shall pay to CBS the Purchase Price by wire transfer of immediately available funds. 8.4.2. Entercom shall deliver to CBS certified copies of resolutions of the Board of Directors of Entercom duly authorizing the execution, delivery, and performance of this Agreement and all documents to be executed and delivered by Entercom at the Closing, and thereafter. 8.4.3. Entercom shall deliver to CBS certificates signed by an authorized officer to the effect that no act or omission of Entercom or state of facts contrary to the agreements, representations, and warranties of Entercom contained herein has been taken or has occurred and that said representations and warranties of Entercom to the extent they do not speak as of a specific time are true and correct as of the Closing Date, with the same effect as if made as of the time of Closing, and that all covenants and agreements contained herein of Entercom have been complied with. 8.4.4. Entercom shall deliver to CBS one or more agreements whereby Entercom assumes and agrees to pay when due any liabilities of CBS relating to the Stations specifically assumed by Entercom hereunder, including without limitation those liabilities accruing after the 29 34 Adjustment Time with respect to those Leases and Contracts being assumed by Entercom hereunder, to the extent such rights and interests under such liabilities have not previously been and assumed by Entercom under the Time Brokerage Agreement. 8.4.5. Entercom shall deliver to CBS one or more opinions of counsel to Entercom dated the Closing Date, in form and substance reasonably satisfactory to CBS. 8.5. COVENANTS OF FURTHER ASSURANCES; AVAILABILITY OF RECORDS. At and after the time of Closing, upon request, each party shall take such action and deliver to the other party such further instruments of assignment, conveyance, or transfer or other documents of further assurance as may be reasonably necessary to evidence the full and effective transfer, conveyance, and assignment of the Assets and possession thereof to the respective parties, their successors and assigns, and to assure complete performance of this Agreement in all respects. After the Closing, for a period of three (3) years, upon request, CBS shall provide Entercom copies of or access to records relating to the Stations that are needed by Entercom for accounting, tax, or other purposes. 8.6. RISK OF LOSS; DAMAGE TO PROPERTY. The risk of loss or damage from fire, theft, storm or other act beyond the control of CBS to any of the Assets prior to Closing, shall be upon CBS. If, at the time of Closing, the tangible property to be sold hereunder shall have suffered such loss or damage to an extent that affects the value thereof and CBS shall not have repaired, replaced, or restored same with property of like kind, quality, and value, Entercom shall complete the purchase and Closing, in which event it shall be entitled to a payment equal to the greater of (a) the amount necessary to repair, replace, or restore such damaged property with property of like kind, quality, and value or (b) the amount of any and all insurance proceeds available to CBS, if any, collectible by reason of such loss or damage. 8.7. TAXES ON TRANSACTION. All sales, purchase, transfer, use, or documentary taxes, if any, payable by reason of this Agreement or any of the transactions contemplated hereby or the sale, transfer, or delivery of any of the Assets hereunder, whether or not imposed on a particular party, shall be paid and borne equally by CBS or Entercom, either by payment thereof or by reimbursement to the other party. 30 35 ARTICLE IX. TERMINATION, DEFAULT AND INDEMNIFICATION 9.1. TERMINATION. This Agreement may be terminated by a party hereto not then in default hereunder upon written notice to the other parties upon occurrence of any of the following: (i) the Closing has not occurred by the date that is one year after the date of this Agreement (the "Upset Date"); (ii) the Commission denies by Final Order or designates for hearing any of the Assignment Applications or any portion thereof; (iii) by either party as provided in Section 7.2; or (iv) any of the conditions set forth in Article V of this Agreement are not waived by such party and such conditions shall not have been satisfied on or before the Upset Date, or shall have become incapable of satisfaction. This Agreement may be terminated by Entercom as provided in Section 6.1.4, Section 6.1.5 and Section 6.6.3, provided Entercom is not then in default hereunder. 9.2. EFFECT OF TERMINATION. The termination of this Agreement under Section 9.1 shall not relieve any party of any liability for breach of this Agreement prior to the date of termination. 9.3. REMEDIES. CBS recognizes that, in the event of a Default by CBS, monetary damages alone will not be adequate. Therefore, in the event of a Default by CBS, unless Entercom is in Default, Entercom shall be entitled, in addition to indemnification pursuant to Section 9.4, to obtain specific performance of the terms of this Agreement. In any action to enforce specifically the performance of this Agreement under this Section 9.3, CBS shall waive the defense that there is another adequate remedy at law or equity and agrees that Entercom shall have the right to obtain specific performance of CBS's obligations under the terms of this Agreement without being required to prove actual damages, post bond, or furnish other security. 9.4. INDEMNIFICATION. 9.4.1. BY CBS. CBS shall indemnify, defend, and hold Entercom and its officers, directors, partners, employees, and Affiliates harmless from, against, and with respect to any and all loss, damage, claim, obligation, assessment, cost, liability, and expense (including, without limitation, reasonable attorneys' fees and costs and expenses incurred in investigating, preparing, defending against or prosecuting any litigation or claim, action, suit, proceeding or demand) of any kind or character (a "Loss") (including without limitation the loss of any of the Authorizations resulting from any failure by the Commission to renew such Authorizations as a result of events occurring 31 36 prior to the Closing Date) incurred, suffered, sustained, or required to be paid by any of them and resulting from, related to or arising out of: (a) any breach of any of the covenants, representations or warranties made by CBS in or pursuant to this Agreement, or in any agreement, document, or instrument executed and delivered pursuant hereto; (b) any failure by CBS to perform or observe, or to have performed or observed, in full, any covenant, agreement, or condition to be performed or observed by it pursuant to this Agreement or in any agreement, document, or instrument executed and delivered by or on behalf of it pursuant hereto; (c) any and all obligations of CBS, except for obligations assumed or required to be assumed by Entercom under the terms of this Agreement or in the Time Brokerage Agreement; (d) the operation or ownership of the Assets prior to the Adjustment Time by CBS and its Affiliates, except for obligations and liabilities assumed by Entercom under the Time Brokerage Agreement; or (e) Closing by Entercom and/or any of its Affiliates prior to the grants of the Assignment Applications becoming Final Orders, if the failure of the grants of the Assignment Applications to become Final Orders is attributable to any issue raised regarding CBS or any of its Affiliates. 9.4.2. BY ENTERCOM. Entercom shall indemnify, defend, and hold CBS and its officers, directors, partners, employees, and Affiliates harmless from, against and with respect to any and all items of Loss incurred, suffered, sustained, or required to be paid by any of them and resulting from, related to or arising out of: (a) any breach of any of the covenants, representations, or warranties made by Entercom in or pursuant to this Agreement, or in any agreement, document, or instrument executed and delivered pursuant hereto; (b) any failure by Entercom to perform or observe, or to have performed or observed, in full, any covenant, agreement, or condition to be performed or observed by it pursuant to this Agreement or in any agreement, document, or instrument executed and delivered by or on behalf of it pursuant hereto; (c) Entercom's operation or ownership of the Assets after the Adjustment Time; or 32 37 (d) any obligations under any Contracts or Leases assumed by Entercom under Section 3.1 hereof. For purposes of Section 9.4.2(b), Entercom acknowledges that if it wrongfully fails to close the transactions contemplated hereby, CBS may not be able to dispose of the Stations in a transaction qualifying under Section 1031 of the Code, and that Entercom shall indemnify and hold harmless CBS for damages sustained by CBS if CBS disposes of the Stations within one year from the date Closing should have occurred and CBS is unable to do so in a manner that qualifies for tax-deferred treatment under Section 1031 of the Code. 9.4.3. NOTICE AND PROCEDURE IN CONNECTION WITH THIRD PARTY CLAIMS. If any party has a claim for indemnification hereunder (such party, an "Indemnitee") arising out of any claim or liability which is asserted or threatened against it, or any action, suit or proceeding is commenced by any third party against any Indemnitee which might result in any indemnification obligations hereunder on behalf of any other party (such other party, an "Indemnitor"), such Indemnitee shall, within twenty (20) business days from the receipt of same, give written notice thereof to each such Indemnitor together with a brief statement of the basis of the claim and a copy of any complaint or other documents relating to such claim, provided, however, that failure to give such notice within such twenty (20) business day period shall not affect the liability of Indemnitor hereunder unless the failure to give such notice within such period materially and adversely affects Indemnitor's ability to defend against the claim giving rise to Indemnitee's claim for indemnification or to cure the default giving rise to such claim. Within twenty (20) days from receipt of such notice, the Indemnitor shall give the Indemnitee written notice as to whether the Indemnitor elects to contest any such claim or liability; provided, however, that during the interim, the Indemnitee shall be entitled to take reasonable action (which shall not include settlement) with respect to such claim which it deems necessary to protect against further damage or default with respect thereto. If an Indemnitor elects to contest any such claim or liability, it shall be at the cost and expense of the Indemnitor and using professionals chosen by the Indemnitor. The Indemnitee may participate in the defense of any claim or liability that an Indemnitor has elected to contest, but such participation shall be at its own expense. If the Indemnitor does not elect to assume control or otherwise participate in the defense of any third party claim, it shall be bound by the results obtained by the Indemnitee with respect to such claim, including any settlement, subject to the Indemnitor's right to contest the underlying obligation to indemnify the Indemnitee. 9.4.4. EXCLUSIVITY. Except as provided in Section 9.1 concerning termination of this Agreement and Section 9.3 concerning the rights of Entercom to specific performance, subsequent to Closing the right to indemnification hereunder shall be the exclusive remedy for all claims of damages of any party in connection with any breach by any other party of its representations, warranties, or covenants. Subsequent to Closing, the parties hereto agree that no party will be entitled to consequential or punitive damages as a result of a breach hereof by any party hereto. 33 38 9.4.5. LIMITATIONS. Except as otherwise provided in this Article IX, any claim asserted for damages or indemnification hereunder must be submitted to the Indemnitor in writing within the time periods set forth in Section 11.3 of this Agreement and any such claim not so asserted shall be waived and barred. No party shall be entitled to indemnification hereunder unless the aggregate amount of its claims for indemnification exceeds One Hundred Thousand Dollars ($100,000.00) per Station, in which event such party shall be indemnified for the entire amount owed. This amount shall have no bearing on any determination as to what constitutes "material" for purposes of this Agreement. No party shall be entitled to indemnification hereunder for amount in the aggregate greater than the Purchase Price. ARTICLE X. INTENTIONS OF THE PARTIES AS TO FORM OF TRANSACTION 10.1. CBS' INTENTION. CBS may elect to transfer and convey the Assets to Entercom in such a fashion as would permit CBS to effect a deferred like-kind exchange of the Assets for other like-kind assets to be acquired by CBS after the Closing with Purchase Price. If CBS so elects, it shall give written notice to Entercom of its intention to effect such a deferred like-kind exchange, and thereafter may at any time at or prior to Closing assign its rights under this Agreement to a "qualified intermediary" as defined in Treas. Reg. Section 1.1031(k)-1(g)(4), subject to all of Entercom's rights and obligations hereunder, and shall promptly provide written notice of such assignment to all parties hereto. In the event CBS assigns its rights hereunder to a "qualified intermediary," Entercom shall acknowledge in writing the notification by CBS of the assignment to the "qualified intermediary" of its rights hereunder, and Entercom shall pay the Purchase Price to the "qualified intermediary" at Closing rather than to CBS, which payment shall discharge the obligation of Entercom to make payment for the Assets hereunder. 10.2. ENTERCOM'S INTENTION. CBS acknowledges that Entercom is purchasing the Assets for cash and that Entercom does not intend its acquisition of the Assets to be part of a like-kind exchange by Entercom. Accordingly, without limiting Entercom's obligation to perform for the benefit of CBS as specifically set forth in Section 10.1, Entercom shall not be obligated to take any other action at the request of CBS or the "qualified intermediary" at Closing or otherwise that would be inconsistent with Entercom's intention to effect a purchase of the Assets for cash. 10.3. INDEPENDENT TRANSACTIONS. The parties acknowledge and agree that the transactions contemplated by this Agreement are not contractually interdependent or otherwise mutually dependent in any way on 34 39 or with the transactions contemplated by either the Tampa Agreement or the Boston II Agreement. The parties further acknowledge that neither the Closing nor any of the rights or obligations of the parties set forth herein are dependent or conditional on the closing or failure to close the transactions contemplated by either the Tampa Agreement or the Boston II Agreement, and that neither the closing of the Tampa Agreement or the Boston II Agreement nor any of the rights or obligations of the parties to such agreements are dependent or conditional on the occurrence of the Closing or the failure of occurrence of the Closing. ARTICLE XI. GENERAL PROVISIONS 11.1. EXPENSES OF THE PARTIES. Except as otherwise specifically provided herein, all expenses involved in the preparation, authorization, and consummation of this Agreement including, without limitation, all fees and expenses of agents, representatives, counsel, and accountants in connection therewith and in connection with applications to the Commission hereunder, shall be borne solely by the party who shall have incurred the same, and the other party shall have no liability in respect thereof. The foregoing notwithstanding, the parties agree that any filing fees of the Commission relating to the filing of the Assignment Applications shall be divided equally between CBS and Entercom. The parties agree that the Required Cure Expense shall not exceed One Million Dollars ($1,000,000.00). 11.2. BROKERS. Each party hereto represents and warrants to the other parties hereto that it has not incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents commissions or other like payment in connection with this Agreement or the transactions contemplated hereby for which the other parties will have any liability, and each party hereto agrees to indemnify and hold the other parties hereto harmless against and in respect of any such obligation or liability based in any way on any agreement, arrangement, or understanding claimed to have been made by such party with any third party. 11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS, AND WARRANTIES. The provisions hereof which by their terms are to be performed and observed after the Closing Date, and the several representations, warranties, indemnities, and agreements of the parties herein contained, shall survive the Closing Date hereunder for a period of eighteen (18) months and shall remain effective and unaltered or unimpaired for such period by any investigation that may have been or may be made at any time prior to Closing by or on behalf of any party, except that the representations concerning title, ERISA, environmental matters, and taxes contained in Sections 4.1.8, 4.1.15, 4.1.19 (other than as provided in Section 6.1.4), and 4.1.24 shall survive until ninety (90) days after the expiration of the applicable statutes of 35 40 limitation, and the provisions of Sections 2.2 and Article X shall survive the Closing without limitation. 11.4. CONFIDENTIALITY. Each party agrees, except as otherwise required by law or the rules of the New York Stock Exchange (the "NYSE"), until such time as this Agreement is made public by filing with the Commission, that it will not disclose to any third party the fact of or content of this agreement or the possible exchange of the radio stations involved without the express prior consent of the other parties. Should a party be required to disclose information regarding the agreement prior to filing with the Commission because of a requirement of law or a rule of the NYSE, it will advise the other parties with reasonable advance notice in writing prior to disclosure. 11.5. AMENDMENT AND WAIVER. This Agreement cannot be changed or terminated orally. Any amendment or modification hereof must be in writing signed by the party against whom enforcement is sought. No waiver of compliance with any provision or condition hereof, and no consent provided for herein, shall be effective unless evidenced by an instrument in writing duly executed by the party sought to be charged with such waiver or consent. 11.6. EFFECT OF THIS AGREEMENT. This Agreement and the Time Brokerage Agreement set forth the entire understanding of the parties and supersedes any and all prior written or oral agreements, arrangements, or understandings relating to the subject matter hereof. No representation, promise or inducement has been made by either party which is not embodied in this Agreement, and neither party shall be bound by, or be liable for, any alleged representation, promise, inducement, or statement of intention not embodied herein unless same shall have been made subsequent hereto, shall be in writing, and shall be signed by the party to be charged therewith. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 11.7. TERMS GENERALLY. (a) Words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other genders as the context requires; (b) the terms "hereof," "herein," and "herewith" or words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all Schedules hereto) and not to any particular provision of this Agreement, and Article, Section, Paragraph, and Schedule references are to be Articles, Sections, Paragraphs, and Schedules to this Agreement unless 36 41 otherwise specified; and (c) the word "or" shall not be exclusive, except where the context otherwise requires. 11.8. HEADINGS. The article or section headings of this Agreement are for convenience of reference only and do not form a part of and do not in any way modify, interpret, or construe the intention of the parties. 11.9. COUNTERPARTS. This Agreement may be executed in one or more counterparts and all such counterparts shall be construed as one and the same instrument. Executed documents transmitted by telecopier shall be valid and binding. 11.10. GOVERNING LAW; JURISDICTION. The construction and performance of this Agreement shall be governed by the laws of the State of New York without reference to its conflict of law rules. The parties hereto expressly waive and agree to waive any right to a jury trial in any controversy or claim arising out of or relating to this Agreement. 11.11. BULK SALES LAWS. Entercom and its Affiliates waive compliance by CBS and its Affiliates with the provisions of the "bulk sales" or similar laws of any state. CBS agrees to indemnify Entercom and its Affiliates and hold them harmless from any and all loss, cost, damages, and expenses (including but not limited to reasonable attorney's fees) sustained by the indemnified parties as a result of any failure of the indemnifying party to comply with any "bulk sales" or similar laws. 11.12. ASSIGNMENT. This Agreement and the rights and obligations hereunder may not be assigned by any party hereto without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld; provided however, that (x) Entercom may make a collateral assignment of their rights hereunder for the benefit of their senior lenders and (y) any party may assign all or any part of this Agreement or the rights and obligations hereunder to an Affiliate, provided that such assignment shall not relieve such party of its obligations hereunder. 11.13. NOTICES. Any notice, report, demand, waiver, or consent required or permitted hereunder shall be in writing and shall be given by hand delivery, by prepaid registered or certified mail, 37 42 with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery or by telecopy addressed as follows: If to CBS: CBS Radio 40 West 57th Street 14th Floor New York, NY 10019 Attention: Mr. Mel Karmazin Telecopier Number: 212-314-9229 with copies to: General Counsel CBS Corporation 51 West 52nd Street New York, NY 10019-6188 Telecopier Number: 212-975-2185 and Leventhal Senter & Lerman, P.L.L.C. 2000 K Street, N.W. Suite 600 Washington, D.C. 20006 Attention: Steven A. Lerman, Esq. Telecopier Number: 202-293-7783 If to Entercom: Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Attention: Mr. Joseph M. Field, President Telecopier Number: 610-660-5641 with copies to: John C. Donlevie, Esq., Executive Vice President and General Counsel Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopier Number: 610-660-5620 and Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, DC 20004 Attention: Joseph D. Sullivan, Esq. Telecopier Number: 202-637-2201 38 43 The date of any such notice and service thereof shall be deemed to be: (i) the day of delivery if hand delivered or delivered by overnight courier; (ii) the day of delivery as indicated on the return receipt if dispatched by mail, or (iii) the date of telecopy transmission as indicated on the telecopier transmission report, provided that any telecopy transmission shall not be effective unless a paper copy is sent by overnight courier on the date of the telecopy transmission. Any party may change its address for the purpose of notice by giving notice of such change in accordance with the provisions of this Section. 11.14. ATTORNEYS' FEES. In the event of a dispute between or among the parties hereto arising out of or related to this Agreement or the interpretation or enforcement of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and expenses from the other party. 11.15. TEMPORARY SUBLEASE FOR WBMX. In the event that as of Closing Date, CBS has been unable to move Station WBMX(FM) to its new office space, Entercom shall permit CBS to continue to occupy that portion of the leased premises under the Lease dated September 30, 1993, as amended October 31, 1997, as amended January 1, 1995, between JMB Urban Huntington Limited Partnership and Atlantic Radio, L.P. for office space at 116 Huntington Avenue, Boston, Massachusetts (the "Office Lease"), which is currently occupied by WBMX(FM) until a date not later than April 31, 1999; provided that CBS shall make reasonable commercial efforts to vacate the premises as soon as possible. CBS shall pay Entercom rent monthly on the first of each month based on the number of square feet of the premises occupied by CBS, divided by the total number of square feet under the Office Lease. 39 44 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized corporate officers and their respective corporate seals thereunto affixed on this the date first written above. CBS RADIO, INC. By:_______________________________________ Title:_____________________________________ CBS RADIO LICENSE, INC. By:_______________________________________ Title:_____________________________________ ENTERCOM COMMUNICATIONS CORP. By:_______________________________________ Title:_____________________________________ 40 EX-10.13 17 TIME BROKERAGE AGREEMENT CBS RADIO 1 EXHIBIT 10.13 TIME BROKERAGE AGREEMENT BY AND AMONG ENTERCOM COMMUNICATIONS CORP. CBS RADIO, INC., AND CBS RADIO LICENSE, INC., DATED AS OF AUGUST 13, 1998 2 TABLE OF SCHEDULES AND EXHIBITS Schedule 1.1 Programming Schedule 1.2 Compensation Schedule 2.1 Programming Policy Statement Schedule 4.1 Time Sales Agreements and Contracts (i) 3 TABLE OF CONTENTS
PAGE ---- ARTICLE I. - SALE OF TIME.............................................................. 1 SECTION 1.1.BROADCAST OF PROGRAMMING................................. 1 SECTION 1.2.PAYMENT.................................................. 1 SECTION 1.3.TERM..................................................... 2 ARTICLE II. - PROGRAMMING AND OPERATING STANDARDS AND PRACTICES........................ 2 SECTION 2.1.COMPLIANCE WITH STANDARDS................................ 2 SECTION 2.2.POLITICAL BROADCASTS..................................... 2 SECTION 2.3.HANDLING OF COMMUNICATIONS............................... 3 SECTION 2.4.PREEMPTION............................................... 3 SECTION 2.5.BROADCASTING OBLIGATIONS OF LICENSEE..................... 3 SECTION 2.6."PAYOLA" AND "PLUGOLA"................................... 4 SECTION 2.7.ADVERTISING AND PROGRAMMING.............................. 4 SECTION 2.8.COMPLIANCE WITH LAWS..................................... 5 SECTION 2.9.CERTIFICATIONS........................................... 5 ARTICLE III. - RESPONSIBILITY FOR EMPLOYEES AND EXPENSES............................... 5 SECTION 3.1.TIME BROKER'S EMPLOYEES.................................. 5 SECTION 3.2.LICENSEE'S EMPLOYEES..................................... 6 SECTION 3.3.TIME BROKER'S EXPENSES................................... 6 SECTION 3.4.OPERATING EXPENSES....................................... 6 SECTION 3.5.TIME BROKER'S INSURANCE.................................. 6 ARTICLE IV. - ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS.............................. 7 SECTION 4.1.ASSIGNMENT............................................... 7 SECTION 4.2.PRORATION................................................ 7 SECTION 4.3.ACCOUNTS RECEIVABLE...................................... 8 ARTICLE V. - OPERATION OF STATION...................................................... 9 ARTICLE VI. - GRANT OF LICENSES........................................................ 9 SECTION 6.1.LICENSE TO USE STATIONS FACILITIES....................... 9 SECTION 6.2.LICENSE OF INTELLECTUAL PROPERTY......................... 10
(i) 4 ARTICLE VII. - INDEMNIFICATION......................................................... 10 SECTION 7.1.INDEMNIFICATION RIGHTS................................... 10 SECTION 7.2.PROCEDURES............................................... 10 ARTICLE VIII. - DEFAULT................................................................ 11 SECTION 8.1.TIME BROKER EVENTS OF DEFAULT............................ 11 SECTION 8.2.LICENSEE'S EVENTS OF DEFAULT............................. 12 SECTION 8.3.CURE PERIODS............................................. 12 SECTION 8.4.OTHER DEFAULTS........................................... 13 ARTICLE IX. - TERMINATION.............................................................. 13 SECTION 9.1.TERMINATION UPON DEFAULT................................. 13 SECTION 9.2.TERMINATION UPON CHANGE IN FCC RULES..................... 13 SECTION 9.3.CERTAIN MATTERS UPON TERMINATION......................... 14 ARTICLE X. - REMEDIES.................................................................. 15 ARTICLE XI. - CERTAIN REPRESENTATIONS AND WARRANTIES OF THE PARTIES................................................. 15 SECTION 11.1.REPRESENTATIONS AND WARRANTIES OF TIME BROKER........... 15 SECTION 11.2.REPRESENTATIONS, WARRANTIES AND COVENANTS OF OPERATOR AND CRLI..................... 16 ARTICLE XII. - MISCELLANEOUS........................................................... 18 SECTION 12.1.MODIFICATION AND WAIVER................................. 18 SECTION 12.2.NO WAIVER; REMEDIES CUMULATIVE.......................... 18 SECTION 12.3.CONSTRUCTION............................................ 18 SECTION 12.4.HEADINGS................................................ 18 SECTION 12.5.SUCCESSORS AND ASSIGNS.................................. 18 SECTION 12.6.FORCE MAJEURE........................................... 19 SECTION 12.7.BROKER.................................................. 19 SECTION 12.8.COUNTERPART SIGNATURES.................................. 19 SECTION 12.9.NOTICES................................................. 19 SECTION 12.10.ENTIRE AGREEMENT....................................... 21 SECTION 12.11.SEVERABILITY........................................... 21 SECTION 12.12.NO JOINT VENTURE....................................... 21 SECTION 12.13.DAMAGE TO STATIONS..................................... 21 SECTION 12.14.NONINTERFERENCE........................................ 21
(ii) 5 SECTION 12.15.REGULATORY CHANGES.................................... 22 SECTION 12.16.ATTORNEYS' FEES....................................... 22
