-----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, PUi4m8h2MTdmbQ/9Bi4KVyo6AS42Ml8PNXr2FBcML8uI8m7XmasWkaqFXBu4+G7X 67P6acLTvkBM1vY7hbOiLA== 0000950152-99-002929.txt : 19990402 0000950152-99-002929.hdr.sgml : 19990402 ACCESSION NUMBER: 0000950152-99-002929 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 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-K SEC ACT: SEC FILE NUMBER: 333-46435 FILM NUMBER: 99583418 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-K 1 REGENT COMMUNICATIONS, INC. FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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 incorporation or organization) Identification No.) 50 East RiverCenter Boulevard Suite 180 Covington, Kentucky 41011 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (606) 292-0300 Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered Series C Convertible Preferred Stock None
Securities registered pursuant to Section 12(g) of the Act: None (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of March 31, 1999, the aggregate market value of registrant's common equity beneficially held by non-affiliates of registrant is $0. The number of common shares of registrant outstanding as of March 31, 1999 is 240,000. 2 DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's definitive Proxy Statement to be filed during April 1999 in connection with the 1999 Annual Meeting of Stockholders presently scheduled to be held on April 29, 1999 are incorporated by reference into Part III of this Form 10-K. Certain exhibits listed in Part IV of this Form 10-K are incorporated by reference from prior filings made by the Registrant under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934. -i- 3 REGENT COMMUNICATIONS, INC. INDEX TO ANNUAL REPORT ON FORM 10-K
Page Part I Item 1 Business 1 Item 2 Properties 10 Item 3 Legal Proceedings 11 Item 4 Submission of Matters to a Vote of Security Holders 11 Part II Item 5 Market for Registrant's Common Equity and Related Stockholder Matters 11 Item 6 Selected Financial Data 11 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 7A Quantitative and Qualitative Disclosures about Market Risk 19 Item 8 Financial Statements and Supplementary Data 19 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 46 Part III Item 10 Directors and Executive Officers of the Registrant 46 Item 11 Executive Compensation 46 Item 12 Security Ownership of Certain Beneficial Owners and Management 46 Item 13 Certain Relationships and Related Transactions 46 Part IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 46
-ii- 4 PART I ITEM 1. BUSINESS. GENERAL DEVELOPMENT OF BUSINESS Regent Communications, Inc. ("Regent" or the "Company") is a holding company engaged in the radio broadcasting business. Regent was incorporated in Delaware in November 1996 by Terry S. Jacobs and William L. Stakelin with the objective of acquiring radio properties, primarily in medium and smaller radio markets, that have a history of growing revenues and broadcast cash flow, have capable operating management and are in communities with good growth prospects or have attractive competitive environments. Regent acquired its first radio station in 1997, and with acquisitions of 32 additional stations in 1998, Regent currently owns and operates 33 radio stations (21 FM and 12 AM) in ten markets in California, Arizona, Michigan and Ohio. Regent has contracted to sell seven of these stations which do not conform to Regent's strategic plans. Regent has also agreed to purchase two FM radio stations and one AM station in the St. Cloud, Minnesota market (the "St. Cloud Stations"). The following table sets forth certain information regarding radio stations owned by Regent and which Regent has agreed to acquire:
License Power Expiration Market Area Call Letters City of License Frequency (kw) Format Date ----------- ------------ --------------- --------- ---- ------ ---- San Diego, CA KCBQ(AM) San Diego, CA 1170 KHz 50.0/1.5 Talk/Information 12/01/05 Chico, CA KFMF(FM) Chico, CA 93.9 MHz 2.0 Album Oriented Rock 12/01/05 KALF(FM) Red Bluff, CA 95.7 MHz 7.0 Country Lite 12/01/05 KPPL(FM) Colusa, CA 107.5 MHz 28.0 Rock 12/01/05 Redding, CA KQMS(AM) Redding, CA 1400 KHz 1.0 News/Talk/Sports 12/01/05 KSHA(FM) Redding, CA 104.3 MHz 100.0 Soft Adult Contemporary 12/01/05 KNNN(FM) Central Valley, CA 99.3 MHz 4.2 Contemporary Hit Radio 12/01/05 KRDG(FM) Shingletown, CA 105.3 MHz 9.9 Oldies 12/01/05 KRRX(FM) Burney, CA 106.1 MHz 100.0 Album Oriented Rock 12/01/05 KNRO(AM) Redding, CA 600 KHz 1.0 Country 12/01/05 Palmdale, CA KAVC(AM) Mohave, CA 1340 KHz 1.0 Religion 12/01/05 KTPI(FM) Tehachapi, CA 103.1 MHz 6.0 Country 12/01/05 KOSS(FM) Rosamond, CA 105.5 MHz 2.9(6.0) Adult Contemporary 12/01/05 Victorville, CA KIXW(AM) Apple Valley, CA 960 KHz 5.0 Spanish 12/01/05 KZXY(FM) Apple Valley, CA 102.3 MHz 3.0 Adult Contemporary 12/01/05 KATJ(FM) George, CA 100.7 MHz 260w Country 12/01/05 KROY(AM) Victorville, CA 1590 KHz 500w Religion 12/01/05 KIXA(FM) Lucerne Valley, CA 106.5 MHz 550w Classic Rock 12/01/05 So. Lake Tahoe, CA KOWL(AM) So. Lake Tahoe, CA 1490 KHz 1.0 News/Talk/Sports 12/01/05 KRLT(FM) So. Lake Tahoe, CA 93.9 MHz 6.0 Lite Rock 12/01/05 Flagstaff, AZ * KZGL(FM) Cottonwood, AZ 95.9 MHz 9.0 Album Oriented Rock 10/01/05 KVNA(AM) Flagstaff, AZ 600 KHz 5.0 News/Talk/Sports 10/01/05 KVNA(FM) Flagstaff, AZ 97.5 MHz 100.0 Adult Contemporary 10/01/05 Kingman, AZ * KFLG(AM) Bullhead City, AZ 1000 KHz 5.0 American Standards 10/01/05 KFLG(FM) Bullhead City, AZ 102.7 MHz 53.0 Country 10/01/05 KAAA(AM) Kingman, AZ 1230 KHz 1.0 News/Talk 10/01/05 KZZZ(FM) Kingman, AZ 94.7 MHz 100.0 Adult Contemporary 10/01/05 Flint, MI WFNT(AM) Flint, MI 1470 KHz 5.0/1.0 News/Talk/Sports 10/01/04 WCRZ(FM) Flint, MI 107.9 MHz 50.0 Adult Contemporary 10/01/04 WWBN(FM) Tuscola, MI 101.5 MHz 6.0 Album Oriented Rock 10/01/04 Mansfield/Shelby, WMAN(AM) Mansfield, OH 1400 KHz 1.0 News/Talk/Sports 10/01/04 OH WYHT(FM) Mansfield, OH 105.3 MHz 50.0 Hot Adult Contemporary 10/01/04 WSWR(FM) Shelby, OH 100.1 MHz 3.0 Oldies 10/01/04 St. Cloud, MN ** WWJO(FM) St. Cloud, MN 98.1 MHz 101.0 Country 04/01/05 KMXK(FM) Cold Spring, MN 94.9 MHz 50.0 Oldies 04/01/05 WJON(AM) St. Cloud, MN 1240 KHz 1.0 News/Talk 04/01/05
* Regent has entered into contracts to sell these stations. ** Regent has entered into a contract to acquire these stations. -1- 5 Acquisition Strategy. Given deregulation and subsequent consolidation in the radio broadcast industry, Regent believes it is prudent in any acquisition plan to acquire a sufficient number of stations in each market to form competitive station clusters. Operating a number of stations in a single market will allow Regent to reduce overhead and marketing expenses, to create a strong identity among advertisers, to attract superior operating and on-air talent, and to build a strong position with demographically attractive listeners, thereby creating operating leverage that should give Regent the opportunity to enhance revenue generation. Initially, Regent has focused on the acquisition of properties that have existing cash flow in order to provide a base for future growth. Regent has not purchased, and does not foresee purchasing in the near future, properties with negative cash flows, or so-called "underperforming" or "turnaround" properties, unless they complement or can be combined with the operations of positive cash flow properties in a market or regional cluster. Regent's strategy is to operate in markets which have minimum market advertising revenue of approximately $8,000,000 where the Regent stations have the potential to generate at least $1,000,000 in annual broadcast cash flow (net broadcasting revenues in excess of operating expenses before depreciation, amortization and corporate expenses). Management does not have a specific inflexible acquisition formula, believing that what may be an attractive cash flow multiple in one situation may be a very poor investment in other circumstances. Factors which may influence pricing of station acquisitions include actual and potential revenue growth rates, competitive factors, the potential to improve or add to existing in-market operations, the quality of technical facilities, and hidden values such as high overhead, poor sales conversion, or real estate or other assets that can be sold. Regent plans to utilize its management's experience in the industry and relationships with both independent owners and larger corporate entities to create opportunities for purchases that may not be available to others. Regent expects to be flexible in structuring its acquisitions, offering certain sellers the opportunity to receive stock of Regent in full or partial payment for their stations. Regent believes the availability of preferred equity as a payment medium may be useful to Regent in accommodating sellers' financial and tax objectives. Operating Strategy. Regent's strategies for operating broadcasting properties and creating value have been developed from its management's years of experience in the industry. Critical elements of Regent's operating strategies include a continual focus on improving ratings, revenues and operating effectiveness at each station; an emphasis on developing superior local and corporate management; the sharing of financial rewards with this management; operating multiple station clusters for maximum efficiency; the development of strong ratings or format positions within its markets; establishing the first, second or third revenue position in each of its markets; improving the performance of developmental stations; centralization of management information systems and controls; ongoing programming research; and effective implementation of the results of this research. Regent management has experience building and operating profitable in-market station clusters with strong ratings or format positions and believes that the opportunities created by deregulation can only be realized by owning well designed and executed clusters. Maximizing performance of an in-market cluster requires musical formats that draw attractive demographics and create a market position less vulnerable to competitive attack. An example of such a cluster might include ownership of an Album Oriented Rock, Classic Rock and a Sports/Talk station. Such a grouping would tend to attract an audience with strength among male demographics. This audience would be of interest to particular advertisers (e.g., brewers, certain automobile manufacturers or retailers oriented toward a male clientele) and allow the broadcaster to create attractive packages for these advertisers. -2- 6 Strong station clusters are also critical to establishing a competitive revenue position. In most markets, holding a top three position generally provides the ability to compete for advertisers seeking broad visibility in the market. Moreover, clusters with larger revenue shares are in a position to spread overhead and other costs over this larger base, thereby increasing margins. In running geographically diverse operations and rapidly changing businesses that are typical of broadcasting companies, management has found that effective management information systems and controls are an important element of success. For Regent, in addition to regular oversight of daily operations by senior management, these include detailed weekly sales and cash management reports, monthly financial statements by department, station and market and, where available, monthly tracking of Arbitron ratings by station and monthly tracking, by market, of market and station revenue data. Assembling talented and aggressive operating management is critical to success for radio companies. Regent endeavors to create positive work environments in order to attract and retain talented personnel. In addition, Regent provides incentives to key employees by creating financial rewards, including making equity available to certain key employees based on performance. In summary, Regent's strategy is to attempt to create solid and growing cash flows, profitable and well thought out local clusters, reasonable geographic and formatic diversity and an experienced management team at both the corporate and station levels. It is believed that the implementation of this strategy will position Regent as a relatively attractive public or private acquisition target or as a merger partner. THE RADIO BROADCASTING INDUSTRY At December 31, 1998, there were 4,793 commercial AM and 5,662 commercial FM stations authorized and operating in the United States. An increasing number of persons listen to FM radio because of clearer sound characteristics and stereo transmission. In the spring of 1998, FM listenership represented about 78.5% of total radio audience. Operations. Radio station revenue is derived predominantly from local and regional advertising and, to a lesser extent, from national advertising. Network compensation also provides some revenue. Local and regional sales generally are made by a station's sales staff. National sales generally are made by "national rep" firms specializing in radio advertising sales on the national level. These firms are compensated on a commission-only basis. Local and regional sales are made primarily to businesses in the market covered by a station's broadcast signal and to some extent to businesses in contiguous or nearby markets. Such businesses include auto dealers, soft drink, beer and wine distributors, fast food outlets and financial institutions. National sales are made to larger, nationwide advertisers, such as soft drink producers, automobile manufacturers and airlines. Most advertising contracts are short-term, generally running only for a few weeks. Advertising rates charged by a radio station are based primarily on the station's ability to attract audiences in the demographic groups which advertisers wish to reach and on the number of stations competing in the market area. Rating service surveys quantify the number of listeners tuned to the station at various times. Rates are generally highest during morning and evening drive-time hours. Regent's stations' advertising sales are made by their respective sales staffs under the direction of a general manager or sales managers. Television, billboard, newspaper and direct mail advertising, as well as special events and promotions, can be used to supplement direct contact by the sales staff in developing advertising clients. -3- 7 The primary costs incurred in operating a radio station are salaries, programming, promotion and advertising expenditures, occupancy costs of premises for studios and offices, transmitting and other equipment expenses and music license royalty fees. Radio broadcasting revenues are spread over the calendar year. The first quarter generally reflects the lowest and the second and third quarters the highest revenues for the year, due in part to increases in demand from retail advertising. The radio industry is continually faced with technological changes and innovations, the possible rise in popularity of competing entertainment and communications media, changes in labor conditions, governmental restrictions and actions of federal regulatory bodies, including the Federal Communications Commission ("FCC"), any of which could have a material effect on Regent's business. However, broadcasting stations have generally enjoyed growth in listeners and value within the past several decades. Population increases and greater availability of radios, particularly car and portable radios, have contributed to this growth. Competition. The radio broadcasting industry is a highly competitive business. Regent's radio broadcasting stations compete for audience share and revenue directly with the other AM and FM radio stations in their respective market areas, as well as with other advertising media such as newspapers, cable television, magazines, outdoor advertising, transit advertising and mail marketing. Competition within the radio broadcasting industry occurs primarily in the individual market areas so that a station in one market does not generally compete with stations in other market areas. In addition to management experience, factors which are material to competitive position include the station's ratings in its market, rates charged for advertising time, broadcast signal coverage, assigned frequency, audience characteristics, the ability to create and execute promotional campaigns for clients and for the station, local program acceptance and the number and characteristics of other stations in the market area. Regent attempts to improve its competitive position by reviewing programming and the programming of competitors, upgrading technical facilities where appropriate, attempting to expand sales to existing advertising clients and developing new client relationships, and by promotional campaigns aimed at the demographic groups targeted by their respective stations. The FCC recently has allocated spectrum to a new technology, digital audio broadcasting ("DAB"), to deliver satellite-based audio programming to a national or regional audience and has adopted regulations for a DAB service. DAB may provide a medium for the delivery by satellite or terrestrial means of multiple new audio programming formats with compact disc quality sound to local and national audiences. Another form of DAB, known as In-Band On Channel, could provide DAB in the present FM radio band. It is not known at this time whether this technology also may be used in the future by existing radio broadcast stations either on existing or alternate broadcasting frequencies. In addition, the FCC has recently authorized spectrum for the use of another new technology, satellite digital audio radio services ("DARS"), to deliver audio programming. The FCC has also authorized two companies to provide DARS service. DARS may provide a medium for the delivery by satellite or terrestrial means of multiple new audio programming formats to local and national audiences. It is not known at this time whether this digital technology may also be used in the future by existing radio broadcast stations either on existing or alternative broadcasting frequencies. The FCC has initiated a rule-making proceeding to consider the licensing of low power radio stations. These low power stations would provide licensees such as religious organizations or educational institutions the opportunity to reach limited, local audiences. The rule-making has not progressed sufficiently for the Company to be able to assess the competitive or other impacts these low power stations could have in the Company's markets or on the Company's stations. -4- 8 New technology allows radio broadcasters to make their programming available to listeners over the Internet. Programming made available over the Internet is exempt from certain government regulations applicable to broadcast stations, including the multiple ownership limitations discussed below under "Federal Regulation of Radio Broadcasting." The impact of radio broadcasting over the Internet has not been fully evaluated and, thus, its effect on the Company's stations is unknown. FEDERAL REGULATION OF RADIO BROADCASTING Introduction. The ownership, operation and sale of broadcast stations, including those licensed to the Company, are subject to the jurisdiction of the FCC, which acts under authority derived from the Federal Communications Act of 1934 (the "Communications Act"). The Communications Act was amended in 1996 by the Telecommunications Act of 1996 (the "Telecom Act"). Among other things, the FCC grants permits and licenses to construct and operate radio stations; assigns frequency bands for broadcasting; determines whether to approve changes in ownership or control of station licenses; regulates equipment used by stations and the operating power and other technical parameters of stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of stations; regulates the content of some forms of radio broadcasting programming; and has the power to impose penalties for violations of its rules under the Communications Act. The following is a brief summary of certain provisions of the Communications Act and of specific FCC regulations and policies. Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of "short-term" (less than the maximum term) license renewal or, for particularly egregious violations, the denial of a license renewal application, the revocation of a license or the denial of FCC consent to acquire additional broadcast properties. Reference should be made to the Communications Act, FCC rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of broadcast stations. License Grant and Renewal. Radio broadcast licenses are granted and renewed for maximum terms of eight years. Licenses may be renewed through an application to the FCC. The Communications Act requires that the FCC grant the renewal of a station's license if the FCC finds that, during the preceding term of the license, the station has served the public interest, convenience and necessity, that there have been no serious violations by the licensee of the Communications Act or the rules and regulations of the FCC, and that there have been no other violations by the licensee of the Communications Act or the rules and regulations of the FCC that, when taken together, would constitute a pattern of abuse. Petitions to deny license renewal applications can be filed by interested parties, including members of the public. Such petitions may raise various issues before the FCC. The FCC is required to hold hearings on renewal applications if the FCC is unable to determine that renewal of a license would serve the public interest, convenience and necessity, or if a petition to deny raises a "substantial and material question of fact" as to whether the grant of the renewal application would be prima facie inconsistent with the public interest, convenience and necessity. Also, during certain periods when a renewal application is pending, the transferability of the applicant's license is restricted. The Company is not currently aware of any facts that would prevent the timely renewal of its licenses to operate its radio stations. Regulatory Approvals. The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast license without the prior approval of the FCC. In determining -5- 9 whether to assign, transfer, grant or renew a broadcast license, the FCC considers a number of factors pertaining to the proposed transferee, including compliance with various rules limiting common ownership of media properties, financial qualifications of the proposed transferee, the "character" of the proposed transferee and those persons holding "attributable" interests therein, and compliance with the Communications Act's limitation on alien ownership, as well as compliance with other FCC rules and policies. Ownership Matters. Under the Communications Act, a broadcast license may not be granted to or held by: (i) a corporation that has more than one-fifth of its capital stock owned or voted by aliens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations; or (ii) a corporation that is controlled, directly or indirectly, by any other corporation more than one-fourth of whose capital stock is owned or voted by aliens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations. These restrictions apply in modified form to other forms of business organizations, including partnerships. Under these restrictions no more than one-fourth of the Company's stock may be owned or voted by aliens, foreign governments or non-U.S. corporations. The Company is required to take appropriate steps to monitor the citizenship of its shareholders, such as through representative samplings on a periodic basis, to provide a reasonable basis for certifying compliance with the foreign ownership restrictions of the Communications Act. The Communications Act and FCC rules also generally restrict the common ownership, operation or control of radio broadcast stations serving the same local market, of a radio broadcast station and a television broadcast station serving the same local market, and of a radio broadcast station and a daily newspaper serving the same local market. Under these "cross-ownership" rules, absent waivers, the Company would not be permitted to acquire any daily newspaper or television broadcast station (other than low power television) in a local market where it then owned any radio broadcast station. The FCC's rules provide for the liberal grant of a waiver of the rule prohibiting common ownership of radio and television stations in the same geographic market in the top 25 television markets if certain conditions are satisfied. The Telecom Act directed the FCC to extend this waiver policy to stations in the top 50 television markets, although the FCC has not yet implemented this change. For purposes of these rules, a "market" is defined by reference to the signal coverage(s) of the station(s) involved. The Telecom Act and the FCC's broadcast multiple ownership rules restrict the number of radio stations one person or entity may own, operate or control on a local level. These limits are: (i) in a market with 45 or more commercial radio signals, an entity may own up to eight commercial radio stations, not more than five of which are in the same service (FM or AM); (ii) in a market with between 30 and 44 (inclusive) commercial radio signals, an entity may own up to seven commercial radio stations, not more than four of which are in the same service; (iii) in a market with between 15 and 29 (inclusive) commercial radio signals, an entity may own up to six commercial radio stations, not more than four of which are in the same service; and (iv) in a market with 14 or fewer commercial radio signals, an entity may own up to five commercial radio stations, not more than three of which are in the same service, except that an entity may not own more than 50% of the stations in such market. None of these multiple ownership rules requires any change in the Company's current ownership of radio broadcast stations or precludes consummation of its pending acquisition in the St. Cloud, Minnesota market; however, these FCC rules and policies will limit the number of additional stations which the Company may acquire in the future in certain of its markets. -6- 10 Because of these multiple and cross-ownership rules, a purchaser of voting stock of the Company which acquires an "attributable" interest in the Company may violate the FCC's rules if it also has an attributable or certain non-attributable interests in other television or radio stations, or in daily newspapers, depending on the number and location of those radio or television stations or daily newspapers. Such a purchaser also may be restricted in the companies in which it may invest, to the extent that these investments give rise to an attributable interest. If an attributable shareholder of the Company violates any of these ownership rules, the Company may be unable to obtain from the FCC one or more authorizations needed to conduct its radio station business and may be unable to obtain FCC consents for certain future acquisitions. The FCC generally applies its television/radio/newspaper cross-ownership rules and its broadcast multiple ownership rules by considering the "attributable" or cognizable interests held by a person or entity. A person or entity can have an interest in a radio station, television station or daily newspaper by being an officer, director, partner or shareholder of a company that owns that station or newspaper. Whether that interest is cognizable under the FCC's ownership rules is determined by the FCC's attribution rules. If an interest is attributable, the FCC treats the person or entity who holds that interest as the "owner" of the radio station, television station or daily newspaper in question, and therefore subject to the FCC's ownership rules. With respect to a corporation, officers, directors and persons or entities that directly or indirectly can vote 5% or more of the corporation's stock (10% or more of such stock in the case of insurance companies, investment companies, bank trust departments and certain other "passive investors" that hold such stock for investment purposes only) generally are attributed with ownership of the radio stations, television stations and daily newspapers the corporation owns. With respect to a partnership, the interest of a general partner is attributable, as is the interest of any limited partner who is "materially involved" in the media-related activities or the management of the partnership. Debt instruments, nonvoting stock, options and warrants for voting stock that have not yet been exercised, limited partnership interests where the limited partner is not "materially involved" in the media-related activities of the partnership and where the limited partnership agreement expressly "insulates" the limited partner from such material involvement, and minority (under 5%) voting stock, generally do not subject their holders to attribution. However, the FCC is currently reviewing its rules on attribution of broadcast interests, and it may adopt stricter criteria. See "Proposed Changes," below. In addition, the FCC has a "cross-interest" policy which, under certain circumstances, could prohibit a person or entity with an attributable interest in a broadcast station or daily newspaper from having a "meaningful" nonattributable interest in another broadcast station or daily newspaper in the same local market. Among other things, "meaningful" interests could include significant equity interests (including non-voting stock, and otherwise "insulated" limited partnership interests) and significant employment positions. This policy may limit the permissible investments a purchaser of the Company's voting stock may make or hold. It also may limit the Company's ability to acquire stations in the same local market in which any of the Company's non-attributable investors has an attributable media interest. Programming and Operation. The Communications Act requires broadcasters to serve the "public interest." Since 1981, the FCC gradually has relaxed or eliminated many of the more formalized procedures it developed to promote the broadcast of certain types of programming responsive to the needs of a station's community of license. However, licensees continue to be required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from listeners concerning a station's programming will be -7- 11 considered by the FCC when it evaluates the licensee's renewal application, but such complaints may be filed and considered at any time. Stations also must follow various FCC rules that regulate, among other things, political advertising, the broadcast of obscene or indecent programming, sponsorship identification and technical operations (including limits on radio frequency radiation). In 1985, the FCC adopted rules regarding human exposures to levels of radio frequency ("RF") radiation. These rules require applicants for new broadcast stations, renewals of broadcast licenses or modifications of existing licenses to inform the FCC at the time of filing such applications whether a new or existing broadcast facility would expose people to RF radiation in excess of certain guidelines. In August 1996, the FCC adopted more restrictive radiation limits. These limits became effective on September 1, 1997 and govern applications filed after that date. The Company anticipates that such regulations will not have a material effect on its business. Local Marketing Agreements. Over the past six years, a number of radio stations, including certain of the Company's stations during 1997 and 1998, entered into what commonly are referred to as "local marketing agreements" ("LMA") or "time brokerage agreements." In a typical LMA, the licensee of a station makes available, for a fee, airtime on its station to a party who supplies programming to be broadcast during that airtime and who collects revenues from advertising aired during such programming. LMAs are subject to compliance with the antitrust laws and the FCC's rules and policies, including the requirement that the licensee of each station maintain independent control over the programming and other operations of its own station. The FCC has held that such agreements do not violate the Communications Act as long as the licensee of the station that is being substantially programmed by another entity maintains complete responsibility for, and control over, operations of its broadcast stations and otherwise ensures compliance with applicable FCC rules and policies. A station that brokers substantial time on another station in its market or engages in an LMA with a station in the same market will be considered to have an attributable ownership interest in the brokered station for purposes of the FCC's ownership rules, discussed above. As a result, a broadcast station may not enter into an LMA that allows it to program more than 15% of the broadcast time, on a weekly basis, of another local station that it could not own under the FCC's local multiple ownership rules. FCC rules also prohibit a station from simulcasting more than 25% of its programming on another station in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations serve substantially the same geographic area, whether the licensee owns the stations or owns one and programs the other through an LMA arrangement. Proposed Changes. From time to time Congress and the FCC have taken under consideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and profitability of the Company's radio stations, result in the loss of audience share and advertising revenues for the Company's radio stations, and affect the ability of the Company to acquire additional radio stations or finance such acquisitions. Such matters include: proposals to impose spectrum use or other fees on FCC licensees; the FCC's regulations relating to political broadcasting; technical and frequency allocation matters; proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages on radio; changes in the FCC's cross-interest, multiple ownership and cross-ownership policies; changes to broadcast technical requirements; proposals to allow telephone or cable television companies to deliver audio and video programming to the home through existing phone lines; proposals to limit the tax deductibility of advertising expenses by certain types of advertisers; and proposals to auction the right to use the radio broadcast spectrum to the highest bidder, instead of granting FCC licenses and subsequent license renewals without such bidding. -8- 12 The Company cannot predict whether any of the foregoing proposed changes will be adopted or what other matters might be considered in the future, nor can it judge in advance what impact, if any, the implementation of any of these proposals or changes might have on its business. The foregoing is a brief summary of certain provisions of the Communications Act, the Telecom Act and of specific FCC rules and policies. This description does not purport to be comprehensive and reference should be made to the Communications Act, the FCC's rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of radio broadcast stations. Antitrust and Market Concentration Considerations. The Company is aware that the United States Department of Justice (the "DOJ"), which evaluates transactions to determine whether those transactions should be challenged under the federal antitrust laws, has been active recently in its review of radio station acquisitions, particularly where an operator proposes to acquire additional stations in its existing markets or multiple stations in new markets. On July 29, 1998, the DOJ issued a Civil Investigative Demand ("CID") to the Company requesting information relating to the Company's acquisition on June 15, 1998 of six radio stations in and around Redding, California ("Redding Stations"). In response to the CID, the Company has submitted certain information requested by the 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 cannot predict what the DOJ will conclude. In addition, the FCC staff has stated publicly that it is currently reevaluating its policies and procedures relating to local radio market concentration, even where proposed acquisitions would comply with the station ownership limits in the Telecom Act and the FCC's multiple-ownership rules, and FCC approval of a number of pending radio station acquisitions by various parties (including acquisitions by the Company in several markets) has been delayed while this policy review is taking place. The FCC has issued a Notice of Inquiry which, among other things, seeks public comment on these issues. There can be no assurance that the DOJ, the Federal Trade Commission ("FTC") or the FCC will not prohibit or require the restructuring of future acquisitions. For an acquisition meeting certain size thresholds, the Hart Scott Rodino Act ("HSR Act") and the rules promulgated thereunder require the parties to file Notification and Report Forms with the FTC and the DOJ and to observe specified waiting period requirements before consummating the transaction. If the agencies determine that the transaction does not raise significant antitrust issues, then they will either terminate the waiting period or allow it to expire after the initial 30 days. On the other hand, if either of the agencies determines that the transaction requires a more detailed investigation, then at the conclusion of the initial 30 day period, it will issue a formal request for additional information ("Second Request"). During the initial 30 day period after the filing, the agencies decide which of them will investigate the acquisition, which in the case of radio broadcasting has generally been the DOJ. The issuance of a Second Request extends the waiting period until the twentieth calendar day after the date of substantial compliance by all parties to the acquisition. Thereafter, such waiting period may only be extended by court order or with the consent of the parties. In practice, complying with a Second Request can take a significant amount of time. In addition, if the investigating agency raises substantive issues in connection with a proposed transaction, then the parties frequently engage in lengthy discussions or negotiations with the investigating agency concerning possible means of addressing those issues, including but not limited to persuading the agency that the proposed acquisition would not violate the antitrust laws, restructuring the proposed acquisition, divestiture of other assets of one or more parties, or abandonment of the transaction. Such discussions and negotiations can be time-consuming, and the parties may agree to delay consummation of the acquisition during their pendency. -9- 13 At any time before or after the consummation of a proposed acquisition, the DOJ or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition or seeking divestiture of the business acquired or other assets of the Company. Acquisitions that are not required to be reported under the HSR Act also may be investigated by the DOJ or the FTC under the antitrust laws before or after consummation. In addition, private parties may under certain circumstances bring legal action to challenge an acquisition under the antitrust laws. As part of its increased scrutiny of radio station acquisitions, the DOJ has stated publicly that it believes that commencement of operations under LMAs and other similar agreements customarily entered into in connection with radio station ownership transfers prior to the expiration of the waiting period under the HSR Act could violate the HSR Act. EMPLOYEES At the corporate level, Regent employs 11 full-time employees and one part-time employee. Each station has its own complement of employees, which may include a general manager, a sales manager, a business manager, an operations manager, advertising staff, on-air personalities and secretarial personnel. In the aggregate, Regent's subsidiaries employ 233 persons on a full-time basis and 145 persons part-time. Regent has never experienced a strike or work stoppage and believes that its relations with its employees are good. ITEM 2. PROPERTIES The types of properties required to support each of Regent's radio stations include offices, studios and tower, transmitter and antenna sites. Regent typically leases its studio and office space with lease terms that expire in five to ten years, although Regent does own certain of its facilities. A station's studios are generally housed with its offices in downtown or business districts. Regent generally considers its facilities to be suitable and of adequate size for its current and intended purposes. Regent owns a majority of its main tower, transmitter and antenna sites and leases the remainder of such sites with lease terms that expire, including renewal options, in periods ranging up to 20 years. The tower, transmitter and antenna site for each station is generally located so as to provide maximum market coverage, consistent with the station's FCC license. In general, Regent does not anticipate difficulties in renewing facility or tower, transmitter and antenna site leases or in leasing additional space or sites if required. Regent owns substantially all of its other equipment, consisting principally of towers, transmitters, antennae, studio equipment and general office equipment. The towers, transmitters, antennae and other transmission equipment used by Regent's stations are generally in good condition, although opportunities to upgrade facilities are continuously reviewed. Substantially all of the property owned by Regent secures Regent's borrowings under its bank credit facility. See Notes 4 and 14 to the Company's 1998 Consolidated Financial Statements for a description of encumbrances against Regent's properties and Regent's rental obligations. Regent leases approximately 4,700 square feet of office space in Covington, Kentucky for its corporate offices under a lease which expires on March 31, 2004. Regent has the option to renew that lease for two additional five-year terms at market rates. Current annual rental is $69,943. Additional corporate office space of approximately 780 square feet is leased at Old Brookville, New York. The lease expires in February 2001. Annual rental is currently $22,200. -10- 14 ITEM 3. LEGAL PROCEEDINGS. The Company becomes involved from time to time in various claims and lawsuits that are incidental to its business. In the opinion of the Company's management, there are no legal proceedings pending against the Company or any of its subsidiaries, or to which any of their properties are subject, that would have a material adverse effect on the financial condition, results of operations or cash flows of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There was no matter submitted to the security holders of the Company during the fourth quarter of its fiscal year ended December 31, 1998. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. As of March 31, 1999, all of the Company's outstanding common stock (240,000 shares) was held by two of the Company's executive officers and directors. There is no public trading market for the Company's common stock. The Company has never declared or paid cash dividends on its common stock and does not intend to do so in the foreseeable future. The Company's existing credit agreement with its lenders prohibits the payment of cash dividends on its common stock. As part of the additional purchase and sale of shares of the Company's Series F Convertible Preferred Stock pursuant to the terms of the Company's existing Stock Purchase Agreement dated June 15, 1998 with Waller-Sutton Media Partners, L.P. and the other purchasers listed therein (collectively, the "Series F Purchasers"), on November 30, 1998, the Company issued 400,000 additional shares of its Series F Convertible Preferred Stock to the Series F Purchasers for an aggregate cash purchase price of $2,000,000 ($5.00 per share). The Series F Convertible Preferred Stock is convertible at any time into shares of the Company's common stock on a one-for-one basis at a conversion price of $5.00 per share. The Company relied upon an exemption from the registration requirements of the Securities Act of 1933, as amended, provided under Section 4(2) thereof and Rule 506 of Regulation D promulgated thereunder with respect to the offer and sale of such Series F Convertible Preferred Stock. ITEM 6. SELECTED FINANCIAL DATA. SELECTED CONSOLIDATED FINANCIAL DATA
YEAR ENDED DECEMBER 31, ----------------------- 1998(1) 1997 1996 1995 1994 ------- ---- ---- ---- ---- Operating results: Net broadcasting revenues $ 14,771,523 $ 5,993,291 $ 4,873,954 $ 5,113,582 $ 4,983,513 Income (loss) from operations (433,321) 1,015,144 1,222,829 1,511,481 1,470,355 Income (loss) before extraordinary items (3,289,924) (362,537) 278,840 244,816 992,079 Extraordinary items, net (1,170,080) (4,333,310) -- -- 787,201 Net income (loss) (4,460,004) (4,695,847) 278,840 244,816 1,779,280 Basic net income (loss) per common share: Income (loss) before extraordinary items $ (42.67) $ (1.51) $ 1.16 $ 1.02 $ 4.13 Extraordinary items (4.88) (18.06) -- -- 3.28 ------------ ------------ ----------- ----------- ----------- Basic net income (loss) per common share $ (47.55) $ (19.57) $ 1.16 $ 1.02 $ 7.41 Diluted net income (loss) per common share: Income (loss) before extraordinary items $ (42.67) $ (1.51) $ 1.16 $ 1.02 $ 4.13 Extraordinary items (4.88) (18.06) -- -- 3.28 ------------ ------------ ----------- ----------- ----------- Diluted net income (loss) per common share $ (47.55) $ (19.57) $ 1.16 $ 1.02 $ 7.41 Balance sheet data at year end: Current assets $ 11,618,745 $ 1,919,232 $ 1,305,585 $ 1,311,916 $ 1,246,104 Total assets 67,617,870 13,010,554 4,326,453 4,546,508 4,488,913 Current liabilities 13,027,306 859,631 1,068,021 1,037,239 1,150,537 Long-term debt 34,617,500 21,911,661 7,276,884 7,828,883 8,347,547 Redeemable preferred stock 26,876,058 -- -- -- -- Total shareholders' deficit (9,546,573) (10,181,788) (5,485,941) (5,764,781) (6,009,597)
(1) See Notes 1 and 2 to the Company's Consolidated Financial Statements for a discussion of comparability between years. The Company has not declared or paid cash dividends on its Common Stock since its inception. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS 1998 Compared to 1997. On June 15, 1998, Regent consummated a number of mergers, acquisitions, borrowings and issuances of additional equity (the "June 1998 Transactions"). See Notes 1, 2, 4 and 5 to the Company's Consolidated Financial Statements included as part of this Form 10-K. The historical financial statements of Faircom Inc. ("Faircom"), which was deemed the "accounting acquirer" in the merger between Faircom and -11- 15 Regent completed June 15, 1998, became the historical financial statements of the Company, and accordingly, the results of operations of Regent and of the other entities which merged with or were acquired by Regent as part of the June 1998 Transactions have been included in the Company's consolidated financial statements only from June 15, 1998. On the closing date of the June 1998 Transactions, the Company expanded from a small broadcaster (represented, from an accounting standpoint, by Faircom's six stations in two markets, of which only three stations in one market were owned prior to June 30, 1997) to a group broadcaster operating 33 stations in ten different markets. This significant change in size of the Company's operations led directly to substantial increases in revenue, operating expenses, depreciation and amortization, corporate general and administrative expenses, and interest expense in 1998 as compared to 1997. Because of the June 1998 Transactions, the results of the Company's operations in 1998 are not comparable to those of 1997, nor are they necessarily indicative of results in the future. The key focus in 1998 was developing the platform from which the Company could carry out its operating strategies as a much larger radio company. Development of the platform required significant expenditures. These costs are viewed by the Company as investment costs which will provide returns to the Company in future years. Operationally, the Company replaced general managers in eight of its markets and added or replaced general sales managers in six markets in order to implement aggressive sales programs. The Company invested significantly in the hiring and training of sales personnel and in increased promotional spending in all markets. Finally, the Company developed a corporate staff which it believes is capable of supporting a much larger operation. In 1997, the Faircom corporate office was a very small operation. While that facility and expense have been maintained, the Company's primary administrative offices are now located in Covington, Kentucky. The cost of additional executive personnel and administrative expense amounted to approximately $940,000 from June 16, 1998 through December 31, 1998 as a result of the merger. Additionally, the issuance 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 resulted in the recognition, as of such date of grant, of approximately $530,000 in additional compensation expense which is included in corporate general and administrative expense for 1998. Consequently, 1998 operating loss of $433,000 compared unfavorably with operating income of $1,015,000 in 1997. Interest expense was $2,883,000 in 1998 as compared with $1,331,000 in 1997 principally due to debt incurred in connection with the June 1998 Transactions and to a lesser extent to debt incurred in connection with the acquisition of the Mansfield Stations and the Shelby Station (defined below). There were no federal, state or local income taxes in 1998 as a result of a taxable loss. In 1998, net loss declined to $4,460,000 from $4,696,000 in 1997 as a result of the increase in operating losses and the increase in interest expense offset by lower net extraordinary losses from debt extinguishment. In addition to developing the infrastructure to support a large radio group, the Company refined its definition of markets which it targets for operation. The Company has decided to concentrate on markets which have a minimum of approximately $8,000,000 in market advertising revenue and where the Regent stations have the potential to generate at least $1,000,000 in annual broadcast cash flow. The St. Cloud Stations, which are expected to be acquired during the second quarter of 1999, meet these criteria. In addition, the Company has entered into agreements for the sales of its Flagstaff and Kingman/Bullhead City, Arizona radio stations (the "Arizona Stations"), which also do not meet this strategic objective. Applications for FCC approval of these sales are pending. -12- 16 1997 Compared to 1996. The results of Faircom's operations for the year ended December 31, 1997 compared to the year ended December 31, 1996 are not comparable or necessarily indicative of results in the future due to the significance of acquisitions. As of June 30, 1997, Faircom, through a wholly-owned subsidiary, Faircom Mansfield Inc. ("Faircom Mansfield"), 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. The acquisition has been accounted for as a purchase, and accordingly the operating results of the Mansfield Stations have been included in the Consolidated Statements of Operations from the acquisition date. The increase in Faircom's net broadcasting revenues in 1997 as compared with 1996 resulted principally from the ownership and operation of the Mansfield Stations during 1997. Net broadcasting revenues increased to $5,993,000 from $4,874,000, or 23.0%, in 1997 as compared with 1996. Station operating expenses increased in 1997 as compared with 1996, primarily as a result of the acquisition of the Mansfield Stations. Such increase was to $3,860,000 from $2,993,000, or 29.0%, in 1997 as compared with 1996. Depreciation and amortization and interest expense increased in 1997 as compared with 1996 as a result of the addition of assets and debt incurred in connection with the acquisition of the Mansfield Stations. Taxes on income for both 1997 and 1996 related principally to state income taxes. There were no current federal income taxes in 1997, as a result of a taxable loss. Current federal income taxes in 1996 were offset in full by the utilization of net operating loss carryforwards. Faircom has provided valuation allowances equal to its deferred tax assets because of uncertainty as to their future utilization. The deferred tax assets relate principally to net operating loss carryforwards. Although Faircom was marginally profitable in 1994 through 1996, the loss in 1997 along with substantial historical losses caused management to conclude that it was still premature to reduce the valuation allowance. As a result principally of an extraordinary loss from debt extinguishment of $4,703,000, offset in part by an extraordinary gain from debt extinguishment of $370,000, net loss was $4,696,000 for 1997 compared to net income of $279,000 in 1996. Seasonality. The financial results of the Company's business are seasonal. Revenues are generally higher in the second, third and fourth calendar quarters than in the first quarter. LIQUIDITY AND CAPITAL RESOURCES In 1998, net cash used in operating activities was $385,000 compared with net cash provided by operating activities of $418,000 for 1997. In 1998, proceeds from the issuance of long-term debt and preferred stock provided substantially all of the funds used in operating activities, as well as funds used for the acquisition of radio stations, capital expenditures, principal payments on long-term debt and other investing and financing -13- 17 activity cash requirements. As a result, there was a net decrease in cash of $57,000 in 1998 compared with a net increase of $412,000 in 1997. The Company's borrowings are made under an agreement with a group of lenders (as amended through the latest amendment dated February 24, 1999, 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. At December 31, 1998, the Company had borrowed $34,900,000 under the Credit Agreement and had approximately $479,000 in cash balances. The remaining unused portion of the Revolver of $20,100,000 was available to finance other acquisitions, subject to restrictions contained in the Credit Agreement. 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. Beginning January 1, 1999, 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); a fixed charge coverage ratio (EBITDA to annual fixed charges); and a financial leverage ratio (total debt to Adjusted EBITDA, as defined in the Credit Agreement). Schedules of these covenants follow:
----------------------------------------------------------------------------------------------------- Minimum Interest Coverage Ratio ----------------------------------------------------------------------------------------------------- Time Period Minimum Interest Coverage Ratio ----------------------------------------------------------------------------------------------------- January 1, 1999 - March 31, 1999 0.95:1.00 ----------------------------------------------------------------------------------------------------- April 1, 1999 - June 30, 1999 1.30:1.00 ----------------------------------------------------------------------------------------------------- July 1, 1999 - September 30, 1999 1.40:1.00 ----------------------------------------------------------------------------------------------------- October 1, 1999 - December 31, 1999 1.60:1.00 ----------------------------------------------------------------------------------------------------- January 1, 2000 - March 31, 2000 1.75:1.00 ----------------------------------------------------------------------------------------------------- April 1, 2000 - and thereafter 2.00:1.00 -----------------------------------------------------------------------------------------------------
-14- 18
----------------------------------------------------------------------------------------------------- MINIMUM FIXED COVERAGE RATIO ----------------------------------------------------------------------------------------------------- Time Period Minimum Fixed Coverage Ratio ----------------------------------------------------------------------------------------------------- January 1, 1999 - March 31, 1999 0.60:1.00 ----------------------------------------------------------------------------------------------------- April 1, 1999 - June 30, 1999 0.80:1.00 ----------------------------------------------------------------------------------------------------- July 1, 1999 - September 30, 1999 0.90:1.00 ----------------------------------------------------------------------------------------------------- October 1, 1999 - December 31, 1999 1.05:1.00 ----------------------------------------------------------------------------------------------------- January 1, 2000 - and thereafter 1.10:1.00 -----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------- MAXIMUM LEVERAGE RATIO ----------------------------------------------------------------------------------------------------- Time Period Maximum Leverage Ratio ----------------------------------------------------------------------------------------------------- January 1, 1999 - December 30, 1999 6.75:1.00 ----------------------------------------------------------------------------------------------------- December 31, 1999 - March 30, 2000 6.25:1.00 ----------------------------------------------------------------------------------------------------- March 31, 2000 - June 29, 2000 6.00:1.00 ----------------------------------------------------------------------------------------------------- June 30, 2000 - September 29, 2000 5.75:1.00 ----------------------------------------------------------------------------------------------------- September 30, 2000 - December 30, 2000 5.25:1.00 ----------------------------------------------------------------------------------------------------- December 31, 2000 - March 30, 2001 4.75:1.00 ----------------------------------------------------------------------------------------------------- March 31, 2001 - June 29, 2001 4.25:1.00 ----------------------------------------------------------------------------------------------------- June 30, 2001 - September 29, 2001 3.75:1.00 ----------------------------------------------------------------------------------------------------- September 30, 2001 - and thereafter 3:50:1.00 -----------------------------------------------------------------------------------------------------
To maintain compliance with these covenants, the Company must reduce its outstanding borrowings during the second and third quarters of 1999. It intends to do this through proceeds from the sales of the Arizona Stations as well as the sale of the Company's operations in another non-strategic market. Sales of the Arizona Stations are expected to close during the second quarter of 1999, pending receipt of FCC consent. The Company is currently seeking a buyer for such other non-strategic market and expects to be able to consummate such sale during the third quarter of 1999. If these sales were to be delayed, the Company would request waivers from its lenders to allow more time for the sales to close or to raise additional equity to reduce its debt. Interest under the Credit Agreement is payable, at the option of the Company, at alternative rates equal to the LIBOR rate (established October 1, 1998 at 5.31% and effective at that same rate at December 31, 1998) plus 1.50% to 3.50% or the base rate announced by the Bank of Montreal (7.75% at December 31, 1998) plus .25% to 2.25%. 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. In connection with the 1997 acquisitions of KCBQ(AM) 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, which 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 Company is currently seeking a buyer for the San Diego station. During 1998, the Company agreed to sell the Charleston station and consummated the sale of that station in March 1999. At that time, the Charleston note, which was collateralized by the assets of the Charleston station, was paid in full. Based upon the Company's expectation that these stations would be sold during 1999, $7,500,000, representing the principal amount of both notes, was classified as a current liability at December 31, 1998 with an offsetting current asset in that amount, designated as "assets held for sale." -15- 19 In the first quarter of 1999, the Company received approximately $5,030,000 in gross proceeds from the issuance of shares of its Series F and G Convertible Preferred Stock at $5.00 per share. In addition, the purchasers of the Series F Convertible Preferred Stock have committed an additional $5,082,000 to the purchase of an additional 1,016,000 shares of the Company's Series F Convertible Preferred Stock at $5.00 per share, to fund acquisitions by the Company. The Company intends to draw on the balance of the committed funds to help finance the pending acquisition of the St. Cloud Stations. Based on current interest rates and accrued interest expense as of December 31, 1998, the Company believes its interest payments for 1999 will be approximately $3,240,000. Debt principal payments are expected to be $980,000 for 1999. Corporate general and administrative expense and capital expenditures for 1999 are estimated to be approximately $2,065,000 and $1,070,000, respectively. Of the $1,070,000 in capital expenditures, approximately $770,000 is required to be made in 1999 under the terms of the Credit Agreement. In addition, during the first quarter of 1999, the Company paid approximately $1,200,000 of deferred professional fees which were mostly incurred in connection with the June 1998 Transactions. The Company intends to pay the remaining balance of approximately $286,000 in deferred professional fees in 1999. For these payments, aggregating $8,841,000, the Company has used or will utilize net cash provided by operations, current cash balances, and proceeds from the issuance of Series F and G Convertible Preferred Stock received in the first quarter of 1999. The Company believes net cash from operations, cash balances, and the proceeds from the sales of the Arizona Stations and the Company's other non-strategic property will be sufficient to reduce borrowings under the Credit Agreement to allow the Company to maintain compliance with all covenants and to meet the Company's interest expense, and any required principal payments, corporate expenses and capital expenditures in the foreseeable future, based on its projected operations and indebtedness. In addition to the Company's pending acquisition of the St. Cloud Stations, which the Company intends to finance through borrowings against the unused portion of its Credit Agreement and the $5,082,000 additional commitment from the holders of its Series F Convertible Preferred Stock, the Company is actively pursuing a number of acquisitions of radio stations in a number of markets. Any 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 through additional equity offerings, which the Company intends to pursue in the second quarter of 1999. There can be no assurance, however, 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 because of borrowings under its Credit Agreement. 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 trading purposes. At December 31, 1998, the Company had $34,900,000 outstanding under its Credit Agreement. The Company's future commitments under its Credit Agreement is contingent upon the quarterly reduction requirements of the Credit Agreement ("Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources") and the outstanding borrowings that the Company has at a particular time. 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 -16- 20 agreement is based on the three-month LIBOR or bank 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 or bank rate depending upon the Company's financial leverage. Based on the $34,900,000 principal amount outstanding under the Company's credit facility at December 31, 1998, the annual interest expense would fluctuate by a maximum of $420,000 on $34,400,000, exclusive of leverage spreads over the LIBOR or bank rate. Any fluctuation on the remaining $500,000 would not have a material effect on the Company. Each series of the Company's redeemable preferred stock is carried at its fair market value, which, at December 31, 1998, equaled its liquidation value. Holders of the redeemable preferred stock may require the Company, subject to certain conditions, to repurchase their shares at any time after five years from issuance. 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 accounting and financial reporting systems and local and wide area networking infrastructure. In addition to IT systems, the Company is also reliant on several non-information technology (non-IT) systems, which could potentially pose Y2K issues, including traffic scheduling and billing systems and digital audio systems providing automated broadcasting. 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. In the fourth quarter of 1998, the Company engaged the services of an independent Y2K consultant in order to analyze the scope of the Company's Y2K compliance issues and to initiate formal communications with its advertisers, suppliers, lenders and other key business partners to determine their exposure to the Y2K issue. During the first quarter of 1999, the assessment phase was completed with respect to the IT-systems and non-IT systems. Based on the findings of the assessment phase, a detailed plan was developed for the remaining phases (remediation, testing and contingency planning). A summary of the status of the Company's Y2K plans in the IT and non-IT areas follows. IT Systems During the assessment phase, the Company evaluated the level of Y2K compliance of IT systems and hardware in its executive offices and all markets. All financial and networking systems which have been determined to be non-compliant will be upgraded in the second quarter of 1999 and tested by the end of the third quarter of 1999. Costs associated with the upgrades are expected to be immaterial. The Company has assessed several of its personal computers ("PCs") to be non-compliant. Several of the non-compliant PCs are either upgradable at a minimal cost or are used for tasks where non-compliance will not impact their functionality. There are PCs which will need to be replaced in 1999 and the cost of replacement is included in the Company's capital plan. All necessary upgrades will occur by the -17- 21 end of the third quarter of 1999. Most of the replacements will take place by the end of the third quarter; however, a portion will occur in the fourth quarter. Non-IT Systems The Company acquired all but one of its radio stations on or after June 15, 1998 from several independent 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. With respect to those properties which the Company expects to own on January 1, 2000, 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, Mansfield, Ohio and Redding, California markets. The costs of the upgrade project have been included in capital expenditures. Upgrades in the Chico, California and the Mansfield, Ohio markets commenced during the first quarter of 1999 and are expected to be completed by the end of the second quarter of 1999. The upgrade in Redding will occur in the third quarter in conjunction with an expansion of the Company's facility in the market. 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. 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 market. 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. By the third quarter of 1999, the Company intends to have replaced its traffic and billing systems at the Victorville stations with a system provided by suppliers utilized by the Company's other stations. During the first quarter of 1999, the Company compiled a detailed inventory of key business partners and prioritized the list based on potential impact to the Company in the event that the business partners experienced severe operational or financial hardship as a result of Y2K non-compliance. Each business partner was contacted and asked to fill out a detailed questionnaire regarding its own Y2K assessment. Follow-up on responses will occur in the second quarter of 1999 and action steps will be developed based on the responses. The Company has budgeted $100,000 in 1999 for capital expenditures and $50,000 for expenses involved in Y2K remediation. The Company does not expect total expenditures to exceed the total budgeted amount. 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 relative to its business partner interfaces will continue through the second quarter of 1999. The remediation phase is also not complete with respect to the broadcast systems at the Company's Chico, Redding 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 significant, could have a material adverse effect on the Company's operations, cash flows -18- 22 and financial condition. The most reasonably likely worst-case scenarios include loss of power and communications links. The impact of these uncertainties on the Company's results of operations, liquidity and financial condition, is not determinable. 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. Testing of contingency plans will occur in the third and fourth quarters of 1999. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS This Form 10-K 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-K. 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. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information required by this Item 7A is set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Market Risk" and is incorporated under this Item 7A by this reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Pages Financial Statements: Reports of Independent Accountants 19 Consolidated Statements of Operations for the three years ended December 31, 1998, 1997 and 1996 20 Consolidated Balance Sheets for the years ended December 31, 1998 and 1997 21 Consolidated Statements of Cash Flows for the three years ended December 31, 1998, 1997 and 1996 22 Statement of Changes in Shareholders' Deficit 23 Notes to Consolidated Financial Statements 24 Financial Statement Schedule: Report of Independent Accountants on Financial Statement Schedule 45 II -- Valuation and Qualifying Accounts 45 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Regent Communications, Inc. In our opinion, the accompanying consolidated balance sheet as of December 31, 1998 and the related consolidated statements of operations, of cash flows, and of changes in shareholders' deficit present fairly, in all material respects, the financial position of Regent Communications, Inc. (the "Company") at December 31, 1998, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. The consolidated financial statements of the Company, prior to the retroactive adjustments referred to below, as of December 31, 1997 and for each of the two years in the period then ended were audited by other independent accountants whose report dated January 21, 1998 expressed an unqualified opinion on those statements. We also audited the adjustments described in Note 1 to the consolidated financial statements that were applied to retroactively adjust the 1997 and 1996 financial statements. In our opinion, such adjustments are appropriate and have been properly applied. PricewaterhouseCoopers LLP Cincinnati, Ohio March 30, 1999 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors and Stockholders Faircom Inc. We have audited the consolidated balance sheet of Faircom Inc. as of December 31, 1997 and the related consolidated statements of operations, shareholders' deficit, and cash flows for the years ended December 31, 1997 and 1996 (see Note 1). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Faircom Inc. at December 31, 1997 and the consolidated results of its operations and its cash flows for the years ended December 31, 1997 and 1996 in conformity with generally accepted accounting principles. BDO Seidman, LLP Melville, New York January 21, 1998 -19- 23 REGENT COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, - --------------------------------------------------------------------------------
1998 1997 1996 ------------ ----------- ----------- Gross broadcast revenues $ 16,046,968 $ 6,696,564 $ 5,517,586 Less agency commissions (1,275,445) (703,273) (643,632) ------------ ----------- ----------- Net broadcast revenues 14,771,523 5,993,291 4,873,954 Station operating expenses 11,051,165 3,860,331 2,993,219 Depreciation and amortization 2,281,497 726,564 321,263 Corporate general and administrative expenses 1,872,182 391,252 336,643 ------------ ----------- ----------- Operating income (loss) (433,321) 1,015,144 1,222,829 Interest expense 2,883,251 1,330,676 913,643 Other income, net 26,648 24,537 7,346 ------------ ----------- ----------- Income (loss) before income taxes and extraordinary items (3,289,924) (290,995) 316,532 Income tax expense -- 71,542 37,692 ------------ ----------- ----------- Income (loss) before extraordinary items (3,289,924) (362,537) 278,840 Extraordinary gain from debt extinguishment, net of taxes -- 370,060 -- Extraordinary loss from debt extinguishment, net of taxes (1,170,080) (4,703,370) -- ------------ ----------- ----------- Net income (loss) $ (4,460,004) $(4,695,847) $ 278,840 ============ =========== =========== Income (loss) applicable to common shares: Net income (loss) $ (4,460,004) $(4,695,847) $ 278,840 Preferred stock dividend requirements (2,165,471) -- -- Preferred stock accretion (4,787,311) -- -- ------------ ----------- ----------- Income (loss) applicable to common shares $(11,412,786) $(4,695,847) $ 278,840 ============ =========== =========== Basic net income (loss) per common share: Before extraordinary items $ (42.67) $ (1.51) $ 1.16 Extraordinary items (4.88) (18.06) -- ------------ ----------- ----------- Net income (loss) per common share $ (47.55) $ (19.57) $ 1.16 ============ =========== =========== Weighted average number of common shares used in basic calculation 240,000 240,000 240,000 Diluted net income (loss) per common share: Before extraordinary items $ (42.67) $ (1.51) $ 1.16 Extraordinary items (4.88) (18.06) -- ------------ ----------- ----------- Net income (loss) per common share $ (47.55) $ (19.57) $ 1.16 ============ =========== =========== Weighted average number of common shares used in diluted calculation 240,000 240,000 240,000
The accompanying notes are an integral part of these financial statements. 20 24 REGENT COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS FOR THE YEARS ENDED DECEMBER 31, - --------------------------------------------------------------------------------
1998 1997 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 478,545 $ 535,312 Accounts receivable, less allowance for doubtful accounts of $268,000 in 1998 and $32,000 in 1997 3,439,372 1,358,002 Other current assets 200,828 25,918 Assets held for sale 7,500,000 -- ------------ ------------ Total current assets 11,618,745 1,919,232 Property and equipment, net 9,303,975 2,156,244 Intangible assets, net 45,023,940 7,701,341 Other assets, net 1,671,210 1,233,737 ------------ ------------ Total assets $ 67,617,870 $ 13,010,554 ============ ============ LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Accounts payable $ 1,005,327 $ 87,280 Accrued expenses 2,772,612 233,955 Interest payable 769,367 108,391 Current portion of long-term debt 980,000 430,005 Notes payable 7,500,000 -- ------------ ------------ Total current liabilities 13,027,306 859,631 ------------ ------------ Long-term debt, less current portion 34,617,500 21,911,611 Warrants and other long-term liabilities 2,643,579 421,050 ------------ ------------ Total liabilities 50,288,385 23,192,342 Commitments and contingencies Redeemable preferred stock: Series A convertible preferred stock, $5.00 stated value, 620,000 shares authorized; 620,000 shares issued and outstanding-liquidation value: $3,433,109 3,433,109 -- Series B senior convertible preferred stock, $5.00 stated value, 1,000,000 shares authorized; 1,000,000 shares issued and outstanding-liquidation value: $5,372,054 5,372,054 -- Series D convertible preferred stock, $5.00 stated value, 1,000,000 shares authorized; 1,000,000 shares issued and outstanding-liquidation value: $5,231,441 5,231,441 -- Series F convertible preferred stock, $5.00 stated value, 4,100,000 shares authorized; 2,450,000 shares issued and outstanding-liquidation value: $12,839,454 12,839,454 -- ------------ ------------ Total redeemable preferred stock 26,876,058 -- 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: $19,311,291 1,584,820 -- Series E convertible preferred stock, $5.00 stated value, 5,000,000 shares authorized; 447,842 shares issued and outstanding-liquidation value: $2,324,453 2,239,210 -- 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 3,948,384 2,677,195 Retained deficit (17,321,387) (12,861,383) ------------ ------------ Total shareholders' deficit (9,546,573) (10,181,788) ------------ ------------ Total liabilities and shareholders' deficit $ 67,617,870 $ 13,010,554 ============ ============
The accompanying notes are an integral part of these financial statements. 21 25 \REGENT COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE YEARS ENDED DECEMBER 31, - --------------------------------------------------------------------------------
1998 1997 1996 ------------ ------------ --------- Cash flows from operating activities: Net income (loss) $ (4,460,004) $ (4,695,847) $ 278,840 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 2,281,497 726,564 321,263 Amortization of deferred rental income (34,008) (34,008) (34,005) Provision for doubtful accounts 174,051 46,308 25,660 Provision for appraisal rights -- -- 215,000 Noncash charge for debt extinguishments 804,580 4,333,310 -- Noncash charge for corporate option compensation 530,264 -- -- Amortization of deferred financing costs 234,897 -- -- Increase (decrease) in cash flows from changes in operating assets and liabilities: Accounts receivable (344,209) (234,538) (250,620) Prepaid expenses 335,644 (13,326) (6,809) Other assets -- -- (1,325) Accounts payable (401,283) 10,427 17,907 Accrued expenses (167,344) (24,751) (19,581) Interest payable 660,976 254,603 (167,714) ------------ ------------ ------- Net cash (used in) provided by operating activities (384,939) 418,244 378,616 Cash flows from investing activities: Acquisitions of radio stations, net of cash acquired (31,440,795) (7,831,180) -- Capital expenditures (818,919) (131,701) (63,440) ------------ ------------ ------- Net cash used in investing activities (32,259,714) (7,962,881) (63,440) Cash flows from financing activities: Proceeds from issuance of Series A, B, D and F Convertible Preferred Stock 20,150,000 -- -- Proceeds from long-term debt 36,000,000 23,000,000 -- Principal payments on and purchase of long-term debt (20,749,410) (13,194,135) (510,502) Payments for deferred financing costs (1,292,042) (834,137) (44,985) Payment of issuance costs (1,520,662) -- -- Payment of appraisal right liability -- (1,015,000) -- ------------ ------------ ------- Net cash (used in) provided by financing activities 32,587,886 7,956,728 (555,487) ------------ ------------ ------- Net increase (decrease) in cash and cash equivalents (56,767) 412,091 (240,311) Cash and cash equivalents at beginning of period 535,312 123,221 363,532 ------------ ------------ ------- Cash and cash equivalents at end of period $ 478,545 $ 535,312 $ 123,221 ============ ============ ========= 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 Series A and B convertible preferred stock warrants $ 310,000
The accompanying notes are an integral part of these financial statements. 22 26 REGENT COMMUNICATIONS, INC. STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT - --------------------------------------------------------------------------------
SERIES C SERIES E CONVERTIBLE CONVERTIBLE ADDITIONAL TOTAL PREFERRED PREFERRED COMMON PAID-IN RETAINED SHAREHOLDERS' STOCK STOCK STOCK CAPITAL DEFICIT DEFICIT ----------- ------------- ------ ----------- ------------ ----------- Balance, December 31, 1995 (retroactively restated) $2,400 $ 2,677,195 $ (8,444,376) $ (5,764,781) Net income 278,840 278,840 ----------- ----------- ------ ----------- ------------ ------------ Balance, December 31, 1996 2,400 2,677,195 (8,165,536) (5,485,941) Net loss (4,695,847) (4,695,847) ----------- ----------- ------ ----------- ------------ ------------ Balance, December 31, 1997 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 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. $ 1,584,820 (3,000,000) (1,415,180) 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 exercisable for 80,000 shares of common stock 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 convertible preferred stock (6,419,075) (6,419,075) Net loss (4,460,004) (4,460,004) ----------- ----------- ------ ----------- ------------ ----------- Balance, December 31, 1998 $ 1,584,820 $ 2,239,210 $2,400 $ 3,948,384 $(17,321,387) $(9,546,573) =========== =========== ====== =========== ============ ===========
23 27 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION Regent Communications, Inc. (including its wholly-owned subsidiaries, the "Company") was formed to acquire, own and operate radio stations in small and medium-sized markets in the United States. 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 under the purchase method of accounting, with Faircom as the accounting acquirer. Consequently, the historical financial statements prior to June 15, 1998, the date of merger, are those of Faircom. Faircom operated radio stations through its wholly-owned subsidiaries in Flint, Michigan and, effective June 30, 1997, in Mansfield, Ohio (see Note 2). As a result of the Faircom merger, Faircom's historical shareholder deficit and earnings per share information have 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. 2. CONSUMMATED 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 4). Faircom allocated approximately $1,089,000 of the purchase price to property and equipment and approximately $6,261,000 to the related Federal Communications Commission (FCC) licenses. The fair values of the acquired assets were determined by an independent valuation. The excess cost over the fair market value of the net assets acquired and the FCC licenses related to this acquisition are being amortized over three to 15-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 principally financed through the borrowing of $1,100,000 represented by a subordinated promissory note. The fair values of the acquired assets were determined by an independent valuation. Faircom allocated substantially all of the purchase price to the related FCC licenses. 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 15-year period. On June 15, 1998, concurrent with the Faircom merger, the following acquisitions (the "June 15 Acquisitions") were consummated. The acquisitions were accounted for under the purchase method of accounting and the fair value of the acquired assets were determined by independent valuations. 24 28 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- The Company acquired all of the outstanding capital stock of The Park Lane Group ("Park Lane") for approximately $24,038,000 in cash and assumed liabilities. Park Lane owned 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. The Company acquired the FCC licenses and related assets used in the operation of radio stations KIXW (AM) and KZWY (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 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 $3,747,000 in cash. The Company separately acquired the accounts receivables of these stations for an additional purchase price of approximately $130,000. The Company acquired all of the outstanding capital stock of Alta California Broadcasting, Inc. ("Alta") for $2,635,000 in cash and assumed liabilities and 205,250 shares of the Company's Series E Convertible Preferred Stock. 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 $215,000 in cash and assumed liabilities, pursuant to an Asset Purchase Agreement between Topaz and RASA Communications Corp. The Company allocated the aggregate purchase price for the June 15 Acquisitions as follows: Accounts receivable $ 143,000 Broadcasting equipment and furniture and fixtures 6,503,000 FCC licenses 30,328,000 Goodwill 1,853,000 Other 360,000 ------------ $ 39,187,000 ============
Goodwill and FCC licenses related to the June 15 Acquisitions are being amortized over a 40-year period. 25 29 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- The sources for the cash portion of the consideration paid by the Company for the June 15 Acquisitions and the Faircom merger, aggregating approximately $52,900,000 (including approximately $21,100,000 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 4), $18,150,000 in additional equity from the sale of the Company's convertible preferred stock (see Note 5) and approximately $350,000 of the Company's funds. On November 30, 1998, the Company purchased substantially all of the assets of radio station KOSS (FM) (formerly KAVC (FM)) located in Lancaster, California from Oasis Radio, Inc. for $1,600,000 in cash. The acquisition was financed through the issuance of additional shares of Series F convertible preferred stock (see Note 5). 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. The results of operations of the acquired businesses are included in the Company's financial statements since the respective dates of acquisition. The following unaudited pro forma data summarizes the combined results of operations of the Company, Faircom, the Mansfield Stations, the June 15 Acquisitions and KOSS (FM) as though the acquisitions had occurred at the beginning of each year ended December 31:
1998 1997 ------------ ------------ Net broadcast revenues $ 20,018,379 $ 20,675,214 Loss before extraordinary items (8,026,665) (6,794,745) Net loss (9,196,745) (11,128,055) Net loss per common share before extraordinary items: Basic and diluted $ (62.41) $ (28.31) Net loss per common share: Basic and diluted $ (67.29) $ (46.37)
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 has not been included in the above pro forma information, due to it not having a material effect on the operating results of the Company. 26 30 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 3. SUMMARY OF ACCOUNTING POLICIES a. Consolidation: The consolidated financial statements include the accounts of all of the Company's wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts and balances have been reclassified to conform to the current classifications with no effect on financial results. b. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. c. Cash and Cash Equivalents: For purposes of the statement of cash flows, the Company considers all highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents. The carrying amount reported in the consolidated balance sheets for cash and cash equivalents approximates its fair value. d. Property and Equipment: Property and equipment are stated at cost and depreciated on the straight-line basis over the estimated useful life of the assets. Buildings are depreciated over forty-years, broadcasting equipment over a six-to-thirteen year life and furniture and fixtures generally over a five-year life. Leasehold improvements are amortized over the shorter of their useful lives or the terms of the related leases. For property and equipment retired or sold, the gain or loss is recognized in other income. e. Intangible Assets: Intangible assets consist principally of the value of FCC licenses and the excess of the purchase price (including related acquisition costs) over the fair value of net assets of acquired radio stations. These assets are amortized on a straight-line basis over lives ranging from 15- to 40-years. Intangible assets are evaluated periodically if events or circumstances indicate a possible inability to recover their carrying amount. Such evaluation is based on various analyses, including cash flows and profitability projections. If future expected undiscounted cash flows are insufficient to recover the carrying amounts of the asset, then an impairment loss is recognized based upon the excess of the carrying value of the asset over the anticipated cash flows on a discounted basis. f. Deferred Financing Costs and Other Assets: Deferred financing costs are amortized on a straight-line basis over the term of the related debt. Non-compete agreements are amortized over the terms of the related agreements. 27 31 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- g. Barter Transactions: Barter transactions (advertising provided in exchange for goods and services) are reported at the estimated fair value of the products or services received. Revenue from barter transactions is recognized when advertisements are broadcast, and merchandise or services received are charged to expense when received or used. If merchandise or services are received prior to the broadcast of the advertising, a liability (deferred barter revenue) is recorded. If advertising is broadcast before the receipt of the goods or services, a receivable is recorded. For the year ended December 31, 1998, barter revenue was approximately $731,000, and barter expense was approximately $800,000. h. Concentrations of Credit Risk: Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. The credit risk is limited due to the large number of customers comprising the Company's customer base and their dispersion across several different geographic areas of the Company. i. Broadcast Revenue: Broadcast revenue for commercial broadcasting advertisements is recognized when the commercial is broadcast. j. Fair Value of Financial Instruments: Long-term debt The fair value of the Company's long-term debt is estimated based on the current rates offered to the Company for debt of the same remaining maturities. Based on borrowing rates currently available, the fair value of long-term debt approximates its carrying value at December 31, 1998. Redeemable preferred stock The fair value of the Company's redeemable preferred stock is estimated based on the market price of a similar financial instrument that has a more readily determinable market value, adjusted as appropriate for any differences in rights. Based on transactions consummated recently, the fair value of the redeemable preferred stock approximates its carrying value at December 31, 1998. 4. LONG-TERM DEBT Long-term debt consists of the following as of December 31:
1998 1997 ------------ ------------ Senior Secured Term Notes (a) $ -- $ 12,341,666 Convertible Subordinated Promissory Notes (b) -- 10,000,000 Senior Reducing Revolving Credit Facility (c) 34,900,000 -- Subordinated Promissory Note (d) 600,000 -- Non-compete Agreements (e) 97,500 -- ------------ ------------ 35,597,500 22,341,666 Less: Current Portion of Long-Term Debt (980,000) (430,005) ------------ ------------ $ 34,617,500 $ 21,911,661 ============ ============
28 32 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- Repayment of long-term debt required over each of the years following December 31, 1998 consists of: 1999 $ 980,000 2000 62,500 2001 60,000 2002 6,545,000 2003 9,685,000 Thereafter 18,265,000 ------------ $ 35,597,500 ============
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 4.5% over 30 day commercial paper rates. As of the date that Faircom entered into the 1997 Loan Agreement, certain accrued interest was extinguished, resulting in an extraordinary gain, net of income taxes, of $370,060. 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, in 1998 consisting of a $366,000 prepayment penalty and the write-off of $804,080 of related deferred financing costs. The effective tax rate applied to the extraordinary gain and loss was zero due to the Company's cumulative loss carryfoward position. 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 proceeds from the sale of the Faircom Notes were used to extinguish existing debt obligations and to pay a portion of the purchase price for the Mansfield Stations. The debt extinguishments resulted in an extraordinary loss of $4,703,370, net of income taxes. The effective tax rate applied to the extraordinary loss was zero due to the Company's cumulative loss carryforward position. 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). 29 33 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- c. Senior Reducing Revolving Credit Facility: The Company has 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. During 1998, in conjunction with financing the June 15 Acquisitions, refinancing certain existing debt and providing for additional working capital, the Company borrowed $34,900,000 under the Credit Agreement. 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 these 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 (established October 1, 1998 at 5.31% and effective at that same rate at December 31, 1998) plus 1.25% to 2.75% or the base rate announced by the Bank of Montreal (7.75% at December 31, 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 is also required to pay certain other fees to the agent and the lenders for the administration of the facilities and the use of the credit facility. At December 31, 1998, the Company had paid non-refundable fees totaling approximately $1,671,000 which are classified as other assets in the accompanying 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 on 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 6.5% and a Floor Rate, as defined of 5.28% plus, in each case, the additional spread stipulated under the Credit Agreement. Effective January 1, 1999, the Company amended the Credit Agreement in order to cure violations of certain restrictive covenants that existed as of December 31, 1998. The amended Credit Agreement stipulates that the Company must reduce the outstanding amount under the Credit Agreement by $915,000 during the first quarter of 1999; consequently, such amount has been classified as current portion of long-term debt at December 31, 1998. The Company also must consummate the sale of its properties 30 34 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- located in Flagstaff and Kingman, Arizona within a specified period of time (see Note 13), divest one other non-strategic market in 1999 and make certain capital expenditures according to an agreed-upon timetable. In addition, the amended Credit Agreement increases the spread applied to the LIBOR rate from 1.25% to 2.75% to 1.50% to 3.50% and the spread applied to the base rate announced by the Bank of Montreal from 0% to 1.50% to .25% to 2.25%. d. Subordinated Promissory Note: In conjunction with the June 15 Acquisitions, the Company assumed a subordinated promissory note (the "McNulty Note") to McNulty Broadcasting, Inc. ("McNulty") for $600,000. 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 8.0% e. Non-Compete Agreements: In conjunction with the June 15 Acquisitions, the Company assumed five year non-compete agreements with McNulty and Island Broadcasting Associates, L.P. in the amounts of $125,000 and $200,000, respectively (the "Non-Compete Agreements"). The Non-Compete Agreements bear no interest and require quarterly payments of $16,250 through May 2000. 5. CAPITAL STOCK AND REDEEMABLE PREFERRED 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"), 4,100,000 shares as Series F Convertible Preferred Stock ("Series F") and, effective January 11, 1999, 4,000,000 shares as Series G Convertible Preferred Stock ("Series G"). The stated value of all series of preferred stock is $5.00 per share. Series A, Series C, Series E, Series F and Series G generally have the same voting rights as common stock and each share may be converted at the option of the holder into one share of common stock, subject to adjustment. Series B has no voting power except for specific events and ranks senior to all other series of preferred stock. Each Series B share may be converted at the option of the holder into one-half share of common stock, subject to adjustment. Series D has limited voting power and, each share may be converted at the option of the holder into one share of common stock, which would also have the same limited voting power in certain circumstances. The Company's Board of Directors also has the right to require conversion of all shares of Series A, B, C, D, E, F and G upon the occurrence of certain events. Series A, Series C, Series D, Series E, Series F and Series G have equal rights for the payment of dividends and the distribution of assets and rights upon liquidation, dissolution or winding up of the Company. 31 35 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- Upon liquidation of the Company, no distribution shall be made (a) to holders of stock ranking junior to the Series B unless the holder of the Series B has 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 rateably on the Series B and all other such parity stock. Dividends accrue cumulatively on all series of preferred stock, except Series F and Series G, at an annual rate of $0.35 per share. Dividends accrue cumulatively on Series F and Series G 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 $2,327,000 or $.54, $.37, $.19, $.23, $.19 and $.24 per share of Series A, Series B, Series C, Series D, Series E and Series F, respectively, at December 31, 1998. In conjunction with the closing of the Faircom merger and the June 15 Acquisitions, BMO Financial, Inc., an existing shareholder of the Company, purchased 780,000 shares of Series D for $3,900,000, General Electric Capital Corporation ("GE Capital") paid $3,900,000 to complete its purchase of 1,000,000 shares of Series B and 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 with the Company (the "Series F 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, WPB Corporate Development Associates V, L.L.C. 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. The 860,000 warrants issued in conjunction with the Series F have been assigned a fair value of $2,459,000 and have been classified under other long-term liability due to the associated "put" rights. The Series F Stock Purchase Agreement 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, as defined, 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, Series D and Series G would have similar "put" rights only if the holders of the Series F were to exercise their "put" rights. As of December 31, 1998, Series A, Series B, Series D and Series F (but not Series C and Series E) have been reclassified and excluded from the equity to reflect such anticipated "put" rights. Issuance costs of approximately $2,070,000 for these reclassified shares have been netted against the proceeds. 32 36 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 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, the holder of the Company's 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, the Company 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 the holder of Series B has been assigned a fair value of $150,000 and has 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 exercise of the "put" rights associated with warrants issued to the Series F holders. In November 1998, the Company issued 400,000 shares of Series F for $5.00 per share to existing Series F holders on a pro rata basis. The proceeds were used to complete the purchase of KOSS (FM) (see Note 2), finance capital expenditures and meet initial working capital requirements of KOSS (FM). In January 1999, the Company issued 372,406 shares of Series G for $5.00 per share to certain executive officers of the Company and Blue Chip Capital Fund II Limited Partnership, an existing holder of Series C. The proceeds were used to pay down existing debt under the Credit Agreement and fund working capital needs of the Company. In February 1999, the Company issued 633,652 shares of Series F for $5.00 per share to existing Series F holders. The proceeds were used to finance certain capital improvements, fund deferred transaction costs related to the June 15 Acquisitions and the Faircom merger and fund working capital needs of the Company. In addition, the holders of Series F committed an additional $5,082,000 through the purchase of an additional 1,016,000 shares of Series F at $5.00 to fund acquisitions by the Company. 6. STOCK-BASED COMPENSATION PLAN The Regent Communications, Inc. 1998 Management Stock Option Plan (the "1998 Stock Option Plan") provides for the issuance of up to an aggregate of 2,000,000 common shares in connection with the issuance of incentive stock options ("ISO's") and non-qualified stock options ("NQSO's"). The Compensation Committee of the Company's Board of Directors determines eligibility. The exercise price of the options is to be not less than the fair market value of the underlying common stock at the grant date, except in the case of ISO's granted to a 10% owner (as defined), for which the option share price must be at least 110% of the fair market value of the underlying common stock at the grant date. Under the terms of the 1998 Stock Option Plan, the options expire no later than ten years from the date of grant in 33 37 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- the case of ISO's (five years in the case of ISOs granted to a 10% owner), no later than ten years and one day in the case of NQSOs, or earlier in either case in the event a participant ceases to be an employee of the Company. Effective with the consummation of the Faircom merger, the Board of Directors authorized a grant of incentive stock options to the Chief Executive Officer and Chief Operating Officer of the Company, providing each of the holders the right to acquire 608,244 shares of the Company's common stock at an exercise price per share of $5.00. Of the options granted, the maximum allowable will be treated as ISO's which vest in equal 10% increments beginning on the grant date and on each of the following nine anniversary dates of the grants. The balance of the options will become exercisable in equal one-third increments at the end of each of the first three years following the grant. All options expire on June 15, 2008. Upon consummation of the Faircom merger, the Board of Directors of the Company adopted the Regent Communications, Inc. Faircom Conversion Stock Option Plan ("Conversion Stock Option Plan") which applies to those individuals previously participating in the Faircom Inc. Stock Option Plan ("Faircom Plan"). In exchange for relinquishing their options under the Faircom Plan, five former officers and members of Faircom's Board of Directors were given, in total, the right to acquire 274,045 shares of the Company's Series C Convertible Preferred stock at exercise prices ranging from $0.89 to $3.73 per share and expiring from May 11, 1999 to July 1, 2002 (the "Converted Options"). Additional expenses were incurred as a consequence of stock options being 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. Subsequent to the consummation of the Faircom merger, the Company issued 105,000 stock options under the 1998 Stock Option Plan to certain key employees. Each of the options has an exercise price per share of $5.00 and expires 10 years from the date of grant. The options become exercisable in equal one-fifth increments over the first five years following the grant. As of December 31, 1998, none of the options issued under the 1998 Stock Option Plan or Conversion Stock Option Plan had been exercised or forfeited. The Company intends to apply the provisions of APB Opinion 25, "Accounting for Stock Issued to Employees" ("APB No. 25"), in accounting for the 1998 Stock Option Plan. Under APB No. 25, no compensation expense is recognized for options granted to employees at exercise prices that are equal to or greater than the fair market value of the underlying common stock at the grant date. Statement of Financial Accounting Standards No. 123, 34 38 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- "Accounting for Stock-Based Compensation" ("SFAS No. 123") requires the Company to provide, beginning with 1995 grants, pro forma information regarding net income and net income per common share as if compensation costs for the Company's stock option plans had been determined in accordance with the fair value based method prescribed in SFAS No. 123. Such pro forma information is as follows for the year ended December 31:
