-----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, QqMO/yHedKx3Qb2jIezEcmvtUr6X73YmD6tAIEwYDe2Uz877/qMv+PxVOvazt6io j2AStQCrnNog1/Dju/tM0A== 0000950152-98-009064.txt : 19981118 0000950152-98-009064.hdr.sgml : 19981118 ACCESSION NUMBER: 0000950152-98-009064 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REGENT COMMUNICATIONS INC CENTRAL INDEX KEY: 0000913015 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 311492857 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-46435 FILM NUMBER: 98752649 BUSINESS ADDRESS: STREET 1: 50 EAST RIVERCENTER BOULEVARD STREET 2: SUITE 180 CITY: COVINGTON STATE: KY ZIP: 41011 BUSINESS PHONE: 6062920030 MAIL ADDRESS: STREET 1: 50 EAST RIVERCENTER BLVD STREET 2: SUITE 180 CITY: COVINGTON STATE: KY ZIP: 41011 10-Q 1 REGENT COMMUNICATIONS, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to _____________________ Commission file number 0-15392 REGENT COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) Delaware 31-1492857 (State or other jurisdiction of (I.R.S. Employer in corporation or organization) Identification No.) 50 East RiverCenter Boulevard Suite 180 Covington, Kentucky 41011 (Address of principal executive offices) (Zip Code) (606) 292-0030 (Registrant's telephone number, including area code) -------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate the number of shares outstanding of the issuer's classes of common stock, as of the latest practicable date. Common Stock - $.01 Par Value - 240,000 shares as of November 16, 1998. 2 REGENT COMMUNICATIONS, INC. FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998 INDEX ----- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statement of Operations for the three months and nine months ended September 30, 1998 (unaudited) and September 30, 1997 (unaudited) Condensed Consolidated Balance Sheets as of September 30, 1998 (unaudited) and December 31, 1997 Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 1998 (unaudited) and September 30, 1997 (unaudited) Consolidated Statement of Changes in Shareholders' Deficit for the nine months ended September 30, 1998 (unaudited) Notes to Condensed Consolidated Financial Statements (unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -2- 3 Part I - Financial Information Item 1. Financial Statements
REGENT COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, -------------------------------- --------------------------------- 1998 1997 1998 1997 ----------- ---------- ----------- ------------ Gross broadcast revenues $ 5,860,649 $2,104,737 $10,339,931 $ 4,559,193 Less agency commissions 439,551 199,390 855,630 495,587 ----------- ---------- ----------- ------------ Net broadcast revenues 5,421,098 1,905,347 9,484,301 4,063,606 Station operating expenses 4,029,194 1,153,307 6,727,843 2,634,727 Depreciation and amortization 779,010 301,535 1,465,946 458,783 Corporate general and administrative expense 499,931 86,952 1,360,001 297,166 ----------- ---------- ----------- ------------ Operating income (loss) 112,963 363,553 (69,489) 672,930 Interest expense 942,770 486,129 2,029,378 836,404 Other income (expense), net (14,035) 14,645 6,738 16,609 ----------- ---------- ----------- ------------ Loss before income taxes and extraordinary items (843,842) (107,931) (2,092,129) (146,865) Income tax expense 0 16,000 0 49,542 ----------- ---------- ----------- ------------ Loss before extraordinary items (843,842) (123,931) (2,092,129) (196,407) Extraordinary gain from debt extinguishment, net of taxes 0 0 0 370,060 Extraordinary loss from debt extinguishment, net of taxes 0 0 (1,170,080) (4,703,370) ----------- ---------- ----------- ------------ Net loss $ (843,842) $ (123,931) $(3,262,209) $(4,529,717) =========== ========== =========== ============ Loss applicable to common shares: Net loss $ (843,842) $ (123,931) $(3,262,209) $(4,529,717) Preferred stock dividend requirements (854,231) 0 (1,290,966) 0 Preferred stock accretion (232,845) 0 (273,673) 0 ----------- ---------- ----------- ------------ Loss applicable to common shares $(1,930,918) $ (123,931) $(4,826,848) $(4,529,717) =========== ========== =========== ============ Basic and diluted loss per common share: Before extraordinary items $ (8.05) $ (0.52) $ (15.24) $ (0.82) Extraordinary items 0.00 0.00 (4.87) (18.05) ----------- ---------- ----------- ------------ Loss per common share $ (8.05) $ (0.52) $ (20.11) $ (18.87) =========== ========== =========== ============ Weighted average number of common shares used in basic and diluted calculations 240,000 240,000 240,000 240,000
The accompanying notes are an integral part of the condensed consolidated financial statements. -3- 4 REGENT COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1998 December 31, 1997 ASSETS ------------------ ----------------- - ------ (UNAUDITED) Current assets: Cash $ 393,743 $ 535,312 Accounts receivable, less allowance for doubtful accounts of $240,000 in 1998 and $32,000 in 1997 3,579,723 1,358,002 Other current assets 669,909 25,918 Assets held for sale 7,500,000 0 ------------------ ----------------- Total current assets 12,143,375 1,919,232 Property and equipment, net 8,985,342 2,156,244 FCC broadcast licenses, net 36,579,038 6,052,764 Other intangibles, net 7,178,037 1,648,577 Other assets, net 1,691,712 1,233,737 ------------------ ----------------- Total assets $ 66,577,504 $ 13,010,554 ================== ================= LIABILITIES AND SHAREHOLDERS' DEFICIT - ------------------------------------- Current liabilities: Accounts payable $ 996,272 $ 87,280 Accrued expenses and liabilities 3,623,853 233,955 Notes payable 7,500,000 0 Current portion of long-term debt 65,000 538,396 ------------------ ----------------- Total current liabilities 12,185,125 859,631 Long-term debt, less current portion 35,048,750 22,264,724 Other long-term liabilities 2,652,081 67,987 ------------------ ----------------- Total liabilities 49,885,956 23,192,342 Redeemable preferred stock: Series A convertible preferred stock, $5.00 stated value, 620,000 shares authorized; 620,000 issued and outstanding - Liquidation value: $3,378,408 3,180,749 0 Series B senior convertible preferred stock, $5.00 stated value, 1,000,000 shares authorized; 1,000,000 shares issued and outstanding - Liquidation value: $5,283,835 4,933,818 0 Series D convertible preferred stock, $5.00 stated value, 1,000,000 shares authorized; 1,000,000 shares issued and outstanding - Liquidation value: $5,143,222 4,937,327 0 Series F convertible preferred stock, $5.00 stated value, 4,100,000 shares authorized; 2,050,000 shares issued and outstanding - Liquidation value: $10,553,288 6,873,628 0 ------------------ ----------------- Total redeemable preferred stock 19,925,522 0 Shareholders' deficit: Preferred stock: Series C convertible preferred stock, $5.00 stated value, 4,000,000 shares authorized; 3,720,620 shares issued and outstanding - Liquidation value: $18,985,737 1,618,681 0 Series E convertible preferred stock, $5.00 stated value, 5,000,000 shares authorized; 447,842 shares issued and outstanding - Liquidation value: $2,285,267 2,239,210 0 Common stock, $.01 par value, 30,000,000 shares authorized; 240,000 shares issued and outstanding (Note 1) 2,400 2,400 Additional paid-in capital 9,029,327 2,677,195 Retained deficit (16,123,592) (12,861,383) ------------------ ----------------- Total shareholders' deficit (3,233,974) (10,181,788) ------------------ ----------------- Total liabilities and shareholder's deficit $ 66,577,504 $ 13,010,554 ================== =================
The accompanying notes are an integral part of the condensed consolidated financial statements. -4- 5 REGENT COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
1 Nine Months Ended September 30, 1998 1997 ------ ------ Net cash provided (used) by operating activities $ (552,933) $ 185,604 ============ ============ Cash flows from investing activities: Acquisitions of radio stations, net of cash acquired $(29,263,668) $ (7,650,000) Escrow deposit (160,000) (100,000) Capital expenditures (433,373) (69,832) ------------ ------------ Net cash used in investing activities $(29,857,041) $ (7,819,832) ============ ============ Cash flows from financing activities: Proceeds from long-term debt $ 35,500,000 $ 22,500,000 Proceeds from issuance of Series A, B, D and F Convertible Preferred Stock 18,150,000 0 Principal payments on long-term debt (20,733,160) (12,595,588) Principal payments under capital lease obligations 0 (3,547) Payments of deferred financing costs (1,292,042) (879,328) Payments of issuance costs (1,356,393) 0 Payment of appraisal right liability 0 (1,015,000) ------------ ------------ Net cash provided by financing activities $ 30,268,405 $ 8,006,537 ------------ ------------ Net increase (decrease) in cash and cash equivalents $ (141,569) $ 372,309 Cash at beginning of period $ 535,312 $ 123,221 ------------ ------------ Cash at end of period $ 393,743 $ 495,530 ============ ============ Supplemental schedule of non-cash investing and financing activities: Conversion of Faircom Inc.'s convertible subordinated promissory notes to Faircom Inc. common stock $ 10,000,000 Liabilities assumed in acquisitions 11,680,322 Series E convertible preferred stock issued in conjunction with the acquisition of Alta California Broadcasting, Inc. and Topaz Broadcasting, Inc. 2,239,210 Series C convertible preferred stock issued in conjunction with the merger between Faircom Inc. and the Company 1,618,681 Warrants for the purchase of common stock issued to holders of Series A and Series B convertible preferred stock 310,000
The accompanying notes are an integral part of the condensed consolidated financial statements. -5- 6 REGENT COMMUNICATIONS, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT (UNAUDITED)
Series C Series E Convertible Convertible Additional Total Preferred Preferred Common Paid-in Retained Shareholders' Stock Stock Stock Capital Deficit Deficit ----------- ----------- --------- ----------- ------------- ------------- Balance, December 31, 1997 (retroactively stated) $2,400 $2,677,195 $(12,861,383) $(10,181,788) Conversion of Faircom Inc.'s Class A and Class B convertible subordinated promissory notes in the amount of $10,000,000 10,000,000 10,000,000 Issuance of 3,720,620 shares of Series C convertible preferred stock and retirement of 26,390,199 shares of Faircom Inc. common stock and recordation of the effect of recapitalization due to the reverse merger with Faircom Inc. $1,618,681 (3,000,000) (1,381,319) Issuance of Faircom Inc. employee stock options immediately converted into options to purchase 157,727 shares of Series C convertible preferred stock in conjunction with the merger 530,264 530,264 Issuance of Series A redeemable preferred stock warrants 160,000 160,000 Issuance of 205,250 shares of Series E convertible preferred stock in connection with the acquisition of Alta California Broadcasting, Inc. $1,026,250 1,026,250 Issuance of 242,592 shares of Series E convertible preferred stock in connection with the acquisition of Topaz Broadcasting, Inc. 1,212,960 1,212,960 Dividends and accretion on Series A, B, D, and F redeemable preferred stock (1,338,132) (1,338,132) Net loss (3,262,209) (3,262,209) ----------- ----------- --------- ----------- ------------- ------------- Balance, September 30, 1998 $1,618,681 $2,239,210 $2,400 $9,029,327 $(16,123,592) $(3,233,974) =========== =========== ========= =========== ============= =============
The accompanying notes are an integral part of the condensed consolidated financial statements. -6- 7 REGENT COMMUNICATIONS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION On June 15, 1998, Regent Communications, Inc. (including its wholly-owned subsidiaries, the "Company") acquired, pursuant to an agreement of merger, all of the outstanding common stock of Faircom Inc. ("Faircom") for 3,720,620 shares of the Company's Series C Convertible Preferred Stock. The acquisition has been treated for accounting purposes as the acquisition of the Company by Faircom with Faircom as the accounting acquirer and accounted for as a reverse acquisition. Consequently, the historical financial statements prior to June 15, 1998 are those of Faircom. As a result of the Faircom merger, Faircom's historical shareholder deficit prior to the merger has been retroactively restated to reflect the number of common shares outstanding subsequent to the merger, with the difference between the par value of the Company's and Faircom's common stock recorded as an offset to additional paid-in capital. The condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and, in the opinion of management, include all adjustments necessary for a fair presentation of the results of operations, financial position and cash flows for each period shown. All adjustments are of normal and recurring nature except for those outlined in Notes 2, 3 and 4. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations. Results for interim periods may not be indicative of results for the full year. The December 31, 1997 condensed balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in Faircom's 1997 Annual Report on Form 10-K, the Company's Form S-4 effective May 7, 1998, the Company's Form 8-K/A filed September 3, 1998 and the Company's Form 10-Q/A filed September 21, 1998. 