(iii) 6 TIME BROKERAGE AGREEMENT This Time Brokerage Agreement (this "Agreement") is made as of the 13th day of August 1998, by and among Entercom Communications Corp., a Pennsylvania corporation, ("Operator"), and/or Entercom's Affiliate to which the rights and obligations of Entercom hereunder are assigned ("Entercom Affiliate") (Operator and/or Entercom Affiliate are collectively referred to herein as "Licensee"), CBS Radio, Inc., a Delaware corporation ("CRI"), and CBS Radio License, Inc. ("CRLI") (CRI and CRLI, collectively, "Time Broker"). An Affiliate of Entercom is the licensee of broadcast stations WYUU(FM), Safety Harbor, Florida, and WLLD(FM), Holmes Beach, Florida (collectively, the "Stations"). Concurrently with the execution of this Agreement, Time Broker, Operator and ELC are entering into an Asset Purchase Agreement (the "Purchase Agreement") providing for the purchase by Time Broker of the Stations, upon the terms and conditions set forth therein. Time Broker and Licensee desire to enter into an agreement providing for the sale of substantially all of the broadcast time of the Stations to Time Broker, subject to and in compliance with the rules and policies of the Federal Communications Commission (the "FCC"). Accordingly, in consideration of the foregoing and of the mutual promises, covenants, and conditions set forth below, the parties agree as follows: ARTICLE I. SALE OF TIME Section 1.1. Broadcast of Programming. Effective as of six (6) business days after the expiration or early termination of any waiting period applicable to the transfer of the Stations to Time Broker under the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") (the "Commencement Date"), Licensee shall broadcast on the Stations, or cause to be broadcast on the Stations, programs which are presented to it by Time Broker as described in greater detail on Schedule 1.1 (the "Programming"). Section 1.2. Payment. Time Broker shall pay Licensee for broadcast of the Programming the amounts set forth in Schedule 1.2 (the "Monthly Payment"), subject to adjustment as set forth in Section 2.4 below. All payments shall be made by wire transfer of immediately-available funds by the last business day of each calendar month, in arrears, to which such payment pertains. Any amount not paid when due shall bear interest at the rate of ten percent (10%) per annum. 7 Section 1.3. Term. This Agreement shall commence on the Commencement Date and shall terminate on the earlier of (i) 12:01 a.m. on the Closing Date under the Purchase Agreement, (ii) the date the Purchase Agreement is terminated, or (iii) the date this Agreement is terminated pursuant to Section 9.1 hereof. ARTICLE II. PROGRAMMING AND OPERATING STANDARDS AND PRACTICES Section 2.1. Compliance with Standards. All Programming delivered by Time Broker and all programming supplied by Licensee during the term of this Agreement shall be in accordance with applicable statutes, FCC requirements and the programming policies set forth on Schedule 2.1. Licensee reserves the right to refuse to broadcast any Programming containing matter which the Licensee believes is unsuitable or not consistent with the needs and interests of its service area or may be violative of any right of any third party, or which may constitute a "personal attack" as that term is and has been defined by the FCC or which Licensee reasonably determines is, or in the reasonable opinion of Licensee may be deemed to be, indecent (and not broadcast during the safe harbor for indecent programming established by the FCC) or obscene by the FCC or any court or other regulatory body with authority over Licensee or the Stations. If Time Broker does not adhere to the foregoing requirements, Licensee may suspend or cancel any specific program not so in compliance, without any reduction or offset in the payments due Licensee under this Agreement. Section 2.2. Political Broadcasts. Time Broker shall maintain and deliver to Licensee all records and information required by the FCC to be placed in the public inspection files of the Stations pertaining to the broadcast of political programming and advertisements, in accordance with the provisions of Sections 73.1940 and 73.3526 of the FCC's rules, and agrees to broadcast sponsored programming addressing political issues or controversial subjects of public importance, in accordance with the provisions of Section 73.1212 of the FCC's rules. Time Broker shall consult and cooperate with Licensee and adhere to all applicable statutes and the rules, regulations and policies of the FCC, as announced from time to time, with respect to the carriage of political advertisements and programming (including, without limitation, the rights of candidates and, as appropriate, others to "equal opportunities" and the carriage of contrasting points of view as mandated by any "fairness" rule with respect to such "issue-oriented" advertising or programming as may be broadcast) and the charges permitted therefor. Time Broker shall promptly provide to Licensee such documentation relating to such programming as Licensee is required to maintain in its public inspection files or as Licensee shall reasonably request. Licensee shall be responsible for the maintenance of the public inspection files of the Stations. 2 8 Section 2.3. Handling of Communications. Time Broker shall cooperate with Licensee in promptly responding to all mail, cables, telegrams or telephone calls directed to the Stations in connection with the Programming provided by Time Broker or any other matter relevant to its responsibilities hereunder. Promptly upon receipt, Time Broker shall provide copies of all such correspondence to Licensee. Time Broker shall promptly advise Licensee of any public or FCC complaint or inquiry known to Time Broker concerning such Programming, and shall provide Licensee with copies of any letters to Time Broker from the public, including complaints concerning such Programming. Upon Licensee's request, Time Broker shall broadcast material responsive to such complaints and inquiries. Notwithstanding the foregoing, Licensee shall handle all matters or inquiries relating to FCC complaints and any other matters required to be handled by Licensee under the rules and regulations of the FCC. Section 2.4. Preemption. Licensee may, from time to time, preempt portions of the Programming to broadcast emergency information or programs it deems would better serve the public interest. Time Broker shall be notified at least one week in advance of any preemption of any of the Programming for the purpose of broadcasting programs Licensee deems necessary to serve the public interest unless such advance notice is impossible or impractical, in which case Licensee shall notify Time Broker promptly upon making such determination. In the event of any such preemption, Time Broker shall be entitled to full reimbursement of damages suffered as a result of such preemption, except in the case of preemption to cover breaking news or to broadcast emergency information. Licensee represents and covenants that preemption pursuant to this Section 2.4 shall only occur to the extent Licensee deems necessary to carry out its obligations as an FCC licensee, and expressly agrees that its right of preemption shall not be exercised in an arbitrary manner or for the commercial advantage of Licensee or others. Section 2.5. Broadcasting Obligations of Licensee. During the term of this Agreement, except as set forth in Sections 2.1 and 2.4, Licensee will broadcast the Programming in its entirety (including commercials), without interruption, deletion or addition of any kind, except as set forth below: Licensee may temporarily refrain from broadcasting the Programming between the hours of 12:30 a.m. and 5:30 a.m. (or at such other time in the event that weather conditions or contractual arrangements relating to transmitter sites dealing with the exposure of humans to RF radiation so require) in order to perform normal, customary and routine maintenance on the Stations' transmitting facilities; provided that Licensee shall provide written notice to Time Broker of its intent to refrain from broadcasting the Programming at least forty-eight (48) hours 3 9 in advance, except when an emergency requires such suspension, and provided further that Licensee shall use its best efforts to minimize the frequency and duration of such interruptions: (a) Licensee may temporarily cease broadcasting the Programming as a result of a natural disaster, act of public enemy, act of God or other event beyond Licensee's control; provided that in any such case, Licensee will act expediently and use its best efforts to resume the broadcast of the Programming as quickly as the applicable circumstances will allow; and (b) Licensee may temporarily refrain from broadcasting the Programming on the Stations as a result of a technical problem with the Stations' transmitting equipment which is beyond Licensee's control and which is not directly or indirectly the result of any act or omission of Licensee or any of its employees or agents; provided that in such case, Licensee will act expediently and use its best efforts to resume the broadcast of the Programming as quickly as the applicable circumstances will allow. Section 2.6. "Payola" and "Plugola". Time Broker agrees that it will not accept any gift, gratuity or other consideration, including, but not limited to, a commission, discount, bonus, material supplies or other merchandise, services or labor (collectively, the "Consideration"), directly or indirectly, from any person or company for the playing of records, the presentation of any programming or the broadcast of any commercial announcement over the Stations unless the payor is identified in the program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act of 1934, as amended (the "Communications Act") and the FCC requirements. It is further understood and agreed that no commercial message, plugs, or undue reference shall be made in programming presented over the Stations to any business venture, profit-making activity or other interest (other than non- commercial announcements for bona fide charities, church activities or other public service activities) unless the payor is identified in the program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act and the FCC requirements. In addition, Time Broker agrees that it will take steps, including the continuation of Licensee's system for periodic execution of affidavits, reasonably designed to assure that it, its employees and agents comply with this Section 2.7. Section 2.7. Advertising and Programming. Beginning with the Commencement Date, Time Broker shall be solely responsible for any expenses incurred in connection with and shall be entitled to all revenue from the sale of advertising or program time on the Stations. Except as otherwise provided herein, Time Broker does not assume any obligation of Licensee under any contract or advertising arrangement entered into by Licensee on or after the Commencement Date. Time Broker will advise Licensee 4 10 of its lowest unit charge for political advertising, and Licensee shall not do anything that would lower Time Broker's lowest unit charge. Section 2.8. Compliance with Laws. At all times during the term of this Agreement, Time Broker and Licensee shall comply in all material respects with all applicable federal, state and local laws, rules and regulations, including the use of FCC-licensed operators where such are required. Section 2.9. Certifications. Pursuant to Section 73.3555(a)(3)(ii) of the FCC's rules, Licensee certifies that it maintains ultimate control over the Stations' facilities, including specifically control over station finances, personnel and programming, and Time Broker certifies that this Agreement complies with the provisions of Sections 73.3555 of the FCC's rules. ARTICLE III. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES Section 3.1. Time Broker's Employees. (a) Time Broker shall employ and be responsible for the payment of salaries, taxes, insurance and all other costs related to all personnel used in the production of the Programming. Time Broker will not incur any liability on account of Licensee's employees arising and accruing prior to the Commencement Date including, without limitation, any such liability on account of unemployment insurance contributions, termination and severance payments, accrued sick leave or accrued vacation. (b) Time Broker's and Licensee's obligations with regard to the hiring by Time Broker of Licensee's employees at the Stations shall be as set forth in Section 3.2.2 and Section 6.5.1 of the Purchase Agreement, except as provided herein. As of the Commencement Date, Licensee shall terminate all of its employees to whom Time Broker will extend offers of employment, except for those personnel necessary to fulfill Licensee's obligations under the Communications Act, the rules of the FCC and other applicable laws and Non- Continuing Employees (as defined in the Purchase Agreement), if any. Time Broker shall offer employment to such terminated employees of Licensee as provided in Section 6.5.1 of the Purchase Agreement. 5 11 Section 3.2. Licensee's Employees. Licensee shall employ and be responsible for the payment of salaries, employment taxes, insurance and all other costs related to the personnel necessary to fulfill its obligations as Licensee and to transmit the Programming. Time Broker shall have no authority and shall not supervise persons in the employ of Licensee after the Commencement Date. Licensee acknowledges that its employees may have access to certain confidential information of Time Broker. Licensee shall, therefore, inform its employees of the confidential nature of such information and require that each such employee keep such information confidential. Section 3.3. Time Broker's Expenses. Time Broker shall pay for all costs associated with the production and delivery of the Programming, including but not limited to (i) all ASCAP, BMI, SESAC and other copyright fees, (ii) any expenses incurred in connection with its sale of advertising time hereunder (including without limitation sales commissions) in connection with the Programming, (iii) the salaries, employment taxes, insurance and related costs for all personnel used in the production of the Programming and all sales personnel (including salespeople, traffic personnel, and programming staff), and (iv) maintenance, repairs and capital expense (to the extent Licensee is not covered by insurance) of the Stations' studio equipment; provided however, that if this Agreement is terminated other than through closing of the Purchase Agreement, Time Broker will be reimbursed for any capital expenditures made during the term of this Agreement. Section 3.4. Operating Expenses. Except as provided in Section 3.3, Licensee shall be responsible for the payment when due of all fees and expenses relating to operation and maintenance of the Stations to the extent necessary for Licensee to maintain the licensed transmitting capability of the Stations and to fulfill its obligations as an FCC Licensee, including, without limitation, salaries, benefits and similar expenses for Licensee's employees, Licensee's federal, state and local taxes, rent, utilities (excluding telephone), maintenance and repairs at the Stations' transmitter and studio sites, any capital expense at the Stations' transmitter and studio sites, insurance on the Stations' equipment, insurance deductibles on claims on the Stations' equipment, and ad valorem property taxes. Section 3.5. Time Broker's Insurance. At all times while this Agreement remains in effect, Time Broker shall maintain Broadcaster's Liability Insurance with coverage of at least One Million Dollars ($1,000,000.00) per occurrence, Workers Compensation insurance and Commercial General Liability insurance with a combined single limit amount of Five Million Dollars ($5,000,000.00) with insurance companies that have a Best rating of A or better. Time Broker shall deliver certificates of 6 12 insurance periodically to Licensee evidencing that such insurance remains in effect and such policies shall name Licensee as an additional insured. ARTICLE IV. ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS Section 4.1. Assignment. On the Commencement Date, Licensee shall assign to Time Broker title to all vehicles that are part of the Property (as defined in the Purchase Agreement) and all Time Sales Agreements, Trade Agreements and Barter Agreements (as such agreements are defined in the Purchase Agreement), together with those contracts and other agreements identified on Schedule 4.1 (collectively, the "Contracts"). Time Broker shall, on and as of the Commencement Date, assume and become fully liable and responsible for all liabilities and obligations of Licensee accruing after the Commencement Date under the Contracts. Except as set forth in the Purchase Agreement, Licensee has provided Time Broker with true and complete copies, including amendments, of the Contracts. The Contracts are freely assignable, or, if consent of the other contracting party to the assignment is required, Licensee shall use its reasonable best efforts to obtain such consent as promptly as practicable; provided that CBS shall not be obligated to pay money to any other contracting party to obtain any such consent, other than reasonable expenses of the party for any legal documentation related to the assignment of the Contract in question. If Licensee is unable to obtain any consent necessary to permit the valid assignment of a Contract, Licensee shall act as Time Broker's agent in connection with such Contract and the parties shall cooperate to cause Time Broker to receive the benefit of the Contract in exchange for performance by Time Broker of all of Licensee's obligations under such Contract (including but not limited to the payment to Licensee of all amounts due under the Contract on or after the Commencement Date for services provided by Licensee). Section 4.2. Proration. All expenses and income arising under the Contracts shall be prorated between Licensee and Time Broker as of the Commencement Date in a manner such that the costs and benefits thereunder through the date before the Commencement Date shall be for the account of Licensee and, thereafter, during the term of this Agreement, for the account of Time Broker. Such proration shall include an adjustment to the extent that the excess of the value of unfulfilled obligations under Trade Agreements and Barter Agreements (as defined in the Purchase Agreement), including any "time bank" provisions thereof, over the value of consideration to be received by the Stations (in each case determined as of the Commencement Date) (the "Net Negative Trade Balance") exceeds One Hundred Thousand Dollars ($100,000.00). The total value of all unfulfilled obligations in respect of Trade Agreements and Barter Agreements to be assumed by Entercom, whether or not the Stations have received consideration therefor, shall not be in excess of Five Hundred Thousand Dollars ($500,000.00) as of the Closing Date. It is agreed and understood that the proration required hereby shall include an adjustment for any 7 13 accrued but unpaid vacation of Licensee's employees that are hired by Time Broker pursuant to the provisions of Section 3.1(b) hereof. It is further agreed and understood that such proration shall not include an adjustment for any termination or severance payments or benefits obligations that Licensee is required to pay as a result of the termination of its employees pursuant to Section 3.1(b) or any sick leave or other similar benefit, and that Time Broker shall not be responsible for any such termination or severance payments or benefits obligations except for those incurred on account of employees hired by Time Broker on or after the Commencement Date pursuant to Time Broker's severance policy, if any, after the Commencement Date. Such prorations shall be completed and any necessary payments on account of such prorations paid within sixty (60) days of the Commencement Date. If any disagreement with respect to the proration of such income and expenses cannot be resolved by the parties, Licensee and Time Broker will select a certified public accountant knowledgeable in the broadcast industry to resolve the dispute. The parties will use their best efforts in good faith to cause to occur as expeditiously as possible the appointment of the certified public accountant, and once appointed, the resolution of the dispute. The resolution of such accountant shall be binding on the parties and subject to judicial enforcement. Payment of the cost of the accountant shall be shared equally between Time Broker and Licensee. Section 4.3. Accounts Receivable. All cash accounts receivable for broadcasts on the Stations which occur prior to the Commencement Date (the "Accounts Receivable") shall belong to Licensee and for broadcasts which occur thereafter shall belong to Time Broker. Within ten (10) days following the Commencement Date, Licensee shall deliver to Time Broker a schedule of Cash Accounts Receivable for the Stations as of the Commencement Date (the "Schedule of Accounts Receivable"). Time Broker agrees to collect for Licensee its Accounts Receivable as shown on the Schedule of Accounts Receivable delivered by Licensee for a period of one hundred fifty (150) days following the Commencement Date. Licensee will provide Time Broker a power of attorney or other required authorization for the limited purpose of allowing Time Broker to endorse and deposit checks and other instruments received in payment of such Accounts Receivable. All payments received by Time Broker from any customer whose name appears in the Schedule of Accounts Receivable and who is also a customer of Time Broker shall be credited as payment of the account or invoice designated by such customer. In the absence of any such designation by the customer, payments shall be first credited to the oldest invoice which is not disputed by said customer. Time Broker shall keep accurate records of the payment received by it on such Accounts Receivable and Licensee shall have access at reasonable times to Time Broker's records to verify such status of the Accounts Receivable. Time Broker shall remit to Licensee on a weekly basis, one week in arrears, amounts previously collected by Time Broker on such Accounts Receivable, along with a written accounting of same, including without limitation, to the extent Licensee's traffic and billing system can produce same, a detailed open Accounts Receivable report reflecting payments remitted therewith. Any Accounts Receivable that have not been collected within such one hundred fifty (150) day period shall be returned to Licensee, together with all records in connection therewith, including without limitation, to the 8 14 extent Licensee's traffic and billing system can produce same, a detailed open Accounts Receivable report reflecting payments remitted therewith, whereupon Licensee may pursue collection thereof in such manner as it, in its sole discretion, may determine. Time Broker shall not have the right to compromise, settle or adjust the amounts of any such Accounts Receivable without Licensee's prior written consent. Except to remit collected Accounts Receivable in accordance herewith, Time Broker shall have no liability or obligation to Licensee with respect to the collection of its accounts and shall not be obligated to take any action to collect such accounts. ARTICLE V. OPERATION OF STATION Notwithstanding any provision of this Agreement to the contrary, Licensee shall retain full authority and power with respect to the management and operation of the Stations during the term of this Agreement. The parties agree and acknowledge that Licensee's continued control of the Stations and their premises is an essential element of the continuing validity and legality of this Agreement. Accordingly, Licensee shall employ the General Manager of the Stations and such other personnel as Licensee determines may be necessary to fulfill its obligations as a licensee under the Communications Act and its obligations in accordance with Section 3.2 hereof. Licensee shall retain full authority and control over the policies, programming and operations of the Stations, including, without limitation, the decision whether to preempt Programming in accordance with Section 2.4 hereof. Licensee shall have ultimate responsibility to effectuate compliance with the Communications Act and with FCC rules, regulations and policies. In no event shall Time Broker or its employees represent, depict, describe or portray Time Broker as the licensee of the Stations. ARTICLE VI. GRANT OF LICENSES Section 6.1. License to Use Stations Facilities. Effective as of the Commencement Date, Licensee grants Time Broker a license to access and use all of the Stations' studio and office space and other facilities ("Stations Facilities") and all equipment and furnishings contained therein ("Stations Equipment") in the production and broadcasting of the Programming and sales and administration relating thereto, in accordance with the terms set forth in this Section 6 (the "Time Broker License"). The Time Broker License shall have a term coterminous with this Agreement. Time Broker shall not remove from the Stations Facilities or modify any Stations Equipment in the Stations Facilities owned by or leased or licensed to Licensee without Licensee's prior written consent, such consent not to be unreasonably withheld. Licensee shall not license the use of the Stations Facilities to any other party during the term of the Time Broker License; and Time Broker's use of the Stations Facilities shall be exclusive except for Licensee's right to use such facilities as it deems appropriate in connection with the satisfaction of its obligations as the Licensee of the 9 15 Stations, including the use of such facilities and adequate office space for the employees of Licensee that are required for Licensee to comply with its obligations under Section 3.2 and 5 hereof. Time Broker shall use due care in the use of any property of Licensee. Time Broker shall indemnify Licensee for any damage (normal wear and tear excepted) to Licensee's property caused by Time Broker or any employee, contractor, agent or guest of Time Broker. Section 6.2. License of Intellectual Property. Effective as of the Commencement Date, Licensee licenses to Time Broker the exclusive right to use (or, to the extent Licensee does not hold exclusive rights, the non-exclusive right to use) all intellectual property owned by or licensed to Licensee and used solely in the operation of the Stations (including, but not limited to, logos, jingles, promotional materials, call signs and goodwill) (the "IP License"). In the event of termination of this Agreement, the IP License shall terminate; provided, however, that Licensee shall own all trademarks, service marks, trade names, characters, formats, jingles, promotional materials, logos and positioning statements which Time Broker develops for the Programming during the term of this Agreement. ARTICLE VII. INDEMNIFICATION Section 7.1. Indemnification Rights. Each party will indemnify and hold harmless the other party, and the directors, officers, partners, employees, agents and affiliates of such other party, from and against any and all liability, including without limitation reasonable attorneys' fees arising out of or incident to (i) any breach by such party of a representation, warranty or covenant made herein, (ii) the programming produced or furnished by such party hereunder, or (iii) the conduct of such party, its employees, contractors or agents (including negligence) in performing its or their obligations hereunder. Without limiting the generality of the foregoing, each party will indemnify and hold harmless the other party, and the directors, officers, partners, employees, agents and affiliates of such other party, from and against any and all liability for libel, slander, infringement of trademarks, trade names, or program titles, violation of rights of privacy, and infringement of copyrights and proprietary rights resulting from the programming produced or furnished by it hereunder. The parties' indemnification obligations hereunder shall survive any termination or expiration of this Agreement. Section 7.2. Procedures. If any party has a claim for indemnification hereunder (such party, an "Indemnitee") arising out of any claim or liability which is asserted or threatened against it, or any action, suit or proceeding is commenced by any third party against any Indemnitee which might result in any indemnification obligations hereunder on behalf of any other party (such other party, an "Indemnitor"), such Indemnitee shall, within twenty (20) business days from the 10 16 receipt of same, give written notice thereof to each such Indemnitor together with a brief statement of the basis of the claim and a copy of any complaint or other documents relating to such claim, provided, however, that failure to give such notice within such twenty (20) business day period shall not affect the liability of Indemnitor hereunder unless the failure to give such notice within such period materially and adversely affects Indemnitor's ability to defend against the claim giving rise to Indemnitee's claim for indemnification or to cure the default giving rise to such claim. Within twenty (20) days from receipt of such notice, the Indemnitor shall give the Indemnitee written notice as to whether the Indemnitor elects to contest any such claim or liability; provided, however, that during the interim, the Indemnitee shall be entitled to take reasonable action (which shall not include settlement) with respect to such claim which it deems necessary to protect against further damage or default with respect thereto. If an Indemnitor elects to contest any such claim or liability, it shall be at the cost and expense of the Indemnitor and using professionals chosen by the Indemnitor. The Indemnitee may participate in the defense of any claim or liability that an Indemnitor has elected to contest, but such participation shall be at its own expense. If the Indemnitor does not elect to assume control or otherwise participate in the defense of any third party claim, it shall be bound by the results obtained by the Indemnitee with respect to such claim. ARTICLE VIII. DEFAULT Section 8.1. Time Broker Events of Default. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be an Event of Default by Time Broker under this Agreement: (a) Time Broker's failure to timely pay any of the Monthly Payment provided for in Section 1.2 or other payments required hereunder; (b) except as otherwise provided for in this Agreement, the failure of Time Broker to supply the Programming; (c) any termination of this Agreement by Time Broker other than as permitted in Section 9.1; or (d) the occurrence of any of the following which arises out of, relates to or is attributable to the acts or omissions of Time Broker: (i) the issuance by the FCC of a Show Cause Order designating any of the Stations' FCC authorizations for revocation; (ii) the issuance by the FCC of an order designating for an evidentiary hearing the Stations' applications for renewal of the FCC authorizations; (iii) the issuance by the FCC of an order designating for an evidentiary hearing an application for the assignment of the Stations' FCC authorizations to Time Broker; 11 17 (iv) breach of any covenant of Time Broker which would reasonably be expected to lead or to the revocation or non-renewal of the FCC authorizations of any of the Stations; or (v) a continuing, uncured material breach of any covenant of Time Broker. Section 8.2. Licensee's Events of Default. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be an Event of Default by Licensee under this Agreement: (a) except as otherwise provided for in this Agreement, the failure of Licensee to broadcast the Programming; (b) any termination of this Agreement by Licensee other than as permitted in Section 9.1; (c) the issuance by the FCC of an order designating for an evidentiary hearing an application for the assignment of the Stations' FCC authorizations to Time Broker which arises out of, relates to or is attributable to the acts or omissions of Licensee but excluding issues which are based upon Time Broker's conduct hereunder for which Licensee may be held responsible; or (d) a continuing, uncured material breach of any covenant of the Licensee. Section 8.3. Cure Periods. The cure periods before any event listed in Sections 8.1 or 8.2 shall become an Event of Default are as follows: (a) Payment by Time Broker. The Monthly Payment or other payments required hereunder to be paid to Licensee must be received by Licensee within five (5) days after Licensee gives written notice of non-payment to Time Broker. (b) Certain Matters. There shall be no cure period for (i) the matters relating to the FCC set forth in Sections 8.1(d) or 8.2(c) hereof, (ii) a termination by Time Broker described in Section 8.1(c); or (iii) a termination by Licensee described in Section 8.2(b) hereof. (c) Programs and Broadcast Matters. With respect to Time Broker's failure to provide the Programming referred to in Section 8.1(b) hereof or Licensee's failure to broadcast the Programming referred to in Section 8.2(a) hereof, the period allowed for cure shall be three business days from the giving of written notice of such failure to the defaulting party by the non-defaulting party. (d) Other Matters. With respect to all matters capable of being cured other than those described in Sections 8.3(a), 8.3(b) or 8.3(c) above, the cure period shall be ten (10) days after written notice to the defaulting party is 12 18 given by the non-defaulting party or, with respect to matters that through the exercise of reasonable diligence cannot be cured within such ten (10) day period, such longer period not to exceed ninety (90) days as is reasonably necessary to effect such cure through the exercise of reasonable diligence. Section 8.4. Other Defaults. For any other breach of a representation, warranty or covenant made herein that is not listed in Sections 8.1 or 8.2, a party's sole remedy shall be indemnification pursuant to Article VII hereof. ARTICLE IX. TERMINATION This Agreement shall automatically terminate upon the expiration of the term of this Agreement as set forth in Section 1.3. In addition, this Agreement shall terminate as provided below. Section 9.1. Termination Upon Default. In addition to other remedies available at law or equity, this Agreement may be terminated by either Licensee or Time Broker by written notice to the other, specifying an effective date of termination which is not less than seven (7) days nor more than ninety (90) days from the date such notice is given, if the party seeking to terminate is not then in material default or breach hereof, upon an uncured Event of Default. In the event that the non-defaulting party does not exercise such right of termination by giving such written notice within sixty (60) days of the occurrence of an uncured Event of Default, then the Event of Default giving rise to such right of termination shall be deemed waived and the Agreement shall continue in full force and effect. Section 9.2. Termination Upon Change in FCC Rules. In addition to other remedies available at law or equity, this Agreement may be terminated by either Licensee or Time Broker by written notice to the other, specifying an effective date of termination which is not less than seven (7) days nor more than thirty (30) days from the date such notice is given, in the event of a change in FCC rules, policies, or precedent that would cause this Agreement to be in violation thereof and such change is final, in effect, and has not been stayed, and the parties have been unable, after negotiating in good faith for at least thirty (30) days, to modify this Agreement to comply with the change in FCC rules, policies, or precedent. 13 19 Section 9.3. Certain Matters Upon Termination. (a) Upon any termination of this Agreement, Licensee shall have no further obligation to provide to Time Broker any broadcast time or broadcast transmission facilities and Time Broker shall have no further obligations to make any payments to Licensee under Section 1.2 hereof. Upon any termination, Time Broker shall be responsible for all debts and obligations of Time Broker to third parties based upon the purchase of air time and use of Licensee's transmission facilities including, without limitation, accounts payable, barter agreements and unaired advertisements, but not for Licensee's federal, state and local income and business franchise tax liabilities or taxes levied upon Licensee's personal property. Notwithstanding anything herein to the contrary, to the extent that any invoice, bill or statement submitted to Licensee after the termination of this Agreement or any payment made by Time Broker prior to the termination of this Agreement relates to expenses incurred in operating the Stations, for periods both before and after the termination of this Agreement, such expenses shall be prorated between Licensee and Time Broker in accordance with the principle that Time Broker shall be responsible for expenses allocable to the period prior to the termination of this Agreement and Licensee shall be responsible for expenses allocable to the period on and after the termination of this Agreement. Such proration shall include an adjustment for Time Broker's Trade Agreements only to the extent that Time Broker's Net Negative Trade Balance exceeds One Hundred Thousand Dollars ($100,000.00). Each party agrees to reimburse the other party for expenses paid by the other party to the extent appropriate to implement the proration of expenses pursuant to the preceding sentence. (b) If this Agreement terminates other than as a result of the Closing (as defined in the Purchase Agreement), Time Broker shall (i) assign to Licensee and Licensee shall assume all Contracts (including those employment contracts assumed by Time Broker pursuant to this Agreement) and all renewals, replacements or other contracts entered in the ordinary course of business relating to the Stations between the Commencement Date and the date of termination of this Agreement ("Supplemental Contracts") in effect on the date of such termination or expiration; (ii) assign to Licensee title to vehicles assigned to Time Broker under Section 4.1; and (iii) be responsible for only those obligations under the Contracts and Supplemental Contracts arising on or after the Commencement Date and prior to the termination of this Agreement. (c) Notwithstanding anything in Section 7.1 to the contrary, no expiration or termination of this Agreement shall terminate the obligation of each party to indemnify the other for claims under Section 7 hereof or limit or impair 14 20 any party's rights to receive payments due and owing hereunder on or before the date of such termination. ARTICLE X. REMEDIES In addition to a party's rights of termination hereunder (and in addition to any other remedies available to it or provided under law), in the event of an uncured Event of Default with respect to either party, the other may seek specific performance of this Agreement, in which case the defaulting party shall waive the defense in any such suit that the other party has an adequate remedy at law and interpose no opposition, legal or otherwise, as to the propriety of specific performance as a remedy hereunder, and agrees that the other party shall have the right to obtain specific performance of the defaulting party without being required to prove actual damages, post bond, or furnish other security. ARTICLE XI. CERTAIN REPRESENTATIONS AND WARRANTIES OF THE PARTIES Section 11.1. Representations and Warranties of Time Broker. Time Broker hereby represents and warrants to Licensee as follows: 11.1.1. Corporate Organization. Time Broker is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, is duly qualified to do business in the Commonwealth of Massachusetts and has full power and authority to conduct its business as currently conducted. 