Net income (loss): 1998 1997 1996 ---- ---- ---- As reported $ (4,460,004) $ (4,695,847) $ 278,840 Pro forma compensation expense, net of tax benefit (599,736) (169,841) (21,585) ------------- ------------- ----------- Pro forma $ (5,059,740) $ (4,865,688) $ 257,255 ============= ============= =========== Basic and diluted net income (loss) per common share: As reported: Basic $ (47.55) $ (19.57) $ 1.16 Diluted $ (47.55) $ (19.57) $ 1.16 Pro forma: Basic $ (50.05) $ (20.27) $ 1.07 Diluted $ (50.05) $ (20.27) $ 1.07
The weighted-average fair value per share for options granted under the 1998 Stock Option Plan was $2.88 for ISOs and $2.00 for NQSOs. The weighted-average fair value for options granted under the Conversion Stock Option Plan was approximately $230,000, and such amount was recognized at the time of conversion since the Converted Options are fully vested. The weighted average fair value per share for options granted in 1997 and 1996 were $.08 and $.09, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
1998 1997 1996 ---------------------------------------- ------- ------- Converted ISOs NQSOs Options ---- ----- ------- Dividends None None None None None Volatility 35.0% 35.0% 35.0% 46.5% 46.5% Risk-free interest rate 5.55% 5.43% 5.38% 6.28% 6.28% Expected term 10 years 5 years 2 years 5 years 5 years
35 39 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- The following table summarizes the status of Company options outstanding and exercisable at December 31, 1998, under the 1998 Stock Option Plan and the Conversion Stock Option Plan:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------- ---------------------------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED REMAINING AVERAGE AVERAGE EXERCISE CONTRACTUAL EXERCISE EXERCISE PRICE SHARES(1) LIFE (YEARS) PRICE SHARES PRICE ----- --------- ------------ ----- ------ ----- $5.00 1,321,488 9.5 $5.00 40,000 $5.00 $0.89-$3.73 274,045 3.5 $2.73 274,045 $2.73 --------- ------- 1,595,533 314,045 ========= =======
Of the options outstanding at December 31, 1998, it is anticipated that no more than 1,195,533 will be treated as NQSOs and at least 400,000 will be treated as ISOs. (1) As of December 31, 1998, the stock options granted under the 1998 Stock Option Plan entitle the holders to purchase 1,321,488 shares of the Company's common stock. Stock options granted under the Conversion Stock Option Plan entitle the holders to purchase 274,045 shares of the Company's Series C Convertible Preferred Stock. 36 40 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 7. 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. Basic EPS and diluted EPS are the same for all periods presented, since the effect of the Company's common stock equivalents would be antidilutive. Basic and diluted EPS for all periods presented have been calculated using the 240,000 common shares that were outstanding subsequent to the merger with Faircom (see Note 1). 8. INCOME TAXES The Company's provision for income taxes consists of the following for the year ended December 31:
1998 1997 1996 ---- ---- ---- Current federal $ -- $ -- $ -- Current state -- 71,542 37,692 ------- ------- ------- Total $ -- $71,542 $37,692 ======= ======= =======
37 41 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- The components of the Company's deferred tax assets and liabilities are as follows as of December 31:
1998 1997 ---- ---- Deferred tax assets: Net operating loss carryforward $ 4,528,000 $ 2,448,000 Miscellaneous accruals and credits 79,000 35,000 Accounts receivable reserve 107,000 -- ----------- ----------- Total deferred tax assets 4,714,000 2,483,000 Deferred tax liabilities: Property and equipment (296,000) -- Intangible assets (170,000) -- ----------- ----------- Total deferred tax liabilities $ (466,000) $ -- =========== =========== Valuation allowance (4,248,000) (2,483,000) ----------- ----------- Net deferred tax assets $ -- $ -- =========== ===========
The Company has cumulative federal and state tax loss carryforwards of approximately $11,320,000 at December 31, 1998. These loss carryforwards will expire in years 2011 through 2019. The utilization of the aforementioned operating losses for federal income tax purposes is limited pursuant to the annual utilization limitations provided under the provisions of Internal Revenue Code Section 382. 38 42 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- The difference between the Company's effective tax rate on income before taxes on income and the federal statutory tax rate arise from the following:
1998 1997 1996 ---- ---- ---- Federal tax expense at statutory rate 34.0% 34.0% 34.0% Loss from debt extinguishment - non-deductible -- (34.6) -- Amortization of intangibles and other non-deductible expenses (12.0) (1.0) 31.9 Benefit of net operating losses -- -- (48.0) Establishment of valuation allowance (28.0) 1.1 (13.9) State tax, net of federal tax benefit 6.0 (1.0) 7.9 ==== ==== ==== Effective tax rate 0% (1.5)% 11.9%
9. SAVINGS PLANS The Company sponsors defined contribution plans covering substantially all employees. The Company did not make contributions to the defined contribution plan during the years ended December 31, 1998 and 1997. Faircom made a contribution in the amount of $6,800 during the year ended December 31, 1996. 39 43 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 10. NOTES PAYABLE Notes payable at December 31, 1998 consist of the following: Promissory note $6,000,000 Promissory note 1,500,000 ---------- $7,500,000
In connection with the acquisition of radio station KCBQ (AM), the Company issued to the seller a promissory note for $6,000,000, which is collateralized by the assets of the station. The terms of the promissory note obligate the Company to pay the lesser of $6,000,000 or the net proceeds from a commercially reasonable sale of the KCBQ (AM) assets (with any such net sale proceeds in excess of $6,000,000 to be split between the Company and the holder of the note in accordance with the terms of the asset purchase agreement) on the earlier of June 4, 2002 or upon the sale of the KCBQ (AM) assets to an unrelated third party. The note does not bear interest prior to the maturity date, as defined. Interest on the unpaid principal of the note after maturity is at the rate of 10% per annum. The Company is currently seeking a buyer for this station and anticipates the sale of the station will occur during 1999. As a result, the unpaid principal balance of $6,000,000 has been classified as a current liability at December 31, 1998 in the accompanying Consolidated Balance Sheet. In connection with the acquisition of an option to acquire radio station WSSP (FM), the Company issued a five-year term promissory note for $1,500,000 to a third party. The terms of the promissory note obligate the Company to pay the lesser of $1,500,000 or the net proceeds from a commercially reasonable sale of the option or the station's assets (with any such net sale proceeds in excess of $1,500,000 to be retained by the Company). The note is collateralized by a security interest in the proceeds of a $1,500,000 note payable to the Company by the owner of WSSP (FM) and matures on the earlier of December 3, 2002 or upon the sale of the WSSP (FM) assets to an unrelated third party. The note does not bear interest prior to the maturity date, as defined. Interest on the unpaid principal of the note after maturity is at the rate of 10% per annum. In March 1999, the Company sold WSSP (FM) for $1,600,000 and repaid the promissory note. Because the Company intended to sell this property during 1999, the unpaid principal balance of $1,500,000 has been classified as a current liability at December 31, 1998 in the accompanying Consolidated Balance Sheet. 40 44 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 11. OTHER FINANCIAL INFORMATION Property and equipment consists of the following as of December 31:
1998 1997 ---- ---- Equipment $ 11,926,277 $ 5,277,474 Furniture and fixtures 1,659,136 1,043,648 Building and improvements 1,442,799 958,583 Land 761,342 285,000 ------------ ----------- 15,789,554 7,564,705 Less accumulated depreciation (6,185,579) (5,408,461) ------------ ----------- Net property and equipment $ 9,303,975 $ 2,156,244 ============ ===========
Intangible assets consists of the following as of December 31:
1998 1997 ---- ---- FCC broadcast licenses $ 40,768,013 $6,672,749 Goodwill 6,545,097 1,813,383 ------------ ---------- 47,313,110 8,486,132 Less accumulated amortization (2,289,170) (784,791) ------------ ---------- Net intangible assets $ 45,023,940 $7,701,341 ============ ==========
Supplemental cash flow information for the year ended December 31:
1998 1997 1996 ---- ---- ---- Cash paid for interest $2,974,000 $1,076,073 866,357 Income taxes paid, net of refunds -- 71,542 43,592
41 45 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 12. 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 in 1998. Company management has determined that comprehensive income equals the Company's net loss as of December 31, 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 4(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 that the impact of adoption will have a material impact on the Company's results of operations and statement of position. 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. The Company elected to adopt SOP 98-1 in 1998. The impact of its adoption was immaterial to the Company's results of operations and statement of position. 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. 13. PENDING TRANSACTIONS On January 6, 1999, the Company entered into an asset purchase agreement to acquire the FCC licenses and related assets used in the operations of radio stations WJON (AM), WWJO (FM) and KMXK (FM) in the St. Cloud, Minnesota market from WJON Broadcasting Company, for approximately $12,700,000 in cash. The transaction is subject to FCC consent. On March 5, 1999, the Company entered into an asset purchase agreement to sell the FCC licenses and related assets used in the operations of radio stations KAAA (AM), and KZZZ (FM) in Kingman, Arizona and KFLG (AM) and KFLG (FM) in Bullhead, Arizona for approximately $5,400,000 in cash to an unrelated third party. The transaction is subject to FCC consent. In addition, the Company entered into a local programming and marketing agreement with the purchaser effective April 1, 1999, which will end upon consummation of the sale or termination of the asset purchase agreement. 42 46 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- On March 30, 1999, the Company entered into an asset purchase agreement to sell the FCC licenses and related assets used in the operation of radio stations KZGL (FM), KVNA (AM) and KVNA (FM) in Flagstaff, Arizona for approximately $2,425,000 in cash to an unrelated third party. The transaction is subject to FCC consent. 14. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Company is subject to various regulatory proceedings, lawsuits, claims and other matters. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. However, the Company believes that the resolution of such matters for amounts above those reflected in the consolidated financial statements would not likely have a materially adverse effect on the Company's results of operations or statement of position. Lease Commitments The Company leases certain facilities and equipment used in its operations. Total rental expenses were approximately $502,000, $56,000 and $46,000 in 1998, 1997 and 1996, respectively. At December 31, 1998, the total minimum annual rental commitments under noncancelable leases are as follows: 1999 $ 730,000 2000 596,000 2001 503,000 2002 334,000 2003 260,000 Thereafter 1,476,000 ----------- Total $ 3,899,000 ===========
43 47 REGENT COMMUNICATIONS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 15. RELATED PARTY TRANSACTIONS: The Company obtains all of its property and casualty insurance and director and officer liability insurance coverages through an insurance brokerage firm 90% owned by the Company's Chief Executive Officer and members of his immediate family. In 1998, the Company paid approximately $221,500 in insurance premiums. 44 48 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Regent Communications, Inc. Our report on the consolidated financial statements of Regent Communications, Inc. which is contained in Item 8 of this Form 10-K also includes the audit of the financial statement schedule on page 45 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. PricewaterhouseCoopers LLP Cincinnati, Ohio March 30, 1999 49 REGENT COMMUNICATIONS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS ADDITIONS -------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER THE END OF PERIOD EXPENSES ACCOUNTS(*) DEDUCTIONS (**) OF PERIOD ---------- -------- ----------- --------------- --------- Allowance for doubtful accounts: Years ended December 31, 1998 $ 32,000 174,051 173,960 112,011 $ 268,000 1997 $ 20,000 46,308 34,308 $ 32,000 1996 $ 20,000 42,449 42,449 $ 20,000
* Recorded in conjunction with acquisitions consummated on June 15, 1998. ** Represents accounts written off to the reserve. 45 50 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required by this Item 10 is hereby incorporated by reference from the Registrant's definitive Proxy Statement, and specifically from the portions thereof captioned "Election of Directors" and "Executive Officers," to be filed in April 1999 in connection with the 1999 Annual Meeting of Stockholders presently scheduled to be held on April 29, 1999. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item 11 is hereby incorporated by reference from the Registrant's definitive Proxy Statement, and specifically from the portion thereof captioned "Executive Compensation," to be filed in April 1999 in connection with the 1999 Annual Meeting of Stockholders presently scheduled to be held on April 29, 1999. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item 12 is hereby incorporated by reference from the Registrant's definitive Proxy Statement, and specifically from the portion thereof captioned "Security Ownership of Certain Beneficial Owners and Management," to be filed in April 1999 in connection with the 1999 Annual Meeting of Stockholders presently scheduled to be held on April 29, 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item 13 is hereby incorporated by reference from the Registrant's definitive Proxy Statement, and specifically from the portion thereof captioned "Certain Relationships and Related Transactions," to be filed in April 1999 in connection with the 1999 Annual Meeting of Stockholders presently scheduled to be held on April 29, 1999. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) 1. FINANCIAL STATEMENTS. The consolidated financial statements of Regent Communications, Inc. and subsidiaries filed as part of this Annual Report on Form 10-K are set forth under Item 8. 2. FINANCIAL STATEMENT SCHEDULES. The financial statement schedule filed as part of this Annual Report on Form 10-K is set forth under Item 8. 46 51 3. EXHIBITS. A list of the exhibits filed or incorporated by reference as part of this Annual Report on Form 10-K is set forth in the Index to Exhibits which immediately precedes such exhibits and is incorporated herein by this reference. (b) REPORTS ON FORM 8-K. The Registrant filed no reports on Form 8-K during the fourth quarter of the fiscal year ended December 31, 1998. 47 52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REGENT COMMUNICATIONS, INC. Date: March 31, 1999 By: /s/ Terry S. Jacobs ---------------------------------------------- Terry S. Jacobs, Chairman of the Board, Chief Executive Officer and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Terry S. Jacobs Chairman of the Board, Chief March 31, 1999 - ------------------------------------ Executive Officer, Treasurer and Terry S. Jacobs Director (Principal Executive Officer) /s/ William L. Stakelin President, Chief Operating Officer, - ------------------------------------ Secretary and Director March 31, 1999 William L. Stakelin /s/ Anthony A. Vasconcellos Vice President and Chief Financial March 31, 1999 - ------------------------------------ Officer (Principal Financial and Anthony A. Vasconcellos Principal Accounting Officer) /s/ Joel M. Fairman Vice-Chairman of the Board and March 31, 1999 - ------------------------------------ Director Joel M. Fairman Director March 31, 1999 - ------------------------------------ R. Glen Mayfield /s/ John H. Wyant Director March 31, 1999 - ------------------------------------- John H. Wyant Director March 31, 1999 - ------------------------------------ William H. Ingram /s/ Richard H. Patterson Director March 31, 1999 - ------------------------------------ Richard H. Patterson
S-1 53 EXHIBIT INDEX The following exhibits are filed, or incorporated by reference where indicated, as part of Part IV of this Annual Report on Form 10-K: EXHIBIT NUMBER EXHIBIT DESCRIPTION 2(a) Asset Purchase Agreement dated January 5, 1999 by and among WJON Broadcasting Company, Regent Broadcasting of St. Cloud, Inc., Regent Licensee of St. Cloud, Inc. and Regent Communications, Inc. The following exhibits and schedules to the foregoing Asset Purchase Agreement are omitted as not material; however, copies will be provided to the Securities and Exchange Commission upon request: Schedules: 1.2 Miscellaneous Excluded Assets 3.4 Allocation of Purchase Price 6.4 Third Party Consents 7.4 Stations Licenses, Etc. 7.7 Tangible Personal Property 7.8 Real Property 7.9 Contracts (including identification of Material Contracts) 7.11 Environmental Matters 7.12 Intellectual Property 7.13 Financial Statements 7.14 Personnel Information 7.15 Litigation 7.16 Compliance With Laws 7.17 Employee Benefit Plans Exhibits: A Form of Indemnification Escrow Agreement B Form of Deposit Escrow Agreement C Form of Assignment and Assumption Agreement D Form of Non-Competition Agreement E Form of Lease Agreement F Form of FCC Counsel Opinion G Form of Buyers' Counsel Opinion H Form of Seller's Counsel Opinion 2(b) Asset Purchase Agreement dated March 4, 1999 by and among Mag Mile Media, L.L.C., Regent Broadcasting of Kingman, Inc. and Regent Licensee of Kingman, Inc. The following exhibits and schedules to the foregoing Asset Purchase Agreement are omitted as not material; however, copies will be provided to the Securities and Exchange Commission upon request: Schedules: A Licenses B Contracts C Tangible Property C-1 Leased Personal Property D Copyrights, Logos, Jingles, Service Marks, Trademarks and Other Intangible Rights E Real Property F Allocation of Purchase Price G Evidence of Sources of Funds H Excluded Employees Exhibits: A Form of Deposit Escrow Agreement B Form of Time Brokerage Agreement C Form of Assignment and Assumption Agreement D Form of Opinion - Sellers' Counsel E Form of Opinion - Sellers' Commission Counsel F Form of Opinion - Buyer's Counsel 2(c) Asset Purchase Agreement dated March 30, 1999 by and among The Guyann Corporation, Regent Broadcasting of Flagstaff, Inc. and Regent Licensee of Flagstaff, Inc. The following exhibits and schedules to the foregoing Asset Purchase Agreement are omitted as not material; however, copies will be provided to the Securities and Exchange Commission upon request: Schedules: 1.2.9 Miscellaneous Excluded Assets 6.3 Buyer Qualifications 7.4 Stations Licenses, Etc. 7.7 Tangible Personal Property 7.8 Leased Real Estate 7.9 Contracts (including identification of Material Contracts) 7.11 Environmental Matters 7.12 Intellectual Property 7.13 Financial Statements 7.14 Employees 7.17 Employee Benefit Plans Exhibits: A Form of Indemnity Escrow Agreement B Form of Deposit Escrow Agreement C Form of Allocation of Purchase Price D Form of Agreement Not to Compete E Form of General Conveyance, Bill of Sale, Assignment and Assumption Agreement F Form of Seller's Counsel Opinion G Form of Seller's FCC Counsel Opinion H Form of Buyer's Counsel Opinion 3(a) Amended and Restated Certificate of Incorporation of Regent Communications, Inc., as amended by a Certificate of Designation, Number, Powers, Preferences and Relative, Participating, Optional and Other Special Rights and the Qualifications, Limitations, Restrictions, and Other Distinguishing Characteristics of Series G Preferred Stock of Regent Communications, Inc., filed January 21, 1999. 3(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(a)* 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.L.C., 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(b)* Stock Purchase Agreement dated June 15, 1998 among Regent Communications, Inc., Waller-Sutton Media Partners, L.P., WPG Corporate Development Associates V, L.C.C., 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). 4(c)* 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.C.C., 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). E-1 54 4(d)* 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(e)* 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(f)* 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(g)* 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(h)* 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). 4(i)* 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(j)* 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(k)* 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(l)* Stock Purchase Agreement dated as of December 8, 1997 between Regent Communications, Inc. and General Electric Capital Corporation (previously filed E-2 55 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(m)* 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(n)* 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(o)* 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). 4(p)* 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(1) to the Registrant's Form S-4 Registration Statement No. 333-46435 effective May 7, 1998 and incorporated herein by this reference). 4(q)* 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(r)* 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 E-3 56 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(s)* 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 (previously filed as Exhibit 4(y) to the Registrant's Form 10-Q for the Quarter Ended September 30, 1998, as amended, and incorporated herein by this reference). 4(t) Amendment to Second Amended and Restated Stockholders' Agreement, dated as of January 11, 1999, 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.L.C., 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) 4(u) Stock Purchase Agreement dated January 11, 1999 between Regent Communications, Inc. and Blue Chip Capital II Limited Partnership relating to the purchase of 315,887 shares of Regent Communications, Inc. Series G Convertible Preferred Stock (excluding exhibits not deemed material or filed separately in executed form) 4(v) Stock Purchase Agreement dated January 11, 1999 between Regent Communications, Inc. and Terry S. Jacobs relating to the purchase of 50,000 shares of Regent Communications, Inc. Series G Convertible Preferred Stock (See Note 3) (excluding exhibits not deemed material or filed separately in executed form) 4(w) Fourth Amendment, Limited Consent and Limited Waiver to Credit Agreement, First Amendment to Subsidiary Guaranty and First Amendment to Pledge and Security Agreement, dated as of October 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. 4(x) Fifth Amendment to Credit Agreement, dated as of November 23, 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. 4(y) Sixth Amendment and Limited Consent to Credit Agreement, dated as of February 24, 1999, 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) Time Brokerage Agreement dated as of March 4, 1999 among Mag Mile Media, L.L.C., Regent Broadcasting of Kingman, Inc. and Regent Licensee of Kingman, Inc. (excluding exhibits not deemed material or filed separately in executed form) 21 Subsidiaries of the Registrant 27 Financial Data Schedule - -------------------------------------------------------------------------------- * Incorporated by reference. 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 Cities 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. 3. Two substantially identical Stock Purchase Agreements were entered into for the purchase of Series G Convertible Preferred Stock as follows: Joel M. Fairman 3,319 shares William L. Stakelin 3,200 shares E-4 EX-2.A 2 EXHIBIT 2(A) 1 EXHIBIT 2(a) ASSET PURCHASE AGREEMENT BY AND AMONG WJON BROADCASTING COMPANY, REGENT BROADCASTING OF ST. CLOUD, INC., REGENT LICENSEE OF ST. CLOUD, INC., AND REGENT COMMUNICATIONS, INC. 2 TABLE OF CONTENTS Page ARTICLE 1 PURCHASE OF ASSETS 1 1.1 Transfer of Assets 1 1.2 Excluded Assets 3 1.3 Collection of Accounts Receivable 4 1.4 Real Estate Matters 5 ARTICLE 2 ASSUMPTION OF OBLIGATIONS 8 2.1 Assumption of Obligations 8 2.2 Retained Liabilities 8 ARTICLE 3 CONSIDERATION 9 3.1 Delivery of Consideration 9 3.2 Escrow Deposit 9 3.3 Proration of Income and Expenses 10 3.4 Allocation of Purchase Price 11 3.5 Adjustment for Barter 11 ARTICLE 4 CLOSING 11 4.1 Closing 11 ARTICLE 5 GOVERNMENTAL CONSENTS 12 5.1 FCC Consent 12 5.2 FCC Application 12 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYERS 13 6.1 Organization and Standing 13 6.2 Authorization and Binding Obligations 13 6.3 Qualification As Assignee 13 6.4 Absence of Conflicting Agreements or Required Consents 13 6.5 Commissions or Finder's Fees 13 6.6 Litigation 14 6.7 Full Disclosure 14 6.8 Financial Qualification 14 ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF SELLER 14 i 3 7.1 Organization and Standing 14 7.2 Authorization and Binding Obligation 14 7.3 Absence of Conflicting Agreements or Required Consents 15 7.4 Government Authorizations 15 7.5 Compliance with FCC Regulations 16 7.6 Taxes 17 7.7 Personal Property 17 7.8 Real Property 17 7.9 Contracts 19 7.10 Status of Contracts, etc. 19 7.11 Environmental 19 7.12 Intellectual Property 20 7.13 Financial Statements 20 7.14 Personnel Information 21 7.15 Litigation 21 7.16 Compliance With Laws 21 7.17 Employee Benefit Plans 22 7.18 Commissions or Finder's Fees 22 7.19 Conduct of Business in Ordinary Course; Adverse Change 22 7.20 Instruments of Conveyance; Good Title 22 7.21 Undisclosed Liabilities 22 7.22 Full Disclosure 22 ARTICLE 8 COVENANTS OF BUYERS 23 8.1 Closing 23 8.2 Notification 23 8.3 No Inconsistent Action 23 8.4 Employees 23 8.5 Senior Lender Consents 23 ARTICLE 9 COVENANTS OF SELLER 24 9.1 Pre-Closing Covenants 24 9.2 Notification 25 9.3 No Inconsistent Action 26 9.4 Closing 26 9.5 Other Items 26 9.6 Exclusivity 26 ii 4 ARTICLE 10 JOINT COVENANTS 27 10.1 Confidentiality 27 10.2 Cooperation 27 10.3 Control of Stations 27 10.4 Consents to Assignment 28 10.5 Filings 28 10.6 Employee Matters 28 10.7 Like-kind Exchanges 29 10.8 Transition Services Agreement 29 ARTICLE 11 CONDITIONS OF CLOSING BY BUYERS 29 11.1 Representations, Warranties and Covenants 29 11.2 Governmental Consents 29 11.3 Governmental Authorizations 30 11.4 Adverse Proceedings 30 11.5 Third-Party Consents 30 11.6 Closing Documents 30 11.7 Satisfactory Investigation of Station Facilities 30 11.8 Environmental Studies 31 11.9 No Adverse Change 31 11.10 Easement 31 11.11 Title Insurance 32 ARTICLE 12 CONDITIONS OF CLOSING BY SELLER 32 12.1 Representations, Warranties and Covenants 32 12.2 Governmental Consents 33 12.3 Adverse Proceedings 33 12.4 Third Party Consents 33 12.5 Matters Relating to Real Estate 33 12.6 Transition Services Agreement 33 12.7 Closing Documents 33 ARTICLE 13 TRANSFER TAXES; FEES AND EXPENSES 33 13.1 Expenses 33 13.2 Specific Charges 34 ARTICLE 14 DOCUMENTS TO BE DELIVERED AT CLOSING 34 14.1 Seller's Documents 34 14.2 Buyers' Documents 35 ARTICLE 15 SURVIVAL, INDEMNIFICATION, ETC. 36 iii 5 15.1 Survival of Representations, Etc 36 15.2 Indemnification 37 15.3 Procedures: Third Party and Direct Indemnification Claims 38 ARTICLE 16 TERMINATION RIGHTS 39 16.1 Termination 39 16.2 Liability 41 16.3 Monetary Damages, Specific Performance and Other Remedies 41 16.4 Seller's Liquidated Damages 41 ARTICLE 17 MISCELLANEOUS PROVISIONS 41 17.1 Risk of Loss 41 17.2 Certain Interpretive Matters and Definitions 42 17.3 Further Assurances 42 17.4 Preservation of Records 43 17.5 Benefit and Assignment 43 17.6 Amendments 43 17.7 Headings 43 17.8 Governing Law 44 17.9 Notices 44 17.10 Counterparts 45 17.11 No Third Party Beneficiaries 45 17.12 Severability 45 17.13 Entire Agreement 45 iv 6 LIST OF SCHEDULES AND EXHIBITS Schedule 1.2 Miscellaneous Excluded Assets 3.4 Allocation of Purchase Price 6.4 Third Party Consents 7.4 Stations Licenses, Etc. 7.7 Tangible Personal Property 7.8 Real Property 7.9 Contracts (including identification of Material Contracts) 7.11 Environmental Matters 7.12 Intellectual Property 7.13 Financial Statements 7.14 Personnel Information 7.15 Litigation 7.16 Compliance With Laws 7.17 Employee Benefit Plans Exhibit A Indemnification Escrow Agreement B Deposit Escrow Agreement C Assignment and Assumption Agreement D Non-Completion Agreement E Lease Agreement F FCC Counsel Opinion G Buyers' Counsel Opinion H Seller's Counsel Opinion v 7 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered this 5th day of January, 1999 by and between WJON BROADCASTING COMPANY, a Minnesota limited partnership (hereinafter referred to as "Seller"), REGENT BROADCASTING OF ST. CLOUD, INC., a Delaware corporation ("RBI"), REGENT LICENSEE OF ST. CLOUD, INC., a Delaware corporation ("RLI") (RBI and RLI collectively referred to as "Buyers"), and REGENT COMMUNICATIONS, INC., a Delaware corporation ("Regent"). RECITALS WHEREAS, Seller owns and operates radio stations WJON-AM and WWJO-FM licensed to St. Cloud, Minnesota, and KMXK-FM, licensed to Cold Spring, Minnesota (together the "Stations" and each individually, a "Station") pursuant to licenses issued by the Federal Communications Commission ("FCC"), and WHEREAS, Seller desires to sell, and Buyers desire to purchase, certain assets and assume certain obligations associated with the ownership and operation of the Stations, all on the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE 1 PURCHASE OF ASSETS 1.1 Transfer of Assets. On the terms and subject to the conditions hereof and subject to Section 1.2, on the Closing Date (as hereinafter defined), Seller shall sell, assign, transfer, convey and deliver to Buyers, Buyers shall purchase for the Purchase Price determined pursuant to Section 3.1, and RBI shall assume from Seller, all of the right, title and interest of Seller in and to all of the assets, properties, interests and rights of Seller of whatsoever kind and nature, real and personal, tangible and intangible, owned or leased (to the extent of Seller's leasehold interest) by Seller as the case may be, wherever situated, which are used or held for use in the operation of the Stations (the "Stations Assets"), including but not limited to all of Seller's right, title and interest in and to the assets, properties, interests and rights described in this Section 1.1 (but specifically excluding the assets identified as Excluded Assets in Section 1.2 hereof): 1.1.1 all transferable licenses, permits and other authorizations issued to Seller by any governmental or regulatory authority including without limitation those issued by the FCC (the licenses, permits and authorizations issued by the FCC are hereafter referred to as the "Stations Licenses") as the same are used or useful in connection with the operation of the Stations, including but not limited to those described in Schedule 7.4, along with renewals or 8 modifications of such items, and all applications pertaining thereto, between the date hereof and the Closing Date; 1.1.2 all equipment, electrical devices, antennae, cables, tools, hardware, office furniture and fixtures, office materials and supplies, inventory, motor vehicles, spare parts and all other tangible personal property of every kind and description, and Seller's rights therein, owned, leased (to the extent of Seller's leasehold interest) or held by Seller and used or useful in connection with the operations of the Stations, including but not limited to those items described or listed in Schedule 7.7, together with any replacements thereof and additions thereto, made between the date hereof and the Closing Date, and less any retirements or dispositions thereof made between the date hereof and the Closing Date in the ordinary course of business and consistent with past practices of Seller; provided, however, Seller agrees that the value of all such assets retired or disposed of and not replaced with an asset of like kind and quality shall not exceed $10,000 in the aggregate unless Seller has obtained the prior written approval of RBI which shall not be unreasonably withheld, delayed or conditioned; 1.1.3 all transferable contracts, agreements, leases and legally binding contractual rights of any kind, written or oral, existing on the date hereof and relating to the operation of the Stations including, but not limited to, those which are listed in Schedule 7.8 and Schedule 7.9, together with (a) all advertising contracts relating to the operation of the Stations which are entered into or acquired by Seller in the ordinary course of business and which are consistent with past practices of Seller; and (b) any other contracts, agreements, leases and legal binding contractual rights relating to the operation of the Stations which are entered into or acquired by Seller in the ordinary course of business between the date hereof and the Closing Date (collectively the "Contracts"); provided, however, Buyers shall be entitled to a credit against the Purchase Price for the amount, if any, by which the aggregate net value of the Stations' Barter Payable as of the Closing Date exceeds the aggregate net value of the Stations' Barter Receivable as of the Closing Date by more than $15,000. 1.1.4 all of Seller's transferable rights in and to the call letters WJON, WWJO, and KMXK, and any variation thereof, as well as all of Seller's transferable rights in and to all trademarks, trade names, service marks, franchises, copyrights, including registrations and applications for registration of any of them, computer software, programs and programming material of whatever form or nature, jingles, slogans, the Stations' logos and all other logos or licenses to use same and all other intangible property rights of Seller, to the extent transferable, which are used or useful in connection with the operation of the Stations, including but not limited to those listed in Schedule 7.12 (collectively, the "Intellectual Property") together with any associated goodwill and any additions thereto between the date hereof and the Closing Date; 1.1.5 all transferable programming materials and elements of whatever form or nature owned by Seller, whether recorded on tape or other medium or intended for live performance, and all copyrights owned by or licensed to Seller that are used or useful in connection with the operation of the Stations, including all such programs, materials, elements and copyrights acquired by Seller between the date hereof and the Closing Date; 2 9 1.1.6 all of Seller's rights in and to all the files, documents, records, and books of account relating to the operation of the Stations or to the Stations Assets, including, without limitation, the Stations' local public files, programming information and studies, blueprints, technical information and engineering data, news and advertising studies or consulting reports, marketing and demographic data, sales correspondence, lists of advertisers, promotional materials, credit and sales reports and filings with the FCC and all written Contracts to be assigned hereunder, logs, transferable software programs and books and records (copies where originals have been retained by Seller) relating to employees, financial, accounting and operation matters, but excluding records relating solely to any Excluded Asset (as hereinafter defined); 1.1.7 all of Seller's rights under manufacturers' and vendors' warranties relating to items included in the Stations Assets and all similar rights against third parties relating to items included in the Stations Assets, to the extent assignable; 1.1.8 the real property and fixtures thereon described in Section 7.8 (exclusive of the Excluded Real Estate, subject to the provisions of Section 1.4 hereof); and 1.1.9 except for Excluded Assets, such other assets, properties, interests and rights owned by Seller that are used or useful in connection with the operation of the Stations to the extent assignable in the case of intangible assets and to the extent of Seller's leasehold interest with respect to leased property. The Stations Assets shall be transferred to RBI (except for the Stations' Licenses which shall be transferred to RLI) free and clear of all debts, security interests, mortgages, trusts, claims, pledges or other liens, liabilities (other than Assumed Liabilities), encumbrances or rights of third parties whatsoever ("Encumbrances"), except for Permitted Encumbrances, if any, as provided for in Section 7.8.2 and except as set forth in Schedule 7.7. and Schedule 7.8. Notwithstanding the foregoing, RBI may, by providing written notice to Seller not less than five (5) days prior to the Closing, decide, in the exercise of its sole discretion, not to purchase any one or more of such Stations Assets which is not a Contract (and, in such event, not to assume any liability secured by, arising from the acquisition of, or otherwise relating to any such Asset); provided, that in no event shall such decision reduce the Purchase Price. 1.2 Excluded Assets. Notwithstanding anything to the contrary contained herein, it is expressly understood and agreed that the Stations Assets shall not include the following assets along with all rights, title and interest therein (the "Excluded Assets"): 1.2.1 all cash and cash equivalents of Seller on hand and/or in banks, including without limitation certificates of deposit, commercial paper, treasury bills, marketable securities, asset or money market accounts and all such similar accounts or investments; 1.2.2 all investment securities, accounts receivable (not to include Barter Receivables which shall be Stations Assets) or notes receivable for services performed by Seller 3 10 prior to the Closing Date, and other claims of Seller to the payment of money relating to the operation of the Stations by the Seller prior to the Closing; 1.2.3 all real property owned by Seller and described on Schedule 7.8 as Excluded Real Estate (subject to the provisions of Section 1.4 hereof) by reason of not being used by Seller in connection with the operation of the Stations and all tangible and intangible personal property of Seller not located at the Stations' facilities identified on Schedule 7.8, and not used by Seller in connection with the operation of the Stations or used by Seller in all material respects solely in connection with the operation of radio station KKJM-FM (those material items of excluded tangible and intangible personal property being listed on Schedule 1.2); 1.2.4 subject to the limitation set forth in Section 1.1.2 of this Agreement, all tangible and intangible personal property of Seller disposed of or consumed in the ordinary course of business consistent with the past practices of Seller between the date of this Agreement and the Closing Date; 1.2.5 all Contracts that have terminated or expired prior to the Closing Date in the ordinary course of business consistent with the past practices of Seller; 1.2.6 Seller's (i) minute books and records, ownership record books and such other books and records as pertain to the organization, existence or capitalization of Seller; (ii) originals of all personnel and other records which Seller is required by law to retain in its possession, including those as are required by Seller to file its tax returns and reports; and (iii) such other records or materials relating to Seller generally and not involving or relating to the Stations Assets or the operation or operations of the Stations; 1.2.7 contracts of insurance, and any insurance proceeds or claims made by, Seller relating to property or equipment repaired, replaced or restored by Seller prior to the Closing Date; 1.2.8 all pension, profit sharing or cash or deferred (Section 401 (k)) plans and trusts and the assets thereof and any other employee benefit plan or arrangement and the assets thereof, if any, maintained by Seller; and 1.2.9 any other right, property or asset described in Schedule 1.2. 1.3 Collection of Accounts Receivable. Following the Closing, RBI shall act as Seller's agent for the sole purpose of collecting the accounts receivable due and owing to the Seller as of the Closing Date, which accounts receivable are identified as Excluded Assets pursuant to Section 1.2.2 ("Seller's Accounts Receivable"). RBI shall use its customary methods for collecting its own accounts receivable in collecting Seller's Accounts Receivable, but RBI shall not be obligated to initiate legal action for such purpose. All payments received by RBI during the four (4) month period following the Closing Date, net of commissions payable to 4 11 RBI's employees who were formerly employees of Seller (provided such amount is actually paid by RBI to said former employees in satisfaction of Seller's obligation thereto), shall be applied, on an account debtor by account debtor basis, first to Seller's Accounts Receivable and, only after full satisfaction thereof, to RBI's account; provided, however, that if during the four-month collection period any account debtor contests the validity of its obligation with respect to any of Seller's Accounts Receivable or specifies in writing (exclusive of any standard language in any RBI statement or invoice which specifies the application of payment) that the payment is to be applied to its account with RBI, RBI may apply the payment from such account debtor to its existing account. RBI shall remit, on a monthly basis, all cash collections of Seller's Accounts Receivable, net of commissions payable thereon to any of Seller's former employees who are employees of RBI (provided such amount is actually paid by RBI to said former employee), within ten (10) days following the expiration of each calendar month and of the four-month collection period, accompanied by a report in form and substance sufficient to enable the Seller to identify the current collection status of Seller's Accounts Receivable. All commissions payable on Seller's Accounts Receivable collected by RBI shall be the obligation of Seller except to the extent such commissions are set off by Buyers as provided for in this Section 1.3. During the four-month collection period, the Seller will refrain from taking any action in an attempt to collect any of the Seller's Accounts Receivable without obtaining the prior written consent of RBI, except that the Seller shall be entitled to pursue the collection of any amount claimed due by Seller from an account debtor who disputes the balance or validity of its obligation to make payment to the Seller or who otherwise directs that payment be applied first to RBI's account in lieu of Seller's account without RBI's written consent by use of any commercially-acceptable collection methods, including submitting uncollected Seller's Accounts Receivable for collection, as the Seller may deem appropriate in its sole discretion. RBI shall not have the right to compromise, settle or adjust the amount of any of Seller's Accounts Receivable without Seller's prior written consent. Upon expiration of the four-month collection period, RBI shall have no further obligation to collect any of Seller's Accounts Receivable, provided, however, that all funds subsequently received by RBI (without time limitation) that can be specifically identified as belonging to the Seller (including payments relating to any Excluded Asset), whether by accompanying invoice, remittance advice or otherwise, shall be promptly paid over or forwarded to the Seller. RBI shall allow Seller and its representatives to review such books, records and documents as may be reasonably necessary or helpful to establish and verify the accuracy and status of RBI's collection of Seller's Accounts Receivable. 1.4 Real Estate Matters. The Real Estate that is included in the Stations Assets includes the KMXK tower site, the WWJO tower site and a portion of the WJON site known as the "Headquarters Property" on which the broadcasting offices and studio of the Stations and WJON-AM tower and ground systems are located (said parcels are collectively referred to herein as the "Included Real Estate"). The excluded portion of the Headquarters Property is identified on Schedule 7.8 as the Excluded Real Estate. The Included Real Estate and the Excluded Real Estate constitute the Owned Real Estate. Seller shall have a surveyor ("Surveyor") prepare legal descriptions for the Excluded Real Estate at Seller's sole cost and expense, which legal descriptions shall conform, in all material respects, with the sketch of the Excluded Real Estate 5 12 identified as parcels 1, 2, 5, and 6 identified on Schedule 7.8 (the "Excluded Real Estate Legal Descriptions"). The parties shall execute an agreement at Closing accepting the Excluded Real Estate Legal Descriptions as prepared by the Surveyor describing the Excluded Real Estate. For the purpose of consummating the transactions contemplated by this Agreement, Seller will convey all of the Owned Real Estate to RBI, subject to Seller's reservation of rights in, and RBI's obligations with respect to the Excluded Real Estate, as the same are more fully described in this Section 1.4. RBI, upon the written request of Seller ("Demand to Re-convey"), will re-convey the Excluded Real Estate (or selected parcels thereof which may be designated by Seller from time to time in a Demand to Re-convey), to Seller. Seller may waive in writing the obligation of RBI to re-convey one or more of the parcels of Excluded Real Estate, in its sole discretion, at any time, provided, however, that RBI shall retain ownership of any parcel(s) of Excluded Real Estate which are not subject to a Demand to Re-convey submitted by the Seller on or prior to the Re-conveyance Deadline. The parties acknowledge that there are certain title problems affecting the Headquarters Property that need to be remedied by Seller by a quiet title action through a judicial proceeding ("Quiet Title Proceeding"). These title problems include (i) a guy wire anchor in the southeast corner of the Included Real Estate is presently located in an ingress and egress easement; (ii) the existence of an appurtenant easement for a guy wire is required as contemplated by Section 11.10 of the Purchase Agreement; (iii) the existence of possible legal description inaccuracies; and (iv) such other title objections made by the Buyers in accordance with the provisions of Section 11.11 which are not Permitted Real Property Encumbrances as described therein. Buyers agree to reasonably cooperate with Seller to quiet the title to such real estate. The cooperation shall include, but not be limited to (i) the joining by RBI in an action by Seller in any Court of competent jurisdiction to quiet the title to the Headquarters Property, (ii) the joining by RBI in any plats or subdivisions of the Headquarters Property necessary to more accurately describe the Headquarters Property and the Excluded Real Estate, and (iii) complying with all reasonable requirements imposed by any applicable governmental authority in the subdivision of the Owned Real Estate to show and describe the Excluded Real Estate as described in this Section 1.4. Notwithstanding anything to the contrary, Buyers' cooperation shall in no way limit, infringe upon, disrupt or otherwise affect their operation of the Headquarters Property as a broadcasting station. Seller acknowledges that Buyers' senior lenders must (i) provide their prior written consent to the Quiet Title Proceeding and (ii) agree in writing to release the Excluded Real Estate from the lien of their mortgage upon re-conveyance of Excluded Real Estate to Seller without any consideration (collectively the "Senior Lender Consents"). Buyers shall exercise commercially reasonable efforts in obtaining the Senior Lender Consents prior to the Closing in such form as may be reasonably acceptable to counsel for the Seller. Seller hereby agrees to indemnify and hold Buyers and Buyers' lenders harmless from any and all costs, expenses, liabilities, loss or damage (including reasonable attorney's fees and disbursements) as a result of the Quiet Title Proceeding. RBI's re-conveyance of the Excluded Real Estate to Seller shall be by a limited warranty deed. RBI will also cause the necessary partial releases for any Encumbrances created or suffered to exist by or as a result of RBI's ownership of the Excluded Real Property at the time 6 13 of any re-conveyance ("RBI Encumbrances"). RBI shall indemnify and hold the Seller harmless from any and all costs, expenses, liabilities, loss or damage (including reasonable attorney's fees and disbursements) incurred by the Seller in enforcing its rights of re-conveyance set forth herein or in obtaining the release or discharge of the RBI Encumbrances. All costs associated with said re-conveyance (exclusive of the RBI Encumbrances and RBI's indemnity obligation related thereto) shall be borne by Seller. RBI shall not encumber the Headquarters Property or the Excluded Real Estate except for liens to secure financing used to acquire the Headquarters Property from the Seller in accordance with the provisions of this Agreement. It is anticipated that the Quiet Title Proceeding, platting of the Headquarters Property and re-conveyance of the Excluded Real Estate shall be completed by March 1, 2000; provided, however, Seller shall have until thirty (30) days after the later of (i) the Quiet Title Proceeding has been finally determined; or (ii) the approval of the last governmental authority to the platting of the Headquarters Property and the Excluded Real Estate to request the conveyance from RBI of the Excluded Real Estate ("Re-conveyance Deadline"). Upon re-conveyance of the Excluded Real Estate to Seller by RBI, Seller shall reimburse RBI for all real estate taxes paid by RBI on the Excluded Real Estate re-conveyed to Seller. The amount of the real estate taxes on the Excluded Real Estate re-conveyed shall be mutually agreed upon at the time of re-conveyance, provided, however, if RBI and Seller cannot mutually agree upon the amount of the real estate taxes, the local assessor or appropriate governmental department of the City of St. Cloud shall allocate the amount of the real estate taxes for the Excluded Real Estate being re-conveyed to Seller by RBI and their allocation shall be final and binding upon the Seller and RBI. It is the intent of the provisions of this Section 1.4 that upon resolution of the Quiet Title Proceeding, the platting of the Headquarters Property and the re-conveyance to Seller of such Excluded Real Estate as Seller shall request, the parties shall be placed in such economic position with respect to such Excluded Real Estate and the balance of the Owned Real Estate as they would be had such Excluded Real Property re-conveyed to Seller never been conveyed to RBI. In the event the Quiet Title Proceeding is unsuccessful in remedying, in all material respects, title problems that affect the Headquarters Property, Seller, diligently and in good faith, shall take such steps to eliminate reasonably foreseeable potential adverse effects of such unresolved title problems that could reasonably interfere in any material respect with the existing use of the Headquarters Property, without cost to Buyers. In the event less expensive remedies have been exhausted, resolution may include, without limitation, a replacement of the WJON-AM tower with a tower of equivalent height with a reconfigured guy wire system. All such remedial steps shall be completed with reasonable promptness in a manner reasonably acceptable to Buyers and their engineer in accordance with good engineering practice and without adversely affecting to any noticeable degree the quality of the broadcast signals transmitted by or to the Station (WJON-AM) over its area of population coverage, the objective being to place Buyers in a position equivalent to the position they would have been in upon Closing of this transaction had such material title problems not existed. Because of stability 7 14 concerns, a shortening or relocation of the existing guy wires to the existing tower will not be a suitable remedial solution. In the event the Quiet Title Proceeding is unsuccessful in remedying the title problems and alternative corrective measures do not exist, then as a remedy of last resort Buyers shall be entitled to compensation in the form of an equitable reduction of the Purchase Price, and a refund of the excess paid with interest at Regent's bank borrowing rate in effect from time to time since the Closing Date, to reflect the diminution in value to Buyers of the transaction, taking into account the unanticipated problems existing by virtue of the title problems. In the event the parties are unable to agree upon the amount of the equitable reduction, the matter shall be submitted to arbitration in Chicago, Illinois in accordance with the commercial rules of the American Arbitration Association then in effect, and the decision shall be binding and enforceable upon the parties. In the event the title problems have not been remedied or alternative corrective measures completed by the time the escrow funds being held under the Indemnification Escrow Agreement are to be released to Seller, then $150,000 of such funds shall continue to be held in escrow under said agreement until such title problems have been remedied, the alternative corrective measures completed, or Buyers have been compensated according to the terms hereof. The Seller and RBI shall enter into a memorandum or short form of this provision which shall be in recordable form ("Memorandum of Re-conveyance"). ARTICLE 2 ASSUMPTION OF OBLIGATIONS 2.1 Assumption of Obligations. Subject to the provisions of this Section 2.1, Section 2.2 and Section 3.3, on the Closing Date, RBI shall assume the obligations of Seller arising or to be performed on and after the Closing Date (except to the extent such obligations represent liabilities for activities, events or transactions occurring, or conditions existing, prior to the Closing Date) under: (a) the Contracts (including Barter Payables); (b) all property taxes and other governmental charges on the Stations Assets; and (c) all federal, state, county, municipal, and foreign sales tax liabilities, including any penalties and interest thereon, relating to the operation of the Stations. All of the foregoing liabilities and obligations shall be referred to herein collectively as the "Assumed Liabilities. " 2.2 Retained Liabilities. Except as specifically set forth in Section 2.1 above for Assumed Liabilities, Buyers expressly do not, and shall not, assume or agree to pay, satisfy, discharge or perform and will not be deemed by virtue of the execution and delivery of this Agreement or any agreement, instrument or document delivered pursuant to or in connection with this Agreement or otherwise by reason of or in connection with the consummation of the transactions contemplated hereby or thereby, to have assumed or to have agreed to pay, satisfy, discharge or perform, any liabilities, obligations or commitments of Seller of any nature whatsoever whether accrued, absolute, contingent or otherwise and whether or not disclosed to Buyer. Seller will retain and pay, satisfy, discharge and perform in accordance with the terms thereof, all liabilities and obligations of the Seller, other than the Assumed Liabilities, including but not limited to, the obligation to assume, perform, satisfy or pay any liability, obligation, agreement, debt, charge, claim, judgment or expense incurred by or asserted against Seller related to taxes, environmental matters, pension or retirement plans or trusts, profit-sharing plans, 8 15 employment contracts, employee benefits, severance of employees, product liability or warranty, negligence, contract breach or default, or other obligations, claims or judgments asserted against Buyers as successor in interest to Seller. All of such liabilities, obligations and commitments of Seller described in this Section 2.2 shall be referred to herein collectively as the "Retained Liabilities." ARTICLE 3 CONSIDERATION 3.1 Delivery of Consideration. In consideration for the sale of the Stations Assets to Buyers, Buyers shall, at the Closing (as hereinafter defined), pay to Seller prior to 11:00 a.m., Central Time, on the Closing Date in cash by wire transfer to an account or accounts designated by Seller the amount of Twelve Million Seven Hundred Thousand and no/100 Dollars ($12,700,000.00), subject to the provisions of Section 1.1.3 above and Sections 3.2, 3.3, and 11.9 below (the "Purchase Price"). Notwithstanding the foregoing, the parties agree that at the Closing, Buyers, Seller and National City Bank, as Escrow Agent (the "Indemnification Escrow Agent"), shall enter into an Indemnification Escrow Agreement in the form of Exhibit A hereto (the "Indemnification Escrow Agreement") pursuant to which Seller shall deposit with the Indemnification Escrow Agent Seven Hundred Fifty Thousand Dollars ($750,000), which funds shall be held in escrow for a period of at least one year from the Closing Date and until the earlier of (a) the date which is thirty (30) days after Buyers' receipt from their auditors of audited financial statements for the Stations for the 12-month period ended December 31, 1999 or (b) June 30, 2000, except as otherwise provided in Section 1.4. Such funds shall be used to satisfy indemnification claims of Buyers pursuant to Sections 15.2.1 and 15.3 hereof, and otherwise be administered and released as specifically provided for in the Indemnification Escrow Agreement. 3.2 Escrow Deposit. (a) Concurrently with the execution and delivery of this Agreement, Buyers, Seller and National City Bank, as Escrow Agent (the "Deposit Escrow Agent"), shall enter into a Deposit Escrow Agreement in the form of Exhibit B hereto (the "Deposit Escrow Agreement") pursuant to which Buyers shall deposit within two (2) business days thereafter the amount described below as a deposit on the amount of the Purchase Price. Such amount held in escrow shall be applied as set forth herein and in the Deposit Escrow Agreement. (b) Pursuant to the terms of the Deposit Escrow Agreement, Buyers shall wire transfer Five Hundred Thousand Dollars ($500,000), or alternatively, deliver an irrevocable, stand-by letter of credit for such amount in form and substance acceptable to Seller, to an escrow account established pursuant to the Deposit Escrow Agreement (the "Escrow Deposit"). At the Closing, the Escrow Deposit if, in the form of cash, shall be applied to the Purchase Price to be paid to Seller and the interest accrued thereon 9 16 shall be paid to Buyers, or if in the form of a letter of credit, shall be returned to Buyers. In the event (i) this Agreement is terminated pursuant to Section 16.1.3 because of Buyers' material breach of this Agreement which was not cured within any applicable cure period and all other conditions to Closing are at such time satisfied or waived (other than such conditions (1) as could not be satisfied because of Buyers' material breach of this Agreement or (2) except for those conditions referred to in (1), as can reasonably be expected to be satisfied by the Closing), the Escrow Deposit shall be paid to or delivered for draw thereon to Seller as liquidated damages as provided in Section 16.4 hereto for Buyers' material breach of this Agreement (the payment of such sum to Seller shall discharge any liability Buyers may have to Seller), and the interest accrued on the Escrow Deposit shall be paid to Buyers; and (ii) this Agreement is terminated under any circumstances other than those set forth in the immediately preceding clause (i), the Escrow Deposit and the interest accrued thereon shall be paid or returned to Buyers; provided, however, the rights and remedies which either party has pursuant to any confidentiality agreement, whether set forth herein or in a separate agreement shall not be merged with this provision and shall survive termination of this Agreement. 3.3 Proration of Income and Expenses. 3.3.1 Except as otherwise provided herein, all revenues, expenses and all deposits, reserves and prepaid and deferred income and expenses relating to the Stations Assets or the Assumed Liabilities and arising from the conduct of the business and operations of the Stations shall be prorated between RBI and Seller in accordance with generally accepted accounting principles as of 11:59 p.m. Central time, on the date immediately preceding the Closing Date (such that Seller shall be responsible for amounts allocable to the period prior to the Closing Date and RBI shall be responsible for amounts allocable to the period on or after the Closing Date). Such prorations shall include, without limitation, all ad valorem, real estate, property taxes and other governmental charges on the Stations Assets (but excluding taxes arising by reason of the transfer of the Stations Assets as contemplated hereby which shall be paid as set forth in Section 13.2), business and license fees, frequency discounts, music and other license fees (including any retroactive adjustments thereof, which retroactive adjustments shall not be subject to the sixty-day limitation set forth in Section 3.3.2), utility expenses, vacation and sick leave, amounts due or to become due under Contracts, rents and similar prepaid and deferred items. 3.3.2 Except as otherwise provided herein, the prorations and adjustments contemplated by this Section 3.3, to the extent practicable, shall be made on the Closing Date. As to those prorations and adjustments not capable of being ascertained on the Closing Date, an estimate shall be made as of the Closing Date with the actual amount of the adjustment and proration to be made within sixty (60) calendar days after the Closing Date. 10 17 3.3.3 In the event of any disputes between the parties as to such adjustments, the amounts not in dispute shall nonetheless be paid at the time provided in Section 3.3.2 and such disputes shall be determined by an independent certified public accountant with no prior relationship to the parties or their Affiliates which is mutually acceptable to the parties, and the fees and expenses of such accountant shall be paid one-half by Seller and one-half by Buyers. The determination of such accountant shall be binding on the parties hereto. 3.4 Allocation of Purchase Price. The Purchase Price shall be allocated among the Stations Assets in accordance with the allocation set forth on Schedule 3.4. Seller and Buyer hereby agree to use the allocation set forth on Schedule 3.4 for all tax purposes, including, without limitation, those matters subject to Section 1060 of the Internal Revenue Code of 1986, as amended. 3.5 Adjustment for Barter. As of the Closing Date, Buyers shall be entitled to a credit against the Purchase Price for the amount, if any, by which the aggregate net value of the Stations' Barter Payable (as defined below) as of the Closing Date exceeds the aggregate net value of the Stations' Barter Receivable (as defined below) as of the Closing Date by more than $15,000 with respect to Contracts for the sale of advertising in exchange, in whole or in part, for merchandise or services ("Trade Agreements"). For purposes of this Agreement, any Contract which provides for the payment of fees for programming services through advertising barter (i.e., barter programming) shall be excluded from the definition of Trade Agreements. "Barter Payable" means the aggregate value of time owed pursuant to each of the Trade Agreements. "Barter Receivable" means the aggregate value of goods and services to be received pursuant to each of the Trade Agreements. Notwithstanding the foregoing, the net Barter Payable, if any, relating solely to the Value Connection shall be calculated by multiplying the net Barter Payable for the Value Connection by a fraction, the numerator of which is seventy (70) and the denominator of which is eighty-five (85). The resultant shall be the net Barter Payable attributable to the Value Connection, which amount shall be aggregated with the net Barter Payable or Receivable from all other Trade Agreements to arrive at the net Barter Payable or Barter Receivable. ARTICLE 4 CLOSING 4.1 Closing. Except as otherwise mutually agreed upon by Buyers and Seller, the consummation of the transactions contemplated herein (the "Closing") shall occur within five (5) business days after the later to occur of (a) the satisfaction or waiver of each condition to closing contained herein, other than such conditions as are reasonably anticipated to be satisfied at Closing (provided that each party hereto shall use its commercially reasonable efforts to cause each condition to closing to be satisfied so that the Closing may occur at the earliest possible date), (b) the issuance of the Final Order (as defined below) or (c) January 1, 1999; or such other date as may be mutually agreed upon by the parties hereto (the "Closing Date"); provided, 11 18 however, that Buyers and Seller may waive the requirement that a Final Order be issued and elect (subject to clause (a) and (c) above, to close at any time (not less than five (5) business days following such agreement) after the release of the initial FCC approval on public notice that the FCC has consented to the transaction contemplated hereby (the "Initial Approval"). For purposes of this Agreement, "Final Order" (and "Final") means an order or grant by the FCC which is no longer subject to reconsideration or review by the FCC or a court of competent jurisdiction and pursuant to which the FCC consents, as the case may be, to the assignments of the FCC Licenses contemplated by this Agreement or to the renewal of the FCC Licenses, each such order or grant being without the imposition of any conditions adverse to Buyers or any Affiliate (as hereinafter defined) of Buyers with respect to the assignment of the FCC Licenses to RLI or the continued operation by Buyers of the Stations or the Stations Assets in the manner presently operated by Seller. In the event the parties close before the Initial Approval has become a Final Order, the parties shall enter into a mutually acceptable unwind agreement. The Closing shall be held in the offices of Moss & Barnett, Minneapolis, Minnesota, or at such place and in such manner as the parties hereto may agree. The Closing shall be effective as of the beginning of business on the Closing Date. ARTICLE 5 GOVERNMENTAL CONSENTS 5.1 FCC Consent. It is specifically understood and agreed by Buyers and Seller that the Closing and the assignment of the Stations Licenses and the transfer of the Stations Assets are expressly conditioned on and are subject to the prior consent and approval of the FCC without the imposition of any conditions materially adverse to Buyers or Regent, on the one hand, or the Seller, on the other hand (the "FCC Consent"). 5.2 FCC Application. Within five (5) business days after the execution of this Agreement, Buyers and Seller shall file an application with the FCC for the FCC Consent (the "FCC Application"). Buyers and Seller shall prosecute the FCC Application with all reasonable diligence and otherwise use their commercially reasonable efforts to obtain the FCC Consent as expeditiously as practicable (but neither Buyers nor Seller shall have any obligation to satisfy complainants or the FCC by taking any steps which would have a material adverse effect upon Buyers or Seller or upon any of their respective Affiliates). If the FCC Consent imposes any condition on Buyers or Seller or any of their respective Affiliates, such party shall use its commercially reasonable efforts to comply with such condition; provided, however, that neither Buyers nor Seller shall be required hereunder to comply with any condition that would have a material adverse effect upon it or any of its Affiliates. If reconsideration or judicial review is sought with respect to the FCC Consent, the party affected shall vigorously oppose such efforts for reconsideration or judicial review; provided, however, that nothing herein shall be construed to limit either party's right to terminate this Agreement pursuant to Article 16 hereof. 12 19 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYERS (AND REGENT) Buyers (and Regent where stated) hereby make the following representations and warranties to Seller, each of which is true and correct on the date hereof, shall survive the Closing for the periods provided for in Section 15.1 and, subject to the provisions of Section 15.3.5, shall be unaffected by any investigation heretofore or hereafter made by Seller: 6.1 Organization and Standing. Buyers and Regent are corporations duly organized validly existing and in good standing under the laws of the State of Delaware, and by the Closing Date Buyers will be duly qualified to conduct business within the State of Minnesota. 6.2 Authorization and Binding Obligations. Buyers have all necessary corporate power and authority to enter into and perform this Agreement and the transactions contemplated hereby, and to own or lease the Stations Assets and to carry on the business of the Stations upon the consummation of the transactions contemplated by this Agreement. Buyers' and Regent's execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all necessary action on their part and, assuming the due authorization, execution and delivery of this Agreement by Seller, this Agreement will constitute the legal, valid and binding obligation of Buyers and Regent, enforceable against them in accordance with its terms, except as limited by laws affecting creditors' rights or equitable principles generally. 6.3 Qualification As Assignee. To the best of Buyers' knowledge, there are no facts which, under the Communications Act of 1934, as amended, or the existing rules and regulations of the FCC, would disqualify RLI as an assignee of the Stations Licenses. 6.4 Absence of Conflicting Agreements or Required Consents. Except as set forth in Article 5 hereof with respect to governmental consents or on Schedule 6.4, the execution, delivery and performance of this Agreement by Buyers and Regent: (a) will not conflict with, result in a breach of, or constitute a violation of, or a default under, the provisions of the articles of incorporation or by-laws (or other charter or organizational documents) of Buyers or Regent; (b) do not require the consent of any third party; (c) will not violate any applicable law, judgment, order, injunction, decree, rule, regulation or ruling of any governmental authority to which either Buyer or Regent or any of their respective assets are now subject; and (d) will not, either alone or with the giving of notice or the passage of time, or both, conflict with, constitute grounds for termination of or result in a breach of the terms, conditions or provisions of, or constitute a default under, any agreement, instrument, license or permit to which either Buyer or Regent is now subject. 6.5 Commissions or Finder's Fees. Neither Buyers, Regent, nor any person or entity acting on behalf of Buyers or Regent has agreed to pay a commission, finder's fee or similar payment in connection with this Agreement or any matter related hereto to any person or entity, with the sole exception of Media Venture Partners. 13 20 6.6 Litigation. Buyers and Regent are not subject to any judgment, award, order, writ, injunction, arbitration decision or decree prohibiting the consummation of the transactions contemplated by this Agreement, and there are no suits, legal proceedings or investigations of any nature pending, or to the best knowledge of Buyers or Regent, threatened against or affecting Buyers or Regent that would affect Buyers' ability to carry out the transactions contemplated by this Agreement. 6.7 Full Disclosure. No representation or warranty made by Buyers or Regent contained in this Agreement or any certificate, document or other instrument furnished or to be furnished by Buyers pursuant hereto contains or will contain any untrue statement of a material fact, or omits or shall omit to state any material fact required to make any statement contained herein or therein not misleading. To the best of Buyers' knowledge, as of the date hereof, there is no pending or contemplated event or occurrence that would cause any of the representations of the Buyers or Regent in this Agreement not to be true and complete on the date of such event or occurrence as if made on that date. 6.8 Financial Qualification. Buyers and Regent have funds available to them subject to terms of an existing Credit Agreement and Stock Purchase Agreement which are sufficient to enable them to acquire the Stations Assets and to consummate the transactions contemplated by this Agreement. ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF SELLER Seller makes the following representations and warranties to Buyers, each of which is true and correct on the date hereof, shall survive the Closing for the periods of time provided for in Section 15.1 and, except as provided in Section 15.3.5, shall be unaffected by any investigation heretofore or hereafter made by Buyers: 7.1 Organization and Standing. Seller is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Minnesota, is authorized to conduct business within the State of Minnesota, and has the requisite power and authority to own, lease and operate the Stations Assets owned or leased by it and to carry on the business of the Stations as now being conducted by it. 7.2 Authorization and Binding Obligation. Seller has all necessary power and authority of a limited partnership to enter into and perform this Agreement and the transactions contemplated hereby. Seller's execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly authorized, executed and delivered by Seller and, assuming the due authorization, execution and delivery of this Agreement by Buyers and Regent, this Agreement will constitute the legal, valid and binding obligation of Seller enforceable against it in accordance with its terms, except as limited by laws affecting the enforcement of creditors' rights or equitable principles generally. 14 21 7.3 Absence of Conflicting Agreements or Required Consents. Except as set forth in Article 5 with respect to governmental consents, in Schedule 7.8 with respect to consents required in connection with the assignment of leases relating to the Leased Real Estate, and in Schedule 7.9 with respect to consents required in connection with the assignment of certain other Contracts, the execution, delivery and performance of this Agreement by Seller: (a) do not require the consent of any third party (including, without limitation, the consent of any governmental, regulatory, administrative or similar authority); (b) will not conflict with, result in a breach of, or constitute a violation of or default under, the provisions of Seller's charter or organizational documents, or any applicable law, judgment, order, injunction, decree, rule, regulation or ruling of any governmental authority to which Seller is a party or by which Seller or any of the Stations Assets are bound; (c) will not either alone or with the giving of notice or the passage of time, or both, conflict with, constitute grounds for termination of or result in a breach of the terms, conditions or provisions of, or constitute a default under, any Material Contract, agreement, instrument, license or permit to which Seller or any of the Stations Assets is now subject; and (d) will not result in the creation of any lien, charge or encumbrance on any of the Stations Assets, excluding in each case violations which, or breaches and approvals the absence of which, individually or in the aggregate could not reasonably have a material adverse effect on the Seller or the Stations Assets. 7.4 Government Authorizations. 7.4.1 Schedule 7.4 hereto contains a true and complete list of the Stations Licenses and other material licenses, permits or other authorizations from governmental and regulatory authorities which are required for the lawful conduct of the business and operations of the Stations in the manner and to the extent they are presently conducted (including, without limitation, auxiliary licenses associated with each Station). Seller has delivered to Buyers true and complete copies of the Stations Licenses and the other material licenses, permits and authorizations listed in Schedule 7.4, including any and all amendments and other modifications thereto. 7.4.2 Seller is the authorized legal holder of the Stations Licenses and other licenses, permits and authorizations listed in Schedule 7.4. Except as set forth Schedule 7.4, none of the Stations Licenses and other licenses, permits and authorizations listed in Schedule 7.4 is subject to any restrictions or conditions which would limit in any material respect the full operation of the Stations as now operated. 7.4.3 Except for the governmental consents contemplated by Article 5 or as set forth in Schedule 7.4, and except for matters affecting the radio broadcast industry generally, there are no applications, complaints, petitions or proceedings pending or, to the best of Seller's knowledge, threatened as of the date hereof before the FCC or any other governmental or regulatory authority relating to the business or operations of the Stations. Except as set forth in Schedule 7.4, the Stations Licenses and the other licenses, permits and authorizations listed in Schedule 7.4 are in full force and effect and are not materially impaired as a result of any act or 15 22 omission of Seller or its members, managers, officers, or employees. The operations of the Stations are now and have been during the current renewal term in all material respects in accordance with the Stations Licenses and the underlying construction permits and the other licenses, permits and authorizations listed in Schedule 7.4. No proceedings are pending or, to the best of Seller's knowledge, threatened, and to the best of Seller's knowledge there has not been any act or omission of Seller or any of its members, managers, officers, or employees, which could reasonably be expected to result in the revocation, modification, non-renewal or suspension of any of the Stations Licenses or the other licenses, permits and authorizations listed in Schedule 7.4, the denial of any pending applications, the issuance of any cease and desist order, the imposition of any administrative actions by the FCC or any other governmental or regulatory authority with respect to the Stations Licenses or the other licenses, permits and authorizations listed in Schedule 7.4 or which could reasonably be expected to have a material adverse effect on Buyers' ability to continue to operate the Stations as they are currently operated. 7.4.4 Each Station is operating with the maximum facilities specified in the respective Station License. 7.4.5 To the best of Seller's knowledge: (i) none of the Stations is causing objectionable interference to the transmissions of any other broadcast station or communications facility nor has any of the Stations received any complaints with respect thereto; and (ii) no other broadcast station or communications facility is causing objectionable interference to the respective transmissions of any Station or the public's reception of such transmissions which exceeds the interference which the Stations are required to accept pursuant to the provisions of the applicable Stations License. 7.4.6 Seller has no reason to believe that the Stations Licenses and the other licenses, permits, or authorizations listed in Schedule 7.4 will not be renewed in their ordinary course. 7.4.7 All reports, forms, and statements required to be filed by Seller with the FCC with respect to the Stations since the grant of the last renewal of the Stations Licenses which the failure to file would materially adversely affect the Stations Licenses have been filed and are complete and accurate in all material respects. 7.4.8 The operation of the Stations and all of the Stations Assets are in compliance in all material respects with ANSI Radiation Standards C95.1-1992. 7.5 Compliance with FCC Regulations. Except as specified in Schedule 7.4, the operation of the Stations and all of the Stations Assets are in compliance in all material respects with: (a) all applicable engineering standards required to be met under applicable FCC rules; and (b) all other applicable federal, state and local rules, regulations, requirements and policies, including, but not limited to, equal employment opportunity policies of the FCC, and all applicable painting and lighting requirements of the FCC and the Federal Aviation 16 23 Administration to the extent required to be met under applicable FCC rules and regulations, and to the best of Seller's knowledge, there are no filed claims to the contrary. 7.6 Taxes. Seller has filed all federal, state, local and foreign income, franchise, sales, use, property, excise, payroll and other tax returns required by law to have been filed by it and has paid in full all taxes, estimated taxes, interest, assessments, and penalties shown as due and payable by it on such returns. All returns and forms which have been filed have been true and correct in all material respects and, to the knowledge of Seller, no tax or other payment in an amount other than as shown on such returns and forms that is required to be paid by Seller with respect to the periods covered by such returns has not been paid by Seller. There are no present disputes as to taxes of any nature payable by Seller which in any event could adversely affect any of the Stations Assets or the operation of the Stations by Buyers. To the best of Seller's knowledge, none of its tax returns, federal, state, local or foreign, are currently being audited. Seller does not and will not in the future have any liability, fixed or contingent, for any unpaid federal, state or local taxes or other governmental or regulatory charges whatsoever (including without limitation withholding and payroll taxes but excluding tax liabilities prorated under Section 3.3.1) which will result in a lien on the Stations Assets after conveyance thereof to Buyers or in any other form of transferee liability to Buyers. 7.7 Personal Property. Schedule 7.7 hereto contains a list of all material items of tangible personal property owned by Seller and used or useful in the conduct of the business and operations of the Stations. Schedule 7.7 also separately lists any material tangible personal property leased by Seller pursuant to leases included within the Contracts. Except as disclosed in Schedule 7.7, Seller has, and following the Closing, RBI will have, good and marketable title to all of the items of tangible personal property which are included in the Stations Assets (other than those subject to lease) and none of such Stations Assets at the Closing will be subject to any Encumbrances except for liens for taxes not yet due and payable, and except for the Assumed Liabilities. The properties listed in Schedule 7.7, along with those properties subject to lease and included among the Contracts, constitute all material tangible personal property necessary to operate the Stations as the same are now being operated. Except as set forth in Schedule 7.7, all items of tangible personal property listed or described on Schedule 7.7 are in good and technically sound operating condition and repair (ordinary wear and tear excepted), are free from all material defect and damage, are suitable for the purposes for which they are now being used, and have been maintained in a manner consistent in all material respects with generally accepted standards of good engineering practice. 7.8 Real Property. 7.8.1 Schedule 7.8 hereto contains a complete and accurate list of all real property (including without limitation, real property relating to the towers, transmitters, studio sites and offices of the Stations) used by Seller in connection with the operations of the Stations, identifying thereon the real property that is owned by Seller or its Affiliates (the "Owned Real Estate") or leased by Seller (the "Leased Real Estate") (collectively, the "Real Estate"). 17 24 7.8.2 Seller will have on or before the Closing Date good and marketable title in fee simple to all of the Owned Real Estate, free and clear of all Encumbrances, except for (i) liens for taxes and other governmental charges which are not yet due and payable, (ii) restrictions, covenants, and easements of record which do not materially detract from the existing use of the property affected or affect the marketability of the same, and (iii) zoning laws and other land use restrictions that do not impair the full use of the Owned Real Estate in the same or substantially similar manner as such is currently used (collectively, the "Permitted Encumbrances") and except for such Encumbrances described in Schedule 7.8 as will be released and discharged on or prior to the Closing Date. 7.8.3 Seller is currently in possession of all Real Estate. To the best knowledge of Seller, there are no present disputes or claims with respect to offsets or defenses by any party against the other under any of the Contracts relating to the Leased Real Estate. Seller has delivered to Buyers true and complete copies of all Contracts relating to the Real Estate. Except as set forth in Schedule 7.9 hereto, the assignment of the Contracts relating to the Leased Real Estate to RBI will not permit the other party to accelerate the rent, cause the terms thereof to be renegotiated or constitute a default thereunder, and will not require the consent of any such party to the assignment thereof to RBI. 7.8.4 Seller has legal access to all of the Real Estate, and except as described in Section 1.4, Section 11.10 or as further described on Schedule 7.8, all easements, rights of way, and real property licenses relating to Seller's use thereof, if any, have been properly recorded in the appropriate public recording offices. Subject to (i) the provisions of Section 1.4 relating to the Quiet Title Proceeding; and (ii) the requirement of obtaining the Easement described in Section 11.10, the Real Estate will include, on or before the Closing Date, all the real property, easements, rights of way, and other real property interests necessary to conduct the business and operations of the Stations as they are now conducted. Except as described in Section 1.4, Section 11.10 or in Schedule 7.8, none of the buildings, structures, improvements or fixtures constructed on any Real Estate, in connection with the operation of the Stations, including, but not limited to, all towers, guy wires and guy anchors and ground radials, encroach upon adjoining real property, and all such buildings, structures, improvements and fixtures are constructed and are operated and used in conformance in all material respects with all "set back" lines, easements, covenants, restrictions and all applicable building, fire, zoning, health and safety laws and codes. No utility lines serving such Real Estate pass over the lands of a third party except where appropriate easements have been obtained. Except as described in Schedule 7.8, all buildings, structures, towers, antennae, improvements and fixtures situated on the Real Estate are in good and technically sound operating condition, ordinary wear and tear excepted, to the best knowledge of Seller have no latent structural mechanical or other defects of material significance, are reasonably suitable for the purposes for which they are being used, and each has (i) adequate rights of ingress and egress, and (ii) to the extent applicable utility service for water and sewer, telephone, electric and/or gas, and sanitary service for the conduct of the business and operations of the Stations as presently conducted. Except for the Quiet Title Proceeding contemplated by Section 1.4, there is no pending or, to the best knowledge of Seller, threatened condemnation or other legal proceeding or action of any kind relating to the Real Estate. 18 25 7.9 Contracts. Schedule 7.9 lists all Contracts to which Seller is a party, or which are binding on Seller and that relate to the Stations or to the Stations Assets as of the date of this Agreement except for those which: (i) were entered into in the ordinary course of business and which do not require aggregate payments by any party thereto in excess of $5,000; (ii) are terminable without further consideration on no more than 90 days' prior notice; or (iii) constitute an advertising contract of the Seller which has been entered into in the ordinary course of business consistent with past practices. Those Material Contracts (as hereinafter defined) listed on Schedule 7.9, if any, requiring the consent of a third party to assignment are identified by an asterisk "*" in the left margin of Schedule 7.9. Those Contracts, if any, that Seller and Buyers have agreed are material to the operation of the Stations Assets and the valid assignment of which and receipt by Buyers of consents thereto (along with appropriate estoppel certificates for the leases related to the Leased Real Estate) is a condition to the consummation of the transactions contemplated hereby (the "Material Contracts") are identified by an "M" in the left margin of Schedule 7.9. 7.10 Status of Contracts, etc. Seller has delivered to Buyers true and complete copies of all written Contracts listed on Schedule 7.9 and true and complete memoranda of all oral Contracts, including any and all amendments and other modifications thereto. Except as disclosed on Schedule 7.9, all of the Material Contracts are in full force and effect and are valid, binding and enforceable in accordance with their respective terms, except as limited by laws affecting creditors' rights or equitable principles generally. Seller has complied in all material respects with all Contracts and is not in default in any material respect beyond any applicable grace periods under any thereof and, to the best of Seller's knowledge, no other contracting party is in default under any thereof. Except as disclosed on Schedule 7.9, none of the Contracts for the sale or provision of radio time or advertising to be fulfilled in whole or in part after the Closing Date (i) shall be for rates materially below the Stations' generally prevailing rates for such time or advertising as of the date such contracts were executed, or (ii) shall be commissionable to any employee after he/she has left the employ of the Stations. 7.11 Environmental. Except as set forth in Schedule 7.11, Seller has complied in all material respects with all federal, state and local environmental laws, rules and regulations as in effect on the date hereof applicable to each of the Stations and its operations, including but not limited to the FCC's guidelines regarding RF radiation. No hazardous or toxic waste, substance, material or pollutant (as those or similar terms are defined under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. SectionSection 9601 et seq., Toxic Substances Control Act. 15 U. S. C. Section Section 2601 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. SectionSection 6901 et seq. or any other applicable federal, state and local environmental law, statute, ordinance, order, judgment rule or regulation relating to the environment or the protection of human health ("Environmental Laws")), including but not limited to, any asbestos or asbestos-related products, oils, or petroleum-derived compounds, CFCs, PCBs, or underground storage tanks (collectively Hazardous Materials"), have been released, emitted or discharged by Seller in violation of applicable laws or regulations or are currently located in quantities in violation of applicable laws and regulations in, on, or 19 26 under or about the Real Estate or contained in the tangible personal property included in the Stations Assets. The Stations Assets and Seller's use thereof are not in violation in any material respect of any Environmental Laws or any occupational, safety and health or other applicable law now in effect. As between Buyer and Regent, on the one hand, and Seller on the other hand, Seller shall be as of the Closing Date and thereafter solely responsible for all environmental liabilities, of whatsoever kind and nature, arising out of or attributable to the operation or ownership of the Stations Assets prior to the Closing Date. 7.12 Intellectual Property. Schedule 7.12 hereto is a true and complete list of all material Intellectual Property applied for, registered or issued to, and owned by Seller or under which Seller is a licensee and which is used in the conduct of Seller's business and operations with regard to the Stations. Except as set forth on Schedule 7.12, to the best of Seller's knowledge: (a) Seller's right, title and interest in the Intellectual Property as owner or licensee, as applicable, is free and clear of all Encumbrances in favor of any third party except for sublicensees, if any, and for the rights of third parties in and to any Intellectual Property which is licensed to the Seller on a non-exclusive basis, and, to the extent any of the Intellectual Property is licensed to Seller, such interest is valid and uncontested by the licensor thereof; (b) all computer software located at the Stations' facilities or used in the Stations' business or operations which is material to the operation of the Stations as presently conducted is (i) properly licensed to Seller, and all of Seller's uses of such computer software are authorized under such licenses, and (ii) is, to the best of Seller's knowledge, "Year 2000 compliant"; (c) all of Seller's right, title and interest in and to the Intellectual Property identified by an "M" in the left margin of Schedule 7.12 as being material shall be assignable to RBI at Closing, and upon such assignment, RBI shall receive valid and enforceable right, title, and interest in and to all tangible and intangible property rights of Seller existing in such material Intellectual Property; (d) and there are no infringements or unlawful use of such material Intellectual Property by Seller in connection with Seller's business or operations. 7.13 Financial Statements. Set forth in Schedule 7.13 are complete copies of the reviewed financial statements of Seller relating to the Stations for the years ended December 31, 1997, 1996 and 1995, together with internally prepared interim statements of operations for the Stations for the ten-month period ending October 31, 1998 (collectively, the "Financial Statements"). The Financial Statements are prepared in accordance with the books and records of Seller and in accordance with generally accepted accounting principles consistently applied and maintained throughout the periods indicated except (i) that the interim Financial Statements lack footnotes and other presentation items, (ii) that the interim Financial Statements are subject to year-end adjustments, and (iii) as has been disclosed in Schedule 7.13 or in the notes to the reviewed financial statements. The Financial Statements, including the notes attached or accompanying said Financial Statements, present fairly the financial condition, results of operations and cash flow of the Stations for the periods indicated. None of the Financial Statements understates in any material respects the actual costs and expenses of conducting the business and operations of the Stations, fails to disclose any material liability, or inflates (or will inflate) the revenues of the Stations for any reason. 20 27 7.14 Personnel Information. 7.14.1 Schedule 7.14 contains a true and complete list of all persons employed at the Stations, including date of hire, a description of material compensation arrangements (other than employee benefit plans set forth in Schedule 7.17) and a list of other material agreements affecting such persons and their employment by Seller. To the best of Seller's knowledge, no individual employee intends to terminate his or her employment relationship with the Stations for reason of the transactions contemplated hereby. 7.14.2 Seller, with respect to the Stations, is not a party to any contract or agreement with any labor organization, nor has Seller agreed to recognize any union or other collective bargaining unit, nor has any union or other collective bargaining unit been certified as representing any employees of Seller at the Stations. Seller has no knowledge of any organization effort currently being made or threatened by or on behalf of any labor union with respect to employees of Seller at the Stations. 7.14.3 Except as disclosed in Schedule 7.14, Seller, with respect to the Stations, has complied in all material respects with all laws relating to the employment of labor, including, without limitation, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and those laws relating to wages, hours, collective bargaining, unemployment insurance, workers' compensation, equal employment opportunity and payment and withholding of taxes. 