2. CONSUMMATED AND PENDING ACQUISITIONS On June 30, 1997, Faircom acquired the assets and operations of two commercial radio stations located in Mansfield, Ohio (the "Mansfield Stations"), pursuant to the terms of an asset purchase agreement dated May 20, 1997, for $7,350,000 in cash. In addition, Faircom paid $300,000 in cash to one of the sellers in consideration of a five-year non-compete agreement. The acquisition was accounted for under the purchase method of accounting and was financed with borrowings under Faircom's senior secured term notes (see Note 3). The excess cost over the fair market value of net assets acquired and the FCC licenses related to this acquisition are being amortized over 15- to 40-year periods. On January 21, 1998, Faircom acquired substantially all of the assets and operations of radio station WSWR-FM in Shelby, Ohio (the "Shelby Station") for $1,125,000 in cash. The acquisition was accounted for under the purchase method of accounting and was financed through the borrowing of $1,100,000 represented by a subordinated promissory note. The excess cost over the fair market value of net assets acquired and the FCC licenses related to this acquisition are being amortized over 15- to 40-year periods. On June 15, 1998, the following acquisitions (the "June 15 Acquisitions") were consummated, and the results of operations of the acquired businesses are included in the Company's financial statements since the date of acquisition: The Company acquired all of the outstanding capital stock of The Park Lane Group ("Park Lane") for approximately $17,525,000 in cash. The acquisition was accounted for under the purchase method of accounting. The excess cost over the fair market value of net assets acquired and the FCC licenses related to this acquisition are being amortized over a 40-year period. Park Lane owns 16 radio stations in California and Arizona. At the time of the acquisition, the Company entered into a one-year consulting and non-competition agreement with the President of Park Lane, providing for the payment of a fee of $200,000. -7- 8 The Company acquired the FCC licenses and related assets used in the operation of radio stations KIXW (AM) and KZXY (FM) in Apple Valley, California from Ruby Broadcasting, Inc. ( the "Ruby Stations"), an affiliate of Topaz Broadcasting, Inc. ("Topaz"), for $5,985,000 in cash. The FCC licenses acquired are being amortized over a 40-year period. The Company acquired the FCC licenses and related assets used in the operation of radio stations KFLG (AM) and KFLG (FM) in Bullhead City, Arizona from Continental Radio Broadcasting, L.L.C. (the "Continental Stations") for approximately $3,607,000 in cash. The Company separately acquired the accounts receivables of these stations for an additional purchase price of approximately $130,000. The FCC licenses acquired are being amortized over a 40-year period. The Company acquired all of the outstanding capital stock of Alta California Broadcasting, Inc. ("Alta") for $1,025,000 in cash and 205,250 shares of the Company's Series E Convertible Preferred Stock. The acquisition was accounted for under the purchase method of accounting. The excess cost over the fair market value of net assets acquired and FCC licenses related to this acquisition are being amortized over a 40-year period. Alta owned four radio stations in California. The Company acquired all of the outstanding capital stock of Topaz for 242,592 shares of the Company's Series E Convertible Preferred Stock. Immediately following the acquisition of Topaz, the Company acquired the FCC licenses and operating assets of radio station KIXA (FM) in Lucerne Valley, California for $275,000 in cash, pursuant to an Asset Purchase Agreement between Topaz and RASA Communications Corp. The acquisitions were accounted for under the purchase method of accounting. The excess cost over the fair market value of net assets acquired and FCC licenses related to these acquisitions are being amortized over a 40-year period. The sources for the cash portion of the consideration paid by the Company for the June 15 Acquisitions, aggregating approximately $53,400,000 (including approximately $21,800,000 of debt assumed and refinanced with borrowings under the Company's Senior Reducing Revolving Credit Facility and $3,700,000 of transaction costs), were $34,400,000 borrowed under the Company's Senior Reducing Revolving Credit Facility (see Note 3), $18,150,000 in additional equity from the sale of the Company's convertible preferred stock (see Note 4), and approximately $850,000 of the Company's funds. On July 10, 1998, the Company entered into an asset purchase agreement with Oasis Radio, Inc. ("Oasis") to acquire substantially all of the assets of radio station KOSS (FM) (formerly KAVC (FM)) located in Lancaster, California for $1,600,000 in cash, subject to adjustment as defined in the agreement. The Company has placed a $160,000 deposit held in escrow pending the closing of the transaction. In addition, the Company entered into a local programming and marketing agreement with Oasis, effective August 1, 1998, which will end upon consummation of the acquisition or termination of the asset purchase agreement. -8- 9 The following unaudited pro forma data summarize the combined results of operations of the Company, Faircom, the Mansfield Stations, Park Lane, the Ruby Stations, the Continental Stations, Alta, Topaz and KIXA(FM) as though the acquisitions had occurred at the beginning of each nine-month period ended September 30, 1998 and 1997:
1998 1997 ---- ---- Net broadcast revenues $14,528,292 $13,369,794 Net loss before extraordinary items (2,139,228) (1,625,612) Net loss (3,309,308) (5,958,922) Basic and diluted loss per common share before extraordinary items (22.50) (20.36) Basic and diluted loss per common share (27.38) (38.42)
These unaudited pro forma amounts do not purport to be indicative of the results that might have occurred if the foregoing transactions had been consummated on the indicated dates. The acquisition of the Shelby Station did not have a material effect on the operating results of the Company. -9- 10 3. LONG-TERM DEBT Long-term debt consists of the following as of:
September 30, 1998 December 31, 1997 ------------------ ----------------- Senior secured term notes (a) $ 0 $12,803,120 Convertible subordinated promissory notes (b) 0 10,000,000 Senior reducing revolving credit facility (c) 34,400,000 0 Subordinated promissory note (d) 600,000 0 Non-compete Agreements (e) 113,750 0 ------------ ------------ 35,113,750 22,803,120 Less: Current portion of long-term debt (65,000) (538,396) ------------ ------------ $ 35,048,750 $ 22,264,724 ============ ============
(a) Senior secured term notes During 1997, Faircom borrowed $12,500,000 under an amended and restated loan agreement (the "1997 loan agreement"). The term notes under the 1997 loan agreement would have matured on July 1, 2002. Interest on the term notes was at the rate of 4.50% over 30-day commercial paper rates. On June 15, 1998, the Company terminated the 1997 loan agreement using funds obtained from the Company's Senior Reducing Revolving Credit Facility. As a result of the extinguishment of debt, the Company recognized an extraordinary loss of $1,170,080, net of income taxes, consisting of a $366,000 prepayment penalty and the write-off of $804,080 of related deferred financing costs. (b) Convertible subordinated promissory notes During 1997, Faircom completed the sale of $10,000,000 aggregate principal amount of its convertible subordinated promissory notes due July 1, 2002 (the "Faircom Notes"). The Faircom Notes consisted of Class A and Class B convertible subordinated promissory notes, each in the aggregate principal amount of $5,000,000, with interest payable at the rate of 7% per annum, compounded quarterly. The Faircom Notes were converted into a total of 19,012,000 shares of Faircom common stock immediately preceding the merger between the Company and Faircom (see Note 1). (c) Senior reducing revolving credit facility During 1997, the Company entered into an agreement with a group of lenders (as amended, the "Credit Agreement") which provides for a senior reducing revolving credit facility with a commitment of up to $55,000,000 expiring in March 2005 (the "Revolver"). In addition, the Company may request from time to time that the lenders issue Letters of Credit in accordance with the same provisions as the Revolver. In order to finance the June 15 Acquisitions (see Note 2), refinance certain existing debt and to provide for additional working capital, the Company borrowed $34,400,000 under the Credit Agreement. -10- 11 The Credit Agreement provides for the reduction of the commitment under the Revolver for each of the four quarters ending December 31, 1999 and by increasing quarterly amounts thereafter, and, under certain circumstances, requires mandatory prepayments of any outstanding loans and further commitment reductions. The indebtedness of the Company under the Credit Agreement is collateralized by liens on substantially all of the assets of the Company and its operating and license subsidiaries and by a pledge of the operating and license subsidiaries' stock, and is guaranteed by those subsidiaries. The Credit Agreement contains restrictions pertaining to the maintenance of financial ratios, capital expenditures, payment of dividends or distributions of capital stock and incurrence of additional indebtedness. Interest under the Credit Agreement is payable, at the option of the Company, at alternative rates equal to the LIBOR rate (5.31% at September 30, 1998) plus 1.25% to 2.75% or the base rate announced by the Bank of Montreal (8.25% at September 30, 1998) plus 0% to 1.50%. The spreads over the LIBOR rate and such base rate vary from time to time, depending upon the Company's financial leverage. The Company must pay quarterly commitment fees equal to 3/8% to 1/2% per annum, depending upon the Company's financial leverage, on the unused portion of the commitment under the Credit Agreement. The Company also is required to pay certain other fees to the agent and the lenders for the administration and the use of the credit facility. At September 30, 1998, the Company had paid non-refundable fees totaling approximately $1,548,000 which are classified as other assets in the accompanying Condensed Consolidated Balance Sheet and are being amortized over the initial seven-year term of the Revolver. As a condition of the Credit Agreement, the Company entered into a two-year collar agreement (the "Collar Agreement") with the Bank of Montreal effective as of August 17, 1998 for a notional amount of $34,400,000. The Collar Agreement is based on the three-month LIBOR rate, provides for a CAP Rate, as defined, of 6.50% and a Floor Rate, as defined, of 5.28% plus, in each case, the additional spread stipulated under the Credit Agreement. (d) Subordinated promissory note During 1995, Park Lane issued a subordinated promissory note (the "McNulty Note") to McNulty Broadcasting, Inc. ("McNulty") which provided Park Lane with $600,000. The McNulty Note was assumed by the Company as part of the acquisition of Park Lane (see Note 2). The McNulty Note provides for quarterly principal payments of $15,000 beginning on August 1, 2000. The remaining principal is due May 1, 2005. Interest on the McNulty Note is payable quarterly at a rate of 8%. (e) Non-compete agreements During 1995, Park Lane entered into five-year non-compete agreements with McNulty and Island Broadcasting Associates, L.P. ("Island Broadcasting") in the amounts of $125,000 and $200,000, respectively (the "Non-Compete Agreements"). The Non-Compete Agreements were assumed by the Company as part of the acquisition of Park Lane (see Note 2). The Non-Compete Agreements bear no interest, expire in May, 2000 and call for quarterly payments of $16,250. -11- 12 4. CAPITAL STOCK The Company's Amended and Restated Certificate of Incorporation authorizes 30,000,000 shares of common stock and 20,000,000 shares of preferred stock and designates 620,000 shares as Series A Convertible Preferred Stock ("Series A"), 1,000,000 shares as Series B Senior Convertible Preferred Stock ("Series B"), 4,000,000 shares as Series C Convertible Preferred Stock ("Series C"), 1,000,000 shares as Series D Convertible Preferred Stock ("Series D"), 5,000,000 shares as Series E Convertible Preferred Stock ("Series E"), and 4,100,000 shares as Series F Convertible Preferred Stock ("Series F"). The stated value of all series of preferred stock is $5.00 per share. Series A, Series C, Series E, and Series F have the same voting rights as common stock and may be converted at the option of the holder into one share of common stock, subject to adjustment, as defined. Series B and D have no voting power except for specific events, as defined. Series D may be converted at the option of the holder only when certain conditions, as defined, have been met. The Company's Board of Directors also has the right to require conversion of all shares of Series A, B, C, D, E, and F upon the occurrence of certain events, as defined. Series A, Series C, Series D, Series E, and Series F have equal rights for the payment of dividends and the distribution of assets and rights upon liquidation, dissolution or winding up of the Company. Series B ranks senior to all other series of preferred stock and may be converted at the option of the holder into one-half share of common stock, subject to adjustment, as defined. Upon liquidation of the Company, no distribution shall be made (a) to holders of stock ranking junior to the Series B unless the holders of the Series B have received the stated value per share, plus an amount equal to all unpaid dividends or (b) to the holders of stock ranking on a parity with the Series B, except distributions made ratably on the Series B and all other such parity stock. Dividends accrue cumulatively on all series of preferred stock, except Series F, at an annual rate of $0.35 per share. Dividends accrue cumulatively on Series F at an annual rate of $0.50 per share and, to the extent not paid in cash, are compounded quarterly at a rate of 10% per annum. The Company may redeem Series A, B, and D at the stated value, plus an amount equal to all unpaid dividends to the date of redemption, whether or not declared. Undeclared dividends in arrears on all outstanding series of preferred stock amounted to approximately $1,438,000 at September 30, 1998. In conjunction with the closing of the Faircom merger, and under the terms of a stock purchase agreement dated December 8, 1997, BMO Financial, Inc., an existing shareholder of the Company, purchased 780,000 shares of Series D for $3,900,000. In addition, General Electric Capital Corporation ("GE Capital") paid $3,900,000 to complete its purchase of 1,000,000 shares of Series B, pursuant to the terms of its stock purchase agreement and promissory note dated December 8, 1997. In connection with the closing of the Park Lane acquisition, and under the terms of a stock purchase agreement dated December 1, 1997, the Chief Operating Officer of the Company purchased 20,000 shares of Series A for $100,000. On June 15, 1998, pursuant to a stock purchase agreement, Waller-Sutton Media Partners, L.P. ("Waller-Sutton") purchased 1,000,000 shares of Series F for $5,000,000. Also on that date, WPG Corporate Development Associates V, L.P. and WPG Corporate Development Associates V (Overseas), L.P. purchased a total of 650,000 shares of Series F for $3,250,000; the Chairman of Waller-Sutton Management Group, which manages Waller-Sutton, purchased 50,000 shares of Series F for $250,000; GE Capital purchased 250,000 shares of Series F for $1,250,000; and River Cities Capital Fund Limited Partnership ("River Cities") purchased 100,000 shares of Series F for $500,000. In connection