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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED
EFFECTIVE OCTOBER 7, 1996].
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
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COMMISSION FILE NUMBER 1-12187
[COX RADIO, INC. LOGO]
(Exact name of registrant as specified in its charter)
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DELAWARE 58-1620022
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
1400 LAKE HEARN DRIVE, ATLANTA, GEORGIA 30319
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (404) 843-5000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Class A Common Stock, par value $1.00 per share
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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 [ ]
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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 amendments to
this Form 10-K. [X]
As of March 18, 1997, the aggregate market value of the Class A Common
Stock held by non-affiliates of the registrant was $171,858,290 based on the
closing price on the New York Stock Exchange on such date.
There were 8,736,973 shares of Class A Common Stock outstanding as of March 18,
1997.
There were 19,577,672 shares of Class B Common Stock outstanding as of March 18,
1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1997 Annual Meeting of Stockholders
are incorporated by reference into Part III.
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COX RADIO, INC.
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 19
Item 3. Legal Proceedings........................................... 20
Item 4. Submission of Matters to a Vote of Security Holders......... 20
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 21
Item 6. Selected Consolidated Financial Data........................ 22
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 29
Item 8. Financial Statements and Supplementary Data................. 35
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 52
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 52
Item 11. Executive Compensation...................................... 52
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 52
Item 13. Certain Relationships and Related Transactions.............. 52
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 53
Signatures ............................................................ 54
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PART I
ITEM 1. BUSINESS
Cox Radio, Inc. ("Cox Radio" or the "Company"), upon completion of the
Pending Transactions (defined herein), will be one of the ten largest radio
broadcasting companies in the United States, based on both net revenues and
number of stations. Cox Radio will own or operate, or provide sales and
marketing services for 43 radio stations (28 FM and 15 AM) clustered in 12
markets, including 18 stations to be acquired from NewCity Communications, Inc.
("NewCity") (the "NewCity Acquisition"). On a pro forma basis for 1996, Cox
Radio will be the number one radio station group ranked by revenue share in five
of its 12 markets. On a pro forma basis, Cox Radio would have generated net
revenue of $189.7 million and broadcast cash flow of $58.6 million during the
year ending December 31, 1996.
Cox Radio is an indirect majority-owned subsidiary of Cox Enterprises, Inc.
("CEI"). CEI indirectly owns approximately 69% of the Company's Common Stock
(defined below) and has approximately 96% of the voting power of Cox Radio. The
Company has two classes of common stock outstanding, Class A Common Stock, par
value $1.00 per share (the "Class A Common Stock") and Class B Common Stock, par
value $1.00 per share (the "Class B Common Stock"), collectively defined as the
"Common Stock." CEI's wholly-owned subsidiary, Cox Broadcasting, Inc. ("Cox
Broadcasting") is the sole stockholder of shares of the Company's Class B Common
Stock. CEI, a privately-held corporation headquartered in Atlanta, Georgia, is
one of the largest media companies in the United States, with consolidated 1996
revenues of approximately $4.6 billion. Prior to the Company's initial public
offering, CEI transferred all of its U.S. radio operations to Cox Radio (the
"Cox Radio Consolidation"). Cox Radio, as part of CEI, was a pioneer in radio
broadcasting, building its first station in 1934, acquiring its flagship
station, WSB-AM (Atlanta), in 1939 and launching its first FM station, WSB-FM
(Atlanta), in 1948.
Cox Radio seeks to maximize the revenues and broadcast cash flow of its
radio stations by operating and developing clusters of stations in
demographically attractive and rapidly growing markets, including major markets
such as Los Angeles and Atlanta and Sunbelt markets such as Miami, Tampa,
Orlando, San Antonio and Birmingham. During the past five years, the 12 markets
in which the Company's stations will operate have demonstrated, on an aggregate
basis, greater radio advertising revenue growth than the average of 5.3%, which
was calculated using revenue projections obtained from the Radio Advertising
Bureau (the "RAB"), for the U.S. radio industry as a whole. The Pending
Transactions will enhance the clustering of the Company's radio stations; Cox
Radio will operate three or more stations in nine of its 12 markets, and a total
of 29 of the Company's 43 stations will be clustered in six markets. In
addition, the NewCity Acquisition will create a platform for future strategic
acquisitions to further cluster radio stations in the Company's markets.
As a result of the Company's management, programming and sales efforts, the
Company's radio stations are characterized by strong ratings and above average
power ratios. In addition, Cox Radio has a track record of acquiring,
repositioning and improving the operating performance of previously
underperforming stations. Cox Radio's senior operating management, together with
the NewCity senior operating management which will join Cox Radio as part of the
NewCity Acquisition, will be comprised of six individuals with an average of
over 23 years of experience in the radio broadcasting industry, including an
average of over 14 years with their respective organizations. The Company
believes that this experienced senior management team will be well positioned to
manage larger radio station clusters and take advantage of new opportunities
arising in the U.S. radio broadcasting industry.
PRIOR, RECENT AND PENDING TRANSACTIONS
During 1996, the Company consummated the following transactions (the "Prior
Transactions"):
Louisville Acquisitions
In January 1996, Cox Radio acquired two Louisville FM stations for $8.7
million in cash. In August 1996, Cox Radio acquired an additional Louisville FM
station for $2.6 million in cash (the "Louisville Acquisitions").
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Miami Disposition
In October 1996, Cox Radio completed its sale of its AM station in Miami
for $13 million in cash (the "Miami Disposition").
Syracuse Acquisition
In June 1996, Cox Radio acquired an AM and an FM station in Syracuse for
$4.5 million in cash (the "Syracuse Acquisition").
Tulsa Acquisition
In December 1996, Cox Radio acquired an AM and an FM station in Tulsa for
$5.5 million in cash (the "Tulsa Acquisition").
As of the date of this report, the Company had consummated the following
transactions during 1997 (the "Recent Transactions"):
Orlando Acquisition
In March 1997, Cox Radio exchanged its two Chicago radio stations for three
Orlando stations and approximately $20 million in cash (the "Orlando
Acquisition").
Tampa Acquisition
In March 1997, Cox Radio acquired an AM station in Tampa for approximately
$1.5 million in cash (the "Tampa Acquisition").
The Company expects to consummate the following transactions in the first
half of 1997 (the "Pending Transactions"):
NewCity Acquisition
In July 1996, Cox Radio agreed to acquire NewCity for an aggregate
consideration of approximately $253 million, consisting of approximately $163
million in cash, approximately $87 million in assumption of NewCity debt and
approximately $3 million in working capital adjustments. The NewCity Acquisition
will provide Cox Radio with an additional 18 stations (12 FM and 6 AM): seven
stations in three new markets (Birmingham, Bridgeport and San Antonio) and 11
stations in four existing markets (Atlanta, Orlando, Syracuse and Tulsa). Two of
the three new markets are in the Sunbelt, a region which the Company believes
will, over the next several years, demonstrate greater radio advertising revenue
growth than the U.S. radio industry as a whole. The acquisition of three radio
stations in Syracuse will provide Cox Radio with five stations (three FM and two
AM) in that market, and the acquisition of four radio stations in Orlando will
provide Cox Radio with seven stations (four FM and three AM) in that market. The
Company expects NewCity's management group to join Cox Radio, providing
continuity and management depth to the combined organization.
Los Angeles Acquisition
In January 1997, Cox Radio agreed in principle to acquire the license and
certain assets of an FM radio station in Los Angeles for $19 million in cash
(the "Los Angeles Acquisition").
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The following table summarizes certain information relating to the
Company's radio stations, assuming the consummation of the Pending Transactions:
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AUDIENCE DEMOGRAPHIC GROUP
SHARE IN RANK IN (ADULTS 25 - 54)
TARGET TARGET TARGET -----------------
MARKET AND STATION CALL DEMOGRAPHIC DEMOGRAPHIC DEMOGRAPHIC AUDIENCE
LETTERS(1) FORMAT GROUP GROUP GROUP SHARE RANK
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LOS ANGELES
KFI-AM Talk Adults 35-54(2) 5.6 2 3.7 6
KOST-FM Adult Contemporary Women 25-44(2) 4.9 2 3.9 4
KRTO-FM(3) -- -- -- -- -- --
KACE-FM R&B Oldies African American 12.5 4 1.3 27(4)
Adults 35-54
ATLANTA
WSB-AM News/Talk Adults 35-64 11.4 1 7.9 3
WSB-FM Adult Contemporary Women 25-54 8.2 4 6.4 5
WJZF-FM(5)(6) Jazz Men 25-54 3.6 11 3.5 13
WCNN-AM(6) Sports/Talk Men 25-54 2.1 17 1.1 18
MIAMI
WFLC-FM Hot Adult Contemporary Adults 25-54 4.0 11 4.0 11
WHQT-FM Urban Adult Contemporary Adults 25-54 5.9 2 5.9 2
TAMPA
WWRM-FM Soft Adult Contemporary Women 35-54(2) 9.4 2 6.1 5(4)
WCOF-FM 70's Oldies Adults 25-44(2) 6.6 3(4) 6.1 5(4)
WSUN-AM Standards Men 25-54 2.7 14 1.6 16
WFNS-AM R&B Oldies Men 25-54 1.0 20 .6 20(4)
ORLANDO
WDBO-AM(5) News/Talk Adults 35-64 7.5 4 4.5 11(4)
WWKA-FM(5) Country Adults 25-54 8.6 1 8.6 1
WCFB-FM(5) Rhythmic Adult Contemporary Women 25-54 6.3 6 5.4 9(4)
WZKD-AM(5) Kids Radio Children 3-11 -- -- -- --
WHOO-AM(7) Standards Adults 55+ -- -- .7 18
WHTQ-FM(7) Classic Rock Men 25-54 8.5 2 5.5 8
WMMO-FM(7) Rock Adult Contemporary Adults 25-54 5.4 9(4) 5.4 9(4)
SAN ANTONIO
KCYY-FM(5) Country Adults 25-54 6.9 3 6.9 3
KKYX-AM(5) Classic Country Adults 35-64 2.6 14 1.4 18
KCJZ-FM(5) Jazz Adults 25-54 4.2 11 4.2 11
LOUISVILLE
WRKA-FM Oldies Adults 35-54(2) 6.7 4 5.8 5(4)
WRVI-FM Rock Adult Adults 25-49 2.0 13(4) 1.8 14(4)
WHTE-FM Contemporary Alternative Adults 18-34 3.9 9 1.8 14(4)
BIRMINGHAM
WZZK-FM(5) Country Adults 25-54 13.8(8) 1(8) 13.8(8) 1(8)
WZZK-AM(5) Country Adults 25-54 -- -- -- --
WODL-FM(5) Oldies Adults 25-54 7.5 5 7.5 5
DAYTON
WHIO-AM News/Talk Adults 35-64 6.6 4 4.1 9
WHKO-FM Country Adults 25-54 13.5 1 13.5 1
TULSA
KRMG-AM(5) News/Talk Adults 25-54 7.7 4 7.7 4
KWEN-FM(5) Country Adults 25-54 11.5 1 11.5 1
KJSR-FM(5) 70's Oldies Adults 25-54 8.3 3 8.3 3
KRAV-FM(7) Adult Contemporary Adults 25-54 4.6 8 4.6 8
KGTO-AM(7) Standards Adults 55+ -- -- .6 19(4)
BRIDGEPORT
WEZN-FM(5) Adult Contemporary Adults 25-54 10.3(9) 1(9) 10.3 1
SYRACUSE
WSYR-AM(5) News/Talk Adults 35-64 10.9 2 6.4 6
WYYY-FM(5) Adult Contemporary Adults 25-54 10.6 2 10.6 2
WBBS-FM(5) Country Adults 25-54 10.8 1 10.8 1
WHEN-AM(7) Sports/Talk Men 25-54 4.5 8 2.5 10
WWHT-FM(7) Adult Hit Radio Women 18-34 4.0 8 2.4 11
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(1) Metropolitan market served; city of license may differ.
(2) Arbitron does not report the audience share on these specific target
audiences. Therefore, the closest representative target audience shares and
rankings were used.
(3) Station to be acquired pursuant to the Los Angeles Acquisition.
(4) Tied.
(5) Station to be acquired pursuant to the NewCity Acquisition.
(6) Station operated by Cox Radio pursuant to an LMA (defined herein).
(7) Station operated by NewCity pursuant to an LMA.
(8) Audience share and audience rank information for WZZK-AM and WZZK-FM are
combined because the stations are simulcast.
(9) Audience share and rank data is based only on Arbitron Market Reports for
Fall 1996 and Spring 1996 because Arbitron does not produce Summer and
Winter Arbitron Market Reports for the Bridgeport/Fairfield County market.
The Company's stations are diversified in terms of format, target audience,
geographic location and stage of development. Management believes that a number
of the Company's stations have significant growth opportunities or turnaround
potential and can therefore be characterized as developing stations. Generally,
the Company considers developing stations to include those which have been
recently acquired by the Company and offer the greatest potential for growth.
Currently, the Company considers nine of its stations to be developing stations.
Cox Radio believes these stations can achieve significant broadcast cash flow
growth by employing the Company's operating strategy. Management believes that
its mix of stations in different stages of development enables it to maximize
the Company's growth potential.
OPERATING STRATEGY
The following is a description of the key elements of the Company's
operating strategy:
Clustering of Stations
Cox Radio operates its stations in clusters to (i) enhance net revenue
growth by increasing the appeal of the Company's stations to advertisers and
enabling such stations to compete more effectively with other forms of
advertising and (ii) achieve operating efficiencies by consolidating broadcast
facilities, eliminating duplicative positions in management and production and
reducing overhead expenses. Management believes that operating several radio
stations in each of its markets will enable its sales teams to offer advertisers
more attractive advertising packages. Furthermore, as radio groups achieve
significant audience share, they can deliver to advertisers the audience reach
that historically only television and newspapers could offer, with the added
benefit of frequent exposure to advertisers' potential customers. Management
believes that the Company's clusters of stations, and their corresponding
audience share, provide opportunities to capture an increased share of total
advertising revenue in each of its markets.
Development of Underperforming Stations
The Company's management has demonstrated its ability to acquire
underperforming radio stations and develop them into consistent ratings and
revenue leaders. The Company's historic margins reflect the acquisition and
continued development of underperforming stations, as well as the fact that
increases in net revenue are typically realized subsequent to increases in
audience share. Management believes that a number of the Company's stations have
significant growth opportunities or turnaround potential and can therefore be
characterized as developing stations.
Implementation of the Company's Management Philosophy
The Company's local station operations are supported by a lean corporate
staff which employs a management philosophy emphasizing (i) market research and
targeted programming; (ii) a customer-focused selling strategy; and (iii)
marketing and promotional activities.
(i) Market Research and Targeted Programming. Cox Radio's research,
programming and marketing strategy combines extensive research with an
assessment of competitors' vulnerabilities and market dynamics
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in order to identify specific audience opportunities within each market. Cox
Radio also retains consultants and research organizations to continually
evaluate listener preferences. Using this information, Cox Radio tailors the
programming, marketing and promotions of each Cox Radio station to maximize its
appeal to its target audience. Cox Radio's disciplined application of market
research enables each of its stations to be responsive to the changing
preferences of its targeted listeners. This approach focuses on the needs of the
listener and its community and is designed to improve ratings and maximize the
impact of advertising for the Company's customers.
Through its research, programming and marketing, Cox Radio also seeks to
create a distinct and marketable local identity for each of its stations in
order to enhance audience share and listener loyalty and to protect against
direct format competition. To achieve this objective, the Company employs and
promotes distinct high-profile on-air personalities and local sports programming
at many of its stations. For example, the Company broadcasts (i) "Dr. Laura,"
which originates at one of the Company's stations in Los Angeles, in Atlanta,
Dayton, Los Angeles, Syracuse, Tulsa and Orlando; (ii) "Rush Limbaugh" in Los
Angeles, Orlando, Syracuse and Tulsa; (iii) the 1996 National League Champion
Atlanta Braves in Atlanta and Tampa; and (iv) the Orlando Magic in Orlando and
Tampa.
(ii) Customer-Focused Selling Strategy. The Company has implemented a
unique, customer-focused approach to selling advertising known as the
Consultative Selling System. The Company's sales personnel are trained to
approach each advertiser with a view towards solving the marketing needs of the
customer. In this regard, the sales staff consults with customers, attempts to
understand their business goals and offers comprehensive marketing solutions,
including the use of radio advertising. Instead of merely selling station
advertising time, the Company's sales personnel are encouraged to develop
innovative marketing strategies for the station's advertising customers.
(iii) Marketing and Promotional Activities. The Company's stations
regularly engage in significant local promotional activities, including
advertising on local television and in local print media, participating in
telemarketing and direct mailings and sponsoring contests, concerts and events.
Special events may include charitable athletic events, events centered around a
major local occasion or local ethnic group and special community or family
events. Cox Radio also engages in joint promotional activities with other media
in their markets to further leverage the Company's promotional spending. These
promotional efforts help the Company's stations add new listeners and increase
the amount of time spent listening to the stations.
Leveraging of Senior Operating Management Team
Cox Radio's senior operating management, together with the NewCity senior
operating management, which will join Cox Radio as part of the NewCity
Acquisition, will be comprised of six individuals with an average of over 23
years of experience in the radio broadcasting industry, including an average of
over 14 years with their respective organizations. See "-- The NewCity
Acquisition -- Additions to Senior Operating Management Team." These two
management teams share a common operating philosophy, which management believes
will facilitate the integration of the two companies. A portion of the
compensation of the senior operating management team is linked to the Company's
operating results through participation in the Company's Long-Term Incentive
Plan. See Note 9 to the Company's Consolidated Financial Statements included
elsewhere herein.
Cultivation of Strong Local Management Teams
The Company places great importance on the hiring and development of strong
local management teams and has been successful in retaining experienced
management teams that have strong ties to their communities and customers.
The Company invests significant resources in identifying and training
employees to create a talented team of managers at all levels of station
operations. These resources include: (i) Gallup/SRI, which helps the Company
identify and select talented individuals for management and sales positions;
(ii) NewCity Associates, an independent sales and management training company
initially created by NewCity, which
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trains and develops managers and sales executives; and (iii) a program of
seminars conducted by the Company's senior operating management and outside
consultants.
Local managers are empowered to run the day-to-day operations of their
stations and to develop and implement policies that will improve station
performance and establish long-term relationships with listeners and
advertisers. The compensation of the local station managers is dependent upon
the financial performance of the stations and linked to participation in the
Company's Long-Term Incentive Plan. See Note 9 to the Company's Consolidated
Financial Statements included elsewhere herein.
ACQUISITION STRATEGY
During the last several years, the Company has implemented its clustering
strategy through the acquisition of radio stations in several of its existing
markets. Management believes that recent changes in federal regulations will
allow Cox Radio to continue to pursue its acquisition strategy. The
Telecommunications Act of 1996 (the "1996 Act") removed the limit on the number
of radio stations an operator may own nationwide and increased the number of
radio stations an operator may own in a single market. As a result of this
legislation, the competitive landscape in the radio broadcasting industry is
changing. Management believes that larger, well-capitalized companies with
experienced management, such as Cox Radio, will be best positioned to take
advantage of this changing environment. Management considers the following
factors when making an acquisition.
Market Selection Considerations
Cox Radio intends to continue to acquire additional radio stations in the
12 markets in which it will operate following the completion of the Pending
Transactions. In the past, the Company has primarily acquired underperforming
stations. Cox Radio may also make opportunistic acquisitions in additional
markets in which the Company believes that it can cost-effectively achieve a
leading position in terms of audience and revenue share. Management also
believes that Cox Radio will have the financial resources and management
expertise to continue to pursue its acquisition strategy. Certain future
acquisitions may be limited by the multiple and cross-ownership rules of the
Federal Communications Commission ("FCC"). See "-- Federal Regulation of
Broadcasting -- Ownership Matters" and "-- Recent Changes."
Station Considerations
Cox Radio expects to concentrate on acquiring radio stations that offer,
through application of Cox Radio's operating philosophy, the potential for
improvement in the station's performance, particularly its broadcast cash flow.
Such stations may be in various stages of development, presenting Cox Radio with
an opportunity to apply its management techniques and to enhance asset value. In
evaluating potential acquisitions, the Company considers the strength of a
station's broadcast signal. A powerful broadcast signal enhances delivery range
and clarity, thereby influencing listener preference and loyalty. Cox Radio also
assesses the strategic fit of an acquisition with its existing clusters of radio
stations. When entering a new market, Cox Radio expects to acquire a "platform"
upon which to expand its portfolio of stations and to build a leading cluster of
stations. Cox Radio believes that the NewCity Acquisition will create such a
platform in several markets for the pursuit of its acquisition strategy.
INDUSTRY OVERVIEW
The primary source of revenues for radio stations is generated from the
sale of advertising time to local and national spot advertisers and national
network advertisers. During the past decade, local advertising revenue as a
percentage of total radio advertising revenue in a given market has ranged from
approximately 72% to 87%. The growth in total radio advertising revenue tends to
be fairly stable and has generally grown at a rate faster than the Gross
National Product ("GNP"). With the exception of 1991, when total radio
advertising revenue fell by approximately 3.1% compared to the prior year,
advertising revenue has risen in each of the 15 years through 1995 (the most
recent year for which this information is available) more rapidly
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than both inflation and the GNP. Total domestic radio advertising revenue in
1995 of $11.5 billion, as reported by the RAB, was at its highest level in the
industry's history.
According to the RAB's Radio Marketing Guide and Fact Book for Advertisers,
1994-1995, radio reaches approximately 96% of all Americans over the age of 12
every week. More than one-half of all radio listening is done outside the home,
in contrast to other advertising media, and three out of four adults are reached
by car radio each week. The average listener spends approximately three hours
and 20 minutes per day listening to radio. Most radio listening occurs during
the morning, particularly between the time a listener wakes up and the time the
listener reaches work. This "morning drive time" period reaches more than 85% of
people over the age of 12 and, as a result, radio advertising sold during this
period achieves premium advertising rates. Radio listeners have gradually
shifted over the years from AM to FM stations. FM reception, as compared to AM,
is generally clearer and provides greater tonal range and higher fidelity. In
comparison to AM, FM's listener share is now in excess of 75%, despite the fact
that the number of AM and FM commercial stations in the United States is
approximately equal.
Radio is considered an efficient, cost-effective means of reaching
specifically identified demographic groups. Stations are typically classified by
their on-air format, such as country, adult contemporary, oldies and news/talk.
A station's format and style of presentation enables it to target certain
demographics. By capturing a specific share of a market's radio listening
audience, with particular concentration in a targeted demographic, a station is
able to market its broadcasting time to advertisers seeking to reach a specific
audience. Advertisers and stations utilize data published by audience measuring
services, such as Arbitron, to estimate how many people within particular
geographical markets and demographics listen to specific stations.
The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format of
a particular station and the local competitive environment. Although the number
of advertisements broadcast during a given time period may vary, the total
number of advertisements broadcast on a particular station generally does not
vary significantly from year to year.
A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station
usually will engage a firm that specializes in soliciting radio advertising
sales on a national level. National sales representatives obtain advertising
principally from advertising agencies located outside the station's market and
receive commissions based on the revenue from the advertising obtained.
COMPETITION; CHANGES IN THE BROADCASTING INDUSTRY
The radio broadcasting industry is a highly competitive business. The
success of each of the Company's stations depends largely upon its audience
ratings and its share of the overall advertising revenue within its market. The
Company's radio stations compete for listeners directly with other radio
stations in their respective markets primarily on the basis of program content
that appeals to a target demographic group. By building a strong listener base
consisting of a specific demographic in each of its markets, Cox Radio is able
to attract advertisers seeking to reach those listeners. The Company's stations
compete for advertising revenue directly with other radio stations and with
other electronic and print media within their respective markets.
Factors that are material to a station's competitive position include
management experience, the station's audience share rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance, and the number and characteristics of other stations in the market
area. Cox Radio attempts to improve its competitive position with promotional
campaigns aimed at the demographics targeted by its stations and by sales
efforts designed to attract advertisers. Recent changes in the law and in FCC
rules and policies have increased the number of radio stations a broadcaster may
own in a given market and permit, within limits, joint arrangements with other
stations in a market relating to programming, advertising sales, and station
operations. Management believes that radio stations that elect to take advantage
of these opportunities may, in certain circumstances, have lower operating costs
and may be able to offer advertisers more attractive rates and services.
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Although the radio broadcasting industry is highly competitive, some
barriers to entry exist. The operation of a radio broadcast station requires a
license from the FCC and the number of radio stations that a single entity may
own and operate in a given market is limited by the availability of FM and AM
radio frequencies allotted by the FCC to communities in that market, as well as
by the FCC's multiple ownership rules, which regulate the number of stations
that may be owned and controlled by a single entity.
The Company's stations compete for advertising revenue with other radio
stations and with other electronic and print media. Potential advertisers can
substitute advertising through broadcast television, cable television systems
(which can offer concurrent exposure on a number of cable networks to enlarge
the potential audience), daily, weekly, and free-distribution newspapers, other
print media, direct mail, and on-line computer services for radio advertising.
Competing media commonly target the customers of their competitors, and
advertisers regularly shift dollars from radio to these competing media and vice
versa. Accordingly, there can be no assurance that any of the Company's stations
will be able to maintain or increase its current audience ratings and
advertising revenue share. In addition, the radio broadcasting industry is
subject to competition from new media technologies that are being developed or
introduced, such as the delivery of audio programming by cable television
systems, by satellite and by digital audio broadcasting ("DAB"). The delivery of
information through the Internet also could create a new form of competition.
The radio broadcasting industry historically has grown despite the introduction
of new technologies for the delivery of entertainment and information, such as
broadcast television, cable television, audio tapes and compact discs. A growing
population and greater availability of radios, particularly car and portable
radios, have contributed to this growth. There can be no assurance, however,
that the development or introduction in the future of any new media technology
will not have an adverse effect on the radio broadcasting industry.
The FCC currently has before it proceedings that will permit the use of DAB
to deliver audio programming, and has allocated spectrum for the provision of
satellite DAB service. DAB provides a medium for the delivery by satellite or
terrestrial means of multiple new, high quality audio programming formats to
local and national audiences. This technology also may be used in the future by
radio broadcast stations either on existing or alternate broadcasting
frequencies or on new frequency bands. In addition, the FCC has authorized an
additional 100 kHz of spectrum for the AM band and will soon allocate
frequencies in this new band to certain existing AM station licensees. By the
end of a transition period to be determined by the FCC, those licensees will be
required to return to the FCC either the license for their existing AM band
station or the license for the expanded AM band station.
Cox Radio cannot predict what other matters might be considered in the
future by the FCC, nor can it assess in advance what impact, if any, the
implementation of any of these proposals or changes might have on its business.
FEDERAL REGULATION OF RADIO BROADCASTING
The ownership, operation and sale of radio stations, including those
licensed to Cox Radio, are subject to the jurisdiction of the FCC, which acts
under authority granted by the Communications Act of 1934, as amended ("the
Communications Act"). Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and operating
power of stations; issues, renews and modifies station licenses; determines
whether to approve changes in ownership or control of station licenses;
regulates equipment used by stations; adopts and implements regulations and
policies that directly or indirectly affect the ownership, operation, program
content, employment practices, and business of stations; and has the power to
impose penalties, including license revocations, for violations of its rules or
the Communications Act.
The 1996 Act, which significantly amended the Communications Act in
numerous respects, dramatically changed the ground rules for competition and
regulation in virtually all sectors of the telecommunications industry,
including broadcasting, local and long-distance telephone services, cable
television services and telecommunications equipment manufacturing. In addition,
the 1996 Act imposes numerous requirements on the FCC to launch new inquiries
and rulemaking proceedings, perhaps 80 in all, involving a multitude of
telecommunications issues, including those described herein that will directly
affect the broadcast industry.
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<PAGE> 11
The 1996 Act mandates that such rulemaking proceedings be completed within
certain time frames, in some cases as short as six months. Some of these
proceedings have been completed while others remain pending.
The following is a brief summary of certain provisions of the
Communications Act, as amended by the 1996 Act, and of specific FCC rules and
policies. Reference should be made to the Communications Act, FCC rules and
public notices and rulings of the FCC for further information concerning the
nature and extent of FCC regulation of broadcast stations.
License Renewal
Broadcast station licenses are subject to renewal upon application to the
FCC. Pursuant to Congress' mandate in the 1996 Act, the FCC has adopted a rule
extending radio station license terms from seven to eight years. All licenses
renewed as part of the current renewal cycle will have a term of eight years.
Under the Communications Act, interested parties, including members of the
public, may file petitions to deny a license renewal application, but competing
applications for the license will not be accepted unless the current licensee's
renewal application is denied. If a petition to deny presents information from
which the FCC concludes (or if the FCC concludes on its own) that there is a
"substantial and material" question whether grant of the renewal application
would be in the public interest under applicable rules and policy, the FCC will
conduct a hearing on specified issues to determine whether renewal should be
granted. The FCC is required to grant a license renewal application if (i) the
licensee has served the public interest; (ii) the licensee has not engaged in
any serious violations of the Communications Act or the FCC's rules and
regulations; and (iii) the licensee has not engaged in any other violations that
would indicate a pattern of abuse of FCC rules or the Communications Act. The
FCC may deny a license renewal application only if it finds that a licensee has
failed to meet this three-pronged test and that there are no mitigating
circumstances to warrant grant of the license renewal for a shorter period than
the full license term, or to warrant the grant of a renewal with certain
conditions attached to the grant. Only in the event of such a denial of a
license renewal application will the FCC accept new applications for the
broadcast frequency occupied by the incumbent broadcast licensee. Also, during
the period when a renewal application is pending (generally four months prior to
expiration of the license), the transferability of the applicant's license may
be restricted.
Historically, Cox Radio's management has not experienced any material
difficulty in obtaining renewal from the FCC of any of the broadcast licenses of
stations under its control.
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<PAGE> 12
The following table sets forth, among other things, the frequency on which
each of the stations owned, or operated pursuant to an LMA, by Cox Radio and
NewCity broadcasts, and the date on which each such station's FCC license
expires (a station may continue to operate beyond the expiration date if a
timely filed license renewal application is pending):
<TABLE>
<CAPTION>
HEIGHT
ABOVE
EXPIRATION FCC AVERAGE
MARKET(1) STATION FREQUENCY DATE OF LICENSE CLASS TERRAIN POWER
- ------------------------- ------------------------- --------- ----------------- ----- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles.............. KFI-AM 640 kHz December 1, 1997 A N.A. 50 kw
KOST-FM 103.5 MHz December 1, 1997 B 949 m 12.5 kw
KACE-FM 103.9 MHz December 1, 1997 A 119 m 1.65 kw
KRTO-FM(2) 98.3 MHz December 1, 1997 A 296 m .65 kw
Atlanta.................. WSB-AM(3) 750 kHz April 1, 1996 A N.A. 50 kw
WSB-FM(3) 98.5 MHz April 1, 1996 C 311 m 100 kw
WJZF-FM(4)(5) 104.1MHz April 1, 2004 C1 371 m 60 kw
WCNN-AM(5) 680 kHz April 1, 2004 B N.A. 50 kw day
10 kw night
Miami.................... WFLC-FM 97.3 MHz February 1, 2004(6) C 307 100 kw
WHQT-FM 105.1MHz February 1, 2004(6) C 307 100 kw
Tampa.................... WWRM-FM 94.9 MHz February 1, 2004(6) C 393 m 95 kw
WCOF-FM 107.3 MHz February 1, 2004(6) C1 189 m 100 kw
WSUN-AM 620 kHz February 1, 2004(6) B N.A. 5 kw
WFNS-AM 910 kHz February 1, 2004(6) B N.A. 5 kw
Orlando.................. WDBO-AM(4) 580 kHz February 1, 2004(6) B N.A. 5 kw
WWKA-FM(4) 92.3 MHz February 1, 2004(6) C 408 m 98 kw
WCFB-FM(4) 94.5 MHz February 1, 2004(6) C 448 m 96 kw
WZKD-AM(4) 950 kHz February 1, 2004(6) B N.A. 5 kw
WHTQ-FM(7) 96.5 MHz February 1, 2004(6) C 487 m 100 kw
WMMO-FM(7) 98.9 MHz February 1, 2004(6) C2 134 m 38 kw
WHOO-AM(7) 990 kHz February 1, 2004(6) B N.A. 50 kw day
5 kw night
San Antonio.............. KCYY-FM(4) 100.3 MHz August 1, 1997 C 300 m 98 kw
KCJZ-FM(4) 106.7 MHz August 1, 1997 C 310 m 100 kw
KKYX-AM(4) 680 kHz August 1, 1997 B N.A. 50 kw day
10 kw night
Louisville............... WRKA-FM 103.1 MHz August 1, 2004(6) A 95 m 6 kw
WRVI-FM 94.7 MHz August 1, 2004(6) A 100 m 3 kw
WHTE-FM 105.9 MHz August 1, 2004(6) A 100 m 3 kw
Birmingham............... WZZK-FM(4) 104.7 MHz April 1, 2004(6) C 396 m 99 kw
WODL-FM(4) 106.9 MHz April 1, 2004(6) C 351 m 99 kw
WZZK-AM(4) 610 kHz April 1, 2004(6) B N.A. 5 kw day
1 kw night
Dayton................... WHIO-AM 1290 kHz October 1, 2004(6) B N.A. 5 kw
WHKO-FM 99.1 MHz October 1, 2004(6) B 325 m 50 kw
Tulsa.................... KWEN-FM(3)(4) 95.5 MHz June 1, 1997 C 405 m 96 kw
KJSR-FM(3)(4) 103.3 MHz June 1, 1997 C 390 m 100 kw
KRAV-FM(3)(7) 96.5 MHz June 1, 1997 C 405 m 96 kw
KGTO-AM(3)(7) 1050 kHz June 1, 1997 B N.A. 1 kw
KRMG-AM(3)(4) 740 kHz June 1, 1997 B N.A. 50 kw day
25 kw night
Bridgeport............... WEZN-FM(4) 99.9 MHz April 1, 1998 B 204 m 27.5 kw
Syracuse................. WSYR-AM(4) 570 kHz June 1, 1998 B N.A. 5 kw
WHEN-AM(7) 620 kHz June 1, 1998 B N.A. 5 kw
WYYY-FM(4) 94.5 MHz June 1, 1998 B 198 m 100 kw
WBBS-FM(4) 104.7 MHz June 1, 1998 B 150 m 50 kw
WWHT-FM(7) 107.9 MHz June 1, 1998 B 152 m 50 kw
</TABLE>
- ---------------
(1) Metropolitan market served; city of license may differ.
(2) Station to be acquired by Cox Radio pursuant to the Los Angeles Acquisition.
(3) Cox Radio or NewCity has filed an application with the FCC to renew such
licenses. Such applications are pending FCC approval as of March 1997.
(4) Station to be acquired by Cox Radio pursuant to the NewCity Acquisition.
(5) Cox Radio provides programming to this station pursuant to an LMA.
(6) License term extended by order of the FCC.
(7) Station operated by NewCity pursuant to an LMA with Cox Radio.
10
<PAGE> 13
General Ownership Matters
The Communications Act prohibits the assignment of a license or the
transfer of control of a broadcast licensee without the prior approval of the
FCC. In determining whether to grant or renew a broadcast license, the FCC
considers a number of factors pertaining to the licensee, including compliance
with the Communications Act's limitations on alien ownership, compliance with
various rules limiting common ownership of broadcast, cable and newspaper
properties, and the "character" of the licensee and those persons holding
"attributable" interests in the licensee.
To obtain the FCC's prior consent to assign or transfer a broadcast
license, appropriate applications must be filed with the FCC. If the application
involves the assignment of the license or a "substantial change" in ownership or
control (e.g., the transfer of more than 50% of the voting stock), the
application must be placed on public notice for a period of approximately 30
days during which petitions to deny the application may be filed by interested
parties, including members of the public. If an assignment application does not
involve a "substantial change" in ownership or control, it is considered a "pro
forma" application, and is not subject to the 30-day public notice period or the
filing of petitions to deny. A "pro forma" application is nevertheless subject
to having informal objections filed against it. If the FCC grants an assignment
or transfer application, interested parties have approximately 30 days from
public notice of the grant to seek reconsideration of the grant. Generally,
parties who do not file petitions to deny or informal objections against the
application face a high hurdle in seeking reconsideration of the grant. The FCC
normally has approximately an additional 10 days to set aside such grant on its
own motion. When passing on an assignment or transfer application, the FCC is
prohibited from considering whether the public interest might be served by an
assignment or transfer to any party other than the assignee or transferee
specified in the application.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. In the
case of corporations holding broadcast licenses, the interests of officers,
directors and those who, directly or indirectly, have the right to vote 5% or
more of the corporation's voting stock are generally deemed to be attributable,
as are positions of an officer or director of a corporate parent of a broadcast
licensee. Cox Radio's indirect parent, CEI, has attributable ownership interests
in television stations located in Orlando, Florida; Charlotte, North Carolina;
Pittsburgh, Pennsylvania; Dayton, Ohio; Atlanta, Georgia; Oakland, California;
and El Paso, Texas and has entered into an agreement to acquire a television
station in Reno, Nevada, and an agreement to acquire a television station
serving the Seattle/Tacoma, Washington area. CEI also has attributable ownership
interests in daily newspapers located in Grand Junction, Colorado; Palm Beach,
Florida; Atlanta, Georgia; Greenville, Rocky Mount and Elizabeth City, North
Carolina; Dayton and Springfield, Ohio; and Austin, Longview, Lufkin, Waco,
Nacogdoches, Marshall and Jefferson, Texas. CEI has a non-attributable ownership
interest in a daily newspaper located in Daytona Beach, Florida. Paul J. Rizzo,
a director of CEI, is a director of The McGraw-Hill Companies, Inc. which,
through a wholly-owned subsidiary, owns and operates television stations
KMGH-TV, Denver, Colorado; WRTV, Indianapolis, Indiana; KERO-TV, Bakersfield,
California, and KGTV, San Diego, California. Mr. Rizzo has no involvement in the
day-to-day operations and management of any of the McGraw-Hill television
stations, only one of which, KERO-TV, is located in a market (Los Angeles, CA)
in which Cox Radio owns radio stations. None of the other officers, directors or
5% or greater shareholders of the voting stock of Cox Radio or of its
subsidiaries has any attributable interest in any broadcast stations other than
through Cox Radio and its subsidiaries.