11.1.2. Authorization; Enforceability. This Agreement has been duly executed and delivered by Time Broker, and is valid, binding and enforceable against Time Broker in accordance with its terms. Time Broker has full right, power, authority and legal capacity to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery and performance of this Agreement and the consummation of the transactions provided for hereby have been duly authorized by all necessary action on the part of Time Broker, and no other organizational or other proceedings on the part of Time Broker are necessary to authorize the execution or delivery of this Agreement or the transactions contemplated hereby. 11.1.3. No Consent. Except to the extent any of the Contracts require consent to assignment, no consent of any other party and no consent, license, approval or authorization of, or exemption by, or filing, restriction or declaration with, any governmental authority, bureau, agency or regulatory authority, other than the filing of this Agreement with the FCC and the expiration or early termination of any applicable waiting period under the HSR Act, 15 21 if applicable, is required in connection with the execution, delivery or performance of this Agreement by Time Broker or will effect the validity or performance of this Agreement. 11.1.4. No Breach. Neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby will constitute or result in the breach of any term, condition or provision of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of Time Broker pursuant to the organizational documents of Time Broker, any agreement or other instrument to which Time Broker is a party or by which any part of its property is bound, or violate any law, regulation, judgment or order binding upon Time Broker. 11.1.5. Actions and Proceedings. There is no judgment outstanding and no litigation, claim, investigation or proceeding pending against Time Broker or, to the knowledge of Time Broker, threatened before any court or governmental agency to restrain or prohibit, or to obtain damages, or other relief in connection with, this Agreement, the Purchase Agreement or the consummation of the transactions contemplated hereby or thereby or that might adversely affect Time Broker's performance under this Agreement. 11.1.6. Qualifications. Time Broker is qualified in accordance with the Communications Act of 1934, as amended, and the rules and policies of the FCC to enter into this Agreement and provide programming on the Stations in accordance with its terms. Between the date hereof and the termination of this Agreement, either by the Closing of the Purchase Agreement or the earlier termination in accordance with Article 9 hereof, Time Broker will not take any action that Time Broker knows, or has reason to believe, would disqualify it from providing programming on the Stations pursuant to this Agreement. Section 11.2. Representations, Warranties and Covenants of Operator and CRLI. Operator and CRLI hereby represent, warrant and covenant to Time Broker as follows: 11.2.1. Corporate Organization. Operator is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, is duly qualified to do business in the Commonwealth of Massachusetts and has full power and authority to conduct its business as currently conducted. CRLI is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, is duly qualified to do business in the Commonwealth of Massachusetts and has full power and authority to conduct its business as currently conducted. 11.2.2. Authorization; Enforceability. This Agreement has been duly executed and delivered by each of Operator and CRLI, and is valid, binding and enforceable against each of them in accordance with its terms. Each of Operator and CRLI has full right, power, authority and legal capacity to enter into and perform its obligations under this 16 22 Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions provided for hereby have been duly authorized by all necessary action on the part of each of Operator and CRLI, and no other organizational or other proceedings on the part of Operator or CRLI are necessary to authorize the execution or delivery of this Agreement or the transactions contemplated hereby. 11.2.3. No Consent. Except to the extent any of the Contracts require consent to assignment, no consent, license, approval or authorization of or exemption by, or filing, restriction or declaration with, any governmental authority, bureau, agency or regulatory authority, other than the filing of this Agreement with the FCC and the expiration or early termination of any applicable waiting period under the HSR Act, if applicable, is required in connection with the execution, delivery or performance of this Agreement or will affect the validity or enforceability of this Agreement. 11.2.4. No Breach. Except to the extent any of the Contracts require consent to assignment, neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby will constitute or result in the breach of any term, condition or provision of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of Operator or CRLI pursuant to the organizational documents of Operator or CRLI, any agreement or other instrument to which Operator or CRLI is a party or by which any part of their property is bound, or violate any law, regulation, judgment or order binding upon Operator or CRLI. 11.2.5. Actions and Proceedings. There is no judgment outstanding and no litigation, claim, investigation or proceeding pending against Operator or CRLI or, to the knowledge of Operator or CRLI, threatened before any court or governmental agency to restrain or prohibit, or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. 11.2.6. Maintenance of Current Operations. The Stations' transmission equipment shall be maintained by Operator and CRLI in a condition consistent with good engineering practices and in compliance in all material respects with the Communications Act and all other applicable rules, regulations and technical standards of the FCC. 11.2.7. Other Agreements. During the term of this Agreement, Operator and CRLI will not enter into any other time brokerage, program provision, local management or similar agreement with any third party with respect to the Stations. 17 23 ARTICLE XII. MISCELLANEOUS Section 12.1. Modification and Waiver. No modification or waiver of any provision of this Agreement shall in any event be effective unless the same shall be in writing signed by the party against whom the waiver is sought to be enforced, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. Section 12.2. No Waiver; Remedies Cumulative. No failure or delay on the part of Licensee or Time Broker in exercising any right or power hereunder shall operate as a waiver thereof, nor any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensee and Time Broker herein provided are cumulative and are not exclusive of any rights or remedies which they may otherwise have. Section 12.3. Construction. This Agreement shall be construed in accordance with the laws of the State of New York without reference to conflict of laws principles, and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations now or hereafter in force and to the regulations of the FCC and all other governmental bodies or authorities presently or hereafter duly constituted. The parties hereto expressly waive and agree to waive any right to a jury trial in any controversy or claim arising out of or relating to this Agreement. Section 12.4. Headings. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. Section 12.5. Successors and Assigns. Any party may assign all or any part of this Agreement or the rights and obligations hereunder to a person or entity controlling, controlled by or under common control with such party, provided that any such assignment shall not relieve such party of its obligations hereunder. Except as otherwise provided herein, this Agreement and the rights and obligations hereunder may not be assigned by any party hereto without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 18 24 Section 12.6. Force Majeure. The parties acknowledge and agree that a party will not be liable for any failure to timely perform any of its obligations under this Agreement if such failure is due, in whole or in part, directly or indirectly, to accidents, fires, floods, governmental actions, war, civil disturbances, other causes beyond such party's control or any other occurrence which would generally be considered an event of force majeure. Section 12.7. Broker. The parties agree to indemnify and hold each other harmless against any claims from any broker or finder based upon any agreement, arrangement, or understanding alleged to have been made by the indemnifying party. Section 12.8. Counterpart Signatures. This Agreement may be signed in one or more counterparts. Section 12.9. Notices. Any notice, report, demand, waiver or consent required or permitted hereunder shall be in writing and shall be given by hand delivery, by prepaid registered or certified mail, with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery or by telecopy addressed as follows: If the notice is to Time Broker: Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Attention: Mr. Joseph M. Field, President Telecopier Number: 610-660-5641 With a copy to: John C. Donlevie, Esq. General Counsel Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopier Number: 610-660-5620 19 25 and Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, D.C. 20004 Attention: Joseph D. Sullivan, Esq. Telecopier Number: 202-637-2201 If the notice is to Licensee: CBS Radio 40 West 57th Street 14th Floor New York, NY 10019 Attention: Mr. Mel Karmazin Telecopier Number: 212-314-9229 With copies to: General Counsel CBS Corporation 51 West 52nd Street New York, NY 10019-6188 Telecopier Number: 212-975-2185 and Leventhal Senter & Lerman, P.L.L.C. 2000 K Street, N.W. Suite 600 Washington, D.C. 20006 Attention: Steven A. Lerman, Esq. Telecopier Number: 202-293-7783 The date of any such notice and service thereof shall be deemed to be: (i) the day of delivery if hand delivered or delivered by overnight courier; (ii) the day of delivery as indicated on the return receipt if dispatched by mail; or (iii) the date of telecopy transmission as indicated on the telecopier transmission report provided that any telecopy transmission shall not be effective unless a paper copy is sent by overnight courier on the date of the telecopy transmission. Either party may change its address for the purpose of notice by giving notice of such change in accordance with the provisions of this Section. 20 26 Section 12.10. Entire Agreement. This Agreement, the letter agreements between the parties dated of even date herewith and the Purchase Agreement (including all attachments, exhibits and schedules) embody the entire agreement between the parties and there are no other agreements, representations, warranties, or understandings, oral or written, between them with respect to the subject matter hereof. Section 12.11. Severability. Except as expressly set forth in Section 12.15, if any provision contained in this Agreement is held to be invalid, illegal or unenforceable in any respect by any court or other authority, then such provision shall be deemed limited to the extent that such court or other authority deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court or other authority shall deem any such provision wholly unenforceable, this shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had not been contained herein. Section 12.12. No Joint Venture. The parties agree that nothing herein shall constitute a joint venture between them. The parties acknowledge that call letters, trademarks and other intellectual property shall at all times remain the property of the respective parties and that neither party shall obtain any ownership interest in the other party's intellectual property by virtue of this Agreement (subject to the IP License set forth in Section 6.2). Section 12.13. Damage to Stations. In the event of damage or destruction to the Stations (other than damage or destruction caused by Time Broker), Licensee shall proceed to repair, replace or restore the Stations to its former condition as promptly as is commercially reasonable. Section 12.14. Noninterference. During the term of this Agreement, neither Licensee nor any of their employees shall take any actions that might impair the operations of Time Broker conducted hereunder, except to the extent expressly contemplated by this Agreement or as otherwise required by law. 21 27 Section 12.15. Regulatory Changes. In the event of any order or decree of an administrative agency or court of competent jurisdiction, including without limitation any material change or clarification in FCC rules, policies, or precedent, that would cause this Agreement to be invalid or violate any applicable law, and such order or decree has become effective and has not been stayed, the parties will use their respective best efforts and negotiate in good faith to modify this Agreement to the minimum extent necessary so as to comply with such order or decree without material economic detriment to either party, and this Agreement, as so modified, shall then continue in full force and effect. In the event that the parties are unable to agree upon a modification of this Agreement so as to cause it to comply with such order or decree without material economic detriment to either party, then this Agreement shall be terminated. Section 12.16. Attorneys' Fees. In the event of a dispute between or among the parties hereto arising out of or related to this Agreement or the interpretation or enforcement of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and expenses from the other party. 22 28 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. CBS RADIO, INC. By:_____________________ Title:__________________ CBS RADIO LICENSE, INC. By:______________________ Title:_____________________ ENTERCOM COMMUNICATIONS CORP. By:_______________________ Title:______________________ 23 29 SCHEDULE 1.1 PROGRAMMING The Programming shall consist of one hundred sixty-four (164) hours per week on the Stations in an entertainment format to be chosen by Time Broker, subject to Section 2 of this Agreement. The Programming shall include (a) news and weather information; (b) public service announcements (including, at Licensee's directive from time to time, a reasonable number of public service announcements of local interest supplied by Licensee or produced by Time Broker under Licensee's supervision); (c) an announcement in form sufficient to meet the station identification requirements of the FCC at the beginning of each hour; (d) an announcement at the beginning of each segment of Programming to indicate that program time has been purchased by Time Broker; and (e) any other announcement that may be required by applicable law or regulation (including but not limited to EAS tests). Time Broker shall maintain and deliver to Licensee copies of all operating and programming information including without limitation information concerning portions of the Programming that are responsive to issues of public importance identified to Time Broker by Licensee, EAS announcements, and station operating logs, necessary for Licensee to maintain its FCC Public File, and all other records required to be kept by FCC rule or policy. Time Broker shall have the sole and exclusive right to sell advertising to be included in the Programming and shall be entitled to retain all the revenues derived from the sale thereof, provided, however, that Licensee shall be entitled to sell such time as it deems necessary to comply with the political advertising rules of the FCC in the event the Programming does not comply with such rules. Notwithstanding any other provision of this Agreement, Time Broker recognizes that Licensee has certain obligations to broadcast programming to meet the needs and interests of the community of license for the Stations. Licensee shall have the right to air specific programming on issues of local importance to the community. Nothing in this Agreement shall abrogate the unrestricted authority of Licensee to discharge its obligations to the public and to comply with the laws, rules and policies of the FCC with respect to meeting the ascertained needs and interests of the public. Accordingly, Licensee may air or cause Time Broker to produce and present under Licensee's supervision for not less than two (2) nor more than four (4) hours per week on the Stations such public affairs programming that responds to the needs and interests of listeners in the Stations' community of license. Such public affairs programming shall be presented between 6:00 a.m. and 9:00 a.m. on Saturdays and/or Sundays or at such other times as the public interest may require. Time Broker will not change the format of the Stations. 1 30 SCHEDULE 1.2 COMPENSATION Beginning on the Commencement Date, for each month during which this Agreement until this Agreement is terminated, Time Broker shall pay a monthly fee equal to One Hundred Fifty Thousand Dollars ($150,000.00) per month (the "Monthly Fee"). In the event that the Commencement Date occurs on a day other than the first day of a month, the initial monthly payment made by Time Broker shall be an amount equal to the Monthly Fee as determined above multiplied by a ratio, the numerator of which is the number of days between the Commencement Date and the end of the month in which the Commencement Date occurs and the denominator of which is the number of days in the month in which the Commencement Date occurs; and in the event that the last day of the TBA Payment Period occurs other than on the last day of a month, the Monthly Payment for the month in which such day occurs shall be similarly prorated. 2 31 SCHEDULE 2.1 PROGRAMMING POLICY STATEMENT Time Broker agrees to cooperate with Licensee in the broadcasting of programs of the highest possible standard of excellence and for this purpose to observe the following regulations in the preparation, writing and broadcasting of its programs. Further, Time Broker agrees that all material broadcast on the Stations shall comply with all federal, state and local applicable laws, rules and regulations. No Plugola or Payola. The broadcast of any material for which any money, service or other valuable consideration is directly or indirectly paid, or promised to or charged or accepted by, the Time Broker, from any person, shall be prohibited, unless, at the time the same is broadcast, it is announced as paid for or furnished by such person. Political Broadcasting. Within thirty (30) days of the Commencement Date, Time Broker shall provide Licensee with a written political advertising disclosure statement which fully and accurately discloses how the Time Broker sells programming and advertising time and which makes parties purchasing political programming and advertising time fully aware of the lowest unit charge provisions of Section 315 of the Communications Act. In addition, at least thirty (30) days before the start of any primary or election campaign, Time Broker will clear with the Stations' general manager the rate Time Broker will charge for the time to be sold to candidates to make certain that the rate charged is in conformance with the applicable law and station policy. Required Announcements. Time Broker shall broadcast (i) announcements in a form satisfactory to Licensee at the beginning of each hour to identify the Stations and (ii) any other announcements that may be required by law, regulation, or Licensee's station policy. No Illegal Announcements. No announcements, broadcasts or promotions prohibited by federal, state or local law shall be made over the Stations. This prohibition specifically includes, but is not limited to, any and all programming or other broadcast material concerning tobacco or alcohol related products which are unlawful. The airing of any broadcast material concerning contests, lotteries or games must be conducted in accordance with all applicable law, including FCC rules and regulations. Any obscene, indecent, or fraudulent programming is prohibited. All sponsored programming or other broadcast material must be identified in accordance with applicable law, including FCC rules and regulations. 1 32 Licensee Discretion Paramount. In accordance with the Licensee's responsibility under the Communications Act and the rules and regulations of the FCC, Licensee reserves the right to reject or terminate any programming (including advertising) proposed to be presented or being presented over the Stations which is in conflict with station policy or which in Licensee's or its general manager's reasonable judgment would not serve the public interest. In any case where questions of policy or interpretation arise, Time Broker should submit the same to Licensee for decision before making any commitments in connection therewith. 2 33 SCHEDULE 4.1 TIME SALES AGREEMENTS AND CONTRACTS All Contracts to be assumed by CBS under the Purchase Agreement other than Leases (as defined in the Purchase Agreement) and contracts relating to operation at the transmitter site for the Stations and employment contracts with the Licensee's retained employees under Sections 3.1 and 3.2. 1 EX-10.14 18 ASSET PURCHASE AGREEMENT CBS RADIO 1 EXHIBIT 10.14 - -------------------------------------------------------------------------------- ASSET PURCHASE AGREEMENT BY AND AMONG CBS RADIO, INC., CBS RADIO LICENSE, INC., ARS ACQUISITION II, INC., AND ENTERCOM COMMUNICATIONS CORP. DATED AS OF AUGUST 13, 1998 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I. - DEFINITIONS..........................................................................................2 1.1. DEFINITIONS..................................................................................2 ARTICLE II. - PURCHASE OF ASSETS..................................................................................6 2.1. PURCHASE AND SALE OF ASSETS..................................................................6 2.2. ALLOCATION OF VALUES.........................................................................6 2.3. NON-ASSIGNABLE CONTRACTS.....................................................................7 ARTICLE III. - LIABILITIES........................................................................................7 3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM........................................................7 3.2. OTHER LIABILITIES............................................................................8 ARTICLE IV. - REPRESENTATIONS AND WARRANTIES......................................................................9 4.1. BY CBS.......................................................................................9 4.2. BY ENTERCOM.................................................................................16 ARTICLE V. - CONDITIONS..........................................................................................17 5.1. MUTUAL CONDITIONS...........................................................................17 5.2. CONDITIONS OF ENTERCOM......................................................................18 5.3. CONDITIONS OF CBS...........................................................................18 5.4. EFFECT OF TIME BROKERAGE AGREEMENT ON CLOSING CONDITIONS......................................................................18 ARTICLE VI. - COVENANTS AND OPERATIONS PRIOR TO CLOSING..........................................................19 6.1. COVENANTS OF CBS............................................................................19 6.2. NEGATIVE COVENANTS OF CBS...................................................................21 6.3. NO CONTROL..................................................................................22 6.4. NO SOLICITATION OR HIRE OF EMPLOYEES AND PROGRAMMING.........................................................................22 6.5. COVENANTS OF ENTERCOM.......................................................................23 6.6. REAL PROPERTY SURVEYS.......................................................................24
(i) 3
ARTICLE VII. - ACTIONS PRIOR TO CLOSING..........................................................................24 7.1. APPLICATION TO COMMISSION...................................................................24 7.2. COMPLIANCE WITH CBS FINAL JUDGMENT..........................................................25 7.3. HART-SCOTT-RODINO NOTIFICATION..............................................................25 7.4. INSPECTION..................................................................................25 7.5. CONFIDENTIALITY.............................................................................26 ARTICLE VIII. - CLOSING..........................................................................................26 8.1. CLOSING.....................................................................................26 8.2. PRORATIONS..................................................................................27 8.3. CLOSING DELIVERIES TO ENTERCOM..............................................................28 8.4. CLOSING DELIVERIES TO CBS...................................................................29 8.5. COVENANTS OF FURTHER ASSURANCES; AVAILABILITY OF RECORDS.................................................................30 8.6. RISK OF LOSS; DAMAGE TO PROPERTY............................................................30 8.7. TAXES ON TRANSACTION........................................................................30 ARTICLE IX. - TERMINATION, DEFAULT AND INDEMNIFICATION..........................................................30 9.1. TERMINATION.................................................................................30 9.2. EFFECT OF TERMINATION.......................................................................31 9.3. REMEDIES....................................................................................31 9.4. INDEMNIFICATION.............................................................................31 ARTICLE X. - ASSET EXCHANGES.....................................................................................34 10.1. POSSIBLE CBS EXCHANGE.......................................................................34 10.2. POSSIBLE ENTERCOM EXCHANGE..................................................................34 10.3. INDEPENDENT TRANSACTIONS....................................................................34 ARTICLE XI. - GENERAL PROVISIONS.................................................................................35 11.2. BROKERS.....................................................................................35 11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS, AND WARRANTIES..........................................................................35 11.4. CONFIDENTIALITY.............................................................................36 11.5. AMENDMENT AND WAIVER........................................................................36 11.6. EFFECT OF THIS AGREEMENT....................................................................36 11.7. TERMS GENERALLY.............................................................................36 11.8. HEADINGS....................................................................................37 11.9. COUNTERPARTS................................................................................37
(ii) 4
11.10. GOVERNING LAW; JURISDICTION.................................................................37 11.11. BULK SALES LAWS.............................................................................37 11.12. ASSIGNMENT..................................................................................37 11.13. NOTICES.....................................................................................37 11.14. ATTORNEYS' FEES.............................................................................39