with these purchases, the purchasers acquired 10-year warrants to purchase an aggregate of 860,000 shares of the Company's common stock for $5.00 per share. Such warrants can be "put" back to the Company after five years. In addition, these purchasers agreed, subject to certain conditions, to purchase an additional 2,050,000 shares of Series F at $5.00 per share. On October 23, 1998, the Company formally notified the Series F shareholders of its intent to issue additional shares of Regent's Series F preferred stock. The proceeds will be used to complete the purchase of KOSS(FM) (see Note 2), finance capital expenditures and meet initial working capital requirements of KOSS(FM). The 860,000 warrants issued in conjunction with the Series F have been assigned a fair value of $2,459,600 and have been classified as a long-term liability due to the associated "put" rights. -12- 13 The stock purchase agreement described above provides that the terms of the Series F include the right of the holders to require the Company to repurchase the Series F at any time after five years at a price equal to the greater of its fair market value or the sum of its stated value of $5.00 per share and all accrued but unpaid dividends thereon, as well as any warrants held by such holders at a price equal to the fair market value of the Company's common stock less the exercise price of such warrants. Holders of the Series A, Series B, and Series D would have similar "put" rights only if the holders of the Series F were to exercise their "put" rights. Series A, Series B, Series D, and Series F (but not Series C and Series E) have been reclassified and excluded from equity to reflect such anticipated "put" rights. Issuance costs of approximately $1,900,000 for these reclassified shares have been netted against the proceeds. The shares are being accreted to their respective redemption values over five years. -13- 14 In connection with the closing of the Faircom merger, Waller-Sutton acquired 400,640 shares of Series C by purchasing an aggregate of $1,500,000 principal amount of Faircom's convertible subordinated promissory notes that were converted into the common stock of Faircom and subsequently converted to Series C. In order to induce River Cities, as a holder of Series A, to approve the merger with Faircom, the Company issued to River Cities, upon consummation of the merger, five-year warrants to purchase 80,000 shares of the Company's common stock at an exercise price of $5.00 per share. R. Glen Mayfield, a member of the Company's Board of Directors, serves as the general partner of River Cities Management Limited Partnership, which is the general partner of River Cities. The warrants issued to the holders of Series A have been assigned a value of $160,000 and have been classified as additional paid-in capital. In order to induce GE Capital, as a holder of Series B, to approve the addition of mandatory conversion rights to the terms of the Series B in conjunction with the issuance of the Series F, Regent issued to GE Capital, upon issuance of the Series F, five-year warrants to purchase 50,000 shares of the Company's common stock at an exercise price of $5.00 per share. The warrants issued to GE Capital have been assigned a fair value of $150,000 and have been classified as a long-term liability due to associated "put" rights. These "put" rights are subject to the prior exercise of the warrants and the exercise of the "put" rights associated with the warrants issued to the Series F holders. 5. EARNINGS PER SHARE The Company has adopted the provisions of SFAS 128, "Earnings Per Share." SFAS 128 calls for the dual presentation of basic and diluted earnings per share ("EPS"). Basic EPS is based upon the weighted average common shares outstanding during the period. Diluted EPS reflects the potential dilution that would occur if common stock equivalents were exercised. The effects of the assumed conversion of the Company's convertible preferred stock and the assumed exercise of outstanding options and warrants would not be dilutive for all periods presented. Therefore, basic EPS and diluted EPS are the same for all periods presented. 6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standard Board issued SFAS 130, "Reporting Comprehensive Income." SFAS 130 establishes standards of disclosure and financial statement display for reporting total comprehensive income and its individual components. SFAS 130 became effective for fiscal years beginning after December 31, 1997. Company management has determined that comprehensive income equals the Company's net loss as of September 30, 1998. In June 1998, the Financial Accounting Standards Board issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 prescribes the accounting treatment for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company may employ financial instruments to manage its exposure to fluctuations in interest rates (see Note 3(c)). The Company does not hold or issue such financial instruments for trading purposes. The Company will adopt SFAS 133, as required in the year 2000, and does not expect the impact of adoption to be material. In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which is effective for fiscal years beginning after December 15, 1998. SOP 98-1 requires the capitalization of certain expenditures for software that is purchased or internally developed for use in the business. Company management believe that the prospective implementation of SOP 98-1 in 1999 may result in some additional capitalization of software expenditures in the future. -14- 15 In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-up Activities." The SOP provides guidance on financial reporting of costs of start-up activities. SOP 98-5 is effective for fiscal years beginning after December 15, 1998. The Company believes the implementation of SOP 98-5 in 1999 will not have a material impact on its financial reporting. -15- 16 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- The results of the Company's operations for the three months ended September 30, 1998 compared to the three months ended September 30, 1997 and for the nine months ended September 30, 1998 compared to the nine months ended September 30, 1997 are not comparable or necessarily indicative of results in the future due to the significance of acquisitions. On June 30, 1997, Faircom, through a wholly-owned subsidiary, acquired the assets and operations of two radio stations, WMAN-AM and WYHT-FM, both located in Mansfield, Ohio (the "Mansfield Stations") for aggregate cash consideration of $7,650,000. As of January 21, 1998, the same Faircom subsidiary purchased substantially all of the assets and operations of radio station WSWR-FM in Shelby, Ohio (the "Shelby Station") for $1,125,000 in cash. These acquisitions have been accounted for as purchases, and accordingly, the operating results of the Mansfield Stations and the Shelby Station have been included in the Company's condensed consolidated financial statements from their respective acquisition dates. On June 15, 1998, the Company consummated a number of mergers, acquisitions, borrowings and issuances of additional equity. See Notes 1 through 4 to the Company's condensed consolidated financial statements included as part of this Form 10-Q. The historical financial statements of Faircom, which was deemed the "accounting acquirer" in the merger between Faircom and the Company completed June 15, 1998, have become the historical financial statements of the Company, and accordingly, the results of operations of the Company and of the other entities which merged with or were acquired by the Company in transactions completed on June 15, 1998 (the "June 15 Acquisitions") have been included in the Company's condensed consolidated financial statements only from June 15, 1998. The increase in the Company's net broadcasting revenues in the three months and the nine months ended September 30, 1998 as compared with the same periods in 1997 resulted primarily from the inclusion of the operations acquired as part of the June 15 Acquisitions, and also, for the nine-month period to a lesser extent, from the inclusion of the operations of the Mansfield Stations. Net broadcasting revenues increased to $5,421,000 from $1,905,000, or 184.5%, in the three months ended September 30, 1998 as compared with the three months ended September 30, 1997, and to $9,484,000 from $4,064,000, or 133.4%, in the nine months ended September 30, 1998 as compared with the nine months ended September 30, 1997. Station operating expenses increased in the three months and nine months ended September 30, 1998 as compared with the same periods in 1997. For the three months ended September 30, 1998, this increase was a result of the inclusion of the operations of the June 15 Acquisitions. For the nine months ended September 30, 1998, this increase resulted primarily from the inclusion of the operations acquired as part of the June 15 Acquisitions and to a lesser extent the inclusion of the operations of the Mansfield Stations. Station operating expenses increased to $4,029,000 from $1,153,000, or 249.4%, in the three months ended September 30, 1998 as compared with the same period in 1997 and to $6,728,000 from $2,635,000, or 155.4%, in the nine months ended September 30, 1998, as compared with the same period in 1997. The performance of a radio station group, such as the Company, is customarily measured by its ability to generate broadcast cash flow. "Broadcast cash flow" is defined as net broadcasting revenues less station operating expenses. Although broadcast cash flow is not a measure of performance calculated in accordance with generally accepted accounting principles ("GAAP"), the Company believes that broadcast cash flow is accepted by the broadcasting industry as a generally recognized measure of performance and is used by analysts who report publicly on the performance of broadcasting companies. Nevertheless, this measure should not be considered in isolation or as a substitute for operating income, net income, net cash provided by operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with GAAP. Broadcast cash flow increased in the three months and the nine months ended September 30, 1998 as compared with the same periods in 1997. For the three months ended September 30, 1998, this increase was the result of the inclusion of the operations acquired as part of the June 15 Acquisitions. For the nine months ended September 30, 1998, this increase was primarily a result of inclusion of the operations acquired as part of the June 15 Acquisitions and to a lesser extent to the inclusion of the operations of the Mansfield Stations. Broadcast cash flow increased to $1,392,000 from $752,000, or 85.1%, in the three months ended September 30, 1998 as compared with the same period in 1997 and to $2,756,000 from $1,429,000, or 92.9%, in the nine months ended September 30, 1998 as compared with the same period in 1997. Depreciation and amortization increased in the three months and nine months ended September 30, 1998 as compared with the comparable 1997 periods primarily as a result of the addition of assets in connection with the June 15 Acquisitions and to a lesser extent the acquisitions of the Mansfield Stations and the Shelby Station. In the three months ended September 30, 1998, corporate general and administrative expense increased as compared with the same period in 1997 to reflect the new corporate administrative organization related to the Company's June 15 Acquisitions resulting in additional executive personnel and administrative expense as compared with Faircom's substantially smaller corporate organization and expense in the comparable period in 1997. In addition, approximately $80,000 of non-recurring corporate expenses were incurred in the three months ended September 30, 1998. Corporate general and administrative expense also increased in the nine months ended September 30, 1998 as compared with the same period in 1997 for the same reasons indicated for the three-month period comparison and also as a consequence of stock options granted as of June 15, 1998 to two officers of Faircom pursuant to the terms of the merger agreement between the Company and Faircom, resulting in the recognition,as of such date of grant, of approximately $530,000 in additional compensation expense. -16- 17 Interest expense increased in the three months and nine months ended September 30, 1998 as compared with the same 1997 periods principally due to debt incurred in connection with the June 15 Acquisitions and to a lesser extent due to debt incurred in connection with the acquisition of the Mansfield Stations and the Shelby Station. As a result of higher corporate general and administrative expense and interest expense, offset in part by higher broadcast cash flow, net loss for the three months ended September 30, 1998 increased to $844,000 from net loss of $124,000 in the comparable 1997 period. In the nine months ended September 30, 1998, net loss declined to $3,262,000 from $4,530,000 as a result of higher broadcast cash flow and a lower extraordinary loss from debt extinguishment, offset in part by higher depreciation and amortization and corporate and interest expenses. Liquidity and Capital Resources - ------------------------------- In the nine months ended September 30, 1998, net cash used by operating activities was $553,000 compared with net cash provided by operating activities of $186,000 for the nine months ended September 30, 1997. In the 1998 period, proceeds from the issuance of long-term debt and preferred stock provided most of the funds used for operating activities, as well as funds used for the acquisition of radio stations, principal payments on long-term debt and other investing and financing activity cash requirements. As a result, there was a net decrease in cash of $142,000 in the nine months ended September 30, 1998 compared with a net increase of $372,000 in the comparable 1997 period. On November 14, 1997, the Company entered into an agreement with a group of lenders (as amended, the "Credit Agreement") which provides for a senior reducing revolving credit facility with a commitment of up to $55,000,000 expiring March 31, 2005 (the "Revolver"). The Credit Agreement permits the borrowing of available credit for working capital and acquisitions, including related acquisition expenses. In addition, the Company may request from time to time that the lenders issue Letters of Credit in accordance with the same provisions as the Revolver. The Credit