The FCC treats all partnership interests as attributable, except for those
limited partnership interests that are "insulated" by the terms of the limited
partnership agreement from "material involvement" in the media-related
activities of the partnership under FCC policies. Stock interests held by
insurance companies, mutual funds, bank trust departments and certain other
passive institutional investors that hold stock for investment purposes only
become attributable with the ownership of 10% or more of the stock of a
corporation holding broadcast licenses. To assess whether a voting stock
interest in a direct or indirect parent corporation of a broadcast licensee is
attributable, the FCC uses a "multiplier" analysis in which non-controlling
voting stock interests are deemed proportionally reduced at each non-controlling
link in a multi-corporation ownership chain.
11
<PAGE> 14
In March 1992, the FCC initiated an inquiry and rulemaking proceeding in
which it solicited comment on whether it should alter its ownership attribution
rules by (a) raising the basic benchmark for attributing ownership in a
corporate licensee from 5% to 10% of the licensee's voting stock; (b) increasing
the attribution benchmark for "passive institutional investors" in corporate
licensees from 10% to 20% of the licensee's voting stock; (c) broadening the
class of investors eligible for "passive institutional investor" status to
include Small Business and Minority Enterprise Small Business Investment
Companies; and (d) exempting certain widely-held limited partnership interests
from attribution where each individual interest represents an insignificant
percentage of total partnership equity.
The FCC initiated a further rulemaking proceeding in December 1994 to
solicit additional public comment on amending its attribution rules. Among the
issues being explored in the proceeding are: (a) whether the FCC should raise
the benchmarks for determining voting stock interests to be "attributable" from
5% to 10% for those stockholders other than passive institutional investors, and
from 10% to 20% for passive institutional investors; (b) whether to consider
non-voting stock interests to be attributable under the multiple ownership rules
(at present such interests are not attributable); (c) whether to consider
generally attributable voting stock interests which account for a minority of
the issued and outstanding shares of voting stock of a corporate licensee, where
the majority of the corporation's voting stock is held by a single stockholder;
(d) whether to relax, for attribution purposes, the FCC's insulation standards
for business development companies and other widely-held limited partnerships;
(e) whether to adopt an equity threshold for non-insulated limited partnerships
below which a limited partner would not be considered to have an attributable
interest in the partnership, regardless of that partner's insulation from
day-to-day management and operations of the media enterprises of the
partnership; (f) how to treat limited liability companies and other new business
forms for purposes of the FCC's attribution rules; (g) the impact of limited
liability companies on broadcast ownership opportunities for women and
minorities; and (h) whether to adopt a new attribution policy under which the
FCC would scrutinize multiple "cross interests" or other significant business
relationships, which are held in combination among ostensibly arm's-length
competing broadcasters in the same market, to determine whether the combined
interests, which individually would not raise concerns as to potential
diminution of competition and diversity of viewpoints, would nonetheless raise
such concerns in light of the totality of the relationships among the parties
(including, e.g., LMAs, JSAs, debt relationships, holdings of non-attributable
interests, or other relationships among competing broadcasters in the same
market).
In November 1996, the FCC issued a second further notice of proposed
rulemaking in which, in addition to the attribution proposals outlined above, it
seeks comment on whether the FCC should modify its attribution rules by, among
other things, (a) attributing ownership in situations where an entity (i) holds
a non-attributable equity or debt interest in a broadcast licensee that exceeds
a minimum threshold and (ii) either supplies programming to the licensee or owns
a daily newspaper, cable system or broadcast station in the same market as the
licensee ("Equity/Debt Plus Rule"); (b) the attribution of interests in LMAs
between television stations in the same market; and (c) the attribution of
interests in JSAs. With respect to application of the Equity/Debt Plus Rule, if
adopted, the Commission may grandfather equity/debt plus relationships that were
in existence as of December 15, 1994, or require parties to terminate such
relationships within a short period of time following the rule's adoption. The
Company cannot predict when or whether any of these attribution proposals will
ultimately be adopted by the FCC.
The Communications Act prohibits the issuance of a broadcast license to, or
the holding of a broadcast license by, any corporation of which more than 20% of
the capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation organized under the laws of a foreign country (collectively,
"Aliens"). The Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast license by, any corporation directly
or indirectly controlled by any other corporation of which more than 25% of the
capital stock is owned of record or voted by Aliens, unless the FCC finds that
the public interest would be served by granting a license under such
circumstances. The FCC generally has declined to permit the control of broadcast
licensees by corporations with foreign ownership or voting rights in excess of
the 25% benchmark. The FCC has issued interpretations of
12
<PAGE> 15
existing law under which these restrictions in modified form apply to other
forms of business organizations, including partnerships, and has established
policies for the calculation of indirect alien ownership and voting rights. As a
result of these provisions, no more than 25% of the Company's capital stock may
be owned or voted by Aliens.
Furthermore, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest in
a broadcast station or daily newspaper from having a "meaningful"
non-attributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock, voting stock, and
limited partnership interests) and significant employment positions. This policy
may limit the permissible acquisitions and investments Cox Radio may make and
the permissible investments a purchaser of Cox Radio's Common Stock may make or
hold. If the FCC determines that a stockholder of Cox Radio has violated this
cross-interest policy, Cox Radio 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. As part of its
rulemaking proceeding soliciting public comment on various proposals to modify
its broadcast attribution policies, the FCC also has requested public comment on
whether to eliminate or codify the remaining aspects of the cross-interest
policy with respect to significant employment positions, non-attributable equity
interests and joint venture arrangements.
Local Radio Ownership Rule
The FCC's local radio multiple ownership rule (the "Radio Contour Overlap
Rule") provides for certain limits on the number of radio stations that one
entity may own in a local geographic market. These limits are as follows:
(a) In a radio market with 45 or more commercial radio stations, a
party may own, operate or control up to eight commercial radio stations,
not more than five of which are in the same broadcast service (i.e., AM or
FM);
(b) In a radio market with between 30 and 44 (inclusive) commercial
radio stations, a party may own, operate or control up to seven commercial
radio stations, not more than four of which are in the same broadcast
service;
(c) In a radio market with between 15 and 29 (inclusive) commercial
radio stations, a party may own, operate or control up to six commercial
radio stations, not more than four of which are in the same broadcast
service; and
(d) In a radio market with 14 or fewer commercial radio stations, a
party may own, operate or control up to five commercial radio stations, not
more than three of which are in the same broadcast service, except that a
party may not own, operate or control more than 50 percent of the stations
in the market.
Notwithstanding the limits contained in the Radio Contour Overlap Rule, the
FCC has the authority to permit any person or entity to own, operate or control,
or have an attributable ownership interest in a number of radio broadcast
stations in excess of the rule's limits if the FCC determines that such
ownership, operation, control or interest will result in an increase in the
number of radio broadcast stations that are in operation. Although the 1996 Act,
which granted the FCC such authority, does not explain the intent or rationale
for this provision, Cox Radio believes that this exception may apply to
newly-constructed stations and/or stations that have been off the air but are
resuming broadcast operations.
The FCC does not regulate the number of radio stations that may be owned or
controlled by one entity nationally.
LMAs and JSAs
Over the past several years, a significant number of radio broadcast
licensees, including certain of Cox Radio's subsidiaries, have entered into
local marketing agreements ("LMAs") and joint sales agreements
13
<PAGE> 16
("JSAs"). Under a typical LMA, separately-owned and licensed radio stations
agree to enter into cooperative arrangements subject to compliance with the
requirements of antitrust laws and with the FCC's rules and policies. Under
these types of arrangements, separately-owned stations serving a common
geographic area agree to function cooperatively in terms of programming,
advertising sales, etc., subject to the licensee of each station maintaining
independent control over the programming and station operations of its own
station. Such arrangements are an extension of the concept of "time brokerage,"
under which a licensee of a station sells the right to broadcast blocks of time
on its station to an entity or entities which program the blocks of time and
sell their own commercial advertising announcements for their own account during
the time periods in question. Under a typical JSA, two separately-owned radio
stations serving a common service area agree to function cooperatively in terms
of advertising sales only. Under such an arrangement, the licensee of one
station sells the advertising time on the other licensee's station for its own
account but does not provide any programming to the other licensee's station.
This arrangement is also subject to ultimate control by the latter licensee.
The FCC has heretofore determined that issues of joint advertising sales
should be left to antitrust enforcement and has specifically exempted LMAs from
its "cross-interest" policy. Further, the FCC and the staff of the FCC's Mass
Media Bureau have held that LMAs do not per se constitute a transfer of control
and are not contrary to the Communications Act, provided that the licensee of
the brokered station maintains complete responsibility for and control over
operations of its broadcast station (including, specifically, control over
station finances, personnel and programming) and complies with applicable FCC
rules and with antitrust laws. See "Item 3 -- Legal Proceedings." LMAs between
two stations in the same market that involve more than 15% of the brokered
station's broadcast hours per week are treated as if the brokered station were
owned by the brokering station for purposes of the Radio Contour Overlap Rule. A
broadcast station, therefore, is not permitted to enter into an LMA giving it
the right to program more than 15% of the broadcast time, on a weekly basis, of
another local station which it could not own under the FCC's Radio Contour
Overlap Rule. A JSA where no programming is provided is not considered an
attributable ownership interest under current FCC rules. However, in connection
with its broadcast attribution rulemaking proceeding, the FCC is considering
revising its attribution rules to adopt the "Equity/Debt Plus Rule" and to deem
attributable for purposes of applying the ownership rules interests in JSAs
where the brokered and brokering stations serve substantially the same market.
The FCC's rules also prohibit a broadcast licensee from simulcasting more
than 25% of its programming on another station in the same broadcast service
(i.e., AM-AM or FM-FM) whether it owns both stations or operates both through an
LMA where the brokered and brokering stations serve substantially the same
geographic area.
Cross-Ownership Rules
Radio/Television Cross-Ownership Rule -- The FCC's radio/television
cross-ownership rule (the "one to a market" rule) generally prohibits a single
individual or entity from having an attributable interest in a television
station and a radio station serving the same market. However, in each of the 25
largest local markets in the United States, provided that there are at least 30
separately-owned stations in the particular market, the FCC has traditionally
employed a policy that presumptively allows waivers of the one to a market rule
to permit the common ownership of one AM, one FM and one TV station in the same
market. The 1996 Act directs the FCC to extend this policy to each of the top 50
markets. As part of a rulemaking commenced in 1994 examining the television
local ownership rules, the FCC has proposed to eliminate this rule altogether
or, in the alternative, to relax its policy for granting waivers of this rule.
The FCC does not apply its presumptive waiver policy in cases involving the
common ownership of one television station and two or more radio stations in the
same service (AM or FM) in the same market. Pending its ongoing rulemaking
proceeding reexamining the one to a market rule, the FCC has stated that it will
consider waivers of the rule in such instances on a case-by-case basis,
considering (a) the public service benefits that will arise from the joint
operation of the facilities such as economies of scale, cost savings, and
programming and service benefits; (b) the types of facilities involved; (c) the
number of media outlets owned by the applicant in the relevant market; (d) the
financial difficulties of the stations involved; and (e) the
14
<PAGE> 17
nature of the relevant market in light of the level of competition and diversity
after joint operation is implemented. Cox Radio cannot predict whether the FCC
will adopt any of these proposals.
Radio/Daily Newspaper Cross-Ownership Rule -- The FCC's rules prohibit the
common ownership of a radio station and a daily newspaper in the same market. In
1993, Congress authorized the FCC to grant waivers of the radio-newspaper
cross-ownership rule to permit cross-ownership of a radio station and a daily
newspaper in a top 25 market with at least 30 independent media voices, provided
the FCC finds the transaction to be in the public interest. Under current
policy, the FCC will grant a permanent waiver of the radio-newspaper
cross-ownership rule only in those circumstances where the effects of applying
the rule would be "unduly harsh," i.e., the newspaper is unable to sell the
commonly-owned station or the sale would be at an artificially depressed price,
or the local community could not support a separately-owned newspaper and radio
station. The FCC has previously granted only two permanent waivers of this
cross-ownership rule. The FCC has pending a Notice of Inquiry requesting comment
on possible changes to its policy for waiving the rule including, among other
things, (a) whether waivers should only be available in markets of a particular
size; (b) whether any weight should be given to a newspaper's or radio station's
economic presence or market penetration; and (c) whether there should be limits
on the number of radio stations or other media outlets that could be co-owned
with a newspaper in the same market.
At present, the FCC's one to a market and radio-newspaper cross-ownership
rules do not apply to radio LMAs. As part of its attribution rulemaking,
however, the FCC has proposed to apply these rules to radio LMAs. If such a rule
were adopted, Cox Radio could not provide programming to a radio station
pursuant to an LMA if Cox Radio or an individual or an entity holding an
attributable ownership interest in Cox Radio already owned a television station
or a daily newspaper in the same market.
Because of these multiple and cross-ownership rules, a purchaser of Cox
Radio's Common Stock who acquires an attributable interest in Cox Radio may
violate and may cause Cox Radio to violate the FCC's ownership rules if such
purchaser also has an attributable interest in other television or radio
stations, or in daily newspapers, depending on the number and location of those
radio or television stations or daily newspapers. Such a purchaser also may be
restricted in the companies in which it may invest, to the extent that those
investments give rise to an attributable interest. If a stockholder of Cox Radio
who holds an attributable interest in Cox Radio violates any of these ownership
rules, Cox Radio 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
consent for certain future acquisitions.
Under the 1996 Act, the FCC is required to review all of its broadcast
ownership rules every other year to determine whether the public interest
dictates that such rules be repealed or modified.
Programming and Operation
The Communications Act requires broadcasters to serve the "public
interest." Since the late 1970s, the FCC gradually has relaxed or eliminated
many of the more formalized procedures it had developed to promote the broadcast
of certain types of programming responsive to the needs of a station's community
of license. However, licensees are still 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 often will be considered by the FCC when it evaluates a
licensee's license renewal application, although such complaints may be filed at
any time and generally may be considered by the FCC at any time. Stations also
must follow various rules promulgated under the Communications Act that
regulate, among other things, political advertising, sponsorship identification,
the advertisement of contests and lotteries, obscene and indecent broadcasts and
technical operations, including limits on radio frequency radiation. In
addition, broadcast licensees must develop and implement programs designed to
promote equal employment opportunities for minorities and women and must submit
reports to the FCC with respect to these matters annually and in connection with
the station's license renewal application.
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 (i.e., less than the full term) renewals or, for particularly
egregious violations, the denial of a license renewal application or the
revocation of a license.
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<PAGE> 18
Restrictions on Broadcast Advertising
Advertising of cigarettes and certain other tobacco products on broadcast
stations has been banned for many years. Various states restrict the advertising
of alcoholic beverages. Congressional committees have recently examined
legislative proposals which may eliminate or severely restrict the advertising
of beer and wine. No prediction can be made as to whether any or all of the
present proposals will be enacted into law.
Digital Audio Broadcasting
The FCC recently has allocated spectrum to a new technology, DAB, to
deliver satellite-based audio programming to a national or regional audience and
is considering 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. 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 broadcast
frequencies. In addition, applications by several entities currently are pending
at the FCC for authority to offer multiple channels of digital,
satellite-delivered S-Band aural services that could compete with conventional
terrestrial radio broadcasting. These satellite radio services use technology
that may permit higher sound quality than is possible with conventional AM and
FM terrestrial radio broadcasting. The FCC recently adopted service and
technical regulations for satellite digital audio radio service and has decided
to conduct a closed auction among four applicants who will bid for the two
satellite digital audio radio slots. The FCC has granted at least one of these
applicants a waiver to begin satellite construction. Implementation of DAB,
whether delivered by satellite or terrestrial means, would provide an additional
audio programming service that could compete with the Company's radio stations
for listeners, but the effect upon Cox Radio cannot be predicted.
Proposed Changes
Congress and the FCC have under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could, directly or indirectly: (i) affect the operation,
ownership and profitability of Cox Radio and its radio broadcast stations; (ii)
result in the loss of audience share and advertising revenue of the Company's
radio broadcast stations; and (iii) affect the ability of Cox Radio to acquire
additional radio broadcast stations or to finance such acquisitions. Such
matters include, for example, changes to the license renewal process; proposals
to impose spectrum use or other governmentally-imposed fees upon licensees;
proposals to expand the FCC's equal employment opportunity rules and other
matters relating to minority and female involvement in broadcasting; proposals
to repeal or modify some or all of the FCC's multiple ownership rules and/or
policies; proposals to increase the benchmarks or thresholds for attributing
ownership interests in broadcast media; proposals to change rules or policies
relating to political broadcasting; technical and frequency allocation matters,
including those relative to the implementation of DAB on both a satellite and
terrestrial basis and AM stereo broadcasting; proposals to permit expanded use
of FM translator stations; 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, alien ownership and cross-ownership rules
and policies; changes to broadcast technical requirements; proposals to allow
telephone companies to deliver audio and video programming to homes through
existing phone lines; proposals to limit the tax deductibility of advertising
expenses by advertisers; and proposals to auction the right to use the radio
broadcast spectrum to the highest bidder, instead of granting broadcast licenses
and subsequent license renewals free of charge.
In addition, the FCC has authorized an additional 100 kHz of bandwidth for
the AM band and is in the process of finalizing an allotment plan for allocation
of frequencies in the new band. Certain existing AM station licensees would then
be permitted to modify their existing AM band licenses and operate their
stations on frequencies in the expanded AM band. At the end of a transition
period to be determined by the FCC, those licensees would be required to return
to the FCC either the license for their existing AM band station or the license
for the expanded AM band station.
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<PAGE> 19
Cox Radio cannot predict 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.
SEASONALITY
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures. Cox Radio's
revenues and broadcast cash flows are typically lowest in the first quarter and
higher in the second and fourth quarters.
EMPLOYEES
As of December 31, 1996, Cox Radio employed 338 full-time and 244 part-time
employees. Of these employees, 53 were represented by American Federation of
Television and Radio Announcers ("AFTRA"), two were represented by National
Association of Broadcasting Employees and Technicians, AFL-CIO ("NABET") and one
was represented by the International Brotherhood of Electrical Workers ("IBEW").
As of December 31, 1996, NewCity employed 420 full-time and 203 part-time
employees, none of whom were represented by unions. Cox Radio considers its
employee relations to be satisfactory.
Cox Radio employs several on-air personalities with large audiences in
their respective markets. Cox Radio enters into employment agreements with these
personalities to protect its interests in those relationships that it believes
to be valuable. Cox Radio does not believe that the loss of any one of these
personalities would have a material adverse effect on Cox Radio's financial
condition or results of operations.
PATENTS AND TRADEMARKS
Cox Radio and NewCity both own numerous domestic trademark registrations
related to the business of the Company's stations. Neither Cox Radio nor NewCity
owns any patents or patent applications. Cox Radio does not believe that any of
its or NewCity's trademarks are material to its business or operations.
THE NEWCITY ACQUISITION
General
On July 1, 1996, Cox Radio entered into an Agreement and Plan of Merger
(the "Merger Agreement") with NewCity and certain stockholders of NewCity (the
"Stockholders"). Pursuant to the Merger Agreement, New Cox Radio II, Inc., a
wholly-owned subsidiary of Cox Radio, will be merged with and into NewCity (the
"Merger"), with NewCity continuing as the surviving corporation as a
wholly-owned subsidiary of Cox Radio. The aggregate purchase price for NewCity
is approximately $253 million, consisting of approximately $163 million payable
in cash, approximately $87 million of existing NewCity debt and approximately $3
million in working capital adjustments. Upon payment of the consideration
described above, Cox Radio will be the sole stockholder of the surviving
corporation. Cox Radio will be required to borrow approximately $105 million to
consummate the NewCity Acquisition. See "-- Cox Radio, Inc. Credit Agreement."
The Communications Act and FCC rules and policies require the prior consent
of the FCC to any transfer of control of broadcast licensees and assignments of
FCC licenses and, therefore, consummation of the NewCity Acquisition is subject
to the receipt of such FCC approval. There can be no assurance that such FCC
approval will be obtained. See "-- Federal Regulation of Radio Broadcasting" and
"Item 3 -- Legal Proceedings."
The Merger Agreement
Representations and Warranties. In the Merger Agreement, NewCity has made
a number of customary representations and warranties. Such representations
relate to, among other things, the corporate organization and qualifications of
NewCity; the authorization, execution, delivery, performance and enforceability
of the Merger Agreement; the capitalization of NewCity; the accuracy of the
historical financial statements of
17
<PAGE> 20
NewCity; the conduct of the business of NewCity; the absence of undisclosed
material litigation; compliance with applicable law; the absence of undisclosed
liabilities; material contracts and other agreements and arrangements of
NewCity; the employee benefit plans of NewCity; environmental matters; certain
tax matters; certain intellectual property rights; and compliance with the
requirements, rules and regulations of the FCC.
Covenants. NewCity has agreed, among other things, that pending
consummation of the NewCity Acquisition, NewCity will not acquire or agree to
acquire any business or any corporation, partnership, joint venture, association
or other business organization or division thereof, or any properties material
to NewCity, except in the ordinary course of business.
Conditions. The obligation of each party to effect the Merger is
conditioned upon, among other things, the absence of an order or other ruling of
a court of competent jurisdiction preventing the consummation of the Merger; the
absence of any material adverse change to the transactions contemplated by the
Merger Agreement required to obtain approval under the HSR Act; and the receipt
of all consents from the FCC and other third parties required with respect to
the Merger. In addition, the obligation of Cox Radio to effect the Merger is
conditioned upon certain other customary conditions.
Termination. The Merger Agreement may be terminated at any time prior to
the Merger becoming effective: (i) by mutual consent of Cox Radio and NewCity;
(ii) by either Cox Radio or NewCity if the Merger is not consummated by June 30,
1997, provided that the terminating party is not in material breach of its
obligations under the Merger Agreement; and (iii) by either party if certain
conditions to such party's obligation to effect the Merger have not been waived
and are incapable of being satisfied by June 30, 1997.
Indemnification. After the closing of the Merger, the Stockholders,
jointly and severally, have agreed to indemnify, and hold Cox Radio and the
employees, officers, directors and stockholders of Cox Radio harmless from and
against liabilities arising from, among other things, the breach of any of the
representations and warranties made by NewCity and any of the Stockholders, and
the failure of NewCity or any of the Stockholders to fulfill the obligations of
NewCity or any of the Stockholders. The Merger Agreement provides that the
indemnification obligations of the Stockholders are limited to $4 million in the
aggregate.
The Guaranty
Cox Broadcasting has provided a guaranty (the "Guaranty") of Cox Radio's
obligations to NewCity in connection with the NewCity Acquisition. Cox Radio
will be required to borrow approximately $105 million to consummate the NewCity
Acquisition. See "-- Cox Radio, Inc. Credit Agreement."
Additions to Senior Operating Management Team
Cox Radio anticipates that, upon consummation of the NewCity Acquisition,
Richard A. Ferguson will be elected to serve as a member of the Cox Radio Board.
RICHARD A. FERGUSON has served as President, Chief Executive Officer and a
Director of NewCity since its organization in 1986. He served as the President
of Katz Broadcasting Company, Inc., a subsidiary of Katz Communications, Inc.,
from 1981 to 1986, when he led a management group in organizing NewCity to
purchase all of the stock of Katz Broadcasting Company, Inc. Prior to 1981, he
served as the President of Park City Communications, Inc. ("Park City"), until
Park City was acquired by Katz Communications, Inc. Mr. Ferguson is Chairman of
the Radio Board of Directors of the NAB and a member of the Radio Operators
Caucus.
In addition, upon consummation of the NewCity Acquisition, Mr. Ferguson and
certain other officers of NewCity are expected to become executive officers of
Cox Radio.
JAMES T. MORLEY has been a Director and Executive Vice President of NewCity
since its organization in 1986. In 1971, he joined RKO General Broadcasting in
Boston, Massachusetts and joined the sales staff of WROR-FM in February 1972. In
October 1975, Mr. Morley became the General Sales Manager for Plough
Broadcasting's Boston radio stations, WCOP-AM/FM. He became General Sales
Manager of WEZN-FM in November 1978, was elected Vice President of Park City in
May 1979 and became Station Manager of
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<PAGE> 21
WEZN-FM in November 1979. In August 1981, he became General Manager of WEZN-FM.
From 1981 until 1986, he was Senior Vice President of the Broadcasting Company,
then a subsidiary of Katz Broadcasting Company, Inc. He is a member of the Board
of Directors of the New York Marketing and Radio Association.
RICHARD A. REIS has been a Director and Group Vice President of NewCity
since its organization in 1986. From 1983 to 1984, he served as Vice President
of the Broadcasting Company, then a subsidiary of Katz Broadcasting Company,
Inc, becoming Group Vice President in 1984. He was General Manager of WFTQ-AM
and WAAF-FM in Worcester, Massachusetts from 1981 and 1983, respectively, to
1989. Since 1989, he has served as General Manager of WDBO-AM and WWKA-FM in
Orlando, Florida and of WCFB-FM since 1992. He is a member of the Orlando Radio
Broadcasters Association.
Upon consummation of the NewCity Acquisition, it is expected that the
Company's senior operating management will consist of Mr. Neil, Mr. Ferguson,
Mr. Morgan, Mr. Green, Mr. Morley and Mr. Reis. See "-- Operating
Strategy -- Leveraging of Senior Operating Management Team."
COX RADIO, INC. CREDIT AGREEMENT
On March 7, 1997, Cox Radio entered into a $300 million, five-year, senior,
unsecured revolving credit facility (the "Credit Agreement") with certain banks,
including Texas Commerce Bank National Association, as Administrative Agent,
Nationsbank of Texas, N.A., as Syndications Agent, and Citibank, N.A., as
Documentation Agent. The loan proceeds may be used to (i) finance the payment of
the consideration payable in the Merger, (ii) repay certain secured debt of
NewCity and (iii) finance (A) the possible repayment or repurchase of certain
unsecured debt of NewCity, (B) additional acquisitions and (C) other corporate
purposes. The Credit Agreement restricts the payment of dividends, prohibits
certain mergers, consolidations or dispositions of assets and establishes
limitations on, among other things, additional indebtedness and transactions
with affiliates.
ITEM 2. PROPERTIES
Cox Radio's corporate offices are located in Atlanta, Georgia. The types of
properties required to support each of the Company's radio stations include
offices, studios, transmitter sites and antenna sites. The transmitter sites and
antenna sites generally are located so as to provide maximum market coverage.
Cox Radio owns transmitter and antenna sites in the Tampa, Miami,
Louisville, Syracuse, Orlando, Tulsa and Los Angeles markets and leases
transmitter and antenna sites in the Los Angeles, Atlanta, Miami, Tampa,
Orlando, Dayton, Louisville, Syracuse and Tulsa markets. Cox Radio owns its
studio and office facilities in Los Angeles and Miami and leases its facilities
in Atlanta, Tampa, Dayton, Louisville, Orlando and Syracuse. Cox Radio generally
considers its facilities to be suitable and of adequate size for their current
and intended purposes. Cox Radio does not anticipate any difficulties in
renewing any facility leases or in leasing additional space, if required.
Cox Radio owns substantially all of its other equipment, consisting
principally of transmitting antennae, transmitters, studio equipment and general
office equipment. The towers, antennae and other transmission equipment used by
the Company's stations are generally in good condition, although opportunities
to upgrade facilities are continuously reviewed.
NewCity's corporate offices are located in Bridgeport, Connecticut. The
types of properties required to support each of NewCity's radio stations include
offices, studios, transmitter sites and antenna sites.
NewCity owns transmitter and antenna sites in the Orlando, San Antonio,
Syracuse, Tulsa, and Atlanta markets and leases transmitter and antenna sites in
the Birmingham, Bridgeport, Orlando, San Antonio, Syracuse and Tulsa markets.
NewCity owns its studio and office facilities in the Birmingham and Orlando
markets and leases its facilities in the Atlanta, Bridgeport, Syracuse, Tulsa
and San Antonio markets. NewCity generally considers its facilities to be
suitable and of adequate size for their current and intended purposes. NewCity
does not anticipate any difficulties in renewing any facility leases or in
leasing additional space, if required.
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ITEM 3. LEGAL PROCEEDINGS
Cox Radio is involved in litigation from time to time in the ordinary
course of its business. In management's opinion, the litigation in which Cox
Radio is currently involved, individually and in the aggregate, is not material
to Cox Radio's financial condition or results of operations.
In connection with the negotiation of the NewCity Acquisition, management
of Cox Radio was informed of the litigation in which NewCity is involved. In the
opinion of the management of Cox Radio, on the basis of such information, such
NewCity litigation is not material to NewCity's financial condition or results
of operations.
In connection with certain of the Pending Transactions, the Company entered
into several LMAs to program certain of the stations involved in such
transactions prior to the expiration of the HSR waiting period applicable to
such Pending Transactions. See "Item 1. -- Business." The Company, along with
several other similarly-situated radio broadcasting companies, was advised by
the Federal Trade Commission ("FTC") that LMAs, if entered into in connection
with an acquisition prior to the expiration of the waiting period required by
HSR, may be violations of HSR. The Department of Justice ("DOJ") investigated
the Pending Transactions which involve such LMAs. However, on October 21, 1996,
a Deputy Assistant Attorney General issued a statement that "absent
extraordinary circumstances, the DOJ does not intend to seek HSR civil penalties
as to parties who in the past entered into LMAs in connection with a purchase
agreement." In light of this statement, Cox Radio believes that the likelihood
of litigation regarding this issue is remote.
In connection with the NewCity Acquisition, on July 29, 1996, CEI, on
behalf of Cox Radio, filed a HSR notification with the DOJ and the FTC. On
August 28, 1996, the DOJ issued a request for additional documents and
information (a "second request") relating to the Orlando area. CEI and NewCity
complied with the second request on December 2 and 3, 1996, respectively, and
the HSR waiting period expired on December 23, 1996. By letter dated January 14,
1997, DOJ confirmed the completion of the HSR process.
On January 10, 1997, CEI received a Civil Investigative Demand ("CID") from
the Antitrust Division of the DOJ. The CID sought production of documents and
interrogatory responses with respect to radio advertising in the Syracuse, New
York area. In the Syracuse area, Cox Radio is the licensee of two radio
stations; pursuant to the NewCity Acquisition, Cox Radio would acquire an
additional three stations. The CID stated that the DOJ was seeking the
information to determine whether the proposed acquisition might violate section
1 of the Sherman Act and/or section 7 of the Clayton Act. On February 27, 1997,
the Company and NewCity were advised that the DOJ had closed its investigation
of the Syracuse market.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal market in which the Class A Common Stock is traded is the New
York Stock Exchange, where such Class A Common Stock trades under the symbol
"CXR". The approximate number of stockholders of record of Class A Common Stock
as of March 18, 1997 was 55. Class A Common Stock commenced trading on September
27, 1996, following effectiveness of the Company's initial public offering.
Accordingly, history of sales prices is limited to the fourth quarter of 1996.
QUARTERLY MARKET INFORMATION:
CLASS A COMMON STOCK
<TABLE>
<CAPTION>
1996 HIGH LOW
- ---- ---- ---
<S> <C> <C>
Fourth Quarter.............................................. 23 1/2 16
</TABLE>
There is no public market for Class B Common Stock. Cox Broadcasting is the
only record holder of Class B Common Stock.
There were no sales of unregistered securities of the Company.
There have been no stock or cash dividends paid on any of Cox Radio's
equity securities since the formation of the Company in the Cox Radio
Consolidation immediately prior to the Company's initial public offering. Cox
Radio does not intend to pay cash dividends in the foreseeable future. Prior to
the consummation of the Cox Radio Consolidation, certain of the indirect, wholly
owned subsidiaries of CEI, including WIOD, Inc. (the predecessor entity of Cox
Radio), paid cash dividends to CEI.
Cox Radio has been selected for listing on the Chicago Board Options
Exchange, a national securities exchange. Trading in options began on February
28, 1997.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data have been derived from the
Consolidated Financial Statements of Cox Radio. The data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of Cox
Radio and notes thereto included elsewhere herein. The statements of operations
data and other operating data for the years ended December 31, 1993, 1994, 1995
and 1996 and the balance sheet data as of December 31, 1994, 1995 and 1996 have
been derived from audited Consolidated Financial Statements of Cox Radio. The
statements of operations data and other operating data for the year ended
December 31, 1992 and the balance sheet data as of December 31, 1992 and 1993
have been derived from unaudited Consolidated Financial Statements of Cox Radio,
which, in the opinion of management, include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of financial
position at such dates and results of operations for such periods. The pro forma
financial data for 1996 have been derived from the unaudited pro forma combined
condensed financial statements and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PRO FORMA
----------------------------------------------- ---------
1992 1993 1994 1995 1996 1996
------ ------ ------ ------ ------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues(1).............................. $ 97.7 $ 95.0 $111.5 $123.6 $132.9 $189.7
Station operating expenses................... 70.9 67.9 76.3 90.0 91.9 131.1
Corporate general and administrative
expenses(2)................................ 2.2 2.5 2.7 5.9 5.3 5.1
Depreciation and amortization................ 7.5 7.3 6.9 7.2 8.1 18.0
------ ------ ------ ------ ------ ------
Operating income............................. 17.1 17.3 25.6 20.5 27.6 35.5
Interest expense............................. 7.7 5.6 5.2 6.0 4.6 16.6
Net income (loss)(3)......................... 4.2 (1.1)(4) 11.2 8.2 14.9 9.1
OTHER OPERATING DATA:
Broadcast cash flow(5)....................... $ 26.8 $ 27.1 $ 35.2 $ 33.6(6) $ 41.0 $ 58.6
Broadcast cash flow margin(5)................ 27.4% 28.5% 31.6% 27.2% 30.9% 30.9%
EBITDA(5).................................... $ 24.6 $ 24.6 $ 32.5 $ 27.7(6) $ 35.7 $ 53.5
After-tax cash flow(5)....................... 11.7 13.8 18.1 15.4 23.0 27.1
Net cash provided by operating activities.... 9.9 11.4 14.1 14.0 26.9 n/m
Net cash used in investing activities........ 0.1 6.1 12.3 17.3 62.6 n/m
Net cash provided by (used in) financing
activities................................. (9.3) (4.8) (1.6) 3.1 44.6 n/m
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents(7)................. $ 1.1 $ 1.7 $ 1.9 $ 1.7 $ 10.6 $ 31.9
Intangible assets, net....................... 113.9 114.2 120.1 126.8 138.1 449.5
Total assets................................. 165.2 168.3 180.0 191.8 261.7 572.1
Total debt (including amounts due to CEI).... 86.2 89.7 120.3 125.1 -- 210.8
Shareholder's equity......................... 70.3 64.2 40.4 47.2 235.8 250.4
</TABLE>
- ---------------
(1) Total revenues less advertising agency commissions.
(2) As described in Note 9 to the Consolidated Financial Statements, certain
executives participated in CEI's Unit Appreciation Plan ("UAP"). Because CEI
is, and Cox Radio was, a private company, the benefits under the UAP are
generally payable in cash. This cash payment option has resulted in charges
to compensation expense of $0.4 million, $0.9 million, $0.8 million, $1.6
million, and $2.5 million for the years ended December 31, 1992, 1993, 1994,
1995 and 1996, respectively. This compensation expense is included in
historical corporate general and administrative expenses. Public companies
traditionally implement stock award plans that provide for the issuance of
stock to participants and do not result in compensation expense under
applicable accounting standards. The Company implemented the Cox Radio, Inc.
Long-Term Incentive Plan in 1996 and, therefore, will not incur this expense
in future periods. In addition, for the year ended December 31, 1995
corporate general and administrative expenses include a nonrecurring
corporate charge.
(3) Cox Radio became publicly traded on the New York Stock Exchange effective
September 27, 1996. Historical earnings per share information has not been
presented because the dissimilarity of the previous capital structure of Cox
Radio precludes a meaningful comparison. Pro forma earnings per pro forma
common share is presented for comparative purposes at Note 4 to the
Company's Consolidated Financial Statements included elsewhere herein.
(4) Includes a $7.6 million noncash charge for the cumulative effect of
accounting changes.
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(5) "Broadcast cash flow" consists of operating income plus depreciation and
amortization and corporate general and administrative expenses. "Broadcast
cash flow margin" is broadcast cash flow as a percentage of net revenues.
"EBITDA" is operating income plus depreciation and amortization. "After-tax
cash flow" is income (loss) before extraordinary items plus depreciation and
amortization. Although broadcast cash flow, broadcast cash flow margin,
EBITDA and after-tax cash flow are not recognized under GAAP, they are
accepted by the broadcasting industry as generally recognized measures of
performance and are used by analysts who report publicly on the condition
and performance of broadcast companies. For the foregoing reasons, the
Company believes that these measures are useful to investors. However,
investors should not consider these measures to be an alternative to
operating income as determined in accordance with GAAP, an alternative to
cash flows from operating activities (as a measure of liquidity) or an
indicator of the Company's performance under GAAP.
(6) Declines in broadcast cash flow and EBITDA from the prior year are due
mainly to the impact of the baseball strike on advertiser spending, the cost
of sports programming rights in Atlanta, start-up costs related to
acquisitions or LMA's consummated in late 1994 and early 1995 and a
nonrecurring corporate charge in 1995. See further discussion in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(7) 1996 amount includes $9.1 million in restricted cash, representing the net
proceeds from the Miami Disposition, net of the cash used for the Tulsa
Acquisition. Pro forma 1996 amount also includes $19.8 million, representing
the net proceeds from the Orlando Acquisition. The Company intends for the
remaining proceeds from the Miami Disposition and the Orlando Acquisition to
be invested in radio properties in transactions that will qualify for
like-kind exchange treatment under Section 1031 of the Internal Revenue Code
("IRC").