7.15 Litigation. Except as set forth in Schedule 7.15, Seller is not subject to any judgment, award, order, writ, injunction, arbitration decision or decree relating to the conduct of the business or the operation of the Stations or any of the Stations Assets, and there is no litigation, administrative action, arbitration, proceeding or investigation pending or, to the best knowledge of Seller, threatened against Seller with respect to, related to or in connection with the operation of the Stations in any federal, state or local court, or before any administrative agency or arbitrator (including, without limitation, any proceeding which seeks the forfeiture of, or opposes the renewal of, any of the Stations Licenses), or before any other tribunal duly authorized to resolve disputes. 7.16 Compliance With Laws. Except as set forth in Schedule 7.16: (i) Seller is not in material violation of, nor has Seller received any notice or communication in writing asserting any non-compliance by it in connection with the operation of the Stations or use or ownership of any of the Stations Assets with, any applicable statute, rule or regulation, whether federal, state or local; (ii) Seller is not in default with respect to any judgment, order, injunction or decree of any court administrative agency or other governmental authority or any other tribunal duly authorized to resolve disputes which relates to the transactions contemplated hereby; and (iii) Seller is in all material respects in compliance with all laws, regulations and governmental orders applicable to the conduct of the business and operations of the Stations, and to the best of Seller's knowledge its present use of the Stations Assets does not violate any of such laws, regulations or orders in any material respect. 21 28 7.17 Employee Benefit Plans. Schedule 7.17 contains a true and complete list as of the date of this Agreement of all employee benefit plans applicable to the employees of Seller employed at the Stations. Seller does not maintain any other employee benefit plan as the term is defined in Section 3 of the Employee Retirement Income Security Act of 1974, as amended, applicable to the employees of Seller employed at the Stations. 7.18 Commissions or Finder's Fees. Neither Seller nor any person or entity acting on behalf of Seller has agreed to pay a commission, finder's fee or similar payment in connection with this Agreement or any matter related hereto to any person or entity, with the exception of Media Venture Partners. 7.19 Conduct of Business in Ordinary Course; Adverse Changes. Since December 31, 1997: (a) Seller has conducted the business of the Stations in all material respects only in the ordinary course consistent with Seller's past practices; (b) there has not been any material adverse change in the business, assets, properties, prospects or condition (financial or otherwise) of the Stations, or any damage, destruction, or loss which has had a material adverse effect on the Stations Assets; and (c) except as identified on Schedules 7.7, 7.8 or 7.9 or incurred in the ordinary course of business, Seller has not created, assumed, or suffered any mortgage, pledge, lien or encumbrance on any of the Stations Assets. 7.20 Instruments of Conveyance: Good Title. The instruments to be executed by Seller and delivered to Buyers at the Closing, conveying the Stations Assets to Buyers, will transfer good and marketable title to the Stations Assets free and clear of all Encumbrances, except for the Assumed Liabilities and Permitted Encumbrances and except as set forth in Schedule 7.7 and Schedule 7.8 hereto. 7.21 Undisclosed Liabilities. Excepting only for the Assumed Liabilities, no liability or obligation of any nature, whether accrued, absolute, contingent or otherwise, relating to Seller, the Stations or the Stations Assets exists which, after the Closing, will result in any form of transferee liability against Buyers or subject the Stations Assets to any Encumbrance or otherwise affect the full, free and unencumbered use of the Stations Assets by Buyers in the manner currently used by Seller. 7.22 Full Disclosure. No representation or warranty made by Seller contained in this Agreement or any certificate, document or other instrument furnished or to be furnished by Seller pursuant hereto contains or will contain any untrue statement of a material fact, or omits or shall omit to state any material fact required to make any statement contained herein or therein not misleading. To the best of Seller's knowledge as of the date hereof, there is no pending or contemplated event or occurrence that would cause any of the foregoing representations not to be true and complete on the date of such event or occurrence as if made on that date. Whenever in this Agreement a warranty or representation is qualified by a word or phrase referring to Seller's knowledge (or similar terms), it shall mean to the actual knowledge of 22 29 Andrew W. Hilger, Steve Stewart, or Deb Huschle, after having made due inquiry of the employees, representatives and agents of Seller who would be expected to have knowledge of the matter, and with respect to the condition of any Stations Assets, records or other object, after having inspected it. ARTICLE 8 COVENANTS OF BUYERS (AND REGENT) 8.1 Closing. Subject to Article 11 hereof, on the Closing Date, Buyers shall purchase the Stations Assets from Seller as provided in Article 1 hereof and RBI shall assume the Assumed Liabilities of Seller as provided in Article 2 hereof. 8.2 Notification. Buyers will provide Seller prompt written notice of any change in any of the information contained in the representations and warranties made in Article 6. Buyers shall also notify Seller of any litigation, arbitration or administrative proceeding pending or, to its knowledge, threatened against Buyers or Regent which challenges the transactions contemplated hereby. Subject to the provisions of Sections 5.2 and 16.1, should any fact relating to Buyers or Regent which would cause the FCC to deny its consent to the transactions contemplated by this Agreement come to Buyers' or Regent's attention, Buyers will promptly notify Seller thereof and will use their commercially reasonable efforts to take such steps as may be necessary to remove any such impediment to the FCC's Consent to the transactions contemplated by this Agreement. 8.3 No Inconsistent Action. Buyers and Regent shall not take any action which is materially inconsistent with its obligations under this Agreement or take any action which would cause any representation or warranty of Buyers or Regent contained herein to be or become false or invalid or which could hinder or delay the consummation of the transactions contemplated by this Agreement. 8.4 Employees. RBI shall offer a position of employment to each of Seller's employees who are employed at the Stations except those who have an equity interest in Seller or its Affiliates. Such offer shall be made within a reasonable period of time prior to Closing and shall be on terms of employment which are not materially different from those applicable to such employee described in Schedules 7.14 and 7.17 hereto. Failure of RBI to make such offers shall be deemed a material breach by RBI of this Agreement. RBI shall not be in default hereunder to the extent any employee fails to accept such offer or for the failure to make an offer to any employee who elects to terminate his/her employment, or such employment is terminated by Seller, prior to the Closing Date. 8.5 Senior Lender Consents. The Buyers and Regent shall exercise commercially reasonable efforts in obtaining the Senior Lender Consents contemplated by Section 1.4 hereof. 23 30 ARTICLE 9 COVENANTS OF SELLER 9.1 Pre-Closing Covenants. Seller covenants and agrees with respect to the Stations that, between the date hereof and the Closing Date or the earlier termination of this Agreement in accordance with its terms, except as expressly permitted by this Agreement or with the prior written consent of Buyers (which shall not be unreasonably withheld, delayed, or conditioned), Seller shall act in accordance with the following: 9.1.1 Seller shall use its commercially reasonable efforts to conduct the business and operations of the Stations in the ordinary and prudent course of business consistent with past practice and with the intent of preserving the Stations Assets and ongoing operations of the Stations, including but not limited to maintaining the independent identity of the Stations, retaining the current format and programming (including the content thereof) of the Stations, continuing at historical levels and frequencies spending for promotions, advertising, and survey testing, and using its commercially reasonable efforts to retain at the Stations the services of all active employees, consultants and agents of the Stations. 9.1.2 Seller shall use its commercially reasonable efforts to: (i) preserve the operation of the Stations intact; (ii) preserve the business of the Stations' advertisers, customers, suppliers and others having business relations with the Stations; and (iii) continue to conduct financial operations of the Stations, including without limitation, their credit and collection and pricing policies and practices, all in the ordinary course of business consistent with past practices. Seller shall not change, alter or modify, in any material respect, its business practices relating to the generation of advertising revenue including, but not limited to increasing costs and expenses incurred by the Seller for the short-term purpose of generating revenue to meet the thresholds set forth in Section 11.9. This restriction shall not prevent the Seller from making such changes in its procedures which are done in the ordinary course of business, consistent with past practice, which activities may include, but shall not be limited to, the practice of selling "surplus advertising inventory" in accordance with Seller's historical practices. 9.1.3 Seller shall operate the Stations in all material respects in accordance with FCC rules and regulations and the Stations Licenses and with all other laws, regulations, rules and orders, and shall not (i) cause or permit by any act, or failure to act, any of the Stations Licenses or other licenses, permits or authorizations listed in Schedule 7.4 to expire, be surrendered, adversely modified, or otherwise terminated, (ii) cause the FCC to institute any proceedings for the suspension, revocation or adverse modification of any of the Stations Licenses, or (iii) fail to prosecute with due diligence any pending applications to the FCC. 9.1.4 Subject to the provisions of Sections 5.2 and 16.1, should any fact relating to Seller which would cause the FCC to deny its consent to the transactions contemplated by this Agreement come to Seller's attention, Seller will promptly notify Buyers thereof and will use its commercially reasonable efforts to take such steps as may be necessary to remove any such impediment to the FCC's Consent. 24 31 9.1.5 Except for changes or actions in the ordinary course of business consistent with past practices, Seller shall not: (i) sell broadcast time on a prepaid basis (other than in the course of existing credit practices); (ii) except as required by the applicable law or written agreements currently in effect, grant or agree to grant any general increases in the rates of salaries or compensation payable to employees of the Stations; (iii) except as required by written agreements currently in effect, grant or agree to grant any specific bonus or increase in compensation to any executive management employee of the Stations; (iv) provide for any new pension, retirement or other employment benefits for employees of the Stations or any increases in any existing benefits, (v) except as contemplated by Section 10.8 or as disclosed on Schedule 1.2 hereof relating to the bifurcation of KKJM contracts, modify, change or terminate any Contract; or (vi) change the advertising rates in effect as of the date hereof; provided, however that subparts (ii) and (iii) of this Section 9.1.5 shall not apply to any equity owner of Seller or any of its Affiliates who is not intended to become an employee of RBI as a result of this transaction. 9.1.6 Seller shall give or cause the Stations to give Buyers and Buyers' counsel, accountants, engineers and other representatives, at Buyers' reasonable request and upon reasonable notice, full and reasonable access during normal business hours to all of Seller's personnel, properties, books, Contracts, reports and records (including, without limitation, financial information and tax returns relating to the Stations, and environmental audits in existence with respect to the Stations Assets), real estate, buildings and equipment relating to the Stations and to the Stations' employees, and to furnish Buyers with information and copies of all documents and agreements relating to the Stations and the operation thereof (including but not limited to financial and operating data and other information concerning the financial condition, results of operations and business of the Stations) that Buyers may reasonably request. The rights of Buyers under this Section 9.1.6 shall not be exercised in such a manner as to interfere unreasonably with the business of the Stations. 9.1.7 Seller shall use its commercially reasonable efforts to obtain the Easement described in Section 11.10 and any third party consents necessary for the assignment of any Contract (which shall not require any payment to any such third party except for such amounts contemplated by the Contract to be assigned, and any amount then owing by Seller to such third party). 9.2 Notification. Seller will provide Buyers prompt written notice of any change in any of the information contained in the representations and warranties made in Article 7 or any Schedule. Seller agrees to notify Buyers of any litigation, arbitration or administrative proceeding pending or, to the best of its knowledge, threatened, which challenges the transactions contemplated hereby. Seller shall promptly notify Buyers if any of the normal broadcast transmissions of any Station are interrupted, interfered with or in any way impaired, by reason other than normal maintenance activities and shall provide Buyers with prompt written notice of the problem and the measures being taken to correct such problem. If such Station is not restored so that operation is resumed to full licensed power and antenna height within five (5) 25 32 days of such event, or if more than five (5) such events occur within any thirty (30) day period, or if any of the Stations shall be off the air for more than seventy-two (72) consecutive hours, then Buyers shall have the right to terminate this Agreement by giving written notice not more than thirty (30) days after the expiration of the applicable period, but in no event later than the Closing Date. 9.3 No Inconsistent Action. Seller shall not take any action which is materially inconsistent with its obligations under this Agreement nor take any action which would cause any representation or warranty of Seller contained herein to be or become false or invalid or which could reasonably be expected to hinder or delay the consummation of the transactions contemplated by this Agreement. 9.4 Closing. Subject to Article 12 hereof, on the Closing Date, Seller shall transfer, convey, assign and deliver to Buyers the Stations Assets and the Assumed Liabilities subject to and as provided in Articles 1 and 2 and Section 7.20 of this Agreement. 9.5 Other Items. Until the Closing Date or the earlier termination of this Agreement in accordance with the terms hereof, Seller shall not: (a) waive or release any material right relating to the business or operations of the Stations, except for adjustments or settlements made in the ordinary course of business consistent with its past practices; (b) transfer or grant any rights under any of the Stations Licenses; (c) enter into any commitment for capital expenditures in an aggregate amount in excess of $25,000 for which Buyers would become liable after the Closing Date; (d) introduce any material changes in the broadcast hours or in the format of the Stations or any other material change in the Stations' programming policies; (e) change the call letters of any Station; and (f) enter into any transaction or make or enter into any contract or commitment with respect to any of the Stations or the Stations Assets which by reason of its size or otherwise is not in the ordinary course of business consistent with past practices. 9.6 Exclusivity. Seller agrees that, commencing on the date hereof through the Closing or earlier termination of this Agreement, Buyers shall have the exclusive right to consummate the transactions contemplated herein, and during such exclusive period, Seller agrees that neither Seller, nor any partner, officer, employee or other representative of Seller: (a) will initiate, solicit or encourage, directly or indirectly, any inquiries, or the making or implementation of any proposal or offer with respect to a merger, acquisition, consolidation or similar transaction involving, or any purchase of, all or any portion of the Stations Assets other than Exchanges contemplated in Section 10.7 of this Agreement (any such inquiry, proposal or offer being hereinafter referred to as an "Acquisition Proposal" and any such transaction being hereinafter referred to as an "Acquisition"); (b) will engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal; or (c) will continue any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal or Acquisition and will take the necessary steps to inform the individuals or entities referred to above of the obligations undertaken by them in this Section 9.6. Notwithstanding the foregoing, in the event 26 33 that Buyers default in any material respect in the observance or in the due and timely performance of any of its covenant or agreements herein contained and such default shall not be cured within ten (10) business days of notice of default served by Seller, Seller's obligations under this Section 9.6 shall be null and void. ARTICLE 10 JOINT COVENANTS Buyers and Seller each covenant and agree that between the date hereof and the Closing Date, they shall act in accordance with the following: 10.1 Confidentiality. Subject to the requirements of applicable law, Buyers and Seller shall each keep confidential all information obtained by it with respect to the other parties hereto and their respective businesses in connection with this Agreement and the negotiations preceding this Agreement, and will use such information solely in connection with the transactions contemplated by this Agreement, and if the transactions contemplated hereby are not consummated for any reason, each shall return to each other party hereto, without retaining a copy thereof, any schedules, documents or other written information obtained from such other party in connection with this Agreement and the transactions contemplated hereby, together with any summaries thereof. Notwithstanding the foregoing, no party shall be required to keep confidential or return any information which: (a) is known or available through other lawful sources, not bound by a confidentiality agreement with the disclosing party; (b) is or becomes publicly known through no fault of the receiving party or its agents; (c) is required to be disclosed pursuant to an order or request of a judicial or governmental authority (provided the disclosing party is given reasonable prior notice of the order or request and the purpose of the disclosure); or (d) is developed by the receiving party independently of the disclosure by the disclosing party. Notwithstanding anything to the contrary herein, either party may in accordance with its legal obligations, including but not limited to filings permitted or required by the Securities Act of 1933 and the Securities and Exchange Act of 1934, make such press releases and other public statements and announcements as it deems necessary and appropriate in connection with this Agreement and the transactions contemplated hereby; provided, however, that prior to making any such unilateral press release or announcement, such party shall first communicate the same in writing to the other and afford the other with a reasonable opportunity under the circumstances to review and make reasonable modifications thereto. 10.2 Cooperation. Subject to express limitations contained elsewhere herein, Buyers and Seller agree to cooperate fully with one another in taking any reasonable actions (including without limitation, reasonable actions to obtain the required consent of any governmental instrumentality or any third party) necessary or helpful to accomplish the transactions contemplated by this Agreement, including but not limited to the satisfaction of any condition to closing set forth herein. 10.3 Control of Stations. Buyers shall not, directly or indirectly, control, supervise or direct the operations of the Stations prior to the Closing. Such operations, including complete 27 34 control and supervision of all Station programs, employees and policies, shall be the sole responsibility of Seller. 10.4 Consents to Assignment. To the extent that any non-Material Contract identified in the Schedules is not capable of being sold, assigned, transferred, delivered or subleased without the waiver or consent of any third person (including a government or governmental unit), or if such sale, assignment, transfer, delivery or sublease or attempted sale, assignment, transfer, delivery or sublease would constitute a breach thereof or a violation of any law or regulation, this Agreement and any assignment executed pursuant hereto shall not constitute a sale, assignment, transfer, delivery or sublease or an attempted sale, assignment, offer, delivery or sublease thereof. Subject to the provisions of Section 11.5, in those cases where consents, assignments, releases and/or waivers have not been obtained at or prior to the Closing relating to the assignment to RBI of the Contracts, this Agreement and any assignment executed pursuant hereto, to the extent permitted by law, shall constitute an equitable assignment by Seller to RBI of all of Seller's otherwise transferable rights, benefits, title and interest in and to the Contracts, and where necessary or appropriate, RBI shall be deemed to be Seller's agent for the purpose of completing, fulfilling and discharging all of Seller's rights and liabilities arising after the Closing Date under such Contracts. Seller shall use its commercially reasonable efforts to provide RBI with the financial and business benefits of such Contracts (including, without limitation, permitting RBI to enforce any rights of Seller arising under such Contracts), and RBI shall, to the extent RBI is provided with the benefits of such Contracts, assume, perform and in due course pay and discharge all debts, obligations and liabilities of Seller under such Contracts to the extent that RBI was to assume those obligations pursuant to the terms hereof. 10.5 Filings. In addition to the covenants of the parties set forth in Article 5 hereto, as promptly as practicable after the execution of this Agreement, Buyers and Seller shall use their commercially reasonable efforts to obtain, and to cooperate with each other in obtaining, all authorizations, consents, orders and approvals of any governmental authority that may be or become necessary in connection with the consummation of the transactions contemplated by this Agreement, and to take all reasonable actions to avoid the entry of any order or decree by any governmental authority prohibiting the consummation of the transactions contemplated hereby, including without limitation, any reports or notifications that may be required to be filed with the FCC, and each shall furnish to one another all such information in its possession as may be necessary for the completion of the reports or notifications to be filed by the other. 10.6 Employee Matters. Except as provided in Section 3.3, regarding proration, Seller shall be responsible for the payment of all compensation and accrued employee benefits payable to all employees up to the Closing Date. Seller acknowledges and agrees that it, and not Buyers, is and shall be solely responsible for any and all severance, insurance, supplemental pension, deferred compensation, retirement and any other benefits, and related costs, premiums and claims, due, to become due, committed or otherwise promised to any person who, as of the Closing Date, is a retiree, former employee, or current employee of Seller, relating to the period up to the Closing Date. Buyers, as purchaser of the Stations Assets, shall assume no employee benefit plans, programs or practices, whether or not set forth in writing, maintained by Seller at 28 35 any time except for vacation and sick leave for which there have been prorations pursuant to Section 3.3.1. 10.7 Like-kind Exchanges. Buyers acknowledge and agree that they shall cooperate fully with the Seller and shall take any reasonable action requested by the Seller at the cost of Seller in order to effect a like-kind exchange of specific Real Estate and/or to effect a like-kind exchange of the Stations Assets, including the Stations Licenses consisting of the WJON-AM business segment ("Exchanges"); provided, however, that the Exchanges shall not result in any material delay or increase in the cost or expense to the Buyers contemplated by this Agreement. 10.8 Transition Services Agreement. RBI and Seller shall have entered into a Transition Services Agreement with respect to the issues and matters identified in Schedule 10.8, which Transition Services Agreement shall be reasonably acceptable to counsel for RBI and the Seller. ARTICLE 11 CONDITIONS OF CLOSING BY BUYERS The obligations of Buyers hereunder are, at their option, subject to satisfaction or waiver, at or prior to the Closing Date, of each of the following conditions: 11.1 Representations, Warranties and Covenants. 11.1.1 All representations and warranties of Seller made in this Agreement or in any Exhibit, Schedule or document delivered pursuant hereto, shall be true and complete if limited by materiality, in accordance with the terms thereof in all respects and if not so limited by materiality, in all material respects, as of the date hereof and on and as of the Closing Date as if made on and as of that date, except for changes (a) expressly permitted or contemplated by the terms of this Agreement; or (b) in the ordinary course of business which are not, either individually or in the aggregate, material and adverse. 11.1.2 All of the terms, covenants and conditions to be complied with and performed by Seller on or prior to the Closing Date shall have been complied with or performed in all material respects. 11.1.3 Buyers shall have received a certificate, dated as of the Closing Date, from Seller, executed by the President of Seller to the effect that: (a) the representations and warranties of Seller contained in this Agreement are true and complete in all material respects on and as of the Closing Date as if made on and as of that date; and (b) Seller has complied with or performed in all material respects all terms, covenants and conditions to be complied with or performed by it on or prior to the Closing Date. 11.2 Governmental Consents. Subject to the provisions of Section 4.1, the FCC Consent shall have been obtained and shall have become a Final Order. 29 36 11.3 Governmental Authorizations. Seller shall be the holder of the Stations Licenses and all other licenses, permits and other authorizations listed in Schedule 7.4, and there shall not have been any modification of any of such licenses, permits and other authorizations which has a material adverse effect on any of the Stations or the operations thereof. No application shall be pending for the renewal of any of the Stations Licenses. No proceeding shall be pending which seeks, or the effect of which reasonably could be, to revoke, cancel, fail to renew, suspend or adversely modify any of the Stations Licenses or any other licenses, permits or other authorizations listed in Schedule 7.4. 11.4 Adverse Proceedings. No suit, action, claim or governmental proceeding shall be pending or threatened against, and no order, decree or judgment of any court, agency or other governmental authority shall have been rendered (and remain in effect) against, any party hereto which: (a) would render it unlawful, as of the Closing Date, to effect the transactions contemplated by this Agreement in accordance with its terms; (b) questions the validity or legality of any transaction contemplated hereby; (c) seeks to enjoin any transaction contemplated hereby; (d) seeks material damages on account of the consummation of any transaction contemplated hereby; or (e) is a petition of bankruptcy by or against Seller, an assignment by Seller for the benefit of its creditors, or other similar proceeding. 11.5 Third-Party Consents. The consents identified on Schedule 6.4 shall have been obtained, all Material Contracts shall be in full force and effect on the Closing Date, and Seller shall have obtained and shall have delivered to RBI all appropriate third-party consents in form and substance reasonably acceptable to RBI (including estoppel certificates for the leases related to the Leased Real Estate) in connection with the assignment of the Material Contracts to RBI. 11.6 Closing Documents. Seller shall have delivered or caused to be delivered to Buyers, on the Closing Date, all bills of sale, general warranty deeds, endorsements, assignments and other instruments of conveyance reasonably satisfactory in form and substance to Buyers, effecting the sale, transfer, assignment and conveyance of the Stations Assets to Buyers, including, without limitation, each of the documents required to be delivered by it pursuant to Article 14. 11.7 Satisfactory Investigation of Station Facilities. Buyers shall have conducted such examination and investigation of the Real Estate and title thereto, studios, transmitter facilities, and other Stations Assets and personnel on matters covered by or generally within the scope of Seller's warranties and representations as Buyers deem advisable or appropriate and shall have determined that the findings and results of such examination and investigation are satisfactory in its sole discretion. Said investigation shall be conducted, in substantial part, through the use of independent third parties who shall provide detailed reports summarizing his/her/their findings with respect to the Stations Assets and other matters within the scope of review as set forth in this Section 11.7 (the "Inspection Reports"). If Buyers do not advise Seller in writing within thirty (30) days after the date of this Agreement of any unsatisfactory findings or results, this condition shall be deemed waived. If Buyers do advise Seller of any unsatisfactory findings or 30 37 results, and such results relate to the discovery of a breach of a representation or warranty by the Seller which is disclosed in any of the Inspection Reports and which is/are capable of being cured by Seller to Buyers' reasonable satisfaction, Seller shall have the obligation (if the cost is reasonably expected to be $200,000 or less) or option (if the cost is reasonably expected to be more than $200,000) to cause the same to be cured to Buyers' reasonable satisfaction prior to Closing Date, provided, that Buyers provide to Seller a copy of the applicable Inspection Report which substantiates the basis for the alleged breach of warranty or representation. Notwithstanding the foregoing to the contrary, the Seller's obligation to cure and/or remediate pursuant to Section 11.7 and 11.8 shall not exceed $200,000 in the aggregate. 11.8 Environmental Studies. Buyers shall have obtained at their cost and expense within thirty (30) days following the date of this Agreement (which may be extended up to an additional fifteen (15) days in the event that the failure to obtain such report is attributable to matters beyond the control of the Buyers), Phase I environmental assessment reports on the Real Estate confirming the representations and warranties of Seller on environmental matters ("Phase I Report"). The Seller shall be listed among the parties who are to receive a reliance letter upon the Phase I Report. If the Phase I Report discloses any condition which is inconsistent with the representations and warranties of Seller, and such is capable of being cured by Seller to Buyers' reasonable satisfaction, Seller shall have the obligation (if the cost is reasonably expected to be $200,000 or less) or option (if the cost is reasonably expected to be more than $200,000) to cause the same to be cured to Buyers' reasonable satisfaction prior to Closing Date. Notwithstanding the foregoing to the contrary, the Seller's obligation to cure and/or remediate pursuant to Section 11.7 and 11.8 shall not exceed $200,000 in the aggregate. 11.9 No Adverse Change. No material adverse change in condition or status of the Stations or the Stations Assets, which change is caused by or arises out of any breach by Seller of any of its representations, warranties, covenants or agreements hereunder, shall have occurred since December 31, 1997, be threatened or be reasonably likely to occur, and no material adverse change in the business, financial condition or results of operations shall be deemed to have occurred. For purposes of this Agreement, a material adverse change in the business, financial results or result of operations shall be deemed to have occurred if, and only if, the combined gross revenue generated by the Stations and KKJM-FM ("Combined Gross Revenue") for the "Calculation Period" (which shall be the 12 consecutive calendar months ending with the month immediately preceding the month prior to the month in which the Closing occurs) is less than $3,372,500. In the event that Combined Gross Revenue generated during the Calculation Period is less than $3,372,500, then there shall be reduction of the Purchase Price by $3.50 for every $1.00 by which Combined Gross Revenue is less than $3,372,500; provided, however, in the event Combined Gross Revenue during the Calculation Period is less than $3,195,000, in lieu of a reduction of the Purchase Price, Buyers may terminate this Agreement. 11.10 Easement. Seller shall have obtained a perpetual easement for the radio tower guy wire currently located on real property adjacent to the north east corner of the Headquarters Property in form reasonably satisfactory to the Buyers ("Easement"). 31 38 11.11 Title Insurance Buyers shall have obtained a title insurance commitment ("Commitment") issued on the Owned Real Estate by a title company ("Title Company") within the thirty-day period identified in Section 11.7. Buyers shall also cause the Title Company to deliver to the Buyers with the Commitment copies of all title exceptions shown on the Commitment, except those exceptions that will be released on the Closing Date. The title to the Owned Real Estate shall be subject only to such permitted encumbrances acceptable to the Buyers ("Permitted Real Property Encumbrances"). Permitted Real Property Encumbrances shall include the 75' ingress and egress easement in Book 90 of Deeds, page 340, subject to the provisions of Section 1.4 of this Agreement, except that, as to parcel number 9 of the Headquarters Property, said easement shall be deemed to be a Permitted Real Property Encumbrance. Within the thirty-day period described in Section 11.7, Buyers shall make any objections to the title of the Owned Real Estate. Buyer's objections shall be made in writing or shall be deemed to have been waived. Buyers shall send said objections to Seller. For purposes of this Agreement, Permitted Real Property Encumbrances shall not be deemed to be objections to title if said Permitted Real Property Encumbrances do not prohibit, restrict, materially detract from or impair the full use of the Owned Real Estate for the operation of the Stations as presently conducted by the Seller or affect the marketability of same. Objections to title which are not Permitted Real Property Encumbrances shall be resolved in accordance with the provisions of Section 1.4 of this Agreement. ARTICLE 12 CONDITIONS OF CLOSING BY SELLER The obligations of Seller hereunder are, at its option, subject to satisfaction or waiver, at or prior to the Closing Date, of each of the following conditions: 12.1 Representations, Warranties and Covenants. 12.1.1 All representations and warranties of Buyers and Regent made in this Agreement or in any Exhibit, Schedule or document delivered pursuant hereto, shall be true and complete in all material respects as of the date hereof and on and as of the Closing Date as if made on and as of that date, except for changes expressly permitted or contemplated by the terms of this Agreement. 12.1.2 All the terms, covenants and conditions to be complied with and performed by Buyers or Regent on or prior to the Closing Date shall have been complied with or performed in all material respects. 12.1.3 Seller shall have received a certificate, dated as of the Closing Date, executed by the President of each of Buyers and Regent, to the effect that: (a) the representations and warranties of Buyers and Regent contained in this Agreement are true and complete in all material respects on and as of the Closing Date as if made on and as of that date; and (b) Buyers 32 39 and Regent have complied with or performed in all material respects all terms, covenants and conditions to be complied with or performed by them on or prior to the Closing Date. 12.2 Governmental Consents. The FCC Consent shall have been obtained and, subject to the provisions of Section 4.1 hereof, shall have become a Final Order. 12.3 Adverse Proceedings. No suit, action, claim or governmental proceeding shall be pending or threatened against, and no other decree or judgment of any court, agency or other governmental authority shall have been rendered (and remain in effect) against, any party hereto which: (a) would render it unlawful, as of the Closing Date, to effect the transactions contemplated by this Agreement in accordance with its terms; (b) questions the validity or legality of any transaction contemplated hereby; (c) seeks to enjoin any transaction contemplated hereby; (d) seeks material damages on account of the consummation of any transaction contemplated hereby; (e) is a petition in bankruptcy by or against any of Buyers or Regent, an assignment for the benefit of creditors, or other similar proceeding. 12.4 Third Party Consents. Seller shall have received all appropriate third party consents in form and substance reasonably acceptable to Seller for the assumption by RBI of the Assumed Liabilities under the Material Contracts and to obtain the Easement described in Section 11.10. 12.5 Matters Relating to Real Estate. 12.5.1 The parties shall have accepted the Excluded Real Estate Legal Description prepared by the Surveyor as describing the Real Estate; and are prepared to execute an agreement to that effect. 12.5.2 Seller shall have received the Senior Lender Consents in form reasonably acceptable to counsel for the Seller; 12.5.3 RBI shall have joined with the Seller in the Quiet Title Proceeding; 12.6 Transition Services Agreement. The Seller shall have received the Transition Services Agreement in the form contemplated by Section 10.8. 12.7 Closing Documents. Buyers shall have delivered or caused to be delivered to Seller, on the Closing Date, the Purchase Price and each of the documents required to be delivered by them pursuant to Article 14. ARTICLE 13 TRANSFER TAXES: FEES AND EXPENSES 13.1 Expenses. Except as set forth in Section 13.2 hereof or otherwise expressly set forth in this Agreement, each party hereto shall be solely responsible for all costs and expenses 33 40 incurred by it in connection with the negotiation, preparation and performance of and compliance with the terms of this Agreement including, but not limited to, the costs and expenses incurred pursuant to Article 5 hereof and the fees and disbursements of counsel and other advisors. 13.2 Specific Charges. All costs of transferring the Stations Assets in accordance with this Agreement, including recordation, transfer and documentary taxes and fees, and any excise, sales or use taxes, shall be paid one-half by Seller and one-half by Buyers. Any filing or grant fees imposed upon it by any governmental authority the consent of which or the filing with which is required for the consummation of the transactions contemplated hereby shall be paid one-half by Seller and one-half by Buyers. Any fees or commission due Media Venture Partners as a result of this transaction shall be paid by Seller, provided Seller shall be reimbursed at the time of Closing by Buyers for the amount paid by Seller to the extent of $100,000. ARTICLE 14 DOCUMENTS TO BE DELIVERED AT CLOSING 14.1 Seller's Documents. At the Closing, Seller shall deliver or cause to be delivered to Buyers the following: 14.1.1 Certified resolutions of all requisite action of Seller approving the execution and delivery of this Agreement and authorizing the consummation of the transactions contemplated hereby; 14.1.2 A certificate of Seller, dated the Closing Date, in the form described in Section 11.1.3; 14.1.3 Governmental certificates showing that Seller is duly organized and in good standing in the State of Minnesota; 14.1.4 Such certificates, bills of sale, general warranty deeds, assignments, documents of title and other instruments of conveyance, assignment and transfer (including without limitation any necessary consents to conveyance, assignment or transfer required to be delivered hereunder), and lien releases, all in form satisfactory to the parties and their counsel, as shall be effective to vest in Buyers good and marketable title in and to the Stations Assets in accordance with the terms of this Agreement, free, clear and unencumbered except for the Assumed Liabilities and Permitted Encumbrances, if any, as set forth on Schedule 7.7 and Schedule 7.8. 14.1.5 An Assignment and Assumption Agreement in the form of Exhibit C effectuating the assignment and assumption of the Assumed Liabilities (the "Assignment and Assumption Agreement"); 14.1.6 The Indemnification Escrow Agreement; 34 41 14.1.7 At the time and place of Closing, originals and all copies of all program, operations, transmission or maintenance logs and all other records required to be maintained by the FCC with respect to the Stations, including the public files of the Stations, shall be left at the Stations and thereby delivered to Buyers; 14.1.8 A written opinion of Seller's corporate counsel, on which Buyers' lenders shall be entitled to rely, in substantially the form set forth in Exhibit H; 14.1.9 A written opinion of Seller's FCC counsel, on which Buyers' lenders shall be entitled to rely, confirming to Buyers' reasonable satisfaction the matters listed on Exhibit F; 14.1.10 A Non-Competition Agreement in the form of Exhibit D (the "Non-Competition Agreement") executed by Seller and Andrew W. Hilger; 14.1.11 A Lease Agreement substantially in the form of Exhibit E (the "Lease Agreement") whereby RBI shall lease to Seller for use as a studio for radio station KKJM-FM for a term of up to one (1) year at no cost to Seller a portion of Seller's building being acquired by RBI in this transaction; 14.1.12 The Easement described in Section 11.10; 14.1.13 The Memorandum of Re-conveyance; 14.1.14 The agreement acknowledging of the Excluded Real Estate Legal Descriptions; 14.1.15 The Transition Services Agreement; 14.1.16 The Nominee Agreement transferring title to the Headquarters Property to the Seller as contemplated by Section 1.4 hereof for the purpose of completing the Quiet Title Proceeding, platting of the Headquarters Property, placing Seller in a position of being able to transfer to RBI all Owned Real Estate and effecting the re-conveyance of the Excluded Real Property (the "Nominee Agreement"); and 14.1.17 Such additional information, materials, agreements, documents and instruments as Buyers and their counsel may reasonably request in order to consummate the Closing. 14.2 Buyers' and Regents Documents. At the Closing, Buyers shall deliver or cause to be delivered to Seller the following: 14.2.1 Certified resolutions of the Board of Directors of each of Buyers and Regent approving the execution and delivery of this Agreement and authorizing the consummation of the transactions contemplated hereby; 35 42 14.2.2 A certificate of Buyers and Regent, dated the Closing Date, in the form described in Section 12.1.3; 14.2.3 Governmental certificates showing that RBI is qualified to conduct business in the State of Minnesota and that each of Buyers is duly organized and in good standing in the State of Delaware; 14.2.4 The Assignment and Assumption Agreement; 14.2.5 The Indemnification Escrow Agreement; 14.2.6 A written opinion of Buyers' and Regent's counsel in substantially the form set forth on Exhibit G; 14.2.7 The Purchase Price in accordance with Section 3.1 hereof; 14.2.8 The Non-Competition Agreement; 14.2.9 The Lease Agreement; 14.2.10 The Transition Services Agreement; 14.2.11 Senior Lender Consents; 14.2.12 The agreement acknowledging the Excluded Real Estate Legal Descriptions; 14.2.13 The Memorandum of Re-conveyance; and 14.2.14 Such additional information, materials, agreement, documents and instruments as Seller and its counsel may reasonably request in order to consummate the Closing. ARTICLE 15 SURVIVAL, INDEMNIFICATION, ETC. 15.1 Survival of Representations, Etc. It is the express intention and agreement of the parties to this Agreement that all covenants and agreements (together, "Agreements") and all representations and warranties (together, "Warranties") made by Buyers, Regent and Seller in this Agreement shall survive the Closing (subject to the provisions of Section 15.3.5, regardless of any knowledge, investigation, audit or inspection at any time made by or on behalf of Buyers, Regent or Seller) as follows: 36 43 15.1.1 The Agreements shall survive the Closing for a period from the Closing Date equal to the statute of limitations for written contracts in Minnesota. 15.1.2 The Warranties in Sections 6.2, 6.5, 7.2, the third sentence of 7.7, 7.18 and 7.20 shall survive the Closing without limitation. 15.1.3 The Warranties in Section 7.11 relating to environmental matters and in Section 7.6 or otherwise relating to the federal, state, local or foreign tax obligations of Seller shall survive the Closing for the period of the applicable statute of limitations plus any extensions or waivers granted or imposed with respect thereto. 15.1.4 All other Warranties shall survive for a period of one (1) year from the Closing Date and until the earlier of (i) the date which is thirty (30) days after Buyers' receipt from their auditors of audited financial statements for the Stations for the 12-month period ended December 31, 1999 or (ii) June 30, 2000. 15.1.5 The right of any party to recover Damages (as defined in Section 15.2.1) pursuant to Section 15.2 shall not be affected by the expiration of any Warranties as set forth herein, provided that notice of the existence of any potential Damages in such reasonable detail from which the basis of a Claim subject to the provisions of Section 15.3 can be determined (but not necessarily the fixed amount of any such Damages) has been given by the indemnified party to the indemnifying party prior to such expiration. 15.1.6 Notwithstanding any provision hereof to the contrary, there shall be no contractual time limit in which Buyers, Regent or Seller may bring any action for actual fraud (a "Fraud Action"), regardless of whether such actual fraud also included a breach of any Agreement or Warranty; provided, however, that any Fraud Action must be brought within the period of the applicable statute of limitations plus any extensions or waivers granted or imposed with respect thereto. 15.2 Indemnification. 15.2.1 Seller shall defend, indemnify and hold harmless Buyers and Regent from and against any and all losses, costs, damages, liabilities and expenses, including reasonable attorneys' fees and expenses ("Damages") incurred by Buyers or Regent arising out of or related to: (a) any breach of the Warranties given or made by Seller in this Agreement; (b) any material breach of the Agreements made by Seller in the Agreement; (c) the Retained Liabilities; (d) any failure of the parties to comply with any "bulk sales" laws applicable to the transactions contemplated hereby; and (e) the conduct of the business and operations of the Stations or any portion thereof or the use or ownership of any of the Stations Assets prior to the Closing Date. 15.2.2 Buyers and Regent jointly and severally shall defend, indemnify and hold harmless Seller from and against any and all Damages incurred by Seller arising out of or related to: (a) any breach of the Agreements and Warranties given or made by either of Buyers or Regent 37 44 in this Agreement; (b) the Assumed Liabilities, and (c) the conduct of the business and operations of the Stations or any portion thereof or the use or ownership of any of the Stations Assets on or after the Closing Date. 15.3 Procedures: Third Party and Direct Indemnification Claims. The indemnified party agrees to give written notice within a reasonable time to the indemnifying party of any demand, suit, claim or assertion of liability by third parties or other circumstances that could give rise to an indemnification obligation hereunder against the indemnifying party (hereinafter collectively "Claims," and individually a "Claim"), it being understood that the failure to give such notice shall not affect the indemnified party's right to indemnification and the indemnifying party's obligation to indemnify as set forth in this Agreement, unless the indemnifying party's ability to contest, defend or settle with respect to such Claim is thereby demonstrably and materially prejudiced. The parties also agree that any Claim for Damages arising directly between the parties relating to this Agreement may be brought at any time within the applicable survival period specified in Section 15.1, provided that the notice required with respect thereto as specified in Section 15.1.5 has been given within the applicable survival period. The obligations and liabilities of the parties hereto with respect to their respective indemnities pursuant to Section 15.2 resulting from any Claim shall be subject to the following additional terms and conditions: 15.3.1 The indemnifying party shall have the right to undertake, by counsel or other representatives of its own choosing, the defense or opposition to such Claim. 15.3.2 In the event that the indemnifying party shall elect not to undertake such defense or opposition within (10) days after notice of any such Claim from the indemnified party or shall otherwise fail to defend or oppose following such election, the indemnified party (upon further written notice to the indemnifying party) shall have the right to undertake the defense, opposition, compromise or settlement of such Claim, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the indemnifying party (subject to the right of the indemnifying party to assume defense of or opposition to such Claim at any time prior to settlement, compromise or final determination thereof). 15.3.3 Anything this Section 15.3 to the contrary notwithstanding: (a) the indemnified party shall have the right, at its own cost and expense, to participate in the defense, opposition, compromise or settlement of the Claim; (b) the indemnifying party shall not, without the indemnified party's written consent (not to be unreasonably withheld, delayed or conditioned), settle or compromise any Claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such Claim, and (c) in the event that the indemnifying party undertakes defense of or opposition to any Claim the indemnified party, by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with the indemnifying party and its counsel or other representatives concerning such Claim and the indemnifying party and the indemnified party, and their 38 45 respective counsel or other representatives, shall cooperate in good faith with respect to such Claim. 15.3.4 No undertaking of defense or opposition to a Claim shall be construed as an acknowledgment by such party that it is liable to the party claiming indemnification with respect to the Claim at issue or other similar Claims. 15.3.5 Notwithstanding the provisions in Section 15.2, neither Seller, Buyers nor Regent shall have the obligation to defend, indemnify and hold harmless under Section 15.2.1(a) and 15.2.2(a) until and only to the extent the aggregate Damages on account thereof exceed $75,000 and then, only to the maximum amount of $2,000,000 in the aggregate, excluding therefrom however, Damages for Claims related to matters of title, taxes, environment, or Licenses, which shall be limited in maximum amount to the Purchase Price. Further, the obligation to indemnify and hold harmless under Section 15.2.1(a) and Section 15.2.2(a) shall be reduced by the amount of any insurance proceeds received by the indemnified party and shall be calculated after taking into account the value of any tax benefits actually realized by the indemnified party as a result of such Damages and the receipt of the indemnification payment to the end result that the indemnified party shall be made whole from such Damages. Notwithstanding any provision of this Agreement to the contrary, Damages for which any indemnifying party may be liable for under Sections 15.2.1 or 15.2.2, whichever is applicable, shall exclude Damages for the breach or falsity of any Warranty if (a) the indemnified party had conscious awareness of facts or law which establish the existence of such breach or falsity (i) prior to the execution of this Agreement; or (ii) with respect to Buyers and Regent, subsequent to the execution of this Agreement but only to the extent such facts are contained in the Phase I Report or any of the Inspection Reports, and (b) such indemnified party failed to inform the indemnifying party of such breach of Warranty prior to the Closing of the transaction contemplated by this Agreement, provided, however, in the event that the Buyers elect to waive the requirements that the conditions of Closing by Buyers described in Sections 11.7 and/or 11.8 be satisfied at the time of Closing, the Seller's aggregate obligation to indemnify the Buyers and Regent, as the same relates to the existence of breaches of Warranties described in Sections 11.7 and/or 11.8, shall, in no event exceed $200,000 in the aggregate. ARTICLE 16 TERMINATION RIGHTS 16.1 Termination. This Agreement may be terminated at any time prior to Closing as follows: 16.1.1 Upon the mutual written consent of Buyers and Seller, this Agreement may be terminated on such terms and conditions as so agreed; or 16.1.2 By written notice of Buyers to Seller if Seller breaches in any material respect any of its representations or warranties or defaults in any material respect in the 39 46 observance or in the due and timely performance of any of its covenants or agreements herein contained and such breach or default shall not be cured within thirty (30) days of the date of notice of breach or default served by Buyers; or 16.1.3 By written notice of Seller to Buyers if either Buyer or Regent breaches in any material respect any of its representations or warranties or defaults in any material respect in the observance or in the due and timely performance of any of its/their covenants or agreements herein contained and such breach or default shall not be cured within thirty (30) days of the date of notice of breach or default served by Seller; or 16.1.4 By written notice of Buyers to Seller or by Seller to Buyers if the FCC denies the FCC Application under circumstances in which Seller is not entitled to the Escrow Deposit; 16.1.5 By written notice of Buyers to Seller, or by Seller to Buyers, if any court of competent jurisdiction shall have issued an order, decree or ruling (which then remains in effect) or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, or by Buyers, if any court, legislative body or governmental or regulatory authority has taken, or is reasonably expected to take, action that reasonably would have a material adverse effect on the ability of Buyers to operate the stations as contemplated by Buyers; or 16.1.6 By written notice of Buyers to Seller, or by Seller to Buyers, if the Closing shall not have been consummated on or before June 30, 1999. 16.1.7 By written notice of Buyers to Seller if it shall become apparent in both Seller's and Buyers' judgment reasonably exercised that any condition to Buyers' obligation to close as set forth in Article 11 hereof will not be satisfied on or before June 30, 1999. 16.1.8 By written notice of Seller to Buyers if it shall become apparent in both Seller's and Buyers' judgment reasonably exercised that any condition to Seller's obligation to close as set forth in Article 12 hereof will not be satisfied on or before June 30, 1999. 16.1.9 By written notice of Buyers to Seller under the conditions set forth in Section 9.2 hereof. 16.1.10 By written notice of Seller to Buyers if the consents listed on Schedule 6.4 have not been obtained by Buyers within thirty (30) days of submitting the FCC Application (and the notice is given thereafter before such consents have been obtained), provided, with respect to the consent of Waller-Sutton, as described on Schedule 6.4, Buyers and Regent shall not have caused Waller-Sutton to deliver its written consent to the transactions contemplated hereby, without any conditions or limitations not expressly set forth in this Agreement, not later than ten (10) days following the expiration of the diligence period described in Section 11.7 of this Agreement. 40 47 Notwithstanding the foregoing, no party hereto may effect a termination hereof if such party is in material default or breach of this Agreement. 16.2 Liability. Except as set forth in Section 16.4 below, the termination of this Agreement under Section 16.1 shall not relieve any party of any liability for breach of this Agreement prior to the date of termination. 16.3 Monetary Damages, Specific Performance and Other Remedies. The parties recognize that if Seller refuses to perform under the provisions of this Agreement in breach of this Agreement, monetary damages alone will not be adequate to compensate Buyers for their injury. Buyers shall therefore be entitled to obtain specific performance of the terms of this Agreement in addition to any other remedies, including but not limited to monetary damages, that may be available to it. If any action is brought by Buyers to enforce this Agreement, Seller shall waive the defense that there is an adequate remedy at law. In the event of a material default by either party, which results in the filing of a lawsuit for damages, specific performance, or other remedy by the other party, the prevailing party shall be entitled to reimbursement by the non-prevailing party of reasonable legal fees and expenses incurred by the prevailing party. 16.4 Seller's Liquidated Damages. As more fully described in the Deposit Escrow Agreement, in the event this Agreement is terminated because of Buyers' material breach of this Agreement, and all other conditions to Closing are at such time satisfied or waived (other than such conditions as can reasonably be satisfied by Closing), then the Escrow Deposit shall be delivered to Seller, and the proceeds thereof shall constitute liquidated damages. It is understood and agreed that such liquidated damages amount represents Buyers' and Seller's reasonable estimate of actual damages and does not constitute a penalty. Recovery of liquidated damages shall be the sole and exclusive remedy of Seller against Buyers for failing to consummate this Agreement as a result of Buyers' material breach hereof, and shall be applicable regardless of the actual amount of damages sustained and all other remedies are deemed waived by Seller. The receipt of such amount, however, shall not affect the right of Seller to enforce specific provisions of this Agreement relating to confidentiality in equity and to recover, to the extent allowed, costs and expenses incurred in such enforcement Notwithstanding the foregoing, Seller shall be entitled to recover its reasonable attorneys fees and costs of collection and enforcement of the Deposit Escrow Agreement from the Buyers in addition to the Escrow Deposit. ARTICLE 17 MISCELLANEOUS PROVISIONS 17.1 Risk of Loss. The risk of loss or damage to any of the Stations Assets prior to the Closing Date shall be upon Seller. If, prior to the Closing Date, any material Stations Asset(s) shall have suffered, sustained or incurred any material loss, damage or destruction, including, without limitation, any environmental contamination or pollution, and Seller shall not have elected at its sole option and expense to wholly repair or replace the Stations Asset(s) which suffered, sustained or incurred the material loss, damage or destruction with assets which are 41 48 equivalent in value, form and function, Buyers shall have the right in their sole discretion and election, to either (i) terminate this Agreement in which event Buyers shall be entitled to receive a full refund of the Escrow Deposit, or (ii) complete the purchase contemplated by this Agreement, in which event: (a) Seller shall assign and transfer to RBI and RBI shall be entitled to receive all insurance proceeds and other compensation collected by reason of such loss, damage or destruction, together with any rights to receive any uncollected insurance proceeds or other compensation relating to such loss, damage or destruction in an amount equal to the sum of the aggregate amount of any applicable deductibles under any insurance policies covering the lost, damage or destroyed Stations Asset(s); or (b) Buyers shall be entitled to reduce the Purchase Price of the Stations Assets by an amount equal to the reasonable cost of repair, or if destroyed or damaged beyond repair, or if expropriated, seized, lost or stolen, by an amount equal to the replacement cost; or (c) Buyers shall be entitled to use alternatives (a) and (b) concurrently, but not both with respect to any single Stations Asset(s). If Buyers elect to complete the purchase contemplated hereby notwithstanding any such loss, damage or destruction, and if Seller assigns such insurance proceeds and other compensation and any other rights thereto to RBI, then Seller shall be released from any and all liability or responsibility with respect to such loss, damage or destruction, but shall cooperate with RBI, at no cost or expense to Seller, in collecting all insurance proceeds and other compensation with respect to thereto. The Purchase Price hereunder in such event shall be reduced by the amount of any deductible amounts under such insurance which is not paid by Seller to RBI. 17.2 Certain Interpretive Matters and Definitions. Unless the context otherwise requires: (a) all references to Sections, Articles, Schedules or Exhibits are to Sections, Articles, Schedules or Exhibits of or to this Agreement; (b) each term defined in this Agreement has the meaning assigned to it; (c) each accounting term not otherwise defined in this Agreement has the meaning assigned to it in accordance with generally accepted accounting principles as in effect on the date hereof, (d) "or" is disjunctive but not necessarily exclusive; (e) words in the singular include the plural and vice versa; (f) the term "Affiliate" has the meaning given it in Rule 12b-2 of Regulation 12B under the Securities Exchange Act of 1934, as amended; and (g) all references to "$" or dollar amounts will be to lawful currency of the United States of America. 17.3 Further Assurances. After the Closing, the parties shall from time to time, at the request of and without further cost or expense to the other parties, execute and deliver such other instruments of conveyance and transfer and take such other actions as may reasonably be requested in order more effectively to consummate the transactions contemplated hereby, 42 49 including but not limited to, vesting in Buyers good and marketable title to the Stations Assets being transferred hereunder in accordance with the terms hereof, and the Buyers or Regent, as applicable, shall from time to time, at the request of and without further cost or expense to Seller, execute and deliver such other instruments and take such other actions as may reasonably be requested in order more effectively to consummate the transaction contemplated hereby. 17.4 Preservation of Records. Subject to Section 10.1 hereof, RBI hereby agrees that it will preserve and make available to Seller and its attorneys and accountants (including the right to inspect and copy at Seller's cost), during normal business hours and upon reasonable advance notice, for six (6) years after the Closing Date, such of the books, records, files, correspondence, memoranda and other documents referred pursuant to this Agreement as Seller may reasonably require for the preparation of tax reports and returns, the preparation of financial statements, or the preparation of a response to any claim by a third party against Seller; provided, however, RBI may destroy any part or parts of such records upon obtaining Seller's prior written consent, which consent shall not be unreasonably withheld. 17.5 Benefit and Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Seller may not voluntarily or involuntarily assign its interest under this Agreement without the prior written consent of Buyers. Buyers shall have the right to assign and/or delegate all or any portion of its rights and obligations under this Agreement, including without limitation, assignments as collateral, provided that any assignment by Buyers which will likely cause a delay of more than seven (7) days in the issuance of FCC Consent on the FCC Application shall require the prior written consent of Seller, and provided further, that no such assignment and/or delegation shall relieve Buyers or Regent of their respective obligations hereunder in the event that its assignee fails to perform the obligations delegated. All covenants, agreements, statements, representations, warranties and indemnities in this Agreement by and on behalf of any of the parties hereto shall bind and inure to the benefit of their respective successors and permitted assigns of the parties hereto. In the event Buyers find it necessary or are required to provide to a third party a collateral assignment of the Buyers' interest in this Agreement and/or any related documents, Seller shall cooperate with the Buyers and any third party requesting such assignment including but not limited to signing a consent and acknowledgment of such assignment. 17.6 Amendments. No amendment, waiver of compliance with any provision or condition hereof or consent pursuant to this Agreement shall be effective unless evidenced by an instrument in writing signed by the party against whom enforcement of any waiver, amendment, change, extension or discharge is sought. 17.7 Headings. The headings set forth in this Agreement are for convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. 43 50 17.8 Governing Law. The construction and performance of this Agreement shall be governed by the laws of the State of Minnesota, without giving effect to the choice of law provisions thereof. 17.9 Notices. Any notice, demand or request required or permitted to be given under the provisions of this Agreement shall be in writing, including by facsimile, and shall be deemed to have been duly delivered and received on the date of personal delivery, on the third (3rd) day after deposit in the U.S. mail if mailed by registered or certified mail, postage prepaid and return receipt requested, on the business day after delivery to a nationally recognized overnight courier service if sent by an overnight delivery service for next morning delivery or when dispatched by facsimile transmission (with the facsimile transmission confirmation being deemed conclusive evidence of such dispatch) and shall be addressed to the following addresses, or to such other address as any party may request, in the case of Seller, by notifying Buyers, and in the case of Buyers, by notifying Seller: To Seller: WJON Broadcasting Company 640 S.E. Lincoln, Avenue St. Cloud, MN 56304 Fax: (320) 251-1855 Attn: Mr. Andrew W. Hilger Copy to: MOSS & BARNETT, a Professional Association 4800 Norwest Center Minneapolis, MN 55402-4129 Fax: (612) 339-6686 Attn: Dave F. Senger, Esq. To Buyers: Regent Broadcasting of St. Cloud, Inc. c/o Regent Communications, Inc. 50 East RiverCenter Blvd. Suite 180 Covington, KY 41011 Fax: (606) 292-0352 Attn: Mr. Terry S. Jacobs Copy to: STRAUSS & TROY 2100 PNC Center 201 East Fifth Street Cincinnati, OH 45202 Fax: (513) 241-8289 Attn: Alan C. Rosser, Esq. 44 51 17.10 Counterparts. This Agreement may be executed in one or more counterparts and by facsimile, each of which will be deemed an original and all of which together will constitute one and the same instrument. 17.11 No Third Party Beneficiaries. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity other than the parties hereto and their successors or permitted assigns any rights or remedies under or by reason of this Agreement. 17.12 Severability. The parties agree that if one or more provisions contained in this Agreement shall be deemed or held to be invalid, illegal or unenforceable in any respect under any applicable law, this Agreement shall be construed with the invalid, illegal or unenforceable provision deleted, and the validity, legality and enforceability of the remaining provisions contained herein shall not be affected or impaired thereby. 17.13 Entire Agreement. This Agreement and the schedules and exhibits hereto embody the entire agreement and understanding of the parties hereto and supersede any and all prior agreements, arrangements and understandings relating to the matters provided for herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. WJON BROADCASTING COMPANY, A REGENT BROADCASTING OF MINNESOTA LIMITED PARTNERSHIP ST. CLOUD, INC. By WJON BROADCASTING COMPANY A MINNESOTA CORPORATION By: /s/ Andrew W. Hilger By: /s/ Terry S. Jacobs -------------------------- ----------------------------- Name: Andrew W. Hilger Name: Terry S. Jacobs Title: President Title: Chairman and CEO Its: General Partner REGENT LICENSEE OF ST. CLOUD, INC. By: /s/ Terry S. Jacobs ----------------------------- Name: Terry S. Jacobs Title: Chairman and CEO REGENT COMMUNICATIONS, INC. By: /s/ Terry S. Jacobs ----------------------------- Name: Terry S. Jacobs Title: Chairman and CEO 45 EX-2.B 3 EXHIBIT 2(B) 1 EXHIBIT 2(b) ASSET PURCHASE AGREEMENT THIS AGREEMENT is made and entered into as of the 4th day of March, 1999, by and among REGENT BROADCASTING OF KINGMAN, INC., a Delaware corporation ("RBK"), and REGENT LICENSEE OF KINGMAN, INC., a Delaware corporation ("RLK") (RBK and RLK being collectively referred to as "Sellers"), and MAG MILE MEDIA, L.L.C., a Delaware limited liability company ("Buyer"). WHEREAS, RBK is the owner and operator, and RLK is the licensee, of Radio Stations KAAA (AM) and KZZZ (FM), which are licensed to Kingman, Arizona, and Radio Stations KFLG (AM) and KFLG (FM), which are licensed to Bullhead City, Arizona, (hereinafter referred to collectively as the "Stations" and each a "Station"); and WHEREAS, Buyer desires to purchase, and Sellers desire to sell, all of the fixed, tangible, and intangible assets of Sellers used or held for use in the operation of the Stations, defined herein as the "Broadcast Assets", and to obtain assignments of the licenses issued by the Federal Communications Commission (the "Commission") for the operation of the Stations, and of other licenses, permits or authorizations issued by any governmental entity in connection therewith; and WHEREAS, the licenses issued by the Commission for the operation of the Stations may not be assigned by RLK to Buyer without the prior written consent of the Commission; and WHEREAS, Buyer and Sellers have negotiated a price (hereinafter called the "Purchase Price") for the sale and purchase of the Broadcast Assets (hereinafter defined) of the Stations. NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter contained, and subject to the conditions hereinafter set forth, the parties hereto agree as follows: DEFINITION OF TERMS 1. Recitals. The foregoing recitals are hereby incorporated herein and made a part hereof. 2. Definition of Terms. As used herein, the following terms shall have the following meanings: (a) "Commission" means the Federal Communications Commission. (b) "Commission's Order" means the action of the Commission consenting to the assignment to Buyer of the Licenses. (c) "Final Order" means the Commission's Order as to which the time for filing a request for all administrative or judicial review or for motion by the Commission -1- 2 ordering review shall have expired without any such motion or filing having been made, or in the event of such motion or filing, the Commission's Order shall have been reaffirmed or upheld and the time for seeking further administrative or judicial review with respect thereto shall have expired without any request for such further review having been filed. (d) "Licenses" means the licenses, permits, approvals, consents and authorizations issued by the Commission for the Stations and all associated auxiliary broadcast stations, all as listed on Schedule A attached hereto. (e) "Closing Date" means the date, time and place designated by not less than seven (7) days' written notice from Buyer to Sellers, which date shall not be less than seven (7) days after the Commission's Order and not more than fifteen (15) days after the Final Order, or such other date within the effective period (including any extension thereof) of the Commission's Order as shall be mutually agreed upon by Sellers and Buyer. The parties will seek to obtain any extension of the effective period of the Commission's Order as may be necessary under this provision. The parties agree that the Closing Date may, by mutual agreement, be prior to the date on which the Commission's Order becomes a Final Order; provided, however, in such event the Closing will take place subject to the terms of an agreement to unwind the transaction and return the parties to their original positions should the Commission's Order thereafter be reversed. "Closing" means the transfer of the Broadcast Assets and the consideration therefor, together with the other documents and consideration provided herein. (f) "Broadcast Assets" means: (i) The Licenses listed on Schedule A and the Public Inspection Files maintained in connection therewith. (ii) The leases, contracts and agreements relating to the operation of the Stations which are described in Schedule B (as may be supplemented by Sellers with Buyer's consent) and which are in effect on the Closing Date, plus such other leases, contracts, and agreements not described in subsections (f)(iii) and (f)(iv) below that are entered into in the ordinary course of business and relate to the operation of the Stations after the date hereof. (iii) All contracts for the sale for cash of broadcast time or advertising on the Stations on or after the Closing Date which are valid and enforceable as of the Closing Date and which are to be assumed or conveyed under Sections 3(a) and 3(b). (iv) All contracts for the sale of broadcast time or advertising on the Stations in exchange for merchandise or services (or a combination of merchandise or services and cash) on or after the Closing Date which are valid and enforceable as of the Closing Date up to $15,000 in liability in the aggregate and which are to be assumed or conveyed under Sections 3(a) and 3(b) hereof. (v) All the tangible property, assets, furniture, fixtures, supplies, materials, goods, receivers, tapes, programming, music libraries, transmitters, switches, -2- 3 equipment and all other personal property used or held for use in the operation of the Stations, including, without limitation, that listed on Schedule C, and including replacements thereof or additions thereto made between the date hereof and the Closing Date, less any retirements made in the ordinary and usual course of business, which are not currently used in the operation of the Stations or are otherwise replaced and excluding any tangible personal property leased by Sellers (as listed in Schedule C-1). (vi) The spare parts and inventory of RBK relating to the items set forth in Schedule C. (vii) Goodwill, privileges, permits, copyrights, logos, jingles, brand names, service marks, trademarks and trade names (including rights in applications in connection therewith), and other intangible rights, including rights to the call letters of the Stations owned by Sellers and used in the operation of the Stations or in connection with the Broadcast Assets, as described on Schedule D. (viii) Such of the correspondence, files, records, books of account, programming studies, advertising reports, software (to the extent transferable), operating and marketing plans, logs, advertising lists, customer and vendor lists, copy and other files, books, writings and records of the Sellers that relate to the business and operations of the Stations (but all of the foregoing shall thereafter for a period of seven (7) years following the Closing Date be available for reasonable inspection and duplication by Sellers at their expense, upon reasonable request during normal business hours). (ix) The real property including fixtures, buildings and improvements thereon and all appurtenant rights owned by Sellers described on Schedule E attached hereto (the "Owned Real Property"). (x) The leases of Real Property with respect to Real Property leased by Sellers described on Schedule F attached hereto (the "Leased Real Property"). The Broadcast Assets do not include at Closing (1) cash or cash equivalents on hand or in banks, (2) accounts receivable, (3) property employed solely in the general corporate operations of Sellers, (4) property not located at the Stations' facilities and used or useful in the operations of any other stations owned or operated by any affiliate of Sellers (provided that such property is not currently used in the operation of the Stations), (5) books and records of the Sellers other than those specified in subsection 1(f)(viii) above and those Buyer is required to maintain by reason of the Commission rules or by law, (6) all pension, profit sharing or cash or deferred (Section 401(k)) plans and trusts and the assets thereof and any other employee benefit plan or arrangement, if any, maintained by Sellers, and (7) Sellers' rights, claims, and causes of action against third parties (including, without limitation, any rights under insurance policies and any rights to tax refunds). Sellers shall maintain copies of and make available to Buyer for a period of seven (7) years those items in number (5) above for reasonable inspection and duplication by Buyer at its expense, upon reasonable request during normal business hours. -3- 4 In addition to the conveyance of the Broadcast Assets, prepaid expenses, deposits and deferred charges of the Stations as of the Closing Date, determined in accordance with generally accepted accounting principles, shall be prorated pursuant to Section 17 hereof. (g) "Financials" means the financial statements of Sellers relating to the Stations furnished by Sellers to Buyer and consisting of unaudited statements of operations and cash flows for the twelve-month period ended December 31, 1998, identified on Schedule H. (h) "Permitted Encumbrances" is defined in Section 14(k). (i) "Time Brokerage Agreement" is defined in Section 26. ASSETS TO BE SOLD 3. Assets to be Conveyed. On the Closing Date, subject to the terms and conditions of this Agreement, Sellers will assign, transfer and deliver or cause to be delivered to Buyer all of the Broadcast Assets free and clear of all debts, liens, security interests, claims, encumbrances and other liabilities of any nature whatsoever, except for Permitted Encumbrances and as otherwise provided in Section 4 of this Agreement, and will execute and deliver to Buyer all such assignments, bills of sale, deeds, leases, and other documents and instruments as may be required by this Agreement or as Buyer or Buyer's counsel may reasonably request (in a form acceptable to Buyer's counsel) in order to sufficiently effectuate the transfer and sale of the Broadcast Assets to Buyer as of the Closing Date. 4. Assumption of Certain Liabilities. (a) On the Closing Date, Buyer will assume, and indemnify, defend and hold Sellers harmless from, the liabilities of Sellers under the contracts, agreements and leases included in the Broadcast Assets as described in subsections 2(f)(ii), 2(f)(iii), and 2(f)(iv), which are applicable to the period after the Closing Date, and Buyer shall execute and deliver to Sellers all documents and instruments as may be required by this Agreement and as Sellers may reasonably request (in a form acceptable to Seller's counsel) in order to sufficiently effectuate such assumption of obligations. (b) The foregoing notwithstanding, Buyer shall not be obligated to assume Sellers' obligations under any "trade out" agreements to the extent there exists a net negative barter balance (the amount by which the value of the service yet to be rendered under all such agreements collectively by the Stations exceeds the consideration yet to be received by the Stations therefor), based upon the Stations' then prevailing rates, in excess of $15,000.00 except to the extent that any such excess is treated as prepaid time sales for cash and adjusted for as a proration in Buyer's favor at Closing under Section 17. All consideration received or to be received by Sellers from such "trade out" accounts not consumed by the Sellers in the ordinary course of business shall be a Broadcast Asset. (c) In no event shall Buyer assume or be responsible for any obligations or liabilities of Sellers except to the extent provided in subsections 4(a) and 4(b). Without limiting -4- 5 the generality of the foregoing, except to the extent provided in subsections 4(a) and 4(b), Buyer shall in no event assume or be responsible for: (i) any liability with respect to any action, suit, proceeding, arbitration, investigation, claim or inquiry against Sellers, whether civil, criminal or administrative ("Litigation"), whether or not described in a schedule; (ii) all liabilities incurred by either Seller in connection with this Agreement and the transactions contemplated herein, including, without limitation, tax liabilities: (iii) any liability of either Seller for federal income taxes and any state or local income, profit, franchise, property or other taxes of any nature, and any penalties or interest due on account thereof; (iv) liabilities of either Seller for any breach or failure to perform any of such Seller's covenants and agreements contained in, or made pursuant to, this Agreement, or, prior to the Closing, any other contract, whether or not assumed hereunder, including any breach arising from assignment of contracts hereunder without consent of third parties; (v) liabilities of either Seller for any violation of or failure to comply with any statute, law, ordinance, rule or regulation (collectively, "Laws") or any order, writ, injunction, judgment, plan or decree (collectively, "Orders") of any court, arbitrator, department, commission, board, bureau, agency, authority, instrumentality or other body, whether federal, state, municipal, foreign or other (collectively, "Government Entities"): (vi) liabilities of either Seller to its present or former Affiliates; and (vii) liabilities for all pension, profit sharing, retirement, bonus, medical, dental, life, accident insurance, disability, executive or deferred compensation, and other similar fringe or employee benefit plans. "Affiliate" shall have the meaning given such term in Rule 13e-3 under the Securities Exchange Act of 1934, as amended, and shall include all shareholders, directors and officers of each Seller. PURCHASE PRICE 5. Purchase Price and Payment Thereof. (a) The Purchase Price for the Broadcast Assets, to be allocated among the Broadcast Assets according to Schedule G, shall be Five Million Four Hundred Thousand Dollars ($5,400,000.00) and shall be payable, including the cash portion of the Escrow Deposit and less or plus prorations and adjustments made pursuant to Section 18 of this Agreement, in cash at the Closing by wire transfer of immediately available funds to such account as is specified by Sellers. (b) On or before the date of this Agreement, Buyer has deposited in escrow with Star Media Group, Inc., as Escrow Agent ("SMG"), pursuant to the provisions of a Deposit Escrow Agreement in the form of Exhibit A hereto among Sellers, Buyer and SMG (the "Deposit Escrow Agreement"), cash and/or an irrevocable, stand-by letter of credit (in form and substance acceptable to Sellers) in the aggregate amount of $270,000,00 (the "Escrow Deposit"), to be held in escrow and applied as set forth herein and in the Deposit Escrow Agreement; provided, however, the Escrow Deposit shall consist of at least $50,000.00 in cash. At the Closing, the cash portion of the Escrow Deposit shall be applied to the Purchase Price to be paid to Sellers, the interest accrued thereon shall be paid to Buyer, and the letter of credit shall be returned to Buyer. As more fully described in the Deposit Escrow Agreement: (i) in the event this Agreement is terminated because of Buyer's breach of -5- 6 this Agreement and all other conditions to Closing are at such time satisfied or waived (other than such conditions as can reasonably be expected to be satisfied by the Closing), the Escrow Deposit shall be distributed to Sellers and the cash proceeds therefrom shall constitute liquidated damages as provided in Section 26 (a) hereto for Buyer's breach of this Agreement (the receipt of such amount by Sellers shall be Seller's sole remedy and shall discharge any liability Buyer may have to Sellers), and the interest accrued on the Escrow Deposit shall be paid to Buyer; (ii) in the event this Agreement is terminated because of Sellers' breach of this Agreement and all other conditions to Closing are at such time satisfied or waived (other than such conditions as can reasonably be expected to be satisfied by the Closing), the Escrow Deposit and the interest thereon shall be distributed to Buyer; and (iii) in the event this Agreement is terminated under any circumstances other than those set forth in the immediately preceding clauses (i) and (ii), the Escrow Deposit, including all accrued interest thereon, shall be distributed to Buyer. COMMISSION MATTERS 6. Commission Consent to Assignment of Licenses. Notwithstanding anything herein to the contrary, the terms and conditions of this Agreement are subject prior to Closing to the Commission's Order (and, except as hereafter otherwise mutually agreed, to a Final Order) granting consent to the assignment of the Licenses by RLK to Buyer. 7. Application for Consent-Cooperation of the Parties. Buyer and Sellers shall join in an application or applications to be filed with the Commission requesting consent to the assignment of the Licenses. They shall file with the Commission within five (5) business days of the date of this Agreement the necessary application and expeditiously prosecute all necessary amendments to such application, briefs, pleadings, documents and supporting data, and take all such actions and give all such notices as may be required or requested by the Commission or as may be appropriate in an effort to expedite the approval of the Commission of the assignment of the Licenses to Buyer. 8. Costs and Expenses. Buyer and Sellers each shall bear its own legal and accounting fees and other costs and expenses with respect to this transaction, including preparation and prosecution of Commission applications. The cost of filing fees and grant fees, if any, imposed by the Commission shall be borne equally by Buyer and RLK. Sellers shall pay all sales, transfer and documentary taxes, and Buyer shall pay all recording fees. 9. Operation of the Stations Before Closing. Between the date of this Agreement and the Closing Date, Sellers (i) will continue to operate the Stations under the terms of the Licenses in the public interest, convenience and necessity and (ii) will file with the Commission all documents required to be filed in connection with the operation of the Stations. Between the date hereof and the Closing Date, Sellers and Buyer shall provide the other with copies of all correspondence received from or filed with the Commission with respect to the Stations, the above application or any of the same. -6- 7 10. Control and Access. Prior to Closing, Buyer and its agents shall not directly or indirectly (i) control, supervise or direct, or (ii) attempt to control, supervise or direct, the operations of the Stations. Such operations shall be the sole responsibility of and in the complete discretion of Sellers. In addition to rights granted to Buyer under the Time Brokerage Agreement (hereinafter defined), Buyer shall be permitted reasonable observation and access and inspection of the records and property of the Stations during regular business hours in such a manner as to not interfere unreasonably with the normal operations of the Stations. 11. Conditions on Assignment Consent. In the event the Commission's Order consenting to assignment of the Licenses to Buyer contains a condition, arising other than in connection with any action or omission of Buyer and Buyer reasonably determines in good faith that the condition is materially adverse to Buyer and prevents Buyer from operating the Stations in substantially the same manner as owned and operated by Sellers, then the parties will cooperate in seeking the removal or mitigation of such condition until the earlier to occur of (1) the reconsideration by the Commission on terms reasonably acceptable to Buyer in accordance with the standards set forth above or (ii) the expiration of 90 days from the effective date of the Commission's Order (the "Reconsideration Period"). Notwithstanding the foregoing, no party shall be obligated to participate in an evidentiary hearing before the Commission. If the Commission has not taken the action specified in (i) above by the termination of the Reconsideration Period, Buyer shall have the right to terminate this Agreement upon written notice to Sellers within 10 days after the expiration of the Reconsideration Period. If Sellers do not agree with Buyer's determination that a condition is materially adverse to Buyer, the matter shall be submitted to arbitration in Phoenix, Arizona in accordance with the rules of the American Arbitration Association, and the results thereof shall be binding upon the parties. 