Agreement provides for the quarterly reduction of the commitment under the Revolver for each of the four quarters during 1999 in the amount of $687,500 per quarter, and by increasing quarterly amounts thereafter to $2,750,000 during 2004, with a final payment of $6,875,000 due March 31, 2005, and, under certain circumstances, requires mandatory prepayments of any outstanding loans and further commitment reductions. Mandatory prepayments and commitment reductions are required to the extent that, from time to time, outstanding loans exceed the commitment then in effect, and from certain asset sales, surplus assets of any pension plans, sales of equity securities and receipts of insurance proceeds. The indebtedness of the Company under the Credit Agreement is collateralized by liens on substantially all of the assets of the Company and its operating and license subsidiaries and by a pledge of the operating and license subsidiaries' stock, and is guaranteed by those subsidiaries. The Credit Agreement contains restrictions pertaining to the maintenance of financial ratios, capital expenditures, payment of dividends or distributions of capital stock and incurrence of additional indebtedness. The Company is required to maintain an interest rate coverage ratio (EBITDA, defined as earnings before interest, taxes, depreciation and amortization, to annual interest rate cost) of at least 1.75 to 1.00 through September 30, 1998 and of at least 2.0 to 1.0 thereafter; a fixed charge coverage ratio (EBITDA to annual fixed charges) of at least 1.10 to 1.00; and a financial leverage ratio (total debt to Adjusted EBITDA, as defined in the Credit Agreement) starting at 6.5 to 1.0 and decreasing over time to 3.5 to 1.0 as follows: Time Period Maximum Leverage Ratio ----------- ---------------------- Through March 31, 1999........................................6.50:1.00 April 1, 1999 through June 30, 1999...........................6.00:1.00 July 1, 1999 through September 30, 1999.......................5.75:1.00 October 1, 1999 through December 31, 1999.....................5.50:1.00 January 1, 2000 through March 31, 2000........................5.25:1.00 April 1, 2000 through June 30, 2000...........................5.00:1.00 July 1, 2000 through September 30, 2000.......................4.75:1.00 October 1, 2000 through December 31, 2000.....................4.50:1.00 January 1, 2001 through March 31, 2001........................4.00:1.00 April 1, 2001 and thereafter..................................3.50:1.00 As of September 30, 1998, the Company is in compliance with all of the aforementioned debt covenants. Interest under the Credit Agreement is payable, at the option of the Company, at alternative rates equal to the LIBOR rate (5.31% at September 30, 1998) plus 1.25% to 2.75% or the base rate announced by the Bank of Montreal (8.25% at September 30, 1998) plus 0% to 1.50%. The spreads over the LIBOR rate and such base rate vary from time to time, depending upon the Company's financial leverage. The Company will pay quarterly commitment fees equal to 3/8% to 1/2% per annum, depending upon the Company's financial leverage, on the unused portion of the commitment under the Credit Agreement. The Company also is required to pay certain other fees to the agent and the lenders for the administration and use of the credit facility. At September 30, 1998, the Company had borrowed $34,400,000 under the Credit Agreement, and $20,600,000 remained in the unused portion. Of the unused portion, approximately $520,000 was available for borrowing by the Company for working capital. In connection with the 1997 acquisitions of KCBQ(FM) in San Diego, California and an option to acquire WSSP(FM) in Charleston, South Carolina, the Company issued notes in the maximum principal amounts of $6,000,000 and $1,500,000, respectively. The San Diego note is collateralized by the assets of the San Diego station, matures on the earlier of June 4, 2002 or the sale of the San Diego station, and bears interest at 10% on any unpaid principal after maturity. The Charleston note is collateralized by a lien on the proceeds of a $1,500,000 note receivable of the Company, matures on the earlier of December 3, 2002 or upon the sale of the Charleston station or of the option, and bears interest at 10% on any unpaid principal amount after maturity. The Company is currently attempting to sell both stations. Consequently, $7,500,000, representing the principal amount of both notes, has been classified as a current asset, designated "assets held for sale," and as an offsetting current liability, designated "notes payable," at September 30, 1998. In connection with the June 15, 1998 acquisition of The Park Lane Group, the Company assumed a $600,000 note, bearing interest at 8% payable quarterly, with the principal payable in quarterly installments of $15,000 from August 2000 to May 2005, at which time the remaining principal balance is due. On June 15, 1998, the Company received $18,150,000 in gross proceeds from the issuance of shares of its Series A, B, D and F Convertible Preferred Stock at $5.00 per share. In conjunction with these transactions, the Company also issued warrants to purchase 990,000 shares of the Company's common stock at $5.00 per share. The purchasers of the Series F Convertible Preferred Stock also have committed an additional $10,250,000 through the purchase, on a pro rata basis, of an additional 2,050,000 shares of the Company's Series F Convertible Preferred Stock at $5.00 per share, to fund future acquisitions by the Company. The Company intends to draw $2,000,000 of such available funds to finance the pending acquisition of KOSS(FM) and certain initial working capital needs and capital expenditures at that station. Based on current interest rates and accrued interest expense as of September 30, 1998, the Company believes its interest payments for the balance of 1998 will be approximately $1,636,000. Debt principal payments are expected to be $16,250 for the balance of 1998. Corporate general and administrative expense and capital expenditures for the remainder of 1998 are estimated to be approximately $440,000 and $205,000, respectively. In addition, the Company expects to pay prior to the end of 1998 approximately $200,000 of approximately $1,500,000 in deferred professional fees which were mostly incurred in connection with the June 15 Acquisitions. For these payments, the Company will utilize net cash provided by operations, current cash balances, and available funds under its Credit Agreement. The Company is currently considering the sale of several of its radio station properties which were acquired as part of the larger group of June 15 Acquisitions but which are not believed to fit within the Company's long-term operating strategies. The Company believes net cash from operations, cash balances, and the proceeds from such asset sales would be sufficient to pay the balance of the deferred professional fees in 1999 and to meet the Company's interest expense, any required principal payments, corporate expenses and capital expenditures in the foreseeable future based on its projected operations and indebtedness. There can be no assurance, however, that any sales of non-strategic stations will be consummated in the near future. In the absence of such sales, based upon discussion with holders of its Series F Convertible Preferred Stock, the Company would expect to utilize some of its equity commitments under its Preferred Stock Purchase Agreement which are reserved for future acquisitions for working capital purposes instead. The Company is actively pursuing a number of acquisitions of radio stations in a number of markets. Such acquisitions would be financed from borrowings against the unused portion of its Credit Agreement (less any utilization of such portion for working capital needs) and the $10,250,000 available under the Preferred Stock Purchase Agreement with the holders of its Series F Convertible Preferred Stock. Depending upon the size and number of acquisitions, the Company intends to seek to expand its current borrowing capacity under its Credit Agreement. In addition, the Company intends to seek additional equity above the previously committed Series F Convertible Preferred Stock. However, there can be no assurance that any of such acquisitions will be consummated or that all or any portion of such financing will be available. Market Risk - ----------- The Company is exposed to the impact of interest rate changes. It is the Company's policy to enter into interest rate transactions only to the extent considered necessary to meet its objectives and to comply with the requirements of its Credit Agreement. The Company has not entered into interest rate transactions for speculative purposes. The Company's exposure to interest rate risk results from borrowings under its Credit Agreement. At September 30, 1998, the Company had $34,400,000 outstanding under its credit facility. To satisfy the requirements of its Credit Agreement, the Company entered into a two-year collar agreement with the Bank of Montreal effective August 17, 1998 for a notional amount of $34,400,000 to mitigate the risk of increasing interest rates created by the borrowing under its Credit Agreement. This agreement is based on the three-month LIBOR rate, has a Cap Rate, as defined, of 6.50% and a Floor Rate, as defined, of 5.28%. These rates are exclusive of additional spreads over the LIBOR rate depending upon the Company's financial leverage. Based on the $34,400,000 principal amount outstanding under the Company's credit facility at September 30, 1998, the annual interest expense would fluctuate by a maximum of $420,000, exclusive of leverage spreads over the LIBOR rate. Year 2000 Computer System Compliance - ------------------------------------ The "Year 2000" ("Y2K") issue results from the fact that many computer programs were written with date-sensitive codes that utilize only the last two digits (rather than all four digits) to refer to a particular year. As the year 2000 approaches, these computer programs may be unable to process accurately certain date-based information, as the program may interpret the year 2000 as 1900. The Company utilizes various information technology (IT) systems in the operation of its business, including (i) accounting and financial reporting systems; (ii) local and wide area networking infrastructure; (iii) traffic scheduling and billing systems; and (iv) digital audio systems providing automated broadcasting. In addition to IT systems, the Company may also be reliant on several non-information technology (non-IT) systems which could potentially pose Y2K issues. Finally, in addition to the risks posed by Y2K issues involving its own IT and non-IT systems, the Company could also be affected by any Y2K problems experienced by its key business partners, which include local and national advertisers, suppliers of communications services, financial institutions and suppliers of utilities. The Company's plans to address the Y2K issue involve four phases: (a) assessment of the existence, nature and risk of Y2K problems affecting the Company's systems; (b) remediation of the Company's systems, whether through repair, replacement or upgrade, based on the findings of the assessment phase; (c) testing of the enhanced or upgraded systems; and (d) contingency planning. Of the three areas of concern (IT systems, non-IT systems and key business partner interfaces), most of the work to date has been in the IT systems area. A summary of the status of the Company's Y2K plans in relation to each of the IT areas follows. The Company has utilized an independent consultant to assess the Y2K issue in its accounting and financial reporting systems and its local and wide area networking systems. Because the Company commenced operations in 1997 with new computer systems at its executive offices, the Company's accounting and financial reporting systems and local and wide area networking systems were either purchased on a Y2K compliant basis or have been rendered Y2K compliant through network upgrades provided by the supplier at no additional cost. A schedule for the actual testing of these systems for Y2K compliance is expected to be developed and completed during the fourth quarter of 1998. Costs incurred relating to the assessment, remediation and testing of these systems have been minimal and have been expensed as incurred, and any such future costs are expected to be immaterial. The traffic scheduling and billing systems currently utilized at the Company's stations are provided by two suppliers on a Y2K compliant basis, with the exception of the Company's stations located in the Victorville, California and the Flint, Michigan markets. By the second quarter of 1999, the Company intends to have replaced its traffic and billing systems at these Victorville and Flint stations with systems provided by suppliers utilized by the Company's other stations. To confirm Y2K compliance of its traffic and billing systems, the Company intends to conduct and complete tests of these systems during the second quarter of 1999. The related costs of these replacements will be capitalized. Any costs that may by incurred relative to the testing and any necessary remediation are expected to be immaterial. The Company acquired all but one of its radio stations on or after June 15, 1998 from several independent small operators. As part of the Company's ongoing plan to provide its stations with a standardized digital audio broadcast system and, thus, to realize certain of the efficiencies of operating as a larger broadcast group, the Company has been systematically upgrading the broadcast systems and other technical equipment at its stations. Although this upgrading plan has had a business purpose independent of the Y2K compliance issue, the Company has required, as a matter of course, written assurance from its suppliers that the new broadcast systems are Y2K compliant. The upgrading project is 70% complete, with the installation of new Y2K compliant broadcast systems having been completed for the Company's stations in all of its markets except the Chico, California, Flint, Michigan and Mansfield, Ohio markets. The costs of the upgrade project have been included in capital expenditures. Upgrade of the broadcast systems at the stations in the Flint, Michigan market is expected to be completed during the fourth quarter of 1998. Upgrades in the Chico, California and the Mansfield, Ohio markets are expected to be commenced and completed by the end of the