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following unaudited pro forma combined condensed financial data are
based on the Consolidated Financial Statements of Cox Radio included elsewhere
herein, adjusted to give pro forma effect to the Prior Transactions, Recent
Transactions, the Pending Transactions and the Company's initial public offering
(the "Offering"). The Unaudited Pro Forma Combined Condensed Statement of
Operations gives effect to the above mentioned transactions as if they had
occurred as of January 1, 1996. The Unaudited Pro Forma Combined Condensed
Balance Sheet gives effect to the above mentioned transactions as if they had
occurred as of December 31, 1996. No pro forma adjustments have been made for
the Louisville Acquisitions, the Tampa Acquisition or the Los Angeles
Acquisition due to immateriality. Adjustments related to the Prior Transactions,
Recent Transactions, Pending Transactions and the Offering are discussed in the
accompanying notes.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS
COX RADIO FOR RECENT NEWCITY FOR NEWCITY PRO FORMA
HISTORICAL TRANSACTIONS(1) HISTORICAL ACQUISITION(2) COMBINED
---------- --------------- ---------- -------------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......... $ 1,544 $ -- $ 1,510 $ -- $ 3,054
Restricted cash................... 9,051 19,750(a) -- -- 28,801
Accounts and notes receivable,
less allowance for doubtful
accounts........................ 31,511 -- 13,882 -- 45,393
Prepaid expenses and other current
assets.......................... 1,575 -- 1,884 -- 3,459
-------- -------- -------- -------- --------
Total current assets.... 43,681 19,750 17,276 -- 80,707
-------- -------- -------- -------- --------
Plant and equipment, net.......... 27,070 2,261(b) 9,287 -- 38,618
Intangible assets, net............ 138,119 1,464(b) 57,995 251,905(a) 449,483
Amounts due from CEI.............. 49,667 -- -- (49,667)(b) --
Other assets...................... 3,182 -- 150 -- 3,332
-------- -------- -------- -------- --------
Total Assets............ $261,719 $ 23,475 $ 84,708 $202,238 $572,140
======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt............................ $ -- $ -- $ 2,000 $ -- $ 2,000
Accounts payable and accrued
expenses........................ 10,296 -- 6,380 -- 16,676
Income taxes payable.............. 3,216 -- 1,251 -- 4,467
Other current liabilities......... 1,314 -- 1,967 -- 3,281
-------- -------- -------- -------- --------
Total current
liabilities........... 14,826 -- 11,598 -- 26,424
Long-term debt.................... -- -- 83,373 117,960(c) 208,833
7,500(a)
Deferred income taxes............. 11,095 8,921(c) -- 69,365(a) 86,531
(2,850)(a)
-------- -------- -------- -------- --------
Total liabilities....... 25,921 8,921 94,971 191,975 321,788
-------- -------- -------- -------- --------
Redeemable preferred stock........ -- -- 12,348 (12,348)(d) --
SHAREHOLDERS' EQUITY:
Common stock...................... 28,315 -- 34 (34)(d) 28,315
Additional paid-in capital........ 248,972 -- -- -- 248,972
Deficit in retained earnings...... (41,489) 14,554(c) (21,954) 21,954(d) (26,935)
Note receivable from
shareholders.................... -- -- (691) 691(d) --
-------- -------- -------- -------- --------
Total shareholders'
equity................ 235,798 14,554 (22,611) 22,611 250,352
-------- -------- -------- -------- --------
Total Liabilities and
Shareholders'
Equity................ $261,719 $ 23,475 $ 84,708 $202,238 $572,140
======== ======== ======== ======== ========
</TABLE>
24
<PAGE> 27
NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
(1) To reflect the pro forma effect of the Recent Transactions:
(a) To reflect the proceeds (net of related expenses) for the exchange
of WCKG-FM and WYSY-FM (Chicago) for WHOO-AM, WHTQ-FM and WMMO-FM (Orlando)
and approximately $20.0 million in cash, pursuant to the Orlando
Acquisition. The transaction was consummated in March 1997. See also (b)
below. The Company intends for the remaining proceeds from the Orlando
Acquisition to be invested in radio properties in transactions that will
qualify for like-kind exchange treatment under Section 1031 of the IRC.
(b) To reflect the net effect on net plant and equipment and intangibles
of the Orlando Acquisition:
<TABLE>
<CAPTION>
NET PLANT
AND
EQUIPMENT INTANGIBLES TOTAL
--------- ----------- --------
<S> <C> <C> <C>
Stations acquired -- Orlando.......................... $ 3,551 $ 16,699 $ 20,250
Stations disposed of -- Chicago....................... (1,290) (15,235) (16,525)
------- -------- --------
$ 2,261 $ 1,464 $ 3,725
======= ======== ========
</TABLE>
(c) To reflect the estimated financial reporting gains and related
deferred taxes to be recorded on the Orlando Acquisition (in thousands):
<TABLE>
<S> <C>
Net cash proceeds........................................... $ 19,750
Estimated fair value of Orlando stations.................... 20,250
--------
Total consideration received........................ 40,000
Less net carrying amount of assets:
Plant and equipment....................................... (1,290)
Intangibles............................................... (15,235)
--------
Pre-tax gain................................................ 23,475
Less related taxes.......................................... 8,921
--------
Net after-tax gain.................................. $ 14,554
========
</TABLE>
(2) To reflect the adjustments to record the NewCity Acquisition and the
application of purchase accounting to the accounts of NewCity, as follows:
(a) To record the excess of the NewCity purchase price over the fair
value of tangible assets acquired and liabilities assumed (in thousands):
<TABLE>
<S> <C>
Purchase price plus net liabilities assumed:
Cash (including estimated working capital adjustment of
$3,000)................................................. $166,627
Assumption of NewCity debt................................ 85,373
Acquisition and other related costs....................... 1,000
--------
Total............................................... 253,000
Estimated fair value of tangible assets acquired and
liabilities assumed:
Plant and equipment....................................... (9,287)
Long-term debt premium.................................... 7,500
Deferred tax asset........................................ (2,850)
Other working capital accounts............................ (7,828)
--------
(12,465)
--------
Excess of purchase price over tangible assets acquired and
liabilities assumed....................................... 240,535
Less previously recorded intangibles........................ (57,995)
--------
Adjustment to intangibles................................. 182,540
Deferred taxes recorded on adjustment to intangibles (at
38%)................................................... 69,365
--------
Pro forma adjustment to intangibles................. $251,905
========
</TABLE>
Purchase accounting requires the fair valuation of the $75 million
aggregate principal amount of NewCity's 11.375% Senior Subordinated Notes
due 2003, which is estimated to be $82.5 million based on market rates
and assuming the notes are redeemed on November 1, 1998 at a redemption
price of 104.266%. The debt premium gives rise to a deferred tax asset of
$2.9 million at an effective rate of 38%.
The allocation of the NewCity purchase price will be finalized after
consummation of the NewCity Acquisition. The final purchase price
allocation is not expected to differ materially from the pro forma
estimate.
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<PAGE> 28
NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET -- (CONTINUED)
(b) To reflect the partial funding of the NewCity Acquisition with an
estimated $49.7 million in net proceeds remaining from the initial public
offering and other amounts due from CEI.
(c) To reflect the financing of the NewCity Acquisition with $118.0
million in borrowings under a new bank credit facility to be negotiated
prior to the consummation of the acquisition.
(d) To reflect the elimination of the redeemable preferred stock and the
historical equity accounts of NewCity.
26
<PAGE> 29
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS
FOR PRIOR AND FOR THE OFFERING
COX RADIO RECENT NEWCITY AND NEWCITY PRO FORMA
HISTORICAL TRANSACTIONS(1) HISTORICAL ACQUISITION(2) COMBINED
---------- --------------- ---------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues........................ $132,904 $(7,176) $ 63,958 $-- $189,686
Costs and expenses:
Operating......................... 41,280 (2,805) 21,389 59,864
Selling, general and
administrative................. 50,585 (2,339) 24,003 (1,026)(a) 71,223
Corporate general and
administrative................. 5,332 2,232 (2,464)(b) 5,100
Depreciation and amortization..... 8,069 279 3,317 6,298(c) 17,963
-------- ------- -------- ------- --------
Operating income.................... 27,638 (2,311) 13,017 (2,808) 35,536
Interest expense, net............... (4,580) 646 (10,117) (2,553)(d) (16,604)
Other, net.......................... 1,639 (1,953) (700) 700(e) (314)
-------- ------- -------- ------- --------
Income (loss) before income taxes... 24,697 (3,618) 2,200 (4,661) 18,618
Income taxes(3)..................... 9,752 (1,375) 500 622 9,499
-------- ------- -------- ------- --------
Net income (loss)................... $ 14,945 $(2,243) $ 1,700 $(5,283) $ 9,119
======== ======= ======== ======= ========
Pro forma per share data:
Net income per share.......................................................................... $ .32
========
Pro forma shares outstanding.................................................................. 28,315
========
</TABLE>
27
<PAGE> 30
NOTES TO PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
(1) To reflect the pro forma effect of the operations of WHOO-AM, WHTQ-FM
and WMMO-FM (Orlando) which were acquired in March 1997. These stations have
been operated by NewCity under an LMA since July 1996. To reflect the pro forma
effect of the operations of WHEN-AM and WWHT-FM (Syracuse) which were acquired
in June 1996. These stations have been operated by NewCity under an LMA since
June 1996. To reflect the pro forma effect of the operations of KRAV-FM and
KGTO-AM (Tulsa) which were acquired in December 1996. These stations have been
operated by NewCity under an LMA since October 1996. Included in the pro forma
adjustments for these operations are the elimination of LMA fees paid by NewCity
to Cox Radio. In addition, pro forma adjustments have been made to reflect the
disposal of WIOD-AM (Miami) including a gain on disposal of $2.0 million in
October 1996, and WCKG-FM and WYSY-FM (Chicago) in March 1997.
The pro forma adjustments for these transactions are set forth as follows:
<TABLE>
<CAPTION>
ACQUISITIONS DISPOSITIONS
------------------------------ -----------------
ORLANDO SYRACUSE TULSA CHICAGO MIAMI TOTAL
------- ------------ ----- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net revenues............................................ $2,470 $132 $976 $(5,372) $(5,382) $(7,176)
Costs and expenses:
Operating............................................. 926 290 371 (1,298) (3,094) (2,805)
Selling, general and administrative................... 1,884 237 678 (3,058) (2,080) (2,339)
Depreciation and amortization........................... 948 178 129 (761) (215) 279
Interest expense........................................ -- -- -- 443 203 646
Other, net.......................................... -- -- -- 63 (2,016) (1,953)
</TABLE>
(2) To reflect the pro forma effect of the NewCity Acquisition:
(a) To eliminate LMA fees paid by NewCity to Cox Radio related to
Cox-owned stations operated by NewCity in Orlando, Syracuse and Tulsa.
(b) To eliminate compensation expense historically allocated to Cox
Radio by CEI under the Unit Appreciation Plan, which was included in
corporate general and administrative expenses. In connection with the
Company's initial public offering, a Long-Term Incentive Plan was
implemented that provides for the issuance of stock to participants that
will not result in compensation expense under applicable accounting
standards. See Note 9 to Consolidated Financial Statements included
elsewhere herein.
(c) To record additional amortization expense related to the pro forma
adjustment to intangibles of approximately $251.9 million arising from the
NewCity Acquisition. Intangible assets are being amortized over 40 years. No
pro forma adjustments have been made for depreciation expense as the fair
value of property and equipment is estimated to approximate book value at
the date of acquisition.
(d) To adjust interest expense resulting from (i) the elimination of
historical intercompany interest expense upon the assumption that the
Company's initial public offering was consummated on January 1, 1996, (ii)
the recording of interest expense resulting from the required borrowings of
approximately $118.0 million necessary to consummate the NewCity Acquisition
at an estimated interest rate of 7% and (iii) the amortization of the debt
premium as a result of recording the NewCity debt at fair value. See Note 2
to Unaudited Pro Forma Combined Condensed Balance Sheet.
A summary of this pro forma adjustment is as follows (in thousands):
<TABLE>
<S> <C>
Historical intercompany interest expense.................... $ 3,934
Interest on required borrowings............................. (8,330)
Amortization of debt premium................................ 1,843
-------
Pro forma adjustment to interest expense............ $(2,553)
=======
</TABLE>
(e) To adjust other expense for costs incurred related to the sale of
NewCity recorded in NewCity's historical results.
(3) An effective tax rate of 38% was used to calculate the adjustments
reflected in Notes 1 and 2(a), (b), (d) and (e). No tax effect is reflected for
the adjustment in Note 2(c) because the amortization of intangibles arising from
the NewCity Acquisition is not deductible for tax purposes.
28
<PAGE> 31
UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following table sets forth selected quarterly financial information for
Cox Radio. This information is derived from unaudited financial statements of
Cox Radio and includes, in the opinion of management, all normal and recurring
adjustments that management considers necessary for a fair presentation of the
results for such periods. The operating results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
1994
Net revenues........................................ $21,608 $27,546 $29,907 $32,474
Corporate general and administrative expenses....... 638 632 659 738
Depreciation and amortization....................... 1,709 1,731 1,744 1,811
Operating income.................................... 3,036 6,275 9,641 6,607
Net income.......................................... 641 3,034 4,613 2,919
1995
Net revenues........................................ $25,856 $32,695 $31,402 $33,619
Corporate general and administrative expenses....... 879 994 2,979(1) 1,001
Depreciation and amortization....................... 1,841 1,874 1,768 1,764
Operating income.................................... 3,856 6,098 3,610 6,946
Net income.......................................... 1,264 2,532 1,355 3,012
1996
Net revenues........................................ $29,568 $36,740 $33,017 $33,579
Corporate general and administrative expenses....... 1,103 1,238 1,986 1,005
Depreciation and amortization....................... 1,982 1,997 2,027 2,063
Operating income.................................... 4,700 7,991 6,578 8,369
Net income.......................................... 1,812 3,401 2,370 7,362
</TABLE>
- ---------------
(1) Includes a nonrecurring corporate charge.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Cox Radio is a leading national radio broadcast company whose business is
devoted to acquiring, developing and operating radio stations located throughout
the United States. Cox Enterprises, Inc. ("CEI") indirectly owns approximately
69% of the Common Stock of Cox Radio.
The performance of a radio station group, such as the Company, is
customarily measured by its ability to generate Broadcast Cash Flow and EBITDA.
Broadcast Cash Flow is defined as operating income plus depreciation and
amortization and corporate general and administrative expenses. EBITDA is
defined as operating income plus depreciation and amortization. Although
Broadcast Cash Flow and EBITDA are not recognized under generally accepted
accounting principles ("GAAP"), they are accepted by the broadcasting industry
as generally recognized measures of performance and are used by analysts who
report publicly on the condition and performance of broadcasting companies. For
the foregoing reasons, the Company believes that these measures will be useful
to investors. However, Broadcast Cash Flow or EBITDA should not be considered to
be an alternative to operating income as determined in accordance with GAAP, an
alternative to cash flows from operating activities (as a measure of liquidity)
or an indicator of the Company's performance under GAAP.
The primary source of the Company's revenues is the sale of local and
national advertising. Historically, approximately 75% and 24% of the Company's
gross revenues have been generated from local and national
29
<PAGE> 32
advertising. The Company's most significant station operating expenses are
employees' salaries and benefits, commissions, programming expenses and
advertising and promotional expenditures.
The Company's revenues vary throughout the year. As is typical in the radio
broadcasting industry, the Company's first calendar quarter generally produces
the lowest revenues for the year, and the second and fourth calendar quarters
generally produce the highest revenues for the year. The Company's operating
results in any period may be affected by the incurrence of advertising and
promotional expenses that do not necessarily produce commensurate revenues until
the impact of the advertising and promotion is realized in future periods.
ACQUISITIONS AND DISPOSITIONS
During the past several years, the Company has actively managed its
portfolio of radio stations through selected acquisitions, dispositions and
exchanges, as well as through the use of LMAs and JSAs. Specific transactions
entered into by the Company during the past three years are discussed below.
In January 1994, the Company entered into an LMA to operate WJZF-FM
(Atlanta). Subsequently, in September 1994, the Company paid $9.4 million for an
option to purchase substantially all of the station's assets.
In April 1995, Cox Radio entered into an LMA to operate WCNN-AM (Atlanta).
In August 1995, Cox Radio completed the acquisition of KACE-FM in
Inglewood, California, a suburb of Los Angeles, for $11.7 million. Cox Radio had
operated this station under an LMA since August 1994.
In January 1996, Cox Radio completed the acquisition of Louisville stations
WRKA-FM and WRVI-FM for $8.7 million. The Company also acquired Louisville
station WXNU-FM, later renamed WHTE-FM, for $2.6 million in August 1996.
In June 1996, the Company acquired WHEN-AM and WWHT-FM in Syracuse for $4.5
million. These stations are being operated by NewCity under an LMA.
In October 1996, the Company completed the sale of WIOD-AM in Miami for
$13.0 million plus a working capital adjustment of $1.2 million (the "Miami
Disposition"). This transaction resulted in a pre-tax gain of approximately $2.0
million which was recognized in the fourth quarter of 1996.
In March 1997, the Company exchanged WCKG-FM and WYSY-FM in Chicago for
WHOO-AM, WHTQ-FM and WMMO-FM in Orlando (the "Orlando Acquisition"). The Orlando
Acquisition resulted in a pre-tax gain of approximately $25 million. In addition
to receiving the three Orlando stations, Cox Radio also received proceeds of
approximately $20 million. NewCity has operated the Orlando stations since July
1996 under an LMA.
For tax purposes, the Company accounted for the Orlando Acquisition and
Miami Disposition as like-kind exchanges. Tax rules allow the Company to defer a
substantial portion of the related tax gains on these transactions upon the
reinvestment of the net proceeds in qualifying acquisitions. The Company is
presently pursuing qualifying reinvestment properties. Pending reinvestment, the
cash proceeds from these transactions is being held in escrow and is reported as
restricted cash.
In December 1996, the Company acquired KRAV-FM and KGTO-AM (Tulsa) for $5.5
million. NewCity operates these stations under an LMA.
In March 1997, the Company acquired WFNS-AM (Tampa) for an aggregate
consideration of approximately $1.5 million. The Company has been operating this
station pursuant to an LMA or JSA since June 1995.
The acquisitions discussed above were accounted for by the purchase method,
and accordingly, the purchase price has been allocated to the assets acquired
based on their estimated fair market values at the date of acquisition. A
substantial portion of each purchase price was allocated to intangible assets to
reflect the FCC broadcasting licenses acquired. The excess of the purchase price
over the fair market value of the net
30
<PAGE> 33
assets acquired has been recorded as goodwill and is being amortized over 30 to
40 years on a straight-line basis. No liabilities were assumed by the Company as
a result of these acquisitions. Operations of acquired stations have been
included in the consolidated results of the Company since the respective
acquisition dates.
Under an LMA or a JSA, the company operating a station provides a
combination of programming, sales, marketing and similar services. The broadcast
revenues and operating expenses of stations operated by Cox Radio under LMAs and
JSAs have been included in the Company's operations since the respective dates
of such agreements.
In July 1996, the Company entered into an agreement to acquire NewCity
Communications, Inc. for approximately $253 million, which includes certain
working capital adjustments, consisting of approximately $163 million in cash,
approximately $87 million in assumption of NewCity debt and approximately $3
million in working capital adjustments (the "NewCity Acquisition"). The NewCity
Acquisition is expected to be financed with proceeds from the new bank credit
facility entered into by the Company on March 7, 1997. The consummation of the
NewCity Acquisition, which is anticipated to occur in the first half of 1997, is
subject to certain closing conditions, including receipt of approval by the FCC.
See Item 3 -- Legal Proceedings.
On January 10, 1997, CEI received a Civil Investigative Demand ("CID") from
the Antitrust Division of the DOJ. The CID sought production of documents and
interrogatory responses with respect to radio advertising in the Syracuse, New
York area. In the Syracuse area, Cox Radio is the licensee of two radio
stations; pursuant to the NewCity Acquisition, Cox Radio would acquire an
additional three stations licensed to NewCity. The CID stated that the DOJ was
seeking the information to determine whether the proposed acquisition might
violate section 1 of the Sherman Act and/or section 7 of the Clayton Act. On
February 27, 1997, the Company and NewCity were advised that the DOJ had closed
its investigation of the Syracuse market.
In January 1997, Cox Radio agreed in principle to acquire the license and
certain assets of an FM radio station in Los Angeles for $19 million in cash
(the "Los Angeles Acquisition").
RESULTS OF OPERATIONS
This discussion should be read in conjunction with the accompanying audited
Consolidated Financial Statements of Cox Radio. The results of operations for
Cox Radio represent the operations of the radio stations currently owned or
operated or to which sales and marketing services were provided in connection
with CEI's U.S. radio broadcasting operations. The historical financial
statements do not necessarily reflect the results of operations or financial
position that would have been reported had Cox Radio been an independent
company.
As a result of the acquisition activity discussed above, the Company's
historical financial statements are not directly comparable from period to
period.
Year ended December 31, 1996 compared to Year ended December 31, 1995
Net Revenues. Net revenues increased $9.3 million to $132.9 million in
1996, a 7.6% increase over the prior year. This growth is primarily attributable
to increases at the Atlanta and Los Angeles station groups, the addition of the
Louisville stations during January and August of 1996 and was partially offset
by the disposal of WIOD-AM (Miami) in October 1996 and an LMA with the
prospective purchaser of WCKG-FM and WYSY-FM (Chicago) in June 1996. Revenue
growth in Atlanta is primarily attributable to higher ratings at WSB-AM and
revenues generated from a full season of Atlanta Braves baseball in 1996. The
baseball strike in 1995 delayed the start of the season by 18 games. In Los
Angeles, higher spot advertising rates resulting from improved utilization of
customer focused selling contributed to higher revenues. On a "same station"
basis (reflecting results from stations operated for the entire year ended
December 31 in both 1996 and 1995), net revenues increased $15.1 million to
$115.8 million, an increase of 15.0% over 1995.
Station Operating Expenses. Station operating expenses increased $1.9
million to $91.9 million, an increase of 2.1% over the prior year. Significant
contributors to this increase include higher programming costs resulting from an
increase in talent costs which fluctuate with ratings and additional selling
expenses
31
<PAGE> 34
associated with the stations' local and national revenue growth. The increase in
station operating expenses was partially offset by the disposal of the
operations of WIOD-AM (Miami) in October 1996 and an LMA with the prospective
purchaser of WCKG-FM and WYSY-FM (Chicago) in June 1996. On a "same station"
basis, station operating expenses increased $6.8 million, to $75.4 million an
increase of 9.9% over 1995.
Broadcast Cash Flow. Broadcast cash flow increased $7.4 million to $41.0
million in 1996, a 22.0% increase over 1995. On a "same station" basis,
broadcast cash flow increased by $8.3 million to $40.3 million, an increase of
26.0% over the prior year. In addition, "same station" broadcast cash flow
margin (defined as broadcast cash flow as a percentage of net revenues)
increased to 34.9% in 1996 from 31.8% for the prior year for the reasons noted
above.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses decreased $.5 million to $5.3 million in 1996 primarily
due to a non-recurring corporate charge in 1995.
Operating Income. Operating income increased $7.1 million to $27.6
million, an increase of 34.8% over 1995 for the reasons noted above. In
addition, the operating margin increased to 20.8% in 1996 from 16.6% in 1995.
Interest Expense. Interest expense for 1996 decreased $1.4 million to $4.6
million, a 23.3% decrease from 1995 primarily due to the repayment of amounts
due to CEI funded by the Company's initial public offering.
Net Income. Net income increased by $6.8 million to $14.9 million, an
increase of 83.1% over 1995, for the reasons noted above as well as a $1.4
million after-tax gain on the sale of WIOD-AM (Miami).
Year ended December 31, 1995 compared to Year ended December 31, 1994
Net Revenues. Net revenues increased $12.0 million to $123.6 million in
1995, an increase of 11% over the prior year. Favorable ratings driven by
Atlanta sports programming, an improved advertising economy and an increase in
the number of stations owned or operated in existing station groups all
contributed to the increase. In Atlanta, net revenue increases were due
primarily to the acquisition by WSB-AM of broadcast rights for the Atlanta
Braves and the Atlanta Hawks and the addition of the operations of WCNN-AM. In
Los Angeles, increases in net revenues reflected continued strong performance by
KOST-FM and the operation of KACE-FM for a full year, offset by the effects of a
temporary decline in audience share at KFI-AM during the O.J. Simpson trial. On
a "same station" basis (reflecting results from stations operated for the entire
twelve months in both 1995 and 1994), net revenues increased $8.0 million to
$118.8 million, an increase of 7% over 1994.
Station Operating Expenses. Station operating expenses increased $13.6
million to $90.0 million, an increase of 18% over the prior year. Significant
components of the increase included the acquisition of broadcast rights for the
Atlanta Braves and the Atlanta Hawks, higher programming, sales and other
operating expenses resulting from a full year of operations at KACE-FM and
WCNN-AM which has been operated under an LMA since April 1995. Higher selling
costs associated with revenue increases posted by the Company's existing
stations also contributed to the increase in station operating expenses. On a
"same station" basis, station operating expenses increased $8.5 million to $84.0
million, an increase of 11% over 1994.
Broadcast Cash Flow. Broadcast cash flow decreased $1.6 million to $33.6
million, a decrease of 5% from the prior year, primarily attributable to the
operations of WCNN-AM discussed above. On a "same station" basis, broadcast cash
flow decreased $0.5 million to $34.8 million, a decrease of 1% over the prior
year, primarily attributable to the operations of the Company's Atlanta radio
stations, exclusive of WCNN-AM.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $3.2 million to $5.9 million principally due
to an increase in Cox Radio's allocated portion of CEI's UAP expense and a
nonrecurring corporate charge in 1995.
Operating Income. Operating income decreased $5.0 million to $20.5
million, a 20% decrease from 1994, for the reasons discussed above.
32
<PAGE> 35
Interest Expense. Interest expense increased $0.7 million to $6.0 million
in 1995, a 14% increase over the prior year due to an increase in interest rates
during 1995.
Net Income. Net income decreased $3.0 million from 1994 to $8.2 million in
1995, due to the operational changes and the nonrecurring corporate charge
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is cash provided by operations.
Cash requirements have been funded by Cox Radio's operating activities and
historically, as needed, through intercompany advances from CEI. Prior to the
Cox Radio Consolidation (defined elsewhere herein), certain of the indirect
subsidiaries of CEI issued various promissory notes in amounts totaling $107.1
million to CEI (the "CEI Notes"), which bore interest at the prime rate (as
reported by the Chase Manhattan Bank N.A.) plus 1.5%. Upon the consummation of
the Company's initial public offering, Cox Radio used approximately $107.1
million of the net proceeds of the offering to discharge all amounts owed under
the CEI Notes. Cox Radio entered into a revolving credit facility with CEI (the
"New CEI Credit Facility"). All interest accrued and principal owed under the
New CEI Credit Facility prior to the consummation of the Company's initial
public offering was contributed by CEI to Cox Radio. Borrowings under the New
CEI Credit Facility accrue interest at a competitive market rate. CEI continues
to perform day-to-day cash management services for Cox Radio.
Cox Radio will be required to borrow approximately $105 million to
consummate the NewCity Acquisition. On March 7, 1997, Cox Radio entered into a
$300 million, five-year, senior, unsecured revolving credit facility (the
"Credit Agreement") with certain guarantors and banks, including Texas Commerce
Bank National Association, as Administrative Agent, Nationsbank of Texas, N.A.,
as Syndications Agent, and Citibank, N.A., as Documentation Agent. The loan
proceeds may be used to (i) finance the payment of the consideration payable in
the Merger, (ii) repay certain secured debt of NewCity and (iii) finance (A) the
possible repayment or repurchase of certain unsecured debt of NewCity, (B)
additional acquisitions and (C) other corporate purposes. The Credit Agreement
restricts the payment of dividends, prohibits certain mergers, consolidations or
dispositions of assets and establishes limitations on, among other things,
additional indebtedness and transactions with affiliates.
Upon consummation of the NewCity Acquisition, Cox Radio will assume certain
indebtedness of NewCity, including NewCity's obligations under an indenture with
Shawmut Bank Connecticut dated November 2, 1993 (the "'Indenture"), which
governs the terms and conditions of the $75 million NewCity Notes. The NewCity
Notes are general unsecured obligations of NewCity and are subordinated to all
existing and future senior indebtedness of NewCity. The NewCity Notes are
redeemable at the option of NewCity, in whole or in part, at any time on or
after November 1, 1998, at an initial redemption price of 104.266% of the
principal amount, plus accrued and unpaid interest through the date of
redemption. The NewCity Acquisition will, due to the "change of control",
trigger an obligation on the part of NewCity to offer to repurchase such NewCity
Notes at 101% of the principal amount thereof plus accrued and unpaid interest
to the date of any such repurchase. Because the NewCity Notes, since the
announcement of the acquisition of NewCity by Cox Radio, have consistently
traded at prices in excess of 101% of the principal amount thereof, Cox Radio
does not expect any holders of the NewCity Notes to accept the "change of
control" repurchase offer. If NewCity is required to repurchase any of the
NewCity Notes, the Company expects to fund such repurchase through debt
financing, including the Credit Agreement.
The Indenture contains certain covenants that, among other things, limit
the ability of NewCity and its subsidiaries to incur additional indebtedness,
pay dividends and make other restricted payments, issue or sell common stock of
NewCity's subsidiaries, enter into sale and leaseback transactions, create
liens, or engage in mergers, consolidations and asset sales. Following
consummation of the NewCity Acquisition, the NewCity Notes will be obligations
of NewCity as a wholly-owned subsidiary of the Company. Accordingly, the
covenants in the Indenture will limit the actions of NewCity and its
subsidiaries and not the other subsidiaries of the Company.
33
<PAGE> 36
Future cash requirements are expected to include capital expenditures,
principal and interest payments on indebtedness and funds for acquisitions. The
Company expects its operations to generate sufficient cash to meet its capital
expenditures and debt service requirements. Additional cash requirements,
including funds for pending or other acquisitions, will be funded by various
sources, including the proceeds from bank financing and other issuances of
securities.
Net cash provided by operating activities for the year ended December 31,
1996 increased $12.9 million to $26.9 million over 1995 primarily as a result of
an increase in net income. Net cash from operating activities in 1995 remained
substantially the same as in 1994.
Net cash used in investing activities for all periods presented principally
reflects the Company's acquisition activity discussed above and capital
expenditures. The increases in annual capital expenditures from 1994 to 1996
were due to the increasing number of stations owned or operated by Cox Radio.
Net cash provided by (used in) financing activities represents the net
change in amounts due to CEI, proceeds from the Company's initial public
offering, repayment of debt, dividends paid and net changes in book overdrafts.
Cash flows from financing activities represent intercompany transactions with
CEI. Fluctuations for the periods presented generally reflect the differences
between changes in both cash flows from operating activities and cash flows from
investing activities.
The Company has contractual commitments for sports programming and on-air
personalities of $12.9 million, $12.3 million, $7.7 million and $.6 million for
1997, 1998, 1999 and 2000, respectively, which are expected to be funded through
operations.
IMPACT OF INFLATION
The impact of inflation on the Company's operations has not been
significant to date. However, there can be no assurance that a high rate of
inflation in the future would not have an adverse impact on the Company's
operating results.
34
<PAGE> 37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Cox Radio, Inc.
We have audited the accompanying consolidated balance sheets of Cox Radio,
Inc. ("Cox Radio") as of December 31, 1995 and 1996, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of Cox Radio's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cox Radio at
December 31, 1995 and 1996, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 7, 1997
35
<PAGE> 38
COX RADIO, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
-------- --------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,691 $ 1,544
Restricted cash........................................... -- 9,051
Accounts and notes receivable, less allowance for doubtful
accounts of $774 and $834, respectively................ 30,667 31,511
Prepaid expenses and other current assets................. 3,289 1,575
-------- --------
Total current assets.............................. 35,647 43,681
Plant and equipment, net.................................... 28,020 27,070
Intangible assets, net...................................... 126,798 138,119
Amounts due from Cox Enterprises, Inc....................... -- 49,667
Other assets................................................ 1,302 3,182
-------- --------
Total assets...................................... $191,767 $261,719
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 10,924 $ 10,296
Unit appreciation plan ("UAP") liability.................. 963 646
Income taxes payable...................................... 278 3,216
Other current liabilities................................. 873 668
-------- --------
Total current liabilities......................... 13,038 14,826
Amounts due to Cox Enterprises, Inc......................... 125,089 --
Deferred income taxes....................................... 6,470 11,095
-------- --------
Total liabilities................................. 144,597 25,921
-------- --------
Commitments and contingencies (Note 12)
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value: 5,000,000 shares,
authorized, none outstanding........................... -- --
Common stock, $1.00 par value; 6,000 shares authorized and
600 shares outstanding at December 31, 1995............ 1 --
Class A common stock, $1.00 par value; 70,000,000 shares
authorized and 8,736,972 shares outstanding at December
31, 1996............................................... -- 8,737
Class B common stock, $1.00 par value; 45,000,000 shares
authorized and 19,577,672 shares outstanding at
December 31, 1996...................................... -- 19,578
Additional paid-in capital................................ 90,947 248,972
Deficit in retained earnings.............................. (43,778) (41,489)
-------- --------
Total shareholders' equity........................ 47,170 235,798
-------- --------
Total liabilities and shareholders' equity........ $191,767 $261,719
======== ========
</TABLE>
See notes to consolidated financial statements.
36
<PAGE> 39
COX RADIO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1994 1995 1996
-------- -------- --------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
NET REVENUES:
Local..................................................... $ 80,484 $ 93,465 $ 99,291
National.................................................. 30,193 29,385 31,648
Other..................................................... 858 722 1,965
-------- -------- --------
Total net revenues................................ 111,535 123,572 132,904
COSTS AND EXPENSES:
Operating................................................. 32,218 41,831 41,280
Selling, general and administrative....................... 44,096 48,131 50,585
Corporate general and administrative...................... 2,667 5,853 5,332
Depreciation and amortization............................. 6,995 7,247 8,069
-------- -------- --------
OPERATING INCOME............................................ 25,559 20,510 27,638
OTHER INCOME (EXPENSE):
Interest expense, net....................................... (5,229) (5,974) (4,580)
Gain on sale of radio station............................... -- -- 2,016
Other -- net................................................ (260) (147) (377)
-------- -------- --------
INCOME BEFORE INCOME TAXES.................................. 20,070 14,389 24,697
Income taxes................................................ 8,863 6,226 9,752
-------- -------- --------
NET INCOME.................................................. $ 11,207 $ 8,163 $ 14,945
======== ======== ========
Net income per common share...................................................... $ .69
========
Weighted average common shares outstanding....................................... 21,762
========
</TABLE>
See notes to consolidated financial statements.
37
<PAGE> 40
COX RADIO, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON CLASS A CLASS B
STOCK COMMON STOCK COMMON STOCK ADDITIONAL DEFICIT IN
--------------- --------------- ---------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ------ ------ ------ ------- ---------- ---------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993... 1 $ 1 -- $ -- -- $ -- $102,221 $(38,042) $ 64,180
Net income................... -- -- -- -- -- -- -- 11,207 11,207
Dividends to CEI............. -- -- -- -- -- -- (11,274) (23,706) (34,980)
-- --- ----- ------ ------ ------- -------- -------- --------
BALANCE AT DECEMBER 31, 1994... 1 1 -- -- -- -- 90,947 (50,541) 40,407
Net income................... -- -- -- -- -- -- -- 8,163 8,163
Dividends to CEI............. -- -- -- -- -- -- -- (1,400) (1,400)
-- --- ----- ------ ------ ------- -------- -------- --------
BALANCE AT DECEMBER 31, 1995... 1 1 -- -- -- -- 90,947 (43,778) 47,170
Net income................... -- -- -- -- -- -- -- 14,945 14,945
Dividends to CEI............. -- -- -- -- -- -- -- (12,656) (12,656)
Capital contribution by
CEI........................ -- -- -- -- -- -- 36,744 -- 36,744
Issuance of Class B common
stock to CEI............... (1) (1) -- -- 19,578 19,578 (19,577) -- --
Issuance of Class A common
stock related to initial
public offering............ -- -- 8,625 8,625 -- -- 140,588 -- 149,213
Issuance of restricted Class
A common stock related to
incentive plans............ -- -- 112 112 -- -- 1,960 -- 2,072
Offering costs for common
stock...................... -- -- -- -- -- -- (1,690) -- (1,690)
-- --- ----- ------ ------ ------- -------- -------- --------
BALANCE AT DECEMBER 31, 1996... -- $-- 8,737 $8,737 19,578 $19,578 $248,972 $(41,489) $235,798
== === ===== ====== ====== ======= ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
38
<PAGE> 41
COX RADIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
------- ------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $11,207 $ 8,163 $14,945
Items not requiring cash:
Depreciation........................................... 2,216 2,382 2,533
Amortization........................................... 4,779 4,865 5,536
Deferred income taxes.................................. 34 (441) 1,001
Settlement of UAP liability through issuance of
restricted stock..................................... -- -- 2,071
Increase in accounts receivable........................... (6,109) (2,221) (844)
Increase in prepaid expenses and other current assets..... (296) (57) (22)
Increase (decrease) in accounts payable and accrued
expenses............................................... 1,902 (299) 1,111
Increase (decrease) in taxes payable...................... (257) (37) 2,938
Increase (decrease) in UAP liability...................... 187 776 (317)
Gain on sale of radio station............................. -- -- (2,016)
Other, net................................................ 405 856 (25)
------- ------- -------
Net cash provided by operating activities......... 14,068 13,987 26,911
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................ (2,705) (4,073) (3,526)
Acquisitions................................................ (9,954) (11,697) (21,500)
(Increase) decrease in other long-term assets............... 337 (1,580) (2,137)
Net proceeds from sale of radio station..................... -- -- 14,195
Increase in amounts due from CEI............................ -- -- (49,667)
Other, net.................................................. 30 8 --
------- ------- -------
Net cash used in investing activities..................... (12,292) (17,342) (62,635)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in amounts due to CEI................. 30,658 4,781 (88,345)
Net proceeds from initial public offering................. -- -- 149,213
Payment of stock offering costs........................... -- -- (1,690)
Dividends paid............................................ (34,980) (1,400) (12,656)
Increase (decrease) in book overdrafts.................... 2,715 (232) (1,894)
------- ------- -------
Net cash provided by (used in) financing
activities...................................... (1,607) 3,149 44,628
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 169 (206) 8,904
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 1,728 1,897 1,691
------- ------- -------
CASH AND CASH EQUIVALENTS (INCLUDING RESTRICTED CASH) AT END
OF PERIOD................................................. $ 1,897 $ 1,691 $10,595
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
39
<PAGE> 42
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Cox Radio is a leading national radio broadcast company whose business is
devoted to acquiring, developing and operating radio stations located throughout
the United States. Cox Enterprises, Inc. ("CEI") indirectly owns approximately
69% of the Common Stock of Cox Radio.