12. Time for Commission Consent-Termination. If no Final Order consenting to the assignment of all the Licenses to Buyer is secured on or before the expiration of six (6) months from the filing of the 314 application, this Agreement may be terminated at the option of either Sellers or Buyer provided that the action or inaction of the terminating party is not the reason the Final Order has not been granted, upon the giving of ten (10) days' written notice to the other and, in the absence of material breach by either of the parties, Buyer and Sellers shall thereupon be released and discharged of all obligations hereunder, and the Escrow Deposit shall be distributed in accordance with the provisions of Section 4(b)(iii) hereof. -7- 8 ACCOUNTS RECEIVABLE 13. Collection. The accounts receivable of Sellers are not included among the Broadcast Assets. Nevertheless, at Closing, RBK shall supply Buyer with a list of RBK's accounts receivable as of the Closing Date (the "Accounts"), and Buyer shall use such efforts as are reasonable and in the ordinary course of business to collect the Accounts on RBK's behalf for a period of sixty (60) days from the Closing Date (the "Collection Period"). This obligation, however, shall not extend to the institution of litigation, employment of counsel, or any other extraordinary means of collection. During the Collection Period, Sellers shall not solicit any monies from an account debtor who, after Closing, continues to do business with the Stations, provided that during such period RBK may act to preserve its rights against a bankrupt debtor or commence suit or otherwise take action against any debtor that disputes the amount of, or liability for, an Account. If RBK receives a payment from an account debtor during the Collection Period, it shall so notify Buyer. Buyer may endorse and deposit in its own name and collect any and all checks and other instruments for the payment of money that Buyer may receive in payment of Accounts. Buyer shall receive no remuneration for its services and shall not be liable for non-collection, or failure of any such collection, except due to its own gross negligence or intentional misconduct. Upon termination of its duties hereunder, Buyer shall deliver to RBK all of its correspondence and files concerning the collection of the Accounts and all reports of attempts to collect the same. Except as otherwise provided herein, amounts collected by Buyer on account of RBK's Accounts shall be remitted in full to RBK on a monthly basis, by the fifteenth (15) day of the month following the month for which remittance is due. Buyer shall deliver to RBK an accounting showing the amount it received during each period on each account. If both RBK and Buyer are entitled to accounts receivable from the same account debtor, all payments received during the Collection Period shall be first applied to RBK's Accounts from such account debtor until the same are paid in full, unless such account debtor has disputed such account receivable in writing to RBK, in which event Buyer shall be entitled to apply the payment made by the account debtor to Buyer's account receivable. At the conclusion of the Collection Period and after remittance of all amounts collected, Buyer will thereafter have no further responsibility with respect to the collection of the Accounts, and Buyer may apply all collections received by Buyer from any Account party who continues business with Buyer to obligations owing to Buyer, except for any payment received by Buyer which such Account party specifies is for amounts owed to RBK, in which event such specified amounts shall be paid over to RBK. Buyer shall not have the right to compromise, settle or adjust the amounts of any one of the Accounts without RBK's prior written consent. RBK shall promptly pay all sales commissions relating to all of its accounts receivable whenever RBK receives payment thereon. COVENANTS, REPRESENTATIONS AND WARRANTIES OF SELLERS 14. Covenants, Representations and Warranties of Sellers. Sellers make the following covenants, representations and warranties: (a) Corporate Standing and Authority. -8- 9 (i) Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and each is duly licensed or qualified to do business as a foreign corporation, and is in good standing, in all such other states where its business requires such qualification, and each Seller has all corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby. (ii) This Agreement, all other documents referred to herein to be signed by Sellers, and the transactions contemplated hereby have been duly authorized and approved by the Board of Directors of each Seller and its sole shareholder, and copies of all corporate proceedings of said corporations relating to such authorization and approval, certified by its Secretary, will be delivered to Buyer at Closing. This Agreement constitutes a valid and binding obligation of Sellers, enforceable in accordance with its terms, subject to bankruptcy laws, other federal and state laws affecting creditors' rights generally and the availability of equitable remedies. (b) Title to Broadcast Assets. RLK, as to the Licenses, and RBK, as to the other Broadcast Assets, have good and marketable title to the Broadcast Assets, free and clear of all liens, mortgages, pledges, conditional sales agreements, security interests, charges and encumbrances, except for such liens as will be released and discharged on or prior to the Closing Date and except, as to any real property included in the Broadcast Assets, for Permitted Encumbrances. (c) Financials. Included as part of Schedule H is a true and complete copy of the Financials relating to the operation of the Stations for the twelve-month period ended December 31, 1998. For the period of ownership of the Stations by Sellers, such Financials are true, complete and accurate, have been prepared in accordance with generally accepted accounting principles (except for the absence of footnote disclosure) applied on a consistent basis, have been prepared in accordance with the books and records of Sellers, and fairly present, in accordance with generally accepted accounting principles, results of operations and cash flows of RBK as of the date and for the periods indicated. Sellers have also provided to Buyer copies of financial statements received at the time of Sellers purchase of the Stations in June of 1998, as included in Schedule H (the "Prior Financials"); provided, however, that no representation or warranty is made by Sellers with respect to the Prior Financials. (d) Accounts Receivable. All accounts receivable of Sellers relating to the operation of the Stations are listed on Schedule I as of the date indicated and represent arm's length sales actually made in the ordinary course of business, are to the best of each Sellers knowledge, collectible (net of reasonable reserves for doubtful accounts) in the ordinary course of business without the necessity of commencing legal proceedings, are subject to no counterclaim or setoff, and are not in dispute. Schedule I contains an aged schedule of all such accounts receivable. (e) Contracts. Schedule B is a complete list or description of all material written and oral contracts relative to the Stations in existence at the date of this Agreement which are enforceable against RBK (other than contracts for the sale of radio time or -9- 10 advertising). All contracts for the sale of broadcast time or advertising on the Stations in exchange for merchandise or services on or after the date hereof to which RBK is a party or by which it is bound are preemptible for cash sales. True and complete copies of all contracts, leases and agreements listed in Schedule B have been made available to Buyer. RBK has and on the Closing Date will have paid all of its obligations and otherwise will not be in material default under any of the contracts, leases and agreements listed on Schedule B or otherwise to be assumed by Buyer hereunder; and each shall be in full force and effect and unimpaired by any acts or omissions of RBK, its agents or employees on the Closing Date, except for those that shall previously have expired by passage of time in accordance with their respective terms. (f) Licenses. Schedule A is a complete list of all Licenses currently held by RLK for the Stations. The Licenses constitute all licenses, permits, approvals, authorizations and consents of the Commission required for the operation of the Stations. The Licenses are currently in effect and are subject to no restrictions of such a nature as would materially limit the full operation of the Stations as presently authorized and conducted. The Licenses have been renewed in the normal course at their last renewal date with the normal expiration date. The operation of the Stations is in all material respects in accordance with the Licenses. Sellers have no knowledge of any matter that might result in the suspension or revocation of the Licenses. There are no Commission citations outstanding with respect to the Stations or their operations. There are no petitions to deny, material complaints or proceedings known by Sellers to be pending before the Commission against the Stations or the Sellers (other than rulemakings of general applicability to the broadcast industry or a substantial segment thereof) and relating to the business and operation of the Stations. (g) Tangible Broadcast Assets. Without material omission, all of the Broadcast Assets, including, without limitation, tangible property and assets of RBK used or held for use in the operation of the Stations as of the date hereof are listed on Schedule C. All equipment actually used in connection with, and necessary for, the operation of the Stations including, without limitation, antennas, transmitters, and other studio and transmitting equipment is in good operating condition (ordinary wear and tear excepted) consistent with the terms of the Stations' licenses, all underlying construction permits, and the Commission's rules and regulations and building, zoning and other laws; and on the date of this Agreement there are no orders or citations outstanding requiring any repairs, improvements or modifications with respect thereto. (h) Laws and Regulations. On the date hereof and at Closing, the Stations will be in compliance in all material respects with all applicable federal, state and local laws, ordinances and regulations, including to the best of Sellers' knowledge, applicable Environmental Laws (as defined below). Sellers agree that prior to the Closing Date, if they become aware of any violations of the Communications Act of 1934, or of the Rules and Regulations of the Commission, they will use their best efforts to remove all such violations and, unless the violation has been caused by Buyer from acts under the Time Brokerage Agreement, be responsible for the costs of removing such, including the payment of any fines that may be assessed before or after Closing for any such violations. Sellers are not in default -10- 11 with respect to any judgment, order, injunction or decree of any court, administrative agency, or other governmental authority in any respect material to this transaction. (i) Compliance. Except as set forth in Schedule J, the Stations (including each and all of their operations and practices) and the Broadcast Assets are in compliance in all material respects with all applicable Laws and Orders, including, without limitation, those applicable to trade practices, competition and pricing, zoning, building and sanitation, product advertising and the Environmental Laws, as hereinafter defined. Except as set forth in Schedule J, neither Seller has received notice of any violation or alleged violation pertaining to the operation of the Stations, and is subject to no liability for, past or continuing violation pertaining to the operation of the Stations, of any Laws or Orders. All reports and returns pertaining to the Stations required to be filed by Sellers with any government entity have been filed and were accurate and complete when filed. The operation of the Stations as it is now conducted does not, nor does any condition existing at any of either Seller's or the Stations' facilities, in any manner constitute a nuisance or other tortuous interference with the rights of any person or persons in such a manner as to give rise to or constitute the grounds for a meritorious suit, action, claim or demand by any such person or persons seeking compensation or damages or seeking to restrain, enjoin or otherwise prohibit any aspect of the conduct of such business or the manner in which it is now conducted. (j) Environmental Matters. The applicable laws relating to pollution or protection of the environment, including laws relating to emissions, discharges, generation, storage, releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic, hazardous or petroleum or petroleum-based substances or wastes ("Waste") into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Waste including, without limitation, the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Toxic Substances Control Act and the Comprehensive Environmental Response Compensation Liability Act ("CERCLA"), as amended, and their state and local counterparts are herein collectively referred to as the "Environmental Laws". Without limiting the generality of the foregoing provisions of this Section 14, each Seller is in full compliance in all material respects with all limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws or contained in any regulations, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder. There is no litigation nor any demand, claim, hearing or notice of violation pending or, to the best of each Seller's knowledge, threatened against either Seller relating in any way to the Environmental Laws or any order issued, entered, promulgated or approved thereunder. Except as set forth in Schedule K, there are no past, present, or, to the best of each Seller's knowledge, anticipated events, conditions, circumstances, activities, practices, incidents, actions, omissions or plans which may materially interfere with or prevent compliance or continued compliance with the Environmental Laws or with any order issued, entered, promulgated or approved thereunder, or which may give rise to any liability, including, without limitation, liability under CERCLA or similar state or local laws, or otherwise form the basis of any litigation, hearing, notice of -11- 12 violation, study or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Waste. (k) Marketable Title. On the Closing Date, other than Liens that will be satisfied at Closing, Sellers shall have and convey good and marketable title to all the Broadcast Assets, free and clear of all mortgages, liens (statutory or otherwise), security interests, claims, pledges, licenses, equities, options, conditional sales contracts, assessments, levies, easements, covenants, reservations, restrictions, rights-of-way, exceptions, limitations, charges or encumbrances of any nature whatsoever (collectively, "Liens"); other than in the case of real property, Liens for taxes and assessments not yet due or which are being contested in good faith by appropriate proceedings (and which have been sufficiently accrued or reserved against in the Recent Balance Sheet); municipal, building and zoning ordinances; easements, restrictions and agreements described on Schedule E; and easements for public utilities which do not materially interfere with the use of the Broadcast Assets as currently utilized or materially and adversely affect the marketability of the Broadcast Assets ("Permitted Encumbrances"). Except as set forth on Schedule L, none of the Broadcast Assets is subject to any restrictions with respect to the transferability thereof, and Sellers have complete and unrestricted power and right to sell, assign, convey and deliver the Broadcast Assets to Buyer as contemplated hereby. At Closing, Buyer will receive good and marketable title to all the Broadcast Assets, free and clear of all Liens of any nature whatsoever except Permitted Encumbrances. (l) Condition. All buildings, towers and other structures owned or otherwise utilized by Sellers are in good condition and repair (normal wear and tear excepted) and have no structural defects or material defects affecting the plumbing, electrical, sewerage, or heating, ventilating or air conditioning systems. (m) Real Property. Schedule E sets forth all real property owned, used or occupied by Sellers, including a description of all land, and all encumbrances, existing leases, easements or rights of way of record (or, if not of record, of which either Seller has notice or knowledge) granted on or appurtenant to or otherwise affecting the Owned Real Property, and all towers, buildings or other structures located thereon. Schedule F sets forth, with respect to each parcel of Leased Real Property the material terms of such lease. Except for provisions contained in leases or licenses referred to on Schedule F, no fact or condition exists which would prohibit or adversely affect the ordinary rights of access to and from the Owned or Leased Real Property from and to the existing highways and roads and there is no pending or, to the best of Seller's knowledge, threatened restriction or denial, governmental or otherwise, upon such ingress and egress. There is not (i) any claim of adverse possession or prescriptive rights involving any of the Owned Real Property or, to the best of Sellers' knowledge, the Leased Real Property, (ii) any structure located on any Owned Real Property or, to the best of Sellers' knowledge, the Leased Real Property which encroaches on or over the boundaries of neighboring or adjacent properties or (iii) any structure of any other party which encroaches on or over the boundaries of any of such Owned Real Property or, to the best of Sellers' knowledge, the Leased Real Property. None of the Owned Real Property or, to the best of -12- 13 Sellers' knowledge, the Leased Real Property is located in a flood plain, flood hazard area, wetland or lakeshore erosion area within the meaning of any Law. No public improvements have been commenced and to each Seller's knowledge none are planned which in either case may result in special assessments against or otherwise materially adversely affect any Owned or Leased Real Property. To the best of Seller's knowledge, no portion of any of the Owned or Leased Real Property has been used as a landfill or for storage or landfill of hazardous or toxic materials. Neither Seller has notice or knowledge of any (i) planned or proposed increase in assessed valuations of any Owned or Leased Real Property, (ii) order requiring repair, alteration, or correction of any existing condition affecting any Owned or Leased Real Property or the systems or improvements thereat, (iii) condition or defect which could give rise to an order of the sort referred to in clause (ii) above, or (iv) underground storage tanks, or any structural, mechanical, or other defects of material significance affecting any Owned or Leased Real Property or the systems or improvements thereat (including, but not limited to, inadequacy for normal use of mechanical systems or disposal or water systems at or serving the Owned or Leased Real Property). (n) No Condemnation or Expropriation. Neither the whole nor any portion of the Broadcast Assets is subject to any Order to be sold or is being condemned, expropriated or otherwise taken by any Government Entity with or without payment of compensation therefor, nor to the best of either Seller's knowledge has any such condemnation, expropriation or taking been proposed. (o) No Certified Survey Map Required. To the best knowledge of Sellers, no certified survey map or other state, municipal, or other governmental approval regarding the division, platting, or mapping of real estate is required as a prerequisite to the conveyance by RBK to Buyer (or as a prerequisite to the recording of any conveyance document) of any Owned Real Property pursuant to the terms hereof. (p) Insurance. Set forth in Schedule M is a complete and accurate list and description of all policies of fire, liability and other forms of insurance presently in effect with respect to the Stations and properties of Sellers used or held for use in the operation of the Stations, true and correct copies of which have been delivered to Buyer. All of the Broadcast Assets which are of an insurable character are insured for fair market value, less reasonable deductibles, by financially sound and reputable insurance companies against loss or damage by fire and other risks to the extent and in the manner customary for such Broadcast Assets. RBK will maintain or cause to be maintained such insurance until the Closing Date. RBK has not received any notice from any of its insurance carriers covering the Stations that any insurance coverage will not be available in the future on substantially the same terms as now in effect. No notice of cancellation or termination has been received with respect to the policies. (q) Disposition of Assets. Between the date hereof and the Closing Date, Sellers will not transfer, convey or assign to any other person any of the Broadcast Assets unless such disposition is in the ordinary course of business or otherwise agreed to in writing by Buyer. -13- 14 (r) Trade-Out Agreements. Subject to the terms of the Time Brokerage Agreement, RBK will encourage advertisers to use prior to the Closing Date the broadcast time available to them under all existing arrangements for the exchange of advertising time for considerations other than cash ("trade-out agreements"). RBK covenants and agrees that at the Closing Date there will be no trade-out agreements to which RBK is a party which shall require the broadcast of advertising following the Closing Date (i) unless approved in writing by Buyer or (ii) unless such were entered into in the ordinary course of business and are preemptible for cash sales. At the Closing, RBK will deliver to Buyer a schedule of all trade-out agreement payables and receivables, together with all contracts pertaining thereto not previously delivered. (s) Transmitter Site. To the best of Sellers' knowledge, the Stations' transmitter sites are not the subject of any official complaint or notice of violation of any applicable zoning ordinance or building code and no such violation is known to exist. To the best of Sellers' knowledge, there is no zoning ordinance or building code or use or occupancy restriction or condemnation proceeding pending or threatened, which would preclude or materially impair the use of such real estate or the improvements thereon by Buyer in the manner and for the purpose for which it is presently used. (t) Litigation. There is no litigation, action, suit, investigation or proceeding pending, or to the best of Sellers' knowledge, threatened, against Sellers which may give rise to any claim against any of the assets to be conveyed or upon Sellers' ability to perform in accordance with the terms of this Agreement, or which might result in a material monetary forfeiture or in any material adverse effect upon the business or assets of Sellers or the Stations. (u) No Conflict. The execution, delivery and performance by Sellers of this Agreement and the consummation of the transactions contemplated hereby by Sellers will not (i) violate, conflict with or result in the breach of any provision of the Certificate of Incorporation or By-Laws of Sellers; (ii) violate any order, writ, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, Sellers or upon the assets of Sellers which violation could give rise to a valid claim for injunction or other equitable relief or for damages; and (iii) subject to obtaining the approvals, consents and permits or making the filings referred to in this Agreement, (A) violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to the Stations or to the assets of Sellers, which violation could have a material adverse effect on the ability of Sellers to perform their obligations hereunder, (B) violate or result in the revocation or suspension of any license or permit, the loss of which could have a material adverse effect on the assets, results of operations or financial condition of the Stations, or (C) require the consent of any third party other than the required consent of Waller-Sutton Media Partners, L.P. (which Sellers covenant to exercise all diligent and reasonable efforts to obtain). (v) Consents. Except for the approvals required by the Commission, there are no authorizations, consents or approvals of, or filings with, any governmental regulatory -14- 15 authority required by Sellers in connection with the execution of this Agreement or the consummation of the transactions contemplated hereby. (w) Qualifications for Assignment. RLK is presently a licensee in good standing with the Commission and RLK knows of no reason why the Commission would not approve the assignment of licenses contemplated by this Agreement or the renewal of the Stations' licenses set forth in Schedule A. (x) Absence of Certain Changes. Between December 31, 1998, and the date of this Agreement, there has not been: (i) Any damage, destruction or loss (whether or not covered by insurance) adversely affecting the Broadcast Assets in a material manner; (ii) Any sale, assignment, lease or other transfer or disposition of any of the properties or assets used or intended for use in the operation of the Stations except in the ordinary course of business, or in connection with the acquisition of similar property or assets in the normal and usual course of business; (iii) Any contract, obligation, or commitment entered into in connection with the operation of the Stations except in the normal and usual course of business; and (iv) Any material change in the accounting methods or practices of the Stations, or the depreciation or amortization policies or rates with respect to the Stations. (y) Labor Relations. Sellers are not parties to or subject to any collective bargaining or similar agreement with any labor union with respect to the employees of Sellers. As of the date of this Agreement, there are no actions or proceedings pending or, to the best of Sellers' knowledge, threatened between Sellers and any of their employees or any labor union, nor is there, to the best of Sellers' knowledge, any attempt by any labor union to gain recognition as the bargaining representative of any of the employees of Sellers. Schedule N contains a true and correct list of all employees to whom either Seller is paying compensation, including bonuses and incentives, at an annual rate in excess of EIGHT THOUSAND DOLLARS ($8,000) for services rendered or otherwise; and in the case of salaried employees such list identifies the current annual rate of compensation for each employee and in the case of hourly or commission employees identifies certain reasonable ranges of rates and the number of employees falling within each such range. (z) Tax Matters. The Financials contain adequate provisions for all material federal income, accumulated earnings, payroll, F.l.C.A., unemployment, withholding and other federal taxes and all state and local income, franchise, real property, personal property, sales, payroll, disability, unemployment, withholding and other taxes imposed on Sellers or their properties or rights or otherwise payable by them, including interest and penalties, if any, in respect thereof, for the period ended on said date and all fiscal periods prior thereto. No deficiency in payment of any taxes for any period has been asserted or proposed by any taxing -15- 16 body at the date hereof, and all reports or returns required to be filed by Sellers with any federal body or authority (and, to the best of Sellers' knowledge, with any state or local governmental body or authority) with respect to the Stations have been properly completed and filed in a timely manner, and any and all amounts shown on such returns and reports to be due and payable have been paid in full except to the extent, if any, that the failure to so file or so pay could not lead to the imposition of any liability upon Buyer or lien or encumbrance upon any of the Broadcast Assets. (aa) Negative Covenants. Between the date hereof and the Closing Date, Sellers, with respect to the Stations, will not without the prior written consent of Buyer, not to be unreasonably withheld: (i) Enter into any contract or commitment or engage in any transaction relating to the Stations except in the normal and usual course of business; (ii) Create any mortgage, pledge, lien or encumbrance affecting any of the Broadcast Assets except for such liens as will be released and discharged on or prior to the Closing Date and for Permitted Encumbrances; (iii) Sell, assign, lease or otherwise transfer or dispose of any of the Broadcast Assets, except in the normal and usual course of business or as permitted in Section 14(q) above; or (iv) Cancel, modify, amend, or in any way impair any of the contracts or other agreements which are to be assumed by Buyer except in the normal and usual course of business. (bb) Additional Agreements. Subject to the terms and conditions herein provided, Sellers agree to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. In case at any time after the Closing any further action is reasonably necessary to carry out the purposes of this Agreement, Sellers shall take such action so long as such will not involve additional costs (except as may be required under the indemnification provisions of this Agreement). (cc) Join in Execution of Documents. Sellers will join with Buyer, at such time as all conditions precedent to the transactions contemplated by this Agreement have been fulfilled, in executing and delivering all documents which may be necessary or appropriate to effect the transactions contemplated by this Agreement. (dd) Full Disclosure. No representation or warranty made by Sellers contained in this Agreement nor any certificate, document or other instrument furnished or to be furnished by Sellers pursuant hereto contains or will contain any untrue statement of a material fact, or omits or shall omit to state any material fact required to make any statement contained herein or therein not misleading. Sellers are not aware of any impending or -16- 17 contemplated event or occurrence that would cause any of the foregoing representations not to be true and complete on the date of such event or occurrence as if made on that date. For purposes of this Agreement, "Seller's knowledge" means the knowledge of William Stakelin (President of Sellers) or Dave Remund (the chief engineer for Sellers) after due inquiry of the employees, representatives and agents of Sellers who would have or be expected to have knowledge of the matter, and with respect to the condition of the Stations, Broadcast Assets, records or other object, after they have inspected it. COVENANTS, REPRESENTATIONS AND WARRANTIES OF BUYER 15. Covenants, Representations and Warranties of Buyer. Buyer makes the following representations, warranties, and covenants: (a) Corporate Standing and Authority. (i) Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware; on the Closing Date will be qualified to do business in the State of Arizona; and has all power and authority to enter into this Agreement, and to carry out the transactions contemplated hereby. (ii) This Agreement, all other documents referred to herein to be signed by Buyer, and the transactions contemplated hereby have been duly authorized and approved by the members of Buyer, and copies of all proceedings of Buyer relating to such authorization and approval, certified by its managers (or directors) have been delivered to Sellers. (iii) This Agreement constitutes a valid and binding obligation of Buyer, enforceable in accordance with the terms, subject to bankruptcy laws, other federal and state laws affecting creditors' rights generally and availability of equitable remedies. (b) Litigation. There is no litigation, action, suit, investigation or proceeding pending, or to the best of Buyer's knowledge, threatened, against Buyer which may give rise to any claim against any of the assets to be conveyed or upon Buyer's ability to perform in accordance with the terms of this Agreement, or which might result in a material monetary forfeiture or in any material adverse effect upon the business or assets of Buyer or the Stations. (c) No Conflict. The execution, delivery and performance by the Buyer of this Agreement and the consummation of the transactions contemplated hereby by the Buyer will not (i) violate, conflict with or result in the breach of any provision of the Operating Agreement of Buyer; (ii) violate any order, writ, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, Buyer or upon the assets of Buyer which violation could give rise to a valid claim for injunction or other equitable relief or for damages; and (iii) subject to obtaining the approvals, consents and -17- 18 permits or making the filings referred to in this Agreement, (A) violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to the Stations or to the assets of Buyer, which violation could have a material adverse effect on the ability of Buyer to perform its obligations hereunder, or (B) require the consent of any third party. (d) Additional Agreements. Subject to the terms and conditions herein provided, Buyer agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement. In case at any time after the Closing any further action is reasonably necessary to carry out the purposes of this Agreement, Buyer shall take such action so long as such will not involve additional costs (except as may be required under the indemnification provisions of this Agreement). (e) Join in Execution of Documents. Buyer will join with Sellers, at such time as all conditions precedent to the transactions contemplated by this Agreement have been fulfilled, in executing and delivering all documents which may be necessary or appropriate to effect the transactions contemplated by this Agreement. (f) Consents. Except for the approvals required of the Commission, there are no material authorizations, consents or approvals of, or filings with, governmental regulatory authorities required by Buyer in connection with the execution or delivery of this Agreement or the consummation of the transactions contemplated hereby. (g) Qualifications. To the best knowledge of Buyer, there are no facts which would, under present law (including the Communications Act of 1934, and present rules, regulations and policies of the Commission), disqualify Buyer from acquiring the Licenses or from owning and operating the Stations. Buyer will not take, or fail to take, any action which action Buyer knows or reasonably expects would cause such disqualification. Buyer has, and will continue to have to the Closing, funds committed and readily available to it sufficient to pay the Purchase Price at the Closing, as evidenced by the documentation set forth in Schedule O. (h) Full Disclosure. No representation or warranty made by Buyer contained in this Agreement nor any certificate, document or other instrument furnished or to be furnished by Buyer pursuant hereto contains or will contain any untrue statement of a material fact, or omits or shall omit to state any material fact required to make any statement contained herein or therein not misleading. Buyer is not aware of any impending or contemplated event or occurrence that would cause any of the foregoing representations not to be true and complete on the date of such event or occurrence as if made on that date. OTHER 16. (a) Title Insurance. Not less than five (5) days prior to the Closing, Sellers, at their expense, shall provide to Buyer a title insurance commitment, issued by a title insurance company reasonably -18- 19 satisfactory to Buyer, agreeing to issue to Buyer a standard form owner's policy of title insurance with respect to all Owned Real Property, together with a copy of each document to which reference is made in such commitment. Such policy shall be in the form of an ALTA Owner's Policy (10-17-92 or more current version) with standard coverage and in the full amount of that portion of the Purchase Price allocated to the Owned Real Property insuring good and marketable title thereto expressly including all easements and other appurtenances. Such policy shall insure title in full accordance with the representations and warranties set forth herein and shall be subject only to such conditions and exceptions as shall be contained in ALTA Loan Policy No. 45032281-M referred to in Schedule E, and shall contain such endorsements as Buyer shall reasonably request (including, but not limited to, an endorsement over rights of creditors, if requested by Buyer or Buyer's lender). (b) Surveys. Not less than five (5) days prior to the Closing, Sellers, at their expense, shall provide to Buyer a survey of the Owned Real Property, and, if obtainable without undue difficulty or expense, a survey of the KFLG-AM/FM leased studio property referenced in Schedule F, prepared in accordance with ALTA/ASCM standards, each dated no more than ninety (90) days prior to the Closing and each detailing the legal description, the perimeter boundaries, all improvements located thereon, all easements and encroachments affecting each such parcel of Owned or Leased Real Property and such other matters as may be reasonably requested by Buyer or the title insurance companies, each containing a surveyor certificate reasonably acceptable to Buyer and the title insurance companies, and each prepared by a registered land surveyor satisfactory to Buyer. (c) Environmental Audits. Buyer, at its expense, will promptly retain a firm engaged in the regular business of environmental engineering to conduct such environmental audits of Sellers' operations and the real estate occupied by Sellers as Buyer in its discretion shall consider necessary or appropriate. (d) Bulk Sales Law. The parties do not believe that any bulk sales or fraudulent conveyance statute applies to the transactions contemplated by this Agreement. Buyer therefore waives compliance by Sellers with the requirements of any such statutes, and Sellers agree to indemnify and hold Buyer harmless against any claim made against Buyer by any creditor of either Seller as a result of a failure to comply with any such statute. (e) Use of Call Letters and Company Name. Following the Closing, neither Seller nor any Affiliate of Sellers, without the prior written consent of Buyer, will make any use of the call letters "KAAA (AM)", "KZZZ (FM)", "KFLG (AM)" or "KFLG (FM)" (or any name confusingly similar thereto), except as -19- 20 may be necessary for Sellers to pay its liabilities, prepare tax returns and other reports, and to otherwise wind up and conclude its business pertaining to the Stations. INDEMNIFICATION 17. Indemnification by Buyer and Sellers. (a) Buyer does not assume and shall not be obligated to pay any liabilities of Sellers under the terms of this Agreement or otherwise and shall not be obligated to perform any obligations of Sellers of any kind or manner except for contracts expressly assigned to and assumed by Buyer hereunder and, with respect to such contracts, only such obligations which arise subsequent to the Closing hereunder or as is herein provided. (b) Sellers and their shareholder hereby agree to jointly and severely indemnify and hold Buyer, its affiliates, successors and assigns, harmless from and against: (i) Any and all claims, liabilities and obligations of any kind or nature, contingent or otherwise, arising from or related to the ownership or operation of the Stations prior to the Closing Date hereunder including, but not limited to, any and all claims, liabilities and obligations arising or required to be performed prior to the Closing hereunder under any lease, contract or agreement assumed by Buyer hereunder, except as otherwise provided herein; (ii) Any and all damages or deficiency resulting from any misrepresentation, breach of warranty, or nonfulfillment of any covenant of Sellers under this Agreement, or from any misrepresentation in or omission from any certificate or other instrument furnished to Buyer pursuant to this Agreement, subject, however, to a maximum liability for all such claims in the aggregate of $5,400,000; and (iii) Any and all actions, suits, proceedings, damages, assessments, judgments, costs and expenses, including reasonable attorneys' fees incurred by Buyer or its Affiliates as a result of Sellers' failure or refusal to defend or satisfy any claim incident to the foregoing provisions, or failure otherwise to comply with the foregoing provisions. (c) Sellers and their shareholder shall jointly and severally indemnify Buyer, its Affiliates, successors and assigns, against any claims by creditors of Sellers (including any taxing authority) under the provisions of any applicable Bulk Sales Law. (d) Sellers and their shareholder shall jointly and severally indemnify Buyer, its Affiliates, successors and assigns, against any claims by employees of the Stations for commissions earned prior to the Closing Date. (e) If any claim of liability shall be asserted against Buyer, its Affiliates, successors and/or assigns, which would give rise to a claim by Buyer, its Affiliates, successors and/or assigns, against Sellers or their shareholder for indemnification under the provisions of -20- 21 this Section 16, Buyer shall promptly notify Sellers in writing of the same and Sellers shall be entitled at their own expense to compromise or defend any such claim. (f) Buyer hereby agrees to indemnify and hold Sellers and their Affiliates, successors and assigns harmless from and against: (i) Any and all claims, liabilities and obligations of any kind or nature, contingent or otherwise, arising from or relating to the ownership or operation of the Stations on and after the Closing Date hereunder including, but not limited to, any and all claims, liabilities and obligations assumed or required to be assumed by Buyer under this Agreement or arising or required to be performed subsequent to the Closing hereunder; (ii) Any and all damages or deficiency resulting from any misrepresentation, breach of warranty, or nonfulfillment of any covenant of Buyer under this Agreement, or from any misrepresentation in or omission from any certificate or other instrument furnished to Sellers pursuant to this Agreement; and (iii) Any and all claims, actions, suits, proceedings, damages, assessments, judgments, costs and expenses, including reasonable attorneys' fees, incurred by Sellers or their Affiliates as the result of Buyer's failure or refusal to defend or satisfy any claim incident to any of the foregoing provisions, or failure otherwise to comply with the foregoing provisions. (g) If any claim or liability shall be asserted against Sellers or their Affiliates which would give rise to a claim by Sellers or their Affiliates against Buyer for indemnification under the provisions of this Section 16, Sellers shall promptly notify Buyer of the same, and Buyer shall be entitled at its own expense to compromise or defend any such claim. (h) The indemnification provided for in subsections (b)(ii) and (f)(ii) above shall apply only in the event the claim for indemnification arises and notice of the claim is given within eighteen (18) months from the Closing Date, except for matters of title or taxes for which there shall be no limitation except such as is provided by law. No indemnified party shall be entitled to assert a claim for indemnification under subsections (b)(ii)and (f)(ii) unless and to the extent that the aggregate damages for all such claims exceeds $75,000.00; provided, however, that in such event, the Indemnified Party shall then be entitled to indemnification in full. Each party's exclusive monetary remedy for breach of representation, warranty or covenant shall be its rights to seek indemnification hereunder. PRORATION 18. Proration. Except as previously prorated pursuant to the Time Brokerage Agreement, all income and expenses arising from the operation of the Stations including, but not limited to, state and local taxes (excluding income taxes), upon the Broadcast Assets, real estate taxes and assessments, license fees, frequency discounts, contractual and other obligations, rents, deposits, prepaid items such as prepaid rent and insurance and prepayments for advertising and broadcast time, utility charges, transferable license, permit and registration -21- 22 fees (including, without limitation, ASCAP, BMI and SESAC), the Commission's Annual License Fee, if any, amounts of any barter balances as provided in Section 3(b) (to the extent such Section is applicable) and all other items normally adjusted in connection with similar transactions shall be prorated and accounted for and paid insofar as practicable as between Sellers and Buyer at the Closing, in accordance with generally-accepted accounting principles as of 11:59 PM on the date immediately preceding the Closing Date. Within sixty (60) days following the Closing Date, Sellers shall furnish to Buyer their good faith computation of any proration items not determinable as of the Closing Date. Within 5 days thereafter, a final adjustment payment shall be made by Buyer or Sellers to the other, as the case may be. RISK OF LOSS 19. Risk of Loss. The risk of loss, damage or destruction from any cause to the Broadcast Assets shall be borne by RBK at all times between the date of this Agreement and the Closing Date. In the event of any material loss, damage or destruction to the Broadcast Assets between the date of this Agreement and the Closing Date, RBK at its option may, but it shall be under no obligation to, repair, replace or restore any such Broadcast Asset prior to the Closing Date to substantially the same condition existing prior to such damage or destruction. In the event of substantial damage to any of the Broadcast Assets or in the event of the occurrence of any damage or event which prevents broadcast transmission of the Stations in the normal and usual manner and in accordance with the Licenses, Sellers shall promptly notify Buyer of the same in writing, specifying with particularity the loss or damage incurred, the cause thereof if known or reasonably ascertainable, and the extent to which restoration, replacement and repair of the property lost or destroyed will be reimbursed under the insurance coverage. In the event the loss, damage or destruction has not been restored, replaced or repaired by the Closing Date, the Closing Date shall be postponed to the extent necessary to allow RBK at least ninety (90) days from the date of loss, damage or destruction to complete the repair, replacement or restoration. In the event the repair, replacement or restoration has not been completed after allowing for such minimum period for such to be accomplished, then Buyer shall have the option to: (a) Terminate this Agreement without any further obligation hereunder; or (b) Elect to consummate the Closing and accept the property in its then condition, in which event RBK shall assign to Buyer all proceeds of insurance theretofore received and due and owing covering the property involved to the extent not previously applied to restore such property. In the event the Closing Date is postponed, Sellers and Buyer will cooperate to extend the time during which this Agreement must be closed as specified in the Commission's Order. -22- 23 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE 20. Conditions Precedent to Buyer's Obligations. If at the Closing Date the following conditions are satisfied or waived, Buyer, subject to the provisions of Section 19 hereof, shall be obligated to purchase the Broadcast Assets in accordance with the terms and conditions of this Agreement: (a) Representations, Warranties and Covenants. The representations and warranties of Sellers contained herein or in any Schedule or in any list, certificate or document delivered pursuant to the provisions hereof shall be true in all material respects as of the date of this Agreement and as of and at the Closing Date as though made on such Closing Date except for (i) changes to schedules resulting from the modification thereof by Sellers to reflect changes from the date hereof to the Closing Date for items that do not result from any breach by Sellers hereunder, (ii) breaches which could not reasonably be expected to have a material adverse effect on the Stations or the Broadcast Assets, and (iii) changes caused by Buyer's time brokering of the Stations under the Time Brokerage Agreement. Sellers shall have performed and complied with all obligations and covenants required by this Agreement and the Time Brokerage Agreement to be duly performed or complied with by Sellers on or prior to the Closing Date (except for such failures to comply which could not reasonably be expected to have a material adverse effect on the Stations or the Broadcast Assets). Sellers shall have delivered to Buyer certificates dated the Closing Date and signed by an officer of Sellers attesting to the above. (b) Delivery of Closing Documents. Sellers shall have delivered to Buyer the Closing Documents described hereinafter in Section 22 of this Agreement. (c) Licenses. RLK shall be the holder of the Licenses and such Licenses shall be free and clear of material adverse conditions not set forth on the Licenses on the date of this Agreement, competing applications, petitions to deny, material complaints, appeals or any restrictions as might limit the operation of the Stations as presently authorized. (d) Consents. On the Closing Date, each person, association, corporation or other entity, the consent or approval of which to the purchase and acquisition of the Broadcast Assets or any material part thereof from Sellers as herein provided is then required shall have duly consented or approved such acquisition of Broadcast Assets; provided, that in connection with the contract consents listed on Schedule B, only those consents marked with an asterisk need be obtained as a condition to Buyer's obligation to purchase the Broadcast Assets. (e) Final Order. The Commission's Order shall have been issued with no conditions materially adverse to Buyer and shall have become a Final Order. (f) No Adverse Conditions. From the date of this Agreement through the Closing, there shall have been no material loss or damage (excluding such as was caused by the acts of Buyer) to the tangible properties or assets forming a part of the Broadcast Assets (whether or not covered by insurance) which materially and adversely affects or impairs the -23- 24 ability of the Stations to conduct their business as it is being conducted on the date hereof and which have not been either (i) repaired, replaced or restored by the Sellers, or (ii) with respect to which the Buyer has not taken the action described in Section 19(b). (g) Adverse Proceedings. As of the Closing Date, no suit, action, claim or governmental proceeding or investigation shall be pending or shall have been instituted, taken, presented or threatened against Sellers which results or reasonably may result in a material adverse effect upon, or substantial disruption of the operations of the Stations, or make unlawful the carrying out of this Agreement, cause it to be rescinded or impose a lien on, or require Buyer to divest itself of, any of the assets to be acquired by it hereunder. (h) Time Brokerage Agreement Compliance. From the date hereof through the Closing Date, the Time Brokerage Agreement shall not have been terminated by Buyer as permitted by the Time Brokerage Agreement as a result of RBK's material noncompliance with its obligations under the Time Brokerage Agreement. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE 21. Conditions Precedent to Sellers' Obligations. If at the Closing Date the following conditions are satisfied or waived, Sellers shall be obligated to sell the Broadcast Assets in accordance with the terms and conditions of this Agreement: (a) Representations, Warranties and Covenants. The representations and warranties of Buyer contained herein or in any list, certificate or document delivered pursuant to the provisions hereof shall be true in all material respects as of and at the Closing Date as though made on such date except for changes permitted by this Agreement. Buyer shall have performed and complied with in all material respects all obligations and covenants required by this Agreement to be performed or complied with by Buyer on or prior to the Closing Date. Buyer shall have delivered to Sellers a certificate dated the Closing Date and signed by an officer of Buyer attesting to the above. (b) Purchase Price. Payment of the Purchase Price on the Closing Date shall have been paid in accordance with the terms of this Agreement. (c) Delivery of Closing Documents. Buyer shall have delivered to Sellers the Closing Documents described hereafter in Section 23 of this Agreement. (d) Commission's Order. The Commission's Order shall have been issued with no conditions materially adverse to Sellers. (e) Adverse Proceedings. As of the Closing Date, no suit, action, claim or governmental proceeding or investigation shall be pending or shall have been instituted, taken, presented or threatened against Buyer which reasonably would make unlawful the carrying out of this Agreement, cause it to be enjoined or rescinded, or impose damages against Sellers if the relief sought were granted. -24- 25 (f) Consents. On the Closing Date, each person, association, corporation or other entity, the consent or approval of which to the sale of the Broadcast Assets or any material part thereof by Sellers as herein provided is then required shall have duly consented or approved such sale of Broadcast Assets; provided, that in connection with the contract consents listed on Schedule B, only those consents marked with an asterisk need be obtained as a condition to Sellers' obligation to sell the Broadcast Assets. CLOSING DOCUMENTS 22. Closing Documents to be Delivered by Sellers. On the Closing Date, Sellers shall deliver to Buyer: (a) A Deed, Bills of Sale and other instruments of conveyance in form satisfactory to Buyer, dated the Closing Date, executed by RBK, in such form and reasonable detail as Buyer may request, conveying to Buyer good title to the assets set forth in Schedule C and to the real property described on Schedule E in accordance with the terms of this Agreement. (b) Assignment instruments in form satisfactory to Buyer, dated the Closing Date, appropriately executed by RLK, assigning the Licenses. (c) Certificates signed by an officer of Sellers to the effect set forth in Section 20(a) hereof. (d) Certified resolutions of the shareholder and Board of Directors of Sellers approving the execution and delivery of this Agreement and authorizing the consummation of the transactions contemplated hereby. (e) Such other assignments, documents and instruments as counsel for Buyer may reasonably require to evidence ownership of all property rights hereunder sold, wherever located. (f) Possession of all Broadcast Assets. (g) All consents required of any other party to any contract marked by an asterisk on Schedule B or whose consent is required pursuant to subsection 14(m) hereof. (h) A Good Standing Certificate dated within fifteen (15) days of the Closing Date issued by the Secretaries of State of the States of Delaware and Arizona. (i) An Assignment and Assumption Agreement executed by RBK in the form of Exhibit C effectuating the assignment and assumption of the liabilities to be assumed by Buyer hereunder (the "Assignment and Assumption Agreement"). (j) A written opinion of Sellers' counsel in the form of Exhibit D, dated as of the Closing Date. -25- 26 (k) A written opinion of Sellers' Commission counsel in the form of Exhibit E, dated as of the Closing Date. (l) Surveys and Title Insurance as required pursuant to Section 16. 23. Closing Documents to be Delivered by Buyer. On the Closing Date, Buyer shall deliver to Sellers: (a) Electronic funds transfers of good funds totaling the Purchase Price, including the Escrow Deposit and less or plus any adjustments thereto by virtue of Section 18. (b) A certificate signed by an officer of Buyer to the effect set forth in Section 21 hereof. (c) A certified copy of the resolution of Buyer's members authorizing the execution, delivery and performance of this Agreement and all instruments referred to herein to which Buyer is a party. (d) Good Standing Certificates dated within fifteen (15) days of the Closing issued by the Secretaries of State of the States of Delaware and Arizona. (e) The Assignment and Assumption Agreement executed by Buyer. (f) A written opinion of Buyer's counsel in the form of Exhibit F, dated as of the Closing Date. MISCELLANEOUS PROVISIONS 24. Confidentiality. Subject to the requirements of applicable law, Buyer and Sellers shall keep confidential all information obtained by them with respect to the other parties hereto in connection with this Agreement and the negotiations preceding this Agreement, and will use such information solely in connection with the transactions contemplated by this Agreement, and if the transactions contemplated hereby are not consummated for any reason, each shall return to the other party hereto, without retaining a copy thereof, any schedules, documents or other written information obtained from such other party in connection with this Agreement and the transactions contemplated hereby. Notwithstanding the foregoing, no party shall be required to keep confidential or return any information which: (a) is known or available through other lawful sources, not bound by a confidentiality agreement with the disclosing party; (b) is or becomes publicly known through no fault of the receiving party or its agents; (c) is required to be disclosed pursuant to an order or request of a judicial or governmental authority (provided the disclosing party is given reasonable prior notice of the order or request and the purpose of the disclosure); or (d) is developed by the receiving party independently of the disclosure by the disclosing party. Notwithstanding anything to the contrary herein, any party may in accordance with its legal obligations, including but not limited to filings permitted or required by the Securities Act of 1933 and the Securities and Exchange Act of 1934, the NASDAQ National Market and other similar regulatory bodies, -26- 27 make such press releases and other public statements and announcements as it deems necessary and appropriate in connection with this Agreement and the transactions contemplated hereby; provided, however, that prior to making any such unilateral press release or announcement, such party shall first communicate the same in writing to the other. 25. Consents to Assignment. To the extent that any contract identified in the Schedules is not capable of being sold, assigned, transferred, delivered or subleased without the waiver or consent of any third person (including a government or governmental unit), or if such sale, assignment, transfer, delivery or sublease or attempted sale, assignment, transfer, delivery or sublease would constitute a breach thereof or a violation of any law or regulation, this Agreement and any assignment executed pursuant hereto shall not constitute a sale, assignment, transfer, delivery or sublease or an attempted sale, assignment, offer, delivery or sublease thereof. Subject to the provisions of Section 20(d), in those cases where consents, assignments, releases and/or waivers have not been obtained at or prior to the Closing relating to the assignment to Buyer of the contracts, this Agreement and any assignment executed pursuant hereto, to the extent permitted by law, shall constitute an equitable assignment by RBK to Buyer of all of RBK's rights, benefits, title and interest in and to the contracts, and where necessary or appropriate, Buyer shall be deemed to be RBK's agent for the purpose of completing, fulfilling and discharging all of RBK's rights and liabilities arising after the Closing Date under such contracts. RBK shall use its reasonable best efforts to provide Buyer with the financial and business benefits of such contracts (including, without limitation, permitting Buyer to enforce any rights of RBK arising under such contracts), and Buyer shall, to the extent Buyer is provided with the benefits of such contracts, assume, perform and in due course pay and discharge all debts, obligations and liabilities of RBK under such contracts to the extent that Buyer was to assume those obligations pursuant to the terms hereof. 26. Time Brokerage Agreement. Simultaneously with the execution hereof, Buyer and RBK are entering into a Time Brokerage Agreement, in the form of Exhibit B hereto (the "Time Brokerage Agreement"), pursuant to which RBK has agreed to make available to Buyer the broadcasting transmission facilities of the Stations and/or cause to be broadcast on the Stations Buyer's programming from the Commencement Date (as defined in the Time Brokerage Agreement) and during the term thereof. An Event of Default by either party under the Time Brokerage Agreement shall constitute a material default under this Agreement and insofar as the cure period specified in the Time Brokerage Agreement has expired with respect to the default, no further cure period shall be afforded under the provisions hereof. 27. Employee Matters. Buyer shall be under no obligation to offer employment to any of Sellers' employees. RBK or any of its Affiliates, may terminate or retain any of RBK's employees. RBK shall be responsible for the payment of all compensation and accrued employee benefits payable to all of its employees. RBK acknowledges and agrees that it, and not Buyer, is and shall be solely responsible for any and all insurance, supplemental pension, deferred compensation, retirement and any other benefits, and related costs, premiums and claims, due, to become due, committed or otherwise promised to any person who is a retiree, former employee, or current employee of RBK, relating to the period of employment by RBK. -27- 28 28. Remedies on Default. (a) In the event of a material breach by Buyer prior to Closing of any term or condition of this Agreement or of any warranty or representation contained herein, Sellers, provided they are not otherwise in default hereunder, may terminate this Agreement and receive as their sole remedy and as liquidated damages the Escrow Deposit. The rights conferred by the above sentence may not be exercised unless Sellers have given Buyer thirty (30) days written notice of the specific nature of the breach and Buyer has failed to correct it within that period; provided, however, that Sellers shall not be required to give Buyer said notice if Sellers are exercising their rights as a result of Buyer's failure to close the transaction contemplated hereby. (b) In the event of a material breach by Sellers prior to Closing of any term or condition of this Agreement or of any warranty or representation contained herein, Buyer, provided that it is not otherwise in default hereunder, may, at its option, terminate this Agreement and recover damages from Sellers and/or pursue the right to specific performance of this Agreement, which Sellers acknowledge is an appropriate remedy because damages recoverable hereunder may be inadequate. The rights conferred by the above sentence may not be exercised unless Buyer has given Sellers thirty (30) days' written notice of the specific nature of the breach and Sellers have failed to correct it within that period; provided, however, that Buyer shall not be required to give Sellers said notice if Buyer is exercising its rights as a result of Sellers' failure to close the transaction contemplated hereby. 29. Brokerage. The parties agree that there is no brokerage commission or finder's fee payable in connection herewith, with the exception of a commission payable to SMG, which commission shall be paid by Sellers. 30. Survival of Representations and Warranties. The representations, warranties, covenants, and agreements herein contained shall be deemed and construed to be continuing representations, warranties, covenants, and agreements which shall survive the consummation of this transaction and any investigation at any time made by or on behalf of Buyer for the period provided in Section 17(h); and neither the acceptance of payments due nor the acceptance of delivery of property hereunder shall constitute a waiver of any covenant, representation, or warranty herein contained. Buyer and Sellers shall remain liable to each other in accordance with the terms and provisions of this Agreement for any damage resulting from any breach, failure, nonperformance or non-fulfillment of any of their respective covenants, representations or warranties herein notwithstanding that the injured party may elect to close this transaction with such breach outstanding. No waiver or forbearance by either party in any instance shall constitute or be deemed a waiver or forbearance in any other instance. Any party hereto may waive the conditions to its performance hereunder other than those pertaining to regulatory approval. 31. Entire Agreement. This Agreement (including the Schedules and Exhibits) and the collateral agreements executed in connection with consummation of the transactions contemplated hereby contain the entire agreement between the parties hereto with respect to the -28- 29 purchase and sale of the Broadcast Assets, and supersedes all prior agreements, written or oral, with respect thereto. 32. Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and delivered in person or sent by fax or certified mail, postage prepaid and properly addressed as follows: To Sellers: To Buyer: c/o Regent Communications, Inc. Mag Mile Media, L.L.C 50 East River Center Boulevard 980 North Michigan Avenue Suite 180 Suite 1880 Covington, Kentucky 41011-1683 Chicago, Illinois 60611 Attn: Mr. Terry S. Jacobs Attn: Bruce Buzil Facsimile: (606) 292-0352 Facsimile: (312) 587-9520 Copy to: Copy to: (which copies shall not constitute notice hereunder) Alan C. Rosser, Esq. Robert E. Neiman, Esq. Struass & Troy Foley & Lardner 2100 PNC Center 330 North Wabash Avenue 201 East Fifth Street Chicago, Illinois 60611 Cincinnati, Ohio 45202 Facsimile (312) 755-1900 Facsimile: (513) 241-8289 All notices and other communication required or permitted under this Agreement which are addressed as provided in this paragraph, if delivered personally, shall be effective upon delivery; if delivered by fax, shall be effective upon receipt; and if delivered by mail, shall be effective upon deposit in the United States mail, postage prepaid. Either party may from time to time change its address for the purpose of notice by a similar notice specifying a new address, but no such change shall be deemed to have been given until it is actually received by the party sought to be charged with the contents. 33. Waivers and Amendments; Non-Contractual Remedies; Preservation of Remedies. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Buyer and the Sellers or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. The rights and -29- 30 remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law or in equity. 34. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Arizona without regard to the conflict of law provisions thereof. 35. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors. This Agreement may be assigned by Buyer without the prior consent of Sellers; provided, however, no such assignment shall relieve Buyer of its obligations hereunder. 36. Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, of the parties hereto. 37. Exhibits and Schedules. The Exhibits and Schedules are a part of this Agreement as if fully set forth herein. All references herein to paragraphs, sections, Exhibits and Schedules shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. 38. Headings. The headings in this Agreement are for reference only, and shall not affect the interpretation of this Agreement. -30- 31 IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. BUYER: SELLERS: MAG MILE MEDIA, L.L.C. REGENT BROADCASTING OF KINGMAN, INC. By: /s/ By: /s/ Title: /s/ Title: /s/ REGENT LICENSEE OF KINGMAN, INC. By: /s/ Title: /s/ SHAREHOLDER: REGENT COMMUNICATIONS, INC., solely for purposes of being bound by the provisions of Section 17 regarding indemnification By: /s/ Title: /s/ -31- 32 (i) LIST OF SCHEDULES Schedule A Licenses Schedule B Contracts Schedule C Tangible Property Schedule C-1 Leased Personal Property Schedule D Copyrights, Logos, Jingles, Service Marks, Trademarks and Other Intangible Rights Schedule E Owned Real Property Schedule F Leased Real Property Schedule G Allocation of Purchase Price Schedule H Financials Schedule I Accounts Receivable Schedule J Non-Compliance with Laws Schedule K Environmental Matters Schedule L Restrictions on Transferability Schedule M Insurance Schedule N Employees Schedule O Sources of Funds (ii) LIST OF EXHIBITS Exhibit A Deposit Escrow Agreement Exhibit B Time Brokerage Agreement Exhibit C Assignment and Assumption Agreement Exhibit D Form of Opinion-Sellers' Counsel 33 Exhibit E Form of Opinion-Sellers' Commission Counsel Exhibit F Form of Opinion-Buyer's Counsel EX-2.C 4 EXHIBIT 2(C) 1 Exhibit 2(c) ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered this 30th day of March, 1999 by and between THE GUYANN CORPORATION, an Arizona corporation, or its assignee (hereinafter referred to as "Buyer") and REGENT LICENSEE OF FLAGSTAFF, INC., a Delaware corporation ("RLF") and REGENT BROADCASTING OF FLAGSTAFF, INC. ("RBF," and with RLF collectively referred to as "Seller"). RECITALS WHEREAS, Seller owns and operates radio stations KZGL-FM licensed to Cottonwood, Arizona, and KVNA-AM and FM licensed to Flagstaff, Arizona (together the "Stations" and each individually, a "Station") pursuant to licenses issued by the Federal Communications Commission ("FCC"), and WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain assets and assume certain obligations associated with the ownership and operation of the Stations, all on the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I PURCHASE OF ASSETS 1.1 Transfer of Assets. On the terms and subject to the conditions hereof and subject to Section 1.2, on the Closing Date (as hereinafter defined), Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and assume from Seller, all of the right, title and interest of Seller in and to all of the assets, properties, interests and rights of Seller of whatsoever kind and nature, real and personal, tangible and intangible, owned or leased (to the extent of Seller's leasehold interest) by Seller as the case may be, wherever situated, which are used or held for use in the operation of the Stations (the "Stations Assets"), including but not limited to all of Seller's right, title and interest in and to the assets, properties, interests and rights described in this Section 1.1: 1.1.1 all licenses, permits and other authorizations issued to Seller by any governmental or regulatory authority including without limitation those issued by the FCC (the licenses, permits and authorizations issued by the FCC are hereafter referred to as the "Stations Licenses") used or useful in connection with the operation of the Stations, including but not limited to those described in Schedule 7.4, along with renewals or modifications of such items between the date hereof and the Closing Date; 1.1.2 all equipment, electrical devices, antennae, cables, tools, hardware, office furniture and fixtures, office materials and supplies, inventory, motor vehicles, spare parts and all -1- 2 other tangible personal property of every kind and description, and Seller's rights therein, owned, leased (to the extent of Seller's leasehold interest) or held by Seller and used or useful in connection with the operations of the Stations, including but not limited to those items described or listed in Schedule 7.7, together with any replacements thereof and additions thereto, made between the date hereof and the Closing Date, and less any retirements or dispositions thereof made between the date hereof and the Closing Date in the ordinary course of business and consistent with past practices of Seller; provided, however, Seller agrees that the value of all such assets retired or disposed of and not replaced with an asset of like kind and quality shall not exceed $5,000 in the aggregate unless Seller has obtained the prior written approval of Buyer which shall not be unreasonably withheld. 1.1.3 all time sales agreements which are in effect on the Closing Date, all Trade Agreements (time sales agreements for consideration other than cash) which are in effect as of the date of this Agreement or which (i) are entered into between the date hereof and the Closing Date and (ii) have a term expiring on or before June 30, 1999, and (a) all other contracts, agreements, leases and legally binding contractual rights of any kind, written or oral, relating to the operation of the Stations and which are listed in Schedule 7.8 and Schedule 7.9, together with (b) all contracts, agreements, leases and legal binding contractual rights entered into or acquired by Seller between the date hereof and the Closing Date which (i) are terminable on no more than thirty (30) days notice for either no or nominal consideration or (ii) the Buyer specifically agrees at Closing to assume (collectively (a) and (b) above are referred to herein as the "Contracts"). 1.1.4 all of Seller's rights in and to the call letters KZGL-FM and KVNA-AM and FM, as well as all of Seller's rights in and to all trademarks, trade names, service marks, franchises, copyrights, including registrations and applications for registration of any of them, computer software programs and programming material of whatever form or nature (to the extent transferable), jingles, slogans, the Stations' logos and all other logos or licenses to use same and all other intangible property rights of Seller, which are used or useful in connection with the operation of the Stations, including but not limited to those listed in Schedule 7.12 (collectively, the "Intellectual Property") together with any associated goodwill and any additions thereto between the date hereof and the Closing Date; 1.1.5 all programming materials and elements of whatever form or nature owned by Seller, whether recorded on tape or other medium or intended for live performance, and all copyrights owned by or licensed to Seller that are used or useful in connection with the operation of the Stations, including all such programs, materials, elements and copyrights acquired by Seller between the date hereof and the Closing Date; 1.1.6 all of Seller's rights in and to all the files, documents, records, and books of account relating to the operation of the Stations or to the Stations Assets, including, without limitation, the Stations' local public files, programming information and studies, blueprints, technical information and engineering data, news and advertising studies or consulting reports, marketing and demographic data, sales correspondence and account files, lists of advertisers, promotional materials, credit and sales reports and filings with the FCC and all written contracts, whether current or expired, including without limitation, the Contracts to be assigned hereunder, -2- 3 logs, books and records relating to employees, financial, accounting and operation matters, but excluding records relating solely to any Excluded Asset (as hereinafter defined); 1.1.7 all of Seller's rights under manufacturers' and vendors' warranties relating to items included in the Stations Assets and all similar rights against third parties relating to items included in the Stations Assets; 1.1.8 the leasehold interests in the real property and fixtures thereon described in Section 7.8; and 1.1.9 except for Excluded Assets, such other assets, properties, interests and rights owned by Seller that are located at the Station's facilities and used or useful in connection with the operation of the Stations. The Stations Assets shall be transferred to Buyer free and clear of all debts, security interests, mortgages, trusts, claims, pledges or other liens, liabilities, encumbrances or rights of third parties whatsoever ("Encumbrances"), except for Permitted Encumbrances (as defined in Section 7.7) and except as set forth in Schedule 7.4, Schedule 7.7 and Schedule 7.8. 1.2 Excluded Assets. Notwithstanding anything to the contrary contained herein, it is expressly understood and agreed that the Stations Assets shall not include the following assets along with all rights, title and interest therein (the "Excluded Assets"): 1.2.1 all cash and cash equivalents of Seller on hand and/or in banks, including without limitation investment securities, certificates of deposit, commercial paper, treasury bills, marketable securities, asset or money market accounts and all such similar accounts or investments; 1.2.2 all investment securities and accounts receivable or notes receivable existing on the Closing Date arising from services performed by Seller in connection with the operation of the Stations prior to the Closing Date; 1.2.3 all property owned by Seller or any affiliate of Seller not located at the Stations' facilities and not used by Seller in connection with the operation of the Stations; 1.2.4 subject to the limitation set forth in Section 1.1.2 of this Agreement, all tangible and intangible personal property of Seller disposed of or consumed in the ordinary course of business consistent with the past practices of Seller between the date of this Agreement and the Closing Date; 1.2.5 all Contracts that have terminated or expired prior to the Closing Date in the ordinary course of business consistent with the past practices of Seller; 1.2.6 Seller's corporate minute books and records, corporate stock record books and such other books and records as pertain to the organization, existence or share capitalization -3- 4 of Seller and duplicate copies of such records as are necessary to enable Seller to file its tax returns and reports, as well as any other records or materials relating to Seller generally and not involving or relating to the Stations Assets or the operation or operations of the Stations; 1.2.7 contracts of insurance, and any insurance proceeds or claims made by, Seller relating to property or equipment repaired, replaced or restored by Seller prior to the Closing Date; 1.2.8 all pension, profit sharing or cash or deferred (Section 401 (k)) plans and trusts and the assets thereof and any other employee benefit plan or arrangement and the assets thereof, if any, maintained by Seller; and 1.2.9 any right, property or asset described in Schedule 1.2.9. ARTICLE 2 ASSUMPTION OF OBLIGATIONS 2.1 Assumption of Obligations. Subject to the provisions of this Section 2. 1, Section 2.2 and Section 3.3, on the Closing Date, Buyer shall assume the obligations of Seller arising or to be performed on and after the Closing Date (except to the extent such obligations represent liabilities for activities, events or transactions occurring, or conditions existing, on or prior to the Closing Date) under: (a) the Contracts; (b) all property taxes and other governmental charges on the Stations Assets; and (c) all time sales agreements and Trade Agreements. All of the foregoing liabilities and obligations shall be referred to herein collectively as the "Assumed Liabilities." 2.2 Retained Liabilities Notwithstanding anything contained in this Agreement to the contrary, Buyer expressly does not, and shall not, assume or agree to pay, satisfy, discharge or perform and will not be deemed by virtue of the execution and delivery of this Agreement or any agreement, instrument or document delivered pursuant to or in connection with this Agreement or otherwise by reason of or in connection with the consummation of the transactions contemplated hereby or thereby, to have assumed or to have agreed to pay, satisfy, discharge or perform, any liabilities, obligations or commitments of Seller of any nature whatsoever whether accrued, absolute, contingent or otherwise and whether or not disclosed to Buyer, other than the Assumed Liabilities. Seller will retain and pay, satisfy, discharge and perform in accordance with the terms thereof, all liabilities and obligations of the Seller, other than the Assumed Liabilities, including but not limited to, the obligation to assume, perform, satisfy or pay any liability, obligation, agreement, debt, charge, claim, judgment or expense incurred by or asserted against Seller related to taxes, environmental matters, stock option, pension or retirement plans or trusts, profit-sharing plans, employment contracts, employee benefits, severance of employees, product liability or warranty, negligence, contract breach or default, or other obligations, claims or judgments asserted against Buyer as successor in interest to Seller. All of such liabilities, obligations and commitments of Seller described in this Section 2.2 shall be referred to herein collectively as the "Retained Liabilities." ARTICLE 3 -4- 5 CONSIDERATION; ACCOUNTS RECEIVABLE 3.1 Delivery of Consideration. In consideration of the Agreement Not to Compete and the sale of the Stations Assets to Buyer, in addition to the assumption of certain obligations of Seller pursuant to Section 2.1 above, Buyer shall, at the Closing (as hereinafter defined), deliver to Seller Two Million Four Hundred Twenty Five Thousand Dollars ($2,425,000.00) by wire transfer of immediately available funds, subject to adjustment pursuant to the provisions of Sections 3.2 and 3.3 below (the "Purchase Price"). Notwithstanding the foregoing, the parties agree that at the Closing, Buyer, Seller and William R. Preston, Jr., Esq., as Escrow Agent (the "Indemnification Escrow Agent"), shall enter into an Indemnification Escrow Agreement in the form of Exhibit A hereto (the "Indemnification Escrow Agreement") pursuant to which Seller shall deposit with the Indemnification Escrow Agent One Hundred Thousand Dollars ($100,000), which funds shall be held in escrow for a period of at least twelve (12) months from the Closing Date and will be used to satisfy indemnification claims of Buyer pursuant to Section 15.2.1 hereof, and which funds shall otherwise be administered and released as specifically provided for in the Indemnification Escrow Agreement. 3.2 Escrow Deposit. (a) Upon the execution and delivery of this Agreement, Buyer, Seller and William R. Preston, Jr., Esq., as Escrow Agent (the "Deposit Escrow Agent"), shall enter into a Deposit Escrow Agreement in the form of Exhibit B hereto (the "Deposit Escrow Agreement") pursuant to which Buyer shall deposit the amount described below as a deposit on the amount of the Purchase Price. Such amounts held in escrow shall be applied as set forth herein and in the Deposit Escrow Agreement. (b) Pursuant to the terms of the Deposit Escrow Agreement, Buyer shall wire transfer One Hundred Thousand Dollars ($100,000) to an escrow account established pursuant to the Deposit Escrow Agreement (the "Escrow Deposit"). At the Closing, the Escrow Deposit shall be applied to the Purchase Price to be paid to Seller and the interest accrued thereon shall be paid to Buyer. As more fully described in the Deposit Escrow Agreement: (a) in the event this Agreement is terminated because of Buyer's material breach of this Agreement and all other conditions to Closing are at such time satisfied or waived (other than such conditions as can reasonably be expected to be satisfied by the Closing), the Escrow Deposit shall be paid to Seller as liquidated damages as provided in Section 16.4 hereto for Buyer's material breach of this Agreement (the payment of such sum to Seller shall discharge any liability Buyer may have to Seller), and the interest accrued on the Escrow Deposit shall be paid to Buyer; and (b) in the event this Agreement is terminated under any circumstances other than those set forth in the immediately preceding clause (a), the Escrow Deposit and the interest accrued thereon shall be paid or returned to Buyer. 3.3 Proration of Income and Expenses. 3.3.1. Except as otherwise provided herein, all deposits, reserves and prepaid and deferred income and expenses relating to the Stations Assets or the Assumed Liabilities and arising from the conduct of the business and operations of the Stations shall be prorated between Buyer and Seller in accordance with generally accepted accounting principles as of 11:59 p.m. -5- 6 local Arizona time, on the date immediately preceding the Closing Date. Such prorations shall include, without limitation, all ad valorem, real estate, property taxes and other governmental charges on the Stations Assets (but excluding taxes arising by reason of the transfer of the Stations Assets as contemplated hereby which shall be paid as set forth in Section 13.2), business and license fees, frequency discounts, music and other license fees (including any retroactive adjustments thereof, which retroactive adjustments shall not be subject to the sixty-day limitation set forth in Section 3.3.2), utility expenses, vacation pay, amounts due or to become due under Contracts, rents and similar prepaid and deferred items. 3.3.2 Except as otherwise provided herein, the prorations and adjustments contemplated by this Section 3.3, to the extent practicable, shall be made on the Closing Date. As to those prorations and adjustments not capable of being ascertained on the Closing Date, an adjustment and proration shall be made within sixty (60) calendar days after the Closing Date. 3.3.3 In the event of any disputes between the parties as to such adjustments, the amounts not in dispute shall nonetheless be paid at the time provided in Section 3.3.2 and such disputes shall be determined by an independent certified public accountant mutually acceptable to the parties, and the fees and expenses of such accountant shall be paid one-half by Seller and one-half by Buyer. 3.4 Allocation of Purchase Price. The parties have agreed upon an allocation of the Purchase Price among the Stations Assets, and the Agreement Not to Compete, as attached to this Agreement as Exhibit C. Seller and Buyer agree to use the agreed upon allocation, if any, for all tax purposes, including without limitation, those matters subject to Section 1060 of the Internal Revenue Code of 1986, as amended. 3.5 Adjustment for Barter. As of the Closing Date, Buyer shall be entitled to a credit against the Purchase Price, for the amount, if any, by which the aggregate net value of the Stations' Barter Payable (as defined below) as of the Closing Date exceeds by more than $10,000 the aggregate net value of the Stations' Barter Receivable (as defined below) as of the Closing Date. "Barter Payable" means the aggregate value of time owed pursuant to each of the Trade Agreements. "Barter Receivable" means the aggregate value of goods and services to be received pursuant to each of the Trade Agreements. 3.6 Agreement Not to Compete. At the Closing, Buyer and Seller shall enter into an Agreement Not to Compete, substantially in the form attached hereto as Exhibit D (the "Agreement Not to Compete"). The Agreement Not to Compete shall provide that Seller shall not compete with Buyer in the radio business in the Cottonwood, Prescott and Flagstaff, Arizona markets for a period of three (3) years after the Closing; provided, however, Seller shall not be restricted by the Agreement Not to Compete from being involved in the radio business in the Phoenix, Arizona market. 3.7 Accounts Receivable. Buyer acknowledges that all accounts receivable arising -6- 7 prior to the Closing Date in connection with the operation of the Stations, including but not limited to accounts receivable for advertising revenues for programs and announcements performed prior to the Closing Date, shall remain the property of RBF ("Seller Accounts Receivable") and that Buyer shall not acquire any beneficial right or interest therein or responsibility therefor under this Agreement. For a period of one hundred twenty (120) days following the Closing Date (the "Collection Period"), Buyer shall for no remuneration use substantially the same efforts to collect the Seller Accounts Receivable as Buyer uses to collect Buyer's own accounts receivable in the normal and ordinary course of business, and Buyer will apply all such amounts collected in connection with the Seller Accounts Receivable collected in connection with the Seller Accounts Receivable to the debtor's oldest account receivable first, except that any such accounts collected by Buyer who are also indebted to Buyer for programs and announcements broadcast on any of the Stations may be applied to Buyer's account if so directed by the debtor or under circumstances in which there is a bona fide dispute between RBF and such account debtor with respect to such account. Buyer's obligation and authority shall not extend to the institution of litigation, employment of counsel or a collection agency or any other extraordinary means of collection. Buyer agrees to reasonably cooperate with RBF, at RBF's expense, as to any litigation or other collection efforts instituted by RBF to collect any delinquent Seller Accounts Receivable. During the Collection Period, neither Seller nor its agents shall make any direct solicitation of any account debtor for collection purposes or institute litigation for the collection of amounts due. Any amounts relating to the Seller Accounts Receivable that are paid directly to Seller shall be retained by Seller, but Seller shall provide Buyer with prompt notice of any such payment. Except as otherwise provided herein, amounts collected by Buyer on account of Seller Accounts Receivable shall be remitted in full to RBF on a monthly basis, by the fifteenth (15) day of the month following the month for which remittance is due. Buyer shall deliver to RBF an accounting showing the amount it received during each period on each account. At the conclusion of the Collection Period and after remittance of all amounts collected, Buyer will thereafter have no further responsibility with respect to the collection of the Seller Accounts Receivable, and Buyer may apply all collections received by Buyer from any party who continues business with Buyer to obligations owing to Buyer, except for any payment received by Buyer which such party specifies is for amounts owed to RBF, in which event such specified amounts shall be paid over to RBF. Buyer shall not have the right to compromise, settle or adjust the amounts of any one of the Seller Accounts Receivable without RBF's prior written consent. RBF shall promptly pay all sales commissions relating to all of its accounts receivable whenever RBF receives payment thereon. ARTICLE 4 CLOSING 4.1 Closing. Except as otherwise mutually agreed upon by Buyer and Seller, the consummation of the transactions contemplated herein (the "Closing") shall occur within ten (10) business days after the later to occur of (a) the satisfaction or waiver of each condition to closing contained herein, other than such conditions as are reasonably anticipated to be satisfied at Closing (provided that each party hereto shall use its reasonable best efforts to cause each condition to closing to be satisfied so that the Closing may occur at the earliest possible date); and (b) the issuance of the Final Order (as defined below), or such other date as may be mutually -7- 8 agreed by the parties hereto (the "Closing Date"); provided, however, that unless Seller's senior lenders object Buyer may in its sole discretion waive the requirement that a Final Order be issued and elect (subject to clause (a) above) to close at any time (upon not less than ten (10) business days' notice to Seller) after the release of initial FCC approval on public notice that it has consented to the transaction contemplated hereby (the "Initial Approval"). For purposes of this Agreement, "Final Order" (and "Final") means an order or grant by the FCC which is no longer subject to reconsideration or review by the FCC or a court of competent jurisdiction and pursuant to which the FCC consents, as the case may be, to the assignments of the FCC Licenses contemplated by this Agreement or to the renewal of the FCC Licenses, each such order or grant being without the imposition of any conditions adverse to Buyer or any Affiliate (as hereinafter defined) of Buyer with respect to the assignment of the FCC Licenses to Buyer or the continued operation by Buyer of the Stations or the Stations Assets. In the event that the parties close before the Initial Approval has become a Final Order, the parties shall enter into an Unwind Agreement mutually acceptable to the parties and their respective senior lenders. The Closing shall be held in the offices of Buyer's counsel in Flagstaff, Arizona, or at such place and in such manner as the parties hereto may agree. ARTICLE 5 GOVERNMENTAL CONSENTS 5.1 FCC Consent. It is specifically understood and agreed by Buyer and Seller that the Closing and the assignment of the Stations Licenses and the transfer of the Stations Assets are expressly conditioned on and are subject to the prior consent and approval of the FCC without the imposition of any conditions adverse to Buyer or any Affiliate of Buyer (the "FCC Consent"). 5.2 FCC Application. Within five (5) business days after the execution of this Agreement, Buyer and RLF shall file an application with the FCC for the FCC Consent (the "FCC Application"). Buyer and RLF shall prosecute the FCC Application with all reasonable diligence and otherwise use their best efforts to obtain the FCC Consent as expeditiously as practicable (but neither Buyer nor RLF shall have any obligation to satisfy complainants or the FCC by taking any steps which would have a material adverse effect upon Buyer or RLF or upon any of their respective Affiliates). If the FCC Consent imposes any condition on Buyer or RLF or any of their respective Affiliates, such party shall use its best efforts to comply with such condition; provided, however, that neither Buyer nor RLF shall be required hereunder to comply with any condition that would have a material adverse effect upon it or any of its Affiliates. If reconsideration or judicial review is sought with respect to the FCC Consent, the party affected shall vigorously oppose such efforts for reconsideration or judicial review; provided, however, that nothing herein shall be construed to limit either party's right to terminate this Agreement pursuant to Article 16 hereof. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER Buyer hereby makes the following representations and warranties to Seller, each of which -8- 9 is true and correct on the date hereof, shall survive the Closing and shall be unaffected by any investigation heretofore or hereafter made by Seller: 6.1 Organization and Standing. Buyer is a corporation duly organized and validly existing under the laws of the State of Arizona. 6.2 Authorization and Binding Obligations. Buyer has all necessary legal power and authority to enter into and perform this Agreement and the transactions contemplated hereby, and to own or lease the Stations Assets and to carry on the business of the Stations upon the consummation of the transactions contemplated by this Agreement. Buyer's execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all necessary action on its part and, assuming the due authorization, execution and delivery of this Agreement by Seller, this Agreement will constitute the legal, valid and binding obligation of Buyer, enforceable against it in accordance with its terms, except as limited by laws affecting creditors' rights or equitable principles generally. 6.3 Qualification As Assignee. To the best of Buyer's knowledge, there are no facts which, under the Communications Act of 1934, as amended, or the existing rules and regulations of the FCC, would disqualify Buyer as an assignee of the Stations Licenses. Buyer has, and will continue to have to the Closing, funds committed and readily available to it sufficient to pay all amounts due at the Closing, as evidenced by the documentation set forth in Schedule 6.3. 6.4 Absence of Conflicting Agreements or Required Consents. Except as set forth in Article 5 hereof with respect to governmental consents, the execution, delivery and performance of this Agreement by Buyer: (a) do not conflict with the provisions of the articles of organization or operating agreement of Buyer; (b) do not require the consent of any third party; (c) will not violate any applicable law, judgment, order, injunction, decree, rule, regulation or ruling of any governmental authority to which Buyer or any of its affiliates is a party; and (d) will not, either alone or with the giving of notice or the passage of time, or both, conflict with, constitute grounds for termination of or result in a breach of the terms, conditions or provisions of, or constitute a default under, any agreement, instrument, license or permit to which Buyer is now subject. 6.5 Commissions or Finder's Fees. Neither Buyer nor any person or entity acting on behalf of Buyer has agreed to pay a commission, finder's fee or similar payment in connection with this Agreement or any matter related hereto to any person or entity. 6.6 Litigation. Buyer is not subject to any judgment, award, order, writ, injunction, arbitration decision or decree prohibiting the consummation of the transactions contemplated by this Agreement, and there are no suits, legal proceedings or investigations of any nature pending, or to the best knowledge of Buyer, threatened against or affecting Buyer that would affect Buyer's ability to carry out the transactions contemplated by this Agreement. 6.7 Full Disclosure. No representation or warranty made by Buyer contained in this Agreement nor any certificate, document or other instrument furnished or to be furnished by -9- 10 Buyer pursuant hereto contains or will contain any untrue statement of a material fact, or omits or shall omit to state any material fact required to make any statement contained herein or therein not misleading. To the best of Buyer's knowledge, there is no impending or contemplated event or occurrence that would cause any of the foregoing representations not to be true and complete on the date of such event or occurrence as if made on that date. ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF SELLER Seller makes the following representations and warranties to Buyer, each of which is true and correct on the date hereof, shall survive the Closing and shall be unaffected by any investigation heretofore or hereafter made by Buyer: 7.1 Organization and Standing. Each of RBF and RLF is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, RBF is authorized to conduct business within the State of Arizona, and each of RBF and RLF has the requisite power and authority to own, lease and operate the Stations Assets owned or leased by it and to carry on the business of the Stations as now being conducted by it and as proposed to be conducted by it between the date hereof and the Closing Date. 7.2 Authorization and Binding Obligation. Seller has the power and authority, and has taken all necessary and proper action to enter into and perform this Agreement and to consummate the actions contemplated hereby. This Agreement has been duly authorized, executed and delivered by Seller and, assuming the due authorization, execution and delivery of this Agreement by Buyer, constitutes the legal, valid and binding obligation of Seller enforceable against it in accordance with its terms, except as limited by laws affecting the enforcement of creditors' rights or equitable principles generally. 7.3 Absence of Conflicting Agreements or Required Consents. Except as set forth in Article 5 with respect to governmental consents and in Schedule 7.9 with respect to required consents, the execution, delivery and performance of this Agreement by Seller: (a) do not require the consent of any third party (including, without limitation, the consent of any governmental, regulatory, administrative or similar authority); (b) will not conflict with, result in a breach of, or constitute a violation of or default under, the provisions of Seller's certificate of organization or bylaws, or any applicable law, judgment, order, injunction, decree, rule, regulation or ruling of any governmental authority to which Seller is a party or by which Seller or any of the Stations Assets are bound; (c) will not either alone or with the giving of notice or the passage of time, or both, conflict with, constitute grounds for termination of or result in a breach of the terms, conditions or provisions of, or constitute a default under, any Contract, agreement, instrument, license or permit to which Seller or any of the Stations Assets is now subject; and (d) will not result in the creation of any lien, charge or encumbrance on any of the Stations Assets. 7.4 Government Authorizations. 7.4.1 Schedule 7.4 hereto contains a true and complete list of the Stations -10- 11 Licenses which are required for the lawful conduct of the business and operations of the Stations in the manner and to the full extent they are presently conducted (including, without limitation, auxiliary licenses associated with each Station and all tower registrations), except for such licenses, permits and authorizations the failure of which to obtain would not have a material adverse effect on Buyer or the Stations. Seller has delivered to Buyer true and complete copies of the Stations Licenses listed in Schedule 7.4, including any and all amendments and other modifications thereto. 7.4.2 RLF is the authorized legal holder of the Stations Licenses. Except as set forth Schedule 7.4, none of the Stations Licenses is subject to any restrictions or conditions which would materially limit the full operation of the Stations as now operated. 7.4.3 Except as set forth in Schedule 7.4, and except for matters affecting the radio broadcast industry generally, there are no complaints, petitions or proceedings pending or, to the best of Seller's knowledge, threatened as of the date hereof before the FCC or any other governmental or regulatory authority relating to the business or operations of the Stations. Except as set forth on Schedule 7.4, there are no applications pending by RLF before the FCC. Except as set forth in Schedule 7.4, the Stations Licenses are in good standing, are in full force and effect and are unimpaired by any act or omission of Seller or its directors, officers, or employees, and the operations of the Stations are in accordance with the Stations Licenses. Except as set forth on Schedule 7.4, no proceedings are pending or, to the best of Seller's knowledge, threatened, and to the best of Seller's knowledge there has not been any act or omission of Seller or any of its directors, officers, or employees, which may result in the revocation, modification, non-renewal or suspension of any of the Stations Licenses, the denial of any pending applications, the issuance of any cease and desist order, the imposition of any administrative actions by the FCC or any other governmental or regulatory authority with respect to the Stations Licenses or which may affect Buyer's ability to continue to operate the Stations as they are currently operated. 7.4.4 Except as set forth on Schedule 7.4, each Station is operating with the maximum facilities specified in the respective Station License. 7.4.5 To the best of Seller's knowledge: (i) none of the Stations is causing objectionable interference to the transmissions of any other broadcast station or communications facility nor has any of the Stations received any complaints with respect thereto; and (ii) no other broadcast station or communications facility is causing objectionable interference to respective transmissions of either Station. 7.4.6 Seller has no reason to believe that the Stations Licenses will not be renewed in their ordinary course. 7.4.7 All reports, forms, and statements required to be filed by RLF with the FCC with respect to the Stations since the grant of the last renewal of the Stations Licenses have been filed and are substantially complete and accurate. -11- 12 7.4.8 To the best knowledge of Seller, there are no facts which, under the Communications Act of 1934, as amended, or the existing rules and regulations of the FCC, would disqualify RLF as assignor of the Stations Licenses or cause the Stations Licenses not to be renewed in their ordinary course. 7.4.9 As if the Closing Date, the operation of the Stations and all of the Stations Assets will be in compliance in all respects with ANSI Radiation Standards C95.1-1992. 7.5 Compliance with FCC Regulations. Except as specified in Schedule 7.4, the operation of the Stations and all of the Stations Assets are in compliance in all material respects with: (a) all applicable engineering standards required to be met under applicable FCC rules; and (b) all other applicable federal, state and local rules, regulations, requirements and policies, including, but not limited to, equal employment opportunity policies of the FCC, and all applicable painting and lighting requirements of the FCC and the Federal Aviation Administration to the extent required to be met under applicable FCC rules and regulations, and to the best of Seller's knowledge, there are no filed claims to the contrary. 7.6 Taxes. Seller has filed all federal, state, local and foreign income, franchise, sales, use, property, excise, payroll and other tax returns required by law to be filed by it and has paid in full all taxes, estimated taxes, interest, assessments, and penalties due and payable by it. All returns and forms which have been filed have been true and correct in all material respects and no tax or other payment in an amount other than as shown on such returns and forms is required to be paid by Seller and has not been paid by Seller. There are no present disputes as to taxes of any nature payable by Seller which in any event could adversely affect any of the Stations Assets or the operation of the Stations by Buyer. Seller has not been advised that any of its tax returns, federal, state, local or foreign, have been or are being audited. Seller does not and will not in the future have any liability, fixed or contingent, for any unpaid federal, state or local taxes or other governmental or regulatory charges whatsoever (including without limitation withholding and payroll taxes) which could result in a lien on the Stations Assets after conveyance thereof to Buyer or in any other form of transferee liability to Buyer. 7.7 Personal Property. Schedule 7.7 hereto contains a list of all material items of tangible personal property owned by RBF and used in the conduct of the business and operations of the Stations. Schedule 7.7, also separately lists any material tangible personal property leased by RBF pursuant to leases included within the Contracts. Except as disclosed in Schedule 7.7 RBF has, and following the Closing, Buyer will have, good and marketable title to all of the items of tangible personal property which are included in the Stations Assets (other than those subject to lease) and, except as set forth in Schedule 7.7, all of which will be paid at or prior to Closing, none of such Stations Assets is, or at the Closing will be, subject to any security interest, mortgage, pledge, lease, license, lien, encumbrance, title defect or other charge, except for liens for taxes not yet due and payable, and except for the Assumed Liabilities ("Permitted Encumbrances"). The properties listed in Schedule 7.7, along with those properties subject to lease and included among the Contracts, constitute all material tangible personal property necessary to operate the Stations as the same are now being operated. Except as set forth in Schedule 7.7, all items of tangible personal property included in the Stations' Assets are in good -12- 13 operating condition and repair (ordinary wear and tear excepted), are free from all material defect and damage, are suitable for the purposes for which they are now being used, and have been properly maintained by Seller in a manner consistent with generally accepted standards of good engineering practice. 7.8 Real Property. 7.8.1 Seller owns no real property. Schedule 7.8 hereto contains a complete and accurate list and description of all real property (including without limitation, real property relating to the towers, transmitters, studio sites and offices of the Stations) leased by RBF and used by RBF in connection with the operations of the Stations (the "Leased Real Estate"). The KZGL office lease in Prescott, AZ with Adolph Bulleri, et al. is on a month-to-month basis. 7.8.2 RBF enjoys quiet possession of all Leased Real Estate. There are no present disputes or claims with respect to offsets or defenses by any party against the other under any of the Contracts relating to the Leased Real Estate. Seller has delivered to Buyer true and complete copies of all Contracts relating to the Leased Real Estate. Except as set forth in Schedule 7.9 hereto, the assignment of the Contracts relating to the Leased Real Estate to Buyer will not permit the other party to accelerate the rent, cause the terms thereof to be renegotiated or constitute a default thereunder, and will not require the consent of any such party to the assignment thereof to Buyer. 7.8.3 Except as described in Schedule 7.8, to the best of Seller's knowledge none of the buildings, structures, improvements or fixtures constructed on any Leased Real Estate, in connection with the operation of the Stations, including, but not limited to, all towers, guy wires and guy anchors and ground radials, encroach upon adjoining real property, and all such buildings, structures, improvements and fixtures are constructed and are operated and used in conformance with all "set back" lines, easements, covenants, restrictions and all applicable building, fire, zoning, health and safety laws and codes. To the best of Seller's knowledge, no utility lines serving such Leased Real Estate pass over the lands of a third party except where appropriate easements have been obtained. To the best of Seller's knowledge, except as described in Schedule 7.8, all buildings, structures, towers, antennae, improvements and fixtures situated on the Leased Real Estate are in good and technically sound operating condition, ordinary wear and tear excepted, have no latent structural mechanical or other defects of material significance, are reasonably suitable for the purposes for which they are being used and each has adequate rights of ingress and egress, utility service for water and sewer, telephone, electric and/or gas, and sanitary service for the conduct of the business and operations of the Stations as presently conducted. There is no pending or, to the best knowledge of Seller, threatened condemnation or other legal proceeding or action of any kind relating to such real property and/or title thereto. 