EXHIBIT 3.03
PARTNERSHIP AGREEMENT
---------------------
OF
--
BELTWAY MEDIA PARTNERS
----------------------
THIS AGREEMENT is made and entered into this 1st day of August, 1991, by
and among NEW INSPIRATION BROADCASTING COMPANY, INC., a California corporation,
GOLDEN GATE BROADCASTING CO., INC., a California corporation, and SALEM
COMMUNICATIONS CORPORATION, a California corporation ("Salem Communications"),
hereinafter referred to individually as a "Partner" and collectively as
"Partners."
W I T N E S S E T H
-------------------
WHEREAS, the Partners desire to form a Partnership (as hereinafter defined)
to acquire, own and operate radio station WAVA (FM) located in Arlington,
Virginia (the "Station"); and
WHEREAS, the Partners have agreed upon the terms and conditions pursuant to
which they will operate the Partnership, which terms and conditions are herein
reduced to writing.
NOW, THEREFORE, in consideration of the promises contained herein, the
Partners agree as follows:
ARTICLE I
GENERAL PROVISIONS
------------------
1.1. Name. The Partners hereby form a partnership pursuant to the
----
provisions of the Virginia Uniform Partnership Act to do business under the name
"Beltway Media Partners" (the "Partnership").
1.2. Term. The term of the Partnership shall commence on the date of this
----
Agreement and shall continue until terminated upon a vote of Partners
representing a majority of the Partnership Interests. For purposes of this
Agreement, a Partner's "Interest" is defined as that Partner's interest in the
Partnership and in the profits and losses of the Partnership as set forth
pursuant to Section 4.1, below.
1.3. Purpose and Objectives. The purpose and business of the Partnership
----------------------
shall be to acquire, own, manage and ultimately sell the Station.
1.4. Office. The Partnership may maintain one or more offices at such
------
location or locations as the Managing Partner (as hereinafter defined) shall
determine.
1.5. Definitions.
-----------
(a) "Capital Account" means, with respect to any Partner, the Capital
Account maintained for such person in accordance with the following
provisions:
(i) To each person's Capital Account there shall be credited such
person's Capital Contributions, such person's distributive share of
Profits, and any items in the nature of income or gain which are
specially allocated, and the amount of any Partnership liabilities
assumed by such person or which are secured by any property
distributed to such person;
(ii) To each person's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property distributed
to such person pursuant to any provision of this Agreement, such
person's distributive share of Losses, and any items in the nature of
expenses or losses which are specially allocated, and the amount of
any liabilities of such person assumed by the Partnership or which are
secured by any property contributed by such person to the Partnership;
(iii) In the event any interest in the Partnership is
transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to
the extent it relates to the transferred interest;
(iv) In determining the amount of any liability for purposes of
sections (i) and (ii) hereof, there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance or Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such Regulations.
(b) "Capital Contributions" means, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any property (other
than money) contributed to the Partnership with respect to the Partnership
Interest held by such Partner pursuant to the terms of this Agreement.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).
(d) "Depreciation" means, for each fiscal year or other period, an
amount equal to the depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year or other period,
except that if the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other
period bears to such beginning adjusted tax basis; provided, however, that
if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined
with references to such beginning Gross Asset Value using any reasonable
method selected by the Managing Partner.
2
(e) "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of
such asset, as determined by the contributing Partner and the
Partnership;
(ii) The Gross Asset Value of all Partnership assets shall be
adjusted to equal their respective gross fair market value, as
determined by the Managing Partner, as of the following times: (a)
the acquisition of an additional interest in the Partnership by any
new or existing Partner in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership to a Partner of
more than a de minimis amount of Property as consideration for an
interest in the Partnership; and (c) the liquidation of the
Partnership within the meaning of Regulations Section 1.704-
1(b)(2)(ii) (g); provided, however, that adjustments pursuant to
clauses (a) and (b) above shall be made only if the Managing Partner
reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Partners
in the Partnership;
(iii) The Gross Asset Value of any Partnership asset distributed
to any Partner shall be the gross fair market value of such asset on
the date of distribution; and
(iv) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m) and Section 1.5(a) hereof; provided,
however, that Gross Asset Values shall not be adjusted pursuant to
this section (iv) to the extent the Managing Partner determines that
an adjustment pursuant to section (ii) hereof is necessary or
appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this section (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to section (i), section (ii) or section (iv) hereof, such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing Profits and
Losses.