second quarter of 1999. The Company plans to conduct and complete its own testing of the broadcast systems at all of its stations by the end of the third quarter of 1999. The cost associated with this testing is expected to be immaterial. With respect to the non-IT and business partner interfaces, the Company intends to begin and substantially complete the assessment phase during the fourth quarter of 1998. The Company expects that the assessment in these two areas will be fully completed with a detailed action plan in place by the end of the first quarter of 1999. As part of the assessment phase, during the fourth quarter of 1998, the Company plans to engage the services of an independent consultant to analyze the scope of the Company's Y2K compliance issues, particularly with respect to its non-IT system risks, and to initiate formal communications with its advertisers, suppliers, lenders and other key business partners to determine their exposure to the Y2K issue. Until this process is underway, the Company cannot assess the degree of Company's risk it may face from these sources. Although the Company has not received any information to date that would lead it to believe its internal Y2K compliance issues will not be able to be resolved on a timely basis or that the related costs will have a material adverse effect on the Company's operations, cash flows or financial condition, the assessment phase of the Company's plans to address Y2K compliance issues is not complete, in particular an assessment of the risks relative to its non-IT system and business partner interfaces. The remediation phase is also not complete with respect to the broadcast systems at the Company's Chico, Flint and Mansfield stations, and no actual testing of the Company's enhanced or upgraded systems has been conducted. Accordingly, unexpected costs associated with the remediation of the Company's systems or with interruption of operation of the Company's stations could occur and, if material, could have a material adverse effect on the Company's operations, cash flows and financial condition. Possible risks include, but are not limited to, loss of power and communications links. Based on the assessment of external and non-IT system risks and the testing to be undertaken by the Company, contingency plans will be developed for all critical systems by the end of the third quarter of 1999. United States Department of Justice Information Request - ------------------------------------------------------- On July 29, 1998, the United States Department of Justice ("DOJ") issued a Civil Investigative Demand ("CID") to the Company requesting information relating to the Company's acquisition of six radio stations in and around Redding, California ("Redding Stations"). In response to the CID, the Company has submitted certain information requested by DOJ so that it may evaluate whether the Company's acquisition of the Redding Stations was in violation of applicable federal antitrust laws. The Company believes that its acquisition of the Redding Stations did not involve a violation of antitrust laws; however, it can not predict what DOJ will conclude. Cautionary Statement Concerning Forward-Looking Statements - ---------------------------------------------------------- This Form 10-Q includes certain forward-looking statements with respect to the Company that involve risks and uncertainties. Such statements are influenced by the Company's financial position, business strategy, budgets, projected costs, and plans and objectives of management for future operations, and are expressed with words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "project" and other similar expressions. Although the Company believes its expectations reflected in such forward-looking statements are based on reasonable assumptions, readers are cautioned that no assurance can be given that such expectations will prove correct and that actual results and developments may differ materially from those conveyed in such forward-looking statements. For these statements, the Company claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements herein include changes in general economic, business and market conditions, as well as changes in such conditions that may affect the radio broadcast industry or the markets in which the Company operates, including, in particular, increased competition for attractive radio properties and advertising dollars, fluctuations in the cost of operating radio properties, and changes in the regulatory climate affecting radio broadcast companies. Such forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-Q. If the Company does update or correct one or more forward-looking statements, readers should not conclude that the Company will make additional updates or corrections with respect thereto or with respect to other forward-looking statements. 18 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following is filed herewith as an exhibit to Part I of this Form 10-Q: Exhibit No. 27 Financial Data Schedule The exhibits identified as Part II Exhibits on the following Exhibit Index, which is incorporated herein by this reference, are filed or incorporated by reference as exhibits to Part II of this Form 10-Q. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. REGENT COMMUNICATIONS, INC. Date: November 16, 1998 By: /s/ TERRY S. JACOBS -------------------------------------- Terry S. Jacobs, Chairman of the Board and Chief Executive Officer Date: November 16, 1998 By: /s/ ANTHONY A. VASCONCELLOS -------------------------------------- Anthony A. Vasconcellos, Chief Financial Officer and Vice President (Chief Accounting Officer) 19 EXHIBIT INDEX Part I Exhibits: The following is filed herewith as an exhibit to Part I of this Form 10-Q:
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------ ------------------- 27 Financial Data Schedule
Part II Exhibits: The following exhibits are filed, or incorporated by reference where indicated, as part of Part II of this Report on Form 10-Q:
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------ ------------------- 4(a)* Amended and Restated Certificate of Incorporation of Regent Communications, Inc. (previously filed as Exhibit 4(a) to the Registrant's Form 8-K filed June 30, 1998 and incorporated herein by this reference). 4(b)* Amended and Restated By-Laws of Regent Communications, Inc. (previously filed as Exhibit 3(b) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference). 4(c)* Second Amended and Restated Stockholders' Agreement dated as of June 15, 1998 among Regent Communications, Inc., Terry S. Jacobs, William L. Stakelin, Waller-Sutton Media Partners, L.P., William H. Ingram, WGP Corporate Development Associates V, L.P., WGP Corporate Development Associates (Overseas) V, L.P., River Cities Capital Fund Limited Partnership, BMO Financial, Inc., General Electric Capital Corporation, Joel M. Fairman, Miami Valley Venture Fund II Limited Partnership, and Blue Chip Capital Fund II Limited Partnership (excluding exhibits not deemed material or filed separately in executed form) (previously filed as Exhibit 4(c) to the Registrant's Form 8-K filed June 30, 1998 and incorporated herein by this reference). 4(d)* Stock Purchase Agreement dated June 15, 1998 among Regent Communications, Inc., Waller-Sutton Media Partners, L.P., WPG Corporate Development Associates V, L.P., WPG Corporate Development Associates (Overseas) V, L.P., General Electric Capital Corporation, River Cites Capital Fund Limited Partnership and William H. Ingram (excluding exhibits not deemed material or filed separately in executed form) (previously filed as Exhibit 4(d) to the Registrant's Form 8-K filed June 30, 1998 and incorporated herein by this reference).
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EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------ ------------------- 4(e)* Registration Rights Agreement dated June 15, 1998 among Regent Communications, Inc., PNC Bank, N.A., Trustee, Waller-Sutton Media Partners, L.P., WPG Corporate Development Associates V, L.P., WPG Corporate Development Associates (Overseas) V, L.P., BMO Financial, Inc., General Electric Capital Corporation, River Cites Capital Fund Limited Partnership, Terry S. Jacobs, William L. Stakelin, William H. Ingram, Blue Chip Capital Fund II Limited Partnership, Miami Valley Venture Fund L.P. and Thomas Gammon (excluding exhibits not deemed material or filed separately in executed form) (previously filed as Exhibit 4(e) to the Registrant's Form 8-K filed June 30, 1998 and incorporated herein by this reference). 4(f)* Warrant for the Purchase of 650,000 Shares of Common Stock issued by Regent Communications, Inc. to Waller-Sutton Media Partners, L.P. dated June 15, 1998 (See Note 1 below) (previously filed as Exhibit 4(f) to the Registrant's Form 8-K filed June 30, 1998 and incorporated herein by this reference). 4(g)* Warrant for the Purchase of 50,000 Shares of Common Stock issued by Regent Communications, Inc. to General Electric Capital Corporation dated June 15, 1998 (previously filed as Exhibit 4(g) to the Registrant's Form 8-K filed June 30, 1998 and incorporated herein by this reference). 4(h)* Agreement to Issue Warrant dated as of June 15, 1998 between Regent Communications, Inc. and General Electric Capital Corporation (excluding exhibits not deemed material or filed separately in executed form) (previously filed as Exhibit 4(h) to the Registrant's Form 8-K filed June 30, 1998 and incorporated herein by this reference). 4(i)* Grant of Incentive Stock Option effective June 15, 1998 in favor of Terry S. Jacobs (previously filed as Exhibit 4(i) to the Form 10-Q for the Quarter Ended June 30, 1998, as amended, and incorporated herein by this reference). 4(j)* Grant of Incentive Stock Option effective June 15, 1998 in favor of William L. Stakelin (previously filed as Exhibit 4(j) to the Form 10-Q for the Quarter Ended June 30, 1998, as amended, and incorporated herein by this reference). 4(k)* Warrant for the Purchase of 80,000 Shares of Common Stock issued by Regent Communications, Inc. to River Cities Capital Fund Limited Partnership dated June 15, 1998 (previously filed as Exhibit 4(k) to the Form 10-Q for the Quarter Ended June 30, 1998, as amended, and incorporated herein by this reference). 4(l)* Stock Purchase Agreement dated as of May 20, 1997 between Terry S. Jacobs and Regent Communications, Inc. (previously filed as Exhibit 4(b) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference).
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EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------ ------------------- 4(m)* Stock Purchase Agreement dated as of May 20, 1997 between River Cities Capital Fund Limited Partnership and Regent Communications, Inc. (previously filed as Exhibit 4(c) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference). 4(n)* Stock Purchase Agreement dated as of November 26, 1997 and Terry S. Jacobs and Regent Communications, Inc. (previously filed as Exhibit 4(d) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference). 4(o)* Stock Purchase Agreement dated as of December 1, 1997 between William L. Stakelin and Regent Communications, Inc. (previously filed as Exhibit 4(e) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference). 4(p)* Stock Purchase Agreement dated as of December 8, 1997 between Regent Communications, Inc. and General Electric Capital Corporation (previously filed as Exhibit 4(f) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference). 4(q)* Stock Purchase Agreement dated as of December 8, 1997 between Regent Communications, Inc. and BMO Financial, Inc. (previously filed as Exhibit 4(g) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference). 4(r)* Amended and Restated Redemption and Warrant Agreement dated as of March 31, 1998 among Regent Communications, Inc., Blue Chip Capital Fund II Limited Partnership, Miami Valley Venture Fund L.P. and Faircom Inc. (previously filed as Exhibit 4(i) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference). 4(s)* Credit Agreement dated as of November 14, 1997 among Regent Communications, Inc., the lenders listed therein, as Lenders, General Electric Capital Corporation, as Documentation Agent and Bank of Montreal, Chicago Branch, as Agent (excluding exhibits not deemed material or filed separately in executed form) (previously filed as Exhibit 4(j) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference). 4(t)* Revolving Note issued by Regent Communications, Inc. to Bank of Montreal, Chicago Branch dated November 14, 1997 in the principal amount of $20,000,000 (See Note 2 below) (previously filed as Exhibit 4(k) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference).
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EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------ ------------------- 4(u)* Agreement to Issue Warrant dated as of March 25, 1998 between Regent Communications, Inc. and River Cities Capital Fund Limited Partnership (previously filed as Exhibit 4(l) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference). 4(v)* Regent Communications, Inc. Faircom Conversion Stock Option Plan (previously filed as Exhibit 4(m) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference). 4(w)* First Amendment to Credit Agreement dated as of February 16, 1998 among Regent Communications, Inc., the financial institutions listed therein, as lenders, General Electric Capital Corporation, as Documentation Agent, and Bank of Montreal, Chicago Branch as Agent (previously filed as Exhibit 4(w) to the Registrant's Form 8-K/A (date of report June 15, 1998) filed September 3, 1998 and incorporated herein by reference). 4(x)* Second Amendment and Limited Waiver to Credit Agreement dated as of June 10, 1998 among Regent Communications, Inc., the financial institutions listed therein, as lenders, General Electric Capital Corporation, as Documentation Agent, and Bank of Montreal, Chicago Branch, as Agent (previously filed as Exhibit 4(x) to the Registrant's Form 8-K/A (date of report June 15, 1998) filed September 3, 1998 and incorporated herein by reference). 4(y) Third Amendment to Credit Agreement dated as of August 14, 1998 among Regent Communications, Inc., the financial institutions listed therein, as lenders, General Electric Capital Corporation, as Documentation Agent, and Bank of Montreal, Chicago Branch, as Agent. 10(a) International Swap Dealer's Association Master Agreement dated as of August 13, 1998 between Regent Communications, Inc. and Bank of Montreal.