7.9 Contracts. Schedule 7.9 lists all Contracts to which Seller is a party, or which are binding on Seller, as of the date of this Agreement, except for contracts which are not to be assumed by or assigned to Buyer. Those Contracts listed on Schedule 7.9, if any, requiring the consent of a third party to assignment are identified by an asterisk in the left margin of Schedule 7.9. Those Contracts, if any, that Seller and Buyer have agreed are material to the operation of -13- 14 the Stations Assets and the valid assignment of which and receipt by Buyer of consents thereto (along with appropriate estoppel certificates for the leases related to the Leased Real Estate) is a condition to the consummation of the transactions contemplated hereby (the "Fundamental Contracts") are identified by an "F" in the left margin of Schedule 7.9. 7.10 Status of Contracts, etc. Seller has delivered to Buyer true and complete copies of all material written Contracts and true and complete memoranda of all material oral Contracts, including any and all amendments and other modifications thereto. All of such material Contracts are in full force and effect and are valid, binding and enforceable in accordance with their respective terms, except as limited by laws affecting creditors' rights or equitable principles generally. Seller has complied in all respects with all material Contracts and is not in default beyond any applicable grace periods under any thereof and, to the best of Seller's knowledge, no other contracting party is in default under any thereof. 7.11 Environmental. To the best of Seller's knowledge, except as set forth in Schedule 7.11, Seller has complied with all federal, state and local environmental laws, rules and regulations as in effect on the date hereof applicable to each of the Stations and its operations, including but not limited to the FCC's guidelines regarding RF radiation. To the best of Seller's knowledge, no hazardous or toxic waste, substance, material or pollutant (as those or similar terms are defined under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. SectionSection 9601 et seq., Toxic Substances Control Act. 15 U. S. C. SectionSection 2601 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. SectionSection 6901 et seq. or any other applicable federal, state and local environmental law, statute, ordinance, order, judgment rule or regulation relating to the environment or the protection of human health ("Environmental Laws")), including but not limited to, any asbestos or asbestos-related products, oils, or petroleum-derived compounds, CFCs, PCBs, or underground storage tanks (collectively Hazardous Materials"), have been released, emitted or discharged by Seller or any predecessor of Seller in violation of applicable laws or regulations, or are currently located in quantities in violation of applicable laws and regulations in, on, or under or about the real property on which the Stations Assets are situated, including without limitation the transmitter sites, or contained in the tangible personal property included in the Stations Assets which were placed there by Seller or any predecessor of Seller. To the best of Seller's knowledge, the Stations Assets and RBF's use thereof are not in violation of any Environmental Laws or any occupational, safety and health or other applicable law now in effect. With respect to Buyer, Seller shall be as of the Closing Date and thereafter solely responsible for all environmental liabilities, of whatsoever kind and nature, arising out of or attributable to the operation or ownership of the Stations Assets prior to the Closing Date. 7.12 Intellectual Property. Schedule 7.12 hereto is a true and complete list of all material Intellectual Property applied for, registered or issued to, and owned by RBF or under which RBF is a licensee and which is used in the conduct of Seller's business and operations, except for computer software licensed for use by the Stations. Except as set forth on Schedule 7.12, to the best of Seller's knowledge: (a) RBF's right, title and interest in the Intellectual Property as owner or licensee, as applicable, is free and clear of all liens, claims, encumbrances, rights, or equities whatsoever of any third party and, to the extent any of the Intellectual Property -14- 15 is licensed to RBF, such interest is valid and uncontested by the licensor thereof or any third party; (b) all computer software located at the Stations' facilities or used in the Stations' business or operations is properly licensed to RBF, and all of RBF's uses of such computer software are authorized under such licenses; (c) all of RBF's right, title and interest in and to the Intellectual Property and computer software shall be assignable to Buyer at Closing, and upon such assignment, Buyer shall receive complete and exclusive right, title, and interest in and to all tangible and intangible property rights existing in the Intellectual Property; and (d) there are no infringements or unlawful use of such Intellectual Property by RBF in connection with RBF's business or operations. 7.13 Financial Statements. Set forth in Schedule 7.13 are complete copies of the income statements of RBF relating to the Stations for the twelve-month period ended December 31, 1998, together with monthly income statement for the Stations for the month of January 1999 (collectively, the "Financial Statements"). The Financial Statements were prepared in accordance with the books and records of RBF and in accordance with generally accepted accounting principles consistently applied and maintained throughout the periods indicated except for the absence of footnotes and customary year-end adjustments and as has been disclosed in Schedule 7.13. The Financial Statements present fairly the results of operations of the Stations for the periods indicated. None of the Financial Statements understates the true costs and expenses of conducting the business and operations of the Stations, fails to disclose any material liability, or inflates (or will inflate) the revenues of the Stations for any reason. 7.14 Personnel Information. 7.14.1 Schedule 7.14 contains a true and complete list of all persons employed at the Stations, including date of hire, a description of material compensation arrangements (other than employee benefit plans set forth in Schedule 7.17) and a list of other material terms of any and all agreements affecting such persons and their employment by RBF. Seller has received no notice that, and Seller is not aware of, any individual employee who shall or is likely to terminate his or her employment relationship with the Stations upon the execution of this Agreement or after the Closing. 7.14.2 Seller, with respect to the Stations, is not a party to any contract or agreement with any labor organization, nor has Seller agreed to recognize any union or other collective bargaining unit, nor has any union or other collective bargaining unit been certified as representing any employees of RBF at the Stations. Seller has no knowledge of any organization effort currently being made or threatened by or on behalf of any labor union with respect to employees of RBF at the Stations. 7.14.3 To the best of Seller's knowledge, except as disclosed in Schedule 7.14, Seller, with respect to the Stations, has complied in all material respects with all laws relating to the employment of labor, including, without limitation, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and those laws relating to wages, hours, collective bargaining, unemployment insurance, workers' compensation, equal employment opportunity and payment and withholding of taxes. -15- 16 7.15 Litigation. Seller is not subject to any judgment, award, order, writ, injunction, arbitration decision or decree relating to the conduct of the business or the operation of the Stations or any of the Stations Assets, and there is no litigation, administrative action, arbitration, proceeding or investigation pending or, to the best knowledge of Seller, threatened against Seller with respect to, related to or in connection with the operation of the Stations in any federal, state or local court, or before any administrative agency or arbitrator (including, without limitation, any proceeding which seeks the forfeiture of, or opposes the renewal of, any of the Stations Licenses), or before any other tribunal duly authorized to resolve disputes. In particular, but without limiting the generality of the foregoing, to the best knowledge of Seller, there are no applications, complaints or proceedings pending or threatened before the FCC or any other governmental organization with respect to the business or operations of the Stations. 7.16 Compliance With Laws. To the best of Seller's knowledge, (i) Seller is not in material violation of, nor has Seller received any notice asserting any non-compliance by it in connection with the operation of the Stations or use or ownership of any of the Stations Assets with, any applicable statute, rule or regulation, whether federal, state or local; (ii) Seller is not in default with respect to any judgment, order, injunction or decree of any court administrative agency or other governmental authority or any other tribunal duly authorized to resolve disputes which relates to the transactions contemplated hereby; and (iii) Seller is in material compliance with all laws, regulations and governmental orders applicable to the conduct of the business and operations of the Stations. 7.17 Employee Benefit Plans. Schedule 7.17 contains a true and complete list as of the date of this Agreement of all employee benefit plans applicable to the employees of RBF employed at the Stations, and a brief description thereof. Seller does not maintain any other employee benefit plan as the term is defined in Section 3 of the Employee Retirement Income Security Act of 1974, as amended, applicable to the employees of RBF employed at the Stations. 7.18 Commissions or Finder's Fees. Neither Seller nor any person or entity acting on behalf of Seller has agreed to pay a commission, finder's fee or similar payment in connection with this Agreement or any matter related hereto to any person or entity. 7.19 Conduct of Business in Ordinary Course: Adverse Changes. Since the date Seller acquired the Stations, (a) Seller has conducted the business of the Stations only in the ordinary course consistent with Seller's past practices; (b) there has not been any material adverse change in the physical condition of the tangible assets of the Stations, nor any damage, destruction, or physical loss affecting any of the Stations Assets; and (c) Seller has not created, assumed, or suffered any mortgage, pledge, lien or encumbrance on any of the Stations Assets. 7.20 Instruments of Conveyance: Good Title. The instruments to be executed by Seller and delivered to Buyer at the Closing, conveying the Stations Assets to Buyer, will transfer good and marketable title to the Assets free and clear of all liabilities (absolute or contingent), security interests, mortgages, pledges, liens, obligations and encumbrances, except for Permitted Encumbrances and except as set forth in Schedule 7.4, Schedule 7.7 and Schedule 7.8 hereto and -16- 17 those obligations referred to in the first sentence of Section 2.1 hereof. 7.21 Undisclosed Liabilities. Excepting only for the Assumed Liabilities, no liability or obligation of any nature, whether accrued, absolute, contingent or otherwise, relating to Seller, the Stations or the Stations Assets exists which could, after discharging any indebtedness therefor at or prior to the Closing, result in any form of transferee liability against Buyer or subject the Stations Assets to any lien, encumbrance, claim, charge, security interest or imposition whatsoever or otherwise affect the full, free and unencumbered use of the Stations Assets by Buyer. 7.22 Full Disclosure. No representation or warranty made by Seller contained in this Agreement nor any certificate, document or other instrument furnished or to be furnished by Seller pursuant hereto contains or will contain any untrue statement of a material fact, or omits or shall omit to state any material fact required to make any statement contained herein or therein not misleading. To the best of Seller's knowledge, there is no impending or contemplated event or occurrence that would cause any of the foregoing representations not to be true and complete on the date of such event or occurrence as if made on that date. Whenever in this Article 7 a warranty or representation is qualified by a word or phrase referring to the best of Seller's knowledge (or similar terms), it shall mean to the actual knowledge of Terry S. Jacobs, William L. Stakelin, David Remund (Seller's engineer), and Jay Mlazgar (Seller's General Manager), after having made due inquiry of the employees, representatives and agents of Seller who would be expected to have knowledge of the matter, and with respect to the condition of any Stations Assets, records or other object, after having inspected it. ARTICLE 8 COVENANTS OF BUYER 8.1 Closing. Subject to Article 11 hereof, on the Closing Date, Buyer shall purchase the Stations Assets from Seller as provided in Article I hereof and shall assume the Assumed Liabilities of Seller as provided in Article 2 hereof. 8.2 Notification. Buyer will provide Seller prompt written notice of any change in any of the information contained in the representations and warranties made in Article 6. Buyer shall also notify Seller of any litigation, arbitration or administrative proceeding pending or, to its knowledge, threatened against Buyer which challenges the transactions contemplated hereby. 8.3 No Inconsistent Action. Buyer shall not take any action which is materially inconsistent with its obligations under this Agreement or take any action which would cause any representation or warranty of Buyer contained herein to be or become false or invalid or which could hinder or delay the consummation of the transactions contemplated by this Agreement. 8.4 Removal of Impediments. Should any fact relating to Buyer which would cause the FCC to deny its consent to the transactions contemplated by this Agreement come to Buyer's -17- 18 attention, Buyer will promptly notify Seller thereof and will use its reasonable efforts to take such steps as may be necessary to remove any such impediment to the FCC's consent to the transactions contemplated by this Agreement. ARTICLE 9 COVENANTS OF SELLER 9.1 Pre-Closing Covenants. Seller covenants and agrees with respect to the Stations that, between the date hereof and the Closing Date or the earlier termination of this Agreement in accordance with its terms, except as expressly permitted by this Agreement or with the prior written consent of Buyer, Seller shall act in accordance with the following: 9.1.1 Seller shall conduct the business and operations of the Stations in the ordinary and prudent course of business consistent with past practice and with the intent of preserving the ongoing operations and assets of the Stations, including but not limited to maintaining the independent identity of the Stations. 9.1.2 Seller shall use its reasonable best efforts to: (i) preserve the operation of the Stations intact; (ii) preserve the business of the Stations' advertisers, customers, suppliers and others having business relations with the Stations; and (iii) continue to conduct financial operations of the Stations, including without limitation, their credit and collection and pricing policies and practices, all in the ordinary course of business consistent with past practices, and, without limiting the generality of the foregoing, Seller shall not discount its accounts receivable, accelerate its efforts to collect accounts receivable or take any other action or use any other collection method not regularly taken or used by it in the ordinary course of business prior to the date of this Agreement. 9.1.3 Except for conditions described in Schedule 7.4, Seller shall operate the Stations in all respects in accordance with FCC rules and regulations and the Stations Licenses and with all other laws, regulations, rules and orders, and shall not cause or permit by any act, or failure to act, any of the Stations Licenses to expire, be surrendered, adversely modified, or otherwise terminated, or the FCC to institute any proceedings for the suspension, revocation or adverse modification of any of the Stations Licenses, or fail to prosecute with due diligence any pending applications to the FCC. 9.1.4 Should any fact relating to Seller which would cause the FCC to deny its consent to the transactions contemplated by this Agreement come to Seller's attention, Seller will promptly notify Buyer thereof and will use its reasonable best efforts to take such steps as may be necessary to remove any such impediment to the FCC's consent to the transactions contemplated by this Agreement. 9.1.5 Except for changes or actions in the ordinary course of business consistent with past practices, Seller shall not: (a) sell broadcast time on a prepaid basis (other than in the course of existing credit practices); (b) except as set forth on Schedule 7.14, or as required by applicable law or written agreements currently in effect, grant or agree to grant any general -18- 19 increases in the rates of salaries or compensation payable to employees of the Stations (provided that no such increase to any employee shall exceed the amount budgeted therefor in RBF's 1999 budgets) unless such increase is as a result of increased commissions payable to employees on account of increased advertising sales; (c) except as required by written agreements currently in effect, grant or agree to grant any specific bonus or increase in compensation to any executive management employee of the Stations (provided that no such increase to any employee shall exceed the amount budgeted therefor in RBF's 1999 budgets) unless such bonus or increase is as a result of increased commissions payable to employees on account of increased advertising sales or is used as an incentive for employees to remain with the Stations up to the Closing; (d) provide for any new pension, retirement or other employment benefits for employees of the Stations or any increases in any existing benefits, (e) modify, change or terminate any Contract other than in the ordinary course of business; or (f) change the advertising rates in effect as of the date hereof other than in the ordinary course of business. 9.1.6 Seller shall give or cause the Stations to give Buyer and Buyer's counsel, accountants, engineers and other representatives, at Buyer's reasonable request and upon reasonable notice, full and reasonable access during normal business hours to all of Seller's personnel, properties, books, Contracts, reports and records (including, without limitation, financial information and tax returns relating to the Stations, and environmental audits in existence with respect to the Stations Assets), real estate, buildings and equipment relating to the Stations and to the Stations' employees, and to furnish Buyer with information and copies of all documents and agreements relating to the Stations and the operation thereof (including but not limited to financial and operating data and other information concerning the financial condition, results of operations and business of the Stations, and any engineering materials in Seller's possession regarding the operations of the Stations and the ability, if any, of the Stations' signals to be upgraded) that Buyer may reasonably request. The rights of Buyer under this Section 9.1.6 shall not be exercised in such a manner as to interfere unreasonably with the business of the Stations. 9.1.7 Seller shall use its reasonable best efforts to obtain any third party consents necessary for the assignment of any Contract (which shall not require any payment to any such third party except for such amounts contemplated by the Contract to be assigned, and any amount then owing by Seller to such third party). 9.2 Notification. Seller will provide Buyer prompt written notice of any change in any of the information contained in the representations and warranties made in Article 7 or any Schedule. Seller agrees to notify Buyer of any litigation, arbitration or administrative proceeding pending or, to the best of its knowledge, threatened, which challenges the transactions contemplated hereby. Seller shall promptly notify Buyer if any of the normal broadcast transmissions of any Station are interrupted, interfered with or in any way impaired, and shall provide Buyer with prompt written notice of the problem and the measures being taken to correct such problem. 9.3 No Inconsistent Action. Seller shall not take any action which is materially inconsistent with its obligations under this Agreement nor take any action which would cause -19- 20 any representation or warranty of Seller contained herein to be or become false or invalid or which could hinder or delay the consummation of the transactions contemplated by this Agreement. 9.4 Closing. Subject to Article 12 hereof, on the Closing Date, Seller shall transfer, convey, assign and deliver to Buyer the Stations Assets and the Assumed Liabilities as provided in Articles 1 and 2 and Section 7.20 of this Agreement. 9.5 Other Items. Until the Closing Date or the earlier termination of this Agreement in accordance with the terms hereof, except with Buyer's prior written consent, Seller shall not: (a) waive or release any right relating to the business or operations of the Stations, except for adjustments or settlements made in the ordinary course of business consistent with its past practices; (b) transfer or grant any rights under any of the Stations Licenses; (c) enter into any commitment for capital expenditures for which Buyer would become liable after the Closing Date; (d) introduce any material changes in the broadcast hours or in the format of the Stations or any other material change in the Station's programming policies; (e) change the call letters of any of the Stations; and (f) enter into any transaction or make or enter into any contract or commitment with respect to any of the Stations or the Stations Assets which by reason of its size or otherwise is not in the ordinary course of business consistent with past practices. 9.6 Exclusivity. Seller agrees that, commencing on the date hereof through the Closing or earlier termination of this Agreement, Buyer shall have the exclusive right to consummate the transactions contemplated herein, and during such exclusive period, Seller agrees that neither Seller, nor any director, officer, employee or other representative of Seller: (a) will initiate, solicit or encourage, directly or indirectly, any inquiries, or the making or implementation of any proposal or offer with respect to a merger, acquisition, consolidation or similar transaction involving, or any purchase of, all or any portion of the Stations Assets (any such inquiry, proposal or offer being hereinafter referred to as an "Acquisition Proposal" and any such transaction being hereinafter referred to as an "Acquisition"); (b) will engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal; or (c) will continue any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal or Acquisition and will take the necessary steps to inform the individuals or entities referred to above of the obligations undertaken by them in this Section 9.6. Notwithstanding the foregoing, in the event that Buyer defaults in any material respect in the observance or in the due and timely performance of any of its covenant or agreements herein contained and such default shall not be cured within ten (10) business days of notice of default served by Seller, Seller's obligations under this Section 9.6 shall be null and void. ARTICLE 10 JOINT COVENANTS -20- 21 Buyer and Seller each covenant and agree that between the date hereof and the Closing Date, they shall act in accordance with the following: 10.1 Confidentiality. Subject to the requirements of applicable law, Buyer and Seller shall each keep confidential all information obtained by it with respect to the other parties hereto in connection with this Agreement and the negotiations preceding this Agreement, and will use such information solely in connection with the transactions contemplated by this Agreement, and if the transactions contemplated hereby are not consummated for any reason, each shall return to each other party hereto, without retaining a copy thereof, any schedules, documents or other written information obtained from such other party in connection with this Agreement and the transactions contemplated hereby. Notwithstanding the foregoing, no party shall be required to keep confidential or return any information which: (a) is known or available through other lawful sources, not bound by a confidentiality agreement with the disclosing party; (b) is or becomes publicly known through no fault of the receiving party or its agents; (c) is required to be disclosed pursuant to an order or request of a judicial or governmental authority (provided the disclosing party is given reasonable prior notice of the order or request and the purpose of the disclosure); or (d) is developed by the receiving party independently of the disclosure by the disclosing party. Notwithstanding anything to the contrary herein, either party may in accordance with its legal obligations, including but not limited to filings permitted or required by the Securities Act of 1933 and the Securities and Exchange Act of 1934, make such press releases and other public statements and announcements as it deems necessary and appropriate in connection with this Agreement and the transactions contemplated hereby; provided, however, that prior to making any such unilateral press release or announcement, such party shall first communicate the same in writing to the other. 10.2 Cooperation. Subject to express limitations contained elsewhere herein, Buyer and Seller agree to cooperate fully with one another in taking any reasonable actions (including without limitation, reasonable actions to obtain the required consent of any governmental instrumentality or any third party and to permit Buyer to take such steps as it may desire to take prior to the Closing Date to remedy those conditions described in Schedule 7.4 as exceptions to Seller's warranties and representations) necessary or helpful to accomplish the transactions contemplated by this Agreement, including but not limited to the satisfaction of any condition to closing set forth herein. 10.3 Control of Stations. Buyer shall not, directly or indirectly, control, supervise or direct the operations of the Stations prior to the Closing. Such operations, including complete control and supervision of all Station programs, employees and policies, shall be the sole responsibility of Seller. 10.4 Consents to Assignment. To the extent that any Contract identified in the Schedules is not capable of being sold, assigned, transferred, delivered or subleased without the waiver or consent of any third person (including a government or governmental unit), or if such sale, assignment, -21- 22 transfer, delivery or sublease or attempted sale, assignment, transfer, delivery or sublease would constitute a breach thereof or a violation of any law or regulation, this Agreement and any assignment executed pursuant hereto shall not constitute a sale, assignment, transfer, delivery or sublease or an attempted sale, assignment, offer, delivery or sublease thereof. Subject to the provisions of Section 11.5, in those cases where consents, assignments, releases and/or waivers have not been obtained at or prior to the Closing relating to the assignment to Buyer of the Contracts, this Agreement and any assignment executed pursuant hereto, to the extent permitted by law, shall constitute an equitable assignment by Seller to Buyer of all of Seller's rights, benefits, title and interest in and to the Contracts, and where necessary or appropriate, Buyer shall be deemed to be Seller's agent for the purpose of completing, fulfilling and discharging all of Seller's rights and liabilities arising after the Closing Date under such Contracts. Seller shall use its reasonable best efforts to provide Buyer with the financial and business benefits of such Contracts (including, without limitation, permitting Buyer to enforce any rights of Seller arising under such Contracts), and Buyer shall, to the extent Buyer is provided with the benefits of such Contracts, assume, perform and in due course pay and discharge all debts, obligations and liabilities of Seller under such Contracts to the extent that Buyer was to assume those obligations pursuant to the terms hereof. 10.5 Filings. In addition to the covenants of the parties set forth in Article 5 hereto, as promptly as practicable after the execution of this Agreement, Buyer and Seller shall use their reasonable best efforts to obtain, and to cooperate with each other in obtaining, all authorizations, consents, orders and approvals of any governmental authority that may be or become necessary in connection with the consummation of the transactions contemplated by this Agreement, and to take all reasonable actions to avoid the entry of any order or decree by any governmental authority prohibiting the consummation of the transactions contemplated hereby, including without limitation, any reports or notifications that may be required to be filed with the FCC, and each shall furnish to one another all such information in its possession as may be necessary for the completion of the reports or notifications to be filed by the other. 10.6 Bulk Sales Laws. Buyer hereby waives compliance by Seller with the provisions of the "bulk sales" or similar laws of any state. Seller agrees to indemnify Buyer and hold it harmless from any and all loss, cost, damage and expense (including but not limited to, reasonable attorney's fees) sustained by Buyer as a result of any failure of Seller to comply with any "bulk sales" or similar laws. 10.7 Employee Matters. RBF shall be responsible for the payment of all compensation and accrued employee benefits payable to all employees up to the Closing Date. RBF acknowledges and agrees that it, and not Buyer, is and shall be solely responsible for any and all insurance, supplemental pension, deferred compensation, retirement and any other benefits, and related costs, premiums and claims, due, to become due, committed or otherwise promised to any person who, as of the Closing Date is a retiree, former employee, or current employee of RBF, relating to the period up to the Closing Date. Buyer, as a purchaser of the Stations Assets, shall assume no employee benefit plans, programs or practices, whether or not set forth in writing, maintained by Seller at any time. ARTICLE 11 CONDITIONS OF CLOSING BY BUYER -22- 23 The obligations of Buyer hereunder are, at its option, subject to satisfaction, at or prior to the Closing Date, of each of the following conditions: 11.1 Representations, Warranties and Covenants. 11.1.1 All representations and warranties of Seller made in this Agreement or in any Exhibit, Schedule or document delivered pursuant hereto, shall be true and complete in all material respects as of the date hereof and on and as of the Closing Date as if made on and as of that date, except for changes (a) expressly permitted or contemplated by the terms of this Agreement or (b) in the ordinary course of business which are not, either individually or in the aggregate, material and adverse. 11.1.2 All of the terms, covenants and conditions set forth in this Agreement to be complied with and performed by Seller on or prior to the Closing Date shall have been complied with or performed in all material respects. 11.1.3 Buyer shall have received a certificate, dated as of the Closing Date, from Seller, executed by an officer of Seller to the effect that: (a) the representations and warranties of Seller contained in this Agreement are true and complete in all material respects on and as of the Closing Date as if made on and as of that date, except for changes (i) expressly permitted or contemplated by the terms of this Agreement, or (ii) in the ordinary course of business which are not, either individually or in the aggregate, material and adverse; and (b) Seller has complied with or performed in all material respects all terms, covenants and conditions set forth in this Agreement to be complied with or performed by it on or prior to the Closing Date. 11.2 Governmental Consents. The FCC Final Approval shall have been obtained. 11.3 Governmental Authorizations. RLF shall be the holder of the Stations Licenses and there shall not have been any modification of any of such Licenses which has a material adverse effect on any of the Stations or the operations thereof. No application shall be pending for the renewal of any of the Stations Licenses. No proceeding shall be pending which seeks, or the effect of which reasonably could be, to revoke, cancel, fail to renew, suspend or adversely modify any of the Stations Licenses. 11.4 Adverse Proceedings. No suit, action, claim or governmental proceeding shall be pending or threatened in writing against, and no order, decree or judgment of any court, agency or other governmental authority shall have been rendered (and remain in effect) against, any party hereto which: (a) would render it unlawful, as of the Closing Date, to effect the transactions contemplated by this Agreement in accordance with its terms; (b) questions the validity or legality of any transaction contemplated hereby; (c) seeks to enjoin any transaction contemplated hereby; (d) seeks material damages on account of the consummation of any transaction contemplated hereby; or (e) is a petition of bankruptcy by or against Seller, an assignment by Seller for the benefit of its creditors, or other similar proceeding. -23- 24 11.5 Third-Party Consents. All Material Contracts shall be in full force and effect on the Closing Date, and Seller shall have obtained and shall have delivered to Buyer all appropriate third-party consents in form and substance acceptable to Buyer (including estoppel certificates for the leases related to the Leased Real Estate) in connection with the assignment of the Material Contracts to Buyer. 11.6 Closing Documents. Seller shall have delivered or caused to be delivered to Buyer, on the Closing Date, all bills of sale, general warranty deeds, endorsements, assignments and other instruments of conveyance reasonably satisfactory in form and substance to Buyer, effecting the sale, transfer, assignment and conveyance of the Stations Assets to Buyer, including, without limitation, each of the documents required to be delivered by it pursuant to Article 14. 11.7 No Adverse Change in Physical Condition of Tangible Assets. No material adverse change in physical condition of any of the tangible assets included in the Station Assets, which change is caused by or arises out of any breach by Seller of any of its representations, warranties, covenants or agreements hereunder shall have occurred or be reasonably likely to occur. 11.8 Phase One Environmental Audit. Buyer shall have received the Phase I environmental site assessments received by Seller related to the Stations during calendar year 1998 (copies of which are included in Schedule 7.11), which assessments, if Buyer requests within thirty (30) days after the date of this Agreement, shall be recertified to Buyer in all material respects by the environmental consultants who prepared the assessments, the cost for such recertification to be paid by Buyer. ARTICLE 12 CONDITIONS OF CLOSING BY SELLER The obligations of Seller hereunder are, at its option, subject to satisfaction, at or prior to the Closing Date, of each of the following conditions: 12.1 Representations, Warranties and Covenants. 12.1.1 All representations and warranties of Buyer made in this Agreement or in any Exhibit, Schedule or document delivered pursuant hereto, shall be true and complete in all material respects as of the date hereof and on and as of the Closing Date as if made on and as of that date, except for changes expressly permitted or contemplated by the terms of this Agreement. 12.1.2 All the terms, covenants and conditions set forth in this Agreement to be complied with and performed by Buyer on or prior to the Closing Date shall have been complied with or performed in all material respects. 12.1.3 Seller shall have received a certificate, dated as of the Closing Date, -24- 25 executed by an officer of Buyer, to the effect that: (a) the representations and warranties of Buyer contained in this Agreement are true and complete in all material respects on and as of the Closing Date as if made on and as of that date; and (b) Buyer has complied with or performed in all material respects all terms, covenants and conditions to be complied with or performed by it on or prior to the Closing Date. 12.2 Governmental Consents. The FCC Initial Approval shall have been obtained. 12.3 Adverse Proceedings. No suit, action, claim or governmental proceeding shall be pending or threatened in writing against, and no other decree or judgment of any court, agency or other governmental authority shall have been rendered (and remain in effect) against, any party hereto which: (a) would render it unlawful, as of the Closing Date, to effect the transactions contemplated by this Agreement in accordance with its terms; (b) questions the validity or legality of any transaction contemplated hereby; (c) seeks to enjoin any transaction contemplated hereby; or (d) seeks material damages on account of the consummation of any transaction contemplated hereby. 12.4 Closing Documents. Buyer shall have delivered or caused to be delivered to Seller, on the Closing Date, the Purchase Price and each of the documents required to be delivered by it pursuant to Article 14. ARTICLE 13 TRANSFER TAXES: FEES AND EXPENSES 13.1 Expenses. Except as set forth in Section 13.2 hereof or otherwise expressly set forth in this Agreement, each party hereto shall be solely responsible for all costs and expenses incurred by it in connection with the negotiation, preparation and performance of and compliance with the terms of this Agreement including, but not limited to, the costs and expenses incurred pursuant to Article 5 hereof and the fees and disbursements of counsel and other advisors. 13.2 Specific Charges. All costs of transferring the Stations Assets in accordance with this Agreement, including recordation, transfer and documentary taxes and fees, and any excise, sales or use taxes, shall be shall be paid by Seller. Each party shall pay any filing or grant fees imposed upon it by any governmental authority the consent of which or the filing with which is required for the consummation of the transactions contemplated hereby, with the exception of filing fees of the FCC which shall be shared equally by Buyer and Seller. ARTICLE 14 DOCUMENTS TO BE DELIVERED AT CLOSING 14.1 Seller's Documents. At the Closing, Seller shall deliver or cause to be delivered to Buyer the following: 14.1.1 Certified resolutions of the directors and sole shareholder of Seller approving the execution and delivery of this Agreement and authorizing the consummation of the -25- 26 transactions contemplated hereby; 14.1.2 A certificate of Seller, dated the Closing Date, in the form described in Section 11.1.3; 14.1.3 Governmental certificates showing that (a) each of RBF and RLF is duly organized, validly existing and in good standing in the State of Delaware, (b) RBF is qualified to transact business and in good standing in the State of Arizona; and (c) each of RBF and RLF has filed all returns, paid all taxes due' thereon and is currently subject to no assessment, each certified as of a date not more than thirty (30) days before the Closing Date; 14.1.4 Such certificates, bills of sale, general warranty deeds, assignments, documents of title and other instruments of conveyance, assignment and transfer (including without limitation any necessary consents to conveyance, assignment or transfer required to be delivered hereunder), and lien releases, all in form satisfactory to Buyer and Buyer's counsel, as shall be effective to vest in Buyer good and marketable title in and to the Stations Assets, free, clear and unencumbered except for Permitted Encumbrances, if any, as set forth on Schedule 7.7 and Schedule 7.8. 14.1.5 An Assignment and Assumption Agreement in the form of Exhibit E effectuating the assignment and assumption of the Assumed Liabilities (the "Assignment and Assumption Agreement"); 14.1.6 The Indemnification Escrow Agreement; 14.1.7 At the time and place of Closing, originals and all copies of all program, operations, transmission or maintenance logs and all other records required to be maintained by the FCC with respect to the Stations, including the public files of the Stations, shall be left at the Stations and thereby delivered to Buyer; 14.1.8 A written opinion of Seller's corporate counsel substantially in the form attached as Exhibit F, dated as of the Closing Date (provided, as to matters of Arizona law, such counsel may rely on or deliver a separate opinion of Arizona counsel); 14.1.9 A written opinion of Seller's FCC counsel confirming the matters set forth in Exhibit G, dated as of the Closing Date; 14.1.10 The Agreement Not to Compete; and 14.1.11 Such additional information, materials, agreements, documents and instruments as Buyer and its counsel may reasonably request in order to consummate the Closing. 14.2 Buyer's Documents. At the Closing, Buyer shall deliver or cause to be delivered to Seller the following: -26- 27 14.2.1 Certified resolutions of the directors of Buyer approving the execution and delivery of this Agreement and authorizing the consummation of the transactions contemplated hereby; 14.2.2 A certificate of Buyer, dated the Closing Date, in the form described in Section 12.1.3; 14.2.3 The Assignment and Assumption Agreement; 14.2.4 The Indemnification Escrow Agreement; 14.2.5 A written opinion of Buyer's counsel in the form attached as Exhibit H, dated as of the Closing Date; 14.2.6 The Purchase Price in accordance with Section 3. 1 hereof; 14.2.7 The Agreement Not to Compete; and 14.2.8 Such additional information, materials, agreement, documents and instruments as Seller and its counsel may reasonably request in order to consummate the Closing. ARTICLE 15 SURVIVAL, INDEMNIFICATION. ETC. 15.1 Survival of Representations, Etc. It is the express intention and agreement of the parties to this Agreement that all covenants and agreements (together, "Agreements") and all representations and warranties (together, "Warranties") made by Buyer and Seller in this Agreement shall survive the Closing (regardless of any knowledge, investigation, audit or inspection at any time made by or on behalf of Buyer or Seller) as follows: 15.1.1 The Agreements shall survive the Closing for a period from the Closing Date equal to the statute of limitations for written contracts in Arizona. 15.1.2 The Warranties in Sections 6.2, 6.5, 7.2, the third sentence of 7.7, 7.18 and 7.20 shall survive the Closing without limitation. 15.1.3 The Warranties in Section 7.6 or otherwise relating to the federal, state, local or foreign tax obligations of Seller shall survive the Closing for the period of the applicable statute of limitations plus any extensions or waivers granted or imposed with respect thereto. 15.1.4 All other Warranties shall survive for a period of twelve (12) months from the Closing Date. 15.1.5 The right of any party to recover Damages (as defined in Section 15.2. 1) -27- 28 pursuant to Section 15.2 shall not be affected by the expiration of any Warranties as set forth herein, provided that notice of the existence of any Damages (but not necessarily the fixed amount of any such Damages) has been given by the indemnified party to the indemnifying party prior to such expiration. 15.1.6 Notwithstanding any provision hereof to the contrary, there shall be no contractual time limit in which Buyer or Seller may bring any action for actual fraud (a "Fraud Action"), regardless of whether such actual fraud also included a breach of any Agreement or Warranty; provided, however, that any Fraud Action must be brought within the period of the applicable statute of limitations plus any extensions or waivers granted or imposed with respect thereto. 15.2 Indemnification. 15.2.1 Seller shall defend, indemnify and hold harmless Buyer from and against any and all losses, costs, damages, liabilities and expenses, including reasonable attorneys' fees and expenses ("Damages") incurred by Buyer arising out of or related to: (a) any breach of the Warranties given or made by Seller in this Agreement; (b) any breach of the Agreements made by Seller in this Agreement; (c) the Retained Liabilities; and (d) any failure of the parties to comply with any "bulk sales" laws applicable to the transactions contemplated hereby. 15.2.2 Buyer shall defend, indemnify and hold harmless Seller from and against any and all Damages incurred by Seller arising out of or related to: (a) any breach of the Warranties given or made by Buyer in this Agreement; (b) any breach of the Agreements made by Buyer in this Agreement, and (c) the Assumed Liabilities. 15.3 Procedures: Third Party and Direct Indemnification Claims. The indemnified party agrees to give written notice, within thirty (30) days following its discovery thereof, to the indemnifying party of any demand, suit, claim or assertion of liability by third parties or other circumstances that could give rise to an indemnification obligation hereunder against the indemnifying party (hereinafter collectively "Claims," and individually a "Claim"), it being understood that the failure to give such notice shall not affect the indemnified party's right to indemnification and the indemnifying party's obligation to indemnify as set forth in this Agreement, unless the indemnifying party's ability to contest, defend or settle with respect to such Claim is thereby demonstrably and materially prejudiced. The parties also agree that any claim for Damages arising directly between the parties relating to this Agreement may be brought at any time within the applicable survival period specified in Section 15. 1, and that the only notice required with respect thereto shall be as specified in Section 15.1.5. The obligations and liabilities of the parties hereto with respect to their respective indemnities pursuant to Section 15.2 resulting from any Claim shall be subject to the following additional terms and conditions: 15.3.1 The indemnifying party shall have the right to undertake, by counsel or other representatives of its own choosing, the defense or opposition to such Claim. -28- 29 15.3.2 In the event that the indemnifying party shall elect not to undertake such defense or opposition, or within (10) days after notice of any such Claim from the indemnified party shall fail to defend or oppose, the indemnified party (upon further written notice to the indemnifying party) shall have the right to undertake the defense, opposition, compromise or settlement of such Claim, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the indemnifying party (subject to the right of the indemnifying party to assume defense of or opposition to such Claim at any time prior to settlement, compromise or final determination thereof). 15.3.3 Anything in this Section 15.3 to the contrary notwithstanding: (a) the indemnified party shall have the right, at its own cost and expense, to participate in the defense, opposition, compromise or settlement of the Claim; (b) the indemnifying party shall not, without the indemnified party's written consent, settle or compromise any Claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such Claim, and (c) in the event that the indemnifying party undertakes defense of or opposition to any Claim the indemnified party, by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with the indemnifying party and its counsel or other representatives concerning such Claim and the indemnifying party and the indemnified party, and their respective counsel or other representatives, shall cooperate in good faith with respect to such Claim. 15.3.4 No undertaking of defense or opposition to a Claim shall be construed as an acknowledgment by such party that it is liable to the party claiming indemnification with respect to the Claim at issue or other similar Claims. 15.3.5 No indemnified party shall be entitled to assert a claim for indemnification under Section 15.2.1(a) or Section 15.2.2(a) unless and then only to the extent that the aggregate damages for all such claims exceed $25,000, and the maximum liability of either party for indemnification under such Subsections shall be $1,000,000, except with respect to claims relating to title, taxes, License revocation, and environmental matters (which shall not be so limited) or as otherwise set forth in Sections 16.2, 16.3 and 16.4 hereof. ARTICLE 16 TERMINATION RIGHTS 16.1 Termination. This Agreement may be terminated at any time prior to Closing as follows: 16.1.1 Upon the mutual written consent of Buyer and Seller, this Agreement may be terminated on such terms and conditions as so agreed; or 16.1.2 By written notice of Buyer to Seller if Seller breaches in any material respect any of its representations or warranties or defaults in any material respect in the -29- 30 observance or in the due and timely performance of any of its covenants or agreements herein contained and such breach or default shall not be cured within thirty (30) days of the date of notice of breach or default served by Buyer; or 16.1.3 By written notice of Seller to Buyer if Buyer breaches in any material respect any of its representations or warranties or defaults in any material respect in the observance or in the due and timely performance of any of its covenants or agreements herein contained and such breach or default shall not be cured within thirty (30) days of the date of notice of breach or default served by Seller; or 16.1.4 By written notice of Buyer to Seller or by Seller to Buyer if the FCC denies the FCC Application under circumstances in which Seller is not entitled to the Escrow Deposit; 16.1.5 By written notice of Buyer to Seller, or by Seller to Buyer, if any court of competent jurisdiction shall have issued an order, decree or ruling (which then remains in effect) or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, or by Buyer, if any court, legislative body or governmental or regulatory authority has taken, or is reasonably expected to take, action that would make the consummation of the transactions contemplated hereby inadvisable or undesirable as determined by Buyer in its sole discretion reasonably exercised; 16.1.6 By written notice of Buyer to Seller, or by Seller to Buyer, if the Closing shall not have been consummated on or before September 15, 1999. 16.1.7 By written notice of Buyer to Seller if it shall become apparent in both Seller's and Buyer's judgment reasonably exercised that any condition to Buyer's obligation to close as set forth in Article 11 hereof will not be satisfied on or before September 15, 1999. 16.1.8 By written notice of Buyer to Seller under the conditions set forth in Section 9.2 hereof. Notwithstanding the foregoing, no party hereto may effect a termination hereof if such party is in material default or breach of this Agreement. 16.2 Liability. Except as set forth in Section 16.4 below, the termination of this Agreement under Section 16.1 shall not relieve any party of any liability for breach of this Agreement prior to the date of termination. 16.3 Monetary Damages. Specific Performance and Other Remedies. The parties recognize that if Seller refuses to perform under the provisions of this Agreement, monetary damages alone will not be adequate to compensate Buyer for its injury. Buyer shall therefore be entitled to obtain specific performance of the terms of this Agreement in addition to any other remedies, including but not limited to monetary damages, that may be available to it. if any action is brought by Buyer to enforce this Agreement, Seller shall waive the defense that there is -30- 31 an adequate remedy at law. In the event of a default by Seller, which results in the filing of a lawsuit for damages, specific performance, or other remedy, Buyer shall be entitled to reimbursement by Seller of reasonable legal fees and expenses incurred by Buyer. 16.4 Seller's Liquidated Damages. As more fully described in the Deposit Escrow Agreement, in the event this Agreement is terminated because of Buyer's material breach of this Agreement, and all other conditions to Closing are at such time satisfied or waived (other than such conditions as can reasonably be satisfied by Closing), then the Escrow Deposit shall be delivered to Seller, and the proceeds thereof shall constitute liquidated damages. It is understood and agreed that such liquidated damages amount represents Buyer's and Seller's reasonable estimate of actual damages and does not constitute a penalty. Recovery of liquidated damages shall be the sole and exclusive remedy of Seller against Buyer for failing to consummate this Agreement as a result of Buyer's material breach hereof, and shall be applicable regardless of the actual amount of damages sustained and all other remedies are deemed waived by Seller. ARTICLE 17 MISCELLANEOUS PROVISIONS 17.1 Risk of Loss. The risk of loss or damage to any of the Stations Assets prior to the Closing Date, shall be upon Seller. Seller shall repair, replace and restore any such damaged or lost Stations Asset to its prior condition as soon as possible and in no event later than forty-five (45) days following the loss or damage; provided, however, that in the event any such loss or damage of the Stations Assets exists on the Closing Date, then notwithstanding any other provision hereto, Buyer at its option may extend the Closing Date for a period of up to sixty (60) days until such time as Seller shall have repaired, replaced and restored any such damaged or lost Stations Asset to its prior condition or deduct from the Purchase Price that amount which Buyer and Seller reasonably determine to be sufficient to cover any such loss or damage and close the transaction on the Closing Date. 17.2 Certain Interpretive Matters and Definitions. Unless the context otherwise requires: (a) all references to Sections, Articles, Schedules or Exhibits are to Sections, Articles, Schedules or Exhibits of or to this Agreement; (b) each term defined in this Agreement has the meaning assigned to it; (c) each accounting term not otherwise defined in this Agreement has the meaning assigned to it in accordance with generally accepted accounting principles as in effect on the date hereof, (d) "or" is disjunctive but not necessarily exclusive; (e) words in the singular include the plural and vice versa; (f) the term "Affiliate" has the meaning given it in Rule l2b-2 of Regulation 12B under the Securities Exchange Act of 1934, as amended; and (g) all references to '$' or dollar amounts will be to lawful currency of the United States of America. 17.3 Further Assurances. After the Closing, Seller shall from time to time, at the request of and without further cost or expense to Buyer, execute and deliver such other instruments of conveyance and transfer and take such other actions as may reasonably be requested in order more effectively to consummate the transactions contemplated hereby to vest in Buyer good and marketable title to the Stations Assets being transferred hereunder in accordance with the terms hereof, and Buyer shall from time to time, at the request of and -31- 32 without further cost or expense to Seller, execute and deliver such other instruments and take such other actions as may reasonably be requested in order more effectively to relieve Seller of any obligations being assumed by Buyer hereunder. 17.4 Preservation of Records. Subject to Section 10. 1 hereof, Buyer hereby agrees that it will preserve and make available to Seller and its attorneys and accountants (including the right to inspect and copy at Seller's cost), during normal business hours and upon reasonable advance notice, for three (3) years after the Closing Date, such of the books, records, files, correspondence, memoranda and other documents referred pursuant to this Agreement as Seller may reasonably require for the preparation of tax reports and returns, the preparation of financial statements, or the preparation of a response to any claim by a third party against Seller. 17.5 Benefit and Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither Buyer nor Seller may voluntarily or involuntarily assign its interest under this Agreement without the prior written consent of the other; provided, however, that no such permitted assignment shall relieve Buyer of its obligations hereunder in the event that its assignee fails to perform the obligations delegated. All covenants, agreements, statements, representations, warranties and indemnities in this Agreement by and on behalf of any of the parties hereto shall bind and inure to the benefit of their respective successors and permitted assigns of the parties hereto. In the event Buyer finds it necessary or is required to provide to a third party a collateral assignment of the Buyer's interest in this Agreement and/or any related documents, Seller shall cooperate with the Buyer and any third party requesting such assignment including but not limited to signing a consent and acknowledgment of such assignment. 17.6 Amendments. No amendment, waiver of compliance with any provision or condition hereof or consent pursuant to this Agreement shall be effective unless evidenced by an instrument in writing signed by the party against whom enforcement of any waiver, amendment, change, extension or discharge is sought. 17.7 Headings. The headings set forth in this Agreement are for convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. 17.8 Governing Law. The construction and performance of this Agreement shall be governed by the laws of the State of Arizona, without giving effect to the choice of law provisions thereof. 17.9 Notices. Any notice, demand or request required or permitted to be given under the provisions of this Agreement shall be in writing, including by facsimile, and shall be deemed to have been duly delivered and received on the date of personal delivery, on the third day after deposit in the U.S. mail if mailed by registered or certified mail, postage prepaid and return receipt requested, on the day after delivery to a nationally recognized overnight courier service if sent by an overnight delivery service for next morning delivery or when dispatched by facsimile transmission (with the facsimile transmission confirmation being deemed conclusive evidence of such dispatch) and shall be addressed to the following addresses, or to such other address as any -32- 33 party may request, in the case of Seller, by notifying Buyer, and in the case of Buyer, by notifying Seller: To Buyer: Guy Christian The Guyann Corporation 1117 West Highway 66 Flagstaff, AZ 86001 Fax: (520) 779-2988 Copy to: HALEY BADER & POTTS 4350 N. Fairfax Drive, Suite 900 Arlington, VA 22203 Attn: Theodore D. Kramer, Esq. Fax: (703) 841-2345 To Seller: Terry S. Jacobs, Chairman Regent Broadcasting of Flagstaff, Inc. 50 East RiverCenter Blvd. Suite 180 Covington, KY 41011 Fax: (606) 292-0352 Copy to: STRAUSS & TROY 2100 PNC Center 201 East Fifth Street Cincinnati, OH 45202 Attn: Alan C. Rosser, Esq. Fax: (513) 241-8389 17.10 First Right of Negotiation. 17.10.1 Effective upon the Closing and continuing thereafter for a period of five (5) years, Seller and its Affiliate, Regent Communications, Inc. ("Regent") shall have a first right to negotiate an acquisition of the Stations and radio stations KAFF(FM), KMGN(FM) and KAFF(AM). Should Buyer or its shareholders desire to sell substantially all of its/their interest in any of the Stations and/or radio stations KAFF(FM), KMGN(FM) and KAFF(AM), it/they shall notify Regent of such desire and shall provide to Regent, in writing, the requested sale price and other material terms of such sale which are acceptable to Buyer or its shareholders. For purposes of this Section 17.10 a sale shall include a transfer, assignment or other disposition of substantially all of the assets used or useful in the operation of any of the Stations and/or radio stations KAFF(FM), KMGN(FM) and KAFF(AM) and a transfer, assignment or other disposition, by purchase, merger or otherwise, of two-thirds (2/3rds) or more of the outstanding voting stock of Buyer, in one transaction or in a series of related transactions; provided, however, any pledge as collateral; gift or any such transfer among or between the shareholders of Buyer as -33- 34 of the date of this Agreement, to or from family members of the shareholders of Buyer as of the date of this Agreement or to charitable organizations; or in connection with legitimate estate planning purposes shall not constitute a transfer, assignment or other disposition. Regent shall have a period of twenty (20) business days from its receipt of such notice in which to negotiate exclusively with Buyer or its shareholders and to send written notice to Buyer or the shareholders that Regent elects to acquire the assets or stock (or that part thereof which is the subject of the proposed sale), on the terms as negotiated or offered to Regent, in which event the parties shall then proceed to the execution of definitive agreements with representations, warranties, terms and conditions customary for transactions of such nature (including conditions for physical, environmental and engineering inspections), the satisfaction of applicable conditions, and closing pursuant to the terms offered or negotiated. Should Regent fail to elect to acquire the assets or stock on the terms offered or negotiated, Buyer or the shareholders shall be free to proceed to sell to a third party in accordance with the terms offered to Regent, provided, however, in the event the actual sale price negotiated with a third party purchaser is less than ninety percent (90%) of the lowest price offered to Regent, the provisions of Section 17.10.2 below shall apply. 17.10.2 In the event the sale price negotiated with a third party purchaser is less than ninety percent (90%) of the price offered to Regent in accordance with Section 17.10.1 above, Buyer or its shareholders, as the case may be, shall provide written notice to Regent of such proposed sale, setting forth all material terms and provisions of the proposed sale. Regent shall have a period of five (5) business days after receipt of such notice to agree in writing to purchase the assets at the same price and on the same terms and provisions as contained in the notice and to deliver a written notice to that effect to Buyer or its shareholders, as the case may be. If Regent does not timely elect to exercise sale right of first refusal, Buyer or the shareholders may consummate such sale with the third party purchaser in accordance with the terms and provisions set forth in the notice. 17.11 Counterparts. This Agreement may be executed in one or more counterparts and by facsimile, each of which will be deemed an original and all of which together will constitute one and the same instrument. 17.12 No Third Party Beneficiaries. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity other than the parties hereto and their successors or permitted assigns any rights or remedies under or by reason of this Agreement. 17.13 Severability. The parties agree that if one or more provisions contained in this Agreement shall be deemed or held to be invalid, illegal or unenforceable in any respect under any applicable law, this Agreement shall be construed with the invalid, illegal or unenforceable provision deleted, and the validity, legality and enforceability of the remaining provisions contained herein shall not be affected or impaired thereby. 17.14 Entire Agreement. This Agreement and the schedules and exhibits hereto embody the entire agreement and understanding of the parties hereto and supersede any and all prior agreements, arrangements and understandings relating to the matters provided for herein. -34- 35 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. REGENT LICENSEE OF FLAGSTAFF, INC. By: /s/ --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ REGENT BROADCASTING OF FLAGSTAFF, INC. By: /s/ --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ THE GUYANN CORPORATION By: /s/ --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ 268185_2.DOC The following shareholders, representing in excess of sixty-six percent (66%) of the outstanding voting stock of Buyer, hereby agree to be bound by the provisions of Section 17.10 above. /s/ ------------------------------------------ /s/ ------------------------------------------ -35- 36 ------------------------------------------ EX-3.A 5 EXHIBIT 3(A) 1 EXHIBIT 3(a) AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF REGENT COMMUNICATIONS, INC. Regent Communications, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies that the Corporation was originally incorporated under the name "JS Communications, Inc." on November 4, 1996, and that its original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on the same date. The Corporation further certifies that the Corporation changed its named from JS Communications, Inc. to Regent Communications, Inc. upon the filing with the Secretary of State of Delaware of a Certificate of Amendment on May 16, 1997. The Corporation further certifies that this Amended and Restated Certificate of Incorporation amends and restates the provisions previously filed with the Secretary of State of the State of Delaware. FIRST: Name. The name of the Corporation is Regent Communications, Inc. SECOND: Registered Office and Registered Agent. The registered office of the Corporation in the State of Delaware is 1209 Orange Street, New Castle County, Wilmington, Delaware 19801. The Registered Agent at the same address is The Corporation Trust Company. THIRD: Purposes. The purposes of the Corporation are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: Capital Stock. A. Authorized Capital Stock. The total number of shares of all classes of stock which the Corporation shall have authority to issue is Fifty Million (50,000,000) shares, consisting of a class of Thirty Million (30,000,000) shares of Common Stock, par value of $.01 per share, and a class of Twenty Million (20,000,000) shares of Preferred Stock, par value of $.01 per share. B. Common Stock. The Common Stock shall have full voting rights and other characteristics of common stock recognized under the General Corporation Law of the State of Delaware subject to the rights and preferences of Preferred Stock; provided, however, in the event the Corporation holds (directly or indirectly) a license or franchise from the Federal Communications Commission to conduct its business and such license or franchise is conditioned upon some or all of the holders of its capital stock possessing prescribed qualifications, such Common Stock and the Preferred Stock shall be subject to redemption by the Corporation, to the extent necessary to prevent the loss of such license or franchise or to reinstate it, for cash, property or rights, including other securities of the Corporation, at such time or times as the Board of Directors determines upon notice and following the same procedures as are applicable to redemption of Preferred Stock at a redemption price equal to the greater of the amount of its liquidation preference or its fair market value; and provided further, that the 2 Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article FOURTH, to provide for the issuance of a series of Common Stock designated Series B Common Stock consisting of such number of shares constituting said series as the Board of Directors shall determine from time to time, each share to be convertible at any time at the option of the holder in the same manner and subject to the same conditions as were applicable to a voluntary conversion of the Series D Convertible Preferred Stock set forth in Section 7 of Subpart G of this Article FOURTH into one share of Common Stock (subject to equitable adjustment for stock splits, reverse stock splits, common stock dividends and the like), and such Series B Common Stock, having the restricted voting rights applicable to the Series D Convertible Preferred Stock set forth in Section 3 of Subpart G of this Article FOURTH and constituting the series of Common Stock issuable upon a mandatory conversion of the Series D Convertible Preferred Stock pursuant to Section 7[c][i] of Subpart G of this Article FOURTH, and by filing a certificate pursuant to the applicable law of the State of Delaware to fix the number of shares to be included in such Series B Common Stock and to set forth the restricted voting and conversion rights thereof. C. Preferred Stock. The Board of Directors is authorized, subject to the limitations prescribed by law and the provisions of this Article FOURTH, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designations, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following: [1] The number of shares constituting that series and the distinctive designation of that series; [2] The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; [3] Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; [4] Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; [5] Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; [6] Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; 2 3 [7] The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series; [8] Any other relative rights, preferences and limitations of that series. D. Designation of Series A Convertible Preferred Stock. A series of the Preferred Stock of the Corporation is hereby created and authorized, and the designations, amount and stated value of such series of Preferred Stock and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereon, are as follows: SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE. The shares of such series shall be designated as "Series A Convertible Preferred Stock" (the "Series A Preferred") and the number of shares constituting such series shall be 620,000 shares. The stated value of the Series A Preferred shall be $5 per share, the original per share issue price (the "Stated Value"). SECTION 2. DIVIDENDS AND DISTRIBUTIONS. The holders of shares of the Series A Preferred shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation out of funds legally available for such purpose, cumulative dividends payable quarterly in cash on the first business day of January, April, July and October (each such date being referred to herein as a "Quarterly Dividend Payment Date"), accruing commencing with the date of issue of such shares, on shares of the Series A Preferred at the rate of $.35 per share per annum. No interest shall be paid on accrued but unpaid dividends. SECTION 3. VOTING RIGHTS. In addition to voting rights required by law or by this Amended Certificate of Incorporation, as amended or restated from time to time (the "Certificate of Incorporation"), subject to restrictions contained in this Certificate of Incorporation the holders of Series A Preferred shall be entitled to vote on all matters submitted to a vote of the Corporation's stockholders. Except as otherwise required by law or provided by this Certificate of Incorporation or by the Board of Directors pursuant to Subpart C of this Article FOURTH, the holders of the Series A Preferred, shall vote together with the holders of all other series of the Corporation's voting preferred stock and the holders of the Corporation's Common Stock as one class with one vote per share (in the case of Preferred Stock, subject to adjustments as provided in Section 7 below and if convertible into Common Stock, one vote per share of Common Stock into which such convertible Preferred Stock is then convertible) on all matters submitted to a vote of the Corporation's stockholders. SECTION 4. CERTAIN RESTRICTIONS. Whenever dividends payable on the Series A Preferred as provided in Section 2 are in arrears, thereafter and until dividends, including all accrued dividends, on shares of the Series A Preferred outstanding shall have been paid in full or declared and set apart for payment, the Corporation shall not (A) pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any stock ranking junior (either as to dividends or upon liquidation, dissolution or 3 4 winding up) to the Series A Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any such junior stock, (B) pay dividends on or make any other distributions on any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred, except dividends paid ratably on the Series A Preferred and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled, (C) redeem or purchase or otherwise acquire for consideration any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior to the Series A Preferred or in satisfaction of contractual obligations to do so entered into with the written consent of the holders of a majority of outstanding shares of Series A Preferred (including, without limitation, in satisfaction of the provisions contained in the Stockholders' Agreement), or (D) purchase or otherwise acquire for consideration any shares of the Series A Preferred, or any shares of stock ranking on a parity with the Series A Preferred except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series of classes, or except pursuant to the provisions of the Stockholders' Agreement. As used in this Amended and Restated Certificate of Incorporation, the term "Stockholders' Agreement" shall mean that certain Second Amended and Restated Stockholders' Agreement, dated in June, 1998, among the Corporation and certain of its stockholders, as the same may be further amended, restated or modified from time to time. All references to the Stockholders' Agreement shall be applicable as long as the Stockholders' Agreement remains in effect. SECTION 5. REACQUIRED SHARES. Any shares of the Series A Preferred which have been converted to Common Stock or have been purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, or otherwise in accordance with Delaware General Corporation Law. SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (A) to the holders of the Series A Preferred unless, prior thereto, the holders of the Series B Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (B) to the holders of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred unless, prior thereto, the holders of Series A Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (C) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred, except distributions made ratably on the Series A Preferred and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. 4 5 SECTION 7. CONVERSION. [a] Optional Conversion. Subject to the provisions for adjustment hereinafter set forth, each share of the Series A Preferred shall be convertible at any time at the option of the holder thereof, in the manner hereinafter set forth, into one (1) fully paid and nonassessable share of Common Stock of the Corporation. [b] Mandatory Conversion. Subject to the provisions for adjustment set forth in this Section 7, each share of the Series A Preferred shall be convertible at the option of the Board of Directors, under the conditions hereinafter set forth, into one (1) fully paid and nonassessable share of Common Stock of the Corporation. The Board of Directors of the Corporation may require conversion of all shares of the Series A Preferred into shares of Common Stock in preparation for or upon any of the following: [i] A public offering of equity securities of the Corporation of at least $10,000,000 in gross proceeds; [ii] A private placement of equity securities of the Corporation of at least $25,000,000 in gross proceeds; [iii] A private placement of equity securities of the Corporation of at least $10,000,000 in gross proceeds under circumstances where the investor(s) reasonably believe the conversion of the Series A Preferred is necessary to achieve its (their) investment objectives; [iv] A merger of the Corporation with another corporation or other entity, whether or not the Corporation is a survivor of such transaction whereby as a result the stockholders of the Corporation hold less than 50% of the outstanding capital stock of the surviving entity; or [v] An acquisition of equity securities of the Corporation in one transaction or in a series of related transactions which results in a transfer of majority voting control of the Corporation. [c] The number of shares of Common Stock into which each share of the Series A Preferred is convertible shall be adjusted from time to time as follows: [i] In case the Corporation shall at any time or from time to time after the issuance of such share of Series A Preferred declare or pay any dividend on its Common Stock payable in its Common Stock or effect a subdivision of the outstanding shares of its Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise), then, and in each such case, the number of shares of Common Stock into which each share of the Series A Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the sum of (I) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event plus (II) the number 5 6 of shares of Common Stock which such holder would have been entitled to receive in connection with the occurrence of such event had such share been converted immediately prior thereto, and the denominator of which is the number of shares of Common Stock determined in accordance with clause (I) above. An adjustment made pursuant to this subparagraph [c][i] shall become effective (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective. [ii] In case the Corporation at any time or from time to time after the issuance of such share of Series A Preferred shall combine or consolidate the outstanding shares of its Common Stock into a lesser number of shares of Common Stock, by reclassification or otherwise, then, and in each such case, the number of shares of Common Stock into which each share of the Series A Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the number of shares which the holder would have owned after giving effect to such event had such share been converted immediately prior to the occurrence of such event and the denominator of which is the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event. An adjustment made pursuant to this subparagraph b(ii] shall become effective at the close of business on the date immediately prior to the day upon which such corporate action becomes effective. [iii] In case the Corporation after the issuance of such share of Series A Preferred shall: (A) issue any options, warrants, or other rights (excluding those issued in exchange for options to purchase common stock in Faircom Inc. pursuant to the terms of a merger, and excluding options to purchase Common Stock issued to management of the Corporation exercisable for up to the lesser of 2,000,000 shares of Common Stock (subject to adjustment pursuant to provisions applicable to the options in the case of stock splits, reverse stock splits and the like) or that number of shares of Common Stock equal to fifteen percent (15%) of the aggregate number of outstanding shares of Common Stock and other equity securities of the Corporation exercisable for the purchase of, or convertible into, Common Stock computed on a fully-diluted basis) entitling the holder thereof to subscribe for, or purchase, Common Stock at a price per share which, when added to the amount of consideration received or receivable by the Corporation for such options, warrants, or other rights, is less than the then fair market value per share of the Common Stock at the date of such issuance; (B) issue or sell securities of the Corporation convertible into, or exchangeable for, Common Stock at a price per share which, when added to the amount of consideration received or receivable, from the Corporation for such exchangeable or convertible securities, is less than the then fair market value of a share of Common Stock at the date of such issuance; or (C) issue or sell additional shares of Common Stock for consideration representing less than the then fair market value of the Common Stock at the date of such issuance; then the number of shares of Common Stock into which each share of the Series A Preferred is convertible shall be adjusted so that, thereafter, until further 6 7 adjusted, the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (w) the number of shares of Common Stock into which such shares are convertible immediately prior to the occurrence of such event by (x) a fraction, the numerator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of additional shares of Common Stock issuable upon exercise of such options, warrants, or rights, or exchangeable or convertible securities, or the additional number of shares of Common Stock issued at such time, and the denominator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of shares of Common Stock that either (y) the sum of the aggregate exercise price of the total number of shares of Common Stock issuable upon exercise of such options, warrants, or rights, or upon conversion or exchange of such convertible securities, and the aggregate amount of consideration, if any, received or receivable by the Corporation for such options, warrants, or rights, or convertible or exchangeable securities, or (z) the aggregate consideration received in connection with the sale of shares of its Common Stock for less than the then fair market value, as the case may be, would purchase at the then fair market value. [iv] In the event that, at any time, or from time to time, after the issuance such share of the Series A Preferred, the Common Stock issuable upon conversion of the Series A Preferred Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend, or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this Section 7), then, and in any such event, each holder of Series A Preferred shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series A Preferred could have been converted immediately prior to such recapitalization, reclassification, or change, all subject to further adjustment as provided herein. [v] If at any time, or from time to time after the issuance such share of the Series A Preferred there is a capital reorganization of the Common Stock other than a recapitalization, subdivision, combination, reclassification, or exchange of shares provided for elsewhere in this Section 7) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all, or substantially all, of the Corporations' properties and assets to any other person, then, as a part of such reorganization, merger, consolidation, or sale, provision shall be made so that the holders of the Series A Preferred shall thereafter be entitled to receive upon conversion of the Series A Preferred the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the holders of Series A Preferred after the reorganization, merger, consolidation, or sale to the end that the provisions of this Section 7 shall be applicable after that event and be as nearly equivalent as may be practicable. 7 8 [vi] Upon the expiration of any rights, options, warrants or conversion or exchange privileges which caused an adjustment pursuant to this Section 7 to be made, if any thereof shall not have been exercised, the number of shares of Common Stock into which each share of the Series A Preferred is convertible shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (a) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange privileges and (b) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise plus the aggregate consideration, if any, actually received by the Corporation for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges, whether or not exercised. [d] If any adjustment in the number of shares of Common Stock into which each share of the Series A Preferred may be converted required pursuant to this Section 7 would result in an increase or decrease of less than 1% in the number of shares of Common Stock into which each share of the Series A Preferred is then convertible, the amount of any such adjustment shall be carried forward and adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least 1% of the number of shares of Common Stock into which each share of the Series A Preferred is then convertible; provided that any such adjustments carried forward shall be made immediately following receipt of notice from a holder of the intent to convert all or a portion of the Series A Preferred such that upon conversion the holder shall receive such number of shares of Common Stock as such holder is entitled, taking into account all adjustments required by this Section 7. All calculations under this paragraph [d] shall be made to the nearest one-hundredth of a share. [e] Subject to the limitation in Section 7[h] below, the holder of any shares of the Series A Preferred may convert such shares into shares of Common Stock pursuant to paragraph [a] of this Section 7 by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of Series A Preferred to be converted (or if such certificate or certificates cannot be found, an affidavit of lost securities in form and substance acceptable to the Corporation) accompanied by a written notice stating that such holder elects to convert all or a specified number of such shares in accordance with the provisions of this Section 7 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. As promptly as practicable, and in any event within five business days after the surrender of such certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes, the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which the holder of the Series A Preferred so converted shall be entitled and (ii) if less than the full number of shares of the Series A Preferred evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or 8 9 certificates less the number of shares converted. Such conversions shall be deemed to have been made at the close of business on the date of giving of such notice and of such surrender of the certificate or certificates representing the shares of the Series A Preferred to be converted so that the rights of the holder thereof shall cease except for the right to receive Common Stock of the corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [g] below,, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [f] The Series A Preferred shall convert to Common Stock of the Corporation pursuant to paragraph [b] of this Section 7 automatically upon notice in writing to the stockholders, including all holders of the Series A Preferred, setting forth the date of such conversion and the material terms of the triggering event. As promptly as practicable after such notice, and in any event within five business days after the surrender of certificates for the Series A Preferred (if required by the Board of Directors), the Corporation shall deliver or cause to be delivered to each holder of Series A Preferred certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which such holder of the Series A Preferred so converted shall be entitled. Such conversion shall be deemed to have been made at the close of business on the date set forth in such notice of mandatory conversion so that the rights of the holder thereof shall cease with or without surrender of certificates for the Series A Preferred, except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [g] below,, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [g] Upon conversion of any shares of the Series A Preferred pursuant to paragraphs [a] or [b] of this Section 7, the holder thereof shall be entitled to receive any accumulated, accrued or unpaid dividends in respect of the shares so converted, including any dividends on such shares of the Series A Preferred declared prior to such conversion if such holder held such shares on the record date fixed for the determination of holders of the Series A Preferred entitled to receive payment of such dividend. [h] Shares of the Series A Preferred may not be converted after the close of business on the third business day preceding the Redemption Date pursuant to Section 8. [i] The Corporation shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock of the Corporation issuable upon the conversion of all outstanding shares of the Series A Preferred. [j] For purposes of this Section, "fair market value" shall be as determined by the Board of Directors in such manner as they shall deem appropriate in their discretion, unless the holder(s) of more than twenty-five percent (25%) of the outstanding shares of Preferred Stock of the Corporation demand in good faith and in writing that "fair market value" be determined by an appraiser who shall be mutually acceptable to the Board of Directors and such holders, whose determination shall be binding and whose fees and expenses shall be paid by the Corporation. [k] The provisions in paragraph [c][ii] above shall not apply to, and no adjustment shall be made as a result of, a reverse stock split of Common Stock made by the Corporation on December 1, 1997. 9 10 SECTION 8. REDEMPTION. [a] The Corporation may, at the election of its Board of Directors, at any time or from time to time, redeem the whole or part of the Series A Preferred, at the Stated Value, plus an amount equal to all unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of redemption. In case the Corporation shall elect to redeem less than all the Series A Preferred, the Corporation shall select pro rata the shares so to be redeemed, except that if the Board of Directors determines in its reasonable business judgment that to do so by lot would be in the best interests of the Corporation, then the shares so to be redeemed shall be selected by lot in such manner as shall be prescribed by the Board of Directors. [b] Notice of every such redemption shall be mailed, first class postage prepaid, not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption ("Redemption Date"), to each holder of record of the shares to be redeemed, at his or her address as the same appears on the record of stockholders; but neither failure to mail any such notice to one or more such holders nor any defect in any such notice shall affect the sufficiency of the proceedings for redemptions as to other holders. Each such notice shall state the Redemption Date; the number of shares of Series A Preferred to be redeemed, and, if less than all the shares of Series A Preferred held by such holder are to be redeemed, the manner of selecting by lot the shares to be redeemed; the place or places where such shares are to be surrendered for payment; that dividends on the shares to be redeemed will cease on such Redemption Date; and the effect of such redemption on the right of conversion. [c] Notice having been mailed as aforesaid, from and after the Redemption Date, all dividends on the shares so called for redemption shall cease to accrue, said shares shall no longer be deemed to be outstanding, all rights of the holders thereof as stockholders of the Corporation (except the right to receive payment for the shares, the right to receive declared dividends pursuant to Section 7[g] above, and the right to convert such shares into shares of Common Stock of the Corporation until the close of business on the third business day preceding the Redemption Date, as provided in Section 7) shall cease, and, upon surrender in accordance with said notice of the certificates for any such shares (properly endorsed or assigned for transfer, if the Board of Directors shall so require), such shares shall be redeemed by the Corporation in accordance with this Section 8. In connection with the determination of the amount of dividends accruing with respect to any conversion in the period between a notice of redemption and the Redemption Date, on a date which is not a Quarterly Dividend Payment Date, the amount of any such dividends shall be prorated based upon the number of days which have elapsed since the immediately preceding Quarterly Dividend Payment Date (excluding such Quarterly Dividend Payment Date itself). SECTION 9. REPORTS AS TO ADJUSTMENTS. Whenever the number of shares of Common Stock into which the shares of the Series A Preferred are convertible is adjusted as provided in Section 7, the Corporation will (A) promptly compute such adjustment and furnish to each transfer agent for the Series A Preferred a certificate, signed by a principal financial officer of the Corporation, setting forth the number of shares of Common Stock into which each share of the Series A Preferred is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment will become effective and (B) promptly mail to the holders of record of the 10 11 outstanding shares of the Series A Preferred a notice stating that the number of shares into which the shares of Series A Preferred are convertible has been adjusted and setting forth the new number of shares into which each share of the Series A Preferred is convertible as a result of such adjustment and when such adjustment will become effective. Notwithstanding the foregoing, the Corporation shall incur no liability for its failure to take any action set forth in this Section 9, nor shall such failure affect the validity, rights or preferences of any shares of the Series A Preferred. SECTION 10. RANKING. The Series A Preferred shall rank senior to the Common Stock and any other series of Preferred Stock of the Corporation hereafter created (except for the Series B Preferred, which shall rank senior to the Series A Preferred, and except for the Series C Preferred, the Series D Preferred, the Series E Preferred, the Series F Preferred, and any other series of Preferred Stock which the Board of Directors shall establish and designate to rank equal therewith pursuant to Subpart C of this Article FOURTH, with which it shall rank equal), as to the payment of dividends and the distribution of assets and rights upon liquidation, dissolution or winding up of the Corporation. SECTION 11. DIRECTORSHIP. The holders of the Series A Preferred, as a class, shall be entitled to be represented on the Board of Directors by one Director (the "Series A Director") who, upon nomination by such holders, as a class, will stand for election by voting by the holders of the Preferred Stock (subject to limitations in this Article FOURTH or established by the Board of Directors pursuant to Section C of this Article FOURTH) and holders of Common Stock together, except under circumstances where the number of individuals nominated for election exceeds the number of Directors to be elected. In the event the number of individuals nominated for election exceeds the number of Directors to be elected then the holders of the Series A Preferred shall have the sole right to vote for, elect and remove the individual nominated by them, as a class, to serve as the Series A Director, and in such event the further right to vote for, elect or remove any of the other Directors who are not to be elected solely by the holders of another class or series of Preferred Stock. The Series A Director, upon being elected, will serve for the same term and have the same voting powers as other Directors. In addition, the Series A Director shall serve as a member of the Compensation, Audit, and Nominating Committees of the Board of Directors (or any other committee of the Board performing such functions), which Committees will be composed of at least one Director, in addition to the Series A Director, who is not an employee of the Corporation. E. Designation of Series B Senior Convertible Preferred Stock. A series of the Preferred Stock of the corporation is hereby created and authorized, and the designations, amount and stated value of such series of Preferred Stock and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereon, are as follows: SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE. The shares of such series shall be designated as Series B Senior Convertible Preferred (the "Series B Preferred") and the number of shares constituting such series shall be 1,000,000 shares. The stated value of the Series B Preferred shall be $5 per share, the original per share issue price (the "Stated Value"). 