(iii) 5 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT MADE AND ENTERED INTO THIS 13TH DAY OF AUGUST, 1998, BY AND AMONG CBS RADIO, INC., A DELAWARE CORPORATION ("CRI"), CBS RADIO LICENSE, INC., A DELAWARE CORPORATION ("CRLI"), ARS ACQUISITION II, INC., A DELAWARE CORPORATION ("ARSA") (CRI, CRLI, AND ARSA, COLLECTIVELY, "CBS"), AND ENTERCOM COMMUNICATIONS CORP., A PENNSYLVANIA CORPORATION ("ENTERCOM"). RECITALS WHEREAS, pursuant to the Authorizations, CBS owns and operates (directly or indirectly through one or more subsidiaries) radio stations WAAF(FM) and WWTM(AM), Worcester, Massachusetts, and WEGQ(FM), Lawrence, Massachusetts (collectively, the "Stations"), and owns all of the Assets relating to the Stations; WHEREAS, Entercom desires to purchase the Assets from CBS; WHEREAS, CBS is willing to sell the Assets to Entercom; WHEREAS, CBS and Entercom have agreed, subject to prior approval by the Commission and certain other conditions, that CBS shall sell, assign, transfer and convey the Assets to Entercom or one or more Affiliates designated by Entercom, in the manner and for the consideration described in this Agreement; and WHEREAS, CBS is required to notify the United States Department of Justice ("DOJ") of this Agreement, pursuant to the final judgment in United States v. CBS Corporation and American Radio Systems Corporation, Civ. No. 98-0819 (D.D.C. filed March 31, 1998) (the "CBS Final Judgment"), and CBS may not consummate the sale contemplated hereby unless CBS has received written notification from DOJ that DOJ does not object to the sale or, in the event that DOJ objects, until the sale has been approved by the United States District Court for the District of Columbia (the "Court"). Pursuant to the CBS Final Judgment, CBS is required to take all steps necessary to operate the Stations as separate, independent, ongoing, economically viable and active competitors to the other stations owned by CBS and its Affiliates in the Boston area and must take all steps necessary to insure that the management of such stations is kept separate and apart from CBS. NOW, THEREFORE, in consideration of the mutual promises herein contained and of the representations and warranties hereinafter set forth and for other good and valuable consideration, the parties, intending to be legally bound hereby, agree as follows: 6 ARTICLE I. DEFINITIONS 1.1. DEFINITIONS. As used herein, the following terms shall have the following respective meanings: "ADJUSTMENT TIME" shall mean with respect to each Station, 12:01:00 a.m. Eastern Standard or Daylight Time, as appropriate, on the Closing Date. "AFTRA CONTRACT" shall have the meaning set forth in Section 3.1.6. "AFFILIATE" shall mean, with respect to any person or entity, a person or entity controlling, controlled by or under common control with such person or entity. "AGREEMENT" shall mean this Asset Purchase Agreement. "APPRAISAL" shall have the meaning set forth in Section 2.2.1 hereof. "ASSETS" shall mean the Property and all of the Authorizations relating to the Stations. "ASSIGNMENT APPLICATIONS" shall have the meaning set forth in Section 7.1 hereof. "AUTHORIZATIONS" shall mean all of the licenses, permits, and authorizations granted by the Commission with respect to the operation of the Stations and all applications for Authorizations for the Stations pending before the Commission. "BARTER AGREEMENTS" shall mean contracts for the sale of time on the Stations in exchange for programming. "BOSTON I AGREEMENT" shall mean that certain Asset Purchase Agreement by and among Entercom, CRI and CRLI for the sale and purchase of radio stations WRKO(AM) and WEEI(AM), Boston, Massachusetts, dated as of August 13, 1998. "CAPSTAR PURCHASE AGREEMENT" shall mean that certain asset purchase agreement by and between Capstar Acquisition Company, Inc. and American Radio Systems Corporation, dated March 6, 1998, for sale and purchase of radio stations WQSO(FM) and WZNN(AM), Rochester, New Hampshire and WERZ(FM) and WMYF(AM), Exeter, New Hampshire. "CBS" shall mean the corporations identified as such in the Preamble of this Agreement. 2 7 "CLOSING" shall mean the event of consummation of the transactions contemplated by this Agreement as more fully described in Article VIII of this Agreement. "CLOSING DATE" shall mean the date that the Closing occurs. "CODE" shall mean the Internal Revenue Code of 1986, as amended, and the applicable regulations issued thereunder. "COMMISSION" shall mean the Federal Communications Commission. "CONTAMINANT" shall mean and include any pollutant, contaminant, hazardous material (as defined in any of the Environmental Laws), toxic substances (as defined in any of the Environmental Laws), asbestos-or asbestos-containing material, urea formaldehyde, polychlorinated biphenyls, regulated substances and wastes, radioactive materials, and petroleum or petroleum by-products, including crude oil or any fraction thereof, except that "Contaminant" shall not include small quantities of maintenance, cleaning and emergency generator fuel supplies customary for the operation of radio stations and maintained in compliance with all Environmental Laws in the Ordinary Course of Business. "CONTRACTS" shall mean all agreements, arrangements, commitments, and undertakings, written or oral, expressed or implied, relating to the present or future operation of the Stations except for any Leases, including without limitation, Time Sales Agreements, Trade Agreements, Barter Agreements and Miscellaneous Contracts. "DEFAULT" shall mean the material default by a party hereto in the performance of its obligations under this Agreement. "ENTERCOM" shall mean the corporation identified as such in the Preamble of this Agreement. "ENVIRONMENTAL LAWS" shall mean any applicable federal, state or local law, statute, charter, ordinance, rule, or regulation or any governmental agency interpretation or policy, including, without limitation, applicable safety/environmental/health laws such as, but not limited to, the Resource Conservation and Recovery Act of 1976, Comprehensive Environmental Response Compensation and Liability Act, Federal Emergency Planning and Community Right to Know Law, the Clean Air Act, the Clean Water Act, the Toxic Substance Control Act, and the Occupational Safety and Health Act, as any of the foregoing have been amended, and any permit, order, directive, court ruling or order, or consent decree applicable to or affecting the Property or any other property (real or personal) used by or relating to the Station in question promulgated or issued pursuant to any Environmental Laws which pertains to, governs, or controls the generation, storage, remediation, or removal of Contaminants or otherwise regulates the protection of health and the environment including, but not limited to, any of the following activities, whether on site or off site: (i) the emission, discharge, release, 3 8 spilling, or dumping of any Contaminant into the air, surface water, ground water, soil, or substrata; or (ii) the use, generation, processing, sale, recycling, treatment, handling, storage, disposal, transportation, labeling, or any other management of any Contaminant. "FINAL ORDER" shall mean an order or action of the Commission that, by reason of expiration of time or exhaustion of remedies, is no longer subject to administrative or judicial reconsideration or review. "IBEW CONTRACT" shall have the meaning set forth in Section 3.1.6. "LEASES" shall mean all agreements, arrangements, or commitments and undertakings, written or oral, express or implied, for the use or occupation of any real or personal property used in the operation of the Stations. "LOSS" shall have the meaning set forth in Section 9.4.1 hereof. "MISCELLANEOUS CONTRACTS" shall mean Contracts and Leases entered into in the Ordinary Course of Business, which involve less than Twenty-Five Thousand Dollars ($25,000.00) individually and less than $150,000 for all of the Stations in the aggregate, and which are not included in Schedule 4.1.6. "NON-CONTINUING EMPLOYEES" shall have the meaning set forth in Section 6.5.1. "ORDINARY COURSE OF BUSINESS" shall mean the routine conduct of the business of the Station in question (excluding extraordinary, irregular, or abnormal transactions) on a basis consistent with the regular practice of such Station since January 1, 1998; provided that any conflict between what is required of CBS by the definition set forth in the immediately preceding clause as applied herein and the CBS Final Judgment shall be resolved in favor of the latter. "PERMITTED ENCUMBRANCES" shall mean: (i) encumbrances for taxes, assessments, or governmental charges or levies which are not yet due and payable, or that, subject to adequate security for payment, are being contested; (ii) easements, rights of way, or other encumbrances disclosed in this Agreement; (iii) easements, rights of way or other encumbrances that do not have a material adverse effect on the Assets or the operation of the Stations as currently operated; (iv) encumbrances imposed by law, such as materialmen's, mechanic's, carrier's, workmen's, or repairmen's liens or other similar encumbrances arising in the Ordinary Course of Business, securing obligations that are not overdue; (v) encumbrances securing indebtedness, which will be removed prior to or at the Closing; (vi) encumbrances pursuant to Contracts and Leases to be assumed by Entercom pursuant to Section 3.1; and (vii) encumbrances listed on Schedule 4.1.8. "PROPERTY" shall mean all of the tangible and intangible property (other than the Authorizations) located at the Stations (including at the transmitter sites of the Stations), whether 4 9 real, personal, or mixed, and all rights and interests which are used or held by CBS or any of its Affiliates and necessary for use primarily in the operation of the Stations as presently conducted, including: (i) all of the rights, titles, and interests under the Leases and the Contracts relating to the Stations; (ii) the call letters, copyrights, trademarks, and other intellectual property associated with the Stations; (iii) originals or, if unavailable, photocopies, of all files, records, studies, data, lists, filings, general accounting records, books of account, computer programs and software, and logs, of every kind, relating to the operations or business of the Stations; and (iv) all of CBS's or any of its Affiliates' rights under manufacturers' and vendors' warranties relating to items included in the Assets of the Stations; but excluding therefrom those assets listed on Schedules attached hereto respectively as "Excluded Property." "PURCHASE PRICE" shall have the meaning set forth in Section 2.1.2. "REQUIRED CONSENTS" shall mean the consents of third parties to the Leases and Contracts that are required for the assignment thereof and that are identified on the Schedules hereto as "Material Leases (or Contracts)-Consent to Assign Required." "REQUIRED CURE EXPENSE" shall mean the sum of the amounts required to be spent by CBS under Sections 6.1.4, 6.1.5 and 6.6.3 of this Agreement and the Boston I Agreement. "STATIONS" shall collectively mean the following radio broadcast stations: WAAF(FM), WWTM(AM), Worcester, Massachusetts, and WEGQ(FM), Lawrence, Massachusetts, or, in the singular form, any one of them. "STATION EMPLOYEES" shall have the meaning set forth in Section 6.5.1. "TAMPA AGREEMENT" shall mean that certain Asset Purchase Agreement by and among Entercom and CBS for the sale and purchase of radio stations WYUU (FM) and WLLD (FM), dated as of August 13, 1998. "TBA COMMENCEMENT DATE" shall mean the date that the Time Brokerage Agreement shall become effective. "TIME BROKERAGE AGREEMENT" shall mean the Time Brokerage Agreement entered into between Entercom and CBS simultaneously with the execution of this Agreement relating to the sale to Entercom of substantially all of the broadcast time on the Stations. "TIME SALES AGREEMENTS" shall mean contracts for the sale of time on the Stations for cash. 5 10 "TRADE AGREEMENTS" shall mean contracts for the sale of time on the Stations in exchange for merchandise or services used or useful for the benefit of the Stations, excluding Barter Agreements. "TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section 6.5. "UPSET DATE" shall have the meaning set forth in Section 9.1.1. ARTICLE II. PURCHASE OF ASSETS 2.1. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions set forth in this Agreement, at the Closing: 2.1.1. CBS shall sell, convey, transfer, assign, and deliver or cause to be sold, conveyed, transferred, assigned, and delivered to Entercom, or to such Affiliates as Entercom shall designate, the Station Assets free and clear of all liens and encumbrances other than Permitted Encumbrances, and Entercom or such designated Affiliates shall acquire and receive same from CBS. 2.1.2. Entercom shall deliver to CBS cash in the amount of Fifty-Eight Million Dollars ($58,000,000.00) (the "Purchase Price") and CBS shall receive same from Entercom. The Purchase Price shall be paid by wire transfer at Closing to the account designated by CBS in writing at least two (2) days prior to the Closing. 2.2. ALLOCATION OF VALUES. 2.2.1. The fair market value of the Assets shall be determined and allocated on the basis of an appraisal (the "Appraisal") prepared by Bond & Pecaro, or another firm reasonably acceptable to CBS and Entercom, whose fees and expenses shall be borne equally by CBS and Entercom. The parties shall use their reasonable best efforts to cause Bond & Pecaro to deliver the Appraisal 10 days before the Closing Date, or failing compliance with such deadline, as soon thereafter as is practicable, but in all events no later than 30 days after the Closing Date. The Appraisal shall set forth the fair market value of each material asset included in the Assets. 2.2.2. Each party, as necessary, shall prepare such IRS Forms as are required by law to be filed with the Internal Revenue Service reflecting the fair market value of the Assets as determined in accordance with the values set forth in the Appraisal and the above provisions and shall forward such forms to the other parties within thirty (30) days after the Closing. Each party, as necessary, shall file with their respective federal income tax returns for the tax year in which the Closing occurs such IRS Forms as prepared in accordance with the foregoing. Each party shall deliver to the other parties hereto a copy of such IRS Forms as filed with their 6 11 respective federal income tax return within thirty (30) days of the filing of such return. The parties hereto hereby covenant and agree with each other that they will not take a position on any income tax return that is in any way inconsistent with the terms of this Section 2.2. 2.3. NON-ASSIGNABLE CONTRACTS. 2.3.1. Without limiting or otherwise affecting the rights of any party hereto, to the extent that any Contract or Lease to be assigned pursuant to this Agreement is not capable of being assigned without the consent, approval, or waiver of a third person or entity, nothing in this Agreement will constitute an assignment or require the assignment thereof except to the extent provided in this Section 2.3. 2.3.2. With respect to all consents, approvals, and waivers referenced in Section 2.3.1, CBS shall use its reasonable best efforts to obtain all such consents, approvals, and waivers prior to and, if the Closing occurs, as promptly as practicable after the Closing Date; provided that CBS shall not be obligated to pay money to any other contracting party to obtain any such consent, approval or waiver, other than reasonable expenses of the party for any legal documentation related to the assignment of the Contract or Lease in question. If the consents, approvals, and waivers are not obtained prior to Closing, the parties shall use their reasonable best efforts in good faith to cooperate, and to cause each of their respective Affiliates to cooperate, in effecting any lawful arrangement to provide to Entercom or its designated Affiliates the economic benefits of the Contracts and Leases for which consents, approvals, and waivers are being sought after Closing, and to have Entercom or its designated Affiliates assume and discharge the obligations under the Contracts and Leases from and after the Closing Date. ARTICLE III. LIABILITIES 3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM. Except as otherwise provided in the Time Brokerage Agreement, from and after the Closing Date, Entercom shall assume and pay, perform, and discharge the following liabilities and obligations relating to the Stations: 3.1.1. The liabilities and obligations arising with respect to events occurring after the Adjustment Time or accruing after the Adjustment Time with respect to any Leases included in the Assets that are specifically identified on Schedule 4.1.5 as being assumed by Entercom, and such additional Leases as are permitted to be entered into by CBS and its Affiliates pursuant to Article VI hereof. 3.1.2. The liabilities and obligations arising with respect to events occurring after the Adjustment Time or accruing after the Adjustment Time with respect to any (a) Contracts included in the Assets that are specifically identified on Schedule 4.1.6 as being assumed by 7 12 Entercom; (b) Miscellaneous Contracts; (c) Time Sales Agreements, Trade Agreements and Barter Agreements entered into in the Ordinary Course of Business; and (d) such additional contracts as are permitted to be entered into by CBS and its Affiliates pursuant to Article VI hereof; 3.1.3. The liabilities and obligations of American Radio Systems Corporation under Section 6.7 of the Capstar Purchase Agreement; 3.1.3. The liabilities and obligations which arise with respect to events occurring after the Adjustment Time or which accrue after the Adjustment Time with respect to the Assets and to the operation of the Stations by Entercom and/or its designated Affiliates; 3.1.4. All taxes and assessments (other than income and franchise taxes of CBS and its Affiliates) that accrue on or with respect to the Assets or the operation of the Stations after the Adjustment Time; 3.1.5. The liabilities and obligations of CBS with respect to the Stations under (a) the Agreement for Radio Announcers and Artists, June 15, 1996 - - June 14, 1999, between the American Federation of Radio and Television Artists and American Radio Systems, Inc. (the "AFTRA Contract") from and after the TBA Commencement Date; and (b) the Agreement, as of May 1, 1997, between American Radio Systems Corporation and Local 1228 of the International Brotherhood of Electrical Workers (the "IBEW Contract"). Neither Entercom nor any of its Affiliates shall assume any obligations under any collective bargaining agreements other than the AFTRA Contract and the IBEW Contract. 3.2. OTHER LIABILITIES. 3.2.1. Except as expressly set forth in this Agreement, CBS shall be solely responsible for all salaries, benefits and other compensation which will or may become payable to any Station Employee in respect of any period of employment prior to the earlier of the TBA Commencement Date or the Adjustment Time, other than accrued vacation time for Transferred Employees, for which Entercom shall be responsible and for which it will receive a proration credit under Section 8.2.1. Entercom shall be solely responsible for any salaries and other compensation which will or may become payable to any Transferred Employee in respect of any period thereafter. Entercom will not assume any obligations under existing leave or severance policies or otherwise have any liability or obligation for severance pay or other termination benefits of Station Employees, except for obligations set forth in Contracts to be assumed by Entercom pursuant to this Agreement. 3.2.2. Except as specifically assumed by Entercom pursuant to Section 3.1 and Section 3.2.1 hereof or pursuant to the Time Brokerage Agreement, neither Entercom nor any of its Affiliates shall assume or undertake to pay, satisfy, or discharge any liabilities, obligations, commitments, or responsibilities of CBS or any of its Affiliates. 8 13 ARTICLE IV. REPRESENTATIONS AND WARRANTIES 4.1. BY CBS. CBS hereby represents and warrants to Entercom that: 4.1.1. CORPORATE STANDING. CRI, CRLI, and ARSA are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware and are qualified to do business in the Commonwealth of Massachusetts. CRI, CRLI, and ARSA have full power and authority to engage in the businesses in which they are presently engaged and to make and perform this Agreement according to its terms. 4.1.2. AUTHORIZATION OF AGREEMENT; NO BREACH. CBS has the necessary corporate power and authority to execute, deliver and perform this Agreement, the Time Brokerage Agreement, and such other agreements as are necessary to consummate the transactions contemplated hereby, and, subject to the receipt of the consents and approvals required elsewhere herein, this Agreement and the Time Brokerage Agreement constitute the valid and binding obligation of CBS enforceable against it in accordance with their terms, except as limited by bankruptcy and insolvency laws and by laws affecting the enforcement of creditors' rights generally or equitable principles. Assuming said consents and approvals are obtained, neither such execution, delivery, and performance nor compliance by CBS with the terms and provisions of this Agreement and the Time Brokerage Agreement will conflict with or result in a breach of any of the terms, conditions, or provisions of the Articles of Incorporation or By-Laws of CBS or its Affiliates or any judgment, order, injunction, decree, regulation, or ruling of any court or any other governmental authority to which CBS or any of its Affiliates is subject or any material agreement or contract to which CBS or any of its Affiliates is a party or to which it is subject, or constitute a material default thereunder. 4.1.3. QUALIFICATION. CRLI is qualified as a licensee of the Commission and is qualified as the assignor of the Authorizations to receive a grant of the Assignment Applications by the Commission. CBS knows of no facts which could reasonably be expected to cause Commission approval of the Assignment Applications to be denied or materially delayed or which could reasonably be expected to lead to the filing of a material objection to such Applications. 9 14 4.1.4. CBS ASSETS. The Assets, taken as a whole, constitute all of the material property, whether real, personal, or mixed, tangible or intangible, used by CBS or its Affiliates in the operation of the Stations except for (i) property replaced in the Ordinary Course of Business and (ii) those assets specifically listed on Schedule 4.1.4 under the heading "Excluded Property." To the knowledge of CBS, none of the assets listed on Schedule 4.1.4 as pertaining to radio station WBMX(FM) is used primarily in the operation of any or all of the Stations. 4.1.5. CBS LEASES. Except as set forth in Schedule 4.1.5, CBS has delivered to Entercom true and correct copies of all Leases listed on Schedule 4.1.5 hereto. There are no other material leases for any items or interests for the use of real or personal property associated with the Assets or the present operation of the Stations other than those disclosed on Schedule 4.1.5 hereto. 4.1.6. CBS CONTRACTS. Schedule 4.1.6 contains a list of all Contracts now in effect, written or oral, express or implied, relating to the Assets or the present or future operation of the Stations, other than those disclosed on Schedule 4.1.5 hereto or other Schedules attached to this Agreement, except for Time Sales Agreements, Barter Agreements, Trade Agreements, Miscellaneous Agreements and Contracts that relate solely to Excluded Property. Except as indicated on Schedule 4.1.6 hereto, CBS has delivered to Entercom true and correct copies of all Contracts listed on Schedule 4.1.6 hereto. 4.1.7. INTELLECTUAL PROPERTY. Schedule 4.1.7 hereto lists all material trademarks and copyrights relating to the operation of the Stations which have been registered with Federal or State governmental agencies. To CBS's knowledge, the operation of the Stations as now conducted does not conflict with any valid patents, trademarks, trade names, service marks, or copyrights of others in any way that is reasonably likely to have a material adverse effect on the operation of the Stations. 4.1.8. TITLE TO PROPERTY. Except for (i) Permitted Encumbrances, (ii) as disclosed on Schedule 4.1.8 hereto and (iii) as provided in the immediately succeeding two sentences, CBS has good ownership, right, title, and interest to the Property including the right to transfer such assets. CBS has a valid leasehold interest in all Property leased and used or held for use in connection with the operation of the Stations. CBS has good and marketable title to the owned real property to be conveyed hereunder, except for Permitted Encumbrances. Except for Permitted Encumbrances 10 15 and items disclosed on Schedule 4.1.8 (which Schedule reflects, where appropriate, the Station to which the disclosed item relates), none of the Property or any of the income or revenue therefrom is subject to any mortgage, conditional sale agreement, security interest, lease, lien, hypothecation, pledge, encumbrance, restriction, liability, charge, claim, or imperfection of title that would materially adversely affect the continued use of the Property as currently used. 4.1.9. NO DEFAULTS. CBS and its Affiliates have complied in all material respects with all of the terms of the Contracts and the Leases and such Contracts and Leases are enforceable by CBS in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy and similar laws affecting the enforcement of creditors' rights and general equitable principles affecting the enforcement of equitable remedies (including within said equitable remedies without limitation the remedy of specific performance). No event has occurred which with the passage of time or the giving of notice or both would constitute a material default by CBS or any of its Affiliates thereunder. To the knowledge of CBS, all other parties to the Contracts and Leases have complied in all material respects with the provisions thereof and no event has occurred which with the passage of time or the giving of notice or both would constitute a material default by any such other party thereunder. 4.1.10. AUTHORIZATIONS AND APPLICATIONS. Except as disclosed on Schedule 4.1.10, all Authorizations necessary to the lawful operations of the Stations have been granted and issued by the Commission to CBS and are listed on Schedule 4.1.10 attached hereto and are now in full force and effect. There are no applications of CBS or any of its Affiliates relating to the Stations pending with the Commission except as listed on such Schedule 4.1.10. CBS and its Affiliates have performed and complied in all material respects with all of the terms and conditions of said Authorizations, the Communications Act of 1934, as amended (the "Communications Act") and all applicable rules, regulations, requirements, and policies of the Commission relating to the operation of the Stations. Except as listed on Schedule 4.1.10, no proceedings are pending or, to the knowledge of any officer of CBS or any of its Affiliates, threatened, which may result in the revocation, modification, non-renewal, or suspension of any of said Authorizations, the denial of any pending applications, the issuance of a cease and desist order, or the imposition of any other sanction by the Commission to which the Stations or the Assets are or may be subject. None of CBS or any of its Affiliates has reason to believe that the Commission will not renew the Authorizations of any of the Stations in the ordinary course for a full term without material qualifications. No renewal of the Authorizations of the Stations would constitute a major environmental action under the rules of the Commission in effect as of the date of this Agreement. All ownership reports, renewal applications, and other material reports and documents required to be filed by CBS and its Affiliates with the Commission relating to the operation of the Stations have been filed, and all such reports, applications and documents are true and correct in all material respects. The Stations are identified by their presently assigned 11 16 call letters and, unless otherwise validly authorized by the Commission and disclosed on Schedule 4.1.10, are operated on their assigned frequencies at the powers and heights authorized by the Commission. The public inspection files for the Stations are in substantial compliance with the regulations of the Commission relating thereto. 4.1.11. PERMITS AND LICENSES. In addition to the Authorizations, CBS has obtained and/or holds, or at Closing will hold, all other governmental permits and licenses necessary for the lawful operation of the respective Stations. All terms, restrictions, and requirements of such permits and licenses have been complied with in all material respects and none of CBS or any of its Affiliates is in default of any of same. 4.1.12. COMPLIANCE WITH LAWS. CBS and its Affiliates have complied in all material respects with all orders (to which CBS or any of its Affiliates is a party or is subject) and applicable laws, rules, and regulations of all federal, state and local authorities with respect to the Assets and operation of the Stations. With respect to the operations of the Stations, none of CBS or any of its Affiliates is in default with respect to or in violation of: (a) any judgment, order, injunction or decree to which CBS or any of its Affiliates is a party or is subject; or (b) any rule or regulation of any court, administrative agency or other governmental authority, in either case in any respect material to this transaction. All material reports, returns and other documents which relate in any way to the Assets and which were filed by CBS or any of its Affiliates with any administrative agency or governmental authority are true, correct and complete in all material respects. 4.1.13. LITIGATION AND CLAIMS. Except as disclosed in Schedule 4.1.13 hereto and except for rulemaking proceedings applicable to radio broadcast stations generally, no litigation, proceeding or controversy is pending or, to the knowledge of any officer of CBS or any of its Affiliates, threatened against CBS or any of its Affiliates, which might materially and adversely affect any material portion of the Assets, CBS's or any of its Affiliates' right or power to transfer the same, the ownership, possession, use or resale of any material portion of the Assets, or the operation of the Stations by Entercom or any assignee thereof and there is no basis known to CBS or any of its Affiliates for any such litigation, proceeding, controversy or claim. No claim has been made or asserted against CBS or any of its Affiliates material to this transaction. 4.1.14. EMPLOYEES. Set forth on Schedule 4.1.14 is a listing, by department, of the name, salary or compensation, all other compensation arrangements, and job title of all employees of CBS and its Affiliates employed at the Stations as of August 1, 1998, and whether each such employee is 12 17 (i) full-time or part-time, (ii) union or non-union, and (iii) whether such employee's services are shared between any of the Stations and any other station to be retained by CBS. Except as disclosed on Schedule 4.1.14, there are no written contracts for the employment of any personnel at the Stations. Except as disclosed on Schedule 4.1.14, all employees of CBS and its Affiliates employed at the Stations are employed on an "at will" basis. 4.1.15. EMPLOYEE BENEFIT AND RETIREMENT PLANS. Listed on Schedule 4.1.15 are the material "employee pension benefit plans" and "employee welfare benefit plans" (as defined respectively in Sections 3(2) and 3(l) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), which CBS and its Affiliates maintain on behalf of their employees at the Stations. In all respects material to this transaction, all "employee pension benefit plans" and "employee welfare benefit plans" listed on Schedule 4.1.15 hereto comply in all material respects with all applicable requirements of law and regulation. None of CBS or any of its Affiliates has incurred or reasonably expects to incur (either directly or indirectly, including as a result of any of the transactions contemplated hereby or any indemnification obligation) any liability (including, without limitation, withdrawal liability) that could become a liability of Entercom, under or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and several liability provisions of the Code relating to employee benefit plans and no event, transaction or condition has occurred or exists which could result in any such liability. CBS and its Affiliates have made all required contributions to all multi-employer plans within the meaning of Section 3(37) of ERISA. 4.1.16. LABOR RELATIONS. In all respects material to this transaction, CBS and its Affiliates have complied with all applicable laws, rules and regulations pertaining to the employment of labor, including those relating to wages, hours, collective bargaining and the payment of or withholding of taxes with respect to the operations of the Stations, and CBS and its Affiliates have withheld all amounts required by law or agreement to be withheld from the wages or salaries of their employees and are not liable for any arrears of wages or any tax or withholding or any penalties or interest for failure to comply with any of the foregoing. Except as disclosed on Schedule 4.1.16, there are no collective bargaining agreements relating to any employee of CBS or any of its Affiliates at the Stations. In addition, except as disclosed on Schedule 4.1.16, none of CBS or any of its Affiliates has knowledge of any union organizing activities in the one year period preceding the date of this Agreement involving or targeting any employees of CBS or any of its Affiliates at the Stations not already covered by a collective bargaining agreement. 4.1.17. INSURANCE. CBS has in force adequate fire and other risk insurance covering the full replacement value of tangible personal property that is part of the Property and shall cause such insurance to be maintained in full force until the Closing Date. CBS also shall maintain in full 13 18 force until the Closing Date, adequate workers compensation and general public liability insurance for the respective Stations in amounts consistent with broadcasting industry standards for similar stations. As of the date of this Agreement, none of the Property currently suffers in any way as a result of fire, explosion, earthquake, accident, fraud, rain, storm, drought, Act of God or public enemy or any other casualty, whether or not covered by insurance. 4.1.18. BROADCASTING CONTRACTS. The total value of all unfulfilled obligations in respect of Trade Agreements and Barter Agreements to be assumed by Entercom, whether or not the Stations have received consideration therefor, shall not be in excess of Five Hundred Thousand Dollars ($500,000.00) as of the Closing Date. To the extent that, as of the Closing Date, the excess of the value of unfulfilled obligations under Trade or Barter Agreements, including any "time bank" provision thereof, over the value of consideration to be received by the Stations (determined as of the Closing Date) exceeds One Hundred Thousand Dollars ($100,000.00), Entercom shall be entitled to a positive cash adjustment pursuant to Section 8.2 hereof. 4.1.19. ENVIRONMENTAL COMPLIANCE, POLYCHLORINATED BIPHENYLS, ASBESTOS AND OTHER TOXIC OR HAZARDOUS SUBSTANCES. Except as disclosed on Schedule 4.1.19, none of the Property contains: (i) any asbestos, polychlorinated biphenyls ("PCBs") or any PCB contaminated oil; (ii) any Contaminants; or (iii) any underground storage tanks. All of the Property is in substantial compliance with all applicable Environmental Laws, except as disclosed on Schedule 4.1.19. 4.1.20. FINANCIAL AND OTHER INFORMATION. CBS has furnished Entercom with profit and loss statements for calendar year 1997 (except for WAAF(FM) and WWTM(AM), for which profit and loss statements furnished were for the period February 1997 through December, 1997) and the months January through June of 1998 (the "Financial Statements"). All Financial Statements provided to Entercom are true and correct in all material respects and such Financial Statements fairly present the results of operation of the Stations for the respective period then ended. There are no material liabilities, whether known or unknown, contingent or fixed, or otherwise, associated with the Stations that have not been otherwise disclosed to Entercom to the extent this Agreement requires the disclosure thereof. 4.1.21. NO INSOLVENCY. No insolvency proceedings of any character, including without limitation, bankruptcy, receivership, reorganization, composition, or arrangement with creditors, voluntary or involuntary, affecting CBS or any of its Affiliates or any of their assets or properties are, or within three years prior to the date hereof have been, pending or, to the best of the knowledge of 14 19 CBS and its Affiliates, threatened, and, within three years prior to the date hereof, none of CBS or any of its Affiliates has made an assignment for the benefit of creditors, nor has CBS or any of its Affiliates taken any action with a view to, or which would constitute the basis for, the institution of any such insolvency proceedings. 4.1.22. CONDITION OF EQUIPMENT. Except as disclosed on Schedule 4.1.22, the transmission and studio equipment and other equipment (mechanical and electrical) included within the Property is, and will be as of the Closing Date, in good repair and working condition, ordinary wear and tear excepted, and is in material compliance with all current FCC requirements. 