(f) "Nonrecourse Deductions" has the meaning set forth in Section
1.704-1T(b)(4)(iv)(b) of the Regulations. The amount of Nonrecourse
Deductions for a Partnership fiscal year equals the net increase, if any,
in the amount of Partnership Minimum Gain during that fiscal year,
determined according to the provisions of Section 1.704-1T(b)(4)(iv)(b) of
the Regulations.
3
(g) "Partner Loan Nonrecourse Deductions" means any Partnership
deductions that would be Nonrecourse Deductions if they were not
attributable to a loan made or guaranteed by a Partner within the meaning
of Regulations Section 1.704-1T(b)(4)(iv)(h).
(h) "Partnership Minimum Gain" has the meaning set forth in
Regulations Section 1.704-1T(b)(4)(iv)(c).
(i) "Percentage Interest" means, with respect to any Partner, the
Percentage interest set forth opposite such Partner's name on Exhibit B
attached hereto. In the event any Partnership interest is transferred in
accordance with the provisions of this Agreement, the transferee of such
interest shall succeed to the Percentage Interest of his transferor to the
extent it relates to the transferred interest.
(j) "Profits" and "Losses" means, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a) (for
this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(l) shall be included in
taxable income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits
or Losses pursuant to this section shall be added to such taxable
income or loss ;
(ii) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and
not otherwise taken into account in computing Profits and Losses
pursuant to this section (j) shall be subtracted from such taxable
income or loss;
(iii) In the event the Gross Asset Value of any Partnership
asset is adjusted pursuant to section 1.5(e)(ii) or section
1.5(e)(iii) hereof, the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for
purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of
the property disposed of, notwithstanding that the adjusted tax basis
of such property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for
such fiscal year or other period, computed in accordance with section
1.5(d) hereof; and
4
(vi) Notwithstanding any other provision of this section, any
items which are specially allocated shall not be taken into account in
computing Profits or Losses.
(k) "Regulations" means the Income Tax Regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
ARTICLE II
MANAGEMENT AND OPERATIONS
-------------------------
2.1. Managing Partner. The management and operation of the Partnership
----------------
shall be the responsibility of, and shall be solely vested in, a managing
partner ("Managing Partner"). The initial Managing Partner of the Partnership
is Salem Communications. The Managing Partner is authorized and empowered to
take such action as it deems necessary to carry out the purposes of the
Partnership set forth in Section 1.3, above. Upon the vote of Partners
representing a majority of the Partnership Interests, the Partners can elect or
to remove the current Managing Partner and appoint a new Managing Partner.
2.2. Authority of Managing Partner. Without limiting the general authority
-----------------------------
of the Managing Partner, the Managing Partner shall be authorized to appoint
agents, retain legal counsel and auditors, contract for professional services,
maintain bank accounts, deposit and draw checks, arrange for the taking and
holding of title to assets, make elections available to the Partnership and file
tax returns under Federal and state tax laws, take custody of investments or
appoint custodians for the same, vote the Partnership's interest in other
entities, and execute agreements and contracts.
2.3. Compensation and Reimbursement of Expenses. The Managing Partner
------------------------------------------
shall be paid an annual management fee for its services to the Partnership in
the amount set forth on Exhibit A attached hereto. The Managing Partner shall
be reimbursed for all reasonable and customary out-of-pocket expenses incurred
by the Managing Partner in connection with the Partnership's business.
ARTICLE III
CAPITAL CONTRIBUTIONS; LOANS
----------------------------
3.1. Capital Contributions. Upon the execution hereof, each Partner shall
---------------------
make a Capital Contribution to the Partnership in the amount described in the
attached Exhibit B. Further Capital Contributions shall be made by the Partners
to the Partnership (i) upon the consent of all the Partners for any reason, or
(ii) upon the call of the Managing Partner and the approval by Partners
representing a majority of Partnership Interests for additional funds to pay the
expenses of the Partnership. The additional Capital Contribution made by each
Partner shall be equal to its pro rata share of the total additional
contribution necessary, determined on the basis of its Percentage Interest.