11 12 SECTION 2. DIVIDENDS AND DISTRIBUTIONS. The holders of shares of the Series B Preferred shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation out of funds legally available for such purpose, cumulative dividends payable quarterly in cash on the first business day of January, April, July and October (each such date being referred to herein as a "Quarterly Dividend Payment Date"), accruing commencing with the date of issue of such shares, on shares of the Series B Preferred at the rate of $.35 per share per annum; provided, however, such rate shall be increased to $.45 per share per annum immediately upon but only for the period during which the ratio of (a) the sum of (i) the Corporation's Consolidated Total Debt plus (ii) the aggregate Stated Value of the then outstanding shares of Series B Preferred to (b) the Corporation's Adjusted Consolidated Operating Cash Flow for any four fiscal quarter period ending as of the last day of any fiscal quarter of the Corporation exceeds, as a result of the incurrence by the Corporation of additional debt, 7.75 to 1.00. No interest shall be paid on accrued but unpaid dividends. For purposes of this Section, the terms "Consolidated Total Debt" and "Adjusted Consolidated Operating Cash Flow" shall have the meanings given those terms in that certain Credit Agreement, dated as of November 14, 1997, as amended through June 11, 1998, among the Corporation, the Lenders listed therein, General Electric Capital Corporation (as Documentation Agent), and Bank of Montreal, Chicago Branch (as Agent) (not taking into account any modification or amendment of such definitions at any time after June 11, 1998 not consented to in writing by holders of the Series B Preferred and irrespective of the termination of such Credit Agreement). SECTION 3. VOTING RIGHTS. Except as provided herein or otherwise required by law, the voting power of the Corporation shall be vested in the holders of shares of Common Stock, Series A Preferred, Series C Preferred, Series E Preferred, Series F Preferred, and such other series of voting preferred stock as are from time to time designated, and the holders of shares of Series B Preferred and the Series D Preferred shall have no voting power except that with respect to the events described below, the holders of the Series A Preferred, the Series B Preferred, the Series C Preferred, the Series D Preferred, the Series E Preferred, Series F. Preferred, and all other series of voting preferred stock as are from time to time designated to have such voting rights, and the holders of the Corporation's Common Stock shall vote together as one class with one vote per share (in the case of Preferred Stock, subject to adjustments as provided in Section 7 below and if convertible into Common Stock, one vote per share of Common Stock into which such convertible Preferred Stock is then convertible), to the extent such of the following events are otherwise subject to the vote of any holders of capital stock of the Corporation pursuant to the requirements of the Delaware General Corporation Law: [a] any amendment of this Amended and Restated Certificate of Incorporation; [b] a sale of all or substantially all of the assets of the Corporation; [c] the dissolution, liquidation or termination of the Corporation; [d] any acquisition of, or merger of the Corporation with, another corporation or other entity, whether or not the Corporation is a survivor of such transaction; [e] any change in the fundamental nature of the business of the Corporation; 12 13 [f] any transaction with affiliates, except upon fair and reasonable terms comparable to an arms-length transaction; and [g] any change in the Corporation's capital structure in a manner that dilutes the ownership interest of the holders of Series B Preferred. SECTION 4. CERTAIN RESTRICTIONS. Whenever dividends payable on the Series B Preferred as provided in Section 2 are in arrears, thereafter and until dividends, including all accrued dividends, on shares of the Series B Preferred outstanding shall have been paid in full or declared and set apart for payment, the Corporation shall not (A) pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any such junior stock, (B) pay dividends on or make any other distributions on any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred, except dividends paid ratably on the Series B Preferred and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled, (C) redeem or purchase or otherwise acquire for consideration any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior to the Series B Preferred or in satisfaction of contractual obligations to do so entered into with the written consent of the holders of a majority of outstanding shares of Series B Preferred, or (D) purchase or otherwise acquire for consideration any shares of the Series B Preferred, or any shares of stock ranking on a parity with the Series B Preferred except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series of classes. SECTION 5. REACQUIRED SHARES. Any shares of the Series B Preferred which have been converted to Common Stock or have been purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, or otherwise in accordance with Delaware General Corporation Law. SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (A) to the holders of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred unless, prior thereto, the holders of Series B Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment or (B) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series 13 14 B Preferred, except distributions made ratably on the Series B Preferred and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. SECTION 7. CONVERSION. [a] Optional Conversion. Subject to the provisions for adjustment hereinafter set forth, each share of the Series B Preferred shall be convertible at any time at the option of the holder thereof, in the manner hereinafter set forth, into one-half (1/2) fully paid and nonassessable share of Common Stock of the Corporation. [b] Mandatory Conversion. Subject to the provisions for adjustment set forth in this Section 7, each share of the Series B Preferred shall be convertible at the option of the Board of Directors into one-half (1/2) fully paid and nonassessable share of Common Stock of the Corporation in the event of, and concurrently with the closing of, a public offering of Common Stock of the Corporation at a per share price of at least $12.00 (subject to adjustment for stock splits, stock dividends, reverse stock splits and the like) with gross proceeds to the Corporation of at least $25,000,000 (excluding the effect of any over-allotment option). [c] The number of shares of Common Stock into which each share of the Series B Preferred is convertible shall be adjusted from time to time as follows: [i] In case the Corporation shall at any time or from time to time after the issuance of such share of Series B Preferred declare or pay any dividend on its Common Stock payable in its Common Stock or effect a subdivision of the outstanding shares of its Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise), then, and in each such case, the number of shares of Common Stock into which each share of the Series B Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the sum of (I) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event plus (II) the number of shares of Common Stock which such holder would have been entitled to receive in connection with the occurrence of such event had such share been converted immediately prior thereto, and the denominator of which is the number of shares of Common Stock determined in accordance with clause (I) above. An adjustment made pursuant to this subparagraph [c][i] shall become effective (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective. [ii] In case the Corporation at any time or from time to time after the issuance of such share of Series B Preferred shall combine or consolidate the outstanding shares of its Common Stock into a lesser number of shares of Common Stock, by reclassification or otherwise, then, and in each such case, the number of shares of Common Stock into which each share of the Series B Preferred is convertible shall be 14 15 adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the number of shares which the holder would have owned after giving effect to such event had such share been converted immediately prior to the occurrence of such event and the denominator of which is the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event. An adjustment made pursuant to this subparagraph b[ii] shall become effective at the close of business on the date immediately prior to the day upon which such corporate action becomes effective. [iii] In case the Corporation after the issuance of such share of Series B Preferred shall: (A) issue any options, warrants, or other rights entitling the holder thereof to subscribe for, or purchase, Common Stock at a price per share which, when added to the amount of consideration received or receivable by the Corporation for such options, warrants, or other rights, is less than the then fair market value per share of the Common Stock at the date of such issuance (other than stock options issued in exchange for options to purchase common stock in Faircom Inc. pursuant to the terms of a merger and options to purchase Common Stock issued to management of the Corporation exercisable for up to the lesser of 2,000,000 shares of Common Stock (subject to adjustment pursuant to provisions applicable to the options in the case of stock splits, reverse stock splits and the like) or that number of shares of Common Stock equal to fifteen percent (15%) of the aggregate number of outstanding shares of Common Stock and other equity securities of the Corporation exercisable for the purchase of, or convertible into, Common Stock computed on a fully-diluted basis); (B) issue or sell securities of the Corporation convertible into, or exchangeable for, Common Stock at a price per share which, when added to the amount of consideration received or receivable, from the Corporation for such exchangeable or convertible securities, is less than the then fair market value of a share of Common Stock at the date of such issuance; or (C) issue or sell additional shares of Common Stock for consideration representing less than the then fair market value of the Common Stock at the date of such issuance; then the number of shares of Common Stock into which each share of the Series B Preferred is convertible shall be adjusted so that, thereafter, until further adjusted, the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (w) the number of shares of Common Stock into which such shares are convertible immediately prior to the occurrence of such event by (x) a fraction, the numerator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of additional shares of Common Stock issuable upon exercise of such options, warrants, or rights, or exchangeable or convertible securities, or the additional number of shares of Common Stock issued at such time, and the denominator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of shares of Common Stock that either (y) the sum of the aggregate exercise price of the total number of shares of Common Stock issuable upon exercise of such options, warrants, or rights, or upon conversion or exchange of such convertible securities, and the aggregate amount of consideration, if any, received or receivable by the Corporation for such options, warrants, or rights, or convertible or 15 16 exchangeable securities, or (z) the aggregate consideration received in connection with the sale of shares of its Common Stock for less than the then fair market value, as the case may be, would purchase at the then fair market value. [iv] In the event that, at any time, or from time to time, after the issuance of such share of the Series B Preferred, the Common Stock issuable upon conversion of the Series B Preferred is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend, or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this Section 7), then, and in any such event, each holder of Series B Preferred shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series B Preferred could have been converted immediately prior to such recapitalization, reclassification, or change, all subject to further adjustment as provided herein. [v] If at any time, or from time to time after the issuance of such share of the Series B Preferred there is a capital reorganization of the Common Stock (other than a recapitalization, subdivision, combination, reclassification, or exchange of shares provided for elsewhere in this Section 7) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all, or substantially all, of the Corporation's properties and assets to any other person, then, as a part of such reorganization, merger, consolidation, or sale, provision shall be made so that the holders of the Series B Preferred shall thereafter be entitled to receive upon conversion of the Series B Preferred the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the holders of Series B Preferred after the reorganization, merger, consolidation, or sale to the end that the provisions of this Section 7 shall be applicable after that event and be as nearly equivalent as may be practicable. [vi] Upon the expiration of any rights, options, warrants or conversion or exchange privileges which caused an adjustment pursuant to this Section 7 to be made, if any thereof shall not have been exercised, the number of shares of Common Stock into which each share of the Series B Preferred is convertible shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (a) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange privileges and (b) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise plus the aggregate consideration, if any, actually received by the Corporation for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges, whether or not exercised. 16 17 [d] If any adjustment in the number of shares of Common Stock into which each share of the Series B Preferred may be converted required pursuant to this Section 7 would result in an increase or decrease of less than 1% in the number of shares of Common Stock into which each share of the Series B Preferred is then convertible, the amount of any such adjustment shall be carried forward and adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least 1% of the number of shares of Common Stock into which each share of the Series B Preferred is then convertible; provided that any such adjustments carried forward shall be made immediately following receipt of notice from a holder of the intent to convert all or a portion of the Series B Preferred such that upon conversion the holder shall receive such number of shares of Common Stock as such holder is entitled, taking into account all adjustments required by this Section 7. All calculations under this paragraph [d] shall be made to the nearest one-hundredth of a share. [e] Subject to the limitation in Section 7[h] below, the holder of any shares of the Series B Preferred may convert such shares into shares of Common Stock pursuant to paragraph [a] of this Section 7 by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of Series B Preferred to be converted (or if such certificate or certificates cannot be found, an affidavit of lost securities in form and substance acceptable to the Corporation) accompanied by a written notice stating that such holder elects to convert all or a specified number of such shares in accordance with the provisions of this Section 7 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. As promptly as practicable, and in any event within five business days after the surrender of such certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes, the Corporation shall deliver or cause to be delivered (I) certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which the holder of the Series B Preferred so converted shall be entitled and (ii) if less than the full number of shares of the Series B Preferred evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Such conversions shall be deemed to have been made at the close of business on the date of giving of such notice and of such surrender of the certificate or certificates representing the shares of the Series B Preferred to be converted so that the rights of the holder thereof shall cease except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [g] below, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [f] The Series B Preferred shall convert to Common Stock of the Corporation pursuant to paragraph [b] of this Section 7 automatically upon notice in writing to the stockholders, including all holders of the Series B Preferred, setting forth the date of such conversion and the material terms of the triggering public offering. As promptly as practicable after such notice, and in any event within five business days after the surrender of certificates for the Series B Preferred (if required by the Board of Directors), the Corporation shall deliver or 17 18 cause to be delivered to each holder of Series B Preferred certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which such holder of the Series B Preferred so converted shall be entitled. Such conversion shall be deemed to have been made at the close of business on the date set forth in such notice of mandatory conversion so that the rights of the holder thereof shall cease with or without surrender of certificates for the Series B Preferred, except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [g] below, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [g] Upon conversion of any shares of the Series B Preferred pursuant to paragraphs [a] or [b] of this Section 7, the holder thereof shall be entitled to receive any accumulated, accrued or unpaid dividends in respect of the shares so converted, including any dividends on such shares of the Series B Preferred declared prior to such conversion if such holder held such shares on the record date fixed for the determination of holders of the Series B Preferred entitled to receive payment of such dividend. [h] Shares of the Series B Preferred may not be converted after the close of business on the third business day preceding the Redemption Date pursuant to Section 8. [i] The Corporation shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock of the Corporation issuable upon the conversion of all outstanding shares of the Series B Preferred. [j] For purposes of this Section, "fair market value" shall be as determined by the Board of Directors in such manner as they shall deem appropriate in their discretion, unless the holder(s) of more than twenty-five percent (25%) of the outstanding shares of Preferred Stock of the Corporation demand in good faith and in writing that "fair market value" be determined by an appraiser, who shall be mutually acceptable to the Board of Directors and such holders, whose determination shall be binding and whose fees and expenses shall be paid by the Corporation. SECTION 8. REDEMPTION. [a] The Corporation may, at the election of its Board of Directors, at any time or from time to time, redeem the whole or part of the Series B Preferred, at the Stated Value, plus an amount equal to all unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of redemption. In case the Corporation shall elect to redeem less than all the Series B Preferred, the Corporation shall select pro rata the shares so to be redeemed, except that if the Board of Directors determines in its reasonable business judgment that to do so by lot would be in the best interests of the Corporation, then the shares so to be redeemed shall be selected by lot in such manner as shall be prescribed by the Board of Directors. [b] Notice of every such redemption shall be mailed, first class postage prepaid, not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption ("Redemption Date"), to each holder of record of the shares to be redeemed, at his or her address as the same appears on the record of stockholders; but neither failure to mail any such notice to one or more such holders nor any defect in any such notice shall affect the sufficiency of the proceedings for redemptions as to other holders. Each such notice shall state the Redemption 18 19 Date; the number of shares of Series B Preferred to be redeemed, and, if less than all the shares of Series B Preferred held by such holder are to be redeemed, the manner of selecting by lot the shares to be redeemed; the place or places where such shares are to be surrendered for payment; that dividends on the shares to be redeemed will cease on such Redemption Date; and the effect of such redemption on the right of conversion. [c] Notice having been mailed as aforesaid, from and after the Redemption Date, all dividends on the shares so called for redemption shall cease to accrue, said shares shall no longer be deemed to be outstanding, all rights of the holders thereof as stockholders of the Corporation (except the right to receive payment for the shares, and the right to convert such shares into shares of Common Stock of the Corporation until the close of business on the third business day preceding the Redemption Date, as provided in Section 7) shall cease, and, upon surrender in accordance with said notice of the certificates for any such shares (properly endorsed or assigned for transfer, if the Board of Directors shall so require), such shares shall be redeemed by the Corporation in accordance with this Section 8. In connection with the determination of the amount of dividends accruing with respect to any conversion in the period between a notice of redemption and the Redemption Date, on a date which is not a Quarterly Dividend Payment Date, the amount of any such dividends shall be prorated based upon the number of days which have elapsed since the immediately preceding Quarterly Dividend Payment Date (excluding such Quarterly Dividend Payment Date itself) SECTION 9. REPORTS AS TO ADJUSTMENTS. Whenever the number of shares of Common Stock into which the shares of the Series B Preferred are convertible is adjusted as provided in Section 7, the Corporation will (A) promptly compute such adjustment and furnish to each transfer agent for the Series B Preferred a certificate, signed by a principal financial officer of the Corporation, setting forth the number of shares of Common Stock into which each share of the Series B Preferred is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment will become effective and (B) promptly mail to the holders of record of the outstanding shares of the Series B Preferred a notice stating that the number of shares into which the shares of Series B Preferred are convertible has been adjusted and setting forth the new number of shares into which each share of the Series B Preferred is convertible as a result of such adjustment and when such adjustment will become effective. Notwithstanding the foregoing, the Corporation shall incur no liability for its failure to take any action set forth in this Section 9, nor shall such failure affect the validity, rights or preferences of any shares of the Series B Preferred. SECTION 10. RANKING. The Series B Preferred shall rank senior to the Common Stock, the Series A Preferred, the Series C Preferred, the Series D Preferred, the Series E Preferred, the Series F Preferred, and any other series of Preferred Stock of the Corporation hereafter created, as to the payment of dividends and the distribution of assets and rights upon liquidation, dissolution or winding up of the Corporation. F. Designation of Series C Convertible Preferred Stock. A series of the Preferred Stock of the corporation is hereby created and authorized, and the designations, amount and stated value of such series of Preferred Stock and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereon, are as follows: 19 20 SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE. The shares of such series shall be designated as Series C Convertible Preferred (the "Series C Preferred") and the number of shares constituting such series shall be 4,000,000 shares. The stated value of the Series C Preferred shall be $5 per share, the original per share issue price (the "Stated Value"). SECTION 2. DIVIDENDS AND DISTRIBUTIONS. The holders of shares of the Series C Preferred shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation out of funds legally available for such purpose, cumulative dividends payable quarterly in cash on the first business day of January, April, July and October (each such date being referred to herein as a "Quarterly Dividend Payment Date"), accruing commencing with the date of issue of such shares, on shares of the Series C Preferred at the rate of $.35 per share per annum. No interest shall be paid on accrued but unpaid dividends. SECTION 3. VOTING RIGHTS. In addition to voting rights required by law or by the Certificate of Incorporation, subject to restrictions contained in this Certificate of Incorporation the holders of Series C Preferred shall be entitled to vote on all matters submitted to a vote of the Corporation's stockholders. Except as otherwise required by law or provided by this Certificate of Incorporation or by the Board of Directors pursuant to Subpart C of this Article FOURTH, the holders of the Series C Preferred shall vote together with the holders of all other series of the Corporation's voting preferred stock and the holders of the Corporation's Common Stock as one class with one vote per share (in the case of Preferred Stock, subject to adjustments as provided in Section 7 below and if convertible into Common Stock, one vote per share of Common Stock into which such convertible Preferred Stock is then convertible) on all matters submitted to a vote of the Corporation's stockholders. SECTION 4. CERTAIN RESTRICTIONS. Whenever dividends payable on the Series C Preferred as provided in section 2 are in arrears, thereafter and until dividends, including all accrued dividends, on shares of the Series C Preferred outstanding shall have been paid in full or declared and set apart for payment, the Corporation shall not (A) pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any such junior stock, (B) pay dividends on or make any other distributions on any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred, except dividends paid ratably on the Series C Preferred and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled, (C) redeem or purchase or otherwise acquire for consideration any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior to the Series C Preferred or in satisfaction of contractual obligations to do so entered into with the written consent of the holders of a majority of outstanding shares of Series C Preferred (including, without limitation, in satisfaction of the provisions contained in the Stockholders' Agreement), or (D) purchase or otherwise acquire for consideration any 20 21 shares of the Series C Preferred, or any shares of stock ranking on a parity with the Series C Preferred except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series of classes, or except pursuant to the provisions of the Stockholders' Agreement. SECTION 5. REACQUIRED SHARES. Any shares of the Series C Preferred which have been converted to Common Stock or have been purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, or otherwise in accordance with Delaware General Corporation Law. SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (A) to the holders of the Series C Preferred unless, prior thereto, the holders of the Series B Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (B) to the holders of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred unless, prior thereto, the holders of Series C Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (C) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Preferred, except distributions made ratably on the Series C Preferred and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. SECTION 7. OPTIONAL CONVERSION. Each share of the Series C Preferred may be converted at any time, at the option of the holder thereof, into shares of Common Stock of the Corporation, on the terms and conditions set forth below in this Section 7: [a] Subject to the provisions for adjustment hereinafter set forth, each share of the Series C Preferred shall be convertible at the option of the holder thereof, in the manner hereinafter set forth, into one (1) fully paid and nonassessable share of Common Stock of the Corporation. [b] The number of shares of Common Stock into which each share of the Series C Preferred is convertible shall be adjusted from time to time as follows: [i] In case the Corporation shall at any time or from time to time after the issuance of such share of Series C Preferred declare or pay any dividend on its Common Stock payable in its Common Stock or effect a subdivision of the outstanding shares of 21 22 its Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise), then, and in each such case, the number of shares of Common Stock into which each share of the Series C Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the sum of (I) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event plus (II) the number of shares of Common Stock which such holder would have been entitled to receive in connection with the occurrence of such event had such share been converted immediately prior thereto, and the denominator of which is the number of shares of Common Stock determined in accordance with clause (I) above. An adjustment made pursuant to this subparagraph b[i] shall become effective (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective. [ii] In case the Corporation at any time or from time to time after the issuance of such share of Series C Preferred shall combine or consolidate the outstanding shares of its Common Stock into a lesser number of shares of Common Stock, by reclassification or otherwise, then, and in each such case, the number of shares of Common Stock into which each share of the Series C Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the number of shares which the holder would have owned after giving effect to such event had such share been converted immediately prior to the occurrence of such event and the denominator of which is the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event. An adjustment made pursuant to this subparagraph b[ii] shall become effective at the close of business on the date immediately prior to the day upon which such corporate action becomes effective. [iii] In case the Corporation after the issuance of such share of Series C Preferred shall: (A) issue any options, warrants, or other rights (excluding options to purchase Common Stock issued to management of the Corporation exercisable for up to the lesser of 2,000,000 shares of Common Stock (subject to adjustment pursuant to provisions applicable to the options in the case of stock splits, reverse stock splits and the like) or that number of shares of Common Stock equal to fifteen percent (15%) of the aggregate number of outstanding shares of Common Stock and other equity securities of the Corporation exercisable for the purchase of, or convertible into, Common Stock computed on a fully-diluted basis) entitling the holder thereof to subscribe for, or purchase, Common Stock at a price per share which, when added to the amount of consideration received or receivable by the Corporation for such options, warrants, or other rights, is less than the then fair market value per share of the Common Stock at the date of such issuance: (B) issue or sell securities of the 22 23 Corporation convertible into, or exchangeable for, Common Stock at a price per share which, when added to the amount of consideration received or receivable, from the Corporation for such exchangeable or convertible securities, is less than the then fair market value of a share of Common Stock at the date of such issuance; or (C) issue or sell additional shares of Common Stock for consideration representing less than the then fair market value of the Common Stock at the date of such issuance; then the number of shares of Common Stock into which each share of the Series C Preferred is convertible shall be adjusted so that, thereafter, until further adjusted, the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (w) the number of shares of Common Stock into which such shares are convertible immediately prior to the occurrence of such event by (x) a fraction, the numerator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of additional shares of Common Stock issuable upon exercise of such options, warrants, or rights, or exchangeable or convertible securities, or the additional number of shares of Common Stock issued at such time, and the denominator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of shares of Common Stock that either (y) the sum of the aggregate exercise price of the total number of shares of Common Stock issuable upon exercise of such options, warrants, or rights, or upon conversion or exchange of such convertible securities, and the aggregate amount of consideration, if any, received or receivable by the Corporation for such options, warrants, or rights, or convertible or exchangeable securities, or (z) the aggregate consideration received in connection with the sale of shares of its Common Stock for less than the then fair market value, as the case may be, would purchase at the then fair market value. [iv] In the event that, at any time, or from time to time, after the issuance of such share of the Series C Preferred, the Common Stock issuable upon conversion of the Series C Preferred is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend, or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this Section 7), then, and in any such event, each holder of Series C Preferred shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series C Preferred could have been converted immediately prior to such recapitalization, reclassification, or change, all subject to further adjustment as provided herein. [v] If at any time, or from time to time after the issuance of such share of the Series C Preferred there is a capital reorganization of the Common Stock other than a recapitalization, subdivision, combination, reclassification, or exchange of shares provided for elsewhere in this Section 7) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all, or substantially all, of the Corporations' properties and assets to any other person, then, as a part of such reorganization, merger, consolidation, or sale, provision shall be made so that the holders of the Series C Preferred shall thereafter be entitled to receive upon conversion of the Series C Preferred the number of shares of stock or other securities 23 24 or property to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the holders of Series C Preferred after the reorganization, merger, consolidation, or sale to the end that the provisions of this Section 7 shall be applicable after that event and be as nearly equivalent as may be practicable. [vi] Upon the expiration of any rights, options, warrants or conversion or exchange privileges which caused an adjustment pursuant to this Section 7 to be made, if any thereof shall not have been exercised, the number of shares of Common Stock into which each share of the Series C Preferred is convertible shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (a) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange privileges and (b) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise plus the aggregate consideration, if any, actually received by the Corporation for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges, whether or not exercised. [c] If any adjustment in the number of shares of Common Stock into which each share of the Series C Preferred may be converted required pursuant to this Section 7 would result in an increase or decrease of less than 1% in the number of shares of Common Stock into which each share of the Series C Preferred is then convertible, the amount of any such adjustment shall be carried forward and adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least 1% of the number of shares of Common Stock into which each share of the Series C Preferred is then convertible; provided that any such adjustments carried forward shall be made immediately following receipt of notice from a holder of the intent to convert all or a portion of the Series C Preferred such that upon conversion the holder shall receive such number of shares of Common Stock as such holder is entitled, taking into account all adjustments required by this Section 7. All calculations under this paragraph [c] shall be made to the nearest one-hundredth of a share. [d] The holder of any shares of the Series C Preferred may convert such shares into shares of Common Stock by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of Series C Preferred to be converted (or if such certificate or certificates cannot be found, an affidavit of lost securities in form and substance acceptable to the Corporation) accompanied by a written notice stating that such holder elects to convert all or a specified number of such shares in accordance with the provisions of this Section 7 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. As promptly as practicable, and in any event within five business days after the surrender of such certificates 24 25 and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes, the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which the holder of the Series C Preferred so converted shall be entitled and (ii) if less than the full number of shares of the Series C Preferred evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Such conversions shall be deemed to have been made at the close of business on the date of giving of such notice and of such surrender of the certificate or certificates representing the shares of the Series C Preferred to be converted so that the rights of the holder thereof shall cease except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [e] below, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [e] Upon conversion of any shares of the Series C Preferred, the holder thereof shall be entitled to receive any accumulated, accrued or unpaid dividends in respect of the shares so converted, including any dividends on such shares of the Series C Preferred declared prior to such conversion if such holder held such shares on the record date fixed for the determination of holders of the Series C Preferred entitled to receive payment of such dividend. [f] The Corporation shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock of the Corporation issuable upon the conversion of all outstanding shares of the Series C Preferred. [g] For purposes of this Section, "fair market value" shall be as determined by the Board of Directors in such manner as they shall deem appropriate in their discretion, unless the holder(s) of more than twenty-five percent (25%) of the outstanding shares of Preferred Stock of the Corporation demand in good faith and in writing that "fair market value" be determined by an appraiser who shall be mutually acceptable to the Board of Directors and such holders, whose determination shall be binding and whose fees and expenses shall be paid by the Corporation. SECTION 8. MANDATORY CONVERSION. Each share of the Series C Preferred shall be converted, at the option of the Board of Directors, into shares of Common Stock of the Corporation, on the terms and conditions set forth below in this Section 8: [a] Subject to the provisions for adjustment set forth in Section 7, which shall also apply to conversions pursuant to this Section 8, each share of the Series C Preferred shall be convertible at the option of the Board of Directors, under the conditions hereinafter set forth, into one (1) fully paid and nonassessable share of Common Stock of the Corporation. [b] The Board of Directors of the Corporation may require conversion of all shares of the Series C Preferred into shares of Common Stock upon any of the following events if, and only if, all other outstanding shares of Preferred Stock of the Corporation, other than those which rank senior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Preferred, are concurrently either redeemed or converted: 25 26 [i] A public offering of equity securities of the Corporation of at least $10,000,000 in gross proceeds; [ii] A private placement of equity securities of the Corporation of at least $25,000,000 in gross proceeds; [iii] A private placement of equity securities of the Corporation of at least $10,000,000 in gross proceeds under circumstances where the investor(s) reasonably believe the conversion of the Series C Preferred is necessary to achieve its (their) investment objectives; [iv] A merger of the Corporation with another corporation or other entity, whether or not the Corporation is a survivor of such transaction whereby as a result the stockholders of the Corporation hold less than 50% of the outstanding capital stock of the surviving entity; or [v] An acquisition of equity securities of the Corporation in one transaction or in a series of related transactions which results in a transfer of majority voting control of the Corporation. [c] The Series C Preferred shall convert to Common Stock of the Corporation automatically upon notice in writing to the stockholders, including all holders of the Series C Preferred, setting forth the date of such conversion and the material terms of the triggering event. As promptly as practicable after such notice, and in any event within five business days after the surrender of certificates for the Series C Preferred (if required by the Board of Directors), the Corporation shall deliver or cause to be delivered to each holder of Series C Preferred certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which such holder of the Series C Preferred so converted shall be entitled. Such conversion shall be deemed to have been made at the close of business on the date set forth in such notice of mandatory conversion so that the rights of the holder thereof shall cease with or without surrender of certificates for the Series C Preferred, except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [d] below, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [d] Upon conversion of the Series C Preferred, the holder thereof shall be entitled to receive any accumulated, accrued or unpaid dividends in respect of the shares so converted, including any dividends on such shares of the Series C Preferred declared prior to such conversion if such holder held such shares on the record date fixed for the determination of holders of the Series C Preferred entitled to receive payment of such dividend. [e] The Corporation shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock of the Corporation issuable upon the conversion of all outstanding shares of the Series C Preferred. SECTION 9. REPORTS AS TO ADJUSTMENTS. 26 27 Whenever the number of shares of Common Stock into which the shares of the Series C Preferred are convertible is adjusted as provided in Section 7, the Corporation will (A) promptly compute such adjustment and furnish to each transfer agent for the Series C Preferred a certificate, signed by a principal financial officer of the Corporation, setting forth the number of shares of Common Stock into which each share of the Series C Preferred is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment will become effective and (B) promptly mail to the holders of record of the outstanding shares of the Series C Preferred a notice stating that the number of shares into which the shares of Series C Preferred are convertible has been adjusted and setting forth the new number of shares into which each share of the Series C Preferred is convertible as a result of such adjustment and when such adjustment will become effective. Notwithstanding the foregoing, the Corporation shall incur no liability for its failure to take any action set forth in this Section 9, nor shall such failure affect the validity, rights or preferences of any shares of the Series C Preferred. SECTION 10. RANKING. The Series C Preferred shall rank senior to the Common Stock and any other series of Preferred Stock of the Corporation hereafter created (except for the Series B Preferred, which shall rank senior to the Series C Preferred, and except for the Series A Preferred, the Series D Preferred, the Series E Preferred, the Series F Preferred, and any other series of Preferred Stock which the Board of Directors shall establish and designate to rank equal therewith pursuant to Subpart C of this Article FOURTH, with which it shall rank equal), as to the payment of dividends and the distribution of assets and rights upon liquidation, dissolution or winding up of the Corporation. SECTION 11. DIRECTORSHIP. The holders of the Series C Preferred, as a class, shall be entitled to be represented on the Board of Directors by one Director (the "Series C Director") who, upon nomination by such holders, as a class, will stand for election by voting by the holders of the Preferred Stock entitled to vote for the election of directors (subject to limitations in this Article FOURTH or established by the Board of Directors pursuant to Section C of this Article FOURTH) and holders of Common Stock together, except under circumstances where the number of individuals nominated for election exceeds the number of Directors to be elected. In the event the number of individuals nominated for election exceeds the number of Directors to be elected, then the holders of the Series C Preferred shall have the sole right to vote for, elect and remove the individual nominated by them, as a class, to serve as the Series C Director, and in such event the further right to vote for, elect or remove any of the other Directors who are not to be elected solely by the holders of another class or series of Preferred Stock.. The Series C Director, upon being elected, will serve for the same term and have the same voting powers as other Directors. The right to elect the Series C Director pursuant to the terms hereof shall be exercisable by the holders of a majority of the Series C Preferred at their option upon at least 60 days notice to the Corporation; provided, however, if the Corporation is subject to the reporting requirements of the Securities Exchange Act of 1934, such notice must be provided on or before the date established by the Corporation for the submission of proposals pursuant to the proxy rules promulgated under the Securities Exchange Act of 1934. The Series C Director, if not an employee of the Corporation, shall serve as a member of the Compensation, Audit, and Nominating Committees of the Board of Directors (or any other Committee of the Board performing such functions), which Committees will be composed of at least one Director, in addition to the Series C Director, who is not an employee of the Corporation. 27 28 G. Designation of Series D Convertible Preferred Stock. A series of the Preferred Stock of the corporation is hereby created and authorized, and the designations, amount and stated value of such series of Preferred Stock and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereon, are as follows: SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE. The shares of such series shall be designated as Series D Convertible Preferred (the "Series D Preferred") and the number of shares constituting such series shall be 1,000,000 shares. The stated value of the Series D Preferred shall be $5 per share, the original per share issue price (the "Stated Value"). SECTION 2. DIVIDENDS AND DISTRIBUTIONS. The holders of shares of the Series D Preferred shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation out of funds legally available for such purpose, cumulative dividends payable quarterly in cash on the first business day of January, April, July and October (each such date being referred to herein as a "Quarterly Dividend Payment Date"), accruing commencing with the date of issue of such shares, on shares of the Series D Preferred at the rate of $.35 per share per annum. No interest shall be paid on accrued but unpaid dividends. SECTION 3. VOTING RIGHTS. Except as provided herein or otherwise required by law, the voting power of the Corporation shall be vested in the holders of shares of Common Stock, Series A Preferred, Series C Preferred, Series E Preferred, Series F Preferred, and such other series of voting preferred stock as are from time to time designated, and the holders of shares of Series B Preferred and the Series D Preferred shall have no voting power, except that with respect to the events described below, the holders of the Series A Preferred, the Series B Preferred, the Series C Preferred, the Series D Preferred, the Series E Preferred, the Series F Preferred, and all other series of voting preferred stock as are from time to time designated to have such voting rights, and the holders of the Corporation's Common Stock shall vote together as one class with one vote per share (in the case of Preferred Stock, subject to adjustments as provided in Section 7 below and if convertible into Common Stock, one vote per share of Common Stock into which such convertible Preferred Stock is then convertible), to the extent such of the following events are otherwise subject to the vote of any holders of capital stock of the Corporation: [a] any amendment of this Amended and Restated Certificate of Incorporation, including the same as it may hereafter be amended or restated, which (i) authorizes, or modifies the rights, preferences or terms of, any security that is or would be senior in any respect to the Series D Preferred, (ii) modifies any of the rights, preferences or terms of the Series D Preferred, or (iii) would otherwise significantly and adversely affect the Series D Preferred. [b] a sale of all or substantially all of the assets of the Corporation; [c] the dissolution, liquidation or termination of the Corporation; 28 29 [d] any merger of the Corporation with another corporation or entity, whether or not the Corporation is the survivor; [e] any material change in the fundamental nature of the business of the Corporation; [f] any transaction with affiliates, except upon fair and reasonable terms comparable to an arms-length transaction; and [g] any change in the Corporation's capital structure in a manner that dilutes the economic interest of the holders of Series D Preferred. At such time as the holders of the Series D Preferred shall have obtained the consent (which does not need to have become final) of the Federal Communications Commission to the exercise by the holders of the Series D Preferred of the voting rights set forth below or at such time as the consent of the Federal Communications Commission is not necessary under applicable law, rule or regulation (in the opinion of counsel acceptable to the Board of Directors), then on the election of a majority of the holders of the Series D Preferred, in addition to voting rights required by law, the holders of Series D Preferred shall be entitled to vote on all matters submitted to a vote of the Corporation's stockholders in accordance with the next sentence. Except as otherwise required by law or this Certificate of Incorporation, the holders of the Series D Preferred and the holders of the Corporation's Common Stock shall vote together as part of the same class and each of the outstanding shares of the Series D Preferred shall have a number of votes per share on a matter equal to the quotient of (a) the lesser of (1) the number of shares of Common Stock into which the outstanding shares of Series D Preferred are then convertible, and (2) the difference between (A) the product of (i) the fraction equal to 0.049 divided by 0.951, multiplied by (ii) the sum of the number of votes entitled to be a cast by the Corporation's Common Stock and any Series of Preferred (other than the Series D Preferred) which votes as a class with the Corporation's Common Stock on such matter minus (B) the number of shares of the Corporation's Common Stock issued pursuant to Section 7[a][i] of this Subarticle G of Article 4 (fully adjusted to reflect the events described in Section 7[c][i] and [ii], divided by (b) the number of outstanding shares of Series D Preferred. It is the intention of this provision that it should be construed consistently with the limitations to which bank holding companies and foreign banks treated as bank holding companies are subject with respect to the ownership or control of voting securities under the Bank Holding Company Act of 1956, as amended. SECTION 4. CERTAIN RESTRICTIONS. Whenever dividends payable on the Series D Preferred as provided in section 2 are in arrears,, thereafter and until dividends, including all accrued dividends, on shares of the Series D Preferred outstanding shall have been paid in full or declared and set apart for payment, the Corporation shall not (A) pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series D Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any such junior stock, (B) pay dividends on or make any other distributions on any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series D Preferred, except dividends paid ratably on the Series D Preferred and all such parity stock on which dividends are payable or in arrears 29 30 in proportion to the total amounts to which the holders of all such shares are then entitled, (C) redeem or purchase or otherwise acquire for consideration any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series D Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior to the Series D Preferred or in satisfaction of contractual obligations to do so entered into with the written consent of the holders of a majority of outstanding shares of Series D Preferred (including, without limitation, in satisfaction of the provisions contained in the Stockholders' Agreement), or (D) purchase or otherwise acquire for consideration any shares of the Series D Preferred, or any shares of stock ranking on a parity with the Series D Preferred except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series of classes or except pursuant to the provisions of the Stockholders' Agreement. SECTION 5. REACQUIRED SHARES. Any shares of the Series D Preferred which have been converted to Common Stock or have been purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, or otherwise in accordance with Delaware General Corporation Law. SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (A) to the holders of the Series D Preferred unless, prior thereto, the holders of the Series B Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (B) to the holders of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series D Preferred unless, prior thereto, the holders of Series D Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (C) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series D Preferred, except distributions made ratably on the Series D Preferred and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. SECTION 7. CONVERSION. [a] Optional Conversion. Subject to Section 7[c] and to the provisions for adjustment hereinafter set forth, each share of the Series D Preferred shall be convertible at the option of the holder thereof, in the manner hereinafter set forth, into one (1) fully paid and nonassessable share of Common Stock of the Corporation. [b] Mandatory Conversion. Subject to the provisions for adjustment set forth in this Section 7, each share of the Series D Preferred shall be convertible at the option of the Board of 30 31 Directors, under the conditions hereinafter set forth, into one (1) fully paid and nonassessable share of Common Stock of the Corporation in the event of, and concurrently with the closing of, a public offering of Common Stock (or Series B Common Stock if required pursuant to clause [c][i] below) of the Corporation at a per share price of at least $12.00 (subject to adjustment for stock splits, stock dividends, reverse stock splits and the like) with gross proceeds to the Corporation of at least $25,000,000 (excluding the effect of any over-allotment option). [c] Shares of Series D Preferred may be converted by a holder pursuant to Section 7[a] or at the option of the Board of Directors pursuant to Section 7[b]only: [i] To acquire shares of Common Stock; provided, however, that to the extent necessary to prevent the holders of Series D Preferred Stock from being in violation of any applicable law or regulation, all shares issuable to such holder on conversion of Series D Preferred, together with all of the shares of Common Stock previously acquired on conversion of Series D Preferred under this provision (fully adjusted to reflect the events described in Section 7[c]), shall, at the time and as a condition of such conversion, be designated Series B Common Stock, which will have all of the characteristics of the Common Stock with the sole exception that the voting rights of such Series B Common Stock shall be subject to the same voting rights limitations as are applicable to the Series D Preferred pursuant to Section 3 above and will be convertible at any time into Common Stock at the option of the holder in the same manner and subject to the same conditions as were applicable to a voluntary conversion of the Series D Preferred set forth in this Section 7; or [ii] In a widely dispersed public distribution of the resulting Common Stock; or [iii] In connection with a private placement in which no one party directly or indirectly acquires the right to purchase in excess of 2% of the Common Stock; or [iv] In an assignment to one or more financial intermediaries (e.g., broker-dealer or investment banker) for the purpose of conducting a widely dispersed distribution of the resulting Common Stock on behalf of the holder; or [v] On effectiveness of an amendment to or repeal of the Bank Holding Company Act of 1956, as amended (including any replacement law, "BHCA"), or the International Banking Act of 1978, as amended ("IBA"), as a result of which a bank holding company (as defined in the BHCA) and a foreign bank with a U.S. branch or agency may acquire the resulting shares of Common Stock without limitation; or [vi] On receipt and finality of an order approving the transaction from the Board of Governors of the Federal Reserve System (including any successor agency responsible for supervision and enforcement under the BHCA or IBA, "FRB") under the BHCA or the IBA. [d] The number of shares of Common Stock into which each share of the Series D Preferred is convertible shall be adjusted from time to time as follows: 31 32 [i] In case the Corporation shall at any time or from time to time after the issuance of such share of Series D Preferred declare or pay any dividend on its Common Stock payable in its Common Stock or effect a subdivision of the outstanding shares of its Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise), then, and in each such case, the number of shares of Common Stock into which each share of the Series D Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the sum of (I) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event plus (II) the number of shares of Common Stock which such holder would have been entitled to receive in connection with the occurrence of such event had such share been converted immediately prior thereto, and the denominator of which is the number of shares of Common Stock determined in accordance with clause (I) above. An adjustment made pursuant to this subparagraph [d][i] shall become effective (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective. [ii] In case the Corporation at any time or from time to time after the issuance of such share of Series D Preferred shall combine or consolidate the outstanding shares of its Common Stock into a lesser number of shares of Common Stock, by reclassification or otherwise, then, and in each such case, the number of shares of Common Stock into which each share of the Series D Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the number of shares which the holder would have owned after giving effect to such event had such share been converted immediately prior to the occurrence of such event and the denominator of which is the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event. An adjustment made pursuant to this subparagraph d[ii] shall become effective at the close of business on the date immediately prior to the day upon which such corporate action becomes effective. [iii] In case the Corporation after the issuance of such share of Series D Preferred shall: (A) issue any options, warrants, or other rights (excluding those issued in exchange for options to purchase common stock in Faircom Inc. pursuant to the terms of a merger, and excluding options to purchase Common Stock issued to management of the Corporation exercisable for up to the lesser of 2,000,000 shares of Common Stock (subject to adjustment pursuant to provisions applicable to the options in the case of stock splits, reverse stock splits and the like) or that number of shares of Common Stock equal to fifteen percent (15%) of the aggregate number of outstanding shares of Common Stock and other equity securities of the Corporation exercisable for the purchase of, or convertible into, Common Stock computed on a 32 33 fully-diluted basis) entitling the holder thereof to subscribe for, or purchase, Common Stock at a price per share which, when added to the amount of consideration received or receivable by the Corporation for such options, warrants, or other rights, is less than the then fair market value per share of the Common Stock at the date of such issuance; (B) issue or sell securities of the Corporation convertible into, or exchangeable for, Common Stock at a price per share which, when added to the amount of consideration received or receivable, from the Corporation for such exchangeable or convertible securities, is less than the then fair market value of a share of Common Stock at the date of such issuance; or (C) issue or sell additional shares of Common Stock for consideration representing less than the then fair market value of the Common Stock at the date of such issuance; then the number of shares of Common Stock into which each share of the Series D Preferred is convertible shall be adjusted so that, thereafter, until further adjusted, the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (w) the number of shares of Common Stock into which such shares are convertible immediately prior to the occurrence of such event by (x) a fraction, the numerator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of additional shares of Common Stock issuable upon exercise of such options, warrants, or rights, or exchangeable or convertible securities, or the additional number of shares of Common Stock issued at such time, and the denominator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of shares of Common Stock that either (y) the sum of the aggregate exercise price of the total number of shares of Common Stock issuable upon exercise of such options, warrants, or rights, or upon conversion or exchange of such convertible securities, and the aggregate amount of consideration, if any, received or receivable by the Corporation for such options, warrants, or rights, or convertible or exchangeable securities, or (z) the aggregate consideration received in connection with the sale of shares of its Common Stock for less than the then fair market value, as the case may be, would purchase at the then fair market value. [iv] In the event that, at any time, or from time to time, after the issuance of such share of the Series D Preferred, the Common Stock issuable upon conversion of the Series D Preferred is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend, or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this Section 7), then, and in any such event, each holder of Series D Preferred shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series D Preferred could have been converted immediately prior to such recapitalization, reclassification, or change, all subject to further adjustment as provided herein. [v] If at any time, or from time to time after the issuance of such share of the Series D Preferred, there is a capital reorganization of the Common Stock other than a recapitalization, subdivision, combination, reclassification, or exchange of shares provided for elsewhere in this Section 7) or a merger or consolidation of the 33 34 Corporation with or into another corporation, or the sale of all, or substantially all, of the Corporations' properties and assets to any other person, then, as a part of such reorganization, merger, consolidation, or sale, provision shall be made so that the holders of the Series D Preferred shall thereafter be entitled to receive upon conversion of the Series D Preferred the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the holders of Series D Preferred after the reorganization, merger, consolidation, or sale to the end that the provisions of this Section 7 shall be applicable after that event and be as nearly equivalent as may be practicable. [vi] Upon the expiration of any rights, options, warrants or conversion or exchange privileges which caused an adjustment pursuant to this Section 7 to be made, if any thereof shall not have been exercised, the number of shares of Common Stock into which each share of the Series D Preferred is convertible shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (a) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange privileges and (b) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges, whether or not exercised. [e] If any adjustment in the number of shares of Common Stock into which each share of the Series D Preferred may be converted required pursuant to this Section 7 would result in an increase or decrease of less than 1% in the number of shares of Common Stock into which each share of the Series D Preferred is then convertible, the amount of any such adjustment shall be carried forward and adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least 1% of the number of shares of Common Stock into which each share of the Series D Preferred is then convertible; provided that any such adjustments carried forward shall be made immediately following receipt of notice from a holder of the intent to convert all or a portion of the Series D Preferred such that upon conversion the holder shall receive such number of shares of Common Stock as such holder is entitled, taking into account all adjustments required by this Section 7. All calculations under this paragraph [e] shall be made to the nearest one-hundredth of a share. [f] Subject to the limitation in Section 7[i] below, the holder of any shares of the Series D Preferred may convert such shares into shares of Common Stock pursuant to paragraph [a] of this Section 7 by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of Series D Preferred to be converted (or if such certificate or certificates cannot be found, an affidavit of lost securities in form and substance acceptable to the Corporation) accompanied by a written notice stating that such holder elects to convert all or 34 35 a specified number of such shares in accordance with the provisions of this Section 7 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. As promptly as practicable, and in any event within five business days after the surrender of such certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes, the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which the holder of the Series D Preferred so converted shall be entitled and (ii) if less than the full number of shares of the Series D Preferred evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Such conversions shall be deemed to have been made at the close of business on the date of giving of such notice and of such surrender of the certificate or certificates representing the shares of the Series D Preferred to be converted so that the rights of the holder thereof shall cease except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [h] below,, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [g] The Series D Preferred shall convert to Common Stock of the Corporation pursuant to paragraph [b] of this Section 7 automatically upon notice in writing to the stockholders, including all holders of the Series D Preferred, setting forth the date of such conversion and the material terms of the triggering public offering. As promptly as practicable after such notice, and in any event within five business days after the surrender of certificates for the Series D Preferred (if required by the Board of Directors), the Corporation shall deliver or cause to be delivered to each holder of Series D Preferred certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which such holder of the Series D Preferred so converted shall be entitled. Such conversion shall be deemed to have been made at the close of business on the date set forth in such notice of mandatory conversion so that the rights of the holder thereof shall cease with or without surrender of certificates for the Series D Preferred, except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [h] below, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [h] Upon conversion of any shares of the Series D Preferred pursuant to paragraph [a] or [b] of this Section 7, the holder thereof shall be entitled to receive any accumulated, accrued or unpaid dividends in respect of the shares so converted, including any dividends on such shares of the Series D Preferred declared prior to such conversion if such holder held such shares on the record date fixed for the determination of holders of the Series D Preferred entitled to receive payment of such dividend. [i] Shares of the Series D Preferred may not be converted after the close of business on the third business day preceding the Redemption Date pursuant to Section 8. 35 36 [j] The Corporation shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock of the Corporation issuable upon the conversion of all outstanding shares of the Series D Preferred. [k] For purposes of this Section, "fair market value" shall be as determined by the Board of Directors in such manner as they shall deem appropriate in their discretion, unless the holder(s) of more than twenty-five percent (25%) of the outstanding shares of Preferred Stock of the Corporation demand in good faith and in writing that "fair market value" be determined by an appraiser, who shall be mutually acceptable to the Board of Directors and such holders, whose determination shall be binding and whose fees and expenses shall be paid by the Corporation. SECTION 8. REDEMPTION. [a] The Corporation may, at the election of its Board of Directors, at any time or from time to time, redeem the whole or part of the Series D Preferred, at the Stated Value, plus an amount equal to all unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of redemption. In case the Corporation shall elect to redeem less than all the Series D Preferred, the Corporation shall select pro rata the shares so to be redeemed, except that if the Board of Directors determines in its reasonable business judgment that to do so by lot would be in the best interests of the Corporation, then the shares so to be redeemed shall be selected by lot in such manner as shall be prescribed by the Board of Directors. [b] Notice of every such redemption shall be mailed, first class postage prepaid, not less than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption ("Redemption Date"), to each holder of record of the shares to be redeemed, at his or her address as the same appears on the record of stockholders; but neither failure to mail any such notice to one or more such holders nor any defect in any such notice shall affect the sufficiency of the proceedings for redemptions as to other holders. Each such notice shall state the Redemption Date; the number of shares of Series D Preferred to be redeemed, and, if less than all the shares of Series D Preferred held by such holder are to be redeemed, the manner of selecting by lot the shares to be redeemed; the place or places where such shares are to be surrendered for payment; that dividends on the shares to be redeemed will cease on such Redemption Date; and the effect of such redemption on the right of conversion. [c] Notice having been mailed as aforesaid, from and after the Redemption Date, all dividends on the shares so called for redemption shall cease to accrue, said shares shall no longer be deemed to be outstanding, all rights of the holders thereof as stockholders of the Corporation (except the right to receive payment for the shares, the right to receive declared dividends pursuant to Section 7[g] above, and the right to convert such shares into shares of Common Stock of the Corporation until the close of business on the third business day preceding the Redemption Date, as provided in Section 7) shall cease, and, upon surrender in accordance with said notice of the certificates for any such shares (properly endorsed or assigned for transfer, if the Board of Directors shall so require), such shares shall be redeemed by the Corporation in accordance with this Section 8. In connection with the determination of the amount of dividends accruing with respect to any conversion in the period between a notice of redemption and the Redemption Date, on a date which is not a Quarterly Dividend Payment Date, the amount of any such dividends shall be prorated based upon the number of days which have elapsed since the 36 37 immediately preceding Quarterly Dividend Payment Date (excluding such Quarterly Dividend Payment Date itself). SECTION 9. REPORTS AS TO ADJUSTMENTS. Whenever the number of shares of Common Stock into which the shares of the Series D Preferred are convertible is adjusted as provided in Section 7, the Corporation will (A) promptly compute such adjustment and furnish to each transfer agent for the Series D Preferred a certificate, signed by a principal financial officer of the Corporation, setting forth the number of shares of Common Stock into which each share of the Series D Preferred is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment will become effective and (B) promptly mail to the holders of record of the outstanding shares of the Series D Preferred a notice stating that the number of shares into which the shares of Series D Preferred are convertible has been adjusted and setting forth the new number of shares into which each share of the Series D Preferred is convertible as a result of such adjustment and when such adjustment will become effective. Notwithstanding the foregoing, the Corporation shall incur no liability for its failure to take any action set forth in this Section 9, nor shall such failure affect the validity, rights or preferences of any shares of the Series D Preferred. SECTION 10. RANKING. The Series D Preferred shall rank senior to the Common Stock and any other series of Preferred Stock of the Corporation hereafter created (except for the Series B Preferred, which shall rank senior to the Series D Preferred, and except for the Series A Preferred, the Series C Preferred, the Series E Preferred, the Series F Preferred, and any other series of Preferred Stock which the Board of Directors shall establish and designate to rank equal therewith pursuant to Subpart C of this Article FOURTH, with which it shall rank equal), as to the payment of dividends and the distribution of assets and rights upon liquidation, dissolution or winding up of the Corporation. H. Designation of Series E Convertible Preferred Stock. A series of the Preferred Stock of the Corporation is hereby created and authorized, and the designations, amount and stated value of such series of Preferred Stock and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereon, are as follows: SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE. The shares of such series shall be designated as "Series E Convertible Preferred Stock" (the "Series E Preferred") and the number of shares constituting such series shall be 5,000,000 shares. The stated value of the Series E Preferred shall be $5 per share, the original per share issue price (the "Stated Value") . SECTION 2. DIVIDENDS AND DISTRIBUTIONS. The holders of shares of the Series E Preferred shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation out of funds legally available for such purpose, cumulative dividends payable quarterly in cash on the first business day of January, April, July and October (each such date being referred to herein as a "Quarterly Dividend Payment Date"), accruing 37 38 commencing with the date of issue of such shares, on shares of the Series E Preferred at the rate of $.35 per share per annum. No interest shall be paid on accrued but unpaid dividends. SECTION 3. VOTING RIGHTS. In addition to voting rights required by law or by this Amended Certificate of Incorporation, as amended or restated from time to time (the "Certificate of Incorporation"), subject to restrictions contained in this Certificate of Incorporation the holders of Series E Preferred shall be entitled to vote on all matters submitted to a vote of the Corporation's stockholders. Except as otherwise required by law or provided by this Certificate of Incorporation or by the Board of Directors pursuant to Subpart C of this Article FOURTH, the holders of the Series E Preferred shall vote together with the holders of all other series of the Corporation's voting preferred stock and the holders of the Corporation's Common Stock as one class with one vote per share (in the case of Preferred Stock, subject to adjustments as provided in Section 7 below and if convertible into Common Stock, one vote per share of Common Stock into which such convertible Preferred Stock is then convertible) on all matters submitted to a vote of the Corporation's stockholders. SECTION 4. CERTAIN RESTRICTIONS. Whenever dividends payable on the Series E Preferred as provided in Section 2 are in arrears, thereafter and until dividends, including all accrued dividends, on shares of the Series E Preferred outstanding shall have been paid in full or declared and set apart for payment, the Corporation shall not (A) pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series E Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any such junior stock, (B) pay dividends on or make any other distributions on any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series E Preferred, except dividends paid ratably on the Series E Preferred and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled, (C) redeem or purchase or otherwise acquire for consideration any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series E Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior to the Series E Preferred or in satisfaction of contractual obligations to do so entered into with the written consent of the holders of a majority of aggregate outstanding shares of Series A Preferred and Series E Preferred outstanding as of the date of the creation of such contractual obligations (including, without limitation, in satisfaction of the provisions contained in the Stockholders' Agreement), or (D) purchase or otherwise acquire for consideration any shares of the Series E Preferred or any shares of stock ranking on a parity with the Series E Preferred except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series of classes or except pursuant to the provisions of the Stockholders' Agreement. SECTION 5. REACQUIRED SHARES. 38 39 Any shares of the Series E Preferred which have been converted to Common Stock or have been purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, or otherwise in accordance with Delaware General Corporation Law. SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (A) to the holders of the Series E Preferred unless, prior thereto, the holders of the Series B Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (B) to the holders of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series E Preferred unless, prior thereto, the holders of Series E Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (C) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series E Preferred, except distributions made ratably on the Series E Preferred and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. SECTION 7. OPTIONAL CONVERSION. Each share of the Series E Preferred may be converted at any time, at the option of the holder thereof, into shares of Common Stock of the Corporation, on the terms and conditions set forth below in this Section 7: [a] Subject to the provisions for adjustment hereinafter set forth, each share of the Series E Preferred shall be convertible at the option of the holder thereof, in the manner hereinafter set forth, into one (1) fully paid and nonassessable share of Common Stock of the Corporation. [b] The number of shares of Common Stock into which each share of the Series E Preferred is convertible shall be adjusted from time to time as follows: [i] In case the Corporation shall at any time or from time to time after the issuance of such share of Series E Preferred declare or pay any dividend on its Common Stock payable in its Common Stock or effect a subdivision of the outstanding shares of its Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise), then, and in each such case, the number of shares of Common Stock into which each share of the Series E Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the sum of (I) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event plus (II) the number of shares of Common Stock which such holder would have been entitled to receive in 39 40 connection with the occurrence of such event had such share been converted immediately prior thereto, and the denominator of which is the number of shares of Common Stock determined in accordance with clause (I) above. An adjustment made pursuant to this subparagraph [b][i] shall become effective (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective. [ii] In case the Corporation at any time or from time to time after the issuance of such share of Series E Preferred shall combine or consolidate the outstanding shares of its Common Stock into a lesser number of shares of Common Stock, by reclassification or otherwise, then, and in each such case, the number of shares of Common Stock into which each share of the Series E Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the number of shares which the holder would have owned after giving effect to such event had such share been converted immediately prior to the occurrence of such event and the denominator of which is the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event. An adjustment made pursuant to this subparagraph b(ii] shall become effective at the close of business on the date immediately prior to the day upon which such corporate action becomes effective. [iii] In case the Corporation after the issuance of such share of Series E Preferred shall: (A) issue any options, warrants, or other rights (excluding those issued in exchange for options to purchase common stock in Faircom Inc. pursuant to the terms of a merger, and excluding options to purchase Common Stock issued to management of the Corporation exercisable for up to the lesser of 2,000,000 shares of Common Stock (subject to adjustment pursuant to provisions applicable to the options in the case of stock splits, reverse stock splits and the like) or that number of shares of Common Stock equal to fifteen percent (15%) of the equity aggregate number of outstanding shares of Common Stock and other securities of the Corporation exercisable for the purchase of, or convertible into, Common Stock, computed on a fully-diluted basis) entitling the holder thereof to subscribe for, or purchase, Common Stock at a price per share which, when added to the amount of consideration received or receivable by the Corporation for such options, warrants, or other rights, is less than the then fair market value per share of the Common Stock at the date of such issuance; (B) issue or sell securities of the Corporation convertible into, or exchangeable for, Common Stock at a price per share which, when added to the amount of consideration received or receivable, from the Corporation for such exchangeable or convertible securities, is less than the then fair market value of a share of Common Stock at the date of such issuance; or (C) issue or sell additional shares of Common Stock for consideration representing less than the then fair market value of the Common Stock at the date of such issuance; then the number of shares of Common Stock into which each share of the Series E Preferred is convertible shall be adjusted so that, thereafter, until further adjusted, the holder of each share thereof shall be entitled to receive, upon the 40 41 conversion thereof, the number of shares of Common Stock determined by multiplying (w) the number of shares of Common Stock into which such shares are convertible immediately prior to the occurrence of such event by (x) a fraction, the numerator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of additional shares of Common Stock issuable upon exercise of such options, warrants, or rights, or exchangeable or convertible securities, or the additional number of shares of Common Stock issued at such time, and the denominator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of shares of Common Stock that either (y) the sum of the aggregate exercise price of the total number of shares of Common Stock issuable upon exercise of such options, warrants, or rights, or upon conversion or exchange of such convertible securities, and the aggregate amount of consideration, if any, received or receivable by the Corporation for such options, warrants, or rights, or convertible or exchangeable securities, or (z) the aggregate consideration received in connection with the sale of shares of its Common Stock for less than the then fair market value, as the case may be, would purchase at the then fair market value. [iv] In the event that, at any time, or from time to time, after the issuance of such share of the Series E Preferred, the Common Stock issuable upon conversion of the Series E Preferred is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend, or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this Section 7), then, and in any such event, each holder of Series E Preferred shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series E Preferred could have been converted immediately prior to such recapitalization, reclassification, or change, all subject to further adjustment as provided herein. [v] If at any time, or from time to time after the issuance of such share of the Series E Preferred there is a capital reorganization of the Common Stock other than a recapitalization, subdivision, combination, reclassification, or exchange of shares provided for elsewhere in this Section 7) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all, or substantially all, of the Corporations' properties and assets to any other person, then, as a part of such reorganization, merger, consolidation, or sale, provision shall be made so that the holders of the Series E Preferred shall thereafter be entitled to receive upon conversion of the Series E Preferred the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the holders of Series E Preferred after the reorganization, merger, consolidation, or sale to the end that the provisions of this Section 7 shall be applicable after that event and be as nearly equivalent as may be practicable. 41 42 [vi] Upon the expiration of any rights, options, warrants or conversion or exchange privileges which caused an adjustment pursuant to this Section 7 to be made, if any thereof shall not have been exercised, the number of shares of Common Stock into which each share of the Series E Preferred is convertible shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (a) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange privileges and (b) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges, whether or not exercised. [c] If any adjustment in the number of shares of Common Stock into which each share of the Series E Preferred may be converted required pursuant to this Section 7 would result in an increase or decrease of less than 1% in the number of shares of Common Stock into which each share of the Series E Preferred is then convertible, the amount of any such adjustment shall be carried forward and adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least 1% of the number of shares of Common Stock into which each share of the Series E Preferred is then convertible; provided that any such adjustments carried forward shall be made immediately following receipt of notice from a holder of the intent to convert all or a portion of the Series B Preferred such that upon conversion the holder shall receive such number of shares of Common Stock as such holder is entitled, taking into account all adjustments required by this Section 7. All calculations under this paragraph [c] shall be made to the nearest one-hundredth of a share. [d] The holder of any shares of the Series E Preferred may convert such shares into shares of Common Stock by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of Series E Preferred to be converted (or if such certificate or certificates cannot be found, an affidavit of lost securities in form and substance acceptable to the Corporation) accompanied by a written notice stating that such holder elects to convert all or a specified number of such shares in accordance with the provisions of this Section 7 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. As promptly as practicable, and in any event within five business days after the surrender of such certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes, the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which the holder of the Series E Preferred so converted shall be entitled and (ii) if less than the full number of shares of the Series E Preferred evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Such conversions shall be deemed to have 42 43 been made at the close of business on the date of giving of such notice and of such surrender of the certificate or certificates representing the shares of the Series E Preferred to be converted so that the rights of the holder thereof shall cease except for the right to receive Common Stock of the corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [e] below, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [e] Upon conversion of any shares of the Series E Preferred, the holder thereof shall be entitled to receive any accumulated, accrued or unpaid dividends in respect of the shares so converted, including any dividends on such shares of the Series E Preferred declared prior to such conversion if such holder held such shares on the record date fixed for the determination of holders of the Series E Preferred entitled to receive payment of such dividend. [f] The Corporation shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock of the Corporation issuable upon the conversion of all outstanding shares of the Series E Preferred. [g] For purposes of this Section, "fair market value" shall be as determined by the Board of Directors in such manner as they shall deem appropriate in their discretion, unless the holder(s) of more than twenty-five percent (25%) of the outstanding shares of Preferred Stock of the Corporation demand in good faith and in writing that "fair market value" be determined by an appraiser, who shall be mutually acceptable to the Board of Directors and such holders, whose determination shall be binding and whose fees and expenses shall be paid by the Corporation. SECTION 8. MANDATORY CONVERSION. Each share of the Series E Preferred shall be converted, at the option of the Board of Directors, into shares of Common Stock of the Corporation, on the terms and conditions set forth below in this Section 8: [a] Subject to the provisions for adjustment set forth in Section 7, which shall also apply to conversions pursuant to this Section 8, each share of the Series E Preferred shall be convertible at the option of the Board of Directors, under the conditions hereinafter set forth, into one (1) fully paid and nonassessable share of Common Stock of the Corporation. [b] The Board of Directors of the Corporation may require conversion of all shares of the Series E Preferred into shares of Common Stock in preparation for or upon any of the following: [i] A public offering of equity securities of the Corporation of at least $10,000,000 in gross proceeds; [ii] A private placement of equity securities of the Corporation of at least $25,000,000 in gross proceeds; [iii] A private placement of equity securities of the Corporation of at least $10,000,000 in gross proceeds under circumstances where the investor(s) reasonably 43 44 believe the conversion of the Series E Preferred is necessary to achieve its (their) investment objectives; [iv] A merger of the Corporation with another corporation or other entity, whether or not the Corporation is a survivor of such transaction whereby as a result the stockholders of the Corporation hold less than 50% of the outstanding capital stock of the surviving entity; or [v] An acquisition of equity securities of the Corporation in one transaction or in a series of related transactions which results in a transfer of majority voting control of the Corporation. [c] The Series E Preferred shall convert to Common Stock of the Corporation automatically upon notice in writing to the stockholders, including all holders of the Series E Preferred, setting forth the date of such conversion and the material terms of the triggering event. As promptly as practicable after such notice, and in any event within five business days after the surrender of certificates for the Series E Preferred (if required by the Board of Directors), the Corporation shall deliver or cause to be delivered to each holder of Series E Preferred certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which such holder of the Series E Preferred so converted shall be entitled. Such conversion shall be deemed to have been made at the close of business on the date set forth in such notice of mandatory conversion so that the rights of the holder thereof shall cease with or without surrender of certificates for the Series E Preferred, except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [d] below, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [d] Upon conversion of the Series E Preferred, the holder thereof shall be entitled to receive any accumulated, accrued or unpaid dividends in respect of the shares so converted, including any dividends on such shares of the Series E Preferred declared prior to such conversion if such holder held such shares on the record date fixed for the determination of holders of the Series E Preferred entitled to receive payment of such dividend. [e] The Corporation shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock of the Corporation issuable upon the conversion of all outstanding shares of the Series E Preferred. SECTION 9. REPORTS AS TO ADJUSTMENTS. Whenever the number of shares of Common Stock into which the shares of the Series E Preferred are convertible is adjusted as provided in Section 7, the Corporation will (A) promptly compute such adjustment and furnish to each transfer agent for the Series E Preferred a certificate, signed by a principal financial officer of the Corporation, setting forth the number of shares of Common Stock into which each share of the Series E Preferred is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment will become effective and (B) promptly mail to the holders of record of the outstanding shares of the Series E Preferred a notice stating that the number of shares into which the shares of Series E Preferred are convertible has been adjusted and setting forth the new number of 44 45 shares into which each share of the Series E Preferred is convertible as a result of such adjustment and when such adjustment will become effective. Notwithstanding the foregoing, the Corporation shall incur no liability for its failure to take any action set forth in this Section 9, nor shall such failure affect the validity, rights or preferences of any shares of the Series E Preferred. SECTION 10. RANKING. The Series E Preferred shall rank senior to the Common Stock and any other series of Preferred Stock of the Corporation hereafter created (except for the Series B Preferred, which shall rank senior to the Series E Preferred, and except for the Series A Preferred, the Series C Preferred, the Series D Preferred, the Series F Preferred, and any other series of Preferred Stock which the Board of Directors shall establish and designate to rank equal therewith pursuant to Subpart C of this Article FOURTH, with which it shall rank equal), as to the payment of dividends and the distribution of assets and rights upon liquidation, dissolution or winding up of the Corporation. I. Designation of Series F Convertible Preferred Stock. A series of the Preferred Stock of the Corporation is hereby created and authorized, and the designations, amount and stated value of such series of Preferred Stock and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereon, are as follows: SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE. The shares of such series shall be designated as Series F Convertible Preferred (the "Series F Preferred") and the number of shares constituting such series shall be 4,100,000 shares. The stated value of the Series F Preferred shall be $5 per share, the original per share issue price (the "Stated Value"). SECTION 2. DIVIDENDS AND DISTRIBUTIONS. The holders of shares of the Series F Preferred shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation out of funds legally available for such purpose, cumulative dividends payable quarterly in cash on the first business day of January, April, July and October (each such date being referred to herein as a "Quarterly Dividend Payment Date"), accruing commencing with the date of issue of such shares, on shares of the Series F Preferred at the rate of $.50 per share per annum; provided, however, that if and to the extent that the holder of a share of the Series F Preferred does not receive a cash dividend on any given Quarterly Dividend Payment Date in full payment of the accrued and unpaid dividend on such share of the Series F Preferred or any previously cumulated dividend on such share for the period ending on such Quarterly Dividend Payment Date and beginning on the immediately preceding Quarterly Dividend Payment Date (or, if such share was first issued during such period, beginning on the date of such issuance), such unpaid portion of such dividend shall be cumulative and shall itself accrue, whether or not declared and whether or not the Corporation has at the time funds legally available for such purpose, from and after such date, until the date so paid in full, dividends on a daily basis at a rate of 10% per annum, compounded quarterly. No interest shall be paid on accrued but unpaid dividends. SECTION 3. VOTING RIGHTS. In addition to voting rights required by law or by this Amended Certificate of Incorporation, as amended or restated from time to time (the "Certificate of Incorporation"), subject to restrictions 45 46 contained in this Certificate of Incorporation the holders of Series F Preferred shall be entitled to vote on all matters submitted to a vote of the Corporation's stockholders. Except as otherwise required by law or provided by this Certificate of Incorporation or by the Board of Directors pursuant to Subpart C of this Article FOURTH, the holders of the Series F Preferred, shall vote together with the holders of all other series of the Corporation's voting preferred stock and the holders of the Corporation's Common Stock as one class with one vote per share (in the case of Preferred Stock, subject to adjustments as provided in Section 7 below and if convertible into Common Stock, one vote per share of Common Stock into which such convertible Preferred Stock is then convertible) on all matters submitted to a vote of the Corporation's stockholders. Further, this Certificate of Incorporation may not be amended to change the liquidation preference, conversion rate, dividend rate or voting, put or redemption rights of any series of the Corporation's Preferred Stock without the approval of the holders of a majority of the outstanding shares of the Series F Preferred, voting as a separate class. SECTION 4. CERTAIN RESTRICTIONS. Whenever dividends payable on the Series F Preferred as provided in Section 2 are in arrears, thereafter and until dividends, including all accrued dividends, on shares of the Series F Preferred outstanding shall have been paid in full or declared and set apart for payment, the Corporation shall not (A) pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series F Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any such junior stock, (B) pay dividends on or make any other distributions on any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series F Preferred, except dividends paid ratably on the Series F Preferred and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled, (C) redeem or purchase or otherwise acquire for consideration any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series F Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior to the Series F Preferred or in satisfaction of contractual obligations to do so entered into with the written consent of the holders of a majority of outstanding shares of Series F Preferred (including, without limitation, in satisfaction of the provisions contained in the Stockholders' Agreement), or (D) purchase or otherwise acquire for consideration any shares of the Series F Preferred, or any shares of stock ranking on a parity with the Series F Preferred except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors (including the Series F Directors voting as part of the majority), after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall unanimously determine in good faith will result in fair and equitable treatment among the respective series of classes or except pursuant to the provisions of the Stockholders' Agreement. SECTION 5. REACQUIRED SHARES. Any shares of the Series F Preferred which have been converted to Common Stock or have been purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, or otherwise in accordance with Delaware General Corporation Law. 46 47 SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (A) to the holders of the Series F Preferred unless, prior thereto, the holders of the Series B Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (B) to the holders of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series F Preferred unless, prior thereto, the holders of Series F Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (C) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series F Preferred, except distributions made ratably on the Series F Preferred and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. SECTION 7. CONVERSION. [a] Optional Conversion. Subject to the provisions for adjustment hereinafter set forth, each share of the Series F Preferred shall be convertible at any time at the option of the holder thereof, in the manner hereinafter set forth, into one (1) fully paid and nonassessable share of Common Stock of the Corporation. [b] Mandatory Conversion. Subject to the provisions for adjustment set forth in this Section 7, each share of the Series F Preferred shall be convertible at the option of the Board of Directors into one (1) fully paid and nonassessable share of Common Stock of the Corporation in the event of, and concurrently with the closing of, a public offering of Common Stock of the Corporation at a per share price of at least $12.00 (subject to adjustment for stock splits, stock dividends, reverse stock splits and the like) with gross proceeds to the Corporation of at least $25,000,000 (excluding the effect of any over-allotment option). [c] The number of shares of Common Stock into which each share of the Series F Preferred is convertible shall be adjusted from time to time as follows: [i] In case the Corporation shall at any time or from time to time after the issuance of such share of Series F Preferred declare or pay any dividend on its Common Stock payable in its Common Stock or effect a subdivision of the outstanding shares of its Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise), then, and in each such case, the number of shares of Common Stock into which each share of the Series F Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the sum of (I) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event plus (II) the number of shares of Common Stock which such holder would have been entitled to receive in connection with the occurrence of such event had such share been converted immediately prior thereto, and the denominator of which is the number of shares of Common Stock determined in 47 48 accordance with clause (I) above. An adjustment made pursuant to this subparagraph [c][i] shall become effective (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective. [ii] In case the Corporation at any time or from time to time after the issuance of such share of Series F Preferred shall combine or consolidate the outstanding shares of its Common Stock into a lesser number of shares of Common Stock, by reclassification or otherwise, then, and in each such case, the number of shares of Common Stock into which each share of the Series F Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the number of shares which the holder would have owned after giving effect to such event had such share been converted immediately prior to the occurrence of such event and the denominator of which is the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event. An adjustment made pursuant to this subparagraph b[ii] shall become effective at the close of business on the date immediately prior to the day upon which such corporate action becomes effective. [iii] In case the Corporation after the issuance of such share of Series F Preferred shall: (A) issue any options, warrants, or other rights (excluding those issued in exchange for options to purchase common stock in Faircom Inc. pursuant to the terms of a merger, and excluding options to purchase Common Stock issued to management of the Corporation exercisable for up to the lesser of 2,000,000 shares of Common Stock (subject to adjustment pursuant to provisions applicable to the options in the case of stock splits, reverse stock splits and the like) or that number of shares of Common Stock equal to fifteen percent (15%) of the aggregate number of outstanding shares of Common Stock and other equity securities of the Corporation exercisable for the purchase of, or convertible into, Common Stock, computed on a fully-diluted basis) entitling the holder thereof to subscribe for, or purchase, Common Stock at a price per share which, when added to the amount of consideration received or receivable by the Corporation for such options, warrants, or other rights, is less than the then fair market value per share of the Common Stock at the date of such issuance; (B) issue or sell securities of the Corporation convertible into, or exchangeable for, Common Stock at a price per share which, when added to the amount of consideration received or receivable, from the Corporation for such exchangeable or convertible securities, is less than the then fair market value of a share of Common Stock at the date of such issuance; or (C) issue or sell additional shares of Common Stock for consideration representing less than the then fair market value of the Common Stock at the date of such issuance; then the number of shares of Common Stock into which each share of the Series F Preferred is convertible shall be adjusted so that, thereafter, until further adjusted, the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (w) the number of shares of Common 48 49 Stock into which such shares are convertible immediately prior to the occurrence of such event by (x) a fraction, the numerator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of additional shares of Common Stock issuable upon exercise of such options, warrants, or rights, or exchangeable or convertible securities, or the additional number of shares of Common Stock issued at such time, and the denominator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of shares of Common Stock that either (y) the sum of the aggregate exercise price of the total number of shares of Common Stock issuable upon exercise of such options, warrants, or rights, or upon conversion or exchange of such convertible securities, and the aggregate amount of consideration, if any, received or receivable by the Corporation for such options, warrants, or rights, or convertible or exchangeable securities, or (z) the aggregate consideration received in connection with the sale of shares of its Common Stock for less than the then fair market value, as the case may be, would purchase at the then fair market value. [iv] In the event that, at any time, or from time to time, after the issuance of such share of the Series F Preferred, the Common Stock issuable upon conversion of the Series F Preferred is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend, or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this Section 7), then, and in any such event, each holder of Series F Preferred shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series F Preferred could have been converted immediately prior to such recapitalization, reclassification, or change, all subject to further adjustment as provided herein. [v] If at any time, or from time to time after the issuance of such share of the Series F Preferred, there is a capital reorganization of the Common Stock other than a recapitalization, subdivision, combination, reclassification, or exchange of shares provided for elsewhere in this Section 7) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all, or substantially all, of the Corporations' properties and assets to any other person, then, as a part of such reorganization, merger, consolidation, or sale, provision shall be made so that the holders of the Series F Preferred shall thereafter be entitled to receive upon conversion of the Series F Preferred the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the holders of Series F Preferred after the reorganization, merger, consolidation, or sale to the end that the provisions of this Section 7 shall be applicable after that event and be as nearly equivalent as may be practicable. [vi] Upon the expiration of any rights, options, warrants or conversion or exchange privileges which caused an adjustment pursuant to this 49 50 Section 7 to be made, if any thereof shall not have been exercised, the number of shares of Common Stock into which each share of the Series F Preferred is convertible shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (a) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange privileges and (b) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges, whether or not exercised. [d] If any adjustment in the number of shares of Common Stock into which each share of the Series F Preferred may be converted required pursuant to this Section 7 would result in an increase or decrease of less than 1% in the number of shares of Common Stock into which each share of the Series F Preferred is then convertible, the amount of any such adjustment shall be carried forward and adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least 1% of the number of shares of Common Stock into which each share of the Series F Preferred is then convertible; provided that any such adjustments carried forward shall be made immediately following receipt of notice from a holder of the intent to convert all or a portion of the Series F Preferred such that upon conversion the holder shall receive such number of shares of Common Stock as such holder is entitled, taking into account all adjustments required by this Section 7. All calculations under this paragraph [d] shall be made to the nearest one-hundredth of a share. [e] Subject to the limitation in Section 7[h] below, the holder of any shares of the Series F Preferred may convert such shares into shares of Common Stock pursuant to paragraph [a] of this Section 7 by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of Series F Preferred to be converted (or if such certificate or certificates cannot be found, an affidavit of lost securities in form and substance acceptable to the Corporation) accompanied by a written notice stating that such holder elects to convert all or a specified number of such shares in accordance with the provisions of this Section 7 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. As promptly as practicable, and in any event within five business days after the surrender of such certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes, the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which the holder of the Series F Preferred so converted shall be entitled and (ii) if less than the full number of shares of the Series F Preferred evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Such conversions shall be deemed to have been made at the close of business on the date of giving of such notice and of such surrender of the certificate or certificates representing 50 51 the shares of the Series F Preferred to be converted so that the rights of the holder thereof shall cease except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [g] below, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [f] The Series F Preferred shall convert to Common Stock of the Corporation pursuant to paragraph [b] of this Section 7 automatically upon notice in writing to the stockholders, including all holders of the Series F Preferred, setting forth the date of such conversion and the material terms of the triggering public offering. As promptly as practicable after such notice, and in any event within five business days after the surrender of certificates for the Series F Preferred (if required by the Board of Directors), the Corporation shall deliver or cause to be delivered to each holder of Series F Preferred certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which such holder of the Series F Preferred so converted shall be entitled. Such conversion shall be deemed to have been made at the close of business on the date set forth in such notice of mandatory conversion so that the rights of the holder thereof shall cease with or without surrender of certificates for the Series F Preferred, except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [g] below, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [g] Upon conversion of any shares of the Series F Preferred pursuant to paragraph [a] or [b] of this Section 7, the holder thereof shall be entitled to receive any accumulated, accrued or unpaid dividends in respect of the shares so converted (whether or not declared or otherwise payable as of such date of conversion), including any dividends on such shares of the Series F Preferred declared prior to such conversion if such holder held such shares on the record date fixed for the determination of holders of the Series F Preferred entitled to receive payment of such dividend. [h] Shares of the Series F Preferred may not be converted after the close of business on the third business day preceding the Redemption Date pursuant to Section 8. [i] The Corporation shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock of the Corporation issuable upon the conversion of all outstanding shares of the Series F Preferred. [j] For purposes of this Section, "fair market value" shall be as determined by the Board of Directors in such manner as they shall deem appropriate in their discretion, unless the holder(s) of more than twenty-five percent (25%) of the outstanding shares of Preferred Stock of the Corporation demand in good faith and in writing that "fair market value" be determined by an appraiser, who shall be mutually acceptable to the Board of Directors and such holders, whose determination shall be binding and whose fees and expenses shall be paid by the Corporation. SECTION 8. REPORTS AS TO ADJUSTMENTS. 