On September 30, 1996, pursuant to an Agreement and Plan of Merger of KFI,
Inc., WCKG, Inc., WWRM, Inc. and Cox Syracuse, Inc. with and into Cox Radio,
Inc. (the "Plan of Merger"), CEI transferred direct or indirect ownership of its
U.S. radio broadcast properties to Cox Radio (the "Cox Radio Consolidation"). In
connection with the Cox Radio Consolidation, the Company amended its Certificate
of Incorporation to change the capital structure of the Company. As a result,
the Company's capital stock consists of 70,000,000 authorized shares of Class A
Common Stock, 45,000,000 authorized shares of Class B Common Stock and 5,000,000
authorized shares of Preferred Stock, all at $1.00 par value per share. Pursuant
to the Plan of Merger, CEI, through its indirect subsidiary, Cox Broadcasting,
Inc., received 19,577,672 shares of the Company's Class B Common Stock for its
ownership interests. CEI's historical basis in the assets and liabilities of the
operations was carried over to Cox Radio.
On October 2, 1996, the Company completed an initial public offering of
8,625,000 shares of the Company's Class A Common Stock at a price of $18.50 per
share. Proceeds to the Company from the public offering and the underwriters'
option totaled approximately $149 million net of underwriting discounts and
commissions. The Company used approximately $107.1 million of such net proceeds
to repay all amounts then outstanding under notes due to CEI. The balance of the
net proceeds is available for general corporate purposes and acquisitions,
including to partially fund the NewCity Acquisition (see note 4). Also in
connection with the public offering, the Company registered 111,973 shares of
the Company's restricted Class A Common Stock that were issued to certain
members of the Company's management pursuant to the Cox Radio, Inc. Long-Term
Incentive Plan.
The consolidated financial statements of Cox Radio represent the operations
of the radio broadcast stations owned by CEI or its other subsidiaries. The
historical financial statements do not necessarily reflect the results of
operations or financial position that would have existed had Cox Radio been an
independent company. All significant intercompany accounts have been eliminated
in the consolidated financial statements of Cox Radio.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Fair value
approximates carrying value.
Revenue Recognition
Revenue is recognized as advertising air time is broadcast and is net of
advertising agency commissions.
Corporate General and Administrative Expenses
Corporate general and administrative expenses consist of corporate overhead
costs not specifically allocable to any of the Company's individual stations
plus expense related to the CEI Unit Appreciation Plan. In 1995, corporate
general and administrative expenses included a nonrecurring corporate charge.
40
<PAGE> 43
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Plant and Equipment
Plant and equipment is stated at cost less accumulated depreciation.
Depreciation is computed using principally the straight-line method at rates
based upon estimated useful lives of 5 to 40 years for buildings and building
improvements and 5 to 20 years for broadcast equipment.
Expenditures for maintenance and repairs are charged to operating expense
as incurred. At the time of retirements, sales or other dispositions of
property, the original cost and related accumulated depreciation are written
off.
Intangible Assets
Intangible assets consist primarily of goodwill/FCC broadcast licenses, an
option to purchase WJZF-FM (Atlanta), and non-compete agreements. Goodwill/FCC
broadcast licenses recorded in business combinations and the purchase option
related to WJZF-FM generally are amortized on a straight-line basis over 30 to
40 years. Non-compete agreements are amortized on a straight-line basis over the
contractual lives of the agreements, generally 3 to 5 years. Cox Radio assesses
on an on-going basis the recoverability of intangible assets based on estimates
of future undiscounted cash flows for the applicable business acquired compared
to net book value. If the future undiscounted cash flow estimate is less than
net book value, net book value is then reduced to the estimated fair value. Cox
Radio also evaluates the amortization periods of intangible assets to determine
whether events or circumstances warrant revised estimates of useful lives.
Impairment of Long-Lived Assets
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," became effective in January 1996. This
Statement requires that long-lived assets and certain intangibles be reviewed
for impairment when events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable, with any impairment losses
being reported in the period in which the recognition criteria are first applied
based on the fair value of the asset. Long-lived assets and certain intangibles
to be disposed of are required to be reported at the lower of carrying amount or
fair value less cost to sell.
Income Taxes
The accounts of Cox Radio were included in the consolidated federal income
tax return and certain state income tax returns of CEI. Current federal and
state income tax expenses and benefits are allocated on a separate return basis
to Cox Radio based on (i) the current year tax effects of the inclusion of its
income, expenses and credits in the consolidated income tax returns of CEI or
(ii) separate state income tax returns.
Deferred income taxes arise from temporary differences between income taxes
and financial reporting and principally relate to depreciation, amortization and
employee benefits.
Pension, Postretirement and Postemployment Benefits
CEI generally provides defined pension benefits to all employees based on
years of service and compensation during those years. CEI also provides certain
health care and life insurance benefits to substantially all retirees and
employees. For employees and retirees of Cox Radio, these benefits are provided
through the CEI plans. Expenses related to these plans are allocated to Cox
Radio through the intercompany account. The amount of the allocations is
generally based on actuarial determinations of the effects of Cox Radio
employees' participation in the plans.
41
<PAGE> 44
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Incentive Compensation Plans
Cox Radio accounts for stock compensation in accordance with the
requirements of APB No. 25, "Accounting for Stock Issued to Employees." SFAS No.
123, "Accounting for Stock-Based Compensation," became effective in January
1996, and requires disclosure of the pro forma effects on net income and
earnings per share had the new fair value recognition provisions been elected
over the Company's policy of following APB No 25.
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.
Concentration of Risk
A significant portion of the Company's business historically has been
conducted in the areas of Los Angeles, Atlanta and Miami. Revenues earned from
radio stations located in Los Angeles, Atlanta, and Miami represented 37%, 19%
and 18%, respectively, of total revenues for the year ended December 31, 1994,
35%, 25% and 17%, respectively, of total revenues for the year ended December
31, 1995, and 36%, 30%, and 16%, respectively, of total revenues for the year
ended December 31, 1996. The Company's concentration of risk in each of the
aforementioned markets has and will be reduced upon the consummation of the
NewCity Acquisition and other transactions described in Note 4.
Earnings Per Common Share
Cox Radio became publicly traded on the New York Stock Exchange effective
September 27, 1996. Earnings per common share calculations for 1994 and 1995
have not been disclosed because the dissimilarity of the previous capital
structure of Cox Radio precludes a meaningful comparison. Historical earnings
per common share for 1996 assumes (i) 19,578,000 shares issued to CEI in
connection with the Cox Radio Consolidation were issued on January 1, 1996 and
(ii) 8,625,000 shares issued in connection with the Company's initial public
offering were outstanding during the entire fourth quarter. See additional pro
forma earnings per share information at Note 4.
3. CASH MANAGEMENT SYSTEM
Cox Radio participates in CEI's cash management system, whereby the bank
sends daily notification of Cox Radio's checks presented for payment. CEI
transfers funds from other sources to cover Cox Radio's checks presented for
payment. Book overdrafts of $3.6 million and $1.7 million existed at December
31, 1995 and 1996, respectively, as a result of Cox Radio's checks outstanding.
These book overdrafts were reclassified as accounts payable on Cox Radio's
financial statements.
4. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES
In January 1994, the Company entered into an LMA to operate WJZF-FM
(Atlanta). Subsequently, in September 1994, the Company paid $9.4 million for an
option to purchase substantially all of the station's assets.
In April 1995, Cox Radio entered into an LMA to operate WCNN-AM (Atlanta).
42
<PAGE> 45
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In August 1995, Cox Radio completed the acquisition of KACE-FM in
Inglewood, California, a suburb of Los Angeles, for $11.7 million. Cox Radio had
operated this station under an LMA since August 1994.
In January 1996, Cox Radio completed the acquisition of Louisville stations
WRKA-FM and WRVI-FM for $8.7 million. The Company also acquired Louisville
station WXNU-FM, later renamed WHTE-FM, for $2.6 million in August 1996 (the
"Louisville Acquisitions").
In June 1996, the Company acquired WHEN-AM and WWHT-FM in Syracuse for $4.5
million (the "Syracuse Acquisition"). These stations are being operated by
NewCity under an LMA.
In October 1996, the Company completed the sale of WIOD-AM in Miami for
$13.0 million plus a working capital adjustment of $1.2 million (the "Miami
Disposition"). This transaction resulted in a pre-tax gain of approximately $2.0
million which was recognized in the fourth quarter of 1996.
In March 1997, the Company exchanged WCKG-FM and WYSY-FM in Chicago for
WHOO-AM, WHTQ-FM and WMMO-FM in Orlando (the "Orlando Acquisition"). The Orlando
Acquisition resulted in a pre-tax gain of approximately $25 million. In addition
to receiving the three Orlando stations, Cox Radio also received cash proceeds
of approximately $20 million. NewCity has operated the Orlando stations since
July 1996 under an LMA.
For tax purposes, the Company accounted for the Orlando Acquisition and
Miami Disposition as like-kind exchanges. Tax rules allow the Company to defer a
substantial portion of the related tax gains on these transactions upon the
reinvestment of the net proceeds in qualifying future acquisitions. The Company
is presently pursuing additional qualifying reinvestment properties. At December
31, 1996, restricted cash of $9.1 million was held in escrow pending
reinvestment and has been reported in the Consolidated Balance Sheet as
restricted cash.
In December 1996, the Company acquired KRAV-FM and KGTO-AM in Tulsa for
$5.5 million (the "Tulsa Acquisition"). NewCity operates these stations under an
LMA.
In March 1997, the Company acquired WFNS-AM in Tampa for an aggregate
consideration of approximately $1.5 million (the "Tampa Acquisition"). The
Company has been operating this station pursuant to an LMA or JSA since June
1995.
The acquisitions were accounted for by the purchase method, and
accordingly, the purchase price has been allocated to the assets acquired based
on their estimated fair market values at the date of the acquisition. A
substantial portion of each purchase price was allocated to intangible assets to
reflect the FCC broadcasting licenses acquired. The excess of the purchase price
over the fair market value of the net assets acquired has been recorded as
goodwill and is being amortized over 30 to 40 years using the straight-line
basis. No liabilities were assumed by the Company as a result of these
acquisitions. Operations of acquired stations have been included in the
consolidated results of the Company since the acquisition date of each such
station.
Under an LMA or a JSA, the company operating a station provides a
combination of programming, sales, marketing and similar services. The broadcast
revenues and operating expenses of stations operated by Cox Radio under LMAs and
JSAs have been included in the Company's operations since the respective dates
of such agreements.
In July 1996, the Company entered into an agreement to acquire NewCity
Communications, Inc. for approximately $253 million, which includes certain
working capital adjustments, consisting of approximately $163 million in cash,
approximately $87 million in assumption of NewCity debt and approximately $3
million in working capital adjustments (the "NewCity Acquisition"). The NewCity
Acquisition is expected to be financed with proceeds from the new bank credit
facility entered into by the Company in March 1997. The consummation of the
NewCity Acquisition, which is anticipated to occur in the first half of 1997, is
subject to
43
<PAGE> 46
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
certain closing conditions, including receipt of approval by the Federal
Communications Commission ("FCC").
On January 10, 1997, CEI received a Civil Investigative Demand ("CID") from
the Antitrust Division of the DOJ. The CID sought production of documents and
interrogatory responses with respect to radio advertising in the Syracuse, New
York area. In the Syracuse area, Cox Radio is the licensee of two radio
stations; pursuant to the NewCity Acquisition, Cox Radio would acquire an
additional three stations licensed to NewCity. The CID stated that the DOJ was
seeking the information to determine whether the proposed acquisition might
violate section 1 of the Sherman Act and/or section 7 of the Clayton Act. On
February 27, 1997, the Company and NewCity were advised that the DOJ had closed
its investigation of the Syracuse market.
In January 1997, Cox Radio agreed in principle to acquire the license and
certain assets of an FM radio station in Los Angeles for $19 million in cash
(the "Los Angeles Acquisition").
The Miami Disposition, the Louisville Acquisitions, the Syracuse
Acquisition, and the Tulsa Acquisition are collectively referred to as the
"Prior Transactions." The Orlando Acquisition and the Tampa Acquisition are
collectively referred to as the "Recent Transactions." The NewCity Acquisition
and the Los Angeles Acquisition are collectively referred to as the "Pending
Transactions."
The following unaudited pro forma summary of operations presents the
consolidated results of operations as if the Prior Transactions, Recent
Transactions, Pending Transactions and the Company's initial public offering had
occurred at the beginning of the periods presented and does not purport to be
indicative of what would have occurred had these transactions been made as of
those dates or of results which may occur in the future. No pro forma
adjustments have been made for the Louisville Acquisitions, the Tampa
Acquisition and the Los Angeles Acquisition due to immateriality.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1995 1996
--------- ---------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net revenues................................................ $168,361 $189,686
Corporate general and administrative expenses............... 4,370 5,100
Depreciation and amortization............................... 15,410 17,963
Operating income............................................ 27,011 35,536
Net income.................................................. $ 3,618 $ 9,119
-------- --------
Earnings per common share................................... $ .13 $ .32
-------- --------
Pro forma shares outstanding................................ 28,315 28,315
======== ========
</TABLE>
5. PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Land and land improvements.................................. $ 14,845 $ 10,718
Buildings and building improvements......................... 5,782 5,334
Broadcast equipment......................................... 27,461 31,067
Construction in progress.................................... 1,629 2,454
-------- --------
Plant and equipment, at cost................................ 49,717 49,573
Less accumulated depreciation............................... (21,697) (22,503)
-------- --------
Net plant and equipment........................... $ 28,020 $ 27,070
======== ========
</TABLE>
44
<PAGE> 47
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
-------- --------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Goodwill/FCC broadcast licenses............................. $162,433 $175,377
WJZF-FM purchase option..................................... 9,381 9,381
Non-compete agreements...................................... 5,707 6,707
Other....................................................... 1,511 2,131
-------- --------
Total............................................. 179,032 193,596
Less accumulated amortization............................... (52,234) (55,477)
-------- --------
Net intangible assets............................. $126,798 $138,119
======== ========
</TABLE>
7. INCOME TAXES
Income tax expense (benefit) is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1995 1996
------ ------ ------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current:
Federal................................................... $7,439 $5,226 $7,788
State..................................................... 1,390 1,441 963
------ ------ ------
Total current..................................... 8,829 6,667 8,751
------ ------ ------
Deferred:
Federal................................................... 137 (589) 1,198
State..................................................... (103) 148 (197)
------ ------ ------
Total deferred.............................................. 34 (441) 1,001
------ ------ ------
Total income taxes.......................................... $8,863 $6,226 $9,752
====== ====== ======
</TABLE>
The tax effects of significant temporary differences which comprise the net
deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------- --------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Current deferred tax asset:
Provision for doubtful accounts........................... $ 301 $ 279
------- --------
Noncurrent deferred tax assets (liabilities):
Plant and equipment....................................... (2,463) (3,273)
Intangibles............................................... (5,550) (10,351)
Net operating loss carryforwards -- states................ 1,056 2,013
Employee benefits......................................... 1,028 1,061
State taxes............................................... (473) (955)
Other..................................................... (68) 410
------- --------
Total net noncurrent liability.................... (6,470) (11,095)
------- --------
Net deferred tax liability........................ $(6,169) $(10,816)
======= ========
</TABLE>
45
<PAGE> 48
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense computed using the United States federal statutory rates
is reconciled to the reported income tax provisions as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1995 1996
------ ------ ------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Federal statutory income tax rate........................ 35% 35% 35%
Computed tax expense at federal statutory rates on income
before income taxes.................................... $7,025 $5,036 $8,643
State income taxes (net of federal tax benefit).......... 836 1,033 498
Non-deductible amortization of intangibles............... 1,028 811 1,037
Benefit arising from low income housing credits.......... (125) (555) (605)
Other, net............................................... 99 (99) 179
------ ------ ------
Income tax provision........................... $8,863 $6,226 $9,752
====== ====== ======
</TABLE>
The consolidated federal income tax returns of CEI for 1986 through 1994
and the combined California franchise tax returns of CEI for 1984 through 1990
are presently under audit. Management believes that any additional liabilities
arising from current tax-related audits are sufficiently provided for at
December 31, 1996.
8. RETIREMENT PLANS
Substantially all of Cox Radio's employees participate in the funded,
noncontributory defined benefit pension plan of CEI and certain key employees
participate in an unfunded, non-qualified supplemental pension plan. The plans
call for benefits to be paid to eligible employees at retirement based primarily
upon years of service with Cox Radio and compensation rates during those years.
Pension expense allocated to Cox Radio by CEI was $412,000, $636,000 and
$801,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
The following table sets forth certain information attributable to the Cox
Radio employees' participation in the CEI pension plans:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------------- -------------------
FUNDED UNFUNDED FUNDED UNFUNDED
PLANS PLANS PLANS PLANS
------- -------- ------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits.......................... $10,276 $1,233 $10,464 $1,188
Nonvested benefits....................... 1,012 199 973 172
------- ------ ------- ------
Accumulated benefit obligation............. $11,288 $1,432 $11,437 $1,360
======= ====== ======= ======
Projected benefit obligation............... $13,965 $1,879 $14,434 $1,867
======= ====== ======= ======
</TABLE>
Assumptions used in the actuarial computations were:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1995 1996
---- ----
<S> <C> <C>
Discount rate............................................... 7.25% 7.75%
Rate of increase in compensation levels..................... 5.00% 5.50%
Expected long-term rate of return on assets................. 9.00% 9.00%
</TABLE>
CEI may establish a defined benefit pension plan and segregate plan assets
for Cox Radio. The amount of the assets that would be segregated would have an
estimated fair value equal to the projected benefit
46
<PAGE> 49
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
obligation of the CEI defined benefit pension plan attributable to Cox Radio
employees as of December 31, 1996, or $14,434,000. The assets segregated would
be used to fund payments to retirees. Any non-qualified supplemental pension
plan payments due to Cox Radio employees will be made by CEI.
CEI provides certain health care and life insurance benefits to
substantially all retirees of CEI and its subsidiaries. Postretirement expense
allocated to Cox Radio by CEI was $298,000, $218,000, and $166,000 for the years
ended December 31, 1994, 1995 and 1996, respectively. Cox Radio's APBO at
December 31, 1996 was $3,554,000.
The funded status of the portion of the postretirement plan covering the
employees of Cox Radio is not determinable. The APBO for the postretirement plan
of CEI substantially exceeded the fair value of assets held in the plan at
December 31, 1996.
Actuarial assumptions used to determine the APBO include a discount rate of
7.75% and an expected long-term rate of return on plan assets of 9%. The assumed
health care cost trend rate for retirees is 11.5%. For participants prior to age
65, the trend rate gradually decreases to 5.5% by year 2007 and remains level
thereafter. For retirees at age 65 or older, this rate decreases to 5.0% by year
2008. Increasing the assumed health care cost trend rate by one percentage point
would have resulted in an increase in the CEI plan's APBO of approximately 6.5%
and an increase in the aggregate of the service cost and interest cost
components of the net periodic postretirement benefit cost of approximately 5.1%
for 1996.
In addition, substantially all of Cox Radio's employees are eligible to
participate in the savings and investment plan of CEI. Under the terms of the
plan, Cox Radio matches a discretionary amount no greater than 50% of employee
contributions up to a maximum of 6% of the employee's base salary. Cox Radio's
expense under the plan was $471,000, $523,000, and $584,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.
Cox Radio employees whose savings and investment plan contributions are at
the Internal Revenue Service ("IRS") maximum or are restricted in order to pass
the nondiscrimination test required by the IRS are eligible to participate in
CEI's non-qualified savings restoration plan, which began in 1995. Under the
terms of this plan, Cox Radio matches a discretionary amount no greater than 50%
of employee contributions to both the savings and investment and restoration
plans up to a maximum percentage of the employee's eligible compensation. Cox
Radio's expense under the non-qualified savings restoration plan was $23,000 and
$23,000 for the years ended December 31, 1995 and 1996, respectively.
9. STOCK-BASED COMPENSATION PLANS
During the three years in the period ending December 31, 1996, the Company
had two stock-based compensation plans. Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," encourages, but
does not require companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Accordingly, compensation for the Cox
Enterprises, Inc. Unit Appreciation Plan ("UAP") has been recorded annually
based on the appraised value of Cox Enterprises, Inc. stock at the end of the
period. Compensation for the Cox Radio, Inc. Long-Term Incentive Plan ("LTIP")
is measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the exercise price. Specific information
regarding each plan and required disclosure of pro forma effect on the Company's
operations if SFAS No. 123 had been adopted is presented below.
47
<PAGE> 50
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cox Enterprises, Inc. UAP
Certain of the executives and key employees of Cox Radio participated in
certain Cox Enterprises, Inc. UAPs that provided for payment of benefits in the
form of shares of CEI common stock, cash, or both, generally five years after
the date of award. Unit benefits are based on the excess, if any, over a base
amount (value of award), of the fair value of a share of CEI common stock five
years after the effective date of award. Fair values are determined by
independent appraisal. The plans provide for a maximum unit benefit of 150% of
the base amount and benefits vest over the five year period following the date
of award. The cost of awards made under the plans was allocated to Cox Radio by
CEI over the applicable vesting periods and was charged to corporate general and
administrative expense. Amounts charged to expense for Cox Radio employees for
the years ended December 31, 1994, 1995 and 1996 were $833,000, $1,646,000 and
$2,464,000 respectively. Amounts accrued under the plans were $963,000 and
$646,000 as of December 31, 1995 and 1996, respectively. In connection with the
Company's initial public offering, a portion of the 1994 plan was settled
through the issuance of 111,973 shares of restricted Class A Common Stock of Cox
Radio as discussed below. The adoption of SFAS No. 123 would have resulted in no
additional compensation expense related to the Cox Enterprises, Inc. UAP.
Cox Radio, Inc. LTIP
Pursuant to the LTIP, executive officers and certain employees of Cox Radio
who have been selected as participants are eligible to receive awards of various
forms of equity-based incentive compensation, including stock options, stock
appreciation rights, stock bonuses, restricted stock awards, performance units
and phantom stock and awards consisting of combinations of such incentives. Cox
Radio has reserved 2,400,000 shares of Class A Common Stock for issuance under
the LTIP.
Subject to the maximum shares reserved under the LTIP, no individual may
receive a stock option covering more than 300,000 shares of Class A Common Stock
in any year nor be granted more than 100,000 shares of Class A Common Stock, in
any combination of performance awards, restricted stock or other stock-based
awards that are subject to performance criteria in any year. The maximum payout
for any individual for a performance award paid in cash is 100% of his or her
base salary as of the beginning of the year of the performance award payment.
Upon the closing of the Company's initial public offering, certain UAP
units awarded in 1994 that would have matured in 1998, were converted into
111,973 restricted shares of Class A Common Stock issued pursuant to the LTIP
based on the calculated appreciation of the UAP units and the quoted market
price at the date of conversion. These restricted shares will remain unvested
until the end of the original five-year UAP appreciation period. Certain UAP
units awarded in 1996 were cancelled and converted to options to acquire Class A
Common Stock pursuant to the LTIP. As of December 31, 1996, 511,673 options had
been granted and were outstanding under the LTIP at an exercise price of $18.50
per share. These options vest 60% after three years from the date of the grant,
80%, after four years from the date of the grant and 100% after five years from
the date of the grant and expire ten years after the date of the grant. None of
the options were exercisable at December 31, 1996, and no compensation cost has
been recognized for these options.
The fair value of the options granted during 1996 is estimated as $9.39 on
the date of grant using the Black-Scholes option-pricing model with the
following assumptions: expected volatility of 38 percent, no dividend yield,
risk-free interest rate of 6.7% and expected life of three years after vesting.
Had compensation cost for the LTIP been determined based on the fair value at
the grant date for awards under this plan consistent with the method of SFAS No.
123, the Company's net income would have been reduced by approximately $.3
million. Pro forma effect on earnings per common share has not been presented
due to the reasons discussed in Note 1.
48
<PAGE> 51
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. TRANSACTIONS WITH AFFILIATED COMPANIES
Cox Radio borrows funds for working capital and other needs from CEI.
Certain management services are provided to Cox Radio by CEI. Such services
include rent, legal, corporate secretarial, tax, treasury, internal audit, risk
management, benefits administration and other support services and are included
in corporate general and administrative expenses in the Consolidated Statements
of Operations. Cox Radio was allocated expenses for the years ended December 31,
1994, 1995 and 1996 of approximately $1,834,000, $2,207,000 and $1,499,000,
respectively, related to these services. Cox Radio pays rent and certain other
occupancy costs to CEI for office facilities. Related rent and occupancy expense
was approximately $395,000, $378,000 and $403,000 for the years ended December
31, 1994, 1995 and 1996, respectively. Corporate general and administrative
expense allocations are based on a specified percentage of expenses related to
the services provided to Cox Radio in relation to those provided to other
subsidiaries. Rent and occupancy expense is allocated based on occupied space.
Management believes that these allocations were made on a reasonable basis.
However, the allocations are not necessarily indicative of the level of expenses
that might have been incurred had Cox Radio contracted directly with third
parties. Management has not made a study or any attempt to obtain quotes from
third parties to determine what the cost of obtaining such services from third
parties would have been. The fees and expenses to be paid by Cox Radio to CEI
are subject to change.
The amounts due to CEI are generally due on demand and represent the net of
various transactions, including those described above. The amounts due to CEI
are classified as long-term because the Company has the ability and the intent
to refinance these obligations on a long-term basis. The amounts due to (from)
CEI are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1995 1996
--------- -------
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Notes payable to CEI........................................ $ (58,918) $ --
Other intercompany amounts due from (to) CEI................ (66,171) 49,667
--------- -------
Total............................................. $(125,089) $49,667
========= =======
</TABLE>
Notes payable to CEI bear interest at prime plus 1 1/2%. These interest
rates are established at the beginning of each quarter and are as follows:
<TABLE>
<CAPTION>
1995 1996
----- ----
<S> <C> <C>
First quarter............................................... 10.00% 8.75%
Second quarter.............................................. 10.50% 8.75%
Third quarter............................................... 10.50% 8.75%
Fourth quarter.............................................. 10.25% 8.75%
</TABLE>
49
<PAGE> 52
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Included in the other intercompany amounts due to CEI are the following
transactions:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS)
<S> <C>
Intercompany due to CEI, December 31, 1994............... $ (61,390)
Dividends to CEI....................................... (1,400)
Cash transferred to CEI................................ 110,617
Acquisitions........................................... (11,697)
Net operating expense allocations and reimbursements... (102,301)
---------
Intercompany due to CEI, December 31, 1995............... $ (66,171)
Dividends to CEI....................................... (12,656)
Cash transferred to CEI................................ 115,002
Acquisitions........................................... (21,500)
Capital contributions by CEI........................... 36,744
Proceeds from initial public offering.................. 149,213
Net operating expense allocations and reimbursements... (150,965)
---------
Intercompany due from CEI, December 31, 1996............. $ 49,667
=========
</TABLE>
Cox Radio is paid interest on the daily intercompany balance at a
competitive market rate as determined by CEI. The rates used during 1996 ranged
from 5% to 6%.
In accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments," Cox Radio has estimated the fair value of
its intercompany advances and notes payable. Given the short-term nature of
these advances, the carrying amounts reported in the balance sheets approximate
fair value.
11. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Additional cash flow information:
Cash paid for interest.................................... $5,354 $6,071 $5,466
Cash paid for income taxes................................ 9,943 7,844 6,033
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
Cox Radio leases land, office facilities, and various items of equipment
under noncancellable operating leases. Rental expense under operating leases
amounted to $1,676,000 in 1994, $1,735,000 in 1995 and $1,520,000 in 1996.
Future minimum lease payments as of December 31, 1996 for all noncancellable
operating leases are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 715
1998........................................................ 723
1999........................................................ 718
2000........................................................ 672
2001........................................................ 671
Thereafter.................................................. 455
------
Total............................................. $3,954
======
</TABLE>
Cox Radio has various contracts primarily for sports programming and on-air
personalities with future minimum payments for 1997, 1998, 1999 and 2000 of
$14.7 million, $14.2 million, $9.7 million and $.6 million, respectively.
50
<PAGE> 53
COX RADIO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1996, the Company had outstanding purchase commitments for
additions to plant and equipment totaling approximately $1.5 million.
Cox Radio is a party to various legal proceedings which are ordinary and
incidental to its business. Management does not expect that any legal
proceedings currently pending will have a material adverse impact on Cox Radio's
consolidated financial position or consolidated results of operations.
51
<PAGE> 54
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required by this Item is incorporated by reference to Cox
Radio's Proxy Statement for the 1997 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to Cox
Radio's Proxy Statement for the 1997 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated by reference to Cox
Radio's Proxy Statement for the 1997 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to Cox
Radio's Proxy Statement for the 1997 Annual Meeting of Stockholders.
52
<PAGE> 55
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents incorporated by reference or filed with this Report
(1) No financial statement schedules are required to be filed by Items
8 and 14 (d) because they are not required or are not applicable, or the
required information is set forth in the applicable financial statements or
notes thereto.
(2) Exhibits required to be filed by Item 601 of Regulation S-K:
Listed below are the exhibits which are filed as part of this Report
(according to the number assigned to them in Item 601 of Regulation S-K):
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
*2.1 -- Agreement and Plan of Merger, dated as of July 1, 1996, by
and among Cox Radio, Inc., New Cox Radio II, Inc., NewCity
Communications, Inc. and certain stockholders of NewCity
Communications, Inc.**
*2.2 -- Guaranty by Cox Broadcasting, Inc., dated as of July 1,
1996, in favor of NewCity Communications, Inc.
*3.1 -- Amended and Restated Certificate of Incorporation of Cox
Radio, Inc.
*3.2 -- Amended and Restated Bylaws of Cox Radio, Inc.
*4.1 -- Indenture between NewCity Communications, Inc. and Shawmut
Bank Connecticut, National Association, as Trustee, dated as
of November 2, 1993, related to the 11 3/8% Notes due 2003
of NewCity Communications, Inc.**
*4.2 -- First Supplemental Indenture between NewCity Communications,
Inc. and Shawmut Bank Connecticut, National Association, as
Trustee, dated as of September 16, 1994, relating to the
11 3/8% Notes due 2003 of NewCity Communications, Inc.
*4.3 -- Specimen of Class A Common Stock Certificate.
10.1 -- Credit Agreement, dated as of March 7, 1997, by and among
Cox Radio, Inc., Texas Commerce Bank National Association,
Nationsbank of Texas, N.A. and Citibank, N.A., individually
and as agents, and the other banks signatory thereto.**
*10.2 -- New CEI Credit Facility.
*10.3 -- Cox Radio, Inc. Long-Term Incentive Plan.
*10.4 -- Cox Radio, Inc. Employee Stock Purchase Plan.
*10.5 -- Cox Radio, Inc. Restricted Stock Plan for Non-Employee
Directors
10.6 -- Tax Allocation and Indemnification Agreement, dated as of
September 30, 1996, by and between Cox Enterprises, Inc. and
Cox Radio, Inc.
*21 -- Subsidiaries of the Registrant
23.1 -- Consent of Deloitte & Touche LLP
24.1 -- Power of Attorney (included on page 54)
27.1 -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* Incorporated by reference to the corresponding exhibit of Cox Radio's
Registration Statement on Form S-1 (Commission File No. 333-08737).
** Schedules and Exhibits intentionally omitted.
53
<PAGE> 56
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Cox Radio, Inc. has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Cox Radio, Inc.
By: /s/ ROBERT F. NEIL
------------------------------------
Robert F. Neil
President and Chief Executive
Officer
Date: March 25, 1997
POWER OF ATTORNEY
Cox Radio, Inc., a Delaware corporation, and each person whose signature
appears below, constitutes and appoints Robert F. Neil and Maritza C. Pichon,
and either of them, with full power to act without the other, such person's true
and lawful attorneys-in-fact, with full power of substitution and
resubstitution, for him and her and in his or her name, place and stead, in any
and all capacities, to sign this Annual Report on Form 10-K and any and all
amendments to such Annual Report on Form 10-K and other documents in connection
therewith, and to file the same and all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to do and
perform each and every act and thing necessary or desirable to be done in and
about the premises, as fully to all intents and purposes as he or she might or
could do in person, thereby ratifying and confirming all that said
attorneys-in-fact, or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Cox Radio,
Inc. and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ NICHOLAS D. TRIGONY Chairman of the Board of March 25, 1997
- ----------------------------------------------------- Directors
Nicholas D. Trigony
/s/ ROBERT F. NEIL President and Chief Executive March 25, 1997
- ----------------------------------------------------- Officer; Director
Robert F. Neil
/s/ MARITZA C. PICHON Chief Financial Officer March 25, 1997
- ----------------------------------------------------- (principal accounting officer
Maritza C. Pichon and principal financial
officer)
/s/ JAMES C. KENNEDY Director March 25, 1997
- -----------------------------------------------------
James C. Kennedy
/s/ DAVID E. EASTERLY Director March 25, 1997
- -----------------------------------------------------
David E. Easterly
/s/ ERNEST D. FEARS, JR. Director March 25, 1997
- -----------------------------------------------------
Ernest D. Fears, Jr.
/s/ PAUL M. HUGHES Director March 25, 1997
- -----------------------------------------------------
Paul M. Hughes
</TABLE>
54
<PAGE> 1
EXHIBIT 10.1
FIVE-YEAR
CREDIT AGREEMENT
among
COX RADIO, INC.,
THE GUARANTORS REFERRED TO HEREIN,
THE BANKS REFERRED TO HEREIN,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Administrative Agent,
NATIONSBANK OF TEXAS, N.A.,
as Syndications Agent,
and
CITIBANK, N.A.,
as Documentation Agent
- -------------------------------------------------------------------------------
<PAGE> 2
COX RADIO, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
<S> <C>
Definitions ................................................................... 1
ARTICLE II
The Loans
SECTION 2.01. The Revolving Loans......................................... 18
SECTION 2.02. Setoff, Counterclaims and Taxes............................. 30
SECTION 2.03. Withholding Tax Exemption................................... 30
SECTION 2.04. Obligations Several, Not Joint.............................. 31
SECTION 2.05. Evidence of Debt............................................ 31
SECTION 2.06. Discretionary Loans......................................... 32
ARTICLE III
Optional and Required Prepayments; Interest
Payment Date; Other Payments
SECTION 3.01. Optional Prepayments........................................ 33
SECTION 3.02. Required Prepayments........................................ 34
SECTION 3.03. Interest Payment Date....................................... 37
SECTION 3.04. Place, Etc. of Payments and
Prepayments............................................ 37
ARTICLE IV
Fees; Reduction of Commitments
SECTION 4.01. Administration Fee.......................................... 38
SECTION 4.02. Commitment Fees............................................. 38
SECTION 4.03. Reduction or Termination of
Commitments............................................ 38
</TABLE>
<PAGE> 3
2
ARTICLE V
<TABLE>
<S> <C>
Application of Proceeds..................................... 39
ARTICLE VI
Representations and Warranties
SECTION 6.01. Organization; Qualification;
Subsidiaries........................................... 39
SECTION 6.02. Financial Statements........................................ 40
SECTION 6.03. Actions Pending............................................. 41
SECTION 6.04. Default..................................................... 41
SECTION 6.05. Title to Assets; Licenses;
Intellectual Property.................................. 41
SECTION 6.06. Payment of Taxes............................................ 42
SECTION 6.07. Conflicting or Adverse Agreements
or Restrictions........................................ 42
SECTION 6.08. Purpose of Loans............................................ 42
SECTION 6.09. Authority; Validity......................................... 43
SECTION 6.10. Consents or Approvals....................................... 43
SECTION 6.11. Compliance with Law......................................... 43
SECTION 6.12. ERISA....................................................... 44
SECTION 6.13. Investment Company Act...................................... 44
SECTION 6.14. Disclosure.................................................. 45
SECTION 6.15. Insurance................................................... 45
SECTION 6.16. Environmental and Safety Matters............................ 45
SECTION 6.17. Restricted Subsidiaries..................................... 46
ARTICLE VII
Conditions
SECTION 7.01. Conditions Precedent to Closing............................. 46
SECTION 7.02. Conditions Precedent to Initial
Borrowing.............................................. 48
SECTION 7.03. Conditions Precedent to Each
Borrowing.............................................. 49
SECTION 7.04. Conditions Precedent to
Borrowings that Increase
Principal Outstanding.................................. 49
</TABLE>
<PAGE> 4
3
ARTICLE VIII
Affirmative Covenants
<TABLE>
<S> <C>
SECTION 8.01. Certain Financial Covenants................................. 51
SECTION 8.02. Financial Statements and
Information............................................ 51
SECTION 8.03. Existence; Laws; Obligations................................ 54
SECTION 8.04. Notice of Litigation and Other
Matters................................................ 54
SECTION 8.05. Books and Records........................................... 55
SECTION 8.06. Inspection of Property and
Records................................................ 55
SECTION 8.07. Maintenance of Property,
Insurance.............................................. 55
SECTION 8.08. ERISA....................................................... 56
SECTION 8.09. Maintenance of Business Lines............................... 56
SECTION 8.10. Further Assurances.......................................... 56
SECTION 8.11. Restricted/Unrestricted
Designation of Subsidiaires............................ 57
ARTICLE IX
Negative Covenants
SECTION 9.01. Mortgages, Etc.............................................. 58
SECTION 9.02. Merger; Consolidation;
Disposition of Assets.................................. 59
SECTION 9.03. Restricted Payments......................................... 60
SECTION 9.04. Limitation on Margin Stock.................................. 60
SECTION 9.05. Transactions with Affiliates................................ 60
SECTION 9.06. Loans and Advances to and
Investments in Unrestricted
Subsidiaries........................................... 61
SECTION 9.07. Certain Transfers........................................... 61
ARTICLE X
Events of Default
SECTION 10.01. Failure To Pay Principal or
Interest............................................... 62
SECTION 10.02. Failure To Pay Other Sums................................... 63
SECTION 10.03. Failure To Pay Other Debt................................... 63
</TABLE>
<PAGE> 5
4
<TABLE>
<S> <C>
SECTION 10.04. Misrepresentation or Breach of
Warranty............................................... 63
SECTION 10.05. Violation of Certain Covenants.............................. 64
SECTION 10.06. Violation of Other Covenants,
Etc.................................................... 64
SECTION 10.07. Undischarged Judgment....................................... 64
SECTION 10.08. ERISA....................................................... 64
SECTION 10.09. Change of Control........................................... 64
SECTION 10.10. Assignment for Benefit of
Creditors or Nonpayment of
Debts.................................................. 64
SECTION 10.11. Voluntary Bankruptcy........................................ 65
SECTION 10.12. Involuntary Bankruptcy...................................... 65
SECTION 10.13. Dissolution................................................. 65
SECTION 10.14. Guarantee................................................... 65
ARTICLE XI
Modifications, Amendments or Waivers.......................... 66
ARTICLE XII
The Administrative Agent
SECTION 12.01. Appointment of Administrative
Agent.................................................. 67
SECTION 12.02. Indemnification of Administrative
Agent.................................................. 68
SECTION 12.03. Limitation of Liability..................................... 68
SECTION 12.04. Independent Credit Decision................................. 69
SECTION 12.05. Rights of TCB............................................... 69
SECTION 12.06. Successor to the Administrative
Agent.................................................. 70
ARTICLE XIII
Guarantee.................................... 70
</TABLE>
<PAGE> 6
5
ARTICLE XIV
Miscellaneous
<TABLE>
<S> <C>
SECTION 14.01. Payment of Expenses......................................... 73
SECTION 14.02. Notices..................................................... 74
SECTION 14.03. Setoff...................................................... 75
SECTION 14.04. Indemnity and Judgments..................................... 76
SECTION 14.05. Interest.................................................... 77
SECTION 14.06. Governing Law; Submission to
Jurisdiction; Venue.................................... 78
SECTION 14.07. Survival of Representations and
Warranties; Binding Effect;
Assignment............................................. 79
SECTION 14.08. Counterparts................................................ 83
SECTION 14.09. Severability................................................ 83
SECTION 14.10. Descriptive Headings........................................ 83
SECTION 14.11. Representation of the Banks................................. 83
SECTION 14.12. Final Agreement of the Parties.............................. 83
Waiver of Jury Trial........................................ 84
</TABLE>
<PAGE> 7
6
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit 2.01(a) - Banks and Commitments
Exhibit 2.01(g)(iv) - Eurocurrency Liabilities
(Regulation D)
Exhibit 6.01 - List of Subsidiaries
Exhibit 6.03 - List of Actions Pending
Exhibit 7.01(b) - Opinion of the Company's Counsel
Exhibit 7.01(c) - Officer's Certificate
Exhibit 7.02(c) - Certificate of Solvency
Exhibit 8.10(a) - Additional Guarantor Agreement
Exhibit 9.01(d) - List of Liens and Security
Interests
Exhibit 14.02 - Addresses for Notices
Exhibit 14.07(c) - Assignment and Acceptance
</TABLE>
<PAGE> 8
FIVE-YEAR CREDIT AGREEMENT dated as of
March 7, 1997 (this "Agreement"), among COX RADIO,
INC., a Delaware corporation (the "Company"), the
GUARANTORS referred to herein, the BANKS referred to
herein, TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as
administrative agent (the "Administrative Agent"),
NATIONSBANK OF TEXAS, N.A., as syndications agent,
and CITIBANK, N.A., as documentation agent.