5
3.2. Failure to Make Capital Contributions. If a Partner fails, in whole
-------------------------------------
or in part, to timely make its share of a required Capital Contribution (the
"Defaulting Partner"), the nondefaulting Partners ("Nondefaulting Partners")
may, but shall not be obligated to, make any additional Capital Contribution in
an amount equal to the portions not made by the Defaulting Partner. If a
Nondefaulting Partner contributes funds to the Partnership which should have
been contributed by a Defaulting Partner, such contributions shall be treated as
a loan, hereinafter referred to as a "default loan," made by the Nondefaulting
Partner to the Defaulting Partner. The default loan shall be payable on demand
with interest equal to the lesser of (i) the maximum rate permitted by law or
(ii) two (2) points over the prime rate of interest as announced from time to
time by Security Pacific National Bank, or its successor (the "Prime Rate"). To
the extent the Defaulting Partner does not repay the default loan directly, the
default loan shall, except as provided below, be repaid by the Defaulting
Partner out of the Partnership distributions otherwise payable to the Defaulting
Partner. If a default loan is not repaid in full within ninety (90) days after
it is made, the Nondefaulting Partner shall have an option to purchase the
Defaulting Partner's Interest. The option shall be exercisable by written
notice to the Defaulting Partner given at any time after the option arose and
before the default loan is repaid in full. The option price shall be an amount
equal to the Defaulting Partner's total cash contributed including the amount
the Defaulting Partner is deemed to have contributed as a result of the default
loan, less the amount of the principal and interest still outstanding on the
default loan. If the option granted herein is exercised, the closing of the
purchase of the Defaulting Partner's Interest shall occur on the thirtieth
(30th) day following the date of exercise of the option. At closing, one-half
of the amount due to the Defaulting Partner by the Nondefaulting Partner shall
be paid in cash, and the balance shall be evidenced by a Promissory Note which
shall provide that the principal, together with interest at the Prime Rate on
the date of closing, shall be payable on the first anniversary of closing. Upon
closing of the purchase, the default loan obligation of the Defaulting Partner
to the Nondefaulting Partner shall cease. If more than one Nondefaulting
Partner desires to make the additional contribution, each such Nondefaulting
Partner shall be entitled to make an additional contribution and purchase the
Defaulting Partner's Interest on a pro rata basis based upon its Interest.
3.3. No Interest on Capital Contributions. No Partner shall be paid
------------------------------------
interest on any capital contribution.
3.4. Treatment of Capital Contributions. The Partnership shall not redeem
----------------------------------
or repurchase any Interests, except as provided in Article V, below, and no
Partner shall have the right to withdraw or receive any return of its capital
contribution, except as provided in Sections 4.2 and 4.3. No capital
contribution is required to be returned in the form of property other than cash.
3.5. Capital Accounts. A Capital Account shall be established for each
----------------
Partner on the books and records of the Partnership.
3.6. Loans by Partners to the Partnership. In the event the Partnership's
------------------------------------
funds are insufficient to meet the costs, expenses, obligations, liabilities and
charges, or to make any expenditure authorized by this Agreement, and additional
capital contributions are not made pursuant to Section 3.1, above, and
additional funds are not available from third parties on terms
6
acceptable to the Managing Partner, the Partners may (but shall not be required
to) advance such funds to the Partnership. To the extent more than one of the
Partners desires to make a loan, it shall be permitted to make loans on a pro
rata basis in accordance with its Percentage Interest. All amounts so advanced
shall take the form of a loan and shall bear interest at a rate equal to the sum
of (i) the Prime Rate, plus (ii) two percent (2%) per annum. Such loans will be
repaid prior to any other distributions to the Partners.