51 52 Whenever the number of shares of Common Stock into which the shares of the Series F Preferred are convertible is adjusted as provided in Section 7, the Corporation will (A) promptly compute such adjustment and furnish to each transfer agent for the Series F Preferred a certificate, signed by a principal financial officer of the Corporation, setting forth the number of shares of Common Stock into which each share of the Series F Preferred is convertible as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment will become effective and (B) promptly mail to the holders of record of the outstanding shares of the Series F Preferred a notice stating that the number of shares into which the shares of Series F Preferred are convertible has been adjusted and setting forth the new number of shares into which each share of the Series F Preferred is convertible as a result of such adjustment and when such adjustment will become effective. Notwithstanding the foregoing, the Corporation shall incur no liability for its failure to take any action set forth in this Section 8, nor shall such failure affect the validity, rights or preferences of any shares of the Series F Preferred. SECTION 9. RANKING. The Series F Preferred shall rank senior to the Common Stock and any other series of Preferred Stock of the Corporation hereafter created (except for the Series B Preferred, which shall rank senior to the Series F Preferred, and except for the Series A Preferred, the Series C Preferred, the Series D Preferred, the Series E Preferred, and any other series of Preferred Stock which the Board of Directors shall establish and designate to rank equal therewith pursuant to Subpart C of this Article FOURTH, with which it shall rank equal), as to the payment of dividends and the distribution of assets and rights upon liquidation, dissolution or winding up of the Corporation. SECTION 10. DIRECTORSHIPS. The holders of the Series F Preferred, as a class, shall be entitled to be represented on the Board of Directors by two Directors (the "Series F Directors") who, upon nomination by such holders, as a class, will stand for election by voting by the holders of the Preferred Stock (subject to limitations in this Article FOURTH or established by the Board of Directors pursuant to Section C of this Article FOURTH) and holders of Common Stock together, except under circumstances where the number of individuals nominated for election exceeds the number of Directors to be elected. In the event the number of individuals nominated for election exceeds the number of Directors to be elected, then the holders of the Series F Preferred shall have the sole right to vote for, elect and remove the individuals nominated by them, as a class, to serve as the Series F Directors, and in such event the further right to vote for, elect or remove any of the other Directors who are not to be elected solely by the holders of another class or series of Preferred Stock. The Series F Directors, upon being elected, will serve for the same term and have the same voting powers as other Directors. The right to elect the Series F Directors pursuant to the terms hereof shall be exercisable by the holders of a majority of the Series F Preferred at their option upon at least 60 days notice to the Corporation; provided, however, if the Corporation is subject to the reporting requirements of the Securities Exchange Act of 1934, such notice must be provided on or before the date established by the Corporation for the submission of proposals pursuant to the proxy rules promulgated under the Securities Act of 1934. One of the Series F Directors shall serve as a member of the Compensation Committee and the other shall serve as a member of the Audit and Nominating Committees of the Board of Directors (or such other Committees of the Board performing such functions), which Committees will be composed of at least one Director, in addition to the Series F Director, who is not an employee of the Corporation. 52 53 FIFTH: Incorporator. The name and mailing address of the incorporator is Terry Jacobs, 50 East RiverCenter Boulevard, Covington, Kentucky 41011, whose powers as incorporator have ceased by virtue of the election of the Board of Directors. SIXTH: Elimination of Director Liability. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended after the filing of the Certificate of Incorporation of which this Article is a part to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. SEVENTH: Right to Indemnification. A. Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party, or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The Corporation shall be required to indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the Corporation. B. Prepayment of Expenses. The Corporation shall pay the expenses of directors and executive officers of the Corporation, and may pay the expenses of all other officers, employees or agents of the Corporation, incurred in defending any proceeding, in advance of its final disposition, provided, however, that the payment of expenses incurred by a director, officer, employee or agent in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the director, officer, employee or agent to repay all amounts advanced if it should be ultimately determined that the director, officer, employee or agent is not entitled to be indemnified under this Article SEVENTH or otherwise. C. Claims. If a claim for indemnification or payment of expenses under this Article is not paid in full within sixty days after a written claim therefor has been received by the Corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law. 53 54 D. Non-Exclusivity of Rights. The rights conferred on any person by this Article SEVENTH shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the certificate of incorporation, bylaws, agreement, vote of stockholders or disinterested directors or otherwise. E. Other Indemnification. The Corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust, enterprise or nonprofit entity, shall be reduced by any amount such person may collect as indemnification from such other Corporation, partnership, joint venture, trust, enterprise or non-profit enterprise. F. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article SEVENTH shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. EIGHTH: Bylaws. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter or repeal bylaws of the Corporation. ******* The Corporation further certifies: II. That at a meeting of the Board of Directors of Regent Communications, Inc. resolutions were duly adopted setting forth the foregoing Amended and Restated Certificate of Incorporation, declaring adoption of the same to be advisable and submitting it to the shareholders of said corporation for approval. III. That thereafter, pursuant to resolution of its Board of Directors, consents of the stockholders of the corporation were executed, in accordance with Section 228 of the General Corporation Law of the State of Delaware, by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Pursuant to Section 228 of the General Corporation Law of the State of Delaware, written notice has been given to stockholders who have not consented in writing. IV. That said amendment was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. 54 55 IN WITNESS WHEREOF, said corporation has caused this certificate to be signed by Terry S. Jacobs, its Chairman, and William L. Stakelin, its Secretary, this 11th day of June, 1998. By: /s/ Terry S. Jacobs ------------------------- Terry S. Jacobs, Chairman ATTEST: /s/ William L. Stakelin ------------------------------ William L. Stakelin, Secretary 55 56 CERTIFICATE OF DESIGNATION, NUMBER, POWERS PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL, AND OTHER SPECIAL RIGHTS AND THE QUALIFICATIONS, LIMITATIONS, RESTRICTIONS, AND OTHER DISTINGUISHING CHARACTERISTICS OF SERIES G PREFERRED STOCK OF REGENT COMMUNICATIONS, INC. It is hereby certified that: 1. The name of the corporation (hereinafter called the "corporation") is REGENT COMMUNICATIONS, INC. 2. The certificate of incorporation (as amended) of the corporation authorizes the issuance of 20,000,000 shares of Preferred Stock (of a par value of $.01 each) and expressly vests in the Board of Directors of the corporation the authority provided therein to issue any or all of said shares in one or more series and by resolution or resolutions, the designation, number, full or limited voting powers, or the denial of voting powers, preferences and relative, participating, optional, and other special rights and the qualifications, limitations, restrictions, and other distinguishing characteristics of each series to be issued. 3. The Board of Directors of the corporation, pursuant to the authority expressly vested in it as aforesaid, has adopted the following resolutions designating a new series of Preferred Stock as Series G Preferred Stock: "RESOLVED, that the Board of Directors hereby designates a new series of Preferred Stock to be known as "Series G Convertible Preferred Stock", the number, amount, stated value, voting powers, preferences and relative, participating, optional and other special rights of which, and the qualifications, limitations or restrictions thereon, are set forth on Exhibit A attached hereto; RESOLVED FURTHER, that the statements contained in the foregoing resolution designating the said Series G Preferred Stock shall, upon the effective date of said series, be deemed to be included in and be a part of the certificate of incorporation of the corporation pursuant to the provisions of Sections 104 and 151 of the General Corporation Law of the State of Delaware; RESOLVED FURTHER, that the officers of the corporation and each of them individually hereby are authorized to execute and deliver, for and on behalf of the corporation a Certificate of Designation to be filed with the Delaware Secretary of State and any other documents or filings required by applicable law required to amend the corporation's Certificate and to otherwise effectuate the intent of the foregoing resolutions." 57 The effective time and date of the series herein certified shall be the filing of this certificate. IN WITNESS WHEREOF, the undersigned officer has executed this document the 11th day of January, 1999. /s/ Terry S. Jacobs --------------------------------- Terry S. Jacobs, Chairman and CEO COMMONWEALTH OF KENTUCKY ) ) SS: COUNTY OF KENTON ) BE IT REMEMBERED, that on this 11th day of January, 1999, before me, the subscriber, a Notary Public in and for said county, personally came Terry S. Jacobs, the Chairman and CEO of Regent Communications, Inc., and acknowledged that he signed the foregoing instrument on behalf of said corporation and that the signing thereof is his voluntary act and deed and the voluntary act and deed of said corporation. IN TESTIMONY THEREOF, I have hereunto subscribed my name and affixed my seal on this day and year aforesaid. /s/ Christina Tenhundfeld ------------------------------ Notary Public 58 EXHIBIT A SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE. The shares of such series shall be designated as Series G Convertible Preferred (the "Series G Preferred") and the number of shares constituting such series shall be 4,000,000 shares. The stated value of the Series G Preferred shall be $5 per share, the original per share issue price (the "Stated Value"). SECTION 2. DIVIDENDS AND DISTRIBUTIONS. The holders of shares of the Series G Preferred shall be entitled to receive, when, as and if declared by the Board of Directors of the Corporation out of funds legally available for such purpose, cumulative dividends payable quarterly in cash on the first business day of January, April, July and October (each such date being referred to herein as a "Quarterly Dividend Payment Date"), accruing commencing with the date of issue of such shares, on shares of the Series G Preferred at the rate of $.50 per share per annum; provided, however, that if and to the extent that the holder of a share of the Series G Preferred does not receive a cash dividend on any given Quarterly Dividend Payment Date in full payment of the accrued and unpaid dividend on such share of the Series G Preferred or any previously cumulated dividend on such share for the period ending on such Quarterly Dividend Payment Date and beginning on the immediately preceding Quarterly Dividend Payment Date (or, if such share was first issued during such period, beginning on the date of such issuance), such unpaid portion of such dividend shall be cumulative and shall itself accrue, whether or not declared and whether or not the Corporation has at the time funds legally available for such purpose, from and after such date, until the date so paid in full, dividends on a daily basis at a rate of 10% per annum, compounded quarterly. No interest shall be paid on accrued but unpaid dividends. SECTION 3. VOTING RIGHTS. In addition to voting rights required by law or by the Company's Amended and Restated Certificate of Incorporation, as amended or restated from time to time (the "Certificate of Incorporation"), subject to restrictions contained in the Certificate of Incorporation the holders of Series G Preferred shall be entitled to vote on all matters submitted to a vote of the Corporation's stockholders. Except as otherwise required by law or provided by the Certificate of Incorporation or by the Board of Directors pursuant to Subpart C of Article Fourth of the Certificate of Incorporation, the holders of the Series G Preferred shall vote together with the holders of all other series of the Corporation's voting preferred stock and the holders of the Corporation's Common Stock as one class with one vote per share (in the case of Preferred Stock, subject to adjustments as provided in Section 7 below and if convertible into Common Stock, one vote per share of Common Stock into which such convertible Preferred Stock is then convertible) on all matters submitted to a vote of the Corporation's stockholders. 59 SECTION 4. CERTAIN RESTRICTIONS. Whenever dividends payable on the Series G Preferred as provided in Section 2 are in arrears, thereafter and until dividends, including all accrued dividends, on shares of the Series G Preferred outstanding shall have been paid in full or declared and set apart for payment, the Corporation shall not (A) pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series G Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any such junior stock, (B) pay dividends on or make any other distributions on any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series G Preferred, except dividends paid ratably on the Series G Preferred and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled, (C) redeem or purchase or otherwise acquire for consideration any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series G Preferred, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior to the Series G Preferred or in satisfaction of contractual obligations to do so entered into with the written consent of the holders of a majority of outstanding shares of Series F Preferred and Series G Preferred voting together as one class on the matter (including, without limitation, in satisfaction of the provisions contained in the Stockholders' Agreement), or (D) purchase or otherwise acquire for consideration any shares of the Series G Preferred, or any shares of stock ranking on a parity with the Series G Preferred except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall unanimously determine in good faith will result in fair and equitable treatment among the respective series of classes or except pursuant to the provisions of the Stockholders' Agreement. SECTION 5. REACQUIRED SHARES. Any shares of the Series G Preferred which have been converted to Common Stock or have been purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, or otherwise in accordance with Delaware General Corporation Law. SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (A) to the holders of the Series G Preferred unless, prior thereto, the holders of the Series B Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (B) to the holders of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series G Preferred unless, prior thereto, the holders of Series G Preferred shall have received the Stated Value per share, plus an amount equal to unpaid dividends thereon, including accrued dividends, whether or not declared, to the date of such payment, or (C) to the holders of stock ranking on a parity 60 (either as to dividends or upon liquidation, dissolution or winding up) with the Series G Preferred, except distributions made ratably on the Series G Preferred and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. SECTION 7. CONVERSION. [a] Optional Conversion. Subject to the provisions for adjustment hereinafter set forth, each share of the Series G Preferred shall be convertible at any time at the option of the holder thereof, in the manner hereinafter set forth, into one (1) fully paid and nonassessable share of Common Stock of the Corporation. [b] Mandatory Conversion. Subject to the provisions for adjustment set forth in this Section 7, each share of the Series G Preferred shall be convertible at the option of the Board of Directors into one (1) fully paid and nonassessable share of Common Stock of the Corporation in the event of, and concurrently with the closing of, a public offering of Common Stock of the Corporation at a per share price of at least $12.00 (subject to adjustment for stock splits, stock dividends, reverse stock splits and the like) with gross proceeds to the Corporation of at least $25,000,000 (excluding the effect of any over-allotment option). [c] The number of shares of Common Stock into which each share of the Series G Preferred is convertible shall be adjusted from time to time as follows: [i] In case the Corporation shall at any time or from time to time after the issuance of such share of Series G Preferred declare or pay any dividend on its Common Stock payable in its Common Stock or effect a subdivision of the outstanding shares of its Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise), then, and in each such case, the number of shares of Common Stock into which each share of the Series G Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the sum of (I) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event plus (II) the number of shares of Common Stock which such holder would have been entitled to receive in connection with the occurrence of such event had such share been converted immediately prior thereto, and the denominator of which is the number of shares of Common Stock determined in accordance with clause (I) above. An adjustment made pursuant to this subparagraph [c][i] shall become effective (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective. [ii] In case the Corporation at any time or from time to time after the issuance of such share of Series G Preferred shall combine or consolidate the 61 outstanding shares of its Common Stock into a lesser number of shares of Common Stock, by reclassification or otherwise, then, and in each such case, the number of shares of Common Stock into which each share of the Series G Preferred is convertible shall be adjusted so that the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (a) the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event by (b) a fraction, the numerator of which is the number of shares which the holder would have owned after giving effect to such event had such share been converted immediately prior to the occurrence of such event and the denominator of which is the number of shares of Common Stock into which such share was convertible immediately prior to the occurrence of such event. An adjustment made pursuant to this subparagraph b[ii] shall become effective at the close of business on the date immediately prior to the day upon which such corporate action becomes effective. [iii] In case the Corporation after the issuance of such share of Series G Preferred shall: (A) issue any options, warrants, or other rights (excluding options to purchase Common Stock issued to management of the Corporation exercisable for up to the lesser of 2,000,000 shares of Common Stock (subject to adjustment pursuant to provisions applicable to the options in the case of stock splits, reverse stock splits and the like) or that number of shares of Common Stock equal to fifteen percent (15%) of the aggregate number of outstanding shares of Common Stock and other equity securities of the Corporation exercisable for the purchase of, or convertible into, Common Stock, computed on a fully-diluted basis) entitling the holder thereof to subscribe for, or purchase, Common Stock at a price per share which, when added to the amount of consideration received or receivable by the Corporation for such options, warrants, or other rights, is less than the then fair market value per share of the Common Stock at the date of such issuance; (B) issue or sell securities of the Corporation convertible into, or exchangeable for, Common Stock at a price per share which, when added to the amount of consideration received or receivable, from the Corporation for such exchangeable or convertible securities, is less than the then fair market value of a share of Common Stock at the date of such issuance; or (C) issue or sell additional shares of Common Stock for consideration representing less than the then fair market value of the Common Stock at the date of such issuance; then the number of shares of Common Stock into which each share of the Series G Preferred is convertible shall be adjusted so that, thereafter, until further adjusted, the holder of each share thereof shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (w) the number of shares of Common Stock into which such shares are convertible immediately prior to the occurrence of such event by (x) a fraction, the numerator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of additional shares of Common Stock issuable upon exercise of such options, warrants, or rights, or exchangeable or convertible securities, or the additional number of shares of Common Stock issued at such time, and the denominator of which shall be the number of shares of Common Stock outstanding prior to such issuance plus the number of shares of Common Stock that either (y) the sum of the aggregate exercise price of the total number of shares of Common Stock issuable upon exercise of such options, 62 warrants, or rights, or upon conversion or exchange of such convertible securities, and the aggregate amount of consideration, if any, received or receivable by the Corporation for such options, warrants, or rights, or convertible or exchangeable securities, or (z) the aggregate consideration received in connection with the sale of shares of its Common Stock for less than the then fair market value, as the case may be, would purchase at the then fair market value. [iv] In the event that, at any time, or from time to time, after the issuance of such share of the Series G Preferred, the Common Stock issuable upon conversion of the Series G Preferred is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend, or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this Section 7), then, and in any such event, each holder of Series G Preferred shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, or other change, by holders of the number of shares of Common Stock into which such shares of Series G Preferred could have been converted immediately prior to such recapitalization, reclassification, or change, all subject to further adjustment as provided herein. [v] If at any time, or from time to time after the issuance of such share of the Series G Preferred, there is a capital reorganization of the Common Stock other than a recapitalization, subdivision, combination, reclassification, or exchange of shares provided for elsewhere in this Section 7) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all, or substantially all, of the Corporation's properties and assets to any other person, then, as a part of such reorganization, merger, consolidation, or sale, provision shall be made so that the holders of the Series G Preferred shall thereafter be entitled to receive upon conversion of the Series G Preferred the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the holders of Series G Preferred after the reorganization, merger, consolidation, or sale to the end that the provisions of this Section 7 shall be applicable after that event and be as nearly equivalent as may be practicable. [vi] Upon the expiration of any rights, options, warrants or conversion or exchange privileges which caused an adjustment pursuant to this Section 7 to be made, if any thereof shall not have been exercised, the number of shares of Common Stock into which each share of the Series G Preferred is convertible shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (a) the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options, warrants or conversion or exchange privileges and (b) such shares of Common Stock, if 63 any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options, warrants or conversion or exchange privileges, whether or not exercised. [d] If any adjustment in the number of shares of Common Stock into which each share of the Series G Preferred may be converted required pursuant to this Section 7 would result in an increase or decrease of less than 1% in the number of shares of Common Stock into which each share of the Series G Preferred is then convertible, the amount of any such adjustment shall be carried forward and adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least 1% of the number of shares of Common Stock into which each share of the Series G Preferred is then convertible; provided that any such adjustments carried forward shall be made immediately following receipt of notice from a holder of the intent to convert all or a portion of the Series G Preferred such that upon conversion the holder shall receive such number of shares of Common Stock as such holder is entitled, taking into account all adjustments required by this Section 7. All calculations under this paragraph [d] shall be made to the nearest one-hundredth of a share. [e] Subject to the limitation in Section 7[h] below, the holder of any shares of the Series G Preferred may convert such shares into shares of Common Stock pursuant to paragraph [a] of this Section 7 by surrendering for such purpose to the Corporation, at its principal office or at such other office or agency maintained by the Corporation for that purpose, a certificate or certificates representing the shares of Series G Preferred to be converted (or if such certificate or certificates cannot be found, an affidavit of lost securities in form and substance acceptable to the Corporation) accompanied by a written notice stating that such holder elects to convert all or a specified number of such shares in accordance with the provisions of this Section 7 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. As promptly as practicable, and in any event within five business days after the surrender of such certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes, the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which the holder of the Series G Preferred so converted shall be entitled and (ii) if less than the full number of shares of the Series G Preferred evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares converted. Such conversions shall be deemed to have been made at the close of business on the date of giving of such notice and of such surrender of the certificate or certificates representing the shares of the Series G Preferred to be converted so that the rights of the holder thereof shall cease except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [g] below, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. 64 [f] The Series G Preferred shall convert to Common Stock of the Corporation pursuant to paragraph [b] of this Section 7 automatically upon notice in writing to the stockholders, including all holders of the Series G Preferred, setting forth the date of such conversion and the material terms of the triggering public offering. As promptly as practicable after such notice, and in any event within five business days after the surrender of certificates for the Series G Preferred (if required by the Board of Directors), the Corporation shall deliver or cause to be delivered to each holder of Series G Preferred certificates representing the number of validly issued, fully paid and nonassessable shares of Common Stock of the Corporation to which such holder of the Series G Preferred so converted shall be entitled. Such conversion shall be deemed to have been made at the close of business on the date set forth in such notice of mandatory conversion so that the rights of the holder thereof shall cease with or without surrender of certificates for the Series G Preferred, except for the right to receive Common Stock of the Corporation in accordance herewith and any accumulated, accrued or unpaid dividends pursuant to paragraph [g] below, and the converting holder shall be treated for all purposes as having become the record holder of such Common Stock of the Corporation at such time. [g] Upon conversion of any shares of the Series G Preferred pursuant to paragraph [a] or [b] of this Section 7, the holder thereof shall be entitled to receive any accumulated, accrued or unpaid dividends in respect of the shares so converted (whether or not declared or otherwise payable as of such date of conversion), including any dividends on such shares of the Series G Preferred declared prior to such conversion if such holder held such shares on the record date fixed for the determination of holders of the Series G Preferred entitled to receive payment of such dividend. [h] Shares of the Series G Preferred may not be converted after the close of business on the third business day preceding the Redemption Date pursuant to Section 8. [i] The Corporation shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock of the Corporation issuable upon the conversion of all outstanding shares of the Series G Preferred. [j] For purposes of this Section, "fair market value" shall be as determined by the Board of Directors in such manner as they shall deem appropriate in their discretion, unless the holder(s) of more than twenty-five percent (25%) of the outstanding shares of Preferred Stock of the Corporation demand in good faith and in writing that "fair market value" be determined by an appraiser, who shall be mutually acceptable to the Board of Directors and such holders, whose determination shall be binding and whose fees and expenses shall be paid by the Corporation. SECTION 8. REPORTS AS TO ADJUSTMENTS. Whenever the number of shares of Common Stock into which the shares of the Series G Preferred are convertible is adjusted as provided in Section 7, the Corporation will (A) promptly compute such adjustment and furnish to each transfer agent for the Series G Preferred a certificate, signed by a principal financial officer of the Corporation, setting forth the number of shares of Common Stock into which each share of the Series G Preferred is convertible as a result of such adjustment, a 65 brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment will become effective and (B) promptly mail to the holders of record of the outstanding shares of the Series G Preferred a notice stating that the number of shares into which the shares of Series G Preferred are convertible has been adjusted and setting forth the new number of shares into which each share of the Series G Preferred is convertible as a result of such adjustment and when such adjustment will become effective. Notwithstanding the foregoing, the Corporation shall incur no liability for its failure to take any action set forth in this Section 8, nor shall such failure affect the validity, rights or preferences of any shares of the Series G Preferred. SECTION 9. RANKING. The Series G Preferred shall rank senior to the Common Stock and any other series of Preferred Stock of the Corporation hereafter created (except for the Series B Preferred, which shall rank senior to the Series G Preferred, and except for the Series A Preferred, the Series C Preferred, the Series D Preferred, the Series E Preferred, the Series F Preferred, and any other series of Preferred Stock which the Board of Directors shall establish and designate to rank equal therewith pursuant to Subpart C of Article Fourth of the Company's Certificate of Incorporation, with which it shall rank equal), as to the payment of dividends and the distribution of assets and rights upon liquidation, dissolution or winding up of the Corporation. EX-4.T 6 EXHIBIT 4(T) 1 EXHIBIT 4(t) AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT THIS AMENDMENT is made and entered into as of January 11, 1999 and amends that certain Second Amended and Restated Stockholders' Agreement among Regent Communications, Inc. and certain of its shareholders (the "Stockholders' Agreement"). Capitalized terms used herein without definition shall have the same meanings as set forth in the Stockholders' Agreement. WITNESSETH: WHEREAS, the Company intends to designate and issue shares of a new series of convertible preferred stock entitled Series G Convertible Preferred Stock (the "Series G Preferred Stock"), which is to have substantially the same terms as the Series F Preferred Stock; and WHEREAS, in conjunction with the issuance of the Series G Preferred Stock, certain amendments to the Stockholders' Agreement are desired; and WHEREAS, the Stockholders signing this Amendment hold more than fifty percent (50%) of the Common Stock Beneficially Owned by all Stockholders, thereby permitting the Company and Stockholders signing below to amend the Stockholders' Agreement pursuant to Section 16 thereof; NOW, THEREFORE, in consideration of the premises and the agreements contained herein, it is hereby agreed as follows: 1. AMENDMENTS. The Stockholders' Agreement is amended as follows: (a) The definition of "Eligible Put Shares" is expanded to include the Series G Preferred Stock, and accordingly, subpart (v) of the definition is changed to state "(v) any series of preferred stock first created by the Board of Directors after the date hereof other than the Company's 10% Series G Convertible Preferred Stock, $ .01 par value". . . . (b) The definition of "Preferred Stock" is amended to state in its entirety as follows: "'Preferred Stock' means any or all of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series F Preferred Stock, or Series G Preferred Stock." (c) Section 12 is amended to add to the exclusions from the applicability of the purchase right contained therein the issuance of Series F Preferred Stock pursuant to the 2 Series F Preferred Stock Purchase Agreement by adding in the second parenthetical phrase in the first sentence the following "or (v) pursuant to the Series F Preferred Stock Purchase Agreement". . . . (d) There is added to the Stockholders' Agreement a Section 30 to state in its entirety as follows: "30. Automatic Amendment to Series G Preferred Stock. In the event any of the terms of the Series F Preferred Stock (other than amendments which provide the holders of the Series F Preferred Stock with increased or additional voting or consent rights or board representation), as set forth in the Amended and Restated Charter, are amended, the corresponding terms of the Series G Preferred Stock shall be similarly amended automatically and without the necessity of a vote of the holders of the Series G Preferred Stock so as to keep the terms of the two Series consistent, purchase and acceptance of delivery of the Series G Preferred Stock being deemed consent to any such automatic amendment." 2. REMAINDER OF AGREEMENT. Except as specifically amended hereby, the terms, conditions and provisions of Stockholders' Agreement remain in full force and effect. 3. COUNTERPARTS. 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. IN WITNESS WHEREOF, the signatories below have caused this Amendment to be executed and delivered as of the date first above written. REGENT COMMUNICATIONS, INC. WALLER-SUTTON MEDIA PARTNERS, L.P. By: /s/ By: Waller-Sutton Media, L.L.C., its General Partner Name: /s/ Title: /s/ By: /s/ Member 3 /s/ TERRY S. JACOBS BLUE CHIP CAPITAL FUND II LIMITED PARTNERSHIP /s/ By: Blue Chip Venture Company, Ltd., WILLIAM L. STAKELIN its General Partner By: /s/ /s/ Name: /s/ JOEL M. FAIRMAN Title: /s/ MIAMI VALLEY VENTURE FUND, L.P. By: Blue Chip Venture Company of Dayton, Ltd., its Special Limited Partner By: /s/ John H. Wyant Manager EX-4.U 7 EXHIBIT 4(U) 1 EXHIBIT 4(u) STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "Agreement") dated as of the 11th day of January, 1999 between REGENT COMMUNICATIONS, INC., a Delaware corporation (the "Company") and BLUE CHIP CAPITAL FUND II LIMITED PARTNERSHIP, an Ohio limited partnership (the "Buyer"). 1. Authorization. The Company will authorize the sale and issuance under this Agreement of 315,887 shares (the "Shares") of its Series G Convertible Preferred Stock (the "Series G Preferred Stock"), having the rights, privileges and preferences as set forth in the Certificate of Designation (the "Certificate") in the form attached to this Agreement as Exhibit A. The shares of Common Stock into which the Shares will be convertible are referred to herein as the "Conversion Stock." 2. Sale and Purchase of the Series G Preferred Stock. On and subject to the terms and conditions set forth herein, the Company will sell, issue and deliver to Buyer, and Buyer will purchase from the Company, 315,887 shares of the Series G Convertible Preferred Stock. 3. Closing Date. The closing of the purchase and sale of the Series G Preferred Stock hereunder shall be on January 11, 1999 (the "Closing") or at such other time upon which the Company and Buyer shall agree (the date of the Closing is hereinafter referred to as the "Closing Date"). 4. Purchase Price. The purchase price for the Series G Preferred Stock is One Million Five Hundred Seventy-Nine Thousand Four Hundred Thirty-Five Dollars ($1,579,435.00) ($5.00 per share) (the "Purchase Price"), which sum Buyer will pay to the Company by wire transfer of immediately available funds on the Closing Date. 5. Deliveries by the Company. At the Closing, the Company will deliver to Buyer the following: (a) a stock certificate or certificates representing the Series G Preferred Stock duly issued in the name of Buyer and bearing the legends set forth in Section 7(j) hereof; and (b) an opinion of Strauss & Troy, as counsel to the Company, in the form attached as Exhibit B. 6. Representations and Warranties of the Company. The Company represents and warrants to Buyer as follows: (a) Organization and Qualification. The Company is a corporation duly organized and existing under, and by virtue of, the laws of the State of Delaware and is in good standing under such laws. The Company has requisite power and authority to own and operate its properties and assets, and to carry on its business as presently conducted. The Company is authorized to transact business as a foreign corporation in good standing in those jurisdictions in which the nature of its activities or the property owned by it make such qualification necessary. (b) Authorization. All corporate action on the part of the Company necessary for the authorization, execution, delivery and performance of this Agreement by the Company, the authorization, sale, issuance and delivery of (i) the Shares and (ii) the Conversion Stock and the 2 performance of all of the Company's obligations hereunder has been taken or will be taken prior to the Closing. This Agreement, when executed and delivered by the Company, shall constitute the valid and binding obligation of the Company, enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement is subject to general principles of equity regardless of whether enforcement is considered in a proceeding at law or in equity. The Shares, when issued in compliance with the provisions of this Agreement, will be validly issued, fully paid and nonassessable. The Conversion Stock has been duly and validly reserved and, when issued in compliance with the provisions of this Agreement, will be validly issued, fully paid and nonassessable. The Shares and the Conversion Stock will be free of any liens or encumbrances, other than any liens or encumbrances created by or imposed upon the holders thereof through no action of the Company; provided, however, that the Shares and the Conversion Stock will be subject to restrictions on transfer under state and/or federal securities laws as set forth herein and under certain other restrictions as set forth in that certain Second Amended and Restated Stockholders' Agreement dated as of June 15, 1998 among the Company, Waller-Sutton Media Partners, L.P. et al. The issuance of the Shares will not violate any preemptive rights available to the holders of any of the Company's securities. The Series G Preferred Stock shall have the rights, preferences, privileges and restrictions set forth in the Certificate. (c) Compliance with Laws. The Company is not in violation of (i) any applicable order, judgment, injunction, award or decree, or (ii) any federal, state, local or foreign law, statute, rule, ordinance or regulation or any other requirement of any governmental or regulatory body, court or arbitrator applicable to the business of the Company except for violations which reasonably could not have a material adverse effect on the business or properties of the Company. The Company has obtained all licenses, permits, orders and approvals of any federal, state, local or foreign governmental regulatory body (collectively, "Permits") that are material to or necessary for the conduct of the business of the Company. All of such Permits are in full force and effect, no violations are or have been recorded in respect of any Permit and no proceeding is pending or, to the best of the Company's knowledge, threatened to revoke or limit any such Permit. (d) Compliance with Other Instruments, None Burdensome, etc. Except as set forth on Schedule 1 hereto, the Company is not in violation of any term of its Amended and Restated Certificate of Incorporation or By-Laws, or, of any term or provision of any material mortgage, indebtedness, indenture, contract, agreement, instrument, judgment or decree. The execution, delivery and performance of and compliance with this Agreement and the issuance of the Series G Preferred Stock and the Conversion Stock have not resulted and will not result in any violation of, or conflict with, or constitute a default under, the Company's existing Amended and Restated Certificate of Incorporation or By-Laws or any of its agreements or result in the creation of, any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company. (e) Litigation. Except as set forth on Schedule 1 hereto, there are no actions, suits, proceedings or investigations pending against the Company or its properties before any court or governmental agency (nor, to the best of the Company's knowledge, is there any reasonable basis therefor or threat thereof). (f) Governmental Consent, etc. No consent, approval or authorization of (or designation, declaration of filing with) any governmental authority on the part of the Company is required in connection with the valid execution and delivery of this Agreement, or the offer, sale or 3 issuance of the Series G Preferred Stock and the Conversion Stock, or the consummation of any other transaction contemplated hereby, except (i) filing of the Certificate in the office of the Secretary of State of the State of Delaware, and (ii) qualification (or taking such action as may be necessary to secure an exemption from qualification, if available) of the offer and sale of the Series G Preferred Stock and the Conversion Stock under applicable state securities laws, which filings and qualifications, if required, will be accomplished in a timely manner. (g) Offering. Subject to the accuracy of the Buyer's representations in Section 7 hereof, the offer, sale and issuance of the Series G Preferred Stock to be issued in conformity with the terms of this Agreement, and the issuance of the Conversion Stock upon conversion of the Series G Preferred Stock, constitute transactions exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended (the "Securities Act"). (h) Brokers or Finders. The Company has not incurred, and will not incur, directly or indirectly, as a result of any action taken by the Company, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement. (i) Disclosure. No representations or warranty by the Company in this Agreement, nor any statement, document, or certificate, furnished or to be furnished, to the Buyer in connection herewith, or pursuant hereto, contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact necessary to make any statement herein or therein not misleading. (j) No Material Adverse Change. Except as set forth on Schedule 1 hereto and except for the utilization of available working capital in the fourth quarter, between the date of the financial statements filed as part of the Company's third quarter 10-Q and the Closing Date, there has not been any change in the assets, liabilities, financial condition or operations of the Company from that reflected in the financial statements, except changes in the ordinary course of business which have not been, either in any case or in the aggregate, materially adverse. 7. Representations and Warranties of Buyer. Buyer hereby represents and warrants to the Company with respect to the purchase of the Shares as follows: (a) Non-Registration. Buyer understands that the offering and sale of the Series G Preferred Stock is intended to be exempt from registration under the Securities Act of 1933, as amended (the "1933 Act"), by virtue of Section 4(2) of the Act and the provisions of Regulation D promulgated thereunder, that the Series G Preferred Stock has not been registered under the 1933 Act or under the securities laws of any state, and that the Company will be under no obligation to effect any such registration. (b) Investment Intent. Buyer is purchasing the Series G Preferred Stock and the Conversion Stock for its own account, for investment and not with a view to resale, distribution, or other disposition, and Buyer has no present plans to enter into any contract, undertaking, agreement or arrangement for any such resale, distribution or other disposition. It understands that the Shares and the Conversion Stock have not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Buyer's representations as expressed herein. Buyer will not sell or otherwise transfer the Series G 4 Preferred Stock without registration under the 1933 Act and applicable state securities laws, or pursuant to an exemption from the registration requirements thereof which, in the opinion of counsel reasonably acceptable to the Company, is available for the transaction. (c) Rule 144. Buyer acknowledges that the Shares and the Conversion Stock must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from such registration is available. It is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the security to be sold, the sale being effected through a "broker's transaction" or in transactions directly with a "market maker" and the number of shares being sold during any three-month period not exceeding specified limitations. (d) No Public Market. Buyer understands that no public market now exists for the Shares and that the Company has made no assurances that a public market will ever exist for the Shares. (e) Status of Buyer. Buyer: (i) is an "accredited investor," as that term is defined in Rule 501(a) of Regulation D promulgated under the 1933 Act, inasmuch as Buyer meets the requirements of subparagraph (a)(3) of Rule 501; (ii) was not formed for the primary purpose of evading federal or state securities laws, and (iii) is a "Qualified Institutional Buyer" as defined in 17 CFR .144A(a). (f) Opportunity to Review Books and Records. Buyer has had a reasonable opportunity to inspect all documents, books and records pertaining to the Company and the Series G Preferred Stock and confirms that the Series G Preferred Stock is being purchased without Buyer's receipt of any offering literature. (g) Opportunity for Questions. Buyer has had a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the Company, its business and operations, the terms of the Series G Preferred Stock and all other aspects of investment in the Company, and all such questions have been answered to the full satisfaction of Buyer. (h) Manner of Purchase. Buyer is not subscribing for the Series G Preferred Stock as a result of or pursuant to any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, or presented at any seminar or meeting, or any solicitation of a subscription by a person other than a representative of the Company. (i) Brokers or Finders. Buyer has not incurred, and will not incur, directly or indirectly, as a result of any action taken by the Company, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement. (j) Legends. Buyer understands that the certificate(s) representing the Series G Preferred Stock shall bear legends in substantially the following forms, and Buyer shall not transfer any 5 of the shares of Series G Preferred Stock, or any shares of common stock that may be issued on conversion thereof, or any interest therein, except in accordance with the terms of such legends: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state (the "Securities Laws"). These securities may not be offered, sold, transferred, pledged or hypothecated in the absence of registration under applicable Securities Laws, or the availability of an exemption therefrom. This certificate will not be transferred on the books of the Corporation or any transfer agent acting on behalf of the Corporation except upon the receipt of an opinion of counsel, satisfactory to the Corporation, that the proposed transfer is exempt from the registration requirements of all applicable Securities Laws, or the receipt of evidence, satisfactory to the Corporation, that the proposed transfer is the subject of an effective registration statement under all applicable Securities Laws." "The issuer is subject to restrictions contained in the Federal Communications Act, as amended. The securities evidenced by this certificate may not be sold, transferred, assigned or hypothecated if, as a result thereof, the issuer would be in violation of that act." "The securities represented by this certificate are subject to the terms and entitled to the benefits of that certain Registration Rights Agreement dated as of June 15, 1998 among the Company and certain of its stockholders, as the same may be amended from time to time, and that certain Second Amended and Restated Stockholders' Agreement dated as of June 15, 1998 among the Company and certain of its stockholders, as the same may be amended from time to time." (k) Authority of Buyer. This Agreement, when executed and delivered by the Buyer will constitute the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement is subject to general principles of equity regardless of whether enforcement is considered in a proceeding at law or in equity. (l) No Conflicts. The execution, delivery and performance of this Agreement by Buyer will not violate in any material respect any provision of law or any rule or regulation of any federal, state or local governmental authority to which Buyer is subject, nor result in a breach or violation by Buyer of any of the terms or provisions of, or constitute an event of default under, any material indenture, mortgage, trust (constructive or otherwise), loan agreement, lease or other agreement or instrument to which Buyer is a party or by which Buyer or its assets are bound. Buyer is not a party to, or subject to, or bound by, any judgment, award, injunction, order or decree of any court or governmental authority, or any arbitration award which may restrict or interfere with the performance by Buyer of this Agreement or such other documents as may be delivered by Buyer in connection herewith. (m) Legal Proceedings. There is no action, suit, proceeding or investigation pending (or, to the knowledge of Buyer, threatened) against Buyer in, before or by any court, administrative 6 agency or arbitrator affecting the ability of Buyer to carry out the provisions of this Agreement and the transactions contemplated hereby. 8. Buyer's Conditions to Closing. The Buyer's obligation to purchase the Shares at the Closing is subject to the fulfillment of the following conditions: (a) Representations and Warranties Correct. The representations and warranties made by the Company in Section 6 hereof shall be true and correct, if limited by materiality, in accordance with the terms thereof in all respects, and if not so limited by materiality, in all material respects, as of the Closing Date. (b) Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing Date shall have been performed or complied with in all material respects. (c) Compliance with State Securities Laws. The Company shall have obtained all permits and qualifications required by any state for the offer and sale of the Shares and the Conversion Stock, or shall have the availability of exemptions therefrom. (d) Legal Matters. All material matters of a legal nature which pertain to this Agreement and the transactions contemplated hereby shall have been reasonably approved by counsel to Buyer. 9. Company's Conditions to Closing. The Company's obligation to sell and issue the Shares at the Closing Date is, at the option of the Company, subject to the fulfillment as of the Closing Date of the following conditions: (a) Representations and Warranties Correct. The representations and warranties made by Buyer in Section 7 hereof shall be true and correct when made, and shall be true and correct on the Closing Date. (b) Compliance with State Securities Laws. The Company shall have obtained all permits and qualifications required by any state for the offer and sale of the Shares and the Conversion Stock, or shall have the availability of exemptions therefrom. (c) Legal Matters. All material matters of a legal nature which pertain to this Agreement, and the transactions contemplated hereby, shall have been reasonably approved by counsel to the Company. 10. Reimbursement of Legal Fees. The Company hereby agrees to reimburse Buyer for its legal fees incurred in connection with the negotiation, execution and performance of this Agreement. 7 11. Miscellaneous. (a) Notices. Any notice, request or other document to be given hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telecopy or certified or registered mail, postage prepaid: (i) if to the Company, addressed to: Regent Communications, Inc. 50 East RiverCenter Boulevard, Suite 180 Covington, KY 41011 Attn: Terry S. Jacobs, Chairman of the Board Facsimile: (606) 292-0352 with a copy to: Strauss & Troy 2100 PNC Center 201 East Fifth Street Cincinnati, Ohio 45202 Attn: Alan C. Rosser, Esq. Facsimile: (513) 241-8289 (ii) if to Buyer, addressed to: Blue Chip Capital Fund II Limited Partnership 250 East Fifth Street, Suite 1100 Cincinnati, Ohio 45202 Attn: John H. Wyant Facsimile: (404) 723-2306 8 with copies to: Taft, Stettinius & Hollister LLP 1800 Star Bank Center 425 Walnut Street Cincinnati, Ohio 45202 Attn: Gerald S. Greenberg, Esq. Facsimile: (513) 381-0205 or to such other address or telecopy number as any party shall have specified by notice given to the other parties in the manner specified above. (b) Entire Agreement; Amendment. This Agreement, including the Exhibits and Schedules hereto, and the other agreements expressly contemplated by this Agreement, contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior oral and written agreements, memoranda, term sheets, understandings and undertakings among the parties hereto relating to the subject matter hereof. This Agreement may be modified or amended only by a written instrument executed by or on behalf of the parties hereto. (c) Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Ohio without regard to the application of its conflicts of laws principles. The parties hereby waive all right to trial by jury in any action, suit or proceeding brought to enforce or defend any rights or remedies under this Agreement or the transactions contemplated hereby. (d) Severability. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. (e) Construction. The section and subsection headings used herein are for convenience of reference only, are not a part of this Agreement and are not to affect the construction of, or be taken into consideration in interpreting, any provision of this Agreement. As used in this Agreement, the masculine, feminine and neuter gender each includes the other, unless the context otherwise dictates. Any and all schedules and exhibits referred to in this Agreement and attached hereto are and shall be deemed to be incorporated in this Agreement as if fully set forth herein. (f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (g) Specific Performance. The parties hereto acknowledge that damages may be an inadequate remedy for any breach of the provisions of this Agreement and agree that the obligations of the parties hereunder may be specifically enforceable, and no party will take any action to impede the other from seeking to enforce such right of specific performance after any such breach. (h) Successors and Assigns: Assignability. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto 9 and their respective successors and permitted assigns; provided, however, that the right of the Buyer to purchase the Series G Preferred Stock shall not be assignable without the consent of the Company. This Agreement (i) shall not confer upon any person other than the parties hereto and their respective successors and permitted assigns any rights or remedies hereunder; and (ii) shall not be assignable by either party without the prior written consent of the other. (i) Further Assurances. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary proper or advisable to consummate and make effective the transactions contemplated by this Agreement. (j) Survival. The representations and warranties of the parties contained herein shall survive execution and delivery of this Agreement and issuance and delivery of the Series G Preferred Stock hereunder. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered, as of the day and year first above written. COMPANY: REGENT COMMUNICATIONS, INC. By: /s/ Its: /s/ BUYER: BLUE CHIP CAPITAL FUND II LIMITED PARTNERSHIP By: Blue Chip Venture Company, Ltd., its general partner By: /s/ Its: /s/ EX-4.V 8 EXHIBIT 4(V) 1 EXHIBIT 4(v) STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "Agreement") dated as of the 11th day of January, 1999 between TERRY S. JACOBS (the "Buyer"), and REGENT COMMUNICATIONS, INC., a Delaware corporation (the "Company"). 1. Sale and Purchase of the Series G Preferred Stock. On and subject to the terms and conditions set forth herein, the Company hereby sells, issues and delivers to Buyer, and Buyer hereby purchases from the Company, 50,000 shares of the Series G Convertible Preferred Stock of the Company (the "Series G Preferred Stock"). 2. Purchase Price. The purchase price for the Series G Preferred Stock is Two Hundred Fifty Thousand Dollars ($250,000.00) ($5.00 per share) (the "Purchase Price"), which sum has been paid by Buyer to the Company prior to the execution of this Agreement, receipt of which is hereby acknowledged. 3. Deliveries by the Company. Upon the execution of this Agreement, the Company has delivered to Buyer, and Buyer hereby acknowledges receipt thereof, a stock certificate representing the Series G Preferred Stock duly issued in the name of Buyer and bearing the legends set forth in Section 5(j) hereof. 4. Representations and Warranties of the Company. The Company represents and warrants to Buyer, as of the date hereof, as follows: (a) Organization and Qualification. The Company is validly existing as a Delaware corporation in good standing and is authorized to transact business as a foreign corporation in good standing in those jurisdictions in which the nature of its activities or the property owned by it make such qualification necessary. (b) Authority of the Company. This Agreement has been duly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity). (c) No Conflicts. The execution, delivery and performance of this Agreement by the Company does not and will not violate any provision of law or any rule or regulation of any federal, state or local governmental authority to which the Company is subject, nor result in a breach or violation by the Company of any of the terms or provisions of, or constitute an event of default under the Company's Certificate of Incorporation or By-Laws, as currently in effect, or any indenture, mortgage, trust (constructive or otherwise), loan agreement, lease or other agreement or instrument to which the Company is a party or by which the Company or its assets are bound. The Company is not a party to, or subject to, or bound by, any judgment, award, injunction, order or 2 decree of any court or governmental authority, or any arbitration award which may restrict or interfere with the performance by the Company of this Agreement. (d) Required Consents. No consent, approval, joinder, waiver, authorization, or declaration, filing or registration with any governmental or regulatory authority, or any consent of any third party, is required to be obtained by the Company in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, other than the waiver attached hereto. 5. Representations and Warranties of Buyer. Buyer hereby represents and warrants to the Company, as of the date hereof, as follows: (a) Non-Registration. Buyer understands that the offering and sale of the Series G Preferred Stock is intended to be exempt from registration under the Securities Act of 1933, as amended (the "1933 Act"), by virtue of Section 4(2) of the Act and the provisions of Regulation D promulgated thereunder, that the Series G Preferred Stock has not been registered under the 1933 Act or under the securities laws of any state, and that the Company will be under no obligation to effect any such registration. (b) Investment Intent. Buyer is purchasing the Series G Preferred Stock for his own account, for investment and not with a view to resale, distribution, or other disposition, and Buyer has no present plans to enter into any contract, undertaking, agreement or arrangement for any such resale, distribution or other disposition. Buyer will not sell or otherwise transfer the Series G Preferred Stock without registration under the 1933 Act and applicable state securities laws, or pursuant to an exemption from the registration requirements thereof which, in the opinion of counsel acceptable to the Company, is available for the transaction. (c) Status of Buyer. Buyer is an "accredited investor," as that term is defined in Rule 501(a) of Regulation D promulgated under the 1933 Act. (d) Opportunity to Review Books and Records. Buyer has had a reasonable opportunity to inspect all documents, books and records pertaining to the Company and the Series G Preferred Stock and confirms that the Series G Preferred Stock is being purchased without Buyer's receipt of any offering literature. Buyer is not relying on the Company or any agent of the Company with respect to the economic or other considerations of an investment in the Company; provided, however, that the representations of Buyer contained in this subsection (d) and in subsection (e) below of this Section 5 shall not operate to limit or modify the representations and warranties made by the Company in Section 4 of this Agreement or the right of Buyer to rely thereon. (e) Opportunity for Questions. Buyer has had a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the Company, its business and proposed operations, the terms of the Series G Preferred Stock and all other aspects of investment in the Company, and all such questions have been answered to the full satisfaction of Buyer. 3 (f) Manner of Purchase. Buyer is not subscribing for the Series G Preferred Stock as a result of or pursuant to any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, or presented at any seminar or meeting, or any solicitation of a subscription by a person other than a representative of the Company. (g) Absence of Certain Convictions, Orders. Neither Buyer nor any affiliate (as defined in the 1933 Act) of Buyer: (i) has filed a registration statement which is the subject of a currently effective stop order entered pursuant to any state's law within five years prior to the date hereof; (ii) has been convicted within five years prior to the date hereof of any felony or misdemeanor in connection with the purchase or sale of any security or any felony involving fraud or deceit including, but not limited to, forgery, embezzlement, obtaining money under false pretenses, larceny or conspiracy to defraud; (iii) is currently subject to any state's administrative order or judgment entered by that state's securities administrator within five years prior to the date hereof and is not subject to any state's administrative order or judgment in which fraud or deceit was found and the order or judgment was entered within five years of the date hereof; (iv) is currently subject to any state's administrative order or judgment which prohibits the use of any exemption from registration in connection with the purchase or sale of securities; (v) is subject to any order, judgment or decree of any court of competent jurisdiction temporarily or preliminarily restraining or enjoining, or is subject to any order, judgment or decree of any court of competent jurisdiction, entered within five years prior to the date hereof, permanently restraining or enjoining the any such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving the making of any false filing with any state. (h) No Conflict. The execution, delivery and performance of this Agreement by Buyer (i) will not constitute a default under or conflict with any agreement or instrument to which Buyer is a party or by which Buyer or his assets are bound, (ii) will not conflict with or violate any order, judgment, decree, statute, ordinance or regulation applicable to Buyer and (iii) do not require the consent of any person or entity. (i) No Broker or Finder. Buyer has not retained, or otherwise entered into any agreement or understanding with, any broker or finder in connection with his purchase of the Series G Preferred Stock hereunder, and the Company will not incur any liability for any fee, commission or other compensation on account of any such retention, agreement or understanding by Buyer. (j) Legends. Buyer understands that the certificate representing the Series G Preferred Stock shall bear legends in substantially the following forms, and Buyer shall not transfer any of the shares of Series G Preferred Stock, or any shares of common stock that may be issued on conversion thereof, or any interest therein, except in accordance with the terms of such legends: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state (the "Securities Laws"). These securities may not be offered, sold, transferred, pledged or hypothecated in the absence of registration under applicable Securities Laws, or the availability of an exemption therefrom. This certificate will not be transferred on the books of the Corporation or any transfer agent acting on behalf of the Corporation 4 except upon the receipt of an opinion of counsel, satisfactory to the Corporation, that the proposed transfer is exempt from the registration requirements of all applicable Securities Laws, or the receipt of evidence, satisfactory to the Corporation, that the proposed transfer is the subject of an effective registration statement under all applicable Securities Laws." "The issuer is subject to restrictions contained in the Federal Communications Act, as amended. The securities evidenced by this certificate may not be sold, transferred, assigned or hypothecated if, as a result thereof, the issuer would be in violation of that act." "The securities represented by this certificate are subject to the terms of that certain Second Amended and Restated Stockholders' Agreement dated as of June 15, 1998, among Regent Communications, Inc. and certain of its stockholders, as the same may be amended from time to time." 6. Audited Financials. The Company shall furnish to the holder(s) of the Series G Preferred Stock issued pursuant to this Agreement, within 120 days after the close of each fiscal year of the Company, audited financial statements of the Company for such fiscal year, prepared and presented in accordance with generally accepted accounting principles, together with the report of independent certified public accountants, unqualified as to scope. 7. Miscellaneous (a) Notices. Any notice, request or other document to be given hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telecopy or certified or registered mail, postage prepaid: (i) if to the Company, addressed to: Regent Communications, Inc. 50 East RiverCenter Boulevard, Suite 180 Covington, KY 41011 Attn: William L. Stakelin, President Facsimile (606) 292-0352 5 (ii) if to Buyer, addressed to: Mr. Terry S. Jacobs c/o Regent Communications, Inc. 50 East RiverCenter Boulevard, Suite 180 Covington, KY 41011 Facsimile (606) 292-0352 or to such other address or telecopy number as any party shall have specified by notice given to the other parties in the manner specified above. (b) Entire Agreement; Amendment. This Agreement, and the other agreements expressly contemplated by this Agreement, contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior oral and written agreements, memoranda, term sheets, understandings and undertakings among the parties hereto relating to the subject matter hereof. This Agreement may be modified or amended only by a written instrument executed by or on behalf of the parties hereto. (c) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio without regard to the application of its conflicts of laws principles. (d) Severability. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. (e) Construction. The section and subsection headings used herein are for convenience of reference only, are not a part of this Agreement and are not to affect the construction of, or be taken into consideration in interpreting, any provision of this Agreement. As used in this Agreement, the masculine, feminine and neuter gender each includes the other, unless the context otherwise dictates. Any and all schedules and exhibits referred to in this Agreement and attached hereto are and shall be incorporated in this Agreement as if fully set forth herein. (f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. (g) Specific Performance. The parties hereto acknowledge that damages may be an inadequate remedy for any breach of the provisions of this Agreement and agree that the obligations of the parties hereunder may be specifically enforceable, and no party will take any action to impede the other from seeking to enforce such right of specific performance after any such breach. (h) Successors and Assigns: Assignability. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns. This Agreement (i) shall not confer upon any person other than the parties hereto and their respective successors and permitted assigns 6 any rights or remedies hereunder; and (ii) shall not be assignable by either party without the prior written consent of the other. (i) Further Assurances. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary proper or advisable to consummate and make effective the transactions contemplated by this Agreement. (j) Survival. The representations and warranties of the parties contained herein shall survive execution and delivery of this Agreement and issuance and delivery of the Series G Preferred Stock hereunder. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered, as of the day and year first above written. COMPANY: REGENT COMMUNICATIONS, INC. By: /s/ Its: /s/ BUYER: /s/ Terry S. Jacobs EX-4.W 9 EXHIBIT 4(W) 1 EXHIBIT 4(w) REGENT COMMUNICATIONS, INC. FOURTH AMENDMENT, LIMITED CONSENT AND LIMITED WAIVER TO CREDIT AGREEMENT, FIRST AMENDMENT TO SUBSIDIARY GUARANTY AND FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT This FOURTH AMENDMENT, LIMITED CONSENT AND LIMITED WAIVER TO CREDIT AGREEMENT, FIRST AMENDMENT TO SUBSIDIARY GUARANTY AND FIRST AMENDMENT TO PLEDGE AND SECURITY AGREEMENT (this "Amendment") is dated as of October 16, 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 the Subsidiaries 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, that certain Second Amendment and Limited Waiver to Credit Agreement dated as of June 10, 1998 and that certain Third Amendment to Credit Agreement dated as of August 14, 1998 (as so amended, the "CREDIT AGREEMENT"), by and among Company, Lenders and Agent, that certain Subsidiary Guaranty dated as of November 14, 1997 by and among each Subsidiary of Company (the "SUBSIDIARY GUARANTY") and that certain Pledge and Security Agreement dated as of November 14, 1997 by and among Company and each Subsidiary of Company (the "PLEDGE AND SECURITY AGREEMENT"). 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 waive compliance with the provisions of subsection 6.1(ii) of the Credit Agreement in the manner and to the limited extent described herein; WHEREAS, Company has requested that Lenders consent to the changes in the corporate structure of and the stock/asset transfers among certain of Company's Subsidiaries as set forth in Schedule A annexed hereto (collectively the "REGROUPING TRANSACTIONS"); 1 2 WHEREAS, in connection with the Regrouping Transactions, 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. LIMITED CONSENT TO THE CREDIT AGREEMENT Anything in the Credit Agreement to the contrary notwithstanding, Lenders hereby consent to the Regrouping Transactions, substantially as set forth in Schedule A annexed hereto. SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS A. SUBSIDIARY NAME CHANGES: As a result of the Regrouping Transactions, the following Credit Parties shall change their names as follows and all references in the Credit Agreement and the other Loan Documents to such Credit Parties shall thereafter be deemed to be references to their new names: 1. "The Park Lane Group" shall be changed to "Regent Broadcasting West Coast, Inc."; 2. "Regent Merger Corp." shall be changed to " Regent Broadcasting Midwest, Inc."; 3. "Faircom Flint Inc." shall be changed to "Regent Broadcasting of Flint, Inc."; and 4. "Faircom Mansfield Inc." shall be changed to "Regent Broadcasting of Mansfield, Inc.". B. SUBSIDIARY MERGERS: As a result of the Regrouping Transactions, the following mergers among Credit Parties shall take place: 1. Park Lane Regency Radio, Inc. into Regent Broadcasting West Coast, Inc., with Regent Broadcasting West Coast, Inc. as the surviving corporation; 2. Park Lane High Desert, Inc. into Regent Broadcasting West Coast, Inc., with Regent Broadcasting West Coast, Inc. as the surviving corporation; 2 3 3. Regent Acquisition Corp., Inc. into Regent Broadcasting of Redding, Inc., with Regent Broadcasting of Redding as the surviving corporation; 4. Park Lane Redding Radio, Inc. into Regent Broadcasting of Redding, Inc., with Regent Broadcasting of Redding, Inc. as the surviving corporation; 5. Park Lane Chico, Inc. into Regent Broadcasting of Chico, Inc., with Regent Broadcasting of Chico, Inc. as the surviving corporation; and 6. Park Lane Northern Arizona, Inc. into Regent Broadcasting of Flagstaff, Inc., with Regent Broadcasting of Flagstaff, Inc. as the surviving corporation. C. NEW CREDIT PARTIES. In connection with the Regrouping Transactions, the following new corporations have been formed and will become new Credit Parties ("NEW CREDIT PARTIES"), and all references to "Credit Party" or "Credit Parties" in the Credit Agreement and the other Loan Documents shall thereafter include the following: 1. Regent Licensee of Lake Tahoe, Inc., a Delaware corporation; 2. Regent Licensee of Palmdale, Inc., a Delaware corporation; 3. Regent Licensee of Redding, Inc., a Delaware corporation; 4. Regent Licensee of Chico, Inc., a Delaware corporation; 5. Regent Licensee of Flagstaff, Inc., a Delaware corporation; 6. Regent Licensee of Flint, Inc., a Delaware corporation; and 7. Regent Licensee of Mansfield, Inc., a Delaware corporation. D. GUARANTIES AND SECURITY INTERESTS. Each New Credit Party created pursuant to the Regrouping Transactions hereby agrees to guaranty and secure the Obligations pursuant to the Subsidiary Guaranty and the Pledge and Security Agreement; furthermore, all Credit Parties hereby agree to take all such action as Agent may reasonably request pursuant to the Credit Agreement and the other Loan Documents to effect the foregoing changes and to insure that all Loans and Obligations continue to be guaranteed and secured by all Credit Parties, including, without limitation, the delivery of executed Counterparts to the 3 4 Subsidiary Guaranty and the Pledge and Security Agreement making each New Credit Party a party thereto, the delivery of certificates representing the shares of capital stock pledged pursuant to the Security Documents, the filing of Uniform Commercial Code financing statements as to the Collateral for all jurisdictions necessary or desirable to perfect Agent's security interest in the Collateral and delivery of all other evidence reasonably satisfactory to Agent that all other filings, recordings and other actions Agent deems necessary or advisable to establish, preserve and perfect the First Priority Liens granted to Agent on behalf and for the ratable benefit of Lenders shall have been made. Without limiting the foregoing, each Credit Party hereby agrees to deliver the certificates set forth on Schedule B annexed hereto evidencing the pledged stock of each New Credit Party. E. AMENDMENTS TO SCHEDULES. Each Credit Party hereby agrees to update each of the Schedules to the Credit Agreement and the Pledge and Security Agreement to the extent necessary to reflect changes resulting from the consummation of the Regrouping Transactions (the "AMENDED AND RESTATED SCHEDULES") effective and dated as of the date upon which the Regrouping Transactions are completed. Each Credit Party shall have delivered to Agent an Officers' Certificate to which such Amended and Restated Schedules shall be attached certifying that such Amended and Restated Schedules are true, correct and accurate as of the date of the consummation of the Regrouping Transactions. SECTION 3. LIMITED WAIVER TO THE CREDIT AGREEMENT Lenders hereby waive compliance with the provisions of subsection 6.1(ii) of the Credit Agreement requiring Company to deliver to Agent on the date which is 45 days after the end of the Fiscal Quarter period ended June 30, 1998 the financial information and related items set forth in such subsection; provided such financial information and related items are delivered no later than September 29, 1998. SECTION 4. LIMITATION OF AMENDMENTS, WAIVERS AND CONSENTS Without limiting the generality of the provisions of subsection 10.6 of the Credit Agreement, the amendments, waivers and consents set forth above shall be limited precisely as written and relate solely to the matters expressly set forth in Sections 1, 2 and 3 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 the Credit Agreement in any other instance or any other term, provision or condition 4 5 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 existing 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 5. 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; (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 6. 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 amendments 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 5 6 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 7. 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. (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 6 7 STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. E. COUNTERPARTS; EFFECTIVENESS; EFFECTIVE DATE OF AMENDMENT. 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. [Remainder of page intentionally left blank] 7 8 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/ Terry S. Jacobs ----------------------------- Name: Terry S. Jacobs Title: Chairman and CEO S-1 9 EXISTING CREDIT PARTIES REGENT BROADCASTING OF LEXINGTON, INC., 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., FAIRCOM FLINT INC., FAIRCOM MANSFIELD INC., each a Delaware corporation By: /s/ Terry S. Jacobs ------------------------ Name: Terry S. Jacobs Title: Chairman and CEO of each of the forgoing THE PARK LANE GROUP, PARK LANE CHICO, INC., PARK LANE HIGH DESERT, INC., PARK LANE NORTHERN ARIZONA, INC., PARK LANE REGENCY RADIO, INC., PARK LANE REDDING RADIO, INC., each a California corporation By: /s/ Terry S. Jacobs ------------------------ Name: Terry S. Jacobs Title: Chairman and CEO of each of the forgoing S-2 10 REGENT LICENSEE OF SAN DIEGO, INC., REGENT LICENSEE OF DAYTON, INC., REGENT LICENSEE OF KINGMAN, INC, REGENT LICENSEE OF VICTORVILLE, INC., REGENT LICENSEE OF LEXINGTON, INC., each a Delaware corporation By: /s/ Terry S. Jacobs ------------------------ Name: Terry S. Jacobs Title: Chairman and CEO of each of the foregoing NEW CREDIT PARTIES REGENT LICENSEE OF LAKE TAHOE, INC., REGENT LICENSEE OF PALMDALE, INC., REGENT LICENSEE OF REDDING, INC., REGENT LICENSEE OF CHICO, INC., REGENT LICENSEE OF FLAGSTAFF, INC., REGENT LICENSEE OF FLINT, INC., REGENT LICENSEE OF MANSFIELD, INC., each a Delaware corporation By: /s/ Terry S. Jacobs ------------------------ Name: Terry S. Jacobs Title: Chairman and CEO of each of the foregoing S-3 11 BANK OF MONTREAL, CHICAGO BRANCH, individually and as Agent By: /s/ Karen Klapper ----------------------------- Name: Karen Klapper Title: Director S-4 12 GENERAL ELECTRIC CAPITAL CORPORATION, individually and as Documentation Agent By: /s/ Thomas P. Waters ----------------------------- Name: Thomas P. Waters Title: Senior Vice President S-5 13 BANK ONE, INDIANAPOLIS, NA, By: /s/ John W. Eyler ------------------------------ Name: John W. Eyler Title: Senior Vice President S-6 14 SCHEDULE A DESCRIPTION OF REGROUPING TRANSACTIONS [SEE ATTACHED] Sch.A-1 15 Schedule A REGENT COMMUNICATIONS, INC. PROPOSAL FOR REGROUPING STATIONS BY MARKET 1. NAME CHANGES (a) The Park Lane Group will change its name to Regent Broadcasting West Coast, Inc. (b) Regent Merger Corp. will change its name to Regent Broadcasting Midwest, Inc. (c) Faircom Flint Inc. will change its name to Regent Broadcasting of Flint, Inc. (d) Faircom Mansfield Inc. will change its name to Regent Broadcasting of Mansfield, Inc. 2. KINGMAN MARKET (a) Regent Communications, Inc. will drop the stock of Regent Broadcasting of Kingman, Inc. down into Regent Broadcasting West Coast, Inc. (fka The Park Lane Group), and Regent Broadcasting West Coast, Inc. (fka The Park Lane Group) will drop the stock of Regent Broadcasting of Kingman, Inc. down into Park Lane Regency Radio, Inc. (b) The assets of KAAA and KZZZ (presently held in Park Lane Regency Radio, Inc.) will be dropped down into Regent Broadcasting of Kingman, Inc., and the FCC licenses will be dropped from there into Regent Licensee of Kingman, Inc. 3. SOUTH LAKE TAHOE MARKET (a) A new Delaware corporation (Regent Licensee of Lake Tahoe, Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of Lake Tahoe, Inc. (b) Regent Communications, Inc. will drop the stock of Regent Broadcasting of Lake Tahoe, Inc. down into Regent Broadcasting West Coast, Inc. (fka The Park Lane Group), and Regent Broadcasting West Coast, Inc. (fka The Park Lane Group) will drop the stock of Regent Broadcasting of Lake Tahoe, Inc. down into Park Lane Regency Radio, Inc. (c) The assets of the Tahoe stations (presently held by Park Lane Regency Radio, Inc. and which are the subject of a pending sale) will be dropped down into Regent Broadcasting of Lake Tahoe, Inc., and the FCC licenses will be dropped down another level into Regent Licensee of Lake Tahoe, Inc. pending the sale. (d) Park Lane Regency Radio, Inc. will then merge with and into Regent Broadcasting West Coast, Inc. (fka The Park Lane Group), with Regent Broadcasting West Coast, Inc. (fka The Park Lane Group) to survive. 16 4. VICTORVILLE MARKET (a) Regent Communications, Inc. will drop the stock of Regent Broadcasting of Victorville, Inc. down into Regent Broadcasting West Coast, Inc. (fka The Park Lane Group), and Regent Broadcasting West Coast, Inc. (fka The Park Lane Group) will drop the stock of Regent Broadcasting of Victorville, Inc. down into Park Lane High Desert, Inc. (b) The assets of KATJ and KROY (the Victorville stations presently held in Park Lane High Desert, Inc.) will be dropped down into Regent Broadcasting of Victorville, Inc., and the FCC licenses of KATJ and KROY will be dropped from there into Regent Licensee of Victorville, Inc. 5. PALMDALE MARKET (a) A new Delaware corporation (Regent Licensee of Palmdale, Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of Palmdale, Inc. (b) Regent Communications, Inc. will drop the stock of Regent Broadcasting of Palmdale, Inc. down into Regent Broadcasting West Coast, Inc. (fka The Park Lane Group), and Regent Broadcasting West Coast, Inc. (fka The Park Lane Group) will drop the stock of Regent Broadcasting of Palmdale, Inc. down into Park Lane High Desert, Inc. (c) The assets of the Palmdale stations (presently held by Park Lane High Desert, Inc.) will be dropped down into Regent Broadcasting of Palmdale, Inc., and the FCC licenses will be dropped down another level into Regent Licensee of Palmdale, Inc. (d) Park Lane High Desert, Inc. will then merge with and into Regent Broadcasting West Coast, Inc. (fka The Park Lane Group), with Regent Broadcasting West Coast, Inc. (fka The Park Lane Group) to survive. 6. REDDING MARKET (a) A new Delaware corporation (Regent Licensee of Redding, Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of Redding, Inc. (b) Regent Communications, Inc. will drop the stock of Regent Broadcasting of Redding, Inc. down into Regent Broadcasting West Coast, Inc. (fka The Park Lane Group) (c) Regent Communications, Inc. will drop the stock of Regent Acquisition Corp. down into Regent Broadcasting West Coast, Inc. (fka The Park Lane Group). (d) Regent Acquisition Corp. will be merged with and into Regent Broadcasting of Redding, Inc., with Regent Broadcasting of Redding to survive. (e) Park Lane Redding Radio, Inc. will be merged with and into Regent Broadcasting of Redding, Inc., with Regent Broadcasting of Redding, Inc. to survive. (f) The licenses of all six of the Redding stations will be dropped down Regent Licensee of Redding, Inc. (the new subsidiary of Regent Broadcasting of Redding, Inc.). -2- 17 7. CHICO MARKET (a) A new Delaware corporation (Regent Licensee of Chico, Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of Chico, Inc. (b) Regent Communications, Inc. will drop the stock of Regent Broadcasting of Chico, Inc. down into Regent Broadcasting West Coast, Inc. (fka The Park Lane Group) (c) Park Lane Chico, Inc. will be merged with and into Regent Broadcasting of Chico, Inc., with Regent Broadcasting of Chico, Inc. surviving. (d) The FCC licenses of the Chico stations will be dropped down into Regent Licensee of Chico, Inc. 8. FLAGSTAFF MARKET (a) A new Delaware corporation (Regent Licensee of Flagstaff, Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of Flagstaff, Inc. (b) Regent Communications, Inc. will drop the stock of Regent Broadcasting of Flagstaff, Inc. down into Regent Broadcasting West Coast, Inc. (fka The Park Lane Group). (c) Park Lane Northern Arizona, Inc. will be merged with and into Regent Broadcasting of Flagstaff, Inc., with Regent Broadcasting of Flagstaff, Inc. surviving. (d) The FCC licenses of the Flagstaff stations will be dropped down into Regent Licensee of Flagstaff, Inc. 9. FLINT MARKET (a) A new Delaware corporation (Regent Licensee of Flint, Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of Flint, Inc. (fka Faircom Flint Inc.) 10. MANSFIELD/SHELBY MARKET (a) A new Delaware corporation (Regent Licensee of Mansfield, Inc.) will be formed as a wholly-owned subsidiary of Regent Broadcasting of Mansfield, Inc. (fka Faircom Mansfield Inc.) -3- 18 [Flow Chart Not Shown] 19 [Flow Chart Not Shown] 20 SCHEDULE B Description of Pledged Stock of New Credit Parties
Stock Issuer Holder Class No. Par Value # of Shares - ------------ ------ ----- --- --------- ----------- Regent Licensee Regent Broadcasting Common 1 $1.00 100 of Lake Tahoe, Inc. of Lake Tahoe, Inc. Regent Licensee Regent Broadcasting of Common 1 $1.00 100 of Palmdale, Inc. Palmdale, Inc. Regent Licensee Regent Broadcasting of Common 1 $1.00 100 of Redding, Inc. Redding, Inc. Regent Licensee Regent Broadcasting of Common 1 $1.00 100 of Chico, Inc. Chico, Inc. Regent Licensee Regent Broadcasting of Common 1 $1.00 100 of Flagstaff, Inc. Flagstaff, Inc. Regent Licensee Regent Broadcasting of Common 1 $1.00 100 of Flint, Inc. Flint, Inc. Regent Licensee Regent Broadcasting of Common 1 $1.00 100 of Mansfield, Inc. Mansfield, Inc.