4.1.23. REAL PROPERTY. Schedule 4.1.23 contains a true and complete list of all real property used in the operation of the Stations, setting forth the nature of the interest, the address, and legal description for each parcel of real property (other than leased real property), and whether such parcel is owned or leased. Except as set forth on Schedule 4.1.23, there are no outstanding options or rights of first refusal to purchase or lease the owned real property or any portion thereof or interest therein, there are no outstanding options or rights of first refusal to sublease the leased real property or any portion thereof or interest therein, and no other parties are in possession of any such real property. The real property identified on Schedule 4.1.23 has vehicular access to a road and is supplied with utilities and other services necessary for the operation of that portion of the operation of the Stations conducted there. No real property other than that listed on Schedule 4.1.23 or listed on such schedule as Excluded Property is used in, held for use in connection with or necessary for the conduct of, the business or operations of the Stations. To the knowledge of CBS and its Affiliates, (i) the improvements of CBS and its Affiliates upon such real property and the current use and operation on such premises by CBS and its Affiliates conform in all material respects to all restrictive covenants, conditions, easements, building, subdivision and similar codes and federal, state and local laws, regulations, rules, orders and ordinances and none of CBS or any of its Affiliates has received any notice of any violation or claimed violation of any such restrictive covenant, condition or easement, or any building, subdivision or similar code, or any federal, state or local law, regulation, rule, order or ordinance which, either individually or in the aggregate, could have a material adverse effect on the assets, business or financial condition of the Stations, provided that any lawfully grandfathered condition shall not be deemed to be a material adverse effect for purposes of this subsection (i); (ii) there is no plan, study or effort by any governmental authority or agency which could reasonably be expected to have a material adverse effect on the Assets or financial condition of the Stations; and (iii) there are no latent defects in the real property that could reasonably be expected to have a material adverse effect on the Assets or financial condition of the Stations. Except as disclosed on Schedule 4.1.23, the improvements of CBS and its Affiliates upon the real property identified on Schedule 4.1.23 are in good operating condition and repair, normal wear and tear excluded. None of CBS or any of its Affiliates has knowledge or received notice (i) of any pending, 15 20 threatened, or contemplated action to take by eminent domain or otherwise to condemn any portion of the real property or interest therein or (ii) of any levied, threatened or proposed assessments for public improvements with respect to the real property. 4.1.24. PAYMENT OF TAXES. CBS and its Affiliates have, and as of the Closing Date, will have, paid and discharged all taxes, assessments, excises and other levies which are due, including but not limited to any such taxes, assessments, excises, and levies which, if due and not paid, would interfere with Entercom's enjoyment or use of the Assets or result in a lien, charge, or encumbrance thereon, excepting such taxes, assessments, and other levies which will not be due until or after the Closing Date, and which are either to be prorated between the parties pursuant to the provisions of Section 8.2 hereof or paid or contested by CBS pursuant to Section 6.1.6. 4.1.25. REQUIRED CONSENTS. The only material approvals or consents of persons or entities not a party to this Agreement that are legally or contractually required to be obtained by CBS in connection with the consummation of the transactions contemplated by this Agreement are those that are (i) set forth on Schedules 4.1.5 and 4.1.6 hereto and (ii) those contemplated by Section 5.1. 4.1.26. EVIDENCE OF FINANCIAL CAPABILITY OF ENTERCOM. CBS acknowledges that Entercom has delivered to it satisfactory proof of its financial capability to consummate the transactions contemplated hereby. 4.2. BY ENTERCOM. Entercom hereby represents and warrants that: 4.2.1. CORPORATE STANDING. Entercom is a corporation, duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Entercom or one or more Affiliates to which Entercom's rights hereunder are assigned pursuant to Section 11.13 is, or will be at Closing, qualified to do business in the Commonwealth of Massachusetts. Entercom has full power and authority to engage in the business in which it is presently engaged and to make and perform this Agreement according to its terms. 4.2.2. AUTHORIZATION OF AGREEMENT; NO BREACH. Entercom has the necessary corporate power and authority, on behalf of itself, to execute, deliver and perform this Agreement, the Time Brokerage Agreement and such other 16 21 agreements as are necessary to consummate the transactions contemplated hereby, and, subject to the receipt of the consents and approvals required elsewhere herein, this Agreement and the Time Brokerage Agreement constitute the valid and binding obligation of Entercom, enforceable against it in accordance with their terms, except as limited by bankruptcy and insolvency laws and by laws affecting the enforcement of creditors rights generally or equitable principles. Assuming said consents and approvals are obtained, neither such execution, delivery, and performance nor compliance by Entercom with the terms and provisions of this Agreement and the Time Brokerage Agreement will conflict with or result in a breach of any of the terms, conditions, or provisions of the Articles of Incorporation or Bylaws of Entercom, or any judgment, order, injunction, decree, regulation, or ruling of any court or any other governmental authority to which Entercom is subject or any material agreement or contract to which Entercom is a party or to which it is subject, or constitute a material default thereunder. 4.2.3. QUALIFICATION. Entercom's Affiliate which will be designated as the assignee of the Authorizations in the Assignment Applications is, or upon the filing of the Assignment Applications will be, qualified as a licensee of the Federal Communications Commission and is, or at the time of filing of the Assignment Applications will be, qualified as the assignee of the Authorizations to receive Commission approval of the Assignment Applications. Entercom knows of no facts relating to Entercom or any of its Affiliates that could reasonably be expected to cause Commission approval of the Assignment Application to be denied or materially delayed or which could reasonably be expected to lead to the filing of a material objection to such Applications. 4.2.4. LITIGATION AND CLAIMS. Except as disclosed in Schedule 4.2.4 hereto, no litigation, proceeding, or controversy is pending or, to the knowledge of any officer of Entercom, threatened, which might affect the ability of Entercom to perform its obligations hereunder, and there is no basis known to Entercom for any such litigation, proceeding, controversy, or claim. No claim has been made or asserted against Entercom material to this transaction. ARTICLE V. CONDITIONS 5.1. MUTUAL CONDITIONS. Performance of the obligations of the parties with respect to the Stations under this Agreement and the Closing, are and shall be subject to the occurrence and concurrence of the express conditions precedent that (i) the Commission has granted its consent and approval in writing to the assignment to a designated Affiliate of Entercom of the Authorizations issued by the Commission as contemplated hereby without any materially adverse condition and any 17 22 condition as to the timing of consummation of the transactions contemplated hereby set forth in such consent shall have been satisfied; (ii) the waiting periods (as they may be extended) applicable to the transfer of the Assets under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have expired or been earlier terminated; and (iii) any approval required under the CBS Final Judgment to consummate the transactions contemplated hereby shall have been received. 5.2. CONDITIONS OF ENTERCOM. Performance of the obligations of Entercom under this Agreement and the Closing of the transactions provided for herein are and shall be subject to the occurrence and concurrence of the express conditions precedent, any of which may be waived by Entercom, that: 5.2.1. All Required Consents have been obtained from the other parties to the Leases and the Contracts identified on Schedules 4.1.5 and 4.1.6 respectively as "Material Leases (or Contracts)-Consent to Assign Required." 5.2.2. No order, decree or judgment of any court, agency or other governmental authority shall have been issued based on or arising out of the conduct, action, inaction, qualifications or status of CBS or any of its Affiliates, which would render it unlawful as of the Closing Date to effect the transactions contemplated by this Agreement in accordance with its terms. 5.3. CONDITIONS OF CBS. Performance of the obligations of CBS under this Agreement and the Closing of the transactions provided for herein are and shall be subject to the occurrence and concurrence of the express conditions precedent, any of which may be waived by CBS, that: 5.3.1. No order, decree or judgment of any court, agency or other governmental authority shall have been issued based on or arising out of the conduct, action, inaction, qualifications or status of Entercom or any of its Affiliates, which would render it unlawful as of the Closing Date to effect the transactions contemplated by this Agreement in accordance with its terms. 5.4. EFFECT OF TIME BROKERAGE AGREEMENT ON CLOSING CONDITIONS. To the extent that any party hereto is unable to fulfill any condition to Closing under this Agreement that could have been fulfilled solely but for (i) an action taken by another party either pursuant to this Agreement or the Time Brokerage Agreement or in breach of this Agreement or the Time Brokerage Agreement or (ii) a failure to take any action that another party was obligated to take, or, in the exercise of commercial reasonableness, should have taken, 18 23 pursuant to this Agreement or the Time Brokerage Agreement, such condition to Closing shall be deemed waived. ARTICLE VI. COVENANTS AND OPERATIONS PRIOR TO CLOSING. 6.1. COVENANTS OF CBS. Except as otherwise provided in the Time Brokerage Agreement and in the CBS Final Judgment, during the period from the date of this Agreement to the Closing Date, CBS and/or one or more of its Affiliates shall: 6.1.1. Conduct the business and operations of the Stations in the Ordinary Course of Business and in accordance with all requirements of law and regulation and, to the extent consistent with the foregoing, in the same manner in which the same have heretofore been conducted with the intent of preserving the ongoing operations and business of the Stations. 6.1.2. Cooperate with Entercom in connection with its review, analysis, and monitoring of the Assets and the operation of the Stations to the end that an efficient transfer of the Assets may be made at Closing, and the business of the Stations and the operation of the Assets may continue on an uninterrupted basis. In addition to providing information required hereunder or reasonably requested by the other parties hereto, CBS agrees to promptly notify the other parties of any unusual problems or developments of which CBS becomes aware with respect to the Assets or the business of the Stations. 6.1.3. Consult with Entercom regarding any proposed material changes to the operation of the Stations to insure continued operation of the Stations as they are now operated and cooperate with Entercom to insure a smooth transfer of ownership and continuity of operations at Closing. 6.1.4. Obtain and deliver to Entercom within 10 days hereof at its expense, and permit Entercom to obtain within 20 days hereof at its expense, Phase I Environmental Assessments of all or any of the Property to be conveyed hereunder and any real property used by the Stations in their operations or for which Entercom could be held responsible under any Environmental Laws. In the event such Phase I Environmental Assessments disclose any conditions contrary to the representations and warranties contained in Section 4.1.19, or any potential that such conditions may exist, then Entercom may conduct or have conducted at its expense additional testing to confirm or negate the existence of any such conditions. If any such Phase I Environmental Assessment or additional testing confirms the existence of any such conditions, CBS will cause the conditions to be remedied as quickly as is reasonably possible to the extent required to comply with applicable Environmental Laws, provided, however, that such remedial action(s) does not cost in the aggregate in excess of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). In the event that such remedial action(s) does cost in the 19 24 aggregate in excess of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1), CBS may elect not to take such remedial action. In such event, Entercom may require CBS to proceed to Closing and Entercom shall receive a proration at Closing, in the amount of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). Alternatively, Entercom may terminate this Agreement and CBS shall have no liability to Entercom as a result of such termination. CBS has furnished to Entercom copies of any environmental reports, title reports, and title insurance policies in its possession previously prepared for any of the Property which CBS has been able to locate through the date hereof, and from the date hereof through Closing, CBS shall forward to Entercom any additional such reports or policies it receives or locates. Notwithstanding any other provision o this Agreement, CBS shall have no further liability to Entercom for any environmental condition to the extent such condition is disclosed on Schedule 4.1.19 or any Phase I Environmental Assessment or other testing conducted pursuant to this Section 6.1.4, except as set forth in this Section 6.1.4. 6.1.5. Obtain within 10 days hereof at its expense and deliver to Entercom, commitments from a reputable title insurance company to issue extended coverage policies of title insurance (ALTA Form 1970 or other form reasonably acceptable to Entercom) with respect to each parcel of real property to be conveyed hereunder, insuring good and marketable title to such real property (the "Title Commitments"). In the event Entercom notifies CBS within 10 business days of receipt of the Title Commitments that the Title Commitments disclose any rights of way, easements, exceptions or other matters which do not constitute Permitted Encumbrances and which materially and adversely interfere with the continued use of such real property as currently used, CBS will cause the conditions to be remedied as quickly as is reasonably possible; provided, however, that such remedial action(s) does not cost in the aggregate in excess of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). In the event that such remedial action(s) does cost in the aggregate in excess of One Million Dollars ($1,000,000.00), CBS may elect not to take such remedial action, and, notwithstanding any other provision of this Agreement, CBS shall have no further liability to Entercom for any title defect. In such event, Entercom may require CBS to proceed to Closing and Entercom shall receive a proration at Closing, in the amount of One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1). Alternatively, Entercom may terminate this Agreement and CBS shall have no liability to Entercom as a result of such termination. 6.1.6. Cooperate with Entercom, with respect to the Stations, in its efforts to employ after the Closing, or TBA Commencement Date, as the case may be, any of the current employees of CBS and its Affiliates who are employed at the Stations (the "Station Employees"), including without limitation, allowing Entercom to meet privately with the Station Employees, other than Non-Continuing Employees (as defined in Section 6.5). CBS and its Affiliates will not interfere with or attempt to undermine in any way the efforts of Entercom to employ such employees. 20 25 6.1.7. Pay and discharge when due all taxes due after Closing accrued or accruing with respect to periods ending on or before the Closing Date, to the extent such taxes could reasonably be expected to result in a lien or otherwise interfere with the use or enjoyment of the Assets; provided, that any such tax may be contested by CBS in good faith by appropriate proceedings; provided further that CBS shall pay any such taxes found to be due and owing upon completion of such proceedings. 6.1.8. Prosecute any renewal application filed by it with the Commission with respect to any of the Stations that are the subject of this Agreement; (ii) diligently defend against any petition to deny or other filing seeking denial of such application or against any matter raised sua sponte by the Commission, and (iii) diligently defend against any petition for reconsideration, application for review, or other post-grant objection to such renewal application, in each case with respect to events occurring or accruing prior to the Closing Date, during the period when the Station in question was owned by CBS or any of its Affiliates. 6.1.9. Use its reasonable best efforts to determine in cooperation with Entercom whether any of the assets listed on Schedule 4.1.4 as pertaining to WBMX(FM) are used or intended for use primarily in the operation of any or all of the Stations. Upon determining that any such assets are so used or so intended for use, such assets will become part of the Property to be conveyed hereunder. 6.2. NEGATIVE COVENANTS OF CBS. Unless Entercom has given its consent in writing, which consent shall not be unreasonably withheld, CBS and it Affiliates shall not, directly or indirectly, during the period from the date hereof to the Closing Date: 6.2.1. Except as specifically provided in this Agreement, cancel, amend, modify adversely, assign, encumber, or in any way discharge or terminate any of the Leases or Contracts other than in the Ordinary Course of Business (provided, however, that CBS shall notify Entercom in writing of any such actions involving a contract that would need to be identified on Schedule 4.1.6). 6.2.2. By any act or omission, surrender, modify adversely, forfeit, or fail to renew on regular terms any Authorizations for the Stations or take or omit any action which might result in the Commission instituting any proceedings for the revocation, suspension or modification of any such Authorizations. 6.2.3. Except in the Ordinary Course of Business, sell or dispose of any of the Assets; provided that any Assets so disposed of in the Ordinary Course of Business (other than Assets that are obsolete, worn beyond repair, or otherwise not suitable for use in any of the Stations and that are not in use) are replaced with assets of comparable or better functionality. 21 26 6.2.4. Suffer or permit the creation of any mortgage, conditional sale agreement, security interest, lease, lien, hypothecation, pledge, encumbrance, restriction, liability, charge, claim, or imperfection of title on or with respect to any of the Assets other than Permitted Encumbrances and those identified on Schedule 4.1.8 hereto. 6.2.5. Enter into, renew, or modify any Contract relating to the Stations with an individual value of over Fifty Thousand Dollars ($50,000.00) or in the aggregate over Two Hundred and Fifty Thousand Dollars ($250,000.00); other than for Time Sales Agreements, Trade Agreements or Barter Agreements, provided, however, that this restriction shall not apply to renewal or modification of any collective bargaining agreement governing employees at any of the Stations, to the extent that such action would constitute a breach of the terms of such agreement or a violation of applicable law. The amounts set forth in the preceding sentence shall have no bearing on any determination as to what constitutes "material" for purposes of this Agreement. 6.2.6. Fail to take any reasonable actions necessary to maintain the Stations' continuous broadcast operations from their respective main antennae. 6.2.7. Fail to take any reasonable actions necessary to avoid the happening of or to cure the existence of any material damage to or impairment of any of the Assets. 6.2.8. Fail to operate the Stations in conformity in all material respects with all of the applicable requirements of law and regulation. 6.2.9. Take any action which is materially inconsistent with its obligations under this Agreement, or that could hinder or delay the consummation of the transactions contemplated hereby. Any notification or consent given under this Article VI will not mitigate, detract from, or otherwise affect the representations, warranties, or obligations under this Agreement and the consequences of the other party's acting on any such notification or consent will be solely such other party's responsibility, except to the extent inherent in the nature of any notification or consent, or otherwise set forth in the terms thereof. 6.3. NO CONTROL. Nothing contained in this Agreement or in the Time Brokerage Agreement shall give Entercom any right to control the operations of the Stations prior to the Closing Date. 6.4. NO SOLICITATION OR HIRE OF EMPLOYEES AND PROGRAMMING. During the period beginning the date of this Agreement and ending the earlier of eighteen (18) months after the Closing Date or, as to any particular Station, upon consummation of any transaction requiring the prior consent of the Commission on FCC Form 314 or 315, CBS shall be prohibited from: (i) soliciting or hiring any Transferred Employee (as defined in Section 22 27 6.5); provided, however, that this prohibition shall not apply to any Transferred Employee hired by Entercom and subsequently terminated by Entercom without cause; (ii) contracting for, negotiating for, or soliciting any of the rights relating to the programming content on or promotional materials related to the Stations listed on Schedule 6.4. 6.5. COVENANTS OF ENTERCOM. 6.5.1. Prior to the earlier of the TBA Commencement Date or the Closing Date, Entercom or its designated Affiliate shall offer employment commencing on the earlier of the TBA Commencement Date or the Closing Date to each of the employees employed by CBS or its Affiliates at the Stations on such date (the "Station Employees"), other than those employees specified on Schedule 6.5 (the "Non-Continuing Employees"). The Station Employees accepting such offers shall be referred to as the "Transferred Employees." "Station Employees" shall also include any employee of the Station who is on a short-term disability or other authorized temporary leave from employment by CBS not in excess of 6 months, and Entercom or its designated Affiliate shall offer employment to such person at such time the person is capable and ready to return to active status, provided that such person actually returns to active status within such six (6) month period. Except for any Transferred Employees whose employment contracts are assumed by Entercom under the terms hereof, the terms and conditions of Entercom's employment of the Transferred Employees shall be at-will employment in at least the same positions, for at least the same direct cash compensation, with medical insurance effective as of the earlier of the TBA Commencement Date or the Closing Date and including coverage for any preexisting health conditions that would have been covered by the health plan in which the employee was a participant immediately prior to the earlier of the TBA Commencement Date or the Closing Date and give effect, in determining any periodic deductible and maximum out-of-pocket limitations, to claims incurred and paid by, and amounts reimbursed to, such Transferred Employees prior to the earlier of the TBA Commencement Date or the Closing Date. For purposes of determining the amount of any entitlement of any Transferred Employee under Entercom's benefit and vacation plans, Entercom will take into account and credit such Transferred Employee under Entercom's benefit and vacation plans with the credit for service the Transferred Employee received from CBS immediately prior to the earlier of the TBA Commencement Date or the Closing Date. With respect to any welfare benefit plan (as defined in Section 3(1) of ERISA) of Entercom for the benefit of Transferred Employees, Entercom shall cause all Transferred Employees who actively participated in similar plans of CBS to become a participant in such welfare benefit plan of Entercom as of the earlier of the TBA Commencement Date or the Closing Date. No provisions of this Agreement shall create any third party beneficiary rights of any employee or former employee (including any beneficiary or dependent thereof) of CBS in respect of continued employment (or resumed employment) with CBS or Entercom or in respect of any other matter. 6.5.2. Without the prior written consent of CBS, which shall not be withheld unreasonably, from and after the date hereof, neither Entercom nor any of its Affiliates shall take 23 28 any action inconsistent with its obligations under this Agreement, or that could hinder or delay the consummation of the transactions contemplated hereby. 6.6. REAL PROPERTY SURVEYS. 6.6.1. Within 30 days of the date hereof, Entercom may procure, at its expense, with respect to each parcel of real property owned by CBS and used in connection with the operation of the Stations, a current survey of each such parcel of real property, prepared by a licensed surveyor, and conforming to current ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location of all improvements, easements, party walls, sidewalks, roadways, utility lines, transmitting towers, tower guy anchors and other matters customarily shown on such surveys, and showing vehicular access affirmatively to public streets and roads (the "Survey"). 6.6.2. Within 10 business days of receipt of the Surveys, Entercom shall give CBS copies of the Surveys and notice of any exceptions to matters revealed by the Survey that would materially and adversely affect the Stations as currently operated (the "Objectionable Exceptions"). If Entercom fails to give such notice in a timely manner, Entercom shall be deemed to have accepted matters revealed by the Surveys other than the Objectionable Exceptions expressly set forth in the notice. 6.6.3. CBS shall cure or remove any Objectionable Exception within 30 days from the date of Entercom's notice; provided, however, that if CBS reasonably determines that the cost of removing such Objectionable Exception would exceed One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1) or that CBS through the expenditure of up to One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1) will be unable to cure or remove an Objectionable Exception within such 30-day period, then CBS shall notify Entercom within 3 business days after such determination, whereupon Entercom shall have the right, exercisable by written notice given to CBS within 3 business days after receipt of CBS's notice, to elect (i) to agree to accept the real property covered by such Survey, subject to such of the Objectionable Exceptions, together with a payment of such sum as is necessary to remove the Objectionable Exception not to exceed One Million Dollars ($1,000,000.00) (subject to the last sentence of Section 11.1), or (ii) to terminate this Agreement. If Entercom fails to elect option (i) or (ii) above, then Entercom shall be deemed to have elected option (i). ARTICLE VII. ACTIONS PRIOR TO CLOSING. 7.1. APPLICATION TO COMMISSION. The parties hereby bind themselves to use their best efforts, and to cooperate with each other, in seeking the consent and approval of the Commission to the assignment of all Authorizations heretofore granted and issued in connection with the Stations as herein provided; 24 29 diligently and promptly to prepare, sign, and file with the Commission within five (5) business days from the date of this Agreement any and all applications requisite or desirable to procure such consents and approvals (the "Assignment Applications"); and diligently and promptly to prepare and submit to the Commission all information, data, exhibits, amendments, resolutions, statements, and other material necessary or proper in connection with the Assignment Applications; and diligently to pursue the grant of a Final Order approving such Assignment Applications. 7.2. COMPLIANCE WITH CBS FINAL JUDGMENT. Entercom acknowledges that CBS has provided it with a copy of the CBS Final Judgment. Within two (2) business days of the date of this Agreement, CBS shall comply with the notification provisions of Section VII of the CBS Final Judgment, and both parties shall thereafter comply in all material respects with all requests for additional information by the DOJ under the CBS Final Judgment. The parties will attempt in good faith to persuade the DOJ to provide written notice of no objection to this Agreement. If the DOJ does not provide written notice of no objection under the CBS Final Judgment, then CBS may, but shall be under no obligation to, seek the Court's approval of this Agreement pursuant to Section VII of the CBS Final Judgment. If CBS decides not to seek Court approval, or if DOJ has not provided written notice of no objection or the Court's approval has not been obtained by the Upset Date (as defined in Section 9.1.1.), then either party shall be permitted to terminate this Agreement as provided in Section 9.1. 7.3. HART-SCOTT-RODINO NOTIFICATION. As promptly as practicable and no later than ten (10) days after the date hereof, the parties hereto shall take all steps reasonably necessary to file and shall participate in the filing of all requisite documents and notifications required to be filed pursuant to the HSR Act. All filing fees in connection with such notifications shall be paid by one-third by CBS and two-thirds by Entercom. The parties agree to diligently take and fully cooperate in the taking of all necessary and proper steps, and provide any additional information reasonably requested in order to obtain promptly the early termination of the waiting period under the HSR Act. 7.4. INSPECTION. During the period from the date of this Agreement to the Closing Date, CBS shall, upon reasonable request, afford, or cause to be afforded, engineers, attorneys, accountants, and other consultants and/or representatives of Entercom free access in a reasonable manner during normal business hours to the employees, offices, studios, transmitter sites, equipment, records, and other documents pertaining to the Stations and furnish or cause to be furnished Entercom with all information concerning the Stations' affairs as Entercom may reasonably request, including but not limited to applications and other documents filed with the Commission. For 25 30 purposes of the foregoing, records shall include, without limitation, any sales, research, consulting, and ratings reports relating to the Stations. 7.5. CONFIDENTIALITY. Each party hereby covenants and agrees that in the event the transactions contemplated by this Agreement are not consummated for any reason whatsoever, they will, upon request, return to the other party within ten (10) days from the date of such request, all versions, including copies, of all information furnished to that party by another party hereto or its representatives or Affiliates, regardless of whether the same is marked "confidential" or "proprietary," together with any and all notes, memoranda, analyses, compilations, studies, or other documents (whether in hard copy or electronic media) prepared by the receiving party, its directors, officers, partners, employees, agents, or other representatives (including advisors, attorneys, accountants, financial advisors, and potential financing sources) which contain or otherwise reflect such information (the "Confidential Information"). Each party hereby covenants and agrees to use reasonable efforts to hold all Confidential Information in confidence and not to disclose, or cause any representative, agent, or employee to disclose to any third party any portion of the Confidential Information except as may be required by law or judicial process, and not to use any portion of the Confidential Information for its own benefit without the written consent of the providing party. Should a party receive a request or be required by applicable law to disclose to a court or other tribunal all or any part of the Confidential Information received from another party hereto, CBS and Entercom confirm that each will adhere to the terms and conditions set forth in paragraph 5 of the Confidentiality Agreement, dated June 9, 1998, between CBS and Entercom. Nothing shall be deemed to be Confidential Information that: (a) is or becomes generally available to the public other than as a result of a disclosure by the receiving party or its representatives; or (b) is or becomes available to the receiving party on a non- confidential basis from a source rightfully in possession of the information and which is under no legal, contractual or fiduciary obligation to keep it confidential. ARTICLE VIII. CLOSING 8.1. CLOSING. Unless otherwise agreed by the parties, the Closing shall take place at the offices of Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Suite 1300, Washington, D.C. 20004, at 10:00 a.m. on the Closing Date. The Closing Date shall be the date selected by Entercom on at least five (5) business days' notice to CBS, which date shall be within nine (9) months after the satisfaction of the conditions to Closing set forth in Section 5.1, Section 5.2.2 and Section 5.3.1 hereof (the "Outside Closing Date"); provided that, once such conditions are satisfied, if: (a) Closing has not occurred prior to the date of closing under the Tampa Agreement, and (b) neither CBS nor Entercom has made a Closing Date Election, as hereinafter defined, then Closing will occur either by ten (10) business days after the closing under the Tampa Agreement 26 31 or by the Outside Closing Date, whichever is earlier. (The date for the Closing described in the immediately preceding sentence is hereafter referred to as the "Provisional Closing Date.") CBS may elect to postpone the Closing Date from the Provisional Closing Date until the date which is not later than the earlier of (i) the date which is five (5) days prior to the last day under Code Section 1031(a)(3) on which Entercom may effect an exchange of the Assets (as defined in the Tampa Agreement) for the Assets or (ii) the Outside Closing Date (the "Closing Date Election"), by giving notice to Entercom at least seven (7) business days prior to the Provisional Closing Date. If CBS does not provide such notice within the time allowed, then CBS shall no longer have the right to make the Closing Date Election, and Entercom shall have the right to make the Closing Date Election, by providing written notice to CBS at least five (5) business days prior to the Provisional Closing Date. 8.2. PRORATIONS. Within ninety (90) days after Closing, an accounting for each Station shall be made as follows: 8.2.1. All prepaid income, prepaid expenses, prepayments on any Contracts and Leases assumed, accrued income, property taxes, and accrued expenses, including without limitation any accrued expenses for Transferred Employees (such as accrued vacation time) assumed by Entercom up to the Adjustment Time shall, except as otherwise expressly provided herein or in the Time Brokerage Agreement, be adjusted and allocated between CBS and Entercom to reflect the principle that all expenses and income arising from the operation of the Station up through the Adjustment Time shall be for the account of CBS, and all expenses and income arising from the operation of the Station or portion thereof acquired by Entercom after the Adjustment Time shall be for the account of Entercom. Trade and Barter Agreements shall be subject to adjustment or proration only to the extent provided in Section 4.1.18. Any appropriate proration required to be made (i) pursuant to Leases referred to in Section 4.1.5, (ii) pursuant to Contracts referred to in Section 4.1.6, (iii) pursuant to Section 6.1.4, and (iv) pursuant to Section 4.1.18 shall also be reflected in such accounting. Any amount not paid when due shall bear interest at the rate of ten percent (10%) per annum. 