- --------- *Incorporated by reference. Notes: 1. Six substantially identical Warrants for the purchase of shares of Registrant's common stock were issued as follows:
Waller-Sutton Media Partners, L.P. 650,000 WPG Corporate Development Associates V, L.P. 112,580 WPG Corporate Development Associates (Overseas) V, L.P. 17,420 General Electric Capital Corporation 50,000 River Cites Capital Fund Limited Partnership 20,000 William H. Ingram 10,000
2. Two substantially identical notes were issued to Bank of Montreal, Chicago Branch, in the principal amounts of $15,000,000 and $20,000,000. EX-4.Y 2 EXHIBIT 4(Y) 1 Exhibit 4(y) REGENT COMMUNICATIONS, INC. THIRD AMENDMENT TO CREDIT AGREEMENT This THIRD AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated as of August 14, 1998 and entered into by and among Regent Communications, Inc., a Delaware corporation ("COMPANY"), the financial institutions listed on the signature pages hereof ("LENDERS"), General Electric Capital Corporation, as documentation agent ("DOCUMENTATION AGENT") and Bank of Montreal, Chicago Branch, as agent for Lenders ("AGENT"), and, for purposes of Section 4 hereof, the Credit Support Parties (as defined in Section 4 hereof) listed on the signature pages hereof, and is made with reference to that certain Credit Agreement dated as of November 14, 1997, as amended by that certain First Amendment to Credit Agreement dated as of February 16, 1998 and that Second Amendment and Limited Waiver to Credit Agreement dated as of June 10, 1998 (as so amended, the "CREDIT AGREEMENT"), by and among Company, Lenders and Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement. RECITALS WHEREAS, Company and Lenders desire to amend the Credit Agreement to make certain amendments as set forth below; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT A. Rate of Interest. Subsection 2.2A is hereby amended by deleting the table set forth therein in its entirety and substituting the following therefor: 1 2
======================================================== ===================================== APPLICABLE MARGIN ----------------- CONSOLIDATED BASE LIBOR TOTAL DEBT RATIO RATE LOAN RATE LOAN ======================================================== ================== ================== Greater than or equal to 6.00:1.00 1.50% 2.75% - -------------------------------------------------------- ------------------ ------------------ Greater than or equal to 5.50:1.0 but less than 6.00:1.00 1.25% 2.50% - -------------------------------------------------------- ------------------ ------------------ Greater than or equal to 5.00:1.0 but less than 5.50:1.00: 1.00% 2.25% - -------------------------------------------------------- ------------------ ------------------ Greater than or equal to 4.50:1.00 but less than 5.00:1.00 0.75% 2.00% - -------------------------------------------------------- ------------------ ------------------ Greater than or equal to 4.00:1.00 but less than 4.50:1.00 0.50% 1.75% - -------------------------------------------------------- ------------------ ------------------ Greater than or equal to 3.50:1.00 but less than 4.00:1.00 0.25% 1.50% - -------------------------------------------------------- ------------------ ------------------ Less than 3.50:1.00: 0.00% 1.25% ======================================================== ================== ==================
B. MAXIMUM CONSOLIDATED TOTAL DEBT RATIO. Subsection 7.6C is hereby amended by deleting the table set forth therein in its entirety and substituting the following therefor:
=========================================================== ============================ MAXIMUM FISCAL YEAR LEVERAGE RATIO =========================================================== ============================ Closing Date - March 31, 1999 6.50:1.00 - ----------------------------------------------------------- ---------------------------- April 1, 1999 - June 30, 1999 6.00:1.00 - ----------------------------------------------------------- ---------------------------- July 1, 1999 - September 30, 1999 5.75:1.00 - ----------------------------------------------------------- ---------------------------- October 1, 1999 - December 31, 1999 5.50:1.00 - ----------------------------------------------------------- ---------------------------- January 1, 2000 - March 31, 2000 5.25:1.00 - ----------------------------------------------------------- ---------------------------- April 1, 2000 - June 30, 2000 5.00:1.00 - ----------------------------------------------------------- ---------------------------- July 1, 2000 - September 30, 2000 4.75:1.00 - ----------------------------------------------------------- ---------------------------- October 1, 2000 - December 31, 2000 4.50:1.00 - ----------------------------------------------------------- ---------------------------- January 1, 2001 - March 31, 2001 4.00:1.00 - ----------------------------------------------------------- ---------------------------- April 1, 2001 and thereafter 3.50:1.00 =========================================================== ============================
2 3 C. ASSET SALES. A new subsection 7.7(vi) is hereby added to the Credit Agreement as follows: "(vi) As long as no Event of Default or Potential Event of Default has occurred and is continuing, or would result therefrom, Company and its Subsidiaries may consummate a sale of the Lake Tahoe Stations and the assets related thereto to a non-Affiliate for a cash purchase price of not less than $1,500,000 (subject to customary closing adjustments); provided that, anything in subsection 2.4B(iii)(a) to the contrary notwithstanding, the Net Cash Proceeds of such Asset Sale shall be applied by Company upon receipt to repay outstanding Revolving Loans but the Revolving Loan Commitments shall not be reduced by such prepayment." SECTION 2. LIMITATION OF AMENDMENTS Without limiting the generality of the provisions of subsection 10.6 of the Credit Agreement, the amendments set forth above shall be limited precisely as written and relate solely to the matters expressly set forth in Section 1 hereof, in the manner and to the extent described above, and nothing in this Amendment shall be deemed to: (a) constitute a waiver of compliance by Company with respect to any other term, provision or condition of the Credit Agreement or any other instrument or agreement referred to therein; or (b) prejudice any right or remedy that Agent or any Lender may now have (except to the extent such right or remedy was based upon noncompliance or defaults that will not exist after giving effect to this Amendment) or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. Except as expressly set forth herein, the terms, provisions and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect and in all other respects are hereby ratified and confirmed. SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Amendment, Company hereby represents and warrants that after giving effect to this Amendment: (a) there exists no Event of Default or Potential Event of Default under the Credit Agreement; 3 4 (b) all representations and warranties contained in the Credit Agreement and the other Loan Documents are true, correct and complete in all material respects on and as of the date hereof except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date; and (c) Company has performed all agreements to be performed on its part as set forth in the Credit Agreement. SECTION 4. ACKNOWLEDGEMENT AND CONSENT Each of the Company and the Subsidiaries (each individually a "Credit Support Party" and collectively, the "CREDIT SUPPORT PARTIES") hereby acknowledges that it has reviewed the terms and provisions of the Credit Agreement and this Amendment and consents to the amendment of the Credit Agreement effected pursuant to this Amendment. The Pledge and Security Agreement, the Collateral Account Agreement and the Subsidiary Guaranty are collectively referred to herein as the "CREDIT SUPPORT DOCUMENTS". Each Credit Support Party hereby confirms that each Credit Support Document to which it is a party or otherwise bound and all Collateral encumbered thereby will continue to guaranty or secure, as the case may be, to the fullest extent possible the payment and performance of all "Guarantied Obligations" and "Secured Obligations", as the case may be (in each case as such terms are defined in the applicable Credit Support Document), including without limitation the payment and performance of all such "Guarantied Obligations" and "Secured Obligations", as the case may be, in respect of the Obligations of Company now or hereafter existing under or in respect of the Credit Agreement and the Notes. SECTION 5. MISCELLANEOUS A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. (i) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. 4 5 (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent or any Lender under, the Credit Agreement or any of the other Loan Documents. B. FEES AND EXPENSES. Company acknowledges that all costs, fees and expenses as described in subsection 10.2 of the Credit Agreement incurred by Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Company. C. HEADINGS. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. E. COUNTERPARTS; EFFECTIVENESS; EFFECTIVE DATE OF AMENDMENTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company, Lenders and each of the Credit Support Parties and receipt by Company and Agent of written or telephonic notification of such execution and authorization of delivery thereof. Upon the effectiveness of this Amendment, the modifications to the Credit Agreement set forth herein shall be deemed to be in effect for all purposes under the Credit Agreement and the other Loan Documents as of June 30, 1998 and thereafter. [Remainder of page intentionally left blank] 5 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. REGENT COMMUNICATIONS, INC. By: /s/ Matthew A. Yeoman --------------------------------------- Name: Matthew A. Yeoman Title: Vice President - Finance S-1 7 REGENT BROADCASTING OF SAN DIEGO,INC., REGENT BROADCASTING OF DAYTON, INC., REGENT BROADCASTING OF CHICO, INC., REGENT BROADCASTING OF FLAGSTAFF, INC., REGENT BROADCASTING OF KINGMAN, INC., REGENT BROADCASTING OF LAKE TAHOE, INC., REGENT BROADCASTING OF PALMDALE, INC., REGENT BROADCASTING OF REDDING, INC., REGENT BROADCASTING OF VICTORVILLE, INC., REGENT ACQUISITION CORP., REGENT MERGER CORP., each a Delaware corporation (for purposes of Section 4 only) as a Credit Support Party By: /s/ Matthew A. Yeoman ---------------------------------------- Name: Matthew A. Yeoman Title: Vice President - Finance of each of the foregoing REGENT LICENSEE OF SAN DIEGO, INC., REGENT LICENSEE OF DAYTON, INC., each a Delaware corporation (for purposes of Section 4 only) as a Credit Support Party By: /s/ Matthew A. Yeoman ---------------------------------------- Name: Matthew A. Yeoman Title: Vice President - Finance of each of the foregoing S-2 8 BANK OF MONTREAL, CHICAGO BRANCH, individually and as Agent By: /s/ Allegra Griffiths -------------------------------- Name: Allegra Griffiths Title: Director S-3 9 GENERAL ELECTRIC CAPITAL CORPORATION, individually and as Documentation Agent By: /s/ Thomas P. Waters ---------------------------------- Name: Thomas P. Waters Title: Senior Vice President S-4 10 BANK ONE, INDIANAPOLIS, NA, By: /s/ Dale C. Arfman -------------------------------- Name: Dale C. Arfman Title: Vice President S-5 EX-10.A 3 EXHIBIT 10(A) 1 Exhibit 10(a) (MULTICURRENCY--CROSS BORDER) ISDA(R) International Swap Dealers Association, Inc. MASTER AGREEMENT dated as of August 13, 1998 REGENT COMMUNICATIONS, INC. and BANK OF MONTREAL have entered and/or anticipate entering into one or more transact) one (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows:-- 1. INTERPRETATION (a) DEFINITIONS. The terms defined in Section 14 and in the will have the meanings therein specified for the purpose of this Master Agreement. (b) INCONSISTENCY. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. OBLIGATIONS (a) GENERAL CONDITIONS. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Copyright (C) 1992 by International Swap Dealers Association, Inc. 2 Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. (b) CHANGE OF ACCOUNT. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) NETTING. If on any date amounts would otherwise be payable:-- (i) in the same currency; and (ii) in respect of the same Transaction, by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries. (d) DEDUCTION OR WITHHOLDING FOR TAX. (i) GROSS-UP. All payments under this Agreement win be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party ("X") will:-- (1) promptly notify the other party ("Y") of such requirement; (2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount teas been assessed against Y; (3) promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for:-- (A) the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or (B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (1) any action taken by a taxing authority, or 2 3 brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (11) a Change in Tax Law. (ii)Liability. If:-- (1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4); (2) X does not so deduct or withhold; and (3) a liability resulting from such Tax is assessed directly against X, then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y teas failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)). (e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 3. REPRESENTATIONS Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that:-- (a) BASIC REPRESENTATIONS. (i) STATUS. It is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing; (ii) POWERS. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it teas under any Credit Support Document to which it is a party and teas taken all necessary action to authorize such execution, delivery and performance; (iii) TO VIOLATION OR CONFLICT. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (iv) CONSENTS. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and 3 4 (v) OBLIGATIONS BINDING. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors" rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it teas occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. (e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true. (f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true. 4. AGREEMENTS Each party agrees with the other that, so long as either party teas or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:-- (a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs:-- (i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation; (ii) any other documents specified in the Schedule or any Confirmation; and (iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification, in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) MAINTAIN AUTHORIZATIONS. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. 4 5 (c) COMPLY WITH LAWS. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. (d) TAX AGREEMENT. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure. (e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organized, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement' is located ("Stamp Tax Jurisdiction") and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party's execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party. 5. EVENTS OF DEFAULT AND TERMINATION EVENTS (a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:-- (i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) Credit Support Default. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; (iv) MISREPRESENTATION. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to 5 6 any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); (vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) BANKRUPTCY. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:-- (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger);. (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially HI its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, teas an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer:-- (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. 6 7 (b) TERMINATION EVENTS. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event upon Merger if the is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:-- . (i) ILLEGALITY. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):-- (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) teas under any Credit Support Document relating to such Transaction; (ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); (iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount teas been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii); (iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified in the Schedule as applying to the panty, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not consulate an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or (v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event" is specified, in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). 7 8 (c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 6. EARLY TERMINATION (a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of Default with respect to a party (the "Defaulting Party') has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT. (i) NOTICE. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist. If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i). Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party's policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed. (iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. (iv) RIGHT TO TERMINATE. IF:-- (1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or (2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party, either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one 8 9 Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (c) EFFECT OF DESIGNATION. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) CALCULATIONS. (i) STATEMENT. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) PAYMENT DATE. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event of Default:-- (1) First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. (2) First Method and Loss. If the First Method and Loss apply, the-Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this Agreement. 9 10 (3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Terminated Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (ii) TERMINATION EVENTS. If the Early Termination Date results from a Termination Event:-- (1) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) Two Affected Parties. If there are two Affected Parties:-- (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and (B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). (iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 10 11 7. TRANSFER Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that:-- (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8. CONTRACTUAL CURRENCY (a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the "Contractual Currency"). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner and in good faith in convening the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess. (b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The terra "rate of exchange" includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency. (c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in respect of this Agreement. (d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss bad an actual exchange or purchase been made. 11 12 9. MISCELLANEOUS (a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) AMENDMENTS. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. (d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. (e) COUNTERPARTS AND CONFIRMATIONS. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. (g) HEADINGS. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 10. OFFICES; MULTIBRANCH PARTIES (a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking of flee or jurisdiction of incorporation or organization of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into. (b) Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party. (c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation. 12 13 11. EXPENSES A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 12. Notices (a) EFFECTIVENESS. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:-- (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback: is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) CHANGE OF ADDRESSES. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it. 13. GOVERNING LAW AND JURISDICTION (a) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) JURISDICTION. With respect to any suit, action or proceedings relating to this Agreement ( Proceedings ), each party irrevocably:-- (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being 13 14 in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable of the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 14. DEFINITIONS As used in this Agreement:-- "ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b). "AFFECTED PARTY" has the meaning specified in Section 5(b). "AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "AFFILIATE" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "APPLICABLE RATE" means:-- (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "BURDENED PARTY" has the meaning specified in Section 5(b). "CHANGE IN TAX LAW," means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into. "CONSENT" includes a consent, approval, action, authorization, exemption, notice, filing, registration or exchange control consent. "CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b). "CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as such in this Agreement. 14 15 "CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule. "DEFAULT RATE" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. "DEFAULTING PART" has the meaning specified in Section 6(a). "EARLY TERMINATION DATE" means the date determined in accordance with Section 6(a) or 6(b)(iv). "EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable, in the Schedule. "ILLEGALITY" has the meaning specified in Section 5(b). "INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or baying been a citizen or resident of such jurisdiction, or being or having been organized, present or engaged in a made or business in such jurisdiction, or having or having bad a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person baying executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). "LAW" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and "lawful" and "unlawful" will be construed accordingly. "LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if different, in the principal financial center, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. "LOSS" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section I 1. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. "MARKET QUOTATION" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) 15 16 in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation teas the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "NON-DEFAULTING PARTY" has the meaning specified in Section 6(a). "OFFICE" means a branch or office of a party, which may be such party's bead or home office. "POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers baying an of flee in the same city. "RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organized, managed and controlled or considered to have its seat. (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made. "SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "SET-OFF" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement. another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination Date, the sum of:-- (a) the Termination Currency Equivalent Or the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference of any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "SPECIFIED ENTITY" has the meaning specified in the Schedule. "SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider 16 17 of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "STAMP TAX" means any stamp, registration, documentation or similar tax. "TAX" means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. "TAX EVENT" has the meaning specified in Section 5(b). "TAX EVENT UPON MERGER" has the meaning specified in Section 5(b). "TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "TERMINATION CURRENCY" has the meaning specified in the Schedule. "TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the "Other Currency"), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties. "TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. "TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts. "UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties. 17 18 IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document.