ARTICLE IV
DISTRIBUTIONS OF CASH AND ALLOCATIONS
-------------------------------------
OF PROFIT AND LOSS
------------------
4.1. Distributions of Cash and Sale Proceeds. Subject to Section 4.4,
---------------------------------------
below, distributions of cash available to distribute to the Partners, after
paying all current expenses and reserving for other expenses and purposes, shall
be distributed to the Partners in proportion to their Percentage Interests, as
and when determined by the Managing Partner.
4.2. Distribution Upon Dissolution. Subject to Section 4.4, below, upon
-----------------------------
dissolution of the Partnership, the assets of the Partnership shall be
liquidated and the proceeds thereof shall be distributed as follows:
(a) First, to the payment of obligations of the Partnership to third
parties;
(b) Second, to the payment of obligations to any Partner; and
(c) Thereafter, to the Partners in proportion to the positive balances
in their Capital Accounts, after giving effect to all contributions,
distributions and allocations for all periods.
4.3. Compliance with Certain Requirements of Regulations. In the event the
---------------------------------------------------
Partnership is "liquidated" within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g), (a) distributions shall be made pursuant to section 4.2 to the
Partners who have positive Capital Accounts in compliance with Regulations
Section 1.704-1(b)(2)(ii)(b)(2), and (b) if any Partner's Capital Account has a
deficit balance (after giving effect to all contributions, distributions, and
allocations for all taxable years, including the year during which such
liquidation occurs), such Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance to zero in
compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(3).
4.4. Distributions to Repay Default Loans. In the event that a Partner
------------------------------------
made a default loan pursuant to the provisions of Section 3.2, above, then the
amounts which would otherwise have been distributed to the Defaulting Partner
pursuant to the provisions of Sections 4.1 or 4.2, above, shall be distributed
to the Partner making the default loan (pro rata based upon total amount then
due, if more than one default loan exists) until the default loan is repaid in
full. The amount so distributed shall be deemed to be payment by the Defaulting
Partner on the default loan and such payment shall be credited first to interest
and then to principal.
7
4.5. Assets Available for Distribution. Except as otherwise provided in
---------------------------------
this Agreement, each holder of an Interest shall look solely to the assets of
the Partnership for all distributions from the Partnership and the return of its
capital contribution thereto and shall have no recourse (upon dissolution or
otherwise) against the other Partners or any of their affiliates.
4.6. Allocation of Profits and Losses. Except to the extent agreed
--------------------------------
otherwise by the Partners, after giving effect to the special allocations set
forth below, Profits and Losses for any fiscal year shall be allocated among the
Partners in proportion to their Percentage Interests.
4.7. Special Allocations.
-------------------
(a) Code Section 754 Adjustment. To the extent an adjustment to the
---------------------------
adjusted tax basis of any Partnership asset pursuant to Code Section 734(b)
or Code Section 743(b) is required, pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as
an item of gain (if the adjustment increases the basis of the asset) or
loss (if the adjustment decreases such basis) and such gain or loss shall
be specially allocated to the Partners in a manner consistent with the
manner in which their Capital Accounts are required to be adjusted pursuant
to such section of the Regulations.
(b) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal
----------------------
year or other period shall be specially allocated among the Partners in
proportion to their Percentage Interests.
(c) Partner Loan Nonrecourse Deductions. Any Partner Loan Nonrecourse
-----------------------------------
Deductions for any fiscal year or other period shall be specially allocated
to the Partner who bears the risk of loss with respect to the loan to which
such Partner Loan Nonrecourse Deductions are attributable in accordance
with Regulations Section 1.704-1T(b) (4) (iv) (h).
(d) Curative Allocations. The allocations set forth in sections
--------------------
4.7(b) and 4.7(c) hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of Regulations Section 1.704-1(b).