8.2.2. As soon as practicable following the Closing Date, and in any event within ninety (90) days thereafter, or at such other time as the parties agree, Entercom shall deliver to CBS Entercom's certificate, setting forth as of the Adjustment Time, all adjustments to be made as provided in Section 8.2.1 above as to each Station. Entercom shall provide CBS or its representatives access to copies of such portions of books and records CBS may reasonably request solely for purposes of verifying such adjustments. Entercom's certificate shall be final and conclusive unless objected to by CBS in writing within thirty (30) days after delivery. Entercom and CBS shall attempt jointly to reach agreement as to the amount of the adjustments to be made hereunder within sixty (60) days after receipt of such written objection, which agreement, if achieved, shall be binding upon all parties to this Agreement and not subject to dispute or review. 27 32 8.2.3. In the event of a disagreement between Entercom and CBS with respect to the accounting to be made hereunder, the parties agree that a public accounting firm chosen jointly by Entercom and CBS shall be the final arbiter of such disagreement. 8.2.4. Any amounts due for the adjustments provided for herein shall be paid within ten (10) business days after final determination. 8.3. CLOSING DELIVERIES TO ENTERCOM. At or before the Closing, CBS shall deliver or cause to be delivered to Entercom the following items and documents in form reasonably satisfactory to counsel for Entercom and properly executed, unless Entercom shall waive in whole or in part in writing such delivery and then only to the extent of such waiver: 8.3.1. CBS shall deliver to Entercom such Bills of Sale and assignments and other instruments of transfer and conveyance, transferring to Entercom the Property to be sold, transferred or assigned hereunder and the rights and interests under the Leases and Contracts being assigned to Entercom hereunder, to the extent such rights and interests under such leases and contracts have not previously been assigned to and assumed by Entercom under the Time Brokerage Agreement. 8.3.2. CBS shall deliver to Entercom one or more Special Warranty Deeds in recordable form transferring to Entercom a fee simple interest in each parcel of owned real property being conveyed to Entercom hereunder. 8.3.3. CBS shall deliver to Entercom an assignment of all right, title and interest of CBS in and to the Authorizations. 8.3.4. CBS shall deliver to Entercom all keys to and actual possession of all of the Assets, in the same condition as the same now are, except for ordinary wear and tear thereof and except as permitted under the Agreement. 8.3.5. CBS shall deliver to Entercom certified copies of resolutions of the Board of Directors of each CBS entity, duly authorizing the execution, delivery, and performance of this Agreement and all documents to be executed and delivered by CBS at the Closing, and thereafter. 8.3.6. CBS shall deliver to Entercom certificates signed by an authorized officer to the effect (a) that no act or omission of CBS or any of its Affiliates, or state of facts contrary to the agreements, representations, and warranties of such party contained herein has been taken or has occurred and that said representations and warranties of such party, to the extent they do not speak as of a specific time, are true and correct as of the Closing Date, with the same effect as if made as of the time of Closing, except to the extent otherwise permitted hereunder or to the 28 33 extent such act, omission, state of facts, untruth or inaccuracy would not have a material adverse effect on Entercom's continued operation of the Stations as currently operated and (b) that all covenants and agreements contained herein of CBS have been complied with in all material respects. 8.3.7. CBS shall deliver to Entercom the Required Consents relating to the Leases and Contracts, to the extent not previously delivered under the Time Brokerage Agreement. 8.3.8. CBS shall deliver to Entercom evidence of the release of all liens and encumbrances on the Assets to be released at Closing. 8.3.9. CBS shall deliver to Entercom one or more opinions of counsel to CBS, dated the Closing Date, in form and substance reasonably satisfactory to Entercom. 8.4. CLOSING DELIVERIES TO CBS. At or before the Closing, Entercom or an Affiliate of Entercom, as appropriate, shall deliver to CBS or cause to be delivered the following items and documents in form reasonably satisfactory to counsel for CBS and properly executed, unless CBS shall waive in whole or in part in writing such delivery and then only to the extent of such waiver: 8.4.1. Entercom shall pay to CBS the Purchase Price by wire transfer of immediately available funds. 8.4.2. Entercom shall deliver to CBS certified copies of resolutions of the Board of Directors of Entercom duly authorizing the execution, delivery, and performance of this Agreement and all documents to be executed and delivered by Entercom at the Closing, and thereafter. 8.4.3. Entercom shall deliver to CBS certificates signed by an authorized officer to the effect that no act or omission of Entercom or state of facts contrary to the agreements, representations, and warranties of Entercom contained herein has been taken or has occurred and that said representations and warranties of Entercom to the extent they do not speak as of a specific time are true and correct as of the Closing Date, with the same effect as if made as of the time of Closing, and that all covenants and agreements contained herein of Entercom have been complied with. 8.4.4. Entercom shall deliver to CBS one or more agreements whereby Entercom assumes and agrees to pay when due any liabilities of CBS relating to the Stations specifically assumed by Entercom hereunder, including without limitation those liabilities accruing after the Adjustment Time with respect to those Leases and Contracts being assumed by Entercom hereunder, to the extent such rights and interests under such liabilities have not previously been and assumed by Entercom under the Time Brokerage Agreement. 29 34 8.4.5. Entercom shall deliver to CBS one or more opinions of counsel to Entercom dated the Closing Date, in form and substance reasonably satisfactory to CBS. 8.5. COVENANTS OF FURTHER ASSURANCES; AVAILABILITY OF RECORDS. At and after the time of Closing, upon request, each party shall take such action and deliver to the other party such further instruments of assignment, conveyance, or transfer or other documents of further assurance as may be reasonably necessary to evidence the full and effective transfer, conveyance, and assignment of the Assets and possession thereof to the respective parties, their successors and assigns, and to assure complete performance of this Agreement in all respects. After the Closing, for a period of three (3) years, upon request, CBS shall provide Entercom copies of or access to records relating to the Stations that are needed by Entercom for accounting, tax, or other purposes. 8.6. RISK OF LOSS; DAMAGE TO PROPERTY. The risk of loss or damage from fire, theft, storm or other act beyond the control of CBS to any of the Assets prior to Closing, shall be upon CBS. If, at the time of Closing, the tangible property to be sold hereunder shall have suffered such loss or damage to an extent that affects the value thereof and CBS shall not have repaired, replaced, or restored same with property of like kind, quality, and value, Entercom shall complete the purchase and Closing, in which event it shall be entitled to a payment equal to the greater of (a) the amount necessary to repair, replace, or restore such damaged property with property of like kind, quality, and value or (b) the amount of any and all insurance proceeds available to CBS, if any, collectible by reason of such loss or damage. 8.7. TAXES ON TRANSACTION. All sales, purchase, transfer, use, or documentary taxes, if any, payable by reason of this Agreement or any of the transactions contemplated hereby or the sale, transfer, or delivery of any of the Assets hereunder, whether or not imposed on a particular party, shall be paid and borne equally by CBS or Entercom, either by payment thereof or by reimbursement to the other party. ARTICLE IX. TERMINATION, DEFAULT AND INDEMNIFICATION 9.1. TERMINATION. This Agreement may be terminated by a party hereto not then in default hereunder upon written notice to the other parties upon occurrence of any of the following: (i) the Closing has not occurred by the date that is one year after the date of this Agreement (the "Upset Date"); (ii) the Commission denies by Final Order or designates for hearing any of the Assignment 30 35 Applications or any portion thereof; (iii) by either party as provided in Section 7.2; or (iv) any of the conditions set forth in Article V of this Agreement are not waived by such party and such conditions shall not have been satisfied on or before the Upset Date, or shall have become incapable of satisfaction. This Agreement may be terminated by Entercom as provided in Section 6.1.4, Section 6.1.5 and Section 6.6.3, provided Entercom is not then in default hereunder. 9.2. EFFECT OF TERMINATION. The termination of this Agreement under Section 9.1 shall not relieve any party of any liability for breach of this Agreement prior to the date of termination. 9.3. REMEDIES. CBS recognizes that, in the event of a Default by CBS, monetary damages alone will not be adequate. Therefore, in the event of a Default by CBS, unless Entercom is in Default, Entercom shall be entitled, in addition to indemnification pursuant to Section 9.4, to obtain specific performance of the terms of this Agreement. In any action to enforce specifically the performance of this Agreement under this Section 9.3, CBS shall waive the defense that there is another adequate remedy at law or equity and agrees that Entercom shall have the right to obtain specific performance of CBS's obligations under the terms of this Agreement without being required to prove actual damages, post bond, or furnish other security. 9.4. INDEMNIFICATION. 9.4.1. BY CBS. CBS shall indemnify, defend, and hold Entercom and its officers, directors, partners, employees, and Affiliates harmless from, against, and with respect to any and all loss, damage, claim, obligation, assessment, cost, liability, and expense (including, without limitation, reasonable attorneys' fees and costs and expenses incurred in investigating, preparing, defending against or prosecuting any litigation or claim, action, suit, proceeding or demand) of any kind or character (a "Loss") (including without limitation the loss of any of the Authorizations resulting from any failure by the Commission to renew such Authorizations as a result of events occurring prior to the Closing Date) incurred, suffered, sustained, or required to be paid by any of them and resulting from, related to or arising out of: (a) any breach of any of the covenants, representations or warranties made by CBS in or pursuant to this Agreement, or in any agreement, document, or instrument executed and delivered pursuant hereto; (b) any failure by CBS to perform or observe, or to have performed or observed, in full, any covenant, agreement, or condition to be performed or observed by it 31 36 pursuant to this Agreement or in any agreement, document, or instrument executed and delivered by or on behalf of it pursuant hereto; (c) any and all obligations of CBS, except for obligations assumed or required to be assumed by Entercom under the terms of this Agreement or in the Time Brokerage Agreement; (d) the operation or ownership of the Assets prior to the Adjustment Time by CBS and its Affiliates, except for obligations and liabilities assumed by Entercom under the Time Brokerage Agreement; or (e) Closing by Entercom and/or any of its Affiliates prior to the grants of the Assignment Applications becoming Final Orders, if the failure of the grants of the Assignment Applications to become Final Orders is attributable to any issue raised regarding CBS or any of its Affiliates. For purposes of Section 9.4.2(b), CBS acknowledges that if it wrongfully fails to close the transactions contemplated hereby, Entercom may not be able to acquire the Stations as replacement property for the Assets (as defined in the Tampa Agreement) in a transaction qualifying under Section 1031 of the Code, and that CBS shall indemnify and hold harmless Entercom for damages sustained by Entercom if Entercom is unable to acquire replacement property other than the Stations so as to obtain tax-deferred treatment under Section 1031 of the Code for the disposition of the Assets (as defined in the Tampa Agreement). 9.4.2. BY ENTERCOM. Entercom shall indemnify, defend, and hold CBS and its officers, directors, partners, employees, and Affiliates harmless from, against and with respect to any and all items of Loss incurred, suffered, sustained, or required to be paid by any of them and resulting from, related to or arising out of: (a) any breach of any of the covenants, representations, or warranties made by Entercom in or pursuant to this Agreement, or in any agreement, document, or instrument executed and delivered pursuant hereto; (b) any failure by Entercom to perform or observe, or to have performed or observed, in full, any covenant, agreement, or condition to be performed or observed by it pursuant to this Agreement or in any agreement, document, or instrument executed and delivered by or on behalf of it pursuant hereto; (c) Entercom's operation or ownership of the Assets after the Adjustment Time; or (d) any obligations under any Contracts or Leases assumed by Entercom under Section 3.1 hereof. 32 37 9.4.3. NOTICE AND PROCEDURE IN CONNECTION WITH THIRD PARTY CLAIMS. If any party has a claim for indemnification hereunder (such party, an "Indemnitee") arising out of any claim or liability which is asserted or threatened against it, or any action, suit or proceeding is commenced by any third party against any Indemnitee which might result in any indemnification obligations hereunder on behalf of any other party (such other party, an "Indemnitor"), such Indemnitee shall, within twenty (20) business days from the receipt of same, give written notice thereof to each such Indemnitor together with a brief statement of the basis of the claim and a copy of any complaint or other documents relating to such claim, provided, however, that failure to give such notice within such twenty (20) business day period shall not affect the liability of Indemnitor hereunder unless the failure to give such notice within such period materially and adversely affects Indemnitor's ability to defend against the claim giving rise to Indemnitee's claim for indemnification or to cure the default giving rise to such claim. Within twenty (20) days from receipt of such notice, the Indemnitor shall give the Indemnitee written notice as to whether the Indemnitor elects to contest any such claim or liability; provided, however, that during the interim, the Indemnitee shall be entitled to take reasonable action (which shall not include settlement) with respect to such claim which it deems necessary to protect against further damage or default with respect thereto. If an Indemnitor elects to contest any such claim or liability, it shall be at the cost and expense of the Indemnitor and using professionals chosen by the Indemnitor. The Indemnitee may participate in the defense of any claim or liability that an Indemnitor has elected to contest, but such participation shall be at its own expense. If the Indemnitor does not elect to assume control or otherwise participate in the defense of any third party claim, it shall be bound by the results obtained by the Indemnitee with respect to such claim, including any settlement, subject to the Indemnitor's right to contest the underlying obligation to indemnify the Indemnitee. 9.4.4. EXCLUSIVITY. Except as provided in Section 9.1 concerning termination of this Agreement and Section 9.3 concerning the rights of Entercom to specific performance, subsequent to Closing the right to indemnification hereunder shall be the exclusive remedy for all claims of damages of any party in connection with any breach by any other party of its representations, warranties, or covenants. Subsequent to Closing, the parties hereto agree that no party will be entitled to consequential or punitive damages as a result of a breach hereof by any party hereto. 9.4.5. LIMITATIONS. Except as otherwise provided in this Article IX, any claim asserted for damages or indemnification hereunder must be submitted to the Indemnitor in writing within the time periods set forth in Section 11.3 of this Agreement and any such claim not so asserted shall be waived and barred. No party shall be entitled to indemnification hereunder unless the aggregate amount of its claims for indemnification exceeds One Hundred Thousand Dollars ($100,000) per Station, in which event such party shall be indemnified for the entire amount owed. This amount 33 38 shall have no bearing on any determination as to what constitutes "material" for purposes of this Agreement. No party shall be entitled to indemnification hereunder for amount in the aggregate greater than the Purchase Price. ARTICLE X. ASSET EXCHANGES 10.1. POSSIBLE CBS EXCHANGE. Entercom acknowledges that CBS may elect to effect the transfer and conveyance of the Assets as part of a deferred like-kind exchange under Section 1031(a)(3) of the Code in which the Assets are relinquished at Closing in exchange for other like-kind assets to be identified and acquired after the Closing in whole or in part with the funds constituting the Purchase Price. If CBS so elects, it shall give written notice to Entercom of its intention to effect such deferred like-kind exchange, and CBS thereafter may at any time at or prior to Closing assign its rights under this Agreement to a "qualified intermediary" as defined in Treas. Reg. Section 1.1031(k)-1(g)(4), subject to all of Entercom's rights and obligations hereunder, and shall promptly provide written notice of such assignment to all parties hereto. In the event CBS assigns its rights hereunder to a "qualified intermediary," Entercom shall acknowledge in writing the notification by CBS of the assignment to the "qualified intermediary" of its rights hereunder, and Entercom shall pay the Purchase Price to the "qualified intermediary" at Closing rather than to CBS, which payment shall discharge the obligation of Entercom to make payment for the Assets hereunder. 10.2. POSSIBLE ENTERCOM EXCHANGE. Entercom may elect to effect the acquisition of the Assets as part of a deferred like-kind exchange under Section 1031(a)(3) of the Code, in lieu of buying such assets hereunder. If Entercom so elects, it shall provide notice to CBS of its election, and thereafter (i) may at any time at or prior to Closing assign its rights under this Agreement to a "qualified intermediary" as defined in Treas. Reg. Section 1.1031(k)-1(g)(4), subject to all of CBS' rights and obligations hereunder and (ii) shall promptly provide written notice of such assignment to all parties hereto. If Entercom has given notice of its intention to effect the acquisition of the Assets as part of an exchange under Section 1031 of the Code, CBS shall (i) promptly provide Entercom with written acknowledgment of such notice and (ii) at Closing, accept payment for the Assets from the "qualified intermediary" rather than from Entercom, which payment shall discharge the obligation of Entercom to make payment for the Assets hereunder and transfer, assign and convey the Assets to Entercom or its designated Affiliates. 10.3. INDEPENDENT TRANSACTIONS. The parties acknowledge and agree that the transactions contemplated by this Agreement are not contractually interdependent or otherwise mutually dependent in any way on 34 39 or with the transactions contemplated by either the Tampa Agreement or the Boston I Agreement. The parties further acknowledge that neither the Closing nor any of the rights or obligations of the parties set forth herein are dependent or conditional on the closing or failure to close the transactions contemplated by either the Tampa Agreement or the Boston I Agreement, and that neither the closing of the Tampa Agreement or the Boston I Agreement nor any of the rights or obligations of the parties to such agreements are dependent or conditional on the occurrence of the Closing or the failure of occurrence of the Closing. ARTICLE XI. GENERAL PROVISIONS 11.1. EXPENSES OF THE PARTIES. Except as otherwise specifically provided herein, all expenses involved in the preparation, authorization, and consummation of this Agreement including, without limitation, all fees and expenses of agents, representatives, counsel, and accountants in connection therewith and in connection with applications to the Commission hereunder, shall be borne solely by the party who shall have incurred the same, and the other party shall have no liability in respect thereof. The foregoing notwithstanding, the parties agree that any filing fees of the Commission relating to the filing of the Assignment Applications shall be divided equally between CBS and Entercom. The parties agree that the Required Cure Expense shall not exceed One Million Dollars ($1,000,000.00). 11.2. BROKERS. Each party hereto represents and warrants to the other parties hereto that it has not incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents commissions or other like payment in connection with this Agreement or the transactions contemplated hereby for which the other parties will have any liability, and each party hereto agrees to indemnify and hold the other parties hereto harmless against and in respect of any such obligation or liability based in any way on any agreement, arrangement, or understanding claimed to have been made by such party with any third party. 11.3. SURVIVAL OF COVENANTS, REPRESENTATIONS, AND WARRANTIES. The provisions hereof which by their terms are to be performed and observed after the Closing Date, and the several representations, warranties, indemnities, and agreements of the parties herein contained, shall survive the Closing Date hereunder for a period of eighteen (18) months and shall remain effective and unaltered or unimpaired for such period by any investigation that may have been or may be made at any time prior to Closing by or on behalf of any party, except that the representations concerning title, ERISA, environmental matters, and taxes contained in Sections 4.1.8, 4.1.15, 4.1.19 (other than as provided in Section 6.1.4), and 4.1.24 shall survive until ninety (90) days after the expiration of the applicable statutes of 35 40 limitation, and the provisions of Sections 2.2 and Article X shall survive the Closing without limitation. 11.4. CONFIDENTIALITY. Each party agrees, except as otherwise required by law or the rules of the New York Stock Exchange (the "NYSE"), until such time as this Agreement is made public by filing with the Commission, that it will not disclose to any third party the fact of or content of this agreement or the possible exchange of the radio stations involved without the express prior consent of the other parties. Should a party be required to disclose information regarding the agreement prior to filing with the Commission because of a requirement of law or a rule of the NYSE, it will advise the other parties with reasonable advance notice in writing prior to disclosure. 11.5. AMENDMENT AND WAIVER. This Agreement cannot be changed or terminated orally. Any amendment or modification hereof must be in writing signed by the party against whom enforcement is sought. No waiver of compliance with any provision or condition hereof, and no consent provided for herein, shall be effective unless evidenced by an instrument in writing duly executed by the party sought to be charged with such waiver or consent. 11.6. EFFECT OF THIS AGREEMENT. This Agreement and the Time Brokerage Agreement set forth the entire understanding of the parties and supersedes any and all prior written or oral agreements, arrangements, or understandings relating to the subject matter hereof. No representation, promise or inducement has been made by either party which is not embodied in this Agreement, and neither party shall be bound by, or be liable for, any alleged representation, promise, inducement, or statement of intention not embodied herein unless same shall have been made subsequent hereto, shall be in writing, and shall be signed by the party to be charged therewith. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 11.7. TERMS GENERALLY. (a) Words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other genders as the context requires; (b) the terms "hereof," "herein," and "herewith" or words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all Schedules hereto) and not to any particular provision of this Agreement, and Article, Section, Paragraph, and Schedule references are to be Articles, Sections, Paragraphs, and Schedules to this Agreement unless 36 41 otherwise specified; and (c) the word "or" shall not be exclusive, except where the context otherwise requires. 11.8. HEADINGS. The article or section headings of this Agreement are for convenience of reference only and do not form a part of and do not in any way modify, interpret, or construe the intention of the parties. 11.9. COUNTERPARTS. This Agreement may be executed in one or more counterparts and all such counterparts shall be construed as one and the same instrument. Executed documents transmitted by telecopier shall be valid and binding. 11.10. GOVERNING LAW; JURISDICTION. The construction and performance of this Agreement shall be governed by the laws of the State of New York without reference to its conflict of law rules. The parties hereto expressly waive and agree to waive any right to a jury trial in any controversy or claim arising out of or relating to this Agreement. 11.11. BULK SALES LAWS. Entercom and its Affiliates waive compliance by CBS and its Affiliates with the provisions of the "bulk sales" or similar laws of any state. CBS agrees to indemnify Entercom and its Affiliates and hold them harmless from any and all loss, cost, damages, and expenses (including but not limited to reasonable attorney's fees) sustained by the indemnified parties as a result of any failure of the indemnifying party to comply with any "bulk sales" or similar laws. 11.12. ASSIGNMENT. This Agreement and the rights and obligations hereunder may not be assigned by any party hereto without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld; provided however, that (x) Entercom may make a collateral assignment of their rights hereunder for the benefit of their senior lenders and (y) any party may assign all or any part of this Agreement or the rights and obligations hereunder to an Affiliate, provided that such assignment shall not relieve such party of its obligations hereunder. 11.13. NOTICES. Any notice, report, demand, waiver, or consent required or permitted hereunder shall be in writing and shall be given by hand delivery, by prepaid registered or certified mail, 37 42 with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery or by telecopy addressed as follows: If to CBS: CBS Radio 40 West 57th Street 14th Floor New York, NY 10019 Attention: Mr. Mel Karmazin Telecopier Number: 212-314-9229 with copies to: General Counsel CBS Corporation 51 West 52nd Street New York, NY 10019-6188 Telecopier Number: 212-975-2185 and Leventhal Senter & Lerman, P.L.L.C. 2000 K Street, N.W. Suite 600 Washington, D.C. 20006 Attention: Steven A. Lerman, Esq. Telecopier Number: 202-293-7783 If to Entercom: Entercom Communications, Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Attention: Mr. Joseph M. Field, President Telecopier Number: 610-660-5641 with copies to: John C. Donlevie, Esq., Executive Vice President and General Counsel Entercom Communications, Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopier Number: 610-660-5620 38 43 and Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, DC 20004 Attention: Joseph D. Sullivan, Esq. Telecopier Number: 202-637-2201 The date of any such notice and service thereof shall be deemed to be: (i) the day of delivery if hand delivered or delivered by overnight courier; (ii) the day of delivery as indicated on the return receipt if dispatched by mail, or (iii) the date of telecopy transmission as indicated on the telecopier transmission report, provided that any telecopy transmission shall not be effective unless a paper copy is sent by overnight courier on the date of the telecopy transmission. Any party may change its address for the purpose of notice by giving notice of such change in accordance with the provisions of this Section. 11.14. ATTORNEYS' FEES. In the event of a dispute between or among the parties hereto arising out of or related to this Agreement or the interpretation or enforcement of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and expenses from the other party. 