REGENT COMMUNICATIONS, INC. BANK OF MONTREAL (Name of Party) (Name of Party) By: /s/ Anthony A. Vasconcellos By: /s/ R.J. Mailloux ------------------------------------------------- ------------------------------------ Name: Anthony A. Vasconcellos Name: R.J. Mailloux Title: Chief Financial Officer and Vice President Title: Senior Manager, Documentation Date: November 5, 1998 Date: November 12, 1998
18 19 (Multicurrent- Cross Border) ISDA SCHEDULE TO THE MASTER AGREEMENT dated as of August 13, 1998 between REGENT COMMUNICATIONS, INC. ("Party A") and BANK OF MONTREAL ("Party B") PART I TERMINATION PROVISIONS (a) "SPECIFIED ENTITY" means in relation to Party A for the purpose of:- Section 5(a)(v), Affiliates Section 5(a)(vi), Affiliates Section 5(a)(vii), Affiliates Section 5(b)(iv), Affiliates and in relation to Party B for the purpose of:- Section 5(a)(v), Not Applicable Section 5(a)(vi), Not Applicable Section 5(a)(vii), Not Applicable Section 5(b)(iv), Not Applicable. (b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14 of this Agreement. (c) The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to Party A and Party B. "SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 14 but it will not include indebtedness in respect of deposits received or any payment obligation not made because of any event similar to Illegality. "THRESHOLD AMOUNT" means 2% of stockholders' equity (including retained earnings). (d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will apply to Party A and Party B. (e) The "AUTOMATIC EARLY TERMINATION" provisions of Section 6(a) will not apply to Party A or Party B. (f) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e) of this Agreement:- (i) Market Quotation will apply. (ii) The Second Method will apply. Notwithstanding the above, with respect to FX Transactions and Currency Options, Loss and Second Method shall apply. (g) "TERMINATION CURRENCY" means the currency selected by the Non-defaulting Party or the non-Affected Party, as the case may be, provided that the Termination Currency shall be one of the currencies in which 19 20 payments in respect of at least one Terminated Transaction are required to be made pursuant to the related Confirmation if such specified currency is freely transferable, failing which the Termination Currency shall be U.S. Dollars. If there are two Affected Parties the Termination Currency shall be U.S. Dollars. (h) Additional Termination Event will not apply. PART 2 TAX REPRESENTATIONS (a) PAYER REPRESENTATION. For the purpose of Section 3(e) of this Agreement, Party A and Party B will each make the following representation:- It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on:- (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement; (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement; and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement; provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position. (b) PAYEE TAX REPRESENTATIONS. For the purpose of Section 3(f) of this Agreement, Party A and Party B make the representations specified below, if any:- (i) The following representation will not apply to Party A and will apply to Party B:- Each payment received or to be received by it in connection with this Agreement will be effectively connected with its conduct of a trade or business in the Specified Jurisdiction. If such representation applies, then:- "SPECIFIED JURISDICTION" means with respect to Party A: Not Applicable "SPECIFIED JURISDICTION" means with respect to Party B: United States of America (ii) The following representation will apply to Party A and will not apply to Party B:- It has been duly incorporated, created or organized under the laws of the United States of America or of any State of the United States of America, and that it is validly existing under those laws. (iii) Other Payee Representations:- None made. PART 3 AGREEMENT TO DELIVER DOCUMENTS For the purpose of Section 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the following documents, as applicable:- 20 21 (a) Each party shall, as soon as practicable after demand, deliver to the other party any form or document reasonably requested by the other party, including without limitation, any form or document required to enable such other party to make payments hereunder without withholding for or on account of Taxes or with such withholding at a reduced rate. (b) Other documents to be delivered by each party concurrently with the execution and delivery of this Agreement are:
PARTY FORM/DOCUMENT/ DATE BY WHICH TO BE COVERED BY - ----- -------------- ------------------- ---------- REQUIRED TO CERTIFICATE DELIVERED SECTION 3(d) - ----------- ----------- --------- ------------ DELIVER REPRESEN- - ------- --------- DOCUMENT TATION - -------- ------ Party A and Certificate of incumbency Upon execution of this Yes Party B containing specimen signatures of Agreement, and if each person executing the requested, each Agreement. Confirmation Party A Legal opinion substantially in the Upon execution of this No form of Exhibit I attached herein Agreement evidencing capacity and authority to enter into and deliver this Agreement. Party B Certified copy of a resolution of Upon execution of this Yes the directors authorizing the Agreement execution and delivery of the Agreement. Party B Internal Revenue Service Form Upon execution of this N/A 4224, or any successor form, Agreement completed fully, accurately and in a manner reasonably satisfactory to Party A
PART 4 MISCELLANEOUS (a) ADDRESSES FOR NOTICES. For the purposes of Section 12(a) of this Agreement:- ADDRESS(ES) FOR NOTICES OR COMMUNICATIONS TO PARTY A:- Address: Regent Communications, Inc. 50 East River Center Boulevard Suite 180 Covington, Kentucky 41011 Attention: Tony Vasconcellos Facsimile: 606-292-0352 Telephone: 606-292-0030 ADDRESS(ES) FOR NOTICES OR COMMUNICATIONS TO PARTY B:- With respect to Transactions, excluding FX Transactions: Address: EMFISYS - Derivatives Operations 130 Adelaide Street West 21 22 Suite 500 Toronto, Ontario M5H 4E1 Canada Attention: Manager, Confirmations Facsimile: (416) 867-4778/6827 Telephone: (416) 867-7173 Swift ID No.: BOFMCAM3 With respect to FX Transactions: Address: FX/MM Operations 129 St. Jacques St. W. 11th Floor, H.O. Montreal, Quebec H2Y 1L6 Canada Attention: Manager, FX Operations Facsimile: (514) 877-2223 Telephone: (514) 877-2203/9186 SWIFT ID Number: BOFMCAM3 Any notice sent to Party B in connection with Sections 5, 6 or 9(b) shall be sent to the following address: Address: Bank of Montreal Treasury Credit B-l Level First Canadian Place Toronto, Ontario M5X 1A1 Attention: Senior Manager, Documentation Telephone: (416) 867-4178 (b) PROCESS AGENT. For purposes of Section 13(c) of this Agreement:- Party A appoints as its Process Agent. Not Applicable. Party B appoints as its Process Agent its Office at 430 Park Avenue, New York, N.Y. 10022. (c) OFFICES. The provisions of Section 10(a) will apply to this Agreement. (d) MULTIBRANCH PARTY. For the purpose of Section 10(c) of this Agreement:- Party A is not a Multibranch Party. Party B is not a Multibranch Party and, for purposes of this Agreement and each Transaction entered into pursuant hereto, will act through its Chicago Office. (e) CALCULATION AGENT. The Calculation Agent is Party B. unless otherwise specified in a Confirmation in relation to the relevant Transaction. (f) CREDIT SUPPORT DOCUMENT. Not Applicable. (g) CREDIT SUPPORT PROVIDER. Not Applicable. (h) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of New York (without reference to choice of law doctrine). (i) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) of this Agreement will apply to all Transactions except for FX Transactions entered into by the same pair of Netting Offices. (j) "AFFILIATE" will have the meaning specified in Section 14 of this Agreement. 22 23 PART 5 OTHER PROVISIONS (a) 1991 ISDA DEFINITIONS. The provisions of the 1991 ISDA Definitions (the "Definitions"), published by the International Swaps and Derivatives Association, Inc., are incorporated by reference in, and will be deemed to be part of, this Agreement and each Confirmation as if set forth in full in this Agreement or in such Confirmation, without regard to any revision or subsequent edition thereof. In the event of any inconsistency between the provisions of this Agreement and the Definitions, this Agreement will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Agreement or the Definitions, such Confirmation will prevail for the purpose of the relevant Transaction. (b) SUPERVENING ILLEGALITY. Without prejudice to a party's right to terminate in the event of Illegality, a party shall not be excused from performance hereunder by supervening illegality (whether by reason of passage or promulgation of a new law, regulation or interpretation or of failure to obtain any required governmental consent or approval), impossibility or frustration, with the effect that, while neither party shall be obligated to violate any applicable law by reason of this Section, each party shall retain its right to payment pursuant to Section 6(e) if the other party does not perform because of supervening illegality, impossibility or frustration. (c) SET-OFF. Any amount (the "Early Termination Amount") payable to one party (the "Payee") by the other party (the "Payer") under Section 6(e), in circumstances where there is a Defaulting Party or one Affected Party in the case where a Termination Event under Section 5(b)(iv) or 5(b)(v) has occurred, will, at the option of the party ('X') other than the Defaulting Party or the Affected Party (and without prior notice to the Defaulting Party or the Affected Party), be reduced by its set-off against any amount(s) (the 'Other Agreement Amount') payable (whether at such time or in the future or upon the occurrence of a contingency) by the Payee to the Payer (irrespective of the currency, place of payment or booking office of the obligation) under any other agreement(s) between the Payee and the Payer or instrument(s) or undertaking(s) issued or executed by one party to, or in favour of, the other party (and the Other Agreement Amount will be discharged promptly and in all respects to the extent it is so set-off). X will give notice to the other party of any set-off effected under this Section. For this purpose, either the Early Termination Amount or the Other Agreement Amount (or the relevant portion of such amounts) may be converted by X into the currency in which the other is denominated at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency. If an obligation is unascertained, X may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained. Nothing in this Section shall be effective to create a charge or other security interest. This Section shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise). (d) CONDITIONS TO CERTAIN PAYMENTS. Notwithstanding the provisions of Section 6(e)(i)(3) and (4), as applicable, if the amount referred to therein is a positive number, the Defaulting Party will pay such amount to the Non-defaulting Party, and if the amount referred to therein is a negative number, the Non-defaulting Party shall have no obligation to pay any amount thereunder to the Defaulting Party unless and until the conditions set forth in (i) and (ii) below have been satisfied at which time there shall arise an obligation of the Non-defaulting Party to pay to the Defaulting Party an amount equal to the absolute value of such negative number less any and all amounts which the Defaulting Party may be obligated to pay under Section 11: (i) the Non-defaulting Party shall have received confirmation satisfactory to it h its sole discretion (which may include an unqualified opinion of its counsel) that (i) no further payments under Section 2(a)(i) or 2(e) in respect of Terminated Transactions will be required to be made in accordance with Section 6(c)(ii) and (ii) each Specified Transaction shall have terminated pursuant to its specified termination date 23 24 or through the exercise by a party of a right to terminate and all obligations owing under each such Specified Transaction shall have been fully and finally performed; and (ii) all obligations (contingent or absolute, matured or unmatured) of the Defaulting Party and any Affiliate of the Defaulting Party to make any payment to the Non-defaulting Party or any Affiliate of the Non-defaulting Party shall have been fully and finally performed. (e) RELATIONSHIP BETWEEN THE PARTIES. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction): NON-RELIANCE. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction. ASSESSMENT AND UNDERSTANDING. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction. STATUS OF PARTIES. The other party is not acting as a fiduciary for or an advisor to it in respect of that Transaction. (f) BANKRUPTCY CODE REPRESENTATION. The parties hereto intend that this Agreement shall be a "master agreement" for purposes of 11 U.S.C. ss. 101(53B) and 12 U.S.C. ss. 1821(e)(8)(D)(vii), or any successor provisions. (g) CFTC REPRESENTATION. (a) Each park represents and warrants that (i) it is an "eligible swap participant" as that term is defined by the Commodity Futures Trading Commission at 17 C.F.R. ss. 35.1(b)(2); and (ii) this Agreement and the Transactions hereunder are entered into in connection with its business or a line of business, and have been individually tailored and negotiated. (b) With respect to any Transaction that is a commodity option, each party when it is the offered represents that (i) it is a producer, processor, commercial user of or merchant handling the commodity; and (ii) it is entering into such Transaction solely for purposes relating to its business as such. (h) (i) ADDITIONAL COVENANTS AND AGREEMENTS. In addition to the agreements set forth in Section 4 of this Agreement, Party A agrees to observe, perform and comply with all the covenants and agreements set forth in the Credit Agreement whether or not the Credit Agreement remains in effect, and such covenants and agreements will be deemed to continue in effect for the benefit of Party B whether or not any commitment remains in effect, or any sum remains payable, under the Credit Agreement provided that any documentation to be delivered to any Lender under the Credit Agreement shall be delivered to Party B. insofar as such covenants and agreements of the Credit Agreement conflict or are inconsistent with or affect any other terms, covenants or conditions in this Agreement, such covenants and agreements of the Credit Agreement shall prevail. (ii) COLLATERAL SECURITY. Party A agrees that all of its obligations under this Agreement (whether present or future, contingent or otherwise) shall be secured by any collateral security from time to time granted by Party A to Party B (whether before or after the date hereof) including without limitation all security provided in respect of Party A's obligations under the Credit Agreement. "CREDIT AGREEMENT" means the Credit Agreement dated as of November 14, 1997 among Regent Communications, Inc., as Borrower, the lenders listed therein, as Lenders, General Electric Capital Corporation, as Documentation Agent, and Bank of Montreal, Chicago Branch, as Agent; and as may be 24 25 amended from time to time (without giving effect to any amendments thereto, or waivers or consents granted thereunder, not consented to by Party B). PART 6 ADDITIONAL TERMS FOR FX TRANSACTIONS AND CURRENCY OPTION TRANSACTIONS. 1. (a) STANDARD TERMS AND CONDITIONS APPLICABLE TO FX TRANSACTIONS AND CURRENCY OPTION Transactions. Each FX Transaction or Currency Option Transaction outstanding at or entered into after the date hereof between the parties shall be governed by this Agreement irrespective of any references in a Confirmation to any other master agreements (e.g. IFEMA, ICOM, any specified terms and conditions). (b) INCORPORATION OF AND AMENDMENTS TO ISDA FX DEFINITIONS. The 1998 ISDA FX and Currency Option Definitions (the "FX and Currency Option Definitions"), published by the International Swaps and Derivatives Association, Inc., are hereby incorporated by reference with respect to any "FX Transactions" and "Currency Option Transactions" as defined by the FX and Currency Option Definitions, except as otherwise specifically provided herein. The following amendments are to be made to the FX and Currency Option Definitions: (i) Article I of the FX and Currency Option Definitions is amended by the addition of the following definition with respect to FX Transactions: "Currency Obligation" means the undertaking of a party hereunder to receive or deliver an amount of currency, including a netted Currency Obligation, and including any Currency Obligation previously entered into by the parties. (ii) Section 3.6(a) of the FX and Currency Option Definitions is hereby amended by deleting in its entirety the final sentence thereof and adding the following two sentences at the end thereof: "A Currency Option Transaction may be exercised in whole or in part. If a Currency Option Transaction is exercised in part, the unexercised portion shall not be extinguished thereby but shall remain a Currency Option Transaction to the extent of such unexercised portion until the earlier of (A) the expiration of the Currency Option Transaction or (B) an exercise of the Currency Option Transaction that leaves no remaining unexercised portion thereof." (iii) Section 3.7 of the FX and Currency Option Definitions is hereby amended by adding the following subsection (d): "(d) POTENTIAL EVENT OF DEFAULT. If an Event of Default or a Potential Event of Default has occurred and is continuing and an Early Termination Date has not been designated by the Non-defaulting Party, the Non-defaulting Party may, by written notice, specify that any or all Currency Option Transactions being settled while such an Event of Default or Potential Event of Default is continuing shall be settled in accordance with Section 3.7(b) and upon such notice becoming effective, the parties shall be deemed to have elected to have the specified Currency Option Transactions settled at the In-the-Money Amount unless and until the Event of Default or Potential Event of Default is no longer continuing." (iv) Section 3.4 of the FX and Currency Option Definitions is hereby amended by adding the following subsection (c): "(c) If a Premium is not received on the Premium Payment Date, the Seller may elect: (i) to accept a late payment of such Premium; (ii) to give written notice of such non-payment and, if such payment shall not be received within three Local Business Days of such notice, treat the related Currency Option Transaction as void; or (iii) to give written 25 26 notice of such non-payment and, if such payment shall not be received within three Local Business Days of such notice, treat such non-payment as an Event of Default under Section 5(a)(i). If the Seller elects to act under clause (i) of the preceding sentence, the Buyer shall pay interest on such Premium in the same currency as such Premium from the day such Premium was due until the day paid at the Default Rate, as determined in good faith by the Seller; if the Seller elects to act under clause (ii) of the preceding sentence, the Buyer shall pay all out-of-pocket costs and actual damages incurred in connection with such unpaid or late Premium or void Currency Option Transaction, including without limitation, interest on such Premium in the same currency as such Premium at the then prevailing market rate and any other costs or expenses incurred by the Seller in covering its obligations (including, without limitation, a delta hedge) with respect to such Currency Option Transaction." (c) CONFIRMATIONS. FX Transactions and Currency Option Transactions shall be promptly confirmed by the parties by Confirmations exchanged by mail, telex, facsimile or other electronic means. Unless either party objects to the terms of an FX Transaction or Currency Option Transaction contained in any Confirmation within three Local Business Days of receipt thereof, the terms of such Confirmation shall be deemed correct and accepted absent manifest error, unless a corrected Confirmation is sent by a party within such three day period, in which case the party receiving such corrected Confirmation shall have three Local Business Days after receipt thereof to object to the terms contained in such corrected Confirmation. Where an FX Transaction or Currency Option Transaction is confirmed by means of mail or an electronic messaging system that the parties have elected to use to confirm such Transaction: (i) such confirmation will constitute a "Confirmation" as referred to in this Agreement even where not so specified in the confirmation, (ii) such Confirmation will supplement, form part of, and be subject to this Agreement and all provisions in this Agreement will govern the Confirmation, and (iii) the definitions and provisions contained in the FX and Currency Option Definitions will be incorporated into the Confirmation. In the event of any inconsistency between the FX and Currency Option Definitions or this Agreement and the Confirmation, such Definitions and this Agreement will govern for the purposes of the relevant FX Transaction or Currency Option Transaction. 2. NETTING, OFFSET AND DISCHARGE WITH RESPECT TO CURRENCY OPTION TRANSACTIONS. The provisions of Section 2(c) shall not apply to Currency Option Transactions. The following provisions shall apply to Currency Option Transactions: (a) If, on any date, and unless otherwise mutually agreed by the parties, a Premium would otherwise be payable hereunder in the same currency between a pair of Offices of the parties, then, on such date, each party's obligation to make payment of any such Premium will be automatically satisfied and discharged and, if the aggregate Premium(s) that would otherwise have been payable by such Office of one party exceeds the aggregate Premium(s) that would otherwise have been payable by such Office of the other party, replaced by an obligation upon the party by whom the larger aggregate Premium(s) would have been payable to pay the other party the excess of the larger aggregate Premium(s) over the smaller aggregate Premium(s). (b) Unless otherwise agreed, any Call or any Put written by a party will automatically be terminated and discharged, in whole or in part, as applicable, against a Call or a Put, respectively, written by the other party, such termination and discharge to occur automatically upon the payment in full of the last Premium payable in respect of such Currency Option Transactions; provided that such termination and discharge may only occur in respect of Currency Option Transactions: (i) each being with respect to the same Put Currency and the same Call Currency; (ii) each having the same Expiration Date and Expiration Time; (iii) each being the same style, i.e. either both being American or both being European; (iv) each having the same Strike Price; 26 27 (v) neither of which shall have been exercised by delivery of a Notice of Exercise; and (vi) which are entered into by the same Offices of the parties; and upon the occurrence of such termination and discharge, neither party shall have any further obligation to the other party in respect of the relevant Currency Option Transactions or, as the case may be, parts thereof so terminated and discharged. In the case of a partial termination and discharge (i.e. where the Currency Option Transactions are for different amounts of the Currency Pair), the remaining portion of the Currency Option Transaction which is partially discharged and terminated shall continue to be a Currency Option Transaction for all purposes of this Agreement. 3. NETTING, DISCHARGE AND TERMINATION OF FX TRANSACTIONS. The provisions of Section 2(c) (ii) shall not apply to FX Transactions. The following provisions shall apply to FX Transactions: (i) NOVATION NETTING (a) Unless otherwise agreed to by the parties hereto, whenever an FX Transaction is entered into between a pair of Netting Offices of the Parties which creates a Currency Obligation in the same currency and for the same Settlement Date as an existing Currency Obligation between such Netting Offices, such Currency Obligations shall automatically and without funkier action be netted, individually cancelled and simultaneously replaced through novation by a new Currency Obligation determined as follows: (i) if the cancelled Currency Obligations evidenced an undertaking by the same party to deliver the underlying currency, the new Currency Obligation shall be equal to the aggregate of the cancelled Currency Obligations, and (ii) if the cancelled Currency Obligations evidence undertakings by each party to deliver the underlying currency, the amount of the underlying currency to be delivered by each party under the cancelled Currency Obligations shall be compared, and the new Currency Obligation shall equal the amount by which the Currency Obligation of the party having the greater obligation with respect to each currency exceeded the Currency Obligation of the party having the lesser obligation with respect to such currency. Such new Currency Obligation shall be considered a "Currency Obligation" under this Agreement. (b) The provisions of paragraph 3(i)(a) of this Part 6 above shall apply notwithstanding that either party (i) may fail to send out a Confirmation, (ii) may not on its books treat the Currency Obligations as cancelled and simultaneously replaced by a new Currency Obligation as provided herein, or (iii) may send out a Confirmation that incorrectly states any term of a Currency Obligation. (ii) SETTLEMENT NETTING If on any Settlement Date, and unless otherwise mutually agreed by the parties, Currency Obligations for the delivery of the same currency shall exist between a pair of Netting Offices of the parties, then on such Settlement Date, each party's Currency Obligation to deliver that currency will be automatically satisfied and discharged and, if the aggregate amount that should otherwise have been delivered by such Office of one party exceeds the aggregate amount that would otherwise have been delivered by such Office of the other party, replaced by a Currency Obligation upon the party by whom the larger aggregate amount would have been deliverable to deliver to the other party the excess of the larger aggregate amount over the smaller aggregate amount. NETTING OFFICE.. For the purposes of this paragraph 3 of this Part 6, "Netting Office" means, with respect to Party A: Covington (Kentucky) with respect to Party B: Chicago; The Netting Office with respect to a Party may be modified from time to time pursuant to notice given in accordance with the terms of Section 12 of the Agreement. 27 28 4. DEFINITIONS. Section 14 is hereby amended as follows: The definition of "Terminated Transaction" shall be deemed to include Currency Obligations. REGENT COMMUNICATIONS, INC. BANK OF MONTREAL By: By: --------------------- ----------------------- Name: Name: --------------------- ----------------------- Title: Title: --------------------- ----------------------- Date: Date: --------------------- ----------------------- 28 EX-27 4 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGENT COMMUNICATION INC.'S FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000913015 REGENT COMMUNICATIONS US DOLLARS 3-MOS DEC-31-1998 SEP-30-1998 1 393,743 0 3,819,723 (240,000) 0 12,143,375 14,885,808 (5,900,466) 66,577,504 12,185,125 0 19,925,522 3,857,891 2,400 (7,094,265) 66,577,504 5,860,649 5,421,098 0 5,308,135 14,035 0 942,770 (843,842) 0 (843,842) 0 0 0 (843,842) (6.53) (6.53)
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