WHEREAS the Company, an indirect majority-owned subsidiary of
Cox Enterprises (such term and each other capitalized term used but not defined
in this Agreement having the meaning set forth in Article I hereof) proposes to
acquire all the issued and outstanding shares of Capital Stock of NewCity
Communications through the merger (the "Merger") of a Wholly Owned Subsidiary
of the Company with and into NewCity Communications (the "Surviving
Corporation") pursuant to the NewCity Merger Agreement.
WHEREAS the Company has requested the Banks to make Loans to
the Company in an aggregate amount not to exceed $300,000,000 at any time
outstanding to be used to finance the payment of the consideration payable in
the Merger of approximately $165,000,000 and additional acquisitions and for
general corporate purposes.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, the parties hereto agree as
follows:
ARTICLE I
Definitions
As used in this Agreement, the following words and terms
shall have the respective meanings indicated opposite each of them and all
accounting terms shall be construed in accordance with GAAP consistent with
those
<PAGE> 9
2
followed in the preparation of the financial statements referred to in Section
6.02, unless otherwise indicated:
"Additional Guarantor Agreement" has the meaning specified in
Section 8.10(a) hereof.
"Administrative Agent" shall have the meaning set forth in
the introductory paragraph of this Agreement.
"Affiliate" shall mean, when used with respect to a specified
Person, another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with
the Person specified.
"Agents' Fee Letters" shall mean the TCB Fee Letter, the fee
letter dated as of February 5, 1997, between Citibank, N.A. and the Company,
and the fee letter dated as of February 5, 1997, between NationsBank of Texas,
N.A. and the Company.
"Agreement" shall mean this Five-Year Credit Agreement, as
the same may be amended from time to time.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the
greater of (a) the Floating Rate in effect on such day; or (b) the Federal
Funds Borrowing Rate in effect for such day plus 1/2 of 1%. For purposes of
this Agreement, any change in the Alternate Base Rate due to a change in the
Federal Funds Borrowing Rate shall be effective on the effective date of such
change in the Federal Funds Borrowing Rate. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive, absent manifest error) that it is unable to ascertain, after
reasonable efforts, the Federal Funds Borrowing Rate, the Alternate Base Rate
shall be the Floating Rate until the circumstances giving rise to such
inability no longer exist.
"Alternate Base Rate Loans" shall mean the loans described in
Section 2.01(d)(i) which bear interest at a rate based on the Alternate Base
Rate.
<PAGE> 10
3
"Assignment and Acceptance" has the meaning specified in
Section 14.07(c) hereof.
"Attributable Amount" shall mean, in connection with any
designation of a Restricted Subsidiary as an Unrestricted Subsidiary or of an
Unrestricted Subsidiary as a Restricted Subsidiary pursuant to Section 8.11,
the amount of EBITDA for the most recent four consecutive fiscal quarter period
for which financial statements have been delivered in accordance with Section
8.02, determined at the time of such designation, which was attributable to
such Subsidiary.
"Banks" shall mean the Persons listed on Exhibit 2.01(a) and
any other Person that shall have become a party hereto pursuant to an
Assignment and Acceptance, other than any such Person that ceases to be a party
hereto pursuant to an Assignment and Acceptance.
"Borrowing Date" shall mean a date upon which a Borrowing is
to be made under Section 2.01(a).
"Borrowings" and individually, "Borrowing", shall mean
Borrowings by the Company under Section 2.01(a) consisting of simultaneous
Revolving Loans from the Banks.
"Business Day" shall mean a day when the Reference Banks and
the Administrative Agent are open for business; provided that in connection
with Eurodollar Loans, it shall mean a day when the Reference Banks and the
Administrative Agent are open for business and banks are authorized to be open
for business in London and New York.
"Capital Stock" of any Person shall mean any and all shares,
interests, share capital, rights to subscribe for or purchase, warrants,
options, participations or other equivalents of or interests or membership
interests in (however designated) equity of such Person, including any
Preferred Stock, any limited or general partnership interest and any limited
liability company membership interest (but excluding any debt securities
convertible into such equity), and any rights to subscribe for or purchase any
thereof.
"Cash Flow Producing Assets" shall mean (a) assets other than
(i) cash equivalents and other
<PAGE> 11
4
investments purchased in the ordinary course of the Company's cash management
activities, (ii) office buildings and office equipment and supplies and (iii)
other assets not comprising radio broadcast systems or portions thereof or not
directly employed in the cash flow-producing activities of the Company and its
Restricted Subsidiaries and (b) any Capital Stock of a Restricted Subsidiary
substantially all of the assets of which constitute assets described in clause
(a) above.
"CD Rate" for any Interest Period shall mean, for each CD
Rate Loan comprising all or part of the relevant Borrowing, an interest rate
per annum determined by the Administrative Agent to be equal to the sum of:
(a) the rate per annum obtained by dividing (i) the per annum
rate of interest determined by the Administrative Agent to be the
average (rounded upward to the nearest whole multiple of 0.01%, if
such average is not such a multiple) of the bid rate determined
independently by each Reference Bank at 9:00 a.m. (Dallas, Texas
time), or as soon thereafter as is practicable, on the first day of
such Interest Period, of a certificate of deposit dealer of recognized
standing selected by each Reference Bank for the purchase at face
value of its certificates of deposit in an amount approximately equal
or comparable to the aggregate principal amount of such CD Rate Loans,
with a maturity equal to such Interest Period, by (ii) the result
obtained by subtracting from 100% all reserve (including, without
limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirements (expressed as
a rate per annum) applicable (or scheduled at the time of
determination to become applicable during such Interest Period) to
such certificates of deposit, plus
(b) the weighted average of annual assessment rates,
determined by the Administrative Agent to be in effect on the first
day of such Interest Period, used to determine the then current annual
assessment payable by the Reference Banks to the Federal Deposit
Insurance Corporation for such Corporation's insuring Dollar deposits
of such Reference Banks in the United States.
<PAGE> 12
5
"CD Rate Loans" shall mean the loans described in Section
2.01(d)(iii) which bear interest at a rate based on the CD Rate.
A "Change of Control" shall be deemed to have occurred if (a)
the Cox Family and Cox Enterprises shall cease at any time to own directly or
indirectly Capital Stock of the Company carrying more than 50% of the voting
power of all the outstanding voting stock of the Company, (b) any Person or
group of Persons other than the Cox Family, Cox Enterprises and Persons
Controlled by them shall have the right or ability, directly or indirectly, to
cause the election of a majority of the directors of the Company, (c) the Cox
Family shall cease at any time to own directly or indirectly at least 50.1% of
the outstanding voting stock of Cox Enterprises, or (d) any Person or group of
Persons other than the Cox Family shall have the right or ability, directly or
indirectly, to cause the election of a majority of the directors of Cox
Enterprises.
"Closing Date" shall mean the date of this Agreement.
"Commitment" shall mean as to any Bank the amount of such
Bank's commitment to make Loans hereunder, as set forth beside such Bank's name
on Exhibit 2.01(a) attached hereto or in any Assignment and Acceptance executed
pursuant to Section 14.07(c), as such amount (a) may be reduced from time to
time pursuant to the terms of this Agreement or pursuant to an Assignment and
Acceptance or (b) may be increased from time to time pursuant to an Assignment
and Acceptance, and "Commitments" shall mean the Commitments of all of the
Banks.
"Commitment Letter" shall have the meaning assigned to such
term in Section 14.04 of this Agreement.
"Commitment Fees" shall have the meaning set forth in Section
4.02.
"Company" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"Control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
a Person, whether through
<PAGE> 13
6
the ability to exercise voting power, by contract or otherwise. "Controlling"
and "Controlled" have meanings correlative thereto.
"Counsel for the Company" shall mean Dow, Lohnes & Albertson,
PLLC.
"Cox Enterprises" shall mean Cox Enterprises, Inc., a
Delaware corporation.
"Cox Family" shall mean those certain trusts commonly
referred to as the Dayton-Cox Trust A, the Barbara Cox Anthony Atlanta Trust,
the Anne Cox Chambers Atlanta Trust, the Estate of James M. Cox, Jr., Barbara
Cox Anthony, Garner Anthony, Anne Cox Chambers, and the estates, executors and
administrators, and children of the above-named individuals, and any
corporation, partnership or trust in which the above-named trusts or
individuals in the aggregate have a beneficial interest of greater than 50%.
"Debt" shall mean with respect to any Person and without
duplication (a) indebtedness for borrowed money or for the deferred purchase
price of Property or services in respect of which such Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in respect of
which such Person directly or indirectly assures a creditor against loss, (b)
the capitalized portions of obligations under leases which shall have been or
should have been, in accordance with GAAP, recorded as capital leases, (c) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments and (d) all Guarantees by such Person of the Debt of others.
"Default Rate" shall mean a rate per annum (for the actual
number of days elapsed, based on a year of 365 or 366 days, as the case may be)
which shall be equal to the lesser of (a) the Alternate Base Rate plus 2% or
(b) the Highest Lawful Rate.
"Depositary" shall have the meaning assigned to such term in
Section 14.03 of this Agreement.
"Discretionary Borrowings" and individually,
"Discretionary Borrowing", shall mean borrowings by the
<PAGE> 14
7
Company under Section 2.06 consisting of Discretionary Loans.
"Discretionary Loans" and individually, "Discretionary Loan",
shall mean loans made by a Bank pursuant to Section 2.06.
"Dollars" and "$" shall mean lawful currency of the United
States of America.
"EBITDA" shall mean, with respect to the Company and its
Restricted Subsidiaries on a consolidated basis for any period, the net income
of the Company and its Restricted Subsidiaries on a consolidated basis for such
period plus, to the extent deducted in computing such consolidated net income,
without duplication, the sum of (a) income tax expense, (b) interest expense,
(c) depreciation and amortization expense, (d) any extraordinary or
non-recurring losses and (e) other noncash items reducing such consolidated net
income, minus, to the extent added in computing such consolidated net income,
without duplication, the sum of (i) interest income, (ii) any extraordinary or
non-recurring gains and (iii) other noncash items increasing such consolidated
net income, determined on a consolidated basis in accordance with GAAP.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"Eurodollar Event" shall have the meaning assigned to such
term in Section 2.01(e) of this Agreement.
"Eurodollar Loans" shall mean the loans described in Section
2.01(d)(ii) which bear interest at a rate based on the Eurodollar Rate.
"Eurodollar Rate" for any Interest Period shall mean, for
each Eurodollar Loan comprising part of the relevant Borrowing, an interest
rate per annum equal to the per annum rate of interest determined by the
Administrative Agent to be the arithmetical average (rounded upward to the
nearest whole multiple of 0.01%, if such average is not such a multiple) of the
rate per annum at which deposits in Dollars are offered by the Lending Office
of each Reference Bank to a prime bank in the interbank domestic eurodollar
<PAGE> 15
8
market at 10:00 a.m. (Dallas, Texas time) two Business Days before the first
day of such Interest Period for a period equal to such Interest Period and in
an amount substantially equal to the amount of the relevant Eurodollar Loan of
such Reference Bank during such Interest Period.
"Event of Default" shall mean any of the events specified in
Section 10; provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "Default" shall mean
any of such events, whether or not any such requirement has been satisfied.
"FCC" shall mean the Federal Communications Commission or any
successor governmental agency thereto.
"Federal Funds Borrowing Rate" shall mean, for any day, a
fluctuating interest rate per annum equal to the weighted average (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System for such day quoted by the Reference Banks to the Administrative
Agent at 12:00 noon (Dallas, Texas time) on such day.
"Fitch" shall mean Fitch Investors Service Inc.
"Floating Rate" shall mean, as of a particular date, the
prime rate most recently determined by TCB and thereafter entered in the
minutes of TCB's Loan and Discount Committee. Without notice to the Company or
any other Person, the Floating Rate shall change automatically from time to
time as and in the amount by which said prime rate shall fluctuate, with each
such change to be effective as of the date of each change in such prime rate.
The Floating Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. TCB may make commercial
loans or other loans at rates of interest at, above or below the Floating Rate.
"GAAP" shall mean generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
<PAGE> 16
9
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant
segments of the accounting profession, which are applicable to the
circumstances as of the date of determination.
"Guarantee" of or by any Person shall mean any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Debt of any other Person (the "Primary Obligor")
(excluding endorsements of checks for collection or deposit in the ordinary
course of business) in any manner, whether directly or indirectly, and
including, without limitation, any obligation of such Person, direct or
indirect, (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Debt or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Debt, (b) to purchase
property, securities or services for the purpose of assuring the owner of such
Debt of the payment of such Debt or (c) to maintain working capital, equity
capital or other financial statement condition or liquidity of the Primary
Obligor so as to enable the Primary Obligor to pay such Debt.
"Guarantor" shall mean each Subsidiary executing this
Agreement as a Guarantor and each other Subsidiary hereafter becoming a
Guarantor as provided in Section 8.10.
"Highest Lawful Rate" shall mean the maximum nonusurious
interest rate, if any, that at any applicable time may be contracted for,
taken, reserved, charged or received on any Loan or on the other amounts which
may be owing to any Bank pursuant to this Agreement under the laws applicable
to such Bank and this transaction.
"Indemnified Liabilities" shall have the meaning assigned to
such term in Section 14.04 of this Agreement.
"Index Debt" shall mean senior, unsecured noncredit-enhanced,
long-term Debt of the Company.
"Interest Coverage Ratio" shall mean, at any time, the ratio
of (a) EBITDA plus, to the extent subtracted in computing EBITDA, interest
income to (b) Interest Expense, in each case for any four consecutive fiscal
quarter period.
<PAGE> 17
10
"Interest Expense" shall mean, with respect to the Company
and its Restricted Subsidiaries on a consolidated basis for any period,
interest expense of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP.
"Interest Payment Date" shall mean the last day
of each Interest Period.
"Interest Period" shall mean, with respect to each Loan made
hereunder, the period commencing on the Borrowing Date of such Loan and
(a) in the case of Alternate Base Rate Loans,
ending not less than one nor more than 90 days
thereafter;
(b) in the case of Eurodollar Loans, ending one,
two, three or six months thereafter; and
(c) in the case of CD Rate Loans, ending 30, 60,
90 or 180 days thereafter;
in each case as the Company may select in the Notice of Borrowing; provided,
however, that (i) no Interest Period for a Loan may be chosen that would extend
beyond the Maturity Date, (ii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day;
provided that with respect to Eurodollar Loans, any Interest Period that would
otherwise end on a day that is not a Business Day shall be extended to the next
succeeding Business Day only if such Business Day does not fall in another
month, and in the event the next succeeding Business Day falls in another
month, the Interest Period for such Eurodollar Loan shall be accelerated so
that such Interest Period shall end on the next preceding Business Day and
(iii) any Interest Period that begins on a day for which there is no
numerically corresponding day in the last month of such Interest Period shall
end on the last Business Day of the last month of such Interest Period. In no
event shall there be more than ten Interest Periods in effect at any one time.
<PAGE> 18
11
"Lending Office" shall mean, with respect to any Bank, its
principal office in the city identified with such Bank in Exhibit 14.02 hereto,
or such other office or branch of such Bank, or Affiliate of such Bank located
in the United States (acting on behalf of such Bank as its "Lending Office"
hereunder), as it shall designate in writing from time to time to the Company,
as the case may be.
"Leverage Ratio" shall mean, at any time, the ratio of (a)
Total Debt, as of the last day of the fiscal quarter most recently ended, to
(b) EBITDA, for any four consecutive fiscal quarter period.
"Loans" and individually, "Loan", shall mean Revolving Loans
and Discretionary Loans.
"Majority Banks" shall mean Banks holding at least 51% of the
aggregate Commitments.
"Margin Percentage" shall mean at any date that percentage
(a) to be added to the CD Rate or the Eurodollar Rate pursuant to Section
2.01(d)(iii) or Section 2.01(d)(ii) for purposes of determining the per annum
rate of interest applicable from time to time to CD Rate Loans or Eurodollar
Loans and (b) to be used in computing the Commitment Fee pursuant to Section
4.02, set forth under the appropriate column below opposite the Category in
which the Company's Leverage Ratio, which in each case shall be determined as
of the last day of and for
<PAGE> 19
12
the most recent four consecutive fiscal quarter period for which financial
statements have been delivered pursuant to Section 8.02:
<TABLE>
<CAPTION>
Leverage Commitment Eurodollar CD
Category Ratio Fee Spread Spread
- -------- -------------- -------------- ----------- -------
<S> <C> <C> <C> <C>
Category < 3.00 0.10% 0.300% 0.425%
1
Category > 3.00 but < 0.10% 0.350% 0.475%
2 3.50
Category > 3.50 but < 0.15% 0.400% 0.525%
3 4.00
Category > 4.00 but < 0.15% 0.450% 0.575%
4 4.50
Category > 4.50 but < 0.20% 0.550% 0.675%
5 5.00
Category > 5.00 but < 0.25% 0.675% 0.800%
6 5.50
Category > 5.50 0.25% 0.800% 0.925%
7
</TABLE>
provided that for any period during which financial statements have not been
delivered as required under Section 8.02, the Margin Percentage shall be
determined by reference to the Category which is one Category higher (based
upon the number assigned to the Categories in the table above) than the
Category in effect immediately prior to such period; and provided further, that
the initial Margin Percentages will be based on Category 3 and such Margin
Percentages shall not be based on a lower-numbered Category until such time as
financial statements dated as of and for a period ended subsequent to the
Merger have been delivered pursuant to Section 8.02.
"Margin Stock" shall mean "margin stock" as that term is
defined in Regulation U of the Board of Governors of the Federal Reserve
System.
"Material FCC Licenses" shall have the meaning set forth in
Section 8.04.
<PAGE> 20
13
"Materially Adverse Effect" shall mean (a) a material and
adverse effect on the business, properties, operations or financial condition
of the Company and its Restricted Subsidiaries taken as a whole or (b) a
material impairment of the rights or interests of the Banks in connection with
this Agreement.
"Maturity Date" shall mean the fifth anniversary of the
Closing Date.
"Maximum Permissible Rate" shall have the meaning set forth
in Section 14.05.
"Merger" shall have the meaning set forth in the introductory
statement of this Agreement.
"Moody's" shall mean Moody's Investors Service, Inc.
"Net Cash Proceeds" shall mean (a) with respect to a sale,
assignment, transfer or other disposition by the Company or any of its
Restricted Subsidiaries to any Person other than the Company or any of its
Restricted Subsidiaries of any Capital Stock or assets owned by such party, the
gross cash proceeds to such party (including, without limitation, cash
proceeds, whenever received, of any non-cash consideration) of such sale,
assignment, transfer or other disposition, less the sum of (i) the reasonable
costs associated with such sale, assignment, transfer or other disposition,
including, without limitation, income taxes (as estimated by the Company or any
of its Restricted Subsidiaries, as the case may be, in good faith), (ii)
payments of the outstanding principal amount of, premium or penalty, if any,
and interest on any Debt required to be, and which in fact is, prepaid under
the terms thereof as a result of such disposition and (iii) appropriate amounts
as a reserve, in accordance with GAAP, against any liabilities directly
associated with the Capital Stock or assets sold and which liabilities are
retained by the Company or any of its Restricted Subsidiaries after such sale,
assignment, transfer or other disposition, including, without limitation,
pension and other post-employment benefit liabilities and liabilities related
to environmental matters or against any indemnification obligations associated
with such sale, assignment, transfer or disposition and (b) with respect to
<PAGE> 21
14
any incurrence of Debt, cash proceeds net of underwriting commissions or
placement fees and expenses directly incurred in connection therewith.
"NewCity Communications" shall mean, prior to the Merger,
NewCity Communications, Inc., a Delaware corporation, and, following the
Merger, the Surviving Corporation.
"NewCity Merger Agreement" shall mean the Agreement and Plan
of Merger dated as of July 1, 1996, among the Company, New Cox Radio II, Inc.,
a Wholly Owned Subsidiary of the Company, certain stockholders of NewCity
Communications and John Riccardi as agent for such stockholders.
"Notice of Borrowing" shall have the meaning set
forth in Section 2.01(b).
"Obligations" shall mean the obligations of the Company under
this Agreement (as it may hereafter be amended, restated, extended,
supplemented or otherwise modified from time to time) with respect to (a) the
principal amount of the Loans, (b) interest on the Loans and (c) all other
monetary obligations of the Company under this Agreement.
"Officer's Certificate" shall mean a certificate signed in
the name of the Company by either its chief executive officer, its president,
its chief financial officer, one of its vice presidents or its treasurer.
"PBGC" shall have the meaning set forth in Section 6.12.
"Person" shall mean an individual, partnership, joint
venture, corporation, company, limited liability company, bank, trust,
unincorporated organization or a government or any department or agency thereof
or any other entity.
"Plan" shall mean any employee pension benefit plan within
the meaning of Article IV of ERISA which is either (i) maintained for employees
of the Company, of any Subsidiary, or of any member of a "controlled group of
corporations" or "combined group of trades or businesses
<PAGE> 22
15
under common control" as such terms are defined, respectively, in Sections
414(b) and (c) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, of which the Company or any Subsidiary is a party, or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
the Company, any Subsidiary or any member of a "controlled group of
corporations" or "combined group of trades or businesses under common control"
defined as aforesaid, is at the time in question making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
"Preferred Stock", as applied to the Capital Stock of any
Person, shall mean Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"Pro Forma Compliance" shall mean the compliance by the
Company on a pro forma basis with the covenants set forth in subsection 8.01
for the four fiscal quarter period ending on the last day of the most recently
ended fiscal quarter for which financial statements have been delivered in
accordance with subsection 8.02 as if the designation of a Restricted
Subsidiary or an Unrestricted Subsidiary with respect to which Pro Forma
Compliance is being measured had occurred on the first day of such period.
"Pro Forma EBITDA" shall mean EBITDA, excluding therefrom
EBITDA attributable to any Property sold or otherwise disposed of other than in
the ordinary course of business during any applicable period as if such
Property were not owned at any time during such period, and including therein
EBITDA attributable to any Property acquired other than in the ordinary course
of business during any applicable period as if such Property were at all times
owned during such period.
"Pro Rata Share" shall mean, with respect to any Bank, a
fraction (expressed as a percentage rounded upward to the nearest whole
multiple of 0.000000001%) (a) the numerator of which shall be the amount equal
to such Bank's
<PAGE> 23
16
Commitment, and (b) the denominator of which shall be the aggregate amount of
all Banks' Commitments.
"Property" shall mean all types of real and personal
property, whether tangible, or intangible or mixed.
"Quarterly Date" shall mean the last day of each March, June,
September and December, beginning with March 31, 1997, or if any such date is
not a Business Day, the next succeeding Business Day.
"Reference Banks" and individually "Reference Bank", shall
mean TCB, NationsBank of Texas, N.A. and Citibank, N.A.
"Register" shall have the meaning set forth in Section
14.07(e) hereof.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System.
"Required Prepayment Date" shall have the meaning set forth
in Section 2.01(e)(i) hereof.
"Restricted Subsidiary" means each Subsidiary other than
those Subsidiaries identified as Unrestricted Subsidiaries in Exhibit 6.01;
provided, however, that subject to Section 8.11, a Restricted Subsidiary may be
designated by the Company as an Unrestricted Subsidiary or an Unrestricted
Subsidiary may be redesignated by the Company as a Restricted Subsidiary;
provided further, that after the initial designation of an Unrestricted
Subsidiary by the Company, only five further redesignations of such Subsidiary
shall be permitted.
"Revolving Loans" and individually, "Revolving Loan" shall
mean CD Rate Loans, Alternate Base Rate Loans or Eurodollar Loans made pursuant
to Section 2.01(a).
"S&P" shall mean Standard & Poor's Rating Group.
"Subsidiary" shall mean, with respect to the Company at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
<PAGE> 24
17
Company in the Company's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as
any other corporation, limited liability company, partnership, association or
other entity (a) of which securities or other ownership interests representing
more than 50% of the equity or more than 50% of the ordinary voting power or,
in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as
of such date, otherwise Controlled, by the Company or one or more Subsidiaries
of the Company or by the Company and one or more Subsidiaries of the Company.
"Surviving Corporation" shall have the meaning assigned to
such term in the introductory statement of this Agreement.
"TCB" shall mean Texas Commerce Bank National Association, a
national banking association.
"TCB Fee Letter" shall mean the fee letter dated as of
February 5, 1997, between TCB and the Company.
"Total Debt" shall mean, as of any date and without
duplication, all Debt of the Company and its Restricted Subsidiaries on a
consolidated basis determined in accordance with GAAP, including, without
limitation, Guaranties of Debt obligations of third parties and obligations
under or with respect to standby letters of credit of the Company and its
Restricted Subsidiaries.
"Transactions" shall mean (a) the Merger and (b) the other
transactions contemplated hereby, including the initial Borrowing hereunder.
"Unrestricted Subsidiary" means any Subsidiary so designated
in accordance with the terms of this Agreement.
"Wholly Owned", when used with respect to a Subsidiary, shall
mean the beneficial ownership by the Company of 100% of the Capital Stock of
such Subsidiary.
<PAGE> 25
18
ARTICLE II
The Loans
SECTION 2.01. The Revolving Loans. (a) Revolving Loan
Commitment. Subject to and upon the terms and conditions set forth in this
Agreement, each Bank severally agrees to make Revolving Loans in Dollars to the
Company on any one or more Business Days on or after the date hereof and prior
to the Maturity Date, up to an aggregate principal amount of Revolving Loans
not exceeding at any one time outstanding an amount equal to such Bank's
Commitment made to the Company by such Bank, if any; provided, however, in no
event shall the aggregate outstanding principal amount at any time of the
Revolving Loans and the Discretionary Loans exceed $300,000,000, as such amount
may be reduced pursuant to the terms of this Agreement. Each Borrowing shall be
in an aggregate amount of not less than $3,000,000 and an integral multiple of
$250,000. Subject to the foregoing, each Borrowing shall be made simultaneously
from the Banks according to their Pro Rata Shares of the principal amount
requested for each Borrowing, and shall consist of Revolving Loans of the same
type (e.g., CD Rate Loans, Alternate Base Rate Loans or Eurodollar Loans) with
the same Interest Period from each Bank. Within such limits and during such
period, the Company may borrow, repay and reborrow under this Section 2.01(a)
(including, without limitation, reborrowings for the sole purpose of
refinancing any Revolving Loan).
(b) Borrowing Procedures; Delivery of Proceeds;
Recordation of Loans. (i) Each Borrowing under this Section 2.01 shall be made
on at least (A) in the case of a Borrowing consisting of Alternate Base Rate
Loans, prior oral or written notice from the Company to the Administrative
Agent by 9:00 a.m. (Dallas, Texas time) on the same day as the requested
Borrowing (and the Administrative Agent shall prior to 12:00 noon (Dallas,
Texas time) on the date such notice is received by the Administrative Agent
provide oral or written notice of the requested Borrowing to the Banks, and
each Reference Bank shall then provide to the Administrative Agent not later
than 12:15 p.m. (Dallas, Texas time) oral or written notice of the rate on
overnight Federal funds for such day offered at 12:00 noon (Dallas, Texas time)
by such Reference Bank
<PAGE> 26
19
to the Company, and the Alternate Base Rate determined by the Administrative
Agent shall be conveyed by the Administrative Agent by oral or written
communication to all of the Banks by 1:00 p.m. (Dallas, Texas time) on the
Borrowing Date), (B) in the case of a Borrowing consisting of Eurodollar Loans,
three Business Days' prior written or oral notice from the Company to the
Administrative Agent by 9:00 a.m. (Dallas, Texas time) and (C) in the case of a
Borrowing consisting of CD Rate Loans, one Business Day's prior written or oral
notice from the Company to the Administrative Agent by 9:00 a.m. (Dallas, Texas
time) (and the Administrative Agent shall, in the case of (B) and (C) above,
provide to each Bank prior oral or written notice of the requested borrowing by
11:30 a.m. (Dallas, Texas time) on the date such notice is received by the
Administrative Agent) (in each case, a "Notice of Borrowing"); provided,
however, with respect to each oral Notice of Borrowing, the Company shall
deliver promptly (and in any event, no later than two Business Days after the
giving of such oral notice) to the Administrative Agent a confirmatory written
Notice of Borrowing. Each Notice of Borrowing shall be irrevocable and shall
specify: (w) the total principal amount of the proposed Borrowing, (x) whether
the Borrowing will be comprised of CD Rate Loans, Alternate Base Rate Loans or
Eurodollar Loans, (y) the applicable Interest Period for such Loans (which may
not extend beyond the Maturity Date), and (z) the Borrowing Date. The
Administrative Agent shall promptly give like notice to the other Banks, and on
the Borrowing Date each Bank shall make its Pro Rata Share of the Borrowing
available at the principal banking office of the Administrative Agent, 2200
Ross Avenue, Dallas, Texas 75201, no later than 3:30 p.m. (Dallas, Texas time)
in the case of a Borrowing consisting of Alternate Base Rate Loans, and no
later than 2:00 p.m. (Dallas, Texas time) in the case of all other Borrowings,
in each case in immediately available funds.
(ii) The Administrative Agent shall pay or deliver the
proceeds of each Borrowing to or upon the order of the Company. Each Bank shall
maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness to such Bank resulting from each Loan, from time to
time, including, without limitation, the amounts of principal and interest
payable and paid such Bank from time to time under this Agreement. The
Administrative Agent shall maintain accounts in which it
<PAGE> 27
20
will record (A) the principal amount of each Loan made hereunder, the type of
each Loan and the Interest Period applicable thereto, (B) the amount of any
principal or interest due and payable or to become due and payable from the
Company to each Bank hereunder and (C) the amount of any sum received by the
Administrative Agent hereunder from the Company and each Bank's Pro Rata Share
thereof. The entries made in the accounts maintained pursuant to this paragraph
shall be prima facie evidence of the existence and amounts of the obligations
therein recorded; provided, however, that the failure of any Bank or the
Administrative Agent to maintain such accounts or any error therein shall not
in any manner affect the obligation of the Company to repay the Loans in
accordance with their terms.
(c) Substitute Rate. Anything in this Agreement to the
contrary notwithstanding, if at any time prior to the determination of the rate
with respect to any proposed Loan (i) the Majority Banks in their discretion
shall determine with respect to Eurodollar Loans to be made by them on the
applicable Borrowing Date of such Loan that there is a reasonable probability
that Dollar deposits will not be offered to such Banks in the interbank
eurodollar market for a period of time equal to the applicable Interest Period
in amounts equal to the amount of each such Bank's Eurodollar Loan in Dollars
or (ii) the Administrative Agent in its discretion shall determine with respect
to CD Rate Loans to be made by the Banks on the applicable Borrowing Date of
such proposed Loan that bid rates will not be provided by certificate of
deposit dealers of recognized standing for the purchase at face value of
certificates of deposit of the Reference Banks for a period of time equal to
the applicable Interest Period in amounts approximately equal or comparable to
the aggregate principal amount of such Loans with a maturity equal to the
applicable Interest Period, then:
(A) the Majority Banks (acting through the Administrative
Agent) or the Administrative Agent, as the case may be, shall give the
Company notice thereof, and in the case of subsection (ii) above, the
Adminstrative Agent shall also give the Banks notice thereof, and
(B) Alternate Base Rate Loans shall be made having an
Interest Period of 10 days in lieu of any
<PAGE> 28
21
Eurodollar Loans or CD Rate Loans that were to have been made at such
time.
(d) Interest. The Loans shall bear interest as
follows:
(i) Each Alternate Base Rate Loan shall bear interest on the
unpaid principal amount thereof from time to time outstanding at a rate
per annum (for the actual number of days elapsed, based on a year of 365
or 366 days, as the case may be) which shall be equal to the lesser of (A)
the Alternate Base Rate or (B) the Highest Lawful Rate.
(ii) Each Eurodollar Loan shall bear interest on the unpaid
principal amount thereof from time to time outstanding at a rate per annum
(for the actual number of days elapsed, based on a year of 360 days) which
shall be equal to the lesser of (A) the Eurodollar Rate plus the
applicable Margin Percentage, or (B) the Highest Lawful Rate.
(iii) Each CD Rate Loan shall bear interest on the unpaid
principal amount thereof from time to time outstanding at a rate per annum
(for the actual number of days elapsed, based on a year of 360 days) which
shall equal to the lesser of (A) the CD Rate plus the applicable Margin
Percentage, or (B) the Highest Lawful Rate.
(iv) Interest on the outstanding principal of each Loan shall
accrue from and including the Borrowing Date for such Loan to but
excluding the date such Loan is paid in full and shall be due and payable
(A) on the Interest Payment Date for each such Loan, (B) as to any
Eurodollar Loan having an Interest Period greater than three months, at
the end of the third month of the Interest Period for such Loan, (C) as to
any CD Rate Loan having an Interest Period greater than 90 days, on the
90th day of the Interest Period for such Loan, and (D) as to all Loans, at
maturity, whether by acceleration or otherwise, or after notice of
prepayment in accordance with Section 2.01(e)(i) or Section 3.01(c)
hereof, on and after the Required Prepayment Date or the applicable
prepayment date, as the case may be, as specified in such notice.
<PAGE> 29
22
(v) Past due principal, whether pursuant to acceleration or
the Company's failure to make a prepayment on the date specified in the
applicable prepayment notice or otherwise, and, to the extent permitted by
applicable law, past due interest and (after the occurrence of an Event of
Default) past due fees, pursuant to acceleration or otherwise, shall bear
interest from their respective due dates, until paid, at the Default Rate
and shall be due and payable upon demand.
(e) Change of Law. (i) Anything in this Agreement to the
contrary notwithstanding, if at any time any Bank in good faith determines
(which determination shall be conclusive) that any change after the date hereof
in any applicable law, rule or regulation or in the interpretation or
administration thereof makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful (any of the above being
described as a "Eurodollar Event") for such Bank or its foreign branch or
branches to maintain or fund any Loan in Dollars by means of Dollar deposits
obtained in the interbank eurodollar market then, at the option of such Bank,
the aggregate principal amount of each of such Bank's Eurodollar Loans then
outstanding, which Loans are directly affected by such Eurodollar Events, shall
be prepaid in Dollars, and any remaining obligation of such Bank hereunder to
make Eurodollar Loans (but not CD Rate Loans or Alternate Base Rate Loans)
shall be suspended for so long as such Eurodollar Events shall continue. Upon
the occurrence of any Eurodollar Event and at any time thereafter so long as
such Eurodollar Event shall continue, such Bank may exercise its aforesaid
option by giving written notice thereof to the Administrative Agent and the
Company. Any prepayment of any Eurodollar Loan which is required under this
Section 2.01(e) shall be made, together with accrued and unpaid interest and
all other amounts payable to such Bank under this Agreement with respect to
such prepaid Loan (including, without limitation, amounts payable pursuant to
Section 2.01(f)), on the date stated in the notice to the Company referred to
above, which date ("Required Prepayment Date") shall be not less than 15 days
(or such earlier date as shall be necessary to comply with the relevant law,
rule or regulation) from the date of such notice. If any Eurodollar Loan is
required to be prepaid under this Section 2.01(e), the Banks agree that at the
written
<PAGE> 30
23
request of the Company, the Bank that has made such Eurodollar Loan shall make
an Alternate Base Rate Loan or a CD Rate Loan on the Required Prepayment Date
to the Company in the same principal amount, in Dollars, as the Eurodollar Loan
of such Bank being so prepaid. Any such written request by the Company for
Alternate Base Rate Loans or a CD Rate Loan under this Section 2.01(e) shall be
irrevocable and, in order to be effective, must be delivered to the
Administrative Agent not less than one Business Day prior to the Required
Prepayment Date.