Sch.B-1 EX-4.X 10 EXHIBIT 4(X) 1 EXHIBIT 4(x) REGENT COMMUNICATIONS, INC. FIFTH AMENDMENT TO CREDIT AGREEMENT This FIFTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated as of November 23, 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, that certain Second Amendment and Limited Waiver to Credit Agreement dated as of June 10, 1998, that certain Third Amendment to Credit Agreement dated as of August 14, 1998 and that certain Fourth Amendment, Limited Consent and Limited Waiver to Credit Agreement, First Amendment to Subsidiary Guaranty and First Amendment to Pledge and Security Agreement dated as of October 16, 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. AMENDMENTS TO SECTION 4.3: CONDITIONS TO PERMITTED ACQUISITIONS. Subsection 4.3H of the Credit Agreement is hereby amended and restated in its entirety as follows: "H. ACQUISITION FCC CONSENT. The Acquisition FCC Consent with respect to the Acquired Stations shall have been obtained and (i) shall not have been reversed, stayed, enjoined, annulled or suspended; (ii) the time for filing a request for administrative or judicial relief shall have expired without any such 2 filing having been made, and without the FCC having instituted administrative review thereof sua sponte; and (iii) no threat of administrative review thereof sua sponte shall be pending." B. AMENDMENTS TO SECTION 6.1: FINANCIAL STATEMENTS AND OTHER REPORTS. Subsection 6.1(i) of the Credit Agreement is hereby amended and restated in its entirety as follows: "(i) Monthly Financials: as soon as available and in any event within 30 days after the end of each month (other than those months which are Fiscal Quarter or Fiscal Year ends) commencing with the month ending October 31, 1998, copies of the monthly sales reports and cash flows for such month for each designated market area in which Company maintains Stations as furnished to Company by such Stations." 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 the Credit Agreement in any other instance or 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 existing 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; 2 3 (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 amendments 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 "Guaranteed 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 "Guaranteed 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. (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. 3 4 (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 AMENDMENT. 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, Requisite 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. [Remainder of page intentionally left blank] 4 5 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/ Anthony A. Vasconcellos --------------------------- Name: Anthony A. Vasconcellos Title: Vice President and CFO S-1 6 CREDIT SUPPORT PARTIES (for the purposes of Section 4 only) REGENT BROADCASTING OF LEXINGTON, INC., 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 BROADCASTING OF SOUTH CAROLINA, INC., REGENT BROADCASTING MIDWEST, INC. (formerly known as Regent Merger Corp.), REGENT BROADCASTING OF FLINT, INC. (formerly known as Faircom Flint Inc.), REGENT BROADCASTING OF MANSFIELD, INC. (formerly known as Faircom Mansfield Inc.), each a Delaware corporation By: /s/ Anthony A. Vasconcellos --------------------------- Name: Anthony A. Vasconcellos Title: Vice President and CFO of each of the forgoing REGENT BROADCASTING WEST COAST, INC. (formerly known as The Park Lane Group), PARK LANE CHICO, INC., PARK LANE HIGH DESERT, INC., PARK LANE NORTHERN ARIZONA, INC., PARK LANE REGENCY RADIO, INC., PARK LANE REDDING RADIO, INC., each a California corporation By: /s/ Anthony A. Vasconcellos --------------------------- Name: Anthony A. Vasconcellos Title: Vice President and CFO of each of the forgoing S-2 7 REGENT LICENSEE OF SAN DIEGO, INC., REGENT LICENSEE OF DAYTON, INC., REGENT LICENSEE OF KINGMAN, INC, REGENT LICENSEE OF VICTORVILLE, INC., REGENT LICENSEE OF LEXINGTON, INC., REGENT LICENSEE OF LAKE TAHOE, INC., REGENT LICENSEE OF PALMDALE, INC., REGENT LICENSEE OF REDDING, INC., REGENT LICENSEE OF CHICO, INC., REGENT LICENSEE OF FLAGSTAFF, INC., REGENT LICENSEE OF FLINT, INC., REGENT LICENSEE OF MANSFIELD, INC., REGENT LICENSEE OF SOUTH CAROLINA, INC., each a Delaware corporation By: /s/ Anthony A. Vasconcellos --------------------------- Name: Anthony A. Vasconcellos Title: Vice President and CFO of each of the foregoing S-3 8 BANK OF MONTREAL, CHICAGO BRANCH, individually and as Agent By: /s/ Ola Anderssen ------------------------ Name: Ola Anderssen Title: Director S-4 9 GENERAL ELECTRIC CAPITAL CORPORATION, individually and as Documentation Agent By: /s/ Thomas P. Waters ---------------------------- Name: Thomas P. Waters Title: Senior Vice President S-5 10 BANK ONE, INDIANAPOLIS, NA, By: /s/ John W. Eyler --------------------------- Name: John W. Eyler Title: Senior Vice President S-6 EX-4.Y 11 EXHIBIT 4(Y) 1 EXHIBIT 4(y) REGENT COMMUNICATIONS, INC. SIXTH AMENDMENT AND LIMITED CONSENT TO CREDIT AGREEMENT This SIXTH AMENDMENT AND LIMITED CONSENT TO CREDIT AGREEMENT (this "AMENDMENT") is dated as of February 24, 1999 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 the Credit Support Parties (as defined in Section 5 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, that certain Second Amendment and Limited Waiver to Credit Agreement dated as of June 10, 1998, that certain Third Amendment to Credit Agreement dated as of August 14, 1998, that certain Fourth Amendment, Limited Consent and Limited Waiver to Credit Agreement, First Amendment to Subsidiary Guaranty and First Amendment to Pledge and Security Agreement dated as of October 16, 1998 and that certain Fifth Amendment to Credit Agreement dated as of November 23, 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 1.1 AMENDMENTS TO SECTION 1: DEFINITIONS A. NEW DEFINITIONS. Subsection 1.1 of the Credit Agreement is hereby amended by adding the following definitions thereto, which shall be inserted in proper alphabetical order: "AUTOMATION DATE" means no later than (i) May 1, 1999 for the Palmdale Stations, (ii) June 1, 1999 for the Mansfield Stations, (iii) June 30, 1999 for the Chico Stations and (iv) September 1, 1999 for the Redding Stations or any other Stations. "ST. CLOUD ACQUISITION" means, the acquisition by Company and its subsidiaries of all of the assets of radio stations WJON-AM and WWJO-FM, each licensed to St. Cloud, Minnesota, and radio station KMXK-FM, licensed to Cold Spring, Minnesota pursuant to that certain Purchase Agreement dated January 5, 1999." 2 B. AMENDED DEFINITIONS. (i) The definition of Acquisition Proceeds contained in subsection 1.1 of the Credit Agreement is hereby amended and restated in its entirety as follows: "`ACQUISITION PROCEEDS' means the proceeds (net of the cost of issuance thereof) of any additional Company Common Stock, Company Preferred Stock or any other equity securities issued by Company in accordance with this Agreement which are issued to be used to consummate Permitted Acquisitions and pay fees and expenses related thereto and at least a portion of which are actually used within 90 days of such issuance to consummate a Permitted Acquisition and pay fees and expenses related thereto and the balance of which are committed to be used to consummate Permitted Acquisitions ("SPECIFIED ACQUISITIONS") and pay fees and expenses related thereto with respect to which the appropriate filings for transfer have been made with the FCC within 180 days of such issuance; provided that if any Specified Acquisition is terminated or does not close for any reason, then immediately upon such termination or non-closure, the Acquisition Proceeds committed to such Specified Acquisition shall cease to be Acquisition Proceeds and shall be applied to the repayment of the Loans and the reduction of the Commitment as set forth in subsection 2.4B(iii)(c)." (ii) The definition of Consolidated Operating Cash Flow contained in subsection 1.1 of the Credit Agreement is hereby amended and restated in its entirety as follows: "`CONSOLIDATED OPERATING CASH FLOW' means, for any period, (x) the sum, without duplication, of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) income taxes paid in Cash, (iv) total depreciation expense, (v) total amortization expense, (vi) other non-Cash items reducing Consolidated Net Income including, without limitation, accrued but unpaid income taxes, but excluding accrued and unpaid Overhead, and (vii) extraordinary losses less (y) other non-Cash items increasing Consolidated Net Income, less (z) extraordinary gains, all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP; provided that for any period in which any Credit Party has acquired, or disposed of, a Station, Consolidated Operating Cash Flow shall be calculated on a pro forma basis satisfactory to Agent as if such acquisition or disposition had occurred on the first date of such period." (iii) The definition of Consolidated Total Debt contained in subsection 1.1 of the Credit Agreement is hereby amended by amending and restating clause (i) of the proviso thereto as follows: "(i) December 31, 1999," (iv) The definition of Consolidated Total Debt Ratio contained in subsection 1.1 of the Credit Agreement is hereby amended and restated in its entirety as follows: 2 3 "`CONSOLIDATED TOTAL DEBT RATIO' means, as of any date of determination, the ratio of (i) Consolidated Total Debt as of such date of determination to (ii) Consolidated Operating Cash Flow for the four consecutive Fiscal Quarter period ending as of the last day of the most recent Fiscal Quarter for which a Compliance Certificate has been delivered hereunder, as calculated in accordance with subsection 7.6C." (v) The definition of Overhead contained in subsection 1.1 of the Credit Agreement is hereby amended by adding the phrase ",deferred, deferrable" immediately after the phrase "paid, payable" in the first line thereof. (vi) The definition of Regent of Charleston contained in subsection 1.1 of the Credit Agreement is hereby amended and restated in its entirety as follows: "`REGENT OF CHARLESTON' means, prior to July 15, 1998, Regent Broadcasting of Charleston, Inc., a Delaware corporation and wholly-owned Subsidiary of Company and, on and after July 15, 1998, Regent Broadcasting of South Carolina, Inc., a Delaware corporation and wholly-owned Subsidiary of Company." (vii) The definition of Charleston License Sub contained in subsection 1.1 of the Credit Agreement is hereby amended and restated in its entirety as follows: "`CHARLESTON LICENSE SUB' means, prior to July 15, 1998, Regent Licensee of Charleston, Inc., a Delaware corporation and wholly-owned Subsidiary of Regent of Charleston and, on and after July 15, 1998, Regent Licensee of South Carolina, Inc., a Delaware corporation and wholly-owned Subsidiary of Company." C. DELETED DEFINITIONS. The definition of Adjusted Consolidated Operating Cash Flow contained in subsection 1.1 of the Credit Agreement is hereby deleted in its entirety and each reference to "Adjusted Consolidated Operating Cash Flow" in the Credit Agreement and the other Loan Documents is hereby amended to be a reference to "Consolidated Operating Cash Flow." 1.2 AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND LOANS A. RATE OF INTEREST: Subsection 2.2A of the Credit Agreement is hereby amended by deleting the table set forth therein in its entirety and substituting the following therefor: 3 4
APPLICABLE MARGIN ---------------------------- CONSOLIDATED BASE LIBOR TOTAL DEBT RATIO RATE LOAN RATE LOAN - ---------------- --------- --------- Greater than or equal to 6.50:1.00 2.250% 3.500% Greater than 6.25:1.00 but less than 6.50:1.00 2.000% 3.250% Greater than 6.00:1.00 but less than 6.25:1.00 1.750% 3.000% Greater than or equal to 5.50:1.00 but less than 1.500% 2.750% 6.00:1.00 Greater than or equal to 5.00:1.00 but less than 1.250% 2.500% 5.50:1.00: Greater than or equal to 4.50:1.00 but less than 1.000% 2.250% 5.00:1.00 Greater than or equal to 4.00:1.00 but less than 0.750% 2.000% 4.50:1.00 Greater than or equal to 3.50:1.00 but less than 0.500% 1.750% 4.00:1.00 Less than 3.50:1.00: 0.250% 1.500%
B. PREPAYMENT OF LOANS. Subsection 2.4B(iii)(c) is hereby amended by (i) deleting the reference to "Acquisition Proceeds" contained in the first sentence thereof and (ii) adding the following proviso to the end of the first sentence thereof: " ; provided that as long as no Event of Default or Potential Event of Default has occurred and is continuing (or would result therefrom) and the Consolidated Total Debt Ratio is equal to or less than 5.50:1.00 at the time of any such equity issuance, then the foregoing prepayments to reduce the Consolidated Total Debt Ratio to 4.50:1.00 shall only be required with the net proceeds of an equity issuance (or related series of equity issuances) for gross proceeds of $20,000,000 or more, which are not Acquisition Proceeds." 1.3. AMENDMENTS TO SECTION 6: AFFIRMATIVE COVENANTS A. MORTGAGES FOR CERTAIN STATIONS Subsection 6.12 of the Credit Agreement is hereby amended by deleting each reference to "the one year anniversary of the Closing Date" set forth therein and substituting a reference to "December 31, 1999" in each case therefor. 4 5 B. SALE OF STATIONS. A new subsection 6.13 is hereby added to the Credit Agreement as follows: "6.13 SALE OF CERTAIN STATIONS. On or before March 30, 1999 (or June 30, 1999 with respect to the Lake Tahoe Stations only), Company and its Subsidiaries shall have entered into definitive sale agreements and made the appropriate filings with the FCC for the sale, for fair market value Cash consideration, of the Flagstaff Stations, the Kingman Stations, the Lake Tahoe Stations or any other Station or combination of Stations the sale of which is reasonably expected to result in aggregate Net Cash Proceeds sufficient (after application of such proceeds in accordance with this Agreement) to achieve a Leverage Ratio of no more than 6.75:1.00 (calculated on a pro forma basis to give effect to such sales). Such sales shall be consummated and the Net Cash Proceeds in respect thereof shall be applied to repay the Loans and reduce the Commitments no later than June 30, 1999 (or September 30, 1999 with respect to the Lake Tahoe Stations only)." 1.4. AMENDMENTS TO SECTION 7: NEGATIVE COVENANTS A. MINIMUM INTEREST COVERAGE RATIO. Subsection 7.6A of the Credit Agreement is hereby amended and restated in its entirety as follows: " A. MINIMUM INTEREST COVERAGE RATIO. Company shall not permit the ratio of (i) Consolidated Operating Cash Flow to (ii) Consolidated Interest Expense for any four consecutive Fiscal Quarter period ending as of the last day of any Fiscal Quarter during any of the periods set forth below to be less than the correlative ratio indicated:
MINIMUM INTEREST COVERAGE PERIOD RATIO ------ ----- January 1, 1999 - March 31, 1999 0.95:1.00 April 1, 1999 - June 30, 1999 1.30:1.00 July 1, 1999 - September 30, 1999 1.40:1.00 October 1, 1999 - December 31, 1999 1.60:1.00 January 1, 2000 - March 31, 2000 1.75:1.00 April 1, 2000 and thereafter 2.00:1.00
" B. MINIMUM FIXED CHARGE COVERAGE RATIO. Subsection 7.6B of the Credit Agreement is hereby amended and restated in its entirety as follows: " B. MINIMUM FIXED CHARGE COVERAGE RATIO. Company shall not permit the ratio of (i) Consolidated Operating Cash Flow to (ii) Consolidated Fixed Charges Expense for any four consecutive Fiscal Quarter period ending as 5 6 of the last day of any Fiscal Quarter during any of the periods set forth below to be less than the correlative ratio indicated:
MINIMUM FIXED COVERAGE PERIOD RATIO ------ ----- January 1, 1999 - March 31, 1999 0.60:1.00 April 1, 1999 - June 30, 1999 0.80:1.00 July 1, 1999 - September 30, 1999 0.90:1.00 October 1, 1999 - December 31, 1999 1.05:1.00 January 1, 2000 and thereafter 1.10:1.00
" C. MAXIMUM CONSOLIDATED TOTAL DEBT RATIO. Subsection 7.6C of the Credit Agreement is hereby amended and restated in its entirety as follows: " C. MAXIMUM CONSOLIDATED TOTAL DEBT RATIO. Company shall not permit the ratio of (i) Consolidated Total Debt as of any date during any of the periods set forth below to (ii) Consolidated Operating Cash Flow for the four consecutive Fiscal Quarter period ending as of the last day of the most recently concluded Fiscal Quarter (including any Fiscal Quarter ending as of such date of determination), to exceed the correlative ratio indicated:
MAXIMUM PERIOD LEVERAGE RATIO ------ -------------- January 1, 1999 - December 30, 1999 6.75:1.00 December 31, 1999 - March 30, 2000 6.25:1.00 March 31, 2000 - June 29, 2000 6.00:1.00 June 30, 2000 - September 29, 2000 5.75:1.00 September 30, 2000 - December 30, 2000 5.25:1.00 December 31, 2000 - March 30, 2001 4.75:1.00 March 31, 2001 - June 29, 2001 4.25:1.00 June 30, 2001 - September 29, 2001 3.75:1.00 September 30, 2001 and thereafter 3.50:1.00
" D. CERTAIN CALCULATIONS. Subsection 7.6 of the Credit Agreement is hereby further amended by adding a new subsection 7.6D at the end thereof as follows: 6 7 " D. CERTAIN ADJUSTMENTS AND CALCULATIONS. For purposes of determining compliance with the financial covenants set forth in this subsection 7.6, the following special adjustments and calculations shall be permitted (without duplication) as specified for certain financial covenants at the times and for the periods indicated (all such calculations and adjustments shall be in form and substance satisfactory to Agent and Requisite Lenders and, without limiting the foregoing, to the extent any such adjustment or calculation is made on the basis of projections or expected results, such adjustment or calculation shall be revised to actual amounts when determined): (i) Automation. With respect to any Stations subject to automation of operations as described in Part 1 of Schedule 7.6D annexed hereto, Company shall be permitted to increase Consolidated Operating Cash Flow by the aggregate amount of annual cost savings that the Company in good faith reasonably expects to realize by automating such Stations in the amounts and for and as of the periods and dates of determination as set forth in Part 1 of Schedule 7.6D; provided that such automation increases (a) shall not apply to any Station that (y) is the subject of any pending or completed Asset Sale or (z) has not completed automation as of its applicable Automation Date, (b) shall not apply for purposes of the financial covenants set forth in subsections 7.6A and 7.6B until such time as such automation is actually completed and (c) in no event shall any automation increases be permitted after March 31, 2000. (ii) Consolidation Savings. With respect to any Stations subject to consolidation of operations as described in Part 2 of Schedule 7.6D annexed hereto during the period beginning the first Fiscal Quarter following such consolidation and ending on March 31, 2000 for the Redding Stations and Palmdale Stations and on September 30, 1999 for all other Stations, Company shall be permitted to increase Consolidated Operating Cash Flow by the aggregate amount of annual cost savings that the Company in good faith reasonably expects to realize by such consolidation savings in the amounts and for and as of the periods and dates of determination as set forth in Part 2 of Schedule 7.6D; provided that no consolidation increases shall be permitted with respect to any Station which is subject to a pending or completed Asset Sale (other than $20,094 of consolidation savings for the third Fiscal Quarter of 1998 for the Kingman Stations to be added back to Consolidated Operating Cash Flow on March 31, 1999). (iii) Sale of Assets. For purposes of calculating the Consolidated Total Debt Ratio only for any relevant period through June 30, 1999 (or through September 30, 1999 with respect to the Lake Tahoe Stations only), with respect to Stations which are subject to pending Asset Sales in accordance with subsection 6.13, Company and its Subsidiaries may calculate Consolidated Total Debt and Consolidated Operating Cash Flow on a pro forma basis as if such sales had been consummated and the Net Cash Proceeds which Company in good faith reasonably expects to result from the consummation of such Asset Sales (as 7 8 certified by Company to Lenders pursuant to an Officers' Certificate no later than March 31, 1999 (or June 30, 1999 with respect to the Lake Tahoe Stations only)) had been applied to repay Loans as required hereunder, in each case as of the first date of such period. (iv) Negative Cash Flow. For purposes of calculating the Consolidated Total Debt Ratio only, (A) for any relevant period through September 30, 1998, to the extent that the operating cash flow on a trailing 12 month basis relating to the Flagstaff Stations (on a combined basis in accordance with GAAP) included in the calculation of Consolidated Operating Cash Flow for any such period is negative, such negative combined operating cash flow for such period shall be deemed to be zero for purposes of calculating Consolidated Operating Cash Flow hereunder (provided, however, that no more than $300,000 in the aggregate of negative combined operating cash flow for all such Stations may be excluded in any such period) and (B) for any relevant period during the first consecutive twelve months following the pre-Closing Date programming format change for Station KIXA(FM), licensed to Lucerne Valley, California, implemented on March 15, 1998, and Station KNRO(AM), licensed to Redding, California, implemented on December 1, 1997, to the extent the operating cash flow on a trailing 12-month basis for any such Station (on a stand-alone basis) included in Consolidated Operating Cash Flow for any such period is negative, such negative combined operating cash flow for such period shall be deemed to be zero for purposes of calculating Consolidated Operating Cash Flow hereunder (provided, however that the aggregate amount of negative operating cash flow that may be so excluded pursuant to the immediately preceding proviso shall not exceed $140,000 for KIXA(FM) and $92,000 for KNRO(AM)); provided that the foregoing adjustments shall not apply to any Station which is subject to a pending or completed Asset Sale. (v) Other Adjustments. For purposes of calculating the Consolidated Total Debt Ratio only for any relevant period, Company may exclude from the calculation of Consolidated Operating Cash Flow (i) the annualized effect of the salary of Terry S. Jacobs and William Stakelin which is to be deferred and not paid in accordance with subsection 7.16 and (ii) through December 31, 1999, the salary of terminated employees and severance costs set forth in Part 3 of Schedule 7.6D annexed hereto in the amounts and for and as the periods and dates of determination as set forth in such Schedule; provided that no such adjustments shall be permitted with respect to any Station which is subject to a pending or completed Asset Sale. F. RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS. (i) Subsection 7.7(ii) of the Credit Agreement is hereby amended by adding the following proviso to the end thereof: " ; provided still further that anything in this Agreement to the contrary not withstanding, in no event shall Company or its Subsidiaries 8 9 consummate any Permitted Acquisition or enter into or continue any LMA at any time that the Consolidated Total Debt Ratio is greater than 5.50:1.00 without the prior written consent of Requisite Lenders." (ii) Subsection 7.7 of the Credit Agreement is hereby further amended by adding a new subsection 7.7(vi) thereto as follows: " (vi) Any Subsidiary of Company (including, without limitation, Regent of Dayton, Inc.) may be merged with or into Company or any wholly-owned Subsidiary of Company, or be liquidated, wound up or dissolved, or all or any substantial part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any wholly-owned Subsidiary of Company; provided that, in the case of such a merger, Company or such wholly-owned Subsidiary shall be the continuing or surviving corporation; and" (iii) Subsection 7.7 of the Credit Agreement is hereby further amended by adding a new subsection 7.7(vii) thereto as follows: " (vii) Company and its Subsidiaries may consummate the St. Cloud Acquisition; provided that (a) the aggregate consideration therefor (net of transactions costs and expenses) shall not exceed $12,750,000, (b) each of the conditions set forth in subsection 4.3 have been satisfied, (c) anything in this Agreement to the contrary notwithstanding, the Consolidated Total Debt Ratio shall be less than or equal to 6.75:1.00 calculated on a pro forma basis to give effect to such Permitted Acquisition and the Asset Sales required by subsection 6.13 and (d) Company and its Subsidiaries shall have entered into definitive agreements and made the appropriate filings with the FCC to sell Stations as required by subsection 6.13." G. CAPITAL EXPENDITURES. Subsection 7.8 of the Credit Agreement is hereby amended and restated in its entirety as follows: "7.8 CAPITAL EXPENDITURES. The Credit Parties shall not, and shall not permit any of their respective Subsidiaries to, make or incur Consolidated Capital Expenditures in excess of (i) $1,750,000 in the aggregate for any twelve consecutive month period ending as of the last day of any Fiscal Quarter during Fiscal Year 1999 and (ii) $1,600,000 in the aggregate during any Fiscal Year thereafter." H. OVERHEAD. Subsection 7.16 of the Credit Agreement is hereby amended and restated in its entirety as follows: "7.16 OVERHEAD. 9 10 Company shall not permit the aggregate amount of Overhead during any twelve consecutive month period ending during the periods or as of any date of determination set forth below to exceed the correlative amount indicated:
AGGREGATE PERIOD ENDING OVERHEAD ------------- -------- March 31, 1999 $1,700,000 April 1, 1999 - September 30, 1999 $1,900,000 October 1, 1999 - December 31, 1999 $2,000,000 January 1, 2000 - December 31, 2000 $2,100,000 January 1, 2001 - December 31, 2001 $2,205,000 January 1, 2002 - December 31, 2002 $2,315,250 January 1, 2003 - December 31, 2003 $2,431,000 January 1, 2004 - December 31, 2004 $2,552,550
; provided that without limiting the foregoing, at least $200,000 of the 1999 annual salary of Terry S. Jacobs and at least $50,000 of the 1999 annual salary of William Stakelin shall be deferred by Company and its Subsidiaries and shall only be payable after such time as the Consolidated Total Debt Ratio is less than or equal to 6.50:1.00 and Company delivers to Agent a Compliance Certificate, demonstrating that the Company shall be in pro forma compliance with the financial covenants set forth in subsection 7.6 after such payments are made and that no Event of Default or Potential Event of Default has occurred and is continuing or would result from such payments; provided further that for purposes of this Agreement, such deferred amounts (i) shall not be considered Indebtedness, (ii) shall apply against the aggregate Overhead limits set forth above for the period when deferred and shall not apply to such limits for the period when paid and (iii) shall be included in the calculation of Consolidated Operating Cash Flow for any applicable period when paid." I. EVENTS OF DEFAULT. Subsection 8.3 of the Credit Agreement is hereby amended by adding a reference to subsection "6.13" immediately after the reference to subsection "6.2" contained therein. J. SCHEDULES. A new Schedule 7.6D is hereby added to the Credit Agreement in the form of Schedule A annexed hereto. SECTION 2. LIMITATION OF AMENDMENTS AND CONSENT Without limiting the generality of the provisions of subsection 10.6 of the Credit Agreement, the amendments and consent set forth above shall be limited precisely as written and 10 11 relate solely to the matters expressly set forth in Sections 1 and 2 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 the Credit Agreement in any other instance or 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 existing 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. CONDITIONS TO EFFECTIVENESS This Amendment shall become effective only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the "SIXTH AMENDMENT EFFECTIVE DATE"): A. EXECUTION OF AMENDMENT. The execution of a counterpart hereof by Company, each Credit Support Party and Requisite Lenders and receipt Agent of written or telephonic notification of such execution and authorization of delivery thereof. B. AMENDMENT FEE. Agent shall have received for distribution to each Lender in accordance with its Pro Rata Share, a non-refundable amendment fee equal to $220,000. C. ISSUANCE OF EQUITY. Company shall have issued at least $5,000,000 of additional equity after January 1, 1999 on substantially the same terms and conditions as the equity issued by Company on the Closing Date, at least $915,000 of which shall have been applied to repay the Loans and reduce the Commitments in accordance with the Credit Agreement and the remaining proceeds of which shall be applied as set forth in Schedule B annexed hereto. D. LEGAL FEES. O'Melveny & Myers LLP, counsel for Agent, shall have received payment of all fees previously billed to Company. SECTION 4. REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, each Credit Party represents and warrants to each Lender that the following statements are true, correct and complete: A. CORPORATE POWER AND AUTHORITY. Each Credit Party has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions 11 12 contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT"). B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of each Credit Party. C. NO CONFLICT. The execution and delivery by each Credit Party of this Amendment and the performance by each Credit Party of the Amended Agreement (to the extent it is a party thereto) do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Certificate or Articles of Incorporation or Bylaws or of Company or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than Liens created under any of the Loan Documents in favor of Agent on behalf of Lenders or otherwise permitted pursuant to the Loan Documents), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries which has not been obtained. D. GOVERNMENTAL CONSENTS. The execution and delivery by each Credit Party of this Amendment and the performance by each Credit Party of the Amended Agreement (to the extent it is a party thereto) do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. E. BINDING OBLIGATION. This Amendment and the Amended Agreement have been duly executed and delivered by each Credit Party to the extent it is a party thereto and are the legally valid and binding obligations of each such Credit Party, enforceable against each such Credit Party in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. F. EQUITY ISSUANCE. As of the Sixth Amendment Effective Date, Company has issued the additional equity described in Section 3C of this Amendment and has applied at least $915,000 of the proceeds thereof to repay the Loans and reduce the Commitments as required by the Credit Agreement and has applied the remaining proceeds thereof as described in Schedule B annexed hereto. G. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT AGREEMENT. The representations and warranties contained in Section 5 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Amendment Effective Date to the same extent as though made on and as of that date, 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. 12 13 H. ABSENCE OF DEFAULT. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Potential Event of Default. SECTION 5. 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 amendments 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 "Guaranteed 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 "Guaranteed 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 6. RELEASE Each Credit Party, hereby knowingly, voluntarily, intentionally and irrevocably releases and discharges Agent, each Lender and each of their respective officers, directors, agents and counsel (each a "RELEASEE") from any and all actions, causes of action, suits , sums of money, controversies, variances, trespasses, damages, judgements, extents, executions, losses, liabilities, costs, expenses, debts, dues, demands, obligations or other claims of any kind whatsoever, known or unknown, in law, admiralty or equity, which such Credit Party ever had, now have or hereafter can, shall or may have against any Releasee for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to and including the date hereof. SECTION 7. 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. (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. 13 14 (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. (iv) All grammatical and technical corrections required in the Credit Agreement and the other Loan Documents in order to effect the substance of the amendments set forth herein shall be deemed made upon the effectiveness of this Amendment. 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. 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. [Remainder of page intentionally left blank] 14 15 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/ Terry S. Jacobs ------------------------- Name: Terry S. Jacobs Title: Chairman and CEO 15 16 CREDIT SUPPORT PARTIES REGENT BROADCASTING OF LEXINGTON, INC., 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 BROADCASTING OF SOUTH CAROLINA, INC., REGENT BROADCASTING MIDWEST, INC., REGENT BROADCASTING OF FLINT, INC., REGENT BROADCASTING OF MANSFIELD, INC., each a Delaware corporation By: /s/ Terry S. Jacobs ---------------------------------- Name: Terry S. Jacobs Title: Chairman and CEO of each of the forgoing REGENT BROADCASTING WEST COAST, INC., PARK LANE HIGH DESERT, INC., PARK LANE REGENCY RADIO, INC., each a California corporation By: /s/ Terry S. Jacobs ---------------------------------- Name: Terry S. Jacobs Title: Chairman and CEO of each of the forgoing 16 17 REGENT LICENSEE OF SAN DIEGO, INC., REGENT LICENSEE OF DAYTON, INC., REGENT LICENSEE OF KINGMAN, INC., REGENT LICENSEE OF VICTORVILLE, INC., REGENT LICENSEE OF LEXINGTON, INC., REGENT LICENSEE OF LAKE TAHOE, INC., REGENT LICENSEE OF PALMDALE, INC., REGENT LICENSEE OF REDDING, INC., REGENT LICENSEE OF CHICO, INC., REGENT LICENSEE OF FLAGSTAFF, INC., REGENT LICENSEE OF FLINT, INC., REGENT LICENSEE OF MANSFIELD, INC., REGENT LICENSEE OF SOUTH CAROLINA, INC., each a Delaware corporation By: /s/ Terry S. Jacobs ---------------------------------- Name: Terry S. Jacobs Title: Chairman and CEO of each of the foregoing 17 18 BANK OF MONTREAL, CHICAGO BRANCH, individually and as Agent By: /s/ Juliet Barnes ------------------------- Name: Juliet Barnes Title: Director 18 19 GENERAL ELECTRIC CAPITAL CORPORATION, individually and as Documentation Agent By: /s/ Kenneth M. Gacevich ---------------------------------- Name: Kenneth M. Gacevich Title: Duly Authorized Signatory 19 20 BANK ONE, INDIANA, NA, By: /s/ John W. Eyler ----------------------------- Name: John W. Eyler Title: Senior Vice President 20 EX-10.A 12 EXHIBIT 10(A) 1 EXHIBIT 10(a) TIME BROKERAGE AGREEMENT Time Brokerage Agreement ("Agreement") dated as of March 4, 1999, by and among REGENT BROADCASTING OF KINGMAN, INC., a Delaware corporation ("RBK"), REGENT LICENSEE OF KINGMAN, INC., a Delaware corporation ("RLK") (RBK and RLK referred to herein collectively as "Licensee"), and MAG MILE MEDIA, L.L.C., a Delaware limited liability company ("Broker"). WHEREAS, RBK and RLK are the owner and licensee, respectively, of the radio stations set forth on Attachment A hereto (referred to herein collectively as the "Stations"); and WHEREAS, RBK, RLK and Broker have entered into an Asset Purchase Agreement dated as of March 4, 1999 (the "Purchase Agreement") for the acquisition by Broker of all of the tangible and intangible assets of Licensee used or held for use in the operation of the Stations, and the licenses issued by the Federal Communications Commission for the operation of the Stations; and WHEREAS, Licensee, while maintaining control over the Stations' finances, personnel matters and programming desires to accept and broadcast programming supplied by Broker on the Stations subject to the terms and conditions set forth herein. NOW, THEREFORE, for and in consideration of the mutual covenants herein contained, the parties hereto have agreed and do agree as follows: 1. Air Time and Transmission Services. Licensee agrees, beginning on April 1, 1999 (the "Commencement Date") to make the Stations' studio and broadcast facilities available to Broker, and to broadcast, or cause to be broadcast, on the Stations, according to the terms hereof, programming designated and provided by Broker (the "Programming"). 2. Payments. Broker hereby agrees to pay Licensee the amounts specified in Attachment B for the right, from and after the Commencement Date, to broadcast the Programming on the terms and conditions herein provided. Payments of the Monthly Fee (as defined in Attachment B), are due and payable in full on the first day of each calendar month for which such payment is intended to be applied and shall be prorated for any partial calendar month at the beginning or end of the term hereof. The failure of Licensee to demand or insist upon prompt payment in accordance herewith shall not constitute a waiver of its right to do so. Broker shall receive a payment credit for any Programming not broadcast by any Station (a "Credit"), such Credit to be determined by multiplying the monthly payment by the ratio of the amount of time preempted or not accepted to the total number of hours of Programming each month. No credit shall be due on account of any Programming rejected for failure to comply with the standards for Programming set forth in this Agreement. 3. Term. The term of this Agreement shall begin on the Commencement Date and end on the earliest of (i) the Closing Date, as defined in the Purchase Agreement, or (ii) the 2 date which is ten (10) days following any termination of the Purchase Agreement in accordance with the terms thereof (such date hereinafter referred to as the "Termination Date," and such period of time as the "Term"). 4. Programming. Broker shall furnish or cause to be furnished the Programming, which shall be an entertainment format and may include, without limitation, news, promotions (including on-air giveaways), contests, syndicated programs, barter programs, paid-for programs, locally-produced programs, advertising commercial matter, including that in both program or spot announcement forms, and public service information; provided, however, that the Programming on each Station shall include news, public service announcements and other programming on issues of importance to the local community as reasonably requested by Licensee. The Programming shall be consistent with the standards set forth in Attachment D. All actions or activities of Broker under this Agreement, and all Programming provided by Broker shall be in accordance with (i) the Communications Act of 1934, as amended; (ii) Federal Communications Commission (the "FCC") rules, requirements and policies, including, without limitation, the FCC's rules on plugola/payola, lotteries, station identification, minimum operating schedule, sponsorship identification, political programming and political advertising rates; (iii) all applicable federal, state and local regulations and policies; and (iv) generally accepted industry quality standards. Broker agrees that, if in the sole, good faith judgment of the Licensee or any of the Stations' General Managers, Broker does not comply with the standards of this paragraph, Licensee may suspend or cancel any Programming not in compliance. Broker shall not be entitled to a Credit for Programming not broadcast over the Station on account of any Programming rejected for failure to comply with the standards for Programming set forth in this Section 4. The right to use the Programming and to authorize its use in any manner and in any media whatsoever shall be, and remain, vested solely in Broker, subject in all events to the rights, if any, of others in such Programming. 5. Special Events. Licensee reserves the right in its discretion, and without liability, to preempt, delay or delete any of the broadcasts of the Programming and to substitute programming which in Licensee's judgment is of greater local, regional or national importance. In all such cases, Licensee shall use its best efforts to give Broker reasonable notice of its intention to preempt such Programming, and, in the event of such preemption, Broker shall receive a payment credit for the Programming so omitted consistent with the intent and pursuant to the terms of Section 2 hereof. 6. Advertising and Programming Revenues. Broker shall retain all advertising and other revenues, and all accounts receivable, with respect to Programming broadcast during the Term, and relating to the Programming it delivers to the Stations for broadcast during the Term, including without limitation, promotion-related revenues. Licensee and Broker each shall have the right, at their own expense, to seek copyright royalty payments for their own programming. Broker may sell advertising on the Stations in combination with the sale of 3 advertising on other broadcasting stations of its choosing, subject to compliance with applicable law. 7. Station Facilities. Subject to the qualifications set forth in this Agreement, throughout the term of this Agreement, Licensee shall make the facilities and equipment of the Stations in good operating condition and repair available to Broker for operation and broadcast with the maximum authorized facilities twenty-four (24) hours a day, seven (7) days a week, except for downtime occasioned by either (i) emergency maintenance or (ii) routine maintenance not to exceed two (2) hours each Sunday morning between the hours of 12 midnight and 5:00 a.m., and except for such programs and announcements prepared by and put on the air by Licensee in order to meet local needs and issues requirements, said programs and announcements not to exceed one (1) hour each Sunday morning at a mutually agreed upon time between the hours of 5:00 a.m. and 7:00 a.m. Broker shall not be entitled to a Credit for Programming not broadcast over the Stations for periods specified in this Section 7 hereof. To the extent practicable, any maintenance work affecting the operation of the Stations at full power shall be scheduled upon at least forty-eight (48) hours prior notice with the agreement of Broker, such agreement not to be unreasonably withheld. 8. Right of Access. Broker and Broker's employees or agents shall at all times be afforded reasonable access to the Stations in order to perform their duties in connection with the production and transmission of the Programming over the facilities of the Stations. Broker shall have the right to install at Licensee's and/or Broker's premises, and to maintain throughout the term of this Agreement, at Broker's expense, any microwave studio/transmitter relay equipment, telephone lines, transmitter remote control, monitoring devices or any other equipment necessary for the proper transmission of the Programming on the Stations, and Licensee and Broker shall take all steps reasonably necessary to prepare and file any applications with the FCC to effectuate such proper transmission. 9. Force Majeure. Any failure or impairment of facilities or any delay or interruption in broadcasting the Programming, or failure at any time to furnish facilities, in whole or in part, for broadcasting, due to acts of God, strikes, or threats thereof, force majeure, or due to causes beyond the control of Licensee, shall not constitute a breach of this Agreement, and Licensee shall not be liable to Broker for any damages or adjustments for such failure, impairment, delay or interruption, except to the extent of allowing in each such case an appropriate payment credit for Programming available to Licensee but not carried consistent with the intent and pursuant to the terms of Section 2 hereof. 10. Licensee Control of Stations. Notwithstanding anything to the contrary in this Agreement, Licensee shall have full authority, control and power over the operation of the Stations during the period of this Agreement. Licensee shall retain control, said control to be reasonably exercised, over the policies, programming and operations of the Stations, including, without limitation, the right to decide whether to accept or reject any Programming or advertisements, the right to preempt any Programming in order to broadcast a program deemed 4 by Licensee to be of greater national, regional, or local interest, and the right to take any other actions necessary for compliance with the laws of the United States; the laws of the relevant states; the rules, regulations, and policies of the FCC (including without limitation the prohibition on unauthorized transfers of control); and the rules, regulations and policies of other federal governmental authorities, including without limitation the Federal Trade Commission and the Department of Justice. Licensee shall be responsible for ensuring that FCC requirements are met with respect to ascertainment of the problems, needs and interests of the community, public service programming, main studio staffing, maintenance of public inspection files and the preparation of quarterly issues/programs lists. Broker shall, upon request by Licensee, provide Licensee with information with respect to such of Broker's programs which are responsive to the problems, needs and interests of the community, so as to assist Licensee in the preparation of required quarterly issues/programs lists, and shall provide upon request other information to enable Licensee to prepare other records, reports and logs required by the FCC or other local, state or federal governmental agencies. Whenever on the Stations' premises, all Broker personnel shall be subject to the supervision and the direction of Licensee's designated personnel. 11. Responsibility for Employees and Expenses. Licensee shall employ two full time employees at each main studio of the Stations, one of whom shall be a manager, both of whom shall report to and be accountable to Licensee, and who shall be ultimately responsible for the day-to-day operation of the Stations. Licensee shall be directly responsible for paying the salaries, taxes, insurance and related costs for such employees (the "Licensee Employee Expenses"). Licensee shall be responsible for paying directly (i) transmitter site rent/mortgage for the Stations; (ii) costs for maintenance and repair of the transmission and other technical equipment; (iii) costs for capital improvements and replacements; and (iv) transmitter site utilities for the Stations ("Licensee Transmitter Expenses"). Licensee shall be responsible for paying directly all income taxes relating to Licensee's earnings from this arrangement. Broker shall employ and be responsible for the salaries, taxes, insurance and related costs in accordance with Brokers employment practices for all personnel used by it, excluding Licensee's two full time employees, in the production of the Programming (including, without limitation, salespeople, traffic personnel, administrative and programming staff) for Broker's use of the studio and for routine maintenance and repair thereto (as opposed to maintenance and repair of the transmission and other technical equipment and capital improvements and replacements which shall be Licensee's responsibility). Excluding those expenses for which Licensee is making payments as set forth in this Section 11, during the Term, Broker shall be responsible for paying all other expenses reasonably and directly related to the continued operation of the Stations subject to the covenants of the parties to this Agreement (the "Other Expenses"), and further subject to the ultimate authority, control and power of Licensee. 11.1 Employee Matters. 5 11.1.1 Licensee shall be responsible for the payment of all compensation and accrued employee benefits payable to all Licensee employees through the Commencement Date. 11.1.2 Licensee acknowledges and agrees that Licensee, and not Broker, is and shall be solely responsible for any and all insurance, supplemental pension, deferred compensation, retirement and any other benefits, and related costs, premiums and claims due, to become due, committed or otherwise promised to any person who, up to the Commencement Date who is a retiree, former employee, or current employee of Licensee, relating to the period up to the Commencement Date. Broker shall assume no employee benefit plans, programs or practices, whether or not set forth in writing, maintained by Licensee at any time. Broker shall have no obligation to any employee of Licensee employed by Broker beyond the term of this Agreement, and shall not be responsible for any other costs or expenses relating to the compensation of any employee not hired or employed prior to the Term of this Agreement. Each employee of Licensee employed by Broker shall be an employee at will and shall be entitled to compensation and benefits, as offered, only up to and including said employees term of employment with Broker. 12. Station Agreements. 12.1 Assignment and Assumption of Station Agreements. On the Commencement Date, Licensee shall assign to Broker and Broker shall assume, subject to the provisions of this Section 12, the obligations of Licensee arising or to be performed on and after the Commencement Date (except to the extent such obligations represent liabilities for activities, events or transactions occurring, or conditions existing, on or prior to the Commencement Date) under (a) all of the contracts which comprise Broadcast Assets (as defined in the Purchase Agreement), excluding (i) contracts and agreements relating to the Licensee Employee Expenses, (ii) contracts and agreements relating to the Licensee Transmitter Expenses, (iii) Licensee's financing agreements and (iv) corporate level contracts and agreements, except, if any, those listed on Attachment C (collectively, the contracts and agreements to be assigned by Licensee and assumed by Broker are referred to as the "Station Agreements"). Licensee hereby makes and incorporates by reference the representations and warranties of Sellers in Section 14(e) of the Purchase Agreement. Licensee represents and warrants that the Station Agreements are freely assignable, or, if consent of the other contracting party to the assignment is required, Licensee will use its reasonable best efforts to obtain such consent as promptly as practicable. As of the Commencement Date, Licensee shall have paid all amounts due on and shall have performed all obligations due under the Station Agreements as of that date. 12.2 Consents to Assignment. To the extent that any Station Agreement is not capable of being assigned, transferred, delivered or subleased without the waiver or consent of any third person (including a government or governmental unit), or if such assignment, transfer, delivery or sublease or attempted assignment, transfer, delivery or sublease would 6 constitute a breach thereof or a violation of any law or regulation, this Agreement and any assignment executed pursuant thereto shall not constitute an assignment, transfer, delivery or sublease or an attempted assignment, transfer, delivery or sublease thereof. In those cases where consents, assignments, releases and/or waivers have not been obtained at or prior to the Commencement Date to the transfer and assignment to Broker of any Station Agreement, this Agreement and any assignment executed pursuant hereto, to the extent permitted by law, shall constitute an equitable assignment by Licensee to Broker of all of Licensee's rights, benefits, title and interest in and to the Station Agreements, and where necessary or appropriate, Broker shall be deemed to be Licensee's agent for the purpose of completion, fulfilling and discharging all of Licensee's rights and liabilities arising after the Commencement Date under such Station Agreements up to and including the date of termination of this Agreement. Licensee shall use its reasonable best efforts to provide Broker with the financial and business benefits of such Station Agreements (including, without limitation, permitting Broker to enforce any rights of Licensee arising under such Station Agreements), and Broker shall, to the extent Broker is provided with the benefits of such Station Agreements, assume, perform and in due course pay and discharge all debts, obligations and liabilities of Licensee under such Station Agreements to the extent that Broker was to assume those obligations pursuant to the terms hereof up to and including the date of termination of this Agreement. 12.3 Retained Liabilities. Except as set forth in Sections 11 and 12 hereof, Broker expressly does not, and shall not, assume or agree to pay, satisfy, discharge or perform and will not be deemed by virtue of the execution and delivery of this Agreement or any agreement, instrument or document delivered pursuant to or in connection with this Agreement or otherwise by reason of or in connection with the consummation of the transactions contemplated hereby or thereby, to have assumed or to have agreed to pay, satisfy, discharge or perform, any liabilities, obligations or commitments of Licensee of any nature whatsoever whether accrued, absolute, contingent or otherwise and whether or not disclosed by Broker, other than the Station Agreements. Licensee will retain and pay, satisfy, discharge and perform in accordance with the terms thereof, all liabilities and obligations of the Licensee, other than the Station Agreements, including but not limited to, the obligation to assume, perform, satisfy or pay any liability, obligation, agreement, debt, charge, claim, judgment or expense incurred by or asserted against Licensee related to taxes, environmental matters, pension or retirement plans or trusts, profit-sharing plans, employment contracts, employee benefits, severance of employees, product liability or warranty, negligence, contract breach or default, copyright, trademarks, service mark, trade name and other intellectual property, or other obligations, claims or judgments asserted against Broker as successor in interest to Licensee. All such liabilities, obligations and commitments of Licensee described in this Section 12.3 shall be referred to herein collectively as the "Retained Liabilities." 13. Accounts Receivable. Broker acknowledges that all accounts receivable arising prior to the Commencement Date in connection with the operation of the Stations, including but not limited to accounts receivable for advertising revenues for programs and announcements performed prior to the Commencement Date and other broadcast revenues for 7 services performed prior to the Commencement Date, shall remain the property of Licensee (the "Licensee Accounts Receivable") and that Broker shall not acquire any beneficial right or interest therein or responsibility therefor. During the term of this Agreement ("Collection Period"), Broker agrees to use reasonable efforts to assist Licensee in collection of the Licensee Accounts Receivable in the normal and ordinary course of business without remuneration and will apply all such amounts collected to the debtor's oldest account receivable first, except that any such accounts collected by Broker from persons who are also indebted to Broker may be applied to Broker's account under circumstances in which there is a bona fide dispute between Licensee and such account debtor with respect to such account provided that such disputed accounts are reassigned to Licensee. Broker's obligation and authority shall not extend to the institution of litigation, employment of counsel or a collection agency or any other extraordinary means of collection. Broker agrees to reasonably cooperate with Licensee, at Licensee's expense, as to any litigation or other collection efforts instituted by Licensee to collect any delinquent Licensee Accounts Receivable. During the Collection Period, neither Licensee nor its agents shall make any direct solicitation of any account debtor for collection purposes or institute litigation for the collection of amounts due except with respect to any accounts that may be reassigned to Licensee. Any amounts relating to the Licensee Accounts Receivable that are paid directly to the Licensee shall be retained by the Licensee, but Licensee shall provide Broker with prompt notice of any such payment.. Amounts collected by Broker on account of Licensee Accounts Receivable shall be remitted in full to RBK on a monthly basis, by the fifteenth (15th) day of the month following the month for which remittance is due, provided that Broker may deduct from such amounts and be responsible for paying commissions due on the collected Licensee Accounts Receivable in accordance with Attachment G hereto. 14. Proration of Income and Expenses: Trade Agreements Adjustment. 14.1 Except as otherwise provided herein, all deposits, reserves and prepaid and deferred income and expenses relating to the Station Agreements shall be prorated between Broker and Licensee in accordance with general accepted accounting principles as of 11:59 p.m., Pacific time, on the date immediately preceding the Commencement Date. 14.2 Schedule 14.2 will include a list of all Trade Agreements as of the Commencement Date included in the Station Agreements and the aggregate value of time owed ("Barter Payable") pursuant to each of the Trade Agreements and the aggregate value of goods and services to be received ("Barter Receivable") pursuant to each of the Trade Agreements, in each case as of the date specified on Schedule 14.2 hereof. On the Commencement Date, Licensee shall deliver to Broker a report, dated as of the Commencement Date (the "Commencement Date Trade Report"), which report lists all Trade Agreements included in the Station Agreements and the contract end date for each Trade Agreement together with a true and correct itemized statement of the aggregate value of the Barter Payable and Barter Receivable pursuant to each of the Trade Agreements. To the extent that the aggregate net value as reflected on the Commencement Date Trade Report of the Stations' Barter Payable 8 exceeds the aggregate net value as reflected on the Commencement Date Trade Report of the Barter Receivable by more than $15,000.00, Broker shall be entitled to receive the amount of such excess over $15,000.00 as a credit against the Purchase Price in accordance with the terms of the Purchase Agreement. In the event that the acquisition of the Station ("Barter Amount") by Broker from Licensee pursuant to the Purchase Agreement is not consummated for any reason other than a default by it, Broker shall be entitled to receive cash for any barter liability below the Barter Amount as of the date hereof and Licensee shall be entitled to receive cash for any barter liability over the Barter Amount, as of the date hereof. 14.3 Except as otherwise provided herein, the prorations and adjustments contemplated by this Section 14, to the extent practicable, shall be made on the Commencement Date. As to those prorations and adjustments not capable of being ascertained on the Commencement Date, an adjustment and proration shall be made within ninety (90) calendar days after the Commencement Date. 14.4 In the event of any disputes between the parties as to such adjustments, the amounts not in dispute shall nonetheless be paid at the time provided in Section 14.3 hereof and such disputes shall be determined by an independent certified public accountant mutually acceptable to the parties, and the fees and expenses of such accountant shall be paid one-half by Licensee and one-half by Broker. 15. Indemnification. 15.1 Indemnification. Broker shall indemnify and hold Licensee and its stockholders, directors, partners, officers, agents, employees, successors, and assigns harmless from and against any and all claims, expenses, causes of action and liability resulting from or relating to (i) the broadcast of Programming during the Term, (ii) any and all promotions, contests and on-air "giveaways" by Broker relating to the Stations during the Term, (iii) a breach of Broker's representations, warranties, covenants or agreements contained herein, (iv) any liability resulting from Broker's default under the Station Agreements, and (v) all other matters arising out of or related to Broker's activities involving the Stations or use of the Licensee Station facilities or relating to the obligations assumed by Broker in connection with this Agreement including but not limited to any damage caused to Station equipment by Broker, its employees, or agents. Licensee agrees to indemnify, defend, and hold harmless Broker and its members, managers, officers, agents, employees, successors and assigns from and against any and all liability that arises out of (i) material broadcast by Licensee other than the Programming, programming the Licensee directs to be broadcast or programming that Licensee refuses to broadcast, (ii) liabilities (but not loss of advertising revenue) that arise as a result of Licensee's alteration of any and/or all Programming prior to broadcast by Licensee; and (iii) the Retained Liabilities. 15.2 Procedures: Third Party and Direct Indemnification Claims. The indemnified party agrees to give written notice within a reasonable time to the indemnifying 9 party of any demand, suit, claim or assertion of liability by third parties or other circumstances that could give rise to an indemnification obligation hereunder against the indemnifying party (hereinafter collectively "Claims," and individually a "Claim"), it being understood that the failure to give such notice shall not affect the indemnified party's right to indemnification and the indemnifying party's obligation to indemnify as set forth in this Agreement, unless the indemnifying party's ability to contest, defend or settle with respect to such Claim is thereby demonstrably and materially prejudiced. The obligations and liabilities of the parties hereto with respect to their respective indemnities pursuant to Section 15.1 resulting from any Claim shall be subject to the following additional terms and conditions: The indemnifying party shall have the right to undertake, by counsel or other representatives of its own choosing, the defense or opposition to such Claim. 15.2.1 In the event that the indemnifying party shall elect not to undertake such defense or opposition, or within ten days after notice of any such Claim from the indemnified party shall fail to defend or oppose, the indemnified party (upon further written notice to the indemnifying party) shall have the right to undertake the defense, opposition, compromise or settlement of such Claim, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the indemnifying party (subject to the right of the indemnifying party to assume defense of or opposition to such Claim at any time prior to a binding settlement, compromise or final determination thereof). 15.2.2 Anything in this Section 15.2 to the contrary notwithstanding: (a) the indemnified party shall have the right, at its own cost and expense, to participate in the defense, opposition, compromise or settlement of the Claim; (b) the indemnifying party shall not, without the indemnified party's written consent, settle or compromise any Claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such Claim; and (c) in the event that the indemnifying party undertakes defense of or opposition to any Claim, the indemnified party, by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with the indemnifying party and its counsel or other representatives concerning such Claim and the indemnifying party and the indemnified party and their respective counsel or other representatives shall cooperate in good faith with respect to such Claim. 15.2.3 No undertaking of defense or opposition to a Claim shall be construed as an acknowledgment by such party that it is liable to the party claiming indemnification with respect to the Claim at issue or other similar Claims. 16. Events of Default: Cure Periods and Remedies. 10 16.1 Events of Default. The following shall, after the expiration of the applicable cure periods, constitute Events of Default under the Agreement: 16.1.1 Non-Payment. Broker's failure to timely pay the consideration provided for in Section 2 and Attachment B hereof which is not cured within five (5) business days following notice in accordance with Section 16.2 hereof; 16.1.2 Default in Covenants or Adverse Legal Action. The default by any party hereto in the material observance or performance of any material covenant, condition or agreement contained herein which is not cured within five (5) business days following notice in accordance with Section 16.2 hereof, or if (a) any party shall make a general assignment for the benefit of creditors, (b) any party shall file or have filed against it a petition for bankruptcy, for reorganization or an arrangement, or for the appointment of a receiver, trustee or similar creditors' representative for the property or assets of such party under any federal or state insolvency law, which, if filed against such party, has not been dismissed or discharged within sixty (60) days thereof, or (c) specifically and without limitation, if Licensee's successors and assigns, including, without limitation, any assignee of the FCC license for the Stations, except if such successor or assign is Broker or an affiliate of Broker, refuses to abide by or terminates this Agreement during the term of this Agreement. 16.1.3 Breach of Representation. If any material representation or warranty herein made by either party hereto, or in any certificate or document furnished by either party to the other pursuant to the provisions hereof, shall prove to have been false in any material respect as of the time made or furnished and is not cured within thirty (30) days following notice in accordance with Section 16.2 hereof. 16.1.4 Breach of Purchase Agreement. The breach by any party or their affiliates in the observance or performance of any representation, warranty, covenant, condition or agreement in the Purchase Agreement which is not cured within any time period provided for such cure under the Purchase Agreement and which breach gives rise to a right to a party to terminate the Purchase Agreement pursuant to Section 28 of the Purchase Agreement, provided that no party may use its or its Affiliate's own breach under the Purchase Agreement as grounds to terminate this Agreement. 16.2 Cure Periods. An Event of Default shall not be deemed to have occurred until after the nondefaulting party has provided the defaulting party with written notice specifying the event or events that if not cured would constitute an Event of Default and specifying the actions necessary to cure within the relevant cure period. The Event of Default shall not be deemed to have occurred if actions necessary to cure are completed during the relevant cure period. 16.3 Termination Upon Default. Upon the occurrence of an Event of Default, the non-defaulting party may terminate this Agreement provided that it is not also in material default hereunder, and may seek such remedies at law and/or equity as are available, including 11 without limitation specific performance. If Broker has defaulted in the performance of its obligations, Licensee shall be under no further obligation to make available to Broker any further broadcast time or broadcast transmission facilities and, without limitation of remedies, all amounts accrued or payable to Licensee up to the date of termination which have not been paid, less any payment credits, shall immediately become due and payable. 16.4 Liabilities Upon Termination. Upon termination of this Agreement, Broker shall be responsible for all liabilities, debts and obligations of Broker accrued from the purchase of air time and transmission services including, without limitation, accounts payable, barter agreements and unaired advertisements, but not for Licensee's federal, state, and local tax liabilities associated with Broker's payments to Licensee as provided for herein. With respect to Broker's obligations to broadcast material over the Stations after termination hereunder, Broker may propose compensation to Licensee for meeting these obligations, but Licensee shall be under no duty to accept such compensation or to perform such obligations. Upon termination, Broker shall return to Licensee any equipment or property of the Stations used by Broker except for such equipment purchased by Broker, its employees or agents, in substantially the same condition and location as such equipment existed on the date of this Agreement, ordinary wear and tear excepted, and Broker shall assign to Licensee the still outstanding Station Agreements that were assigned to Broker pursuant to Section 12 hereof and any new contracts entered into by Broker relating to the Stations that Licensee expressly agrees to assume. Notwithstanding anything in the foregoing to the contrary, termination shall not extinguish any rights of either party as may be provided by Section 15 hereof. 17. Broker Termination Option. Broker may elect to terminate this Agreement at any time during the term hereof in the event that Licensee preempts or substitutes other programming for that supplied by the Broker during ten percent (10%) or more of the total hours of operation of the Stations during any calendar month. In the event Broker elects to terminate this Agreement pursuant to this provision, it shall give Licensee notice of such election at least ten (10) days prior to the termination date. Upon termination, neither party shall have any further liability to the other except as may be provided by Sections 15 and 16.4 hereof. 18. Responsive Programming. Broker and Licensee mutually acknowledge their interest in ensuring that the Stations serve the needs and interests of the residents of the Stations' community of license and service areas and agree to cooperate in doing so. Licensee shall, on a regular basis, assess the issues of concern to residents of the Stations' community of license and service areas and address those issues in its public service programming. Licensee shall describe those issues and responsive programming and place issues/programs lists in the Stations' public inspection file as required by FCC rules. The Programming shall include material that is responsive to the issues identified by Licensee. Licensee may request, and Broker shall provide, information concerning such of Broker's Programming that is responsive to community issues so as to assist Licensee in the satisfaction of its public service programming obligations. Broker shall also provide to Licensee upon request such other 12 information necessary to enable Licensee to prepare records and reports required by the FCC or other local, state or federal government entities. 19. Time Brokerage Challenge. If this Agreement is challenged in whole or in part at or by a governmental authority or is challenged in whole or in part in a judicial forum, counsel for the Licensee and counsel for the Broker shall jointly defend this Agreement and the parties' performance thereunder throughout all such proceedings. If this Agreement is declared invalid or illegal in whole or in substantial part by a ruling, order or decree of a governmental authority or court, and such ruling, order or decree has become effective, then the parties shall endeavor in good faith to reform the Agreement as necessary. If the parties are unable to reform this Agreement within thirty (30) days of the effective date of such ruling, order or decree, then this Agreement shall terminate, and all sums owing to Licensee shall be paid and neither party shall have any further liability to the other except as may be provided by Section 15 hereof. 20. Additional Representations, Warranties and Covenants. 20.1 Mutual Representations, Warranties and Covenants. Both Licensee and Broker represent that they are legally qualified, empowered, and able to enter into this Agreement, and that the execution, delivery and performance hereof shall not constitute a breach or violation of any agreement, contract or other obligation to which either party is subject or by which it is bound. 20.2 Additional Licensee Representations, Warranties and Covenants. Licensee makes the following further representations, warranties and covenants: 20.2.1 Authorizations. During the term of this Agreement, Licensee shall own and hold all licenses and other permits and authorizations necessary for the operation of the Stations as presently conducted (including licenses, permits and authorizations issued by the FCC), and such licenses, permits and authorizations shall be in full force and effect for the entire Term hereunder, unimpaired by any acts or omissions of Licensee, its principals, employees or agents. Licensee hereby makes and incorporates by reference the representations, warranties and covenants of Sellers set forth in the Purchase Agreement that pertain to Licensee, its assets or its operation of the Stations. 20.2.2 Payment of Obligations. Licensee shall not incur any debt, obligation or liability without the prior written consent of Broker if such undertaking would adversely affect Licensee's performance hereunder or the business and operations of the Broker permitted hereby. Subject to the provisions of Sections 2 and 11 hereof, Licensee shall pay in a timely fashion all of its debts, assessments and obligations, including without limitation tax liabilities and payments in each case attributable to the operations of the Stations, as they come due during the Term of this Agreement. 13 20.2.3 Broadcast Obligations. Licensee has no agreement, contract, commitment or understanding to broadcast on the Stations on or after the Commencement Date, any programs or commercial matter other than the Station Agreements. Licensee shall not incur any other programming obligations without the prior written consent of Broker except in connection with programming obligations incurred by Licensee for programming that replaces Programming that does not meet the standards set forth in this Agreement. 20.2.4 Licensee Control. Licensee hereby verifies that for the term of this Agreement it shall maintain ultimate control over the Stations' facilities, including specifically control over the Stations' finances, personnel and programming, and nothing herein shall be interpreted as depriving Licensee of the power or right of such ultimate control. 20.2.5 Insurance. Licensee shall maintain in full force and effect (at Broker's expense) throughout the term of this Agreement insurance with responsible and reputable insurance companies or associations covering such risks (including fire and other risks insured against by extended coverage, public liability insurance, insurance for claims against personal injury or death or property damage and such other insurance as may be applicable) and in such amounts and on such terms as is conventionally carried by broadcasters operating radio stations with facilities in the area comparable to those of the Stations. Broker shall be listed as an additional insured on such insurance policies. Any insurance proceeds received by Licensee in respect of damaged property shall be used to repair or replace such property so that the operations of the Stations conform with this Agreement. Licensee shall present to Broker prior to the execution of this Agreement certificates of insurance or binders for such insurance policies. If requested by Broker, Licensee shall maintain, at Broker's expense, business interruption insurance for Broker's benefit. 20.2.6 Compliance with Law. Licensee covenants that, throughout the term of this Agreement, Licensee shall comply with all laws and regulations applicable in the conduct of Licensee's business and Licensee acknowledges that Broker has not urged, counseled, or advised the use of any unfair business practice. 20.3 Additional Broker Representations, Warranties and Covenants. 20.3.1 Compliance with 47 C.F.R. Section 73.3555(a). Broker hereby verifies that execution and performance of this Agreement complies with the Commission's restrictions on local radio ownership set out in Section 73.3555(a) of the FCC Rules. 20.3.2 Compliance with Applicable Law. Broker covenants that its performance of its obligations under this Agreement and its furnishing of Programming shall be in compliance with, and shall not violate, any applicable laws or any applicable rules, regulations, or orders of the FCC or any other governmental agency and Broker acknowledges that Licensee has not urged, counseled, or advised the use of any unfair business practice. 14 20.3.3 Handling of Complaints. Broker shall promptly advise Licensee of any public or FCC complaint or inquiry that Broker receives concerning the Programming on the Stations and shall cooperate with Licensee and take all actions as may be reasonably requested by Licensee in responding to any such complaint or inquiry. 20.3.4 Copyright and Licensing. Broker represents and warrants to Licensee that Broker has and shall have throughout the term of this Agreement the full authority to broadcast the Programming on the Stations and that Broker shall not broadcast on the Stations any material in violation of the Copyright Act. All music supplied by Broker shall be: (i) licensed by ASCAP, SESAC or BMI; (ii) in the public domain; or (iii) cleared at the source by Broker. 20.3.5 Information For FCC Reports. Upon request by Licensee, Broker shall provide in a timely manner any such information in its possession which shall enable Licensee to prepare, file or maintain the records and reports required by the FCC. 20.3.6 Payola/Plugola. Broker covenants that it shall not accept, and shall instruct its employees not to accept, any consideration, compensation, gift or gratuity of any kind whatsoever, regardless of its value or form, including, but not limited to, a commission, discount, bonus, materials, supplies or other merchandise, services or labor, whether or not pursuant to written contracts or agreements between Broker and merchants or advertisers, unless the payer is identified in the program as having paid for or furnished such consideration, in accordance with FCC requirements. Broker agrees to annually, or more frequently at the request of Licensee, execute and provide Licensee with an affidavit regarding payola/plugola compliance. 21. Intellectual Property. Effective as of the Commencement Date, Licensee licenses to Broker the exclusive right to use all intellectual property owned by or licensed to Licensee and used solely in the operation of the Stations (including, but not limited to, logos, jingles, promotional materials, call signs, goodwill, trademarks, service marks, slogans, trade names, copyrights and any applications and registrations therefor) (the "IP License"). In the event of termination of this Agreement, the IP License shall terminate. 22. Subcarrier Rights. Licensee and Broker acknowledge and agree that any subsidiary communications services transmitted on a subcarrier within the FM baseband signal of any of the Stations ("Subcarrier"), and any uses of the Subcarrier authorized by the FCC ("Subcarrier Uses"), are subject to the terms and conditions of this Agreement. Licensee hereby agrees (a) to apply, at Broker's expense, for any additional authorization from the FCC or any other governmental agency or entity that may be necessary in order to make use of any Subcarrier Uses, and (b) that Broker has the sole and exclusive right, subject to the terms and conditions hereof, to make use of any Subcarrier Uses and collect the revenues therefrom. Broker hereby agrees to reimburse Licensee for Licensee's reasonable expenses incurred in 15 carrying out Licensee's obligations pursuant to this Section 22, including reasonable attorneys and engineering fees and expenses. 23. Publicity. Licensee and Broker shall not issue any press release or otherwise make any public statement with respect to the transactions contemplated herein except as may be required by law or regulation or as agreed to by Licensee and Broker. 24. No Waiver; Remedies Cumulative. No failure or delay on the part of Licensee or Broker in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensee and Broker herein provided are cumulative and are not exclusive of any right or remedies which it may otherwise have. 25. Construction. This Agreement shall be construed in accordance with the laws of the State of Arizona, without giving effect to the choice of law provisions thereunder, and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations now or hereafter in force and to the regulations of the FCC and all other governmental bodies or authorities presently or hereafter to be constituted. 26. Headings. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. 27. Parties in Interest; Assignment. All covenants and agreements contained in this Agreement by or on behalf of any of the parties to this Agreement shall bind and inure to the benefit of their respective successors and assigns, whether so expressed or not. No party to this Agreement may assign its rights or delegate its obligations under this Agreement to any other person or entity without the express prior written consent of the other parties, which consent shall not be unreasonably withheld. 28. Notices. All notices, demands, requests, or other communications which may be or are required to be given or made by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, mailed by first-class registered or certified mail, return receipt requested, postage prepaid, delivered by overnight air courier, or transmitted by telegram, telex, or facsimile transmission addressed in accordance with the listing set forth in Attachment E hereto or such other address as the addressee may indicate by written notice to the other parties. Each notice, demand, request, or communication which shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the affidavit of messenger or (with respect to a telex or facsimile) the answerback being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 16 29. Entire Agreement. This Agreement and the Purchase Agreement and related documents embody the entire agreement between the parties and there are no other agreements, representations, warranties, or understandings, oral or written, between them with respect to the subject matter hereof. No alterations, modification or change of this Agreement shall be valid unless made in writing, and signed by like written instrument. No waiver of any provision hereof shall be valid unless in writing and signed by the party adversely affected by the waiver, and then such waiver shall be effective only in the specified instance and for the purpose for which given. 30. Severability. In the event that any of the provisions contained in this Agreement is held to be invalid, illegal or unenforceable such event shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been contained herein. 31. Counterpart Signatures. This Agreement may be signed in one or more counterparts, each of which shall be deemed a duplicate original, binding on the parties hereto notwithstanding that the parties are not signatory to the original or the same counterpart. This Agreement shall be binding and effective as of the date on which the executed counterparts are exchanged by the parties. 17 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. REGENT BROADCASTING OF KINGMAN, INC. By:_____________________________ Name:___________________________ Title:__________________________ REGENT LICENSEE OF KINGMAN, INC. By: /s/_________________________ Name: /s/_______________________ Title: /s/______________________ MAG MILE MEDIA, L.L.C. By: /s/_________________________ Name: /s/_______________________ Title: /s/______________________ EX-14.A.1 13 EXHIBIT 14(A)1 1 EXHIBIT 14(a)1. Financial Statements: Consolidated Statements of Operations for the three years ended December 31, 1998, 1997 and 1996 Consolidated Balance Sheet for the years ended December 31, 1998 and 1997 Consolidated Statements of Cash Flows for the three years ended December 31, 1998, 1997 and 1996 Statement of Changes in Shareholders' Deficit Notes to Consolidated Financial Statements EX-21 14 EXHIBIT 21 1 Exhibit 21 SUBSIDIARIES OF REGENT COMMUNICATIONS, INC.
Name of Subsidiary State of Incorporation ------------------ ---------------------- Regent Broadcasting Midwest, Inc. Delaware Regent Broadcasting West Coast, Inc. California Regent Broadcasting of Chico, Inc. Delaware Regent Broadcasting of Flagstaff, Inc. Delaware Regent Broadcasting of Flint, Inc. Delaware Regent Broadcasting of Kingman, Inc. Delaware Regent Broadcasting of Lake Tahoe, Inc. Delaware Regent Broadcasting of Lexington, Inc. Delaware Regent Broadcasting of Mansfield, Inc. Delaware Regent Broadcasting of Palmdale, Inc. Delaware Regent Broadcasting of Redding, Inc. Delaware Regent Broadcasting of San Diego, Inc. Delaware Regent Broadcasting of South Carolina, Inc. Delaware Regent Broadcasting of St. Cloud, Inc. Delaware Regent Broadcasting of Victorville, Inc. Delaware Regent Licensee of Chico, Inc. Delaware Regent Licensee of Flagstaff, Inc. Delaware Regent Licensee of Flint, Inc. Delaware Regent Licensee of Kingman, Inc. Delaware Regent Licensee of Lake Tahoe, Inc. Delaware Regent Licensee of Lexington, Inc. Delaware Regent Licensee of Mansfield, Inc. Delaware Regent Licensee of Palmdale, Inc. Delaware Regent Licensee of Redding, Inc. Delaware Regent Licensee of San Diego, Inc. Delaware Regent Licensee of South Carolina, Inc Delaware Regent Licensee of St. Cloud, Inc. Delaware Regent Licensee of Victorville, Inc. Delaware
EX-27.1 15 EXHIBIT 27.1
5 US DOLLARS YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 1 478,545 0 3,707,372 268,000 0 11,618,745 15,489,554 6,185,579 67,617,870 13,027,306 34,617,500 26,876,058 3,824,030 2,400 (13,373,003) 67,617,870 16,046,968 14,771,523 0 15,204,844 (26,648) 0 2,883,251 (3,289,924) 0 (3,289,924) 0 (1,170,080) 0 (4,460,004) (47.55) (47.55)
EX-27.2 16 EXHIBIT 27.2
5 US DOLLARS 9-MOS DEC-31-1998 JAN-01-1998 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 35,048,750 24,358,753 3,857,891 2,400 (11,527,496) 66,577,504 10,339,931 9,484,301 0 9,553,790 (6,738) 0 2,029,378 (2,092,129) 0 (2,092,129) 0 (1,170,080) 0 (3,262,209) (38.38) (38.38)
EX-27.3 17 EXHIBIT 27.3
5 US DOLLARS 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1 769,796 0 3,532,806 171,000 0 12,372,659 14,452,095 5,617,079 66,831,177 11,570,204 35,065,000 23,868,956 3,837,891 2,400 (10,193,857) 66,831,177 4,479,282 4,063,203 0 4,245,655 (20,773) 0 1,086,608 (1,248,287) 0 (1,248,287) 0 (1,170,080) 0 (2,418,367) (31.30) (31.30)
EX-27.4 18 EXHIBIT 27.4
5 US DOLLARS 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 524,181 0 1,118,206 32,000 0 1,669,435 7,786,383 5,487,232 13,885,559 1,110,404 22,886,652 0 0 2,400 (10,725,816) 13,885,559 0 1,613,205 0 596,406 0 0 503,770 (529,628) 12,000 (541,628) 0 0 0 (541,628) (3.42) (3.42)
EX-27.5 19 EXHIBIT 27.5
5 US DOLLARS YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 1 535,312 0 1,390,002 32,000 0 1,919,232 7,564,705 5,408,461 13,010,554 859,631 21,911,661 0 0 2,400 (10,184,188) 13,010,554 0 6,696,564 0 2,293,804 0 34,000 1,330,676 (290,995) 71,542 (362,537) 0 (4,333,310) 0 (4,695,847) (19.57) (19.57)
EX-27.6 20 EXHIBIT 27.6
5 US DOLLARS 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 1 495,530 0 1,258,116 20,000 0 1,820,451 9,629,531 5,400,590 13,081,696 809,203 22,036,662 0 0 2,400 (10,018,058) 13,081,696 0 4,559,193 0 1,553,698 0 0 836,404 (146,845) 49,542 (196,407) 0 (4,333,310) 0 (4,529,717) (18.87) (18.87)
EX-27.7 21 EXHIBIT 27.7
5 US DOLLARS 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 461,792 0 953,666 20,000 0 1,467,294 9,434,671 5,256,000 12,871,187 384,140 22,293,783 0 0 2,400 (9,894,127) 12,871,187 0 2,454,456 0 913,158 0 0 350,275 (38,934) 33,542 (72,476) 0 (4,333,310) 0 (4,405,786) (18.36) (18.36)
EX-27.8 22 EXHIBIT 27.8
5 US DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 95,869 0 806,733 20,000 0 943,063 6,354,775 5,208,083 4,348,180 1,478,791 7,123,884 0 0 2,400 (5,696,092) 4,348,180 0 1,030,277 0 419,953 0 0 173,042 (191,751) 16,000 (207,751) 0 0 0 (207,751) (.87) (.87)
EX-27.9 23 EXHIBIT 27.9
5 US DOLLARS YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 1 123,221 0 1,189,772 20,000 0 1,305,585 6,344,519 5,159,965 4,326,453 1,068,021 7,276,884 0 0 2,400 (5,488,341) 4,326,453 0 5,517,586 0 1,861,792 0 23,000 698,643 316,532 37,692 278,840 0 0 0 278,840 1.16 1.16
-----END PRIVACY-ENHANCED MESSAGE-----