Notwithstanding an other provisions of this section 4, the Regulatory
Allocations shall be taken into account in allocating other Profits,
Losses, and items of income, gain, loss, and deduction among the Partners
so that, to the extent possible, the net amount of such allocations of
other Profits, Losses, and other items and the Regulatory Allocations to
each Partner shall be equal to the net amount that would have been
allocated to each such Partner if the Regulatory Allocations had not
occurred. Notwithstanding the preceding sentence, Regulatory Allocations
relating to (a) Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a reduction in Partnership Minimum
Gain, and (b) Partner Loan Nonrecourse Deductions shall not be taken into
account except to the extent that there would have been a reduction in
Partnership Minimum Gain if the loan to which such deductions are
attributable were not made or guaranteed by a Partner within the meaning of
Regulations Section 1.704-1T(b)(4)(iv)(h).
8
4.8. Tax Allocations: Code Section 704(c). In accordance with Code
-------------------------------------
Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction
with respect to any property contributed to the capital of the Partnership
shall, solely for tax purposes, be allocated among the Partners so as to take
account of any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its Initial Gross Asset Value.
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to section 1.5(e) hereof, subsequent allocations of income, gain, loss,
and deduction with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and its
Gross Asset Value in the same manner as under Code Section 704(c) and the
Regulations thereunder.
Any elections or other decisions relating to such allocations shall be made
by the Managing Partner in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this section 4.8 are
solely for purposes of federal, state, and local taxes and shall not affect, or
in any way be taken into account in computing, any Person's Capital Account or
share of Profits, Losses, other items, or distributions pursuant to any
provisions of this Agreement.
ARTICLE V
TRANSFER OF PARTNERSHIP INTEREST
--------------------------------
5.1. General Restrictions. No partner shall sell, assign, pledge,
--------------------
hypothecate, encumber or in any way transfer any portion of its Interest,
whether voluntarily or by operation of law, during the term of this Agreement
without the prior, express, written consent of the partner(s), including the
transferring Partner, then owning at least eighty percent (80%) of the
Interests. Any permitted transferee, as defined below, pledgee or security
holder shall hold such interest subject to the provisions of this Article V.
5.2. Sale to Third Parties; Transfer of Control. If (i) a Partner proposes
------------------------------------------
to sell, transfer or otherwise dispose of its Interest, or any portion thereof,
to a party, including another Partner, other than as permitted by Section 5.1,
above, (ii) a Partner is to be divested of its Interest, or any portion thereof,
through seizure or sale by legal process or through operation of law, or (iii)
there shall occur a proposed "transfer of control", as defined below, of a
Partner, the Interest shall first be offered simultaneously for sale to the
Partnership and the other Partners in writing (the "Offer"). The Offer shall
state the Interest, or portion thereof, to be sold, the name and address of the
prospective purchaser or transferee of control, and the proposed price and terms
of payment of the sale. The Partnership and the non-offering Partners shall
have the option to purchase the Interest, or portion thereof, described in the
Offer upon the same terms and conditions and at the same price as set forth in
the Offer, or for an amount equal to the Appraised Value of such Interest, or
portion thereof; provided, however, that if any Partner is to be divested of its
Interest, or portion thereof, through seizure or sale by legal process or any
transfer through operation of law, or in the event of a proposed transfer of
control of a Partner, the offering price shall be equal to the Appraised Value.
If the Interest, or portion thereof, is purchased at its Appraised Value, the
purchase price shall be paid in not more than five (5) equal annual principal
installments, the
9
first due on the date of closing, and subsequent installments due on the
anniversary thereof, plus interest payable annually together with each principal
payment and accruing on the unpaid principal balance at the Prime Rate. The
closing for a sale hereunder shall occur not more than sixty (60) days after the
last acceptance of the Offer.
5.3. Acceptance of Offer. The Partnership may, with approval of a majority
-------------------
of the Partnership Interests, exclusive of the offering Partner's Interest,
accept the Offer as to all or any portion of the Interest being offered within
the later of (i) thirty (30) days after the date of receipt of the Offer or,
(ii) if requested by the Partnership or any Partner that could potentially
purchase the Interest within thirty (30) days after the date of receipt of the
Offer, thirty (30) days after the determination of the Appraised Value of such
Interest. If the Partnership does not accept the Offer with respect to all of
the Interest being offered within such thirty (30) day period, then the Managing
Partner shall call a meeting of all Partners, other than the Partner whose
Interest is being offered, by giving ten (10) days notice thereof to the
Partners entitled thereto (the "Offeree Partners"). Such meeting shall be held
not more than thirty (30) days after the expiration of the thirty (30) day
period during which the Offer may be accepted by the Partnership. The Managing
Partner shall make successive offers of the Interest, or portion thereof, not
accepted by the Partnership to those Offeree Partners present or legally
represented, in accordance with the procedures set forth in Section 5.4, below.