(ii) Notwithstanding the foregoing, in the event the Company
is required to pay to any Bank amounts with respect to any Borrowing pursuant
to Section 2.01(e)(i), the Company may give notice to such Bank (with copies to
the Administrative Agent) that it wishes to seek one or more assignees (which
may be one or more of the Banks) to assume the Commitment of such Bank and to
purchase its outstanding Loans and the Administrative Agent will use its best
efforts to assist the Company in obtaining an assignee; provided that if more
than one Bank requests that the Company pay substantially and proportionately
equal additional amounts under Section 2.01(e)(i) and the Company elects to
seek an assignee to assume the Commitments of any of such affected Banks, the
Company must seek an assignee or assignees to assume the Commitments of all of
such affected Banks. Each Bank requesting compensation pursuant to Section
2.01(e)(i) agrees to sell its Commitment, Loans and interest in this Agreement
in accordance with Section 14.07 to any such assignee for an amount equal to
the sum of the outstanding unpaid principal of and accrued interest on such
Loans in Dollars plus all other fees and amounts (including, without
limitation, any compensation claimed by such Bank under Section 2.01(e)(i) and
Section 2.01(f)) due such Bank hereunder calculated, in each case, to the date
such Commitment, Loans and interest are purchased. Upon such sale or
prepayment, each such Bank shall have no further Commitment or other obligation
to the Company hereunder.
(f) Funding Losses. In the event of (i) any payment or
prepayment (whether authorized or required hereunder pursuant to acceleration
or otherwise) of all or a portion of any CD Rate Loan or Eurodollar Loan on a
day other than an Interest Payment Date, (ii) any payment or prepayment
(whether authorized or required hereunder
<PAGE> 31
24
pursuant to acceleration or otherwise), of any CD Rate Loan or Eurodollar Loan
made after the delivery of the Notice of Borrowing for such CD Rate Loan or
Eurodollar Loan, but before the Borrowing Date therefor, if such payment or
prepayment prevents such CD Rate Loan or Eurodollar Loan from being made in
full, (iii) the failure of any Loan to be made by any Bank due to any condition
precedent to a Loan not being satisfied or as a result of this Section 2.01 or
(iv) due to any other action or inaction of the Company, the Company shall pay,
in Dollars, to each affected Bank upon its request made on or before 45 days
after the occurrence of any such event, acting through the Administrative
Agent, such amount or amounts (to the extent such amount or amounts would not
be usurious under applicable law) as may be necessary to compensate such Bank
for any direct or indirect costs and losses incurred by such Bank (including,
without limitation, such amount or amounts as will compensate it for the amount
by which the rate of interest on such Loan immediately prior to such repayment
exceeds the Eurodollar Rate or the CD Rate, for the period from the date of
such prepayment to the Interest Payment Date with respect to such prepaid Loan,
all as determined in good faith by such Bank) but otherwise without penalty.
Any such claim by a Bank for compensation shall be made through the
Administrative Agent and shall be accompanied by a certificate signed by an
officer of such Bank authorized to so act on behalf of such Bank, setting forth
the computation upon which such claim is based. The obligations of the Company
under this Section 2.01(f) shall survive the termination of this Agreement
and/or the payment of the obligations hereunder.
(g) Increased Costs--Taxes, Reserve Requirements, Etc. (i)
The Company for and on behalf of each Bank shall pay or cause to be paid
directly to the appropriate governmental authority or shall reimburse or
compensate each Bank upon demand by such Bank, acting through the
Administrative Agent, for all costs incurred, losses suffered or payments made,
as determined by such Bank, by reason of any and all present or future taxes
(including, without limitation, any interest equalization tax or any similar
tax on the acquisition of debt obligations), levies, imposts or any other
charge of any nature whatsoever imposed by any taxing authority, whether or not
such taxes were correctly or legally asserted, on or with regard to any aspect
of the transactions with respect
<PAGE> 32
25
to this Agreement and the Loans, except such taxes as may be measured by the
overall net income of a Bank or its Lending Office and increase in franchise
taxes imposed by the jurisdiction, or any political subdivision or taxing
authority thereof, in which such Bank's principal executive office or its
Lending Office is located.
(ii) The Company shall pay immediately upon demand by any
Bank, acting through the Administrative Agent, any applicable stamp and
registration taxes, duties, official and sealed paper taxes, or similar charges
due, or which under currently applicable law could in the future become due, or
which may in the future become due as a result of any change in applicable law,
the interpretation thereof, or otherwise, in connection with any Loans or this
Agreement or in connection with the enforcement hereof.
(iii) If any Bank or the Administrative Agent receives a
refund in respect of taxes for which such Bank or the Administrative Agent has
received payment from the Company hereunder, it shall promptly notify the
Company of such refund and shall, within 30 days after receipt of such refund,
repay such refund to the Company with interest if any interest is received
thereon by such Bank or the Administrative Agent; provided that the Company,
upon the request of such Bank or the Administrative Agent, agrees to return
such refund (plus penalties, interest or other charges) to such Bank or the
Administrative Agent in the event such Bank or the Administrative Agent is
required to repay such refund.
(iv) (A) The Company shall reimburse or compensate each Bank
upon demand by such Bank, acting through the Administrative Agent, for all
costs incurred, losses suffered or payments made in connection with any CD Rate
Loans or Eurodollar Loans or any part thereof which costs, losses or payments
are a result of any present or future reserve, special deposit or similar
requirement against assets of, liabilities of, deposits with or for the account
of, or Loans by such Bank imposed on such Bank, its foreign lending branch or
the interbank eurodollar market by any regulatory authority, central bank or
other governmental authority, whether or not having the force of law,
including, without limitation, Regulation D.
<PAGE> 33
26
(B) If as a result of (y) the introduction of or any change
in or in the interpretation or administration of any law or regulation or (z)
the compliance with any request from any central bank or other governmental
authority (whether or not having the force of law), there shall be any increase
in the cost to any Bank of agreeing to make or making, funding or maintaining
Loans for which such Bank shall not have been reimbursed pursuant to the
provisions of clause (A) above, then the Company shall from time to time, upon
demand by such Bank, acting through the Administrative Agent, pay to such Bank
additional amounts sufficient to indemnify such Bank against the full amount of
such increased cost.
(C) Any Bank claiming reimbursement or compensation under
this Section 2.01(g)(iv) shall make its demand on or before 45 days after the
end of each Interest Period during which any such cost is incurred, loss is
suffered or payment is made and shall provide the Administrative Agent, who in
turn shall provide the Company, with a written statement of the amount and
basis of its request, which statement, subject to Section 2.01(h), shall be
conclusive absent manifest error; provided that in the event any reimbursement
or compensation demanded by a Bank under this Section 2.01(g) is a result of
reserves actually maintained pursuant to the requirements imposed by Regulation
D with respect to "Eurocurrency liabilities" (as defined or within the meaning
of such Regulation), such demand shall be accompanied by a statement of such
Bank in the form of Exhibit 2.01(g)(iv) attached hereto. No Bank may request
reimbursement or compensation under this Section 2.01(g)(iv) for any period
prior to the period for which demand has been made in accordance with the
foregoing sentence. Such statement shall be conclusive and binding on the
Company, subject to Section 2.01(h), except in the case of manifest error. In
preparing any statement delivered under this Section 2.01(g)(iv), such Bank may
employ such assumptions and allocations of costs and expenses as it shall in
good faith deem reasonable and may be determined by any reasonable averaging
and attribution method. So long as any notice requirement provided for herein
has been satisfied, any decision by the Administrative Agent or any Bank not to
require payment of any interest, cost or other amount payable under this
Section 2.01(g)(iv), or to calculate any amount payable by
<PAGE> 34
27
a particular method, on any occasion, shall in no way limit or be deemed a
waiver of the Administrative Agent's or such Bank's right to require full
payment of any interest, cost or other amount payable hereunder, or to
calculate any amount payable by another method, on any other or subsequent
occasion for a subsequent Interest Period.
(v) If any Bank shall have determined in good faith that any
applicable law, rule, regulation or guideline regarding capital adequacy now or
hereafter in effect, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Bank (or any Lending Office of such Bank) with any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such governmental authority, central bank or comparable agency has the
effect of reducing the rate of return on such Bank's capital or the capital of
any corporation Controlling such Bank as a consequence of its obligations
hereunder to a level below that which such Bank would have achieved as a
consequence of its obligations hereunder but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed in good faith by such Bank to be
material, then from time to time, upon notice by the Bank requesting (through
the Administrative Agent) compensation, under this Section 2.01(g)(v) within a
reasonable period of time after such Bank has obtained knowledge of such event,
the Company shall pay to the Administrative Agent for the account of such Bank
such additional amount or amounts as will compensate such Bank for such
reduction. Any such claim by a Bank for compensation shall be made through the
Administrative Agent and shall be accompanied by a certificate signed by an
officer of such Bank authorized to so act on behalf of such Bank setting forth
the calculation upon which such claim is based.
(vi) Notwithstanding the foregoing, in the event the Company
is required to pay to any Bank amounts pursuant to Section 2.01(g)(iv)(A),
Section 2.01(g)(iv)(B) or Section 2.01(g)(v), the Company may give notice to
such Bank (with copies to the Administrative Agent) (A) that it wishes to seek
one or more assignees (which may be one or
<PAGE> 35
28
more of the Banks) to assume the Commitment of such Bank and to purchase its
outstanding Loans, in which case the Administrative Agent will use its best
efforts to assist the Company in obtaining an assignee, or (B) in the case of
any Bank that became a Bank pursuant to an assignment under Section 14.07, that
it wishes to terminate the Commitment of such Bank; provided that if more than
one Bank requests that the Company pay substantially and proportionately equal
additional amounts under Section 2.01(g)(iv)(A), Section 2.01(g)(iv)(B) or
Section 2.01(g)(v) and the Company elects to seek an assignee to assume, or to
terminate, the Commitments of any of such affected Banks, the Company must seek
an assignee or assignees to assume, or must terminate, as the case may be, the
Commitments of all of such affected Banks. Each Bank requesting compensation
pursuant to Section 2.01(g)(iv)(A), Section 2.01(g)(iv)(B) or Section
2.01(g)(v) agrees to sell its Commitment, its outstanding Loans and interest in
this Agreement in accordance with Section 14.07 to any such assignee for an
amount equal to the sum of, and agrees that its Commitment shall be terminated
as provided above upon payment to it by the Company of, the outstanding unpaid
principal of and accrued interest on its outstanding Loans in Dollars plus all
other fees and amounts (including, without limitation, any compensation claimed
by such Bank under Section 2.01(f), Section 2.01(g)(iv)(A), Section
2.01(g)(iv)(B) or Section 2.01(g)(v)) due such Bank hereunder calculated, in
each case, to the date such Commitment, Loans and interest are purchased or
such amounts are paid, as the case may be. Upon such sale or prepayment, each
such Bank shall have no further Commitment or other obligation to the Company
hereunder.
(vii) Any Bank claiming any amounts pursuant to this Section
2.01(g) shall use its reasonable good faith efforts (consistent with its
internal policies and legal and regulatory restrictions) to avoid or minimize
the payment by the Company of any amounts under this Section 2.01(g),
including, without limitation, changing the jurisdiction of its Lending Office;
provided that no such change or action shall be required to be made or taken
if, in the reasonable judgment of such Bank, such change would be materially
disadvantageous to such Bank.
(viii) The aggregate amount payable, reimbursable or
compensable by the Company to or for the account of a
<PAGE> 36
29
Bank under this Section 2.01(g) shall not include any cost covered by the
amount received by such Bank from the Company through the Administrative Agent
in connection with the calculation of the CD Rate. The Company agrees to
indemnify and hold the Administrative Agent and each Bank harmless from and
against any and all liabilities with respect to or resulting from any delay in
the payment or omission to pay such amounts. The obligations of the Company
under this Section 2.01(g) created in accordance with this Section 2.01(g)
shall survive the termination of the Commitments, this Agreement and the
payment of the Obligations hereunder.
(h) Calculation Errors. Each calculation by the
Administrative Agent or any Bank with respect to amounts owing or to be owing
by the Company pursuant to this Agreement or any Loan shall be conclusive
except in the case of error. In the event the Administrative Agent determines
within a reasonable time that any such error shall have occurred in connection
with the determination of the applicable interest rate for any Loan which
results in the Company paying either more or less than the amount which would
have been due and payable but for such error, then (i) any Bank that received
an overpayment or underpayment or (ii) the Company, as the case may be, shall
promptly refund or pay, as the case may be, to the other any such overpayment
or underpayment. In the event it is determined within a reasonable time that
any Bank, acting through the Administrative Agent, has miscalculated any amount
for which it has demanded reimbursement or compensation from the Company in
respect of amounts owing by the Company other than interest which results in
the Company paying more or less than the amount which would have been due and
payable but for such error, such Bank or the Company, as the case may be, shall
promptly refund or pay, as the case may be, to the other the full amount of
such overpayment or underpayment. In the event it is determined within a
reasonable time that the Company has miscalculated the Commitment Fees due
under Section 4.02 which results in the Company paying more or less than the
amount which would have been due and payable but for such error, (y) any Bank
that received an overpayment or underpayment or (z) the Company, as the case
may be, shall promptly refund or pay, as the case may be, the full amount of
the overpayment or underpayment.
<PAGE> 37
30
SECTION 2.02. Setoff, Counterclaims and Taxes. All payments
(whether of principal, interest, fees, reimbursements or otherwise) under this
Agreement shall be made by the Company without setoff or counterclaim and shall
be made free and clear of and without deduction (except as specifically
contemplated in Section 2.03 below) for any present or future tax, levy,
impost, or any other charge, if any, of any nature whatsoever now or hereafter
imposed by any governmental authority (including, without limitation,
withholdings of United States taxes, except as otherwise provided in Section
2.03). Except as specifically provided in Section 2.03 below, if the making of
such payments is prohibited by law unless such tax, levy, impost, or other
charge is deducted or withheld therefrom, the Company shall pay to the
Administrative Agent for the account of each Bank, on the date of each such
payment, such additional amounts as may be necessary in order that the net
amounts received by such Bank after such deduction or withholding shall equal
the amounts in Dollars which would have been received if such deduction or
withholding were not required. The Company shall confirm that all applicable
taxes, if any, imposed on this Agreement or transactions hereunder shall have
been properly and legally paid by it to the appropriate taxing authorities by
sending official tax receipts or notarized copies of such receipts to the
Administrative Agent within 30 calendar days after payment of any applicable
tax. Upon request of any Bank, the Administrative Agent shall forward to such
Bank a copy of such official receipt or a copy of such notarized copy of such
receipt.
SECTION 2.03. Withholding Tax Exemption. At least five
Business Days prior to the first date on which interest or fees are payable
hereunder to the Banks, if any Bank is not incorporated or organized under the
laws of the United States of America, or a state thereof, such Bank agrees that
it will deliver to the Company (with a copy to the Administrative Agent) a duly
completed copy of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Bank is entitled to receive payments under
this Agreement without deduction or withholding of any United States Federal
income taxes. If such Bank delivers a Form 1001 or 4224, such Bank further
undertakes to deliver to the Company (with a copy to the Administrative Agent)
an additional copy of such form (or a successor form) on or before the date
that such form
<PAGE> 38
31
expires (currently, three successive calendar years for Form 1001 and one
calendar year for Form 4224) or becomes obsolete or after the occurrence of any
event requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Company, in each case certifying that such Bank is entitled to
receive payments under this Agreement without deduction or withholding of any
United States Federal income taxes, unless an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Bank from duly completing
and delivering any such form with respect to it and such Bank advises the
Company (and the Administrative Agent) that it is not capable of receiving
payments without any deduction or withholding of United States Federal income
tax. In no event will any withholding by the Company of interest payable by any
Bank as contemplated by this Section 2.03 give rise to a Default under Section
10.01 with respect to payments of interest.
SECTION 2.04. Obligations Several, Not Joint. The obligations
of the Banks hereunder are several and not joint. The failure of any Bank to
make the Loan to be made by it as part of any Borrowing shall not relieve any
other Bank of its obligation to make its Loan on the date of such Borrowing,
and no Bank shall be responsible for the failure of any other Bank to make the
Loan to be made by such other Bank on the date of any Borrowing.
SECTION 2.05. Evidence of Debt. Any Bank may request that
Loans made by it be evidenced by a promissory note. In such event, the Company
shall prepare, execute and deliver to such Bank a promissory note payable to
the order of such Bank (or, if requested by such Bank, to such Bank and its
registered assigns) and in a form approved by the Administrative Agent.
Thereafter, the Loans evidenced by such promissory note and interest thereon
shall at all times (including after assignment pursuant to Section 14.07) be
represented by one or more promissory notes in such form payable to the order
of the payee named therein (or, if such promissory note is a registered note,
to such payee and its registered assigns).
<PAGE> 39
32
SECTION 2.06. Discretionary Loans. (a) Each Bank may, in its
sole discretion and on terms and conditions in writing satisfactory to it and
the Company that are not inconsistent with the provisions of this Agreement,
make additional Loans to the Company under its Commitment on any one or more
Business Days on or after the date hereof and prior to the Maturity Date, which
Discretionary Loans will be payable to the appropriate Bank upon such terms and
conditions; provided, however, that the Company will not permit to remain
outstanding any Discretionary Loans from any Bank, and no Bank will make any
Discretionary Loans to the Company, if the aggregate principal amount of the
Discretionary Loans and the Revolving Loans made by such Bank exceeds such
Bank's Commitment. Should any Discretionary Loan be outstanding from any Bank
on a date on which a Borrowing is to be made, such Borrowing shall be made
available only if the Company has paid or shall simultaneously with the making
of such Borrowing pay such portions of Discretionary Loans (including, without
limitation, the payment of the amount of any losses payable pursuant to Section
2.01(f) actually incurred by such Bank as a result of such prepayment) as shall
be necessary to make available a portion of each Bank's Commitment at least
equal to such Bank's Pro Rata Share of such Borrowing. No Discretionary Loan
shall have a maturity date or interest period that extends beyond the Maturity
Date. Each Bank shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness to such Bank resulting from each
Discretionary Loan made by such Bank. The entries made in the accounts
maintained pursuant to this Section 2.06(a) shall be prima facie evidence of
the existence and amounts of the obligations therein recorded; provided,
however, that the failure of any Bank to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Company to repay
the Discretionary Loans in accordance with their terms.
(b) Promptly upon written request of the Administrative
Agent, each Bank will certify in writing the borrowing date, the principal
amount and the maturity date of any Discretionary Loans made during any period
for which the Commitment Fees under Section 4.02 are to be calculated. The
Company agrees to certify to the Administrative Agent at the request of the
Administrative Agent on or before (i) each Borrowing and each
<PAGE> 40
33
Discretionary Borrowing, the borrowing date, the principal amount, the maturity
date and the lending Bank for each outstanding Discretionary Loan and (ii) each
Quarterly Date, the borrowing date, the principal amount, the maturity date and
the lending Bank for all Discretionary Loans made during any period for which
the Commitment Fees under Section 4.02 are to be calculated.
ARTICLE III
Optional and Required Prepayments; Interest
Payment Date; Other Payments
SECTION 3.01. Optional Prepayments. Loans may be prepaid in
whole or from time to time in part at the option of the Company on any Business
Day, without premium or penalty, notwithstanding that such Business Day is not
an Interest Payment Date, provided that:
(a) losses, if any, incurred by any Bank under Section
2.01(f) shall be payable with respect to each such prepayment of any such
Eurodollar Loan or CD Rate Loan; and
(b) all partial prepayments shall be in an aggregate
principal amount of at least $2,000,000 and an integral multiple of
$200,000; and
(c) the Company shall give the Administrative Agent not less
than one full Business Day's prior oral or written notice of each
prepayment of any Eurodollar Loans or CD Rate Loans, or any portion
thereof, and notice to the Administrative Agent not less than 9:00 a.m.
(Dallas, Texas time) on the same day of the prepayment of Alternate Base
Rate Loans, or any portion thereof, proposed to be made pursuant to this
Section 3.01, specifying the aggregate principal amount of the Loans to be
prepaid and the prepayment date; provided, however, with respect to each
oral notice of a prepayment, the Company shall deliver promptly (and in
any event, no later than two Business Days after the giving of such oral
notice) to the Administrative Agent a confirmatory written notice of such
proposed prepayment. The Administrative Agent shall promptly notify the
Banks of the principal amount to be prepaid and the prepayment
<PAGE> 41
34
date. Notice of such prepayment shall be irrevocable and having been given
as aforesaid, the principal amount specified in such notice, together with
accrued and unpaid interest thereon to the date of prepayment, shall
become due and payable on such prepayment date, and the provisions of
Section 2.01(f) shall be applicable. The Company shall have no optional
right to prepay the principal amount of any Loan other than as provided in
this Section 3.01.
SECTION 3.02. Required Prepayments. (a) If the Company shall
reduce or terminate the respective Commitments of the Banks pursuant to Section
4.03, it will prepay to each Bank on the effective date of any such reduction
or termination:
(i) in the case of a reduction of the Commitments, that part
of such unpaid principal amount outstanding of the Revolving Loans and the
Discretionary Loans held by such Bank that exceeds the amount of the
Commitment of such Bank immediately after such reduction; and
(ii) in the case of termination of the Commitments, the
entire unpaid principal amount of the Revolving Loans and the
Discretionary Loans, as applicable;
together, in each case, with accrued and unpaid interest on the amount being so
prepaid and all other amounts accrued and owing under this Agreement on such
date.
(b) As of any date on which the Company or any Restricted
Subsidiary sells, assigns, transfers or otherwise disposes of any Property
(other than (i) dispositions of inventory in the ordinary course of business or
(ii) sales or transfers of Capital Stock or assets to the Company or a
Restricted Subsidiary), if either (A) the ratio of Total Debt, as of the date
of the balance sheet most recently delivered pursuant to Section 8.02, to
EBITDA, for the four consecutive fiscal quarter period ended on the date of
such balance sheet, is in excess of 4.5 to 1.0 or (B) the Company is not in
compliance with its obligations under Section 8.02, then 50% of the Net Cash
Proceeds of such sale, assignment, transfer or disposition shall be immediately
applied to the
<PAGE> 42
35
prepayment of Loans under this Agreement, and the Commitments under this
Agreement shall be reduced by such amount so prepaid; provided that if in
connection with the disposition of any such Property the Company shall advise
the Administrative Agent that it intends to use the Net Cash Proceeds of such
disposition to acquire Cash Flow Producing Assets to be owned by the Company or
a Restricted Subsidiary, then (i) the Commitments will not be reduced as
required by this Section 3.02(b) to the extent the amount prepaid or a portion
thereof shall have been reborrowed within 12 months after the date of such
disposition and used to acquire Cash Flow Producing Assets, and (ii) during
such 12 month period an amount of the Commitments equal to the amount so
prepaid will be restricted and the Company will be entitled to reborrow such
amount as provided herein only upon a certification to the Administrative Agent
that the proceeds of such borrowing will be promptly applied to acquire such
Cash Flow Producing Assets. Notwithstanding the foregoing, such prepayment will
not be required in the event and for so long as such Net Cash Proceeds are held
by a "qualified intermediary" (as defined in ss. 1.103(k)- 1(g)(4)(iii) of
Title 26 of the Code of Federal Regulations) pursuant to a like kind exchange
as provided for by ss. 1031 of the Internal Revenue Code of 1986; provided,
however, that this sentence shall in no way limit or otherwise affect the
Company's obligations under this Section 3.02(b) to reduce the Commitments by
50% of such Net Cash Proceeds in the event the notice and reinvestment
provisions set forth above are not complied with.
(c) As of any date on which the Company or any Restricted
Subsidiary on a consolidated basis incurs Debt other than Debt incurred under
this Agreement, if either (i) the ratio of Total Debt, as of the date of the
balance sheet most recently delivered pursuant to Section 8.02 on a pro forma
basis giving effect to such incurrence and any use of the proceeds thereof to
repay Debt reflected on such balance sheet, to EBITDA, for the four consecutive
fiscal quarter period ended on the date of such balance sheet, is in excess of
4.5 to 1.0, or (ii) the Company is not in compliance with its obligations under
Section 8.02, then 50% of the Net Cash Proceeds of such Debt shall be
immediately applied to the prepayment of Loans under this Agreement, and the
Commitments under this Agreement shall be reduced by the amount so prepaid
except to the extent that after such application the ratio of (i) Total Debt as
<PAGE> 43
36
of such balance sheet date minus such amount of Net Cash Proceeds to (ii)
EBITDA for such four consecutive fiscal periods would be less than 4.5 to 1.0;
provided, however, that prepayments and reductions required under this Section
3.02(c) shall be made only at such time as the aggregate amount of payments and
reductions required but not made shall equal an amount not less than
$20,000,000, at which time Loans shall be prepaid and Commitments reduced in
such aggregate amount.
(d) Notwithstanding the foregoing, (i) no prepayment shall be
required under Section 3.02(b) with respect to an aggregate of $10,000,000 of
Net Cash Proceeds and (ii) in the event any prepayment required by Section
3.02(b) to be made under this Agreement shall be in an amount less than
$2,000,000, such prepayment may be deferred until the aggregate amount of the
prepayments deferred in reliance on this provision shall exceed $2,000,000, at
which time all such prepayments shall be promptly made and the Commitments
correspondingly reduced. In the event any prepayment required by Section
3.02(b) or (c) with respect to any Loan would become due on a date that is not
an Interest Payment Date and as a result thereof the Company would incur
liabilities under Section 2.01(f), then (A) if the next Interest Payment Date
for such Loan would occur within 90 days of the date on which such prepayment
is otherwise due, such prepayment may be made on such Interest Payment Date and
(B) if the next Interest Payment Date for such Loan would not occur within 90
days of such date on which such prepayment is due, the Company shall make such
prepayment to the Administrative Agent on the due date; provided, however, that
interest shall continue to accrue on any Loan so prepaid and shall be paid by
the Company to the Administrative Agent on the applicable Interest Payment
Date, and, so long as no Default or Event of Default shall occur or shall have
occurred and be continuing, the Administrative Agent shall hold the proceeds of
such prepayment for the benefit of the Banks, in an interest bearing account,
until such time as such proceeds can be applied towards payment of the Loans in
accordance with the provisions of this Agreement without resulting in any
liability to the Company under Section 2.01(f). All interest which may accrue
on such amounts so held in escrow shall be held by the Administrative Agent for
the benefit of the Company.
<PAGE> 44
37
(e) All prepayments made pursuant to the provisions of this
Section 3.02 shall be applied, first, towards payment of all Alternate Base
Rate Loans, as the Company directs, and secondly, and subject to the provisions
of Section 2.01(f), towards payment of the appropriate amount of CD Rate Loans
and Eurodollar Loans, as the Company directs.
SECTION 3.03. Interest Payment Date. The Company shall repay
the principal amount of each Loan on the Interest Payment Date for such Loan,
or if earlier, the Maturity Date; provided that the Company may reborrow in
accordance with Section 2.01(a) or Section 2.06 for the purpose of refinancing
any Loan made thereunder. All principal payments of Loans shall be accompanied
by accrued and unpaid interest on the principal amount being repaid to the date
of payment.
SECTION 3.04. Place, Etc. of Payments and Prepayments. All
payments and prepayments made in accordance with the provisions of this
Agreement in respect of the Commitment Fees and the Administrative Agent's fee
and of principal of and interest on the Revolving Loans shall be made to the
Administrative Agent in Dollars at its office at 2200 Ross Avenue, Dallas,
Texas 75201, in immediately available funds for the accounts of the Banks. The
Administrative Agent will promptly distribute to the Banks, in accordance with
each Bank's Pro Rata Share in immediately available funds, the amount of
principal, interest and Commitment Fees received by the Administrative Agent
for the account of the Banks, taking into account the effect of any
Discretionary Loans; provided that if interest shall accrue on any Loan at a
rate different from the rate applicable to any other Loan, payment and
distribution of interest shall be based on the respective accrual rates
applicable to such Loan. Any payment to the Administrative Agent for the
account of a Bank under this Agreement shall constitute payment by the Company
to such Bank of the amounts so paid to the Administrative Agent, and any Loan
or portions thereof so paid shall not be considered outstanding for any purpose
after the date of such payment to the Administrative Agent.
<PAGE> 45
38
ARTICLE IV
Fees; Reduction of Commitments
SECTION 4.01. Administration Fee. Until payment in full of
the Obligations and termination of the Commitments hereunder, the Company
agrees to pay to the Administrative Agent an administration fee pursuant to the
terms and conditions set forth in the TCB Fee Letter.
SECTION 4.02. Commitment Fees. The Company agrees to pay to
the Administrative Agent for the account of each Bank in Dollars, Commitment
Fees, computed on a daily basis of a year of 365 or 366 days, as the case may
be, from the date of this Agreement to and including the Maturity Date at a
rate per annum equal to the applicable Margin Percentage from time to time in
effect on the daily average unused amount of the Commitment of such Bank
(taking into account all Revolving Loans and Discretionary Loans of such Bank
outstanding on the dates covered by such calculation). Each such Commitment Fee
shall be payable on or before the fifteenth day following each Quarterly Date
and on the Maturity Date or on such earlier date as the Commitment of such Bank
shall terminate pursuant to the terms of this Agreement.
SECTION 4.03. Reduction or Termination of Commitments. The
Company may at any time or from time to time reduce ratably in proportion to
their respective Commitments or terminate in whole, the respective Commitments
of the Banks hereunder by giving not less than three full Business Days' prior
written notice to such effect to the Administrative Agent; provided that any
partial reduction shall be in an aggregate amount of not less than $5,000,000
and an integral multiple of $1,000,000; provided, further, that the Commitments
may not be reduced to an amount less than the aggregate principal amount of
Discretionary Loans and Revolving Loans outstanding at such time, unless
simultaneously therewith the Company shall make a prepayment in accordance with
Section 3.02(a) hereof. In the event of any prepayment of the Loans outstanding
hereunder pursuant to Section 3.02(b) or (c), the Commitments shall be ratably
reduced by the amount of such prepayment to the extent provided in Section
3.02(b) or (c). The Administrative Agent shall promptly notify each Bank of its
Pro Rata Share of and of
<PAGE> 46
39
the date of each reduction of the Commitments. After each such reduction, the
Commitment Fees owing to each Bank shall be calculated upon the Commitment of
such Bank as so reduced. In the event of acceleration of the date on which any
Loan is payable in accordance with Article X, the Commitments hereunder of the
Banks shall thereupon automatically terminate without notice. Each reduction or
any termination of the Commitments, and each notice thereof, under this
Agreement shall be irrevocable.
ARTICLE V
Application of Proceeds
The Company agrees that the proceeds of the Loans hereunder
shall be used by the Company in accordance with the introductory statement to
this Agreement.
ARTICLE VI
Representations and Warranties
The Company represents and warrants that:
SECTION 6.01. Organization; Qualification; Subsidiaries. The
Company and each Subsidiary (a) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, (b) has the corporate power to own its properties and to carry
on its business as now conducted, and (c) is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction where
failure to be duly qualified would materially and adversely affect the
business, properties, operations or financial condition of the Company and its
Restricted Subsidiaries on a consolidated basis or the ability of the Company
and its Restricted Subsidiaries to perform its obligations under this
Agreement. Attached hereto as Exhibit 6.01 is a correct and complete list
(determined in good faith by the Company) setting forth, as of date hereof (but
after giving effect to the Transactions): (i) the name of and jurisdiction of
organization of each Subsidiary, (ii) the title and number of such outstanding
shares of Capital Stock of each Subsidiary, if any, owned by Persons other than
the Company or any Subsidiary;
<PAGE> 47
40
(iii) the name and address of each such other Persons and (iv) whether such
Subsidiary is a Restricted or Unrestricted Subsidiary. All shares of Capital
Stock of Restricted Subsidiaries owned by the Company or any Restricted
Subsidiary are owned thereby free and clear of all liens, claims and
encumbrances. No shares of Capital Stock of any Restricted Subsidiary are owned
by any Unrestricted Subsidiary.
SECTION 6.02. Financial Statements. (a) The Company has
furnished each Bank with the consolidated financial statements for the Company
and its Subsidiaries as at and for its fiscal year ended December 31, 1995,
accompanied by the opinion of Deloitte & Touche LLP, and quarterly consolidated
financial statements as at and for the period ended September 30, 1996. Such
statements have been prepared in conformity with GAAP consistently applied
throughout the period involved, except as may be explained in such opinion.
Such statements fairly present the financial condition of the Company and its
Subsidiaries on a consolidated basis and the results of its and their
operations as at the dates and for the periods indicated. There has been no
material adverse change in the business, properties, operations or financial
condition of the Company and its Subsidiaries on a consolidated basis since
September 30, 1996.
(b) The Company has furnished each Bank with the consolidated
financial statements for NewCity Communications and its consolidated
subsidiaries on a consolidated basis as at and for its fiscal year ended
December 31, 1995, accompanied by the audit opinion of a nationally recognized
accounting firm, and quarterly consolidated financial statements as at and for
the period ended September 30, 1996. To the knowledge of the Company, such
statements have been prepared in conformity with GAAP consistently applied
throughout the period involved, except as may be explained in such opinion. To
the knowledge of the Company, such statements fairly present the financial
condition of NewCity Communications and its consolidated subsidiaries on a
consolidated basis and the results of its and their operations as at the dates
and for the periods indicated. To the knowledge of the Company, there has been
no material adverse change in the business, properties, operations or financial
condition of NewCity Communications
<PAGE> 48
41
and its subsidiaries on a consolidated basis since September 30, 1996.
SECTION 6.03. Actions Pending. Except as disclosed in Exhibit
6.03 attached hereto, there is no action, suit or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any Restricted
Subsidiary before any court or administrative agency or other governmental
authority which might (although in the opinion of the Company such actions,
suits and proceedings would not reasonably be expected to) result in any
material adverse change in the business, properties, operations or financial
condition of the Company and its Restricted Subsidiaries on a consolidated
basis or impair the ability of the Company to perform its obligations under
this Agreement.
SECTION 6.04. Default. Neither the Company nor any Restricted
Subsidiary is (a) in default under the provisions of any instrument evidencing
any Debt or any other liability, contingent or otherwise, or of any agreement
relating thereto or (b) in default under or in violation of any order, writ,
injunction or decree of any court, or in default under or in violation of any
order, regulation or demand of any governmental instrumentality, other than for
such defaults or violations under clauses (a) and (b) above which taken in the
aggregate do not and could not reasonably be expected to materially and
adversely affect the business, properties, operations or financial condition of
the Company and its Restricted Subsidiaries on a consolidated basis or impair
the ability of the Company to perform its obligations under this Agreement.
SECTION 6.05. Title to Assets; Licenses; Intellectual
Property. (a) The Company and each Restricted Subsidiary (i) have good and
marketable title to their respective real property assets and (ii) good title
to their respective personal property assets, in each case subject to no liens,
security interests or other encumbrances except those permitted by Section
9.01.
(b) Each of the Company and its Restricted Subsidiaries owns,
or is licensed to use, all trademarks, tradenames, copyrights, patents,
licenses and other intellectual property material to its business, and the use
<PAGE> 49
42
thereof by the Company and its Restricted Subsidiaries does not infringe upon
the rights of any other Person, except for any such infringements that,
individually or in the aggregate, could not reasonably be expected to result in
a Materially Adverse Effect.
SECTION 6.06. Payment of Taxes. The Company and each
Subsidiary have filed all Federal and state income and franchise tax returns,
or extensions therefor, which, to the knowledge of the officers thereof, are
required to be filed and have paid all taxes shown on said returns and all
assessments which are due. The Company and its officers know of no claims by
any governmental authority for any unpaid taxes which claims in the aggregate
could reasonably be expected to result in a material and adverse effect on the
business, properties, operations or financial condition of the Company and its
Restricted Subsidiaries on a consolidated basis.
SECTION 6.07. Conflicting or Adverse Agreements or
Restrictions. Neither the Company nor any Restricted Subsidiary is a party to
any contract or agreement or subject to any restriction which materially and
adversely affects the business, properties, operations or financial condition
of the Company and its Restricted Subsidiaries on a consolidated basis. Neither
the execution nor delivery of this Agreement nor compliance with the terms and
provisions hereof or of any instruments required hereby will be contrary to the
provisions of, or constitute a default under, (a) the charter or by-laws of the
Company or any Restricted Subsidiary or (b) any law or any regulation, order,
writ, injunction or decree of any court or governmental authority or any
material agreement to which the Company or any Restricted Subsidiary is a party
or by which it is bound or to which it is subject if such noncompliance or
defaults referred to in this clause (b) could in the aggregate have a material
and adverse effect on the business, properties, operations or financial
condition of the Company and its Restricted Subsidiaries on a consolidated
basis or impair the ability of the Company to perform its obligations under
this Agreement.
SECTION 6.08. Purpose of Loans. Neither the Company nor any
Subsidiary is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
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43
Margin Stock. This Agreement and the transactions contemplated hereby comply in
all respects with Regulations G, U, T and X and all other regulations of the
Board of Governors of the Federal Reserve System. Neither the Company nor any
agent acting on its behalf has taken or will take any action which would cause
this Agreement to violate Regulation G, U, T or X or any other regulation of
the Board of Governors of the Federal Reserve System or to violate the
Securities Exchange Act of 1934, in each case as in effect now or as the same
may hereafter be in effect on the date of any Loan.
SECTION 6.09. Authority; Validity. The Company and each
Guarantor has the corporate power and authority to make and carry out this
Agreement and the transactions contemplated herein, to make the borrowings
provided for herein and to perform its obligations hereunder; and all such
action has been duly authorized by all necessary corporate proceedings on its
part. This Agreement has been duly and validly executed and delivered by the
Company and each Guarantor and constitutes a valid and legally binding
agreement of the Company and each Guarantor, enforceable in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the enforcement of
creditors' rights and general principles of equity.
SECTION 6.10. Consents or Approvals. No order, consent,
approval, license, authorization or validation of any governmental authority
and no registration or filing with or notice to any governmental authority is
necessary to authorize or permit, or is required in connection with, the
execution and delivery of this Agreement, the making of borrowings pursuant
hereto or the performance of the obligations of the Company hereunder.