39 44 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized corporate officers and their respective corporate seals thereunto affixed on this the date first written above. CBS RADIO, INC. By:_____________________________________ Title:__________________________________ CBS RADIO LICENSE, INC. By:_____________________________________ Title:__________________________________ ARS ACQUISITION II, INC. By:_____________________________________ Title:__________________________________ ENTERCOM COMMUNICATIONS CORP. By:_____________________________________ Title:__________________________________ 40 EX-10.15 19 TIME BROKERAGE AGREEMENT CBS RADIO 1 EXHIBIT 10.15 - -------------------------------------------------------------------------------- TIME BROKERAGE AGREEMENT BY AND AMONG CBS RADIO, INC., CBS RADIO LICENSE, INC., ARS ACQUISITION II, INC., AND ENTERCOM COMMUNICATIONS CORP. DATED AS OF AUGUST 13, 1998 - -------------------------------------------------------------------------------- 2 TABLE OF SCHEDULES AND EXHIBITS Schedule 1.1 Programming Schedule 1.2 Compensation Schedule 2.1 Programming Policy Statement Schedule 4.1 Time Sales Agreements and Contracts 3 TABLE OF CONTENTS PAGE ARTICLE I. - SALE OF TIME......................................................1 Section 1.1. Broadcast of Programming..................................1 Section 1.2. Payment...................................................1 Section 1.3. Term......................................................1 ARTICLE II. - PROGRAMMING AND OPERATING STANDARDS AND PRACTICES................2 Section 2.1. Compliance with Standards.................................2 Section 2.2. Political Broadcasts......................................2 Section 2.3. Handling of Communications................................2 Section 2.4. Preemption................................................3 Section 2.5. Broadcasting Obligations of Licensee......................3 Section 2.6. "Payola" and "Plugola"....................................4 Section 2.7. Advertising and Programming...............................4 Section 2.8. Compliance with Laws......................................5 Section 2.9. Certifications............................................5 ARTICLE III. - RESPONSIBILITY FOR EMPLOYEES AND EXPENSES.......................5 Section 3.1. Time Broker's Employees...................................5 Section 3.2. Licensee's Employees......................................5 Section 3.3. Time Broker's Expenses....................................6 Section 3.4. Operating Expenses........................................6 Section 3.5. Time Broker's Insurance...................................6 ARTICLE IV. - ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS......................7 Section 4.1. Assignment................................................7 Section 4.2. Proration.................................................7 Section 4.3. Accounts Receivable.......................................8 ARTICLE V. - OPERATION OF STATION..............................................9 ARTICLE VI. - GRANT OF LICENSES................................................9 Section 6.1. License to Use Stations Facilities........................9 Section 6.2. License of Intellectual Property.........................10 (i) 4 ARTICLE VII. - INDEMNIFICATION................................................10 Section 7.1. Indemnification Rights...................................10 Section 7.2. Procedures...............................................10 ARTICLE VIII. - DEFAULT.......................................................11 Section 8.1. Time Broker Events of Default............................11 Section 8.2. Licensee's Events of Default.............................12 Section 8.3. Cure Periods.............................................12 Section 8.4. Other Defaults...........................................13 ARTICLE IX. - TERMINATION.....................................................13 Section 9.1. Termination Upon Default.................................13 Section 9.2. Termination Upon Change in FCC Rules.....................13 Section 9.3. Certain Matters Upon Termination.........................13 ARTICLE X. - REMEDIES.........................................................15 ARTICLE XI. - CERTAIN REPRESENTATIONS AND WARRANTIES OF THE PARTIES..................................................15 Section 11.1. Representations and Warranties of Time Broker............15 Section 11.2. Representations, Warranties and Covenants of Operator and CRLI.................................................16 ARTICLE XII. - MISCELLANEOUS..................................................17 Section 12.1. Modification and Waiver..................................17 Section 12.2. No Waiver; Remedies Cumulative...........................18 Section 12.3. Construction.............................................18 Section 12.4. Headings.................................................18 Section 12.5. Successors and Assigns...................................18 Section 12.6. Force Majeure............................................18 Section 12.7. Broker...................................................19 Section 12.8. Counterpart Signatures...................................19 Section 12.9. Notices..................................................19 Section 12.10. Entire Agreement.........................................20 Section 12.11. Severability.............................................21 Section 12.12. No Joint Venture.........................................21 Section 12.13. Damage to Stations.......................................21 (ii) 5 Section 12.14. Noninterference..........................................21 Section 12.15. Regulatory Changes.......................................21 Section 12.16. Attorneys' Fees..........................................22 (iii) 6 TIME BROKERAGE AGREEMENT This Time Brokerage Agreement (this "Agreement") is made as of the 13th day of August 1998, by and among CBS Radio, Inc., a Delaware corporation ("Operator"), CBS Radio License, Inc., a Delaware Corporation ("CRLI"), ARS Acquisition II, Inc., a Delaware Corporation ("ARSA") (CRI, CRLI and ARSA are collectively referred to herein as "Licensee") and Entercom Communications Corp., a Pennsylvania corporation ("Entercom" or "Time Broker"). CRLI is the licensee of broadcast stations WAAF(FM) and WWTM(AM), Worcester, Massachusetts, and WEGQ(FM), Lawrence, Massachusetts (collectively, the "Stations"). Concurrently with the execution of this Agreement, Time Broker, Operator and CRLI are entering into an Asset Purchase Agreement (the "Purchase Agreement") providing for the purchase by Time Broker of the Stations, upon the terms and conditions set forth therein. Time Broker and Licensee desire to enter into an agreement providing for the sale of substantially all of the broadcast time of the Stations to Time Broker, subject to and in compliance with the rules and policies of the Federal Communications Commission (the "FCC"). Accordingly, in consideration of the foregoing and of the mutual promises, covenants, and conditions set forth below, the parties agree as follows: ARTICLE I. SALE OF TIME Section 1.1. Broadcast of Programming Effective seven (7) business days after the expiration or early termination of any waiting period applicable to the transfer of the Stations to Time Broker under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") (the "Commencement Date"), Licensee shall broadcast on the Stations, or cause to be broadcast on the Stations, programs which are presented to it by Time Broker as described in greater detail on Schedule 1.1 (the "Programming"). Section 1.2. Payment. Time Broker shall pay Licensee for broadcast of the Programming the amounts set forth in Schedule 1.2 (the "Monthly Payment"), subject to adjustment as set forth in Section 2.4 below. All payments shall be made by wire transfer of immediately-available funds by the last business day of each calendar month, in arrears, to which such payment pertains. Any amount not paid when due shall bear interest at the rate of ten percent (10%) per annum. Section 1.3. Term. This Agreement shall commence on the Commencement Date and shall terminate on the earlier of (i) 12:01 a.m. on the Closing Date under the Purchase Agreement, (ii) the date 7 the Purchase Agreement is terminated, or (iii) the date this Agreement is terminated pursuant to Section 9.1 hereof. ARTICLE II. PROGRAMMING AND OPERATING STANDARDS AND PRACTICES Section 2.1. Compliance with Standards. All Programming delivered by Time Broker and all programming supplied by Licensee during the term of this Agreement shall be in accordance with applicable statutes, FCC requirements and the programming policies set forth on Schedule 2.1. Licensee reserves the right to refuse to broadcast any Programming containing matter which the Licensee believes is unsuitable or not consistent with the needs and interests of its service area or may be violative of any right of any third party, or which may constitute a "personal attack" as that term is and has been defined by the FCC or which Licensee reasonably determines is, or in the reasonable opinion of Licensee may be deemed to be, indecent (and not broadcast during the safe harbor for indecent programming established by the FCC) or obscene by the FCC or any court or other regulatory body with authority over Licensee or the Stations. If Time Broker does not adhere to the foregoing requirements, Licensee may suspend or cancel any specific program not so in compliance, without any reduction or offset in the payments due Licensee under this Agreement. Section 2.2. Political Broadcasts. Time Broker shall maintain and deliver to Licensee all records and information required by the FCC to be placed in the public inspection files of the Stations pertaining to the broadcast of political programming and advertisements, in accordance with the provisions of Sections 73.1940 and 73.3526 of the FCC's rules, and agrees to broadcast sponsored programming addressing political issues or controversial subjects of public importance, in accordance with the provisions of Section 73.1212 of the FCC's rules. Time Broker shall consult and cooperate with Licensee and adhere to all applicable statutes and the rules, regulations and policies of the FCC, as announced from time to time, with respect to the carriage of political advertisements and programming (including, without limitation, the rights of candidates and, as appropriate, others to "equal opportunities" and the carriage of contrasting points of view as mandated by any "fairness" rule with respect to such "issue-oriented" advertising or programming as may be broadcast) and the charges permitted therefor. Time Broker shall promptly provide to Licensee such documentation relating to such programming as Licensee is required to maintain in its public inspection files or as Licensee shall reasonably request. Licensee shall be responsible for the maintenance of the public inspection files of the Stations. Section 2.3. Handling of Communications. Time Broker shall cooperate with Licensee in promptly responding to all mail, cables, telegrams or telephone calls directed to the Stations in connection with the Programming 2 8 provided by Time Broker or any other matter relevant to its responsibilities hereunder. Promptly upon receipt, Time Broker shall provide copies of all such correspondence to Licensee. Time Broker shall promptly advise Licensee of any public or FCC complaint or inquiry known to Time Broker concerning such Programming, and shall provide Licensee with copies of any letters to Time Broker from the public, including complaints concerning such Programming. Upon Licensee's request, Time Broker shall broadcast material responsive to such complaints and inquiries. Notwithstanding the foregoing, Licensee shall handle all matters or inquiries relating to FCC complaints and any other matters required to be handled by Licensee under the rules and regulations of the FCC. Section 2.4. Preemption. Licensee may, from time to time, preempt portions of the Programming to broadcast emergency information or programs it deems would better serve the public interest. Time Broker shall be notified at least one week in advance of any preemption of any of the Programming for the purpose of broadcasting programs Licensee deems necessary to serve the public interest unless such advance notice is impossible or impractical, in which case Licensee shall notify Time Broker promptly upon making such determination. In the event of any such preemption, Time Broker shall be entitled to full reimbursement of damages suffered as a result of such preemption, except in the case of preemption to cover breaking news or to broadcast emergency information. Licensee represents and covenants that preemption pursuant to this Section 2.4 shall only occur to the extent Licensee deems necessary to carry out its obligations as an FCC licensee, and expressly agrees that its right of preemption shall not be exercised in an arbitrary manner or for the commercial advantage of Licensee or others. Section 2.5. Broadcasting Obligations of Licensee. During the term of this Agreement, except as set forth in Sections 2.1 and 2.4, Licensee will broadcast the Programming in its entirety (including commercials), without interruption, deletion or addition of any kind, except as set forth below: Licensee may temporarily refrain from broadcasting the Programming between the hours of 12:30 a.m. and 5:30 a.m. (or at such other time in the event that weather conditions or contractual arrangements relating to transmitter sites dealing with the exposure of humans to RF radiation so require) in order to perform normal, customary and routine maintenance on the Stations' transmitting facilities; provided that Licensee shall provide written notice to Time Broker of its intent to refrain from broadcasting the Programming at least forty-eight (48) hours in advance, except when an emergency requires such suspension, and provided further that Licensee shall use its best efforts to minimize the frequency and duration of such interruptions: (a) Licensee may temporarily cease broadcasting the Programming as a result of a natural disaster, act of public enemy, act of God or other event beyond Licensee's control; provided that in any such case, Licensee 3 9 will act expediently and use its best efforts to resume the broadcast of the Programming as quickly as the applicable circumstances will allow; and (b) Licensee may temporarily refrain from broadcasting the Programming on the Stations as a result of a technical problem with the Stations' transmitting equipment which is beyond Licensee's control and which is not directly or indirectly the result of any act or omission of Licensee or any of its employees or agents; provided that in such case, Licensee will act expediently and use its best efforts to resume the broadcast of the Programming as quickly as the applicable circumstances will allow. Section 2.6. "Payola" and "Plugola". Time Broker agrees that it will not accept any gift, gratuity or other consideration, including, but not limited to, a commission, discount, bonus, material supplies or other merchandise, services or labor (collectively, the "Consideration"), directly or indirectly, from any person or company for the playing of records, the presentation of any programming or the broadcast of any commercial announcement over the Stations unless the payor is identified in the program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act of 1934, as amended (the "Communications Act") and the FCC requirements. It is further understood and agreed that no commercial message, plugs, or undue reference shall be made in programming presented over the Stations to any business venture, profit-making activity or other interest (other than non-commercial announcements for bona fide charities, church activities or other public service activities) unless the payor is identified in the program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act and the FCC requirements. In addition, Time Broker agrees that it will take steps, including the continuation of Licensee's system for periodic execution of affidavits, reasonably designed to assure that it, its employees and agents comply with this Section 2.7. Section 2.7. Advertising and Programming. Beginning with the Commencement Date, Time Broker shall be solely responsible for any expenses incurred in connection with and shall be entitled to all revenue from the sale of advertising or program time on the Stations. Except as otherwise provided herein, Time Broker does not assume any obligation of Licensee under any contract or advertising arrangement entered into by Licensee on or after the Commencement Date. Time Broker will advise Licensee of its lowest unit charge for political advertising, and Licensee shall not do anything that would lower Time Broker's lowest unit charge. 4 10 Section 2.8. Compliance with Laws. At all times during the term of this Agreement, Time Broker and Licensee shall comply in all material respects with all applicable federal, state and local laws, rules and regulations, including the use of FCC-licensed operators where such are required. Section 2.9. Certifications. Pursuant to Section 73.3555(a)(3)(ii) of the FCC's rules, Licensee certifies that it maintains ultimate control over the Stations' facilities, including specifically control over station finances, personnel and programming, and Time Broker certifies that this Agreement complies with the provisions of Sections 73.3555 of the FCC's rules. ARTICLE III. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES Section 3.1. Time Broker's Employees. (a) Time Broker shall employ and be responsible for the payment of salaries, taxes, insurance and all other costs related to all personnel used in the production of the Programming. Time Broker will not incur any liability on account of Licensee's employees arising and accruing prior to the Commencement Date including, without limitation, any such liability on account of unemployment insurance contributions, termination and severance payments, accrued sick leave or accrued vacation. (b) Time Broker's and Licensee's obligations with regard to the hiring by Time Broker of Licensee's employees at the Stations shall be as set forth in Section 3.2.2 and Section 6.5.1 of the Purchase Agreement, except as provided herein. As of the Commencement Date, Licensee shall terminate all of its employees to whom Time Broker will extend offers of employment, except for those personnel necessary to fulfill Licensee's obligations under the Communications Act, the rules of the FCC and other applicable laws and Non-Continuing Employees (as defined in the Purchase Agreement), if any. Time Broker shall offer employment to such terminated employees of Licensee as provided in Section 6.5.1 of the Purchase Agreement. Section 3.2. Licensee's Employees. Licensee shall employ and be responsible for the payment of salaries, employment taxes, insurance and all other costs related to the personnel necessary to fulfill its obligations as Licensee and to transmit the Programming. Time Broker shall have no authority and shall not 5 11 supervise persons in the employ of Licensee after the Commencement Date. Licensee acknowledges that its employees may have access to certain confidential information of Time Broker. Licensee shall, therefore, inform its employees of the confidential nature of such information and require that each such employee keep such information confidential. Section 3.3. Time Broker's Expenses. Time Broker shall pay for all costs associated with the production and delivery of the Programming, including but not limited to (i) all ASCAP, BMI, SESAC and other copyright fees, (ii) any expenses incurred in connection with its sale of advertising time hereunder (including without limitation sales commissions) in connection with the Programming, (iii) the salaries, employment taxes, insurance and related costs for all personnel used in the production of the Programming and all sales personnel (including salespeople, traffic personnel, and programming staff), and (iv) maintenance, repairs and capital expense (to the extent Licensee is not covered by insurance) of the Stations' studio equipment; provided however, that if this Agreement is terminated other than through closing of the Purchase Agreement, Time Broker will be reimbursed for any capital expenditures made during the term of this Agreement. Section 3.4. Operating Expenses. Except as provided in Section 3.3, Licensee shall be responsible for the payment when due of all fees and expenses relating to operation and maintenance of the Stations to the extent necessary for Licensee to maintain the licensed transmitting capability of the Stations and to fulfill its obligations as an FCC Licensee, including, without limitation, salaries, benefits and similar expenses for Licensee's employees, Licensee's federal, state and local taxes, rent, utilities (excluding telephone), maintenance and repairs at the Stations' transmitter sites, any capital expense at the Stations' transmitter and studio sites, insurance on the Stations' equipment, insurance deductibles on claims on the Stations' equipment, and ad valorem property taxes. Section 3.5. Time Broker's Insurance. At all times while this Agreement remains in effect, Time Broker shall maintain Broadcaster's Liability Insurance with coverage of at least One Million Dollars ($1,000,000.00) per occurrence, Workers Compensation insurance and Commercial General Liability insurance with a combined single limit amount of Five Million Dollars ($5,000,000.00) with insurance companies that have a Best rating of A or better. Time Broker shall deliver certificates of insurance periodically to Licensee evidencing that such insurance remains in effect and such policies shall name Licensee as an additional insured. 6 12 ARTICLE IV. ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS Section 4.1. Assignment. On the Commencement Date, Licensee shall assign to Time Broker title to all vehicles that are part of the Property (as defined in the Purchase Agreement) and all Time Sales Agreements, Trade Agreements and Barter Agreements (as such agreements are defined in the Purchase Agreement), together with those contracts and other agreements identified on Schedule 4.1 (collectively, the "Contracts"). Time Broker shall, on and as of the Commencement Date, assume and become fully liable and responsible for all liabilities and obligations of Licensee accruing after the Commencement Date under the Contracts. Except as set forth in the Purchase Agreement, Licensee has provided Time Broker with true and complete copies, including amendments, of the Contracts. The Contracts are freely assignable, or, if consent of the other contracting party to the assignment is required, Licensee shall use its reasonable best efforts to obtain such consent as promptly as practicable; provided that CBS shall not be obligated to pay money to any other contracting party to obtain any such consent, other than reasonable expenses of the party for any legal documentation related to the assignment of the Contract in question. If Licensee is unable to obtain any consent necessary to permit the valid assignment of a Contract, Licensee shall act as Time Broker's agent in connection with such Contract and the parties shall cooperate to cause Time Broker to receive the benefit of the Contract in exchange for performance by Time Broker of all of Licensee's obligations under such Contract (including but not limited to the payment to Licensee of all amounts due under the Contract on or after the Commencement Date for services provided by Licensee). Section 4.2. Proration. All expenses and income arising under the Contracts shall be prorated between Licensee and Time Broker as of the Commencement Date in a manner such that the costs and benefits thereunder through the date before the Commencement Date shall be for the account of Licensee and, thereafter, during the term of this Agreement, for the account of Time Broker. Such proration shall include an adjustment to the extent that the excess of the value of unfulfilled obligations under Trade Agreements and Barter Agreements (as defined in the Purchase Agreement), including any "time bank" provisions thereof, over the value of consideration to be received by the Stations (in each case determined as of the Commencement Date) (the "Net Negative Trade Balance") exceeds One Hundred Thousand Dollars ($100,000.00). The total value of all unfulfilled obligations in respect of Trade Agreements and Barter Agreements to be assumed by Entercom, whether or not the Stations have received consideration therefor, shall not be in excess of Five Hundred Thousand Dollars ($500,000.00) as of the Closing Date. It is agreed and understood that the proration required hereby shall include an adjustment for any accrued but unpaid vacation of Licensee's employees that are hired by Time Broker pursuant to the provisions of Section 3.1(b) hereof. It is further agreed and understood that such proration shall not include an adjustment for any termination or severance payments or benefits obligations 7 13 that Licensee is required to pay as a result of the termination of its employees pursuant to Section 3.1(b) or any sick leave or other similar benefit, and that Time Broker shall not be responsible for any such termination or severance payments or benefits obligations except for those incurred on account of employees hired by Time Broker on or after the Commencement Date pursuant to Time Broker's severance policy, if any, after the Commencement Date. Such prorations shall be completed and any necessary payments on account of such prorations paid within sixty (60) days of the Commencement Date. If any disagreement with respect to the proration of such income and expenses cannot be resolved by the parties, Licensee and Time Broker will select a certified public accountant knowledgeable in the broadcast industry to resolve the dispute. The parties will use their best efforts in good faith to cause to occur as expeditiously as possible the appointment of the certified public accountant, and once appointed, the resolution of the dispute. The resolution of such accountant shall be binding on the parties and subject to judicial enforcement. Payment of the cost of the accountant shall be shared equally between Time Broker and Licensee. Section 4.3. Accounts Receivable. All cash accounts receivable for broadcasts on the Stations which occur prior to the Commencement Date (the "Accounts Receivable") shall belong to Licensee and for broadcasts which occur thereafter shall belong to Time Broker. Within ten (10) days following the Commencement Date, Licensee shall deliver to Time Broker a schedule of Cash Accounts Receivable for the Stations as of the Commencement Date (the "Schedule of Accounts Receivable"). Time Broker agrees to collect for Licensee its Accounts Receivable as shown on the Schedule of Accounts Receivable delivered by Licensee for a period of one hundred fifty (150) days following the Commencement Date. Licensee will provide Time Broker a power of attorney or other required authorization for the limited purpose of allowing Time Broker to endorse and deposit checks and other instruments received in payment of such Accounts Receivable. All payments received by Time Broker from any customer whose name appears in the Schedule of Accounts Receivable and who is also a customer of Time Broker shall be credited as payment of the account or invoice designated by such customer. In the absence of any such designation by the customer, payments shall be first credited to the oldest invoice which is not disputed by said customer. Time Broker shall keep accurate records of the payment received by it on such Accounts Receivable and Licensee shall have access at reasonable times to Time Broker's records to verify such status of the Accounts Receivable. Time Broker shall remit to Licensee on a weekly basis, one week in arrears, amounts previously collected by Time Broker on such Accounts Receivable, along with a written accounting of same, including without limitation, to the extent Licensee's traffic and billing system can produce same, a detailed open Accounts Receivable report reflecting payments remitted therewith. Any Accounts Receivable that have not been collected within such one hundred fifty (150) day period shall be returned to Licensee, together with all records in connection therewith, including without limitation, to the extent Licensee's traffic and billing system can produce same, a detailed open Accounts Receivable report reflecting payments remitted therewith, whereupon Licensee may pursue collection thereof in such manner as it, in its sole discretion, may determine. Time Broker shall 8 14 not have the right to compromise, settle or adjust the amounts of any such Accounts Receivable without Licensee's prior written consent. Except to remit collected Accounts Receivable in accordance herewith, Time Broker shall have no liability or obligation to Licensee with respect to the collection of its accounts and shall not be obligated to take any action to collect such accounts. ARTICLE V. OPERATION OF STATION Notwithstanding any provision of this Agreement to the contrary, Licensee shall retain full authority and power with respect to the management and operation of the Stations during the term of this Agreement. The parties agree and acknowledge that Licensee's continued control of the Stations and their premises is an essential element of the continuing validity and legality of this Agreement. Accordingly, Licensee shall employ the General Manager of the Stations and such other personnel as Licensee determines may be necessary to fulfill its obligations as a licensee under the Communications Act and its obligations in accordance with Section 3.2 hereof. Licensee shall retain full authority and control over the policies, programming and operations of the Stations, including, without limitation, the decision whether to preempt Programming in accordance with Section 2.4 hereof. Licensee shall have ultimate responsibility to effectuate compliance with the Communications Act and with FCC rules, regulations and policies. In no event shall Time Broker or its employees represent, depict, describe or portray Time Broker as the licensee of the Stations. ARTICLE VI. GRANT OF LICENSES Section 6.1. License to Use Stations Facilities. Effective as of the Commencement Date, Licensee grants Time Broker a license to access and use all of the Stations' studio and office space and other facilities ("Stations Facilities") and all equipment and furnishings contained therein ("Stations Equipment") in the production and broadcasting of the Programming and sales and administration relating thereto, in accordance with the terms set forth in this Section 6 (the "Time Broker License"). The Time Broker License shall have a term coterminous with this Agreement. Time Broker shall not remove from the Stations Facilities or modify any Stations Equipment in the Stations Facilities owned by or leased or licensed to Licensee without Licensee's prior written consent, such consent not to be unreasonably withheld. Licensee shall not license the use of the Stations Facilities to any other party during the term of the Time Broker License; and Time Broker's use of the Stations Facilities shall be exclusive except for Licensee's right to use such facilities as it deems appropriate in connection with the satisfaction of its obligations as the Licensee of the Stations, including the use of such facilities and adequate office space for the employees of Licensee that are required for Licensee to comply with its obligations under Section 3.2 and 5 hereof. Time Broker shall use due care in the use of any property of Licensee. Time Broker shall 9 15 indemnify Licensee for any damage (normal wear and tear excepted) to Licensee's property caused by Time Broker or any employee, contractor, agent or guest of Time Broker. Section 6.2. License of Intellectual Property. Effective as of the Commencement Date, Licensee licenses to Time Broker the exclusive right to use (or, to the extent Licensee does not hold exclusive rights, the non-exclusive right to use) all intellectual property owned by or licensed to Licensee and used solely in the operation of the Stations (including, but not limited to, logos, jingles, promotional materials, call signs and goodwill) (the "IP License"). In the event of termination of this Agreement, the IP License shall terminate; provided, however, that Licensee shall own all trademarks, service marks, trade names, characters, formats, jingles, promotional materials, logos and positioning statements which Time Broker develops for the Programming during the term of this Agreement. ARTICLE VII. INDEMNIFICATION Section 7.1. Indemnification Rights. Each party will indemnify and hold harmless the other party, and the directors, officers, partners, employees, agents and affiliates of such other party, from and against any and all liability, including without limitation reasonable attorneys' fees arising out of or incident to (i) any breach by such party of a representation, warranty or covenant made herein, (ii) the programming produced or furnished by such party hereunder, or (iii) the conduct of such party, its employees, contractors or agents (including negligence) in performing its or their obligations hereunder. Without limiting the generality of the foregoing, each party will indemnify and hold harmless the other party, and the directors, officers, partners, employees, agents and affiliates of such other party, from and against any and all liability for libel, slander, infringement of trademarks, trade names, or program titles, violation of rights of privacy, and infringement of copyrights and proprietary rights resulting from the programming produced or furnished by it hereunder. The parties' indemnification obligations hereunder shall survive any termination or expiration of this Agreement. Section 7.2. Procedures. If any party has a claim for indemnification hereunder (such party, an "Indemnitee") arising out of any claim or liability which is asserted or threatened against it, or any action, suit or proceeding is commenced by any third party against any Indemnitee which might result in any indemnification obligations hereunder on behalf of any other party (such other party, an "Indemnitor"), such Indemnitee shall, within twenty (20) business days from the receipt of same, give written notice thereof to each such Indemnitor together with a brief statement of the basis of the claim and a copy of any complaint or other documents relating to such claim, provided, however, that failure to give such notice within such twenty (20) business 10 16 day period shall not affect the liability of Indemnitor hereunder unless the failure to give such notice within such period materially and adversely affects Indemnitor's ability to defend against the claim giving rise to Indemnitee's claim for indemnification or to cure the default giving rise to such claim. Within twenty (20) days from receipt of such notice, the Indemnitor shall give the Indemnitee written notice as to whether the Indemnitor elects to contest any such claim or liability; provided, however, that during the interim, the Indemnitee shall be entitled to take reasonable action (which shall not include settlement) with respect to such claim which it deems necessary to protect against further damage or default with respect thereto. If an Indemnitor elects to contest any such claim or liability, it shall be at the cost and expense of the Indemnitor and using professionals chosen by the Indemnitor. The Indemnitee may participate in the defense of any claim or liability that an Indemnitor has elected to contest, but such participation shall be at its own expense. If the Indemnitor does not elect to assume control or otherwise participate in the defense of any third party claim, it shall be bound by the results obtained by the Indemnitee with respect to such claim. ARTICLE VIII. DEFAULT Section 8.1. Time Broker Events of Default. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be an Event of Default by Time Broker under this Agreement: (a) Time Broker's failure to timely pay any of the Monthly Payment provided for in Section 1.2 or other payments required hereunder; (b) except as otherwise provided for in this Agreement, the failure of Time Broker to supply the Programming; (c) any termination of this Agreement by Time Broker other than as permitted in Section 9.1; or (d) the occurrence of any of the following which arises out of, relates to or is attributable to the acts or omissions of Time Broker: (i) the issuance by the FCC of a Show Cause Order designating any of the Stations' FCC authorizations for revocation; (ii) the issuance by the FCC of an order designating for an evidentiary hearing the Stations' applications for renewal of the FCC authorizations; (iii) the issuance by the FCC of an order designating for an evidentiary hearing an application for the assignment of the Stations' FCC authorizations to Time Broker; (iv) breach of any covenant of Time Broker which would reasonably be expected to lead or to the revocation or non-renewal of the FCC authorizations of any of the Stations; or 11 17 (v) a continuing, uncured material breach of any covenant of Time Broker. Section 8.2. Licensee's Events of Default. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be an Event of Default by Licensee under this Agreement: (a) except as otherwise provided for in this Agreement, the failure of Licensee to broadcast the Programming; (b) any termination of this Agreement by Licensee other than as permitted in Section 9.1; (c) the issuance by the FCC of an order designating for an evidentiary hearing an application for the assignment of the Stations' FCC authorizations to Time Broker which arises out of, relates to or is attributable to the acts or omissions of Licensee but excluding issues which are based upon Time Broker's conduct hereunder for which Licensee may be held responsible; or (d) a continuing, uncured material breach of any covenant of the Licensee. Section 8.3. Cure Periods. The cure periods before any event listed in Sections 8.1 or 8.2 shall become an vent of Default are as follows: (a) Payment by Time Broker. The Monthly Payment or other payments required hereunder to be paid to Licensee must be received by Licensee within five (5) days after Licensee gives written notice of non-payment to Time Broker. (b) Certain Matters. There shall be no cure period for (i) the matters relating to the FCC set forth in Sections 8.1(d) or 8.2(c) hereof, (ii) a termination by Time Broker described in Section 8.1(c); or (iii) a termination by Licensee described in Section 8.2(b) hereof. (c) Programs and Broadcast Matters. With respect to Time Broker's failure to provide the Programming referred to in Section 8.1(b) hereof or Licensee's failure to broadcast the Programming referred to in Section 8.2(a) hereof, the period allowed for cure shall be three business days from the giving of written notice of such failure to the defaulting party by the non-defaulting party. (d) Other Matters. With respect to all matters capable of being cured other than those described in Sections 8.3(a), 8.3(b) or 8.3(c) above, the cure period shall be ten (10) days after written notice to the defaulting party is given by the non-defaulting party or, with respect to matters that through the exercise of reasonable diligence cannot be cured within such ten (10) day period, such longer period not to exceed ninety (90) days as is reasonably necessary to effect such cure through the exercise of reasonable diligence. 12 18 Section 8.4. Other Defaults. For any other breach of a representation, warranty or covenant made herein that is not listed in Sections 8.1 or 8.2, a party's sole remedy shall be indemnification pursuant to Article VII hereof. ARTICLE IX. TERMINATION This Agreement shall automatically terminate upon the expiration of the term of this Agreement as set forth in Section 1.3. In addition, this Agreement shall terminate as provided below. Section 9.1. Termination Upon Default. In addition to other remedies available at law or equity, this Agreement may be terminated by either Licensee or Time Broker by written notice to the other, specifying an effective date of termination which is not less than seven (7) days nor more than ninety (90) days from the date such notice is given, if the party seeking to terminate is not then in material default or breach hereof, upon an uncured Event of Default. In the event that the non-defaulting party does not exercise such right of termination by giving such written notice within sixty (60) days of the occurrence of an uncured Event of Default, then the Event of Default giving rise to such right of termination shall be deemed waived and the Agreement shall continue in full force and effect. Section 9.2. Termination Upon Change in FCC Rules. In addition to other remedies available at law or equity, this Agreement may be terminated by either Licensee or Time Broker by written notice to the other, specifying an effective date of termination which is not less than seven (7) days nor more than thirty (30) days from the date such notice is given, in the event of a change in FCC rules, policies, or precedent that would cause this Agreement to be in violation thereof and such change is final, in effect, and has not been stayed, and the parties have been unable, after negotiating in good faith for at least thirty (30) days, to modify this Agreement to comply with the change in FCC rules, policies, or precedent. Section 9.3. Certain Matters Upon Termination. (a) Upon any termination of this Agreement, Licensee shall have no further obligation to provide to Time Broker any broadcast time or broadcast transmission facilities and Time Broker shall have no further obligations to make any payments to Licensee under Section 1.2 hereof. Upon 13 19 any termination, Time Broker shall be responsible for all debts and obligations of Time Broker to third parties based upon the purchase of air time and use of Licensee's transmission facilities including, without limitation, accounts payable, barter agreements and unaired advertisements, but not for Licensee's federal, state and local income and business franchise tax liabilities or taxes levied upon Licensee's personal property. Notwithstanding anything herein to the contrary, to the extent that any invoice, bill or statement submitted to Licensee after the termination of this Agreement or any payment made by Time Broker prior to the termination of this Agreement relates to expenses incurred in operating the Stations, for periods both before and after the termination of this Agreement, such expenses shall be prorated between Licensee and Time Broker in accordance with the principle that Time Broker shall be responsible for expenses allocable to the period prior to the termination of this Agreement and Licensee shall be responsible for expenses allocable to the period on and after the termination of this Agreement. Such proration shall include an adjustment for Time Broker's Trade Agreements only to the extent that Time Broker's Net Negative Trade Balance exceeds One Hundred Thousand Dollars ($100,000.00). Each party agrees to reimburse the other party for expenses paid by the other party to the extent appropriate to implement the proration of expenses pursuant to the preceding sentence. (b) If this Agreement terminates other than as a result of the Closing (as defined in the Purchase Agreement), Time Broker shall (i) assign to Licensee and Licensee shall assume all Contracts (including those employment contracts assumed by Time Broker pursuant to this Agreement) and all renewals, replacements or other contracts entered in the ordinary course of business relating to the Stations between the Commencement Date and the date of termination of this Agreement ("Supplemental Contracts") in effect on the date of such termination or expiration; (ii) assign to Licensee title to vehicles assigned to Time Broker under Section 4.1; and (iii) be responsible for only those obligations under the Contracts and Supplemental Contracts arising on or after the Commencement Date and prior to the termination of this Agreement. (c) Notwithstanding anything in Section 7.1 to the contrary, no expiration or termination of this Agreement shall terminate the obligation of each party to indemnify the other for claims under Section 7 hereof or limit or impair any party's rights to receive payments due and owing hereunder on or before the date of such termination. 14 20 ARTICLE X. REMEDIES In addition to a party's rights of termination hereunder (and in addition to any other remedies available to it or provided under law), in the event of an uncured Event of Default with respect to either party, the other may seek specific performance of this Agreement, in which case the defaulting party shall waive the defense in any such suit that the other party has an adequate remedy at law and interpose no opposition, legal or otherwise, as to the propriety of specific performance as a remedy hereunder, and agrees that the other party shall have the right to obtain specific performance of the defaulting party without being required to prove actual damages, post bond, or furnish other security. ARTICLE XI. CERTAIN REPRESENTATIONS AND WARRANTIES OF THE PARTIES Section 11.1. Representations and Warranties of Time Broker. Time Broker hereby represents and warrants to Licensee as follows: 11.1.1. Corporate Organization. Time Broker is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, is duly qualified to do business in the Commonwealth of Massachusetts and has full power and authority to conduct its business as currently conducted. 11.1.2. Authorization; Enforceability. This Agreement has been duly executed and delivered by Time Broker, and is valid, binding and enforceable against Time Broker in accordance with its terms. Time Broker has full right, power, authority and legal capacity to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery and performance of this Agreement and the consummation of the transactions provided for hereby have been duly authorized by all necessary action on the part of Time Broker, and no other organizational or other proceedings on the part of Time Broker are necessary to authorize the execution or delivery of this Agreement or the transactions contemplated hereby. 11.1.3. No Consent. Except to the extent any of the Contracts require consent to assignment, no consent of any other party and no consent, license, approval or authorization of, or exemption by, or filing, restriction or declaration with, any governmental authority, bureau, agency or regulatory authority, other than the filing of this Agreement with the FCC and the expiration or early termination of any applicable waiting period under the HSR Act, if applicable, is required in connection with the execution, delivery or performance of this Agreement by Time Broker or will effect the validity or performance of this Agreement. 15 21 11.1.4. No Breach. Neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby will constitute or result in the breach of any term, condition or provision of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of Time Broker pursuant to the organizational documents of Time Broker, any agreement or other instrument to which Time Broker is a party or by which any part of its property is bound, or violate any law, regulation, judgment or order binding upon Time Broker. 11.1.5. Actions and Proceedings. There is no judgment outstanding and no litigation, claim, investigation or proceeding pending against Time Broker or, to the knowledge of Time Broker, threatened before any court or governmental agency to restrain or prohibit, or to obtain damages, or other relief in connection with, this Agreement, the Purchase Agreement or the consummation of the transactions contemplated hereby or thereby or that might adversely affect Time Broker's performance under this Agreement. 11.1.6. Qualifications. Time Broker is qualified in accordance with the Communications Act of 1934, as amended, and the rules and policies of the FCC to enter into this Agreement and provide programming on the Stations in accordance with its terms. Between the date hereof and the termination of this Agreement, either by the Closing of the Purchase Agreement or the earlier termination in accordance with Article 9 hereof, Time Broker will not take any action that Time Broker knows, or has reason to believe, would disqualify it from providing programming on the Stations pursuant to this Agreement. Section 11.2. Representations, Warranties and Covenants of Operator and CRLI. Operator and CRLI hereby represent, warrant and covenant to Time Broker as follows: 11.2.1. Corporate Organization. Operator is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, is duly qualified to do business in the Commonwealth of Massachusetts and has full power and authority to conduct its business as currently conducted. CRLI is a corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware, is duly qualified to do business in the Commonwealth of Massachusetts and has full power and authority to conduct its business as currently conducted. 11.2.2. Authorization; Enforceability. This Agreement has been duly executed and delivered by each of Operator and CRLI, and is valid, binding and enforceable against each of them in accordance with its terms. Each of Operator and CRLI has full right, power, authority and legal capacity to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions provided for hereby have 16 22 been duly authorized by all necessary action on the part of each of Operator and CRLI, and no other organizational or other proceedings on the part of Operator or CRLI are necessary to authorize the execution or delivery of this Agreement or the transactions contemplated hereby. 11.2.3. No Consent. Except to the extent any of the Contracts require consent to assignment, no consent, license, approval or authorization of or exemption by, or filing, restriction or declaration with, any governmental authority, bureau, agency or regulatory authority, other than the filing of this Agreement with the FCC and the expiration or early termination of any applicable waiting period under the HSR Act, if applicable, is required in connection with the execution, delivery or performance of this Agreement or will affect the validity or enforceability of this Agreement. 11.2.4. No Breach. Except to the extent any of the Contracts require consent to assignment, neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby will constitute or result in the breach of any term, condition or provision of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of Operator or CRLI pursuant to the organizational documents of Operator or CRLI, any agreement or other instrument to which Operator or CRLI is a party or by which any part of their property is bound, or violate any law, regulation, judgment or order binding upon Operator or CRLI. 11.2.5. Actions and Proceedings. There is no judgment outstanding and no litigation, claim, investigation or proceeding pending against Operator or CRLI or, to the knowledge of Operator or CRLI, threatened before any court or governmental agency to restrain or prohibit, or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. 11.2.6. Maintenance of Current Operations. The Stations' transmission equipment shall be maintained by Operator and CRLI in a condition consistent with good engineering practices and in compliance in all material respects with the Communications Act and all other applicable rules, regulations and technical standards of the FCC. 11.2.7. Other Agreements. During the term of this Agreement, Operator and CRLI will not enter into any other time brokerage, program provision, local management or similar agreement with any third party with respect to the Stations. ARTICLE XII. MISCELLANEOUS Section 12.1. Modification and Waiver. No modification or waiver of any provision of this Agreement shall in any event be effective unless the same shall be in writing signed by the party against whom the waiver is 17 23 sought to be enforced, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. Section 12.2. No Waiver; Remedies Cumulative. No failure or delay on the part of Licensee or Time Broker in exercising any right or power hereunder shall operate as a waiver thereof, nor any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensee and Time Broker herein provided are cumulative and are not exclusive of any rights or remedies which they may otherwise have. Section 12.3. Construction. This Agreement shall be construed in accordance with the laws of the State of New York without reference to conflict of laws principles, and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations now or hereafter in force and to the regulations of the FCC and all other governmental bodies or authorities presently or hereafter duly constituted. The parties hereto expressly waive and agree to waive any right to a jury trial in any controversy or claim arising out of or relating to this Agreement. Section 12.4. Headings. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. Section 12.5. Successors and Assigns. Any party may assign all or any part of this Agreement or the rights and obligations hereunder to a person or entity controlling, controlled by or under common control with such party, provided that any such assignment shall not relieve such party of its obligations hereunder. Except as otherwise provided herein, this Agreement and the rights and obligations hereunder may not be assigned by any party hereto without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Section 12.6. Force Majeure. The parties acknowledge and agree that a party will not be liable for any failure to timely perform any of its obligations under this Agreement if such failure is due, in whole or in part, directly or indirectly, to accidents, fires, floods, governmental actions, war, civil disturbances, other causes beyond such party's control or any other occurrence which would generally be considered an event of force majeure. 18 24 Section 12.7. Broker. The parties agree to indemnify and hold each other harmless against any claims from any broker or finder based upon any agreement, arrangement, or understanding alleged to have been made by the indemnifying party. Section 12.8. Counterpart Signatures. This Agreement may be signed in one or more counterparts. Section 12.9. Notices. Any notice, report, demand, waiver or consent required or permitted hereunder shall be in writing and shall be given by hand delivery, by prepaid registered or certified mail, with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery or by telecopy addressed as follows: If the notice is to Time Broker: Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Attention: Mr. Joseph M. Field, President Telecopier Number: 610-660-5641 With a copy to: John C. Donlevie, Esq. General Counsel Entercom Communications Corp. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopier Number: 610-660-5620 and Latham & Watkins 1001 Pennsylvania Avenue, N.W. Suite 1300 Washington, D.C. 20004 Attention: Joseph D. Sullivan, Esq. Telecopier Number: 202-637-2201 19 25 If the notice is to Licensee: CBS Radio 40 West 57th Street 14th Floor New York, NY 10019 Attention: Mr. Mel Karmazin Telecopier Number: 212-314-9229 With copies to: General Counsel CBS Corporation 51 West 52nd Street New York, NY 10019-6188 Telecopier Number: 212-975-2185 and Leventhal Senter & Lerman, P.L.L.C. 2000 K Street, N.W. Suite 600 Washington, D.C. 20006 Attention: Steven A. Lerman, Esq. Telecopier Number: 202-293-7783 The date of any such notice and service thereof shall be deemed to be: (i) the day of delivery if hand delivered or delivered by overnight courier; (ii) the day of delivery as indicated on the return receipt if dispatched by mail; or (iii) the date of telecopy transmission as indicated on the telecopier transmission report provided that any telecopy transmission shall not be effective unless a paper copy is sent by overnight courier on the date of the telecopy transmission. Either party may change its address for the purpose of notice by giving notice of such change in accordance with the provisions of this Section. Section 12.10. Entire Agreement. This Agreement, the letter agreements between the parties dated of even date herewith and the Purchase Agreement (including all attachments, exhibits and schedules) embody the entire agreement between the parties and there are no other agreements, representations, warranties, or understandings, oral or written, between them with respect to the subject matter hereof. 20 26 Section 12.11. Severability. Except as expressly set forth in Section 12.15, if any provision contained in this Agreement is held to be invalid, illegal or unenforceable in any respect by any court or other authority, then such provision shall be deemed limited to the extent that such court or other authority deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court or other authority shall deem any such provision wholly unenforceable, this shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had not been contained herein. Section 12.12. No Joint Venture. The parties agree that nothing herein shall constitute a joint venture between them. The parties acknowledge that call letters, trademarks and other intellectual property shall at all times remain the property of the respective parties and that neither party shall obtain any ownership interest in the other party's intellectual property by virtue of this Agreement (subject to the IP License set forth in Section 6.2). Section 12.13. Damage to Stations. In the event of damage or destruction to the Stations (other than damage or destruction caused by Time Broker), Licensee shall proceed to repair, replace or restore the Stations to its former condition as promptly as is commercially reasonable. Section 12.14. Noninterference. During the term of this Agreement, neither Licensee nor any of their employees shall take any actions that might impair the operations of Time Broker conducted hereunder, except to the extent expressly contemplated by this Agreement or as otherwise required by law. Section 12.15. Regulatory Changes. In the event of any order or decree of an administrative agency or court of competent jurisdiction, including without limitation any material change or clarification in FCC rules, policies, or precedent, that would cause this Agreement to be invalid or violate any applicable law, and such order or decree has become effective and has not been stayed, the parties will use their respective best efforts and negotiate in good faith to modify this Agreement to the minimum extent necessary so as to comply with such order or decree without material economic detriment to either party, and this Agreement, as so modified, shall then continue in full force and effect. In the event that the parties are unable to agree upon a modification of this 21 27 Agreement so as to cause it to comply with such order or decree without material economic detriment to either party, then this Agreement shall be terminated. Section 12.16. Attorneys' Fees. In the event of a dispute between or among the parties hereto arising out of or related to this Agreement or the interpretation or enforcement of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and expenses from the other party. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. CBS RADIO, INC. By:_______________________________________ Title:_____________________________________ CBS RADIO LICENSE, INC. By:_______________________________________ Title:_____________________________________ ARS ACQUISITION II, INC. By:_______________________________________ Title:_____________________________________ ENTERCOM COMMUNICATIONS CORP. By:_______________________________________ Title:_____________________________________ 22 28 SCHEDULE 1.1 PROGRAMMING The Programming shall consist of one hundred sixty-four (164) hours per week on the Stations in an entertainment format to be chosen by Time Broker, subject to Section 2 of this Agreement. The Programming shall include (a) news and weather information; (b) public service announcements (including, at Licensee's directive from time to time, a reasonable number of public service announcements of local interest supplied by Licensee or produced by Time Broker under Licensee's supervision); (c) an announcement in form sufficient to meet the station identification requirements of the FCC at the beginning of each hour; (d) an announcement at the beginning of each segment of Programming to indicate that program time has been purchased by Time Broker; and (e) any other announcement that may be required by applicable law or regulation (including but not limited to EAS tests). Time Broker shall maintain and deliver to Licensee copies of all operating and programming information including without limitation information concerning portions of the Programming that are responsive to issues of public importance identified to Time Broker by Licensee, EAS announcements, and station operating logs, necessary for Licensee to maintain its FCC Public File, and all other records required to be kept by FCC rule or policy. Time Broker shall have the sole and exclusive right to sell advertising to be included in the Programming and shall be entitled to retain all the revenues derived from the sale thereof, provided, however, that Licensee shall be entitled to sell such time as it deems necessary to comply with the political advertising rules of the FCC in the event the Programming does not comply with such rules. Notwithstanding any other provision of this Agreement, Time Broker recognizes that Licensee has certain obligations to broadcast programming to meet the needs and interests of the community of license for the Stations. Licensee shall have the right to air specific programming on issues of local importance to the community. Nothing in this Agreement shall abrogate the unrestricted authority of Licensee to discharge its obligations to the public and to comply with the laws, rules and policies of the FCC with respect to meeting the ascertained needs and interests of the public. Accordingly, Licensee may air or cause Time Broker to produce and present under Licensee's supervision for not less than two (2) nor more than four (4) hours per week on the Stations such public affairs programming that responds to the needs and interests of listeners in the Stations' community of license. Such public affairs programming shall be presented between 6:00 a.m. and 9:00 a.m. on Saturdays and/or Sundays or at such other times as the public interest may require. Time Broker will not change the format of the Stations other than WEGQ(FM). 1 29 SCHEDULE 1.2 COMPENSATION Beginning on the Commencement Date, for each month during which this Agreement until this Agreement is terminated, Time Broker shall pay a monthly fee equal to Three Hundred Ninety-Five Thousand Dollars ($395,000.00) per month; provided however, if Licensee makes the Closing Date Election under the Purchase Agreement, the monthly fee for the months of January, February and March of 1999 shall be Two Hundred Twenty Thousand Dollars ($220,000.00) (the "Monthly Fee"). In the event that the Commencement Date occurs on a day other than the first day of a month, the initial monthly payment made by Time Broker shall be an amount equal to the Monthly Fee as determined above multiplied by a ratio, the numerator of which is the number of days between the Commencement Date and the end of the month in which the Commencement Date occurs and the denominator of which is the number of days in the month in which the Commencement Date occurs; and in the event that the last day of the TBA Payment Period occurs other than on the last day of a month, the Monthly Payment for the month in which such day occurs shall be similarly prorated. 1 30 SCHEDULE 2.1 PROGRAMMING POLICY STATEMENT Time Broker agrees to cooperate with Licensee in the broadcasting of programs of the highest possible standard of excellence and for this purpose to observe the following regulations in the preparation, writing and broadcasting of its programs. Further, Time Broker agrees that all material broadcast on the Stations shall comply with all federal, state and local applicable laws, rules and regulations. No Plugola or Payola. The broadcast of any material for which any money, service or other valuable consideration is directly or indirectly paid, or promised to or charged or accepted by, the Time Broker, from any person, shall be prohibited, unless, at the time the same is broadcast, it is announced as paid for or furnished by such person. Political Broadcasting. Within thirty (30) days of the Commencement Date, Time Broker shall provide Licensee with a written political advertising disclosure statement which fully and accurately discloses how the Time Broker sells programming and advertising time and which makes parties purchasing political programming and advertising time fully aware of the lowest unit charge provisions of Section 315 of the Communications Act. In addition, at least thirty (30) days before the start of any primary or election campaign, Time Broker will clear with the Stations' general manager the rate Time Broker will charge for the time to be sold to candidates to make certain that the rate charged is in conformance with the applicable law and station policy. Required Announcements. Time Broker shall broadcast (i) announcements in a form satisfactory to Licensee at the beginning of each hour to identify the Stations and (ii) any other announcements that may be required by law, regulation, or Licensee's station policy. No Illegal Announcements. No announcements, broadcasts or promotions prohibited by federal, state or local law shall be made over the Stations. This prohibition specifically includes, but is not limited to, any and all programming or other broadcast material concerning tobacco or alcohol related products which are unlawful. The airing of any broadcast material concerning contests, lotteries or games must be conducted in accordance with all applicable law, including FCC rules and regulations. Any obscene, indecent, or fraudulent programming is prohibited. All sponsored programming or other broadcast material must be identified in accordance with applicable law, including FCC rules and regulations. 2 31 Licensee Discretion Paramount. In accordance with the Licensee's responsibility under the Communications Act and the rules and regulations of the FCC, Licensee reserves the right to reject or terminate any programming (including advertising) proposed to be presented or being presented over the Stations which is in conflict with station policy or which in Licensee's or its general manager's reasonable judgment would not serve the public interest. In any case where questions of policy or interpretation arise, Time Broker should submit the same to Licensee for decision before making any commitments in connection therewith. 3 32 SCHEDULE 4.1 TIME SALES AGREEMENTS AND CONTRACTS All Contracts to be assumed by Entercom under the Purchase Agreement other than Leases (as defined in the Purchase Agreement) and contracts relating to operation at the transmitter site for the Stations and employment contracts with the Licensee's retained employees under Sections 3.1 and 3.2. 1 EX-23.01 20 CONSENT OF DELOITTE & TOUCHE LLP, PHILADELPHIA, PA 1 EXHIBIT 23.01 INDEPENDENT AUDITORS' CONSENT To the Board of Directors of Entercom Communications Corp. Bala Cynwyd, Pennsylvania We consent to the use in this Amendment No. 1 to Registration Statement No. 333-61381 of Entercom Communications Corp. of our report dated September 18, 1998 (October 8, 1998 as to Note 12(F) and October 29, 1998 as to Note 6(B)(3) appearing in the Prospectus, which is a part of this Registration Statement, and of our report dated September 18, 1998, (October 8, 1998 as to Note 12(F) and October 29, 1998 as to Note 6(B)(3)) related to the financial statement schedule included elsewhere in this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania October 30, 1998 EX-23.02 21 CONSENT OF DELOITTE & TOUCHE LLP, SALT LAKE CITY 1 Exhibit 23.02 INDEPENDENT AUDITORS' CONSENT To the Board of Directors of Entercom Communications Corp. Bala Cynwyd, Pennsylvania We consent to the use in this Amendment No. 1 to Registration Statement No. 333-61381 of Entercom Communications Corp. of our report dated June 10, 1998, appearing in the Prospectus, which is a part of this Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Salt Lake City, Utah October 30, 1998 EX-23.03 22 CONSENT OF DELOITTE & TOUCHE LLP, CINCINNATI OH 1 Exhibit 23.03 INDEPENDENT AUDITORS' CONSENT To the Board of Directors of Entercom Communications Corp. Bala Cynwyd, Pennsylvania We consent to the use in this Amendment No. 1 to Registration Statement No. 333-61381 of Entercom Communications Corp. of our report dated May 21, 1998, appearing in the Prospectus, which is a part of this Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Cincinnati, Ohio October 30, 1998 EX-23.04 23 CONSENT OF DELOITTE & TOUCHE SEATTLE 1 Exhibit 23.04 INDEPENDENT AUDITORS' CONSENT To the Board of Directors of Entercom Communications Corp. Bala Cynwyd, Pennsylvania We consent to the use in this Amendment No. 1 to Registration Statement No. 333-61381 of Entercom Communications Corp. of our report dated May 29, 1998, appearing in the Prospectus, which is a part of this Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Seattle, Washington October 30, 1998 EX-23.05 24 CONSENT OF DELOITTE & TOUCHE LLP BOSTON 1 Exhibit 23.05 INDEPENDENT AUDITORS' CONSENT To the Board of Directors of Entercom Communications Corp. Bala Cynwyd, Pennsylvania We consent to the use in this Amendment No. 1 to Registration Statement No. 333-61381 of Entercom Communications Corp. of our report dated September 18, 1998, appearing in the Prospectus, which is a part of this Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Boston, Massachusetts October 30, 1998 EX-23.06 25 CONSENT OF ARTHUR ANDERSEN LLP, BALTIMORE, MD 1 Exhibit 23.06 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report (and to all references to our Firm) included in or made a part of this Registration Statement under the Securities Act of 1933. /s/ ARTHUR ANDERSEN LLP ----------------------- Baltimore, Maryland, October 30, 1998 EX-27.01 26 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS SEP-30-1998 OCT-1-1997 JUN-30-1998 6,094 0 30,891 1,422 0 39,360 56,241 10,699 513,445 11,452 296,996 0 0 6 218,459 513,445 0 92,086 72,849 72,849 3,042 0 9,175 16,036 172 15,864 0 2,377 0 (13,487) (7,263) (5,172)
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