Such successive offers shall continue until either the entire Interest so
offered is accepted or until it is determined by successive offerings that the
entire Interest so offered will not be accepted.
5.4. Procedure at Meeting. At the meeting called in accordance with
--------------------
Section 5.3, above, the Managing Partner shall offer the portion of the Interest
not accepted by the Partnership to the Offeree Partners who are present or
legally represented at the meeting, in the following manner:
(a) The Managing Partner shall offer to each Offeree Partner present
or legally represented, and each may accept, only that percentage of the
Interest not accepted by the Partnership as the Interest of such Offeree
Partner bears to the Interests of all Offeree Partners present or legally
represented.
(b) If the entire Interest offered is not accepted in accordance with
the procedures set forth in Subsection (a), above, the Managing Partner
shall thereafter make successive offerings during each of which the
Managing Partner shall offer to each Offeree Partner present or legally
represented who had not previously refused to accept all of the Interest
offered to it at such meeting, that percentage of the Interest not
previously accepted by those present at the meeting as its Interest,
including any Interest accepted at the meeting, bears to the Interests,
including any Interest accepted at the meeting, of all Offeree Partners
present or legally represented who have not previously refused to accept
all of the Interest offered to them at such meeting.
5.5. Non-Acceptance. If a Partner proposes to dispose of its Interest, or
--------------
any portion thereof, or is to be divested of its Interest as provided in Section
5.2(i) or (ii), above, and if the offer of sale is not accepted by the
Partnership and the Offeree Partners with respect to the entire Interest offered
for sale, then the offering Partner shall have the right to sell or transfer
such non-
10
accepted Interest to the third party designated in the Offer, on the same terms
and conditions specified in the Offer; provided that said sale or transfer is
made within ninety (90) days after the date on which the Offer was made to the
Partnership and the Offeree Partners under Section 5.2, above, and the
transferee shall take such Interest free from the restrictions of this
Agreement. The Partnership and the Offeree Partners shall provide the selling
Partner with such documents as may be necessary to permit the sale of said
Interest free from the restrictions of this Agreement. In the event that neither
the Partnership nor the Offeree Partners nor the third party purchases the
entire Interest within the period provided above, the Interest shall again be
subject to the restrictions of this Agreement.
5.6. Notice of Disposition. No assignment or other disposition of any
---------------------
Interest shall be effective until notice in writing of the assignment or other
disposition has been received by the Managing Partner and recorded in the books
of the Partnership.
5.7. Remedy for Violation. Upon any sale, transfer, pledge, bequest, or
--------------------
other disposition of any Interest in violation of any of the provisions of this
Article V or any other provisions of this Agreement, the Partnership shall have,
in addition to such other remedies and damages as may be available to it under
applicable law, the right and option at any time within two (2) years after the
discovery of such sale or other disposition in violation of this Agreement, to
purchase all or any of such Interest from the holder thereof at the price at
which such Interest was sold or transferred, or the Appraised Value as of such
date, whichever is lower.
5.8. Definition of Appraised Value. For purposes of this Article V,
-----------------------------
Appraised Value shall mean the fair market value of the assets of the
Partnership less the liabilities of the Partnership, determined by an appraiser
selected by the Partnership and an appraiser selected by the transferring
Partner, or if such appraisers are unable to agree on a value, they shall
jointly appoint a third appraiser, and the value shall be determined by a
majority of these three (3) appraisers.
5.9. Transfer of Control. For purposes of this Agreement, a transfer of
-------------------
control shall be defined as a transaction or series of transactions whereby more
than fifty percent (50%) of the voting stock of a Partner is held by a person or
persons other than Edward G. Atsinger III, Stuart W. Epperson, their spouses,
their children and trusts created for the primary benefit of their spouses and
children.