SECTION 6.11. Compliance with Law. Neither the Company nor
any of its Restricted Subsidiaries are in violation of any Federal, state or
local laws or orders affecting the Company or any Subsidiary or any of their
businesses and operations which taken alone, or in the aggregate, could
reasonably be expected to have a material and adverse effect on the business,
properties, operations or financial condition of the Company and its Restricted
Subsidiaries, on a consolidated basis, or could reasonably be expected to
impair the ability of the Company to perform
<PAGE> 51
44
its obligations under this Agreement. Neither the Company nor any Restricted
Subsidiary has failed to obtain any license, permit, franchise, consent or
authorization of any governmental authority necessary to the ownership of its
properties or the operation of its business, which failure could reasonably be
expected to have a material and adverse effect on the business, properties,
operations or financial condition of the Company and its Restricted
Subsidiaries on a consolidated basis or could reasonably be expected to impair
the ability of the Company to perform its obligations under this Agreement.
SECTION 6.12. ERISA. The Company and its Subsidiaries are in
compliance in all material respects with the applicable provisions of ERISA.
Neither the Company nor any Subsidiary, taken individually or in the aggregate,
has incurred any material accumulated funding deficiency within the meaning of
ERISA or Section 4971 of the Internal Revenue Code of 1986, as amended, or has
incurred any material liability to the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto under ERISA (the "PBGC"), in
connection with any Plan. None of the Company, any Subsidiary or any member of
a "controlled group of corporations" or "combined group of trades or businesses
under common control" as such terms are defined, respectively, in Sections
414(b) and (c) of the Internal Revenue Code of 1986, as amended, is required to
contribute to any "multiemployer plan" (as such term is defined in Section
4001(a)(3) of ERISA) or has withdrawn from any multiemployer plan where such
contribution obligation or withdrawal has resulted or could result in any
"withdrawal liability" (as such term is defined in Section 4201 of ERISA) which
could reasonably be expected to have a Materially Adverse Effect.
SECTION 6.13. Investment Company Act. Neither the Company nor
any Subsidiary (i) is an investment company as that term is defined in the
Investment Company Act of 1940, as amended, (ii) directly or indirectly
Controls or is Controlled by a company which is an investment company as that
term is defined in the Investment Company Act of 1940, as amended, or (iii) is
otherwise subject to regulation under the Investment Company Act of 1940, as
amended.
<PAGE> 52
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SECTION 6.14. Disclosure. All material information furnished
by or on behalf of the Company in writing to the Administrative Agent or any
Bank pursuant to the terms of this Agreement (a) in the Confidential
Information Memorandum dated January 1997 or (b) after the date hereof and, in
either case, concerning the historical operations of the Company, did not or
will not, as the case may be, when made, include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were or are
made, not materially misleading.
SECTION 6.15. Insurance. The Company and each Restricted
Subsidiary maintains insurance of such types as is usually carried by
corporations of established reputation engaged in the same or similar
businesses and similarly situated with financially sound and reputable
insurance companies or associations (or, as to workers' compensation or similar
insurance, with an insurance fund or by self-insurance authorized by the
jurisdiction in which its operations are carried on) and in such amounts (and
with co-insurance and deductibles) as such insurance is usually carried by
corporations of established reputation engaged in the same or similar
businesses and similarly situated.
SECTION 6.16. Environmental and Safety Matters. The Company
and each Restricted Subsidiary has complied in all material respects with all
Federal, state, local and other statutes, ordinances, orders, judgments,
rulings and regulations relating to environmental pollution or to environmental
regulation or control or to employee health or safety. To the best knowledge of
the Company's executive officers, neither the Company nor any Restricted
Subsidiary has received notice of any material failure so to comply. The
Company's and the Restricted Subsidiaries' plants do not manage any hazardous
wastes, hazardous substances, hazardous materials, toxic substances, toxic
pollutants or substances similarly denominated, as those terms or similar terms
are used in the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Hazardous Materials
Transportation Act, the Toxic Substance Control Act, the Clean Air Act, the
Clean Water Act or any other applicable law relating to environmental pollution
or
<PAGE> 53
46
employee health and safety generally, in violation in any material respect of
any law or any regulations promulgated pursuant thereto. The Company is aware
of no events, conditions or circumstances involving environmental pollution or
contamination or employee health or safety that could reasonably be expected to
result in a material and adverse effect on the business, properties, operations
or financial condition of the Company and its Restricted Subsidiaries on a
consolidated basis.
SECTION 6.17. Restricted Subsidiaries. Every Restricted
Subsidiary of the Company (other than the Surviving Corporation if permitted by
Section 8.10(b)) is a Guarantor hereunder.
ARTICLE VII
Conditions
SECTION 7.01. Conditions Precedent to Closing. The
effectiveness of this Agreement is subject to the satisfaction on the Closing
Date of the following conditions:
(a) the Company and each Guarantor shall have duly and
validly executed and delivered to the Administrative Agent this
Agreement;
(b) the Administrative Agent shall have received on behalf of
the Banks from Counsel for the Company, its opinion, dated the Closing
Date, substantially in the form attached hereto as Exhibit 7.01(b);
(c) the Administrative Agent shall have received on behalf of
the Banks an Officer's Certificate, dated the Closing Date, substantially
in the form attached hereto as Exhibit 7.01(c);
(d) no Default shall have occurred and be continuing or shall
occur after giving effect to the Company's execution of this Agreement;
(e) after giving effect to the Company's execution of this
Agreement, the representations and
<PAGE> 54
47
warranties made by the Company in Article VI shall be true on and as
of the Closing Date;
(f) no material adverse change shall have occurred in the
business, properties, operations or financial condition of the Company and
its Subsidiaries on a consolidated basis since September 30, 1996;
(g) there shall not exist any litigation or regulatory
proceedings or other legal or regulatory development, actual or
threatened, that, in the good faith judgment of the Banks, could
reasonably be expected to have a material and adverse effect on the
business, properties, operations or financial condition of (i) the Company
and its Subsidiaries taken as a whole or (ii) NewCity Communications;
provided that for purposes of this clause (g), any litigation or
regulatory proceeding or other legal or regulatory development shall be
deemed to have a material and adverse effect as contemplated above if,
after giving effect to such proceeding or development on a pro forma basis
over the succeeding twelve month period, a Default would occur hereunder;
(h) the Administrative Agent shall have received from the
Company certificates of appropriate officials as to the existence and good
standing of the Company in its jurisdiction of incorporation and any and
all jurisdictions where the Property owned or the business transacted by
the Company makes such qualification necessary and where the failure to be
so duly qualified would have a material and adverse effect on the
business, properties, operations or financial condition of the Company and
its Subsidiaries on a consolidated basis or the ability of the Company to
perform its obligations under this Agreement, all in form and substance
satisfactory to the Administrative Agent and counsel for the
Administrative Agent;
(i) the Administrative Agent shall have received all such
information as the Administrative Agent shall request concerning the
insurance maintained by the Company described in Section 6.15 hereof;
(j) the Administrative Agent shall have received copies of
the NewCity Merger Agreement, duly certified by an officer of the Company
that such agreements are in the
<PAGE> 55
48
form as filed with the Securities and Exchange Commission;
(k) the Banks shall be satisfied as to the absence of
litigation related to the Transactions which could materially adversely
affect their rights or interests in connection with this Agreement;
(l) the Administrative Agent shall have received all fees and
other amounts due and payable to the Administrative Agent and to the Banks
on or prior to the Closing Date, including, without limitation, (i) such
fees and amounts due and payable pursuant to the terms and conditions set
forth in the Agents' Fee Letters and (ii) to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Company hereunder.
SECTION 7.02. Conditions Precedent to Initial Borrowing. The
obligation of the Banks to fund the initial Borrowing is subject to the
following:
(a) the conditions to the obligations of the Company set
forth in the NewCity Merger Agreement shall have been, or shall
simultaneously with the initial Borrowing be, satisfied without giving
effect to any amendment thereto or waiver thereof which would reasonably
be expected to have a Materially Adverse Effect;
(b) the Transactions shall have been, or shall simultaneously
with the initial Borrowing be, completed in accordance with applicable law
and on the terms set forth in the NewCity Merger Agreement without giving
effect to any amendment thereto which would reasonably be expected to have
a Materially Adverse Effect;
(c) the Administrative Agent shall have received a
certificate of a senior financial officer of the Company, substantially in
the form attached hereto as Exhibit 7.02(c), as to the solvency of the
Company after giving effect to the Transactions; and
(d) all material governmental authorities (including the FCC)
and third parties shall have approved or consented to the Transactions to
the extent required,
<PAGE> 56
49
all applicable appeal periods and waiting periods shall have expired and
there shall be no governmental or judicial action, actual or threatened,
restraining or preventing the Transactions contemplated hereby.
SECTION 7.03. Conditions Precedent to Each Borrowing. The
obligation of the Banks to fund each Borrowing (including, without limitation,
the initial Borrowing) is subject to the following:
(a) No Event of Default shall have occurred and be continuing
or shall occur after giving effect to such Borrowing and the application
of the proceeds thereof, and each Borrowing shall be deemed to constitute
a representation and warranty by the Company on the applicable Borrowing
Date to such effect.
(b) The Administrative Agent shall have received by telecopy,
or otherwise, the Notice of Borrowing required by Section 2.01(b).
(c) The Company shall have delivered to the Administrative
Agent and each Bank such certificates and other documents as are otherwise
required under this Agreement.
SECTION 7.04. Conditions Precedent to Borrowings that
Increase Principal Outstanding. The obligation of the Banks to fund each Loan
(including, without limitation, the initial Borrowing), which has the effect of
increasing the aggregate outstanding principal amount of Revolving Loans on the
applicable Borrowing Date, is subject, in addition to the conditions set forth
in Section 7.03, to the following conditions:
(a) After giving effect to such Borrowing and the application
of the proceeds thereof, the representations and warranties contained in
Article VI, other than the representations and warranties made by the
Company in the last sentence of Section 6.02(a) and Section 6.02(b) and in
Sections 6.03 and 6.04, shall be true on and as of the particular
Borrowing Date as though made on and as of such date and each such
Borrowing shall be deemed to constitute a representation and warranty by
the Company on the applicable Borrowing Date as to the matters set forth
in Article VI (other than the
<PAGE> 57
50
representations and warranties made by the Company in the last sentence of
Section 6.02(a) and Section 6.02(b) and in Sections 6.03 and 6.04).
(b) Except as otherwise set forth therein, or in certificates
accompanying such financial statements, the most recent financial
statements delivered to the Banks pursuant to Section 8.02 together with
the reconciliation adjustments made thereto pursuant to Section
8.02(a)(ii) or Section 8.02(b)(ii), as the case may be, fairly present the
financial condition of the Company and its Restricted Subsidiaries on a
consolidated basis and the results of its and their operations as at the
dates and for the periods indicated. Each such Borrowing shall be deemed
to constitute a representation and warranty by the Company on the
applicable Borrowing Date to such effect.
(c) No Default shall have occurred and be continuing or shall
occur after giving effect to such Borrowing and the application of the
proceeds thereof, and each Borrowing shall be deemed to constitute a
representation and warranty by the Company on the applicable Borrowing
Date to such effect.
(d) The Company shall have delivered to the Administrative
Agent and each Bank such certificates and other documents as are otherwise
required under this Agreement.
<PAGE> 58
51
ARTICLE VIII
Affirmative Covenants
The Company covenants and agrees that, until payment in full
of the Obligations and termination of the Commitments hereunder, the Company
will:
SECTION 8.01. Certain Financial Covenants.
Maintain at all times:
(a) a Leverage Ratio as of the last day of and for any four
consecutive fiscal quarter period ending during a period set forth below
not in excess of the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through
March 31, 1999 6.0 to 1.0
April 1, 1999 through
March 31, 2000 5.5 to 1.0
Thereafter 5.0 to 1.0
</TABLE>
(b) an Interest Coverage Ratio for any four consecutive
fiscal quarter (commencing with such period ending on March 31, 1997)
period of not less 2.0 to 1.0.
SECTION 8.02. Financial Statements and Information.
Deliver to each of the Banks in duplicate:
(a) as soon as available, and in any event within 90 days,
after the end of each fiscal year (i) a copy of the consolidated
annual audited financial statements of the Company and its
Subsidiaries for such fiscal year containing a balance sheet, an
income statement, a statement of shareholders' equity and a
consolidated statement of cash flows, all in reasonable detail,
together with the unqualified opinion of Deloitte & Touche LLP or
another independent certified public accountant of recognized standing
satisfactory to the Banks, that such
<PAGE> 59
52
statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, except as may be
explained in such opinion, and fairly present the financial condition
of the Company and its Subsidiaries on a consolidated basis and the
results of its and their operations as at the dates and for the
periods indicated and (ii) a copy of the reconciliation sheet,
certified by the chief financial officer of the Company, setting forth
the adjustments required to the consolidated audited financial
statements of the Company and its Subsidiaries referred to above in
this paragraph (a) in order to arrive at the consolidated financial
statements of the Company and its Restricted Subsidiaries;
(b) as soon as available, and in any event within 60 days,
after the end of each of the first three quarterly accounting periods
in each fiscal year (i) a copy of the consolidated unaudited financial
statements of the Company and its Subsidiaries as at the end of such
quarter and for the period then ended, containing a balance sheet, an
income statement, a statement of shareholders' equity and a
consolidated statement of cash flows, all in reasonable detail and
certified by a financial officer of the Company to have been prepared
in accordance with GAAP, consistently applied (subject to year end
audit adjustments and except for the absence of footnotes), except as
may be explained in such certificate, and as fairly presenting the
financial condition of the Company and its Subsidiaries on a
consolidated basis and the results of its and their operations as at
the dates and for the periods indicated and (ii) a copy of the
reconciliation sheet, certified by the chief financial officer of the
Company, setting forth the adjustments required to the consolidated
quarterly financial statements of the Company and its Subsidiaries
referred to above in this paragraph (b) in order to arrive at the
consolidated financial statements of the Company and its Restricted
Subsidiaries;
(c) promptly after the filing thereof, copies of all
statements and reports filed with the Securities and Exchange
Commission other than Form S-8
<PAGE> 60
53
registration statements and other reports relating to employee benefit
plans, supplements to registration statements relating solely to the
pricing of securities offerings for which registration statements were
previously filed and delivered and Forms D;
(d) promptly after any officer of the Company obtains
knowledge of an Event of Default or Default, an Officer's Certificate
specifying the nature of such Event of Default or Default, the period
of existence thereof, and what action the Company has taken and
proposes to take with respect thereto;
(e) promptly upon the Company's or any Subsidiary's receipt
thereof, copies of all notices received from the FCC regarding the
termination, cancellation, revocation or taking of any other
materially adverse action with respect to any Material FCC Licenses;
and
(f) promptly after request, such additional financial or
other information as the Administrative Agent or any Bank acting
through the Administrative Agent may reasonably request from time to
time.
All financial statements specified in clauses (a) and (b)
above shall be furnished with comparative consolidated figures for the
corresponding period in the preceding year. Together with each delivery of
financial statements required by clauses (a) and (b) above, the Company will
deliver to each Bank (i) such schedules, computations and other information as
may be required to demonstrate that the Company is in compliance with its
covenants in Sections 8.01, 9.01(f), 9.02 and 9.06 or reflecting any
non-compliance therewith as at the applicable date, and (ii) an Officer's
Certificate stating that there exists no Event of Default or, to the knowledge
of such officer, any Default, or, if any such Event of Default or, to the
knowledge of such officer, any Default exists, stating the nature thereof, the
period of existence thereof, and what action the Company has taken and proposes
to take with respect thereto. Together with each delivery of financial
statements required by clause (a) above, the Company will deliver to each Bank
a written statement of said accountants that, in making the audit necessary to
the certification of such financial statements, they have
<PAGE> 61
54
obtained no knowledge of any Event of Default or Default, or, if such
accountants shall have obtained knowledge of any Event of Default or Default,
they shall specify the nature and period of existence thereof in such
statement; provided that such accountants shall not be liable directly or
indirectly to any Bank for failure to obtain knowledge of any Event of Default
or Default. Each Bank is authorized to deliver a copy of any financial
statement delivered to it to any regulatory body having jurisdiction over it
and to any other Person as may be required by applicable law, rules and
regulations.
SECTION 8.03. Existence; Laws; Obligations. Maintain its
corporate existence, comply and cause its Subsidiaries to comply, in all
respects material to the business, properties, operations and financial
condition of the Company and its Restricted Subsidiaries on a consolidated
basis, with all applicable laws and regulations and pay and cause its
Restricted Subsidiaries to pay all taxes, assessments, governmental charges and
other obligations which if unpaid might become a lien against the Property of
the Company or a Restricted Subsidiary, except liabilities being contested in
good faith by appropriate proceedings.
SECTION 8.04. Notice of Litigation and Other Matters.
Promptly notify the Administrative Agent in writing of (i) any action, suit or
proceeding pending or to the knowledge of the Company threatened, before any
governmental authority (including, without limitation, any bankruptcy or
similar proceeding by or against the Company or any Restricted Subsidiary)
which, in the reasonable view of the Company, if adversely determined or during
the pendency thereof, would materially impair the ability of the Company and
its Restricted Subsidiaries on a consolidated basis to carry on their
businesses substantially as now being conducted or would materially and
adversely affect the business, properties, operations or financial condition of
the Company and its Restricted Subsidiaries on a consolidated basis or would
impair the ability of the Company to perform its obligations under this
Agreement, (ii) any action or development which, in the view of the Company,
might reasonably be expected to materially impair the ability of the Company
and its Restricted Subsidiaries on a consolidated basis to carry on their
businesses substantially as now being conducted or
<PAGE> 62
55
would materially and adversely affect the business, properties, operations or
financial condition of the Company and its Restricted Subsidiaries on a
consolidated basis or would impair the ability of the Company to perform its
obligations under this Agreement, (iii) the failure of any Unrestricted
Subsidiary to pay when due (after giving effect to any grace period permitted
from time to time) any Debt of such Unrestricted Subsidiary, the outstanding
amount of which exceeds, singularly or in the aggregate, $10,000,000, or the
holder of which Debt declares, or may declare, such Debt due prior to its
stated maturity because of the occurrence of a default or other event
thereunder or with respect thereto and (iv) any revocation, suspension or
expiration of FCC licenses which, individually or in the aggregate, are
material to the operations of the Company and the Restricted Subsidiaries on a
consolidated basis (the "Material FCC Licenses").
SECTION 8.05. Books and Records. Maintain, and cause its
Subsidiaries to maintain, proper books of record and account in accordance with
GAAP, consistently applied.
SECTION 8.06. Inspection of Property and Records. Permit any
Person designated in writing by the Administrative Agent, or any Bank (i) to
visit and inspect any of the properties of the Company and any Restricted
Subsidiary and discuss its and their respective affairs and finances with its
and their respective principal officers and to inspect any of the corporate
books and financial records of the Company and any Restricted Subsidiary and
(ii) from and after the occurrence of an Event of Default, to make copies of
and abstracts from the books and records of account of the Company and its
Restricted Subsidiaries, in each case all upon reasonable prior notice and at
such times as the Administrative Agent or any Bank may reasonably request.
SECTION 8.07. Maintenance of Property, Insurance. Cause its
Property and the Property of its Subsidiaries to be maintained, preserved and
protected and kept in good repair, working order and condition so as not to
materially and adversely affect the business carried on in connection therewith
and maintain, and cause its Subsidiaries to maintain, insurance with
responsible companies in such amounts and against such risks as is reasonably
deemed appropriate by the Company.
<PAGE> 63
56
SECTION 8.08. ERISA. Comply, and cause each Subsidiary to
comply, in all material respects with the applicable provisions of ERISA and
furnish to the Administrative Agent (i) as soon as possible, and in any event
within 30 days after the Company or a duly appointed administrator of a Plan
files or is required to file, with respect to any Plan, any notice of a
"reportable event" (as such term is defined in Section 4043 of ERISA) for which
the notice requirement has not been waived by the PBGC (provided that notice
shall be required for reportable events arising from the disqualification of a
Plan or the distress termination of a Plan (in accordance with ERISA Section
4041(c)) without regard to the waiver of notice provided by the PBGC by
regulation or otherwise), a statement of the chief financial officer of the
Company setting forth details as to such reportable event and the action which
the Company, or such Subsidiary, as the case may be, proposes to take with
respect thereto, together with a copy of the notice of such reportable event
given to the PBGC and (ii) promptly after receipt thereof, a copy of any notice
the Company, any Subsidiary or any member of the Controlled group of
corporations may receive from the PBGC relating to the intention of the PBGC to
terminate any Plan pursuant to Section 4042 of ERISA.
SECTION 8.09. Maintenance of Business Lines. Maintain and
cause its Restricted Subsidiaries to maintain lines of business only in radio
broadcasting and related lines of business that are similar in scope to the
existing business lines and operations of the Company and its Restricted
Subsidiaries.
SECTION 8.10. Further Assurances. (a) Promptly after the
acquisition or formation of any Subsidiary that is designated a Restricted
Subsidiary (and promptly after designating any Subsidiary that was formerly an
Unrestricted Subsidiary as a Restricted Subsidiary), cause such Restricted
Subsidiary to execute and deliver to the Administrative Agent an Additional
Guarantor Agreement in substantially the form of Exhibit 8.10(a) attached
hereto (the "Additional Guarantor Agreement") under which such Restricted
Subsidiary shall become, and shall assume all the obligations of, a Guarantor
hereunder and become liable as a Guarantor hereunder for all the Obligations.
<PAGE> 64
57
(b) If any Subsidiary that is a Restricted Subsidiary on the
Closing Date fails to provide a Guarantee of the Obligations in accordance with
paragraph (a) above as a result of a prohibition contained under the terms of
any Debt existing as of January 31, 1997 and outstanding on the Closing Date,
promptly after such Debt is repaid or repurchased or such Subsidiary is
otherwise no longer subject to such prohibition, cause such Subsidiary to
execute and deliver to the Administrative Agent an Additional Guarantor
Agreement under which such Restricted Subsidiary shall become, and shall assume
all the obligations of, a Guarantor hereunder and become liable as a Guarantor
hereunder for all the Obligations.
SECTION 8.11. Restricted/Unrestricted Designation of
Subsidiaries. The Company will be permitted to designate a Restricted
Subsidiary as an Unrestricted Subsidiary or an Unrestricted Subsidiary as a
Restricted Subsidiary by the delivery to the Administrative Agent of a written
notice certifying that all conditions set forth in this Section 8.11 are
satisfied as of the effective date of such designation, which certification
shall state the effective date of such designation and shall set forth the
computations and information as may be required to demonstrate that the Company
is in compliance with this Section 8.11 and shall be signed by a financial
officer of the Company; provided that (a) no Default or Event of Default shall
exist immediately before or after the effective date of any such designation
and the Company (other than with respect to designations of a Subsidiary
involved in, and in connection with, a merger, an acquisition of an entity or a
business or a joint venture in connection with any such transaction) shall be
in Pro Forma Compliance with respect to such designation; and (b) the Company
shall not designate as Unrestricted Subsidiaries during any period of 12
consecutive months Restricted Subsidiaries as to which the Attributable Amount
shall exceed 15% of Pro Forma EBITDA for the four consecutive fiscal quarter
period ended on the date of the balance sheet most recently delivered pursuant
to Section 8.02 excluding therefrom the Attributable Amount of the Unrestricted
Subsidiaries which have been designated as Restricted Subsidiaries during such
period. Notwithstanding anything contained in the foregoing to the contrary,
any calculation of Pro Forma Compliance shall exclude the effect of any entity
or business for the period
<PAGE> 65
58
during which such entity or business was not a Subsidiary or part of a
Subsidiary of the Company. Promptly after receiving any written notice from the
Company regarding the designation thereby of a Restricted Subsidiary or an
Unrestricted Subsidiary, the Administrative Agent will
provide notice thereof to the Lenders.
ARTICLE IX
Negative Covenants
Until payment in full of the Obligations and termination of
the Commitments hereunder:
SECTION 9.01. Mortgages, Etc. The Company will not and will
not permit any Restricted Subsidiary to create or permit to exist any lien,
encumbrance, or security interest (including the charge upon assets purchased
under a conditional sales agreement, purchase money mortgage, security
agreement, or other title retention agreement) upon any of its assets, whether
now owned or hereafter acquired, or assign or otherwise convey any right to
receive income, except:
(a) liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings;
(b) other liens, encumbrances and security interests
incidental to the conduct of its business or the ownership of its
assets which were not incurred in connection with the borrowing of
money, and which do not in the aggregate materially detract from the
value of its assets or materially impair the use thereof in the
operation of its business;
(c) liens and security interests on assets of a Restricted
Subsidiary to secure obligations of such Restricted Subsidiary to the
Company or a Wholly Owned Restricted Subsidiary;
(d) liens and security interests existing on the date hereof
which are (i) both (y) described in Exhibit 9.01(d) attached hereto
and (z) reflected in the consolidated financial statements of the
Company
<PAGE> 66
59
referred to in Section 6.02(a) and (ii) liens and security interests
on Property that were existing at the time of the acquisition thereof
by the Company or any Restricted Subsidiary or placed thereon to
secure a portion of the purchase price thereof described in Exhibit
9.01(d);
(e) liens and security interests on Property acquired after
the date hereof existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary or placed thereon within one year
of such acquisition to secure a portion of the purchase price thereof,
provided that no such lien or security interest may encumber or cover
any other Property of such Restricted Subsidiary, of the Company or of
any other Restricted Subsidiary; and
(f) at any time when each Restricted Subsidiary is a
Guarantor, other liens and security interests (in addition to those
permitted pursuant to Section 9.01(e)) on Property of the Company and
its Restricted Subsidiaries that secure Debt of the Company and its
Restricted Subsidiaries in an amount which, when taken together with
all other outstanding secured Debt incurred in reliance on this clause
(f) ("Section 9.01(f) Debt"), does not at the time such lien or
security interest comes into existence exceed 20% of Pro Forma EBITDA
for the four consecutive fiscal quarter period ended on the date of of
the balance sheet most recently delivered pursuant to Section 8.02;
provided, that in no event will the aggregate book value of Property
securing Section 9.01(f) Debt exceed by more than 40% the aggregate
amount of Section 9.01(f) Debt; and
(g) liens, encumbrances and security interests on shares of
Capital Stock of Unrestricted Subsidiaries.
SECTION 9.02. Merger; Consolidation; Disposition of Assets.
The Company will not merge or consolidate with any Person unless the Company
shall be the continuing or surviving corporation and both before and after
giving effect to such merger or consolidation no Default or Event of Default
shall exist. The Company will not and will not permit any Restricted Subsidiary
to sell, lease or transfer or otherwise dispose of (whether in one transaction
or a
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60
series of transactions) any Cash Flow Producing Assets, other than sales of
inventory in the ordinary course of business and Capital Stock of Unrestricted
Subsidiaries to any Person and other than dispositions to the Company and its
Restricted Subsidiaries, unless both before and after giving effect to such
disposition no Default or Event of Default shall exist. The Company will not
and will not permit any Restricted Subsidiary to directly or indirectly acquire
(by purchase, merger or otherwise) any Property in any transaction or series of
transactions involving a purchase price in excess of $5,000,000, unless both
before and after giving effect to such acquisition no Default or Event of
Default shall exist.
SECTION 9.03. Restricted Payments. If on any date either (a)
the ratio of Total Debt, as of the date of the balance sheet most recently
delivered pursuant to Section 8.02, to EBITDA (as reduced by the amount of any
payment, declaration, redemption or acquisition described below), for the four
consecutive fiscal quarter period ended on the date of such balance sheet, is
in excess of 4.5 to 1.0 or (b) the Company is not in compliance with its
obligations under Section 8.02, then the Company will not, and will not permit
any Restricted Subsidiary to, pay or declare dividends (exclusive of stock
dividends and cash dividends paid by the Subsidiaries to the Company or to
Restricted Subsidiaries) or redeem or acquire, directly or indirectly, any of
the Capital Stock of the Company or such Subsidiary or any warrant or option to
purchase any of such Capital Stock.
SECTION 9.04. Limitation on Margin Stock. The Company will
not and will not permit any Subsidiary to own or acquire Margin Stock such that
at any time (a) Margin Stock of the Company and its Subsidiaries represents
more than 25% of the value of the assets of the Company and its Restricted
Subsidiaries on a consolidated basis that are subject to Section 9.01 or
Section 9.02, or (b) any Loan or Loans shall be in violation of Regulation U of
the Federal Reserve Board.
SECTION 9.05. Transactions with Affiliates. The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly
enter into any transaction or series of transactions, whether or not in the
ordinary course of business, with any Affiliate other
<PAGE> 68
61
than (a) of the type specified in Section 9.06 that are not prohibited by such
Section 9.06, (b) transactions on terms and conditions substantially as
favorable to the Company or such Restricted Subsidiary as would be obtainable
by the Company or such Restricted Subsidiary at the time in comparable arm's
length transactions with Persons other than Affiliates, (c) transactions
involving the Company and its Restricted Subsidiaries exclusively and (d) any
executive or employee incentive or compensation plan, contract or other
arrangement (including any loans or extensions of credit in connection
therewith) if such plan, contract or arrangement is approved either by the
stockholders of the Company (in accordance with such voting requirements as may
be applicable) or by the Board of Directors of the Company at a meeting at
which a quorum of disinterested directors is present.
SECTION 9.06. Loans and Advances to and Investments in
Unrestricted Subsidiaries. At any time when (a) the Company shall not have
outstanding Index Debt that is investment grade rated by two of Moody's, S&P
and Fitch and (b) the Leverage Ratio for the four consecutive fiscal quarter
period most recently ended exceeds (or would exceed on a pro forma basis after
giving effect to a transaction of the sort referred to in this Section 9.06 as
if it had occurred at the beginning of such period and as if loans,
investments, capital contributions and other investments are deductions to
EBITDA) 4.5 to 1.0, the Company will not and will not permit any Restricted
Subsidiary to make any loan or advance to, or make any capital contribution to
or other investment in, any Unrestricted Subsidiary unless (i) in the case of a
loan, advance, capital contribution or other investment, such loan, advance,
capital contribution or other investment is on terms which are no less
favorable to the Company or such Restricted Subsidiary, as the case may be,
than would obtain in a comparable arm's length transaction with an unaffiliated
Person, and (ii) in each case at the time of the making of any such loan,
advance, capital contribution or investment no Default or Event of Default has
occurred and is continuing and after giving effect to such loan, advance,
capital contribution or investment no Default or Event of Default would occur.
SECTION 9.07. Certain Transfers. The Company will not and
will not permit any Guarantor to, at any time, transfer (by means of issuance
and incurrence of Debt,
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62
investment, purchase and sale, or otherwise) directly or indirectly (including
by means of the financing of an acquisition on behalf of a Restricted
Subsidiary that is not a Guarantor) any Property (including, without
limitation, cash) to any Restricted Subsidiary that is not a Guarantor at such
time.
ARTICLE X
Events of Default
Upon (i) the occurrence of any Event of Default specified in
Sections 10.10, 10.11, 10.12 or 10.13, (x) the unpaid principal amount of, and
all accrued but unpaid interest on, all Loans outstanding (including all
Discretionary Loans) and any other amounts payable hereunder shall
automatically become immediately due and payable without presentment, demand,
protest, notice of intent to accelerate or other notice of any kind to the
Company, all of which are hereby expressly waived and (y) the obligation of the
Banks to make Loans hereunder shall immediately terminate and (ii) the
occurrence and during the continuance of any other Event of Default and upon
the written request of the Majority Banks, the Administrative Agent shall, by
notice to the Company, (x) declare the obligation of the Banks to make Loans
hereunder to be immediately terminated, and the same shall forthwith be
terminated, and/or (y) declare all Loans then outstanding (including all
Discretionary Loans) and any other amount payable hereunder to be, and the same
shall forthwith become, immediately due and payable without presentment,
demand, protest, notice of intent to accelerate or other notice of any kind to
the Company, all of which are hereby expressly waived.
SECTION 10.01. Failure To Pay Principal or Interest. The
Company does not pay or prepay any principal of any Loan on the date due
(whether at stated maturity, by acceleration, by notice of prepayment, under
Section 2.01, 3.01 or 3.02 or otherwise) or the Company does not pay or prepay
any interest on any Loan (a) on or before five days after actual receipt of
oral or written notice from the Administrative Agent, or the applicable Bank
with respect to any Discretionary Loan, as to the amount of interest due, but
in no event shall the Company be required to pay
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or prepay any such interest prior to the date due, or (b) within 10 days after
the due date thereof if no notice is actually received by the Company from the
Administrative Agent with respect to the amount of interest due; or
SECTION 10.02. Failure To Pay Other Sums. The Company does
not pay any sums (other than payments of principal and interest on any Loan
covered by Section 10.01) payable to the Administrative Agent or any Bank under
the terms of this Agreement within 10 days after the date due (or, in the case
of administration fees payable to the Administrative Agent pursuant to Section
4.01 or the Commitment Fees payable to the Administrative Agent for the account
of each Bank pursuant to Section 4.02, 10 days after written notice of
nonpayment has been received by the Company from the Administrative Agent or
any Bank); or
SECTION 10.03. Failure To Pay Other Debt. (a) The Company or
any Restricted Subsidiary does not pay when due any other Debt of the Company
or any Restricted Subsidiary, the outstanding amount of which exceeds,
singularly or in the aggregate, $10,000,000, in respect of which any applicable
grace period has expired; or (b) the Company or any Restricted Subsidiary shall
otherwise default under any other Debt of the Company or any Restricted
Subsidiary (or any other event shall have occurred that would cause, or give
the holders thereto the right to cause, such Debt to become due prior to the
maturity thereof), the outstanding amount of which exceeds, singularly or in
the aggregate, $10,000,000, in respect of which any applicable notice has been
given and either (i) such Debt has been declared or become due prior to any
maturity thereof or (ii) any Restricted Subsidiary is not a Guarantor; provided
that during the continuance of any applicable grace period with respect
thereto, such event shall constitute a Default (but not an Event of Default)
hereunder; or
SECTION 10.04. Misrepresentation or Breach of Warranty. (i)
Any representation or warranty made by the Company herein when made or deemed
made by the Company pursuant hereto shall be incorrect in any material respect
or (ii) any other information (other than projections and similar
forward-looking information) provided by the Company pursuant to this Agreement
after the date hereof,
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shall, when made, include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they are made, not materially misleading; or
SECTION 10.05. Violation of Certain Covenants. The Company
violates any covenant, agreement or condition contained in Article V or Section
8.01 or Section 8.02(d) or Article IX; or
SECTION 10.06. Violation of Other Covenants, Etc. The Company
violates any other covenant, agreement or condition contained herein and such
violation shall not have been remedied within 30 days after written notice has
been received by the Company from the Administrative Agent or any Bank; or
SECTION 10.07. Undischarged Judgment. Final judgment for the
payment of money in excess of $10,000,000 shall be rendered against the Company
or any Restricted Subsidiary and the same shall remain undischarged for a
period of 30 days during which period execution shall not be effectively
stayed; or
SECTION 10.08. ERISA. (a) A "reportable event" (as such term
is defined in Section 4043 of ERISA) shall have occurred with respect to any
Plan and within 30 days after the reporting of any such reportable event to the
Administrative Agent, the Administrative Agent shall have notified the Company
in writing that the Majority Banks have made a determination that, on the basis
of such reportable event, there is a substantial likelihood that such Plan will
be terminated by the PBGC or (b) the PBGC has instituted proceedings to
terminate any Plan and the effect of either of the foregoing would reasonably
be expected to have a Materially Adverse Effect; or
SECTION 10.09. Change of Control. A Change of Control shall
have occurred; or
SECTION 10.10. Assignment for Benefit of Creditors or
Nonpayment of Debts. The Company or any Restricted Subsidiary makes an
assignment for the benefit of creditors or is generally not paying its debts as
such debts become due; or
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SECTION 10.11. Voluntary Bankruptcy. The Company or any
Restricted Subsidiary petitions or applies to any tribunal for or consents to
the appointment of, or taking possession by, a trustee, receiver, custodian,
liquidator or similar official, of the Company or any Restricted Subsidiary, or
of any substantial part of the assets of the Company or any Restricted
Subsidiary, or commences any case or proceedings relating to the Company or any
Restricted Subsidiary under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or other liquidation law of any
jurisdiction; or
SECTION 10.12. Involuntary Bankruptcy. An involuntary
proceeding is commenced or an involuntary petition is filed in a court of
competent jurisdiction seeking (i) relief in respect of the Company or any
Restricted Subsidiary, or of a substantial part of the property or assets of
the Company or a Restricted Subsidiary, under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other Federal or state
bankruptcy, insolvency, receivership or similar law or (ii) the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Company or any Restricted Subsidiary or for a substantial part of the
property or assets of the Company or Restricted Subsidiary; and such proceeding
or petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered; or
SECTION 10.13. Dissolution. Any order is entered in any
proceeding against the Company or any Restricted Subsidiary decreeing the
dissolution or split-up of the Company or such Restricted Subsidiary, and such
order remains unstayed and in effect for 60 days.
SECTION 10.14. Guarantee. Five days after any Guarantee of
any Guarantor hereunder or under any Additional Guarantee Agreement shall for
any reason be held by a court of competent jurisdiction not to be, or shall be
asserted by the Company or any Guarantor not to be, valid in accordance with
the terms thereof or any Guarantor shall be in violation of the terms thereof,
unless (i) the Company shall have the right under this Agreement to designate
such Guarantor as an Unrestricted Subsidiary
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without causing a Default or Event of Default to occur and (ii) within such
five-day period the Company shall have designated such Guarantor an
Unrestricted Subsidiary.
ARTICLE XI
Modifications, Amendments or Waivers
Any of the provisions of this Agreement may from time to time
be modified or amended by, or waived with the written consent of, the Majority
Banks; provided that no such waiver, modification or amendment may be made
which will:
(a) Reduce or increase the amount or alter the term of the
Commitment of any Bank hereunder, other than as permitted by Section
4.03, without the prior written consent of such Bank; or
(b) Extend the stated maturity of or the time for payment of
interest on any Loan or the time for payment of any fee, or waive an
Event of Default with respect to payment of any principal, interest,
or fee, or reduce the principal amount of or the rate of interest on
any Loan, or reduce the amount of any fee, or otherwise affect the
terms of payment of any such fee, without the prior written consent of
each affected Bank; or
(c) Change the definition of Majority Banks without the
prior written consent of all the Banks; or
(d) Waive, modify or amend the provisions of this Article XI,
Section 14.07(a) or any other provision of this Agreement requiring
the ratable distribution of payments among the Banks without the prior
written consent of all the Banks; or
(e) Waive, modify or amend the provisions of Article XII
without the prior written consent of the Administrative Agent and the
Majority Banks; or
(f) Release the Guarantee of any Guarantor without the prior
written consent of all the Banks except for the release of such
Guarantee of any
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Restricted Subsidiary (i) that has become an Unrestricted Subsidiary
in accordance with Section 8.11 or (ii) all of the Capital Stock of
which has been sold in accordance with Section 9.02.
No failure or delay on the part of the Administrative Agent
or any Bank in exercising any right, power or remedy hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy or any abandonment or discontinuance of steps to enforce such a
power, right or remedy preclude any other or further exercise thereof or the
exercise of any other power, right or remedy hereunder. The remedies provided
for in this Agreement are cumulative and not exclusive of any remedies provided
by law or in equity. No modification or waiver of any provision of this
Agreement or consent to any departure by the Company or any Guarantor therefrom
shall in any event be effective unless the same shall be in writing, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on the Company or any
Guarantor in any case shall entitle the Company or such Guarantor to any other
or further notice or demand in similar or other circumstances.
ARTICLE XII
The Administrative Agent
SECTION 12.01. Appointment of Administrative Agent. Each of
the Banks irrevocably appoints and authorizes the Administrative Agent to act
on its behalf under this Agreement, and to exercise such powers hereunder as
are specifically delegated to or required of the Administrative Agent by the
terms hereof, together with such powers as may be reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement, the
Administrative Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall
be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Banks, and such instructions shall be binding upon
all Banks; provided, however, that the Administrative Agent shall not be
required to take any action which exposes the Administrative Agent to personal
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liability or which is contrary to this Agreement or applicable law.
SECTION 12.02. Indemnification of Administrative Agent. The
Administrative Agent shall not be required to take any action hereunder or to
prosecute or defend any suit in respect of this Agreement, unless indemnified
to its reasonable satisfaction by the Banks against loss, cost, liability and
expense. If any indemnity furnished to the Administrative Agent shall become
impaired, it may call for additional indemnity and cease to do the acts
indemnified against until such additional indemnity is given. In addition, the
Banks agree to indemnify the Administrative Agent (to the extent not reimbursed
by the Company), ratably according to the respective principal amounts of the
Loans then held by each of them (or if no Loans are at the time outstanding,
ratably according to the respective amounts of their Commitments), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of this Agreement or
any action taken or omitted by the Administrative Agent under this Agreement,
provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Administrative Agent's gross
negligence or wilful misconduct.
SECTION 12.03. Limitation of Liability. Neither the
Administrative Agent nor any of its directors, officers, employees, attorneys
or agents shall be liable for any action taken or omitted by it or them
hereunder, or in connection herewith, (i) with the consent or at the request of
the Majority Banks, or (ii) in the absence of its or their own gross negligence
or wilful misconduct. Without limitation of the generality of the foregoing
(but subject to the immediately preceding clause (ii)), the Administrative
Agent: (v) may consult with legal counsel (including Counsel for the Company),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such Counsel, accountants or experts; (w) makes
no warranty or
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representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Agreement; (x) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement, or to inspect the Property (including the books and records) of the
Company; (y) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability and genuineness of this Agreement, or any
other instrument or document furnished pursuant hereto; and (z) shall incur no
liability under or in respect of the Agreement by acting upon any notice or
consent (whether oral or written and whether by telephone, telegram, cable or
facsimile), certificate or other instrument or writing (which may be by
telegram, cable or facsimile) believed by it to be genuine and communicated,
signed or sent by the proper Person or Persons.
SECTION 12.04. Independent Credit Decision. Each Bank agrees
that it has relied solely upon its independent review of the financial
statements of the Company and all other representations and warranties made by
the Company herein or otherwise in making the credit decisions preliminary to
entering into this Agreement and agrees that it will continue to rely solely
upon its independent review of the facts and circumstances of the Company in
making future decisions with respect to this Agreement and the Loans. Each Bank
agrees that it has not relied and will not rely upon the Administrative Agent
or any other Bank respecting the ability of the Company to perform its
obligations pursuant to this Agreement.
SECTION 12.05. Rights of TCB. With respect to its Commitment
and the Loans made by it, TCB shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though it were not the
Administrative Agent; and the term "Bank" or "Banks" shall, unless otherwise
expressly indicated, include TCB in its individual capacity. TCB and its
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the Company,
any of the Subsidiaries and any Person or entity who may do business with or
own securities of any of them or of their subsidiaries, all as if TCB were not
the Administrative Agent and without any duty to account therefor to the Banks.
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SECTION 12.06. Successor to the Administrative Agent. The
Administrative Agent may resign at any time as Administrative Agent under this
Agreement, by giving 30 days' prior written notice thereof to the Banks and the
Company and may be removed as Administrative Agent under this Agreement, at any
time with or without cause by the Company and the Majority Banks. Upon any such
resignation or removal, the Company (with the consent of the Majority Banks)
shall have the right to appoint a successor Administrative Agent thereunder. If
no successor Administrative Agent shall have been so appointed by the Company
(with the consent of the Majority Banks), and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Banks' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Banks, appoint a successor Administrative Agent, which shall be a
commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$100,000,000. Upon the acceptance of any appointment as Administrative Agent
under this Agreement by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation or removal as Administrative Agent under this Agreement, the
provisions of this Article XII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
ARTICLE XIII
Guarantee
In order to induce the Banks to extend credit hereunder, each
Guarantor hereby unconditionally guarantees (except to the extent, and only for
so long as, any such Guarantor is prohibited from doing so by the terms of any
Debt obligation existing as of January 31, 1997 and outstanding on the Closing
Date), jointly with the other Guarantors and severally, as a primary obligor
and not
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merely as a surety, the Obligations. Each Guarantor further agrees that the
Obligations may be extended or renewed, in whole or in part, without notice to
or further assent from it, and that it will remain bound upon its Guarantee
hereunder notwithstanding any such extension or renewal of any Obligation.
Each Guarantor waives presentment to, demand of payment from
and protest to the Company of any of the Obligations, and also waives notice of
acceptance of its obligations and notice of protest for nonpayment. The
obligations of each Guarantor hereunder shall not be affected by (a) the
failure of any Bank or the Administrative Agent to assert any claim or demand
or to enforce any right or remedy against the Company under the provisions of
this Agreement or otherwise, (b) any rescission, waiver, amendment or
modification of any of the terms or provisions of this Agreement or any other
agreement, (c) the failure of any Bank to exercise any right or remedy against
the Company or (d) any release of any other Guarantor.
Each Guarantor further agrees that its agreement hereunder
constitutes a promise of payment when due and not merely of collection, and
waives any right to require that any resort be had by any Bank to any balance
of any deposit account or credit on the books of any Bank in favor of the
Company or any other Person.
The obligations of each Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
and shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever, by reason of the invalidity, illegality or
unenforceability of the Obligations, any impossibility in the performance of
the Obligations or otherwise. Without limiting the generality of the foregoing,
the obligations of each Guarantor hereunder shall not be discharged or impaired
or otherwise affected by the failure of the Administrative Agent or any Bank to
assert any claim or demand or to enforce any remedy under this Agreement or
under any other agreement, by any waiver or modification in respect of any
thereof, by any default, failure or delay, wilful or otherwise, in the
performance of the Obligations, or by any other act or omission which may or
might in any manner or to any extent vary the risk of such Guarantor or
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otherwise operate as a discharge of such Guarantor as a matter of law or
equity.
Each Guarantor further agrees that its obligations hereunder
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of principal of or interest on any
Obligation is rescinded or must otherwise be restored by the Administrative
Agent or any Bank upon the bankruptcy or reorganization of the Company or
otherwise.
In furtherance of the foregoing and not in limitation of any
other right which the Administrative Agent or any Bank may have at law or in
equity against any Guarantor by virtue hereof, upon the failure of the Company
to pay any Obligation when and as the same shall become due, whether at
maturity, by acceleration, after notice of prepayment or otherwise, each
Guarantor hereby promises to and will, upon receipt of written demand by the
Administrative Agent, forthwith pay, or cause to be paid, in cash the amount of
such unpaid Obligation.
Upon payment by any Guarantor of any Obligations, each Bank
shall, in a reasonable manner, assign the amount of the Obligations owed to it
and so paid to such Guarantor, such assignment to be pro tanto to the extent to
which the Obligations in question were discharged by such Guarantor, or make
such disposition thereof as such Guarantor shall direct (all without recourse
to and without any representation or warranty by any Bank).
Upon payment by any Guarantor of any sums as provided above,
all rights of such Guarantor against the Company or any other Guarantor arising
as a result thereof by way of right of subrogation or otherwise (including the
rights of such Guarantor under the previous and the next paragraphs) shall in
all respects be subordinated and junior in right of payment to the prior
indefeasible payment in full of all the Obligations to the Banks.
In addition to all such rights of indemnity and subrogation
as the Guarantors may have under applicable law, the Company agrees that in the
event a payment shall be made by any Guarantor under its Guarantee, the Company
shall indemnify such Guarantor for the full amount of such payment and such
Guarantor shall be subrogated to the
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rights of the Person to whom such payment shall have been made to the extent of
such payment. Each Guarantor agrees that in the event a payment shall be made
by any Guarantor under its Guarantee, and such Guarantor (the "Claiming
Guarantor") shall not have been indemnified by the Company as provided in the
preceding sentence, each other Guarantor (a "Contributing Guarantor") shall
indemnify the Claiming Guarantor in an amount equal to the amount of such
payment multiplied by a fraction of which the numerator shall be the net worth
of the Contributing Guarantor on the date hereof (or any later date on which it
shall have become a Guarantor) and the denominator shall be the aggregate net
worth of all the Guarantors on the date hereof (or, as to any Guarantor, on any
later date on which it shall have become a Guarantor).
ARTICLE XIV
Miscellaneous
SECTION 14.01. Payment of Expenses. Any provision hereof to
the contrary notwithstanding, and whether or not the transactions contemplated
by this Agreement shall be consummated, the Company agrees to pay on demand (i)
all reasonable costs and expenses of the Administrative Agent and the Banks or
any Bank in connection with the preparation, execution and delivery of this
Agreement and all amendments hereto (including, without limitation, waivers
hereunder and workouts with respect to Loans hereunder) and the other
instruments and documents to be delivered hereunder or with respect to any
amendment hereto, including, without limitation, the reasonable fees and
out-of-pocket expenses of any counsel for the Administrative Agent and the
Banks or any Bank with respect thereto; provided, however, that so long as no
Default or Event of Default has occurred and is continuing, such reasonable
counsel expenses shall be limited to the reasonable expenses of one counsel for
the Administrative Agent, (ii) all reasonable increases in costs and expenses
of the Administrative Agent and the Banks or any Bank (including reasonable
counsel fees and expenses, including reasonable allocated costs of in-house
legal counsel to the Administrative Agent or any Bank), if any, in connection
with the administration of this Agreement after the occurrence of a Default or
Event of Default and so long as
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the same is continuing and (iii) all reasonable costs and expenses of the
Administrative Agent and the Banks or any Bank (including reasonable counsel
fees and expenses, including reasonable allocated costs of in-house legal
counsel to the Administrative Agent or any Bank), if any, in connection with
the enforcement of this Agreement and the other instruments and documents to be
delivered hereunder. The obligations of the Company under this Section 14.01
shall survive the termination of this Agreement and the payment of the
obligations hereunder.
SECTION 14.02. Notices. The Administrative Agent or any Bank
giving consent or notice to the Company or any Guarantor provided for hereunder
(other than in connection with any Discretionary Loans) shall notify each Bank
and the Administrative Agent thereof. In the event that any Bank shall transfer
any Loan in accordance with Section 14.07(c), it shall immediately so advise
the Administrative Agent which shall be entitled to assume conclusively that no
transfer of any Loan has been made by any Bank unless and until the
Administrative Agent receives written notice to the contrary. Except as
otherwise specifically permitted by this Agreement with respect to oral Notices
of Borrowing or oral notices regarding the payment of interest under Section
10.01, notices and other communications provided for herein shall be in writing
(including telegraphic, facsimile or cable communication) and shall be
delivered, mailed, telegraphed, transmitted or cabled addressed to the
addresses set forth on Exhibit 14.02 attached hereto (or, as to the Company,
any Guarantor or the Administrative Agent, at such other address as shall be
designated by such party to the other parties in a written notice to the other
parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Company and the
Administrative Agent). All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement shall be deemed to
have been given upon receipt or if sent by registered or certified mail four
Business Days after being duly posted, in each case addressed to such party as
provided in this Section 14.02 or in accordance with the latest unrevoked
direction from such party, except for Notices of Borrowing and notices of
prepayments of Loans hereunder, which shall be deemed to have been given when
received by the Administrative Agent, and except for notices from the
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Administrative Agent to the Company under Section 10.01 with respect to the
amount of accrued and unpaid interest due on the Loans, which shall be deemed
to have been given when received by the Company. The Administrative Agent and
the Banks may at any time waive any requirement for notice hereunder.
SECTION 14.03. Setoff. If one or more Events of Default as
defined herein shall occur, any Bank or commercial bank which is owed any
obligation hereunder (a "Depositary") shall have the right, in addition to all
other rights and remedies available to it, and is hereby authorized, to the
extent permitted by applicable law, at any time and from time to time, without
notice to the Company (any such notice being hereby expressly waived by the
Company), to setoff and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness (whether
or not then due and payable) at any time owing by the Depositary to or for the
credit or the account of the Company or any Guarantor, against any and all of
the Obligations of the Company or any Guarantor now or hereafter existing under
this Agreement irrespective of whether or not the Depositary shall have made
any demand for satisfaction of such Obligations and although such Obligations
may be unmatured. Each Depositary agrees to notify the Company and the
Administrative Agent promptly after any such setoff and application, provided
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Depositary under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of setoff which such Depositary may have hereunder or under any
applicable law). Each Depositary agrees that (i) if it shall exercise any such
right of banker's lien, setoff, counterclaim or similar right pursuant hereto,
it will apply the proceeds thereof to the payment of Loans outstanding
hereunder and (ii) if it shall through the exercise of a right of banker's
lien, setoff, counterclaim or otherwise obtain payment of a proportion of the
Loans held by it in excess of the proportion of the Loans of each of the other
Depositaries being paid simultaneously, it shall be deemed to have
simultaneously purchased from each other Depositary a participation in the
Loans owed to such other Depositaries so that the amount of unpaid Loans and
participations therein held by all Depositaries shall be
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proportionate to the original principal amount of the Loans owed to them, and
in each case it shall promptly remit to each such Depositary the amount of the
participation thus deemed to have been purchased. The Company expressly
consents to the foregoing arrangements, and in furtherance thereof, agrees that
at such time as an Event of Default hereunder has occurred, the Administrative
Agent shall provide to each Bank a schedule setting forth the Commitment of
each Bank hereunder to permit each Bank to correctly determine the portion
which its Commitment hereunder bears to the aggregate of all Commitments
hereunder. If all or any portion of any such excess payment is thereafter
recovered from the Depositary which received the same, the purchase provided
for herein shall be deemed to have been rescinded to the extent of such
recovery, without interest.
SECTION 14.04. Indemnity and Judgments. The Company agrees to
indemnify the Administrative Agent and each of the Banks and each of their
respective directors, officers, employees, agents, attorneys, advisors,
Controlling Persons and Affiliates from and hold each harmless against any and
all losses, costs, liabilities, claims, damages and expenses incurred by any of
the foregoing Persons (collectively, the "Indemnified Liabilities"), including,
without limitation, reasonable attorneys' fees, settlement costs, court costs
and other legal expenses, arising out of or by reason of any participation in,
or any action or omission in connection with this Agreement (and, with respect
to TCB, Chase Securities Inc., NationsBank of Texas, N.A., NationsBanc Capital
Markets, Inc., Citibank, N.A. and Citicorp Securities, Inc. and their officers,
directors, employees and Affiliates, any action or omission in connection with
the Commitment Letter dated as of February 5, 1997 (the "Commitment Letter") by
and among the Company and such parties) or any Loan by a Bank hereunder or any
investigation, litigation or other proceedings brought or threatened relating
thereto, or to any use or proposed use to be made by the Company or any
Subsidiary of the Loans and to the extent that the Indemnified Liabilities
arise out of or by reason of claims made by Persons other than the
Administrative Agent or any Bank; provided that no such Person shall be
entitled to be indemnified and held harmless against any such Indemnified
Liabilities arising out of or by reason of the gross negligence or wilful
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misconduct of such Person. The parties acknowledge that the indemnification
provisions set forth in the Commitment Letter shall be superseded by this
Section 14.04.
SECTION 14.05. Interest. Anything in this Agreement to the
contrary notwithstanding, the Company shall never be required to pay unearned
interest on any Loan and shall never be required to pay interest on any Loan at
a rate in excess of the Highest Lawful Rate, and if the effective rate of
interest which would otherwise be payable under this Agreement would exceed the
Highest Lawful Rate, or if any Bank shall receive any unearned interest or
shall receive monies that are deemed to constitute interest which would
increase the effective rate of interest payable under this Agreement to a rate
in excess of the Highest Lawful Rate, then (i) in lieu of the amount of
interest which would otherwise be payable under this Agreement, the Company
shall pay the Highest Lawful Rate, and (ii) any unearned interest paid by the
Company or any interest paid by the Company in excess of the Highest Lawful
Rate shall be credited on the principal of such Loan, and, thereafter, refunded
to the Company. It is further agreed that, without limitation of the foregoing,
all calculations of the rate of interest contracted for, charged or received by
any Bank under this Agreement that are made for the purpose of determining
whether such rate exceeds the Highest Lawful Rate applicable to such Bank (such
Highest Lawful Rate being such Bank's "Maximum Permissible Rate"), shall be
made, to the extent permitted by usury laws applicable to such Bank (now or
hereafter enacted), by amortizing, prorating and spreading in equal parts
during the period of the full stated term of the Loans all interest at any time
contracted for, charged or received by such Bank in connection therewith. If at
any time and from time to time (y) the amount of interest payable to any Bank
on any date shall be computed at such Bank's Maximum Permissible Rate pursuant
to this Section 14.05 and (z) in respect of any subsequent interest computation
period the amount of interest otherwise payable to such Bank would be less than
the amount of interest payable to such Bank computed at such Bank's Maximum
Permissible Rate, then the amount of interest payable to such Bank in respect
of such subsequent interest computation period shall continue to be computed at
such Bank's Maximum Permissible Rate until the total amount of interest payable
to such Bank shall equal the total amount
<PAGE> 85
78
of interest which would have been payable to such Bank if the total amount of
interest had been computed without giving effect to this Section.
SECTION 14.06. Governing Law; Submission to Jurisdiction;
Venue. (a) THIS AGREEMENT AND OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH
SHALL BE DEEMED TO BE CONTRACTS AND AGREEMENTS EXECUTED BY THE COMPANY, THE
GUARANTORS, THE ADMINISTRATIVE AGENT AND THE BANKS UNDER THE LAWS OF THE STATE
OF NEW YORK AND OF THE UNITED STATES AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF SAID STATE AND OF THE UNITED
STATES. Without limitation of the foregoing, nothing in this Agreement shall be
deemed to constitute a waiver of any rights which any Bank may have under
applicable Federal law relating to the amount of interest which such Bank may
contract for, take, receive or charge in respect of any Loans, including any
right to take, receive, reserve and charge interest at the rate allowed by the
laws of the state where such Bank is located. To the extent that Texas law is
applicable to the determination of the Highest Lawful Rate or a Maximum
Permissible Rate, the provisions of Chapter 15 of Subtitle 3, Title 79, of the
Revised Civil Statutes of Texas, 1925, as amended, shall not apply to this
Agreement. Any legal action or proceeding with respect to this Agreement may be
brought in the courts of the State of New York sitting in New York City or of
the United States for the Southern District of New York, and by execution and
delivery of this Agreement, each of the Company and the Guarantors hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts. Each
of the Company and the Guarantors further irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to either the Company or the respective Guarantor at its
address for notices pursuant to Section 14.02, such service to become effective
15 days after such mailing. Nothing herein shall affect the right of the
Administrative Agent or any Bank to serve process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against the
Company or any Guarantor in any other jurisdiction.
<PAGE> 86
79
(b) Each of the Company and the Guarantors irrevocably waives
any objection which it may now or here after have to the laying of venue of any
of the aforesaid actions or proceedings arising out of or in connection with
this Agreement brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 14.07. Survival of Representations and Warranties;
Binding Effect; Assignment. (a) All representations, warranties and covenants
contained herein or made in writing by the Company or any Guarantor in
connection herewith shall survive the execution and delivery of this Agreement,
and will bind and inure to the benefit of the respective successors and assigns
of the parties hereto, whether so expressed or not. This Agreement shall become
effective when it shall have been executed by the Company, the Guarantors, the
Administrative Agent and each of the Banks, and thereafter shall be binding
upon and inure to the benefit of the Company, the Guarantors, the
Administrative Agent and the Banks and their respective successors and assigns,
except that neither the Company nor any Guarantor shall have the right to
assign its rights or obligations hereunder or any interest herein without the
prior written consent of each Bank.
(b) Each Bank may grant participations to one or more other
banks or other Persons in or to all or any part of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment) pursuant to such participation agreements and certificates as are
customary in the banking industry; provided, however, that (i) such Bank's
obligations under this Agreement (including, without limitation its Commitment
to the Company hereunder) shall remain unchanged, (ii) such Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations and (iii) the Company, the Guarantors, the Administrative Agent and
the other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement,
including without limitation, such Bank's rights under Article XI hereof. In
connection with any such
<PAGE> 87
80
participation, each Bank may deliver such financial information concerning the
Company and its Subsidiaries to permit such participant to make an informed and
independent credit decision concerning such participation; provided, however,
each such Bank shall obtain from each such participant an agreement to the
effect that all such information delivered to it in connection with such
participation shall be considered confidential and shall not be further
distributed or delivered to any other Person except any regulatory body having
jurisdiction over such participant or to any director, officer, employee,
Affiliate or representative (including accountants and attorneys acting for
such participants) or as may otherwise be required by legal process or
applicable law, rules and regulations. Upon request of the Company, each Bank
shall give prompt notice to the Company of each such participation to banks or
other Persons that are not Affiliates of such Bank identifying each such
participant and the interest acquired by each such participant. This Agreement
shall not be construed so as to confer any right or benefit upon any Person,
including, without limitation, any Person acquiring a participation in any
Loan, other than the parties to this Agreement, except that any Person
acquiring a participation shall be entitled to the benefits conferred upon the
Banks by Section 2.01(f)-(g) (provided that the cost to the Company is not in
excess of what such cost would have been had such participation not been
granted).
(c) Subject (except in the case of assignments to Affiliates
of the Banks) to the prior written consent of the Company (which consent shall
not be unreasonably withheld) and the Administrative Agent, each Bank may
assign to a bank or other Person a portion of its rights and obligations under
this Agreement (including, without limitation, a portion of its Commitment);
provided, however, that (i) each such assignment shall be of a constant, and
not a varying, percentage of all of the assigning Bank's rights and obligations
under this Agreement and shall be in an amount equal to or greater than
$5,000,000 of the assigning Bank's Commitment (except in the case of
assignments to Affiliates of any Bank or unless otherwise agreed by the
Company) and (ii) the parties to each such assignment shall execute and deliver
to the Administrative Agent, for its acceptance and recording in the Register,
an Assignment and Acceptance in
<PAGE> 88
81
substantially the form of Exhibit 14.07(c) attached hereto (the "Assignment and
Acceptance"), together with a processing and recordation fee of $3,500;
provided, however, that such recordation fee shall not be payable if such
transfer is made pursuant to Sections 2.01(e) or (g)(vi). Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be the date on
which such Assignment and Acceptance is accepted by the Administrative Agent,
(x) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Bank under this
Agreement and (y) the Bank assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Bank's rights and obligations
under this Agreement, such Bank shall cease to be a party hereto).
(d) By executing and delivering an Assignment and Acceptance,
the Bank assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Bank makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of any other instrument or document furnished pursuant
thereto, (ii) such assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Company or the performance or observance by the Company of any of its
respective obligations under this Agreement, (iii) such assignee confirms that
it has received a copy of this Agreement, together with copies of the financial
statements referred to in Sections 6.02 and 8.02 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance, (iv) such assignee will,
independently and without reliance upon the Administrative Agent, such
<PAGE> 89
82
assigning Bank or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement, (v) such
assignee appoints and authorizes the Administrative Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Administrative Agent by the terms hereof, together with such
powers as are reasonably incidental thereto, and (vi) such assignee agrees that
it will perform in accordance with its terms all of the obligations which by
the terms of this Agreement are required to be performed by it as a Bank.
(e) The Administrative Agent shall maintain at its address
referred to in Section 14.02 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Banks and the Commitment of, and principal amount of the Loans
owing to, each Bank from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Company, the Guarantors, the Administrative Agent and the Banks
may treat each Person whose name is recorded in the Register as a Bank
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Company or any Bank at any reasonable time and from time
to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed
by an assigning Bank, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit
14.07(c) attached hereto, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Company.
(g) Notwithstanding any other provision in this Agreement,
any Bank may at any time, without the consent of the Company, assign all or any
portion of its rights under this Agreement (including, without limitation, the
Loans) in favor of any Federal Reserve Bank in accordance with Regulation A of
the Board of Governors of the Federal Reserve System; provided that no such
assignment shall
<PAGE> 90
83
release a Bank from any of its obligations hereunder or substitute any such
Federal Reserve Bank for such Bank as a party hereto. In order to facilitate
such an assignment to a Federal Reserve Bank, the Company shall, at the request
of the assigning Bank, duly execute and deliver to the assigning Bank a
promissory note or notes evidencing the Loans made to the Company by the
assigning Bank hereunder.
SECTION 14.08. Counterparts. This Agreement may be executed
in several counterparts, and by the parties hereto on separate counterparts.
When counterparts executed by all the parties shall have been delivered to the
Administrative Agent, this Agreement shall become effective, and at such time
the Administrative Agent shall notify the Company and each Bank. Each
counterpart, when so executed and delivered, shall constitute an original
instrument, and all such separate counterparts shall constitute but one and the
same instrument.
SECTION 14.09. Severability. Should any clause, sentence,
paragraph or section of this Agreement be judicially declared to be invalid,
unenforceable or void, such decision will not have the effect of invalidating
or voiding the remainder of this Agreement, and the parties hereto agree that
the part or parts of this Agreement so held to be invalid, unenforceable or
void will be deemed to have been stricken herefrom and the remainder will have
the same force and effectiveness as if such part or parts had never been
included herein.
SECTION 14.10. Descriptive Headings. The section headings in
this Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Agreement.
SECTION 14.11. Representation of the Banks. Each Bank hereby
represents and warrants that it is not relying upon any Margin Stock as
collateral in extending or maintaining the credit to the Company represented by
this Agreement.
SECTION 14.12. Final Agreement of the Parties. This Agreement
(including the Exhibits hereto) represents the final agreement between the
parties and may not be contradicted by evidence of prior, contemporaneous or
<PAGE> 91
84
subsequent oral agreements of the parties. There are no oral agreements between
the parties.
SECTION 14.13. Waiver of Jury Trial. THE COMPANY AND EACH
GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LEGAL ACTION OR PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
IN WITNESS WHEREOF this Agreement has been executed by the
duty authorized signatories of the parties hereto in several counterparts all
as of the day and year first above written.
COX RADIO, INC.,
by
/s/ Richard J. Jacobson
--------------------------------
Name: Richard J. Jacobson
Title: Treasurer
<PAGE> 92
85
WHIO, INC., as Guarantor,
by
/s/ Andrew A. Merdek
--------------------------------------
Name: Andrew A. Merdek
Title: Secretary
<PAGE> 93
86
WSB, INC., as Guarantor,
by
/s/ Andrew A. Merdek
---------------------------------------
Name: Andrew A. Merdek
Title: Secretary
<PAGE> 94
87
COX KENTUCKY, INC., as
Guarantor,
by
/s/ Andrew A. Merdek
---------------------------------------
Name: Andrew A. Merdek
Title: Secretary
<PAGE> 95
88
COX LOUISVILLE, L.L.C., as
Guarantor,
by
/s/ Andrew A. Merdek
---------------------------------------
Name: Andrew A. Merdek
Title: Secretary
<PAGE> 96
89
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, individually and
as Administrative Agent,
by
/s/ Kevin Kelty
---------------------------------------
Name: Kevin Kelty
Title: Senior Vice President
<PAGE> 97
90
NATIONSBANK OF TEXAS, N.A.,
individually and as
Syndications Agent,
by
/s/ Daniel J. Rabbitt
---------------------------------------
Name: Daniel J. Rabbitt
Title: Vice President
<PAGE> 98
91
CITIBANK, N.A., individually
and as Documentation Agent,
by
/s/ Mary E. Thomas
---------------------------------------
Name: Mary E. Thomas
Title: Attorney-In-Fact
<PAGE> 99
92
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
by
/s/ Russell D. Solomon
---------------------------------------
Name: Russell D. Solomon
Title: Vice President
<PAGE> 100
93
CIBC INC.,
by
/s/ Cynthia McCahill
--------------------------------------
Name: Cynthia McCahill
Title: Director
<PAGE> 101
94
THE DAI-ICHI KANGYO BANK,
LIMITED ATLANTA AGENCY,
by
/s/ Toshiaki Kurihara
--------------------------------------
Name: Toshiaki Kurihara
Title: Joint General Manager
<PAGE> 102
95
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA,
by
/s/ Bruce W. Loftin
---------------------------------------
Name: Bruce W. Loftin
Title: Senior Vice President
<PAGE> 103
96
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
by
/s/ Kathryn Sayko-Yanes
--------------------------------------
Name: Kathryn Sayko-Yanes
Title: Vice President
<PAGE> 104
97
SUNTRUST BANK,
ATLANTA,
by
/s/ Willem-Jan O. Hattink
---------------------------------------
Name: Willem-Jan O. Hattink
Title: Group Vice President
by
/s/ Jenna M. Hale
---------------------------------------
Name: Jenna M. Hale
Title: Assistant Vice
President
<PAGE> 105
98
WACHOVIA BANK OF GEORGIA,
N.A.,
by
/s/ J. Timothy Toler
---------------------------------------
Name: J. Timothy Toler
Title: Senior Vice President
<PAGE> 1
EXHIBIT 10.6
TAX ALLOCATION AND
INDEMNIFICATION AGREEMENT
This Tax Allocation and Indemnification Agreement (the
"Agreement"), effective as of the 30th day of September, 1996, by and between
COX ENTERPRISES, INC., a Delaware corporation ("CEI"), and COX RADIO, INC.
(formerly WIOD, Inc.), a Delaware corporation ("CRI"), each with its principal
office located at 1400 Lake Hearn Drive, Atlanta, Georgia 30319.
RECITALS
WHEREAS, CRI has effected a public offering of its shares
(the "Public Offering") on the date hereof, with the result that members of the
public acquired shares of the stock of CRI, and effective as of this date CRI
is no longer an indirect wholly-owned subsidiary of CEI; and
WHEREAS, the parties have determined that subsequent to the
Public Offering CRI will no longer be a member of the Consolidated Group (as
defined below); and
WHEREAS, CEI and CRI desire to set forth their agreement with
respect to the allocation of taxes for taxable periods prior to the Public
Offering Date for which CRI files its Tax Returns as a member of the
Consolidated Group;
NOW THEREFORE, in consideration of the mutual promises,
covenants and agreements contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and the plural forms of the terms defined):
"Affiliate" means any corporation which is a member of
the Consolidated Group.
"CEI Affiliate" means any corporation which is a member of
the Consolidated Group (including CEI) and which is not a member of the CRI
Group.
"CEI Group" means CEI and the other CEI Affiliates.
"Code" means the Internal Revenue Code of 1986, as amended,
or any successor thereto, as in effect for the taxable period in question.
<PAGE> 2
"Consolidated Group" means the affiliated group of
corporations of which CEI is the common parent (within the meaning of Section
1504 of the Code), and any other corporations which may become members of such
affiliated group.
"CRI Affiliate" means any corporation which is a member of
the CRI Group (including CRI).
"CRI Group" means the group of corporations (including CRI)
of which CRI is the common parent (within the meaning of section 1504 of the
Code) immediately after the Public Offering, and any other corporations which
may become members of such affiliated group.
"Final Determination" means the final resolution of liability
for any Tax for a taxable period, including any related interest or penalties,
(i) by Internal Revenue Service Form 870 or 870-AD (or any successor forms
thereto), on the date of acceptance by or on behalf of the Internal Revenue
Service, or by a comparable form under the laws of other jurisdictions, except
that a Form 870 or 870-AD or comparable form that reserves (whether by its
terms or by operation of law) the right of the taxpayer to file a claim for
refund and/or the right of the Tax Authority to assert a further deficiency
shall not constitute a Final Determination; (ii) by a decision, judgment,
decree, or other order by a court of competent jurisdiction, which has become
final and unappealable; (iii) by a closing agreement or accepted offer in
compromise under Section 7121 or 7122 of the Code, or comparable agreements
under the laws of other jurisdictions; (iv) by any allowance of a refund or
credit in respect of an overpayment of Tax, but only after the expiration of
all periods during which such refund may be recovered (including by way of
offset) by the jurisdiction imposing such Tax; or (v) by any other final
disposition, including by reason of the expiration of the applicable statute of
limitations.
"Public Offering Date" means __________, 1996, the date
of the Public Offering.
"Tax" means any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding on amounts paid, payroll, employment, excise, severance,
stamp, occupation, property, or other like assessment or charge of any kind
whatsoever imposed by any Tax Authority, together with any interest, penalties,
or other additions to tax with respect thereto.
"Tax Authority" means the Internal Revenue Service or any
other domestic (including state or local) or foreign governmental authority
responsible for the administration of any Tax.
2
<PAGE> 3
"Tax Return" means any return, filing, questionnaire or other
document required to be filed, including requests for extensions of time,
filings made with estimated Tax payments, claims for refund and amended returns
that may be filed, for any taxable period with any Tax Authority (whether
domestic or foreign) in connection with any Tax or Taxes (whether or not a
payment is required to be made with respect to such filing).
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
2.01. Applicability of Provisions of Agreement. For
all Tax periods ending on or prior to the Public Offering Date, CRI is a member
of the Consolidated Group, and the federal income Tax Returns of the CRI Group
shall be filed accordingly for all such Tax periods. This Agreement is
effective as of the Public Offering Date for CEI and all members of the CRI
Group and supersedes any previous tax allocation or tax sharing agreement
between the parties. This Agreement does not constitute a change in the method
of allocating the federal regular income tax liability of the Consolidated
Group requiring the consent of the Commissioner under Treasury Regulation
Section 1.1552-1(c).
2.02. Federal Income Tax Returns. CEI shall timely prepare
and file, or cause to be timely prepared and filed, all federal income Tax
Returns for the Consolidated Group. For all Tax periods ending on or prior to
the Public Offering Date: (i) each CRI Affiliate shall provide CEI with its Tax
Returns, supporting schedules and additional information on a timely basis, as
requested by CEI, in order for CEI to timely file the Tax Returns for the
Consolidated Group, and (ii) CEI shall file the Tax Returns for the CRI Group
consistent with the Tax Returns, supporting schedules and additional
information provided by the CRI Affiliates. Upon request, CEI shall deliver to
CRI copies of the Tax Returns of the CRI Affiliates within 30 days after
filing.
2.03. Other Tax Returns. For so long as any member of the CRI
Group files any Tax Return as a member of, or its items of income, gain,
deduction or loss are reported in, any other consolidated or combined Tax
Return with CEI or any CEI Affiliate, CEI shall be responsible for the
preparation and filing of such Tax Returns (including returns for Tax periods
ending after the Public Offering Date). Such Tax Returns shall be prepared and
filed in accordance with the principles set forth in this Article II and in
Article III.
ARTICLE III
ALLOCATION AND PAYMENT OF TAXES
3.01. Acknowledgement of Elections. Any and all elections
previously made in accordance with past practice and in
3
<PAGE> 4
effect as of the Public Offering Date shall continue to govern the allocation
of the federal income tax liability of the Consolidated Group among the members
of the Consolidated Group.
3.02. Federal Regular Income Tax. CEI and CRI agree
to allocate the federal regular income tax liability of the
Consolidated Group for periods ending on or prior to the Public
Offering Date in the following manner:
(a) The consolidated federal regular income tax
liability to be allocated to and paid by each Affiliate shall be that
percentage of the consolidated federal regular income tax liability which is
equal to the percentage that the federal taxable income of such Affiliate,
computed on a separate return basis, would be of the total federal taxable
income of all Affiliates so computed. Allocations pursuant to this Section
3.02(a) shall be made in accordance with the principles set forth in Treasury
Regulation Section 1.1552-1(a)(1).
(b) An additional liability shall be allocated
to each Affiliate which, as a result of net operating losses, excess charitable
contributions, foreign tax credits, investment tax credits or similar items
arising from or generated by the activities of another Affiliate or Affiliates
in either a separate return year or a consolidated return year, has a smaller
allocated tax liability determined under Section 3.02(a) above than it would
have on a separate return basis. The additional liability allocated to each
Affiliate shall be equal to the excess of the amount that the Affiliate would
have paid on a separate return basis over the allocated tax liability
determined under Section 3.02(a) above. An amount equal to the total additional
liabilities allocated to all such Affiliates for the consolidated return year
shall be paid to the Affiliates which generated such losses, credits or
deductions, in the proportion which the tax benefit derived by the Consolidated
Group from the losses, credits and deductions of such Affiliate bears to the
tax benefit derived by the Consolidated Group from the losses, credits and
deductions of all Affiliates. Allocations pursuant to this Section 3.02(b)
shall be made in accordance with the principles set forth in Treasury
Regulation Section 1.1502- 33(d)(3).
(c) For purposes of this Agreement, the CRI
Group's allocable share of the consolidated Federal regular income tax
liability is the aggregate amount of liability allocated to the CRI Affiliates.
The CEI Group's allocable share of the consolidated federal regular income tax
liability is the aggregate amount of liability allocated to the CEI Affiliates.
4
<PAGE> 5
3.03. Alternative Minimum Tax.
(a) Any consolidated alternative minimum tax
liability shall be allocated for the respective consolidated Tax Return year to
the Affiliates whose separate company tentative minimum tax