ARTICLE VI
BOOKS AND RECORDS, ACCOUNTING,
------------------------------
TAX ELECTIONS, ETC.
------------------
6.1. Books and Records. Books and records of the Partnership shall be
-----------------
maintained at the principal office of the Partnership or at any other place
determined by the Managing Partner and shall be available for examination by any
Partner or its duly authorized representative(s) at any reasonable time.
11
6.2. Accounting. The books of account of the Partnership shall be kept on
----------
a calendar year basis using such method of accounting as the Managing Partner
shall determine.
6.3. Expenses of the Partnership. All expenses of organizing and operating
---------------------------
the Partnership shall be borne by the Partnership. Expenses of operating the
Partnership shall be deemed to include, without limitation, legal and accounting
fees, fees and expenses paid to other persons employed by the Partnership,
brokerage fees and commissions, and all other fees and expenses associated with
the activities of the Partnership.
6.4. Special Basis Adjustment. In connection with any transfer of a
------------------------
Partnership interest, the Managing Partner shall have the option to cause the
Partnership to make an election to adjust the basis of the Partnership's
property in the manner provided in Section 734(b) and 743(b) of the Code.
6.5. Tax Matters Partner. The Managing Partner shall be the party
-------------------
designated to receive all notices from the Internal Revenue Service which
pertain to the tax affairs of the Partnership. The Managing Partner shall be
the "Tax Matters Partner" pursuant to the Code.
ARTICLE VII
MISCELLANEOUS PROVISIONS
------------------------
7.1. Amendment. This Partnership Agreement shall not be amended except
---------
upon the written agreement of all of the Partners.
7.2. Binding Effect. The covenants and agreements contained herein shall
--------------
be binding upon, and inure to the benefit of the Partners and their successors
and assigns.
7.3. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the state of California.
7.4. Separability of Provisions. Each provision of this Agreement shall be
--------------------------
considered separable and if for any reason any provision or provisions hereof
are determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect of those portions of this
Agreement which are valid.
7.5. Headings. Section headings are for descriptive purposes only and
--------
shall not control or alter the meaning of this Agreement as set forth in the
text.
7.6. Interpretation. When the context in which words are used in this
--------------
Agreement indicates that such is the intent, words in the singular shall include
plural and vice versa.
7.7. Partition. The Partners hereby waive their rights, if any, to
---------
partition Partnership property.
12
IN WITNESS WHEREOF, the undersigned have executed this Partnership
Agreement as of the day, month and year first above written.
NEW INSPIRATION BROADCASTING COMPANY,
INC.
By:
-----------------------------------
GOLDEN GATE BROADCASTING CO., INC.
By:
-----------------------------------
SALEM COMMUNICATIONS CORPORATION
By:
-----------------------------------
13
EXHIBIT A
---------
Annual Management Fees
----------------------
NET SALES FEE BASE PLUS OF NET
FROM TO -------- ------ SALES OVER
- ---- -- ----------
$ 25,000 $ 49,999 $ 3,000 7.50% $ 25,000
$ 50,000 $ 74,999 $ 4,875 7.75% $ 50,000
$ 75,000 $ 99,999 $ 6,813 8.00% $ 75,000
$100,000 $149,999 $ 8,813 8.25% $100,000
$150,000 $199,999 $12,938 8.50% $150,000
$200,000 $249,999 $17,188 8.75% $200,000
$250,000 $299,999 $21,563 9.00% $250,000
$300,000 $349,999 $26,063 9.25% $300,000
$350,000 $399,999 $30,688 9.50% $350,000
$400,000 $449,999 $35,438 9.75% $400,000
$450,000 $499,999 $40,313 10.00% $450,000
$500,000 or more $45,313
14
EXHIBIT B
---------
PERCENTAGE INITIAL CAPITAL
PARTNER INTEREST CONTRIBUTION
- ------- -------- ------------
New Inspiration Broadcasting Company, 45% 45%
Inc.
Golden Gate Broadcasting Company, Inc. 40% 40%
Salem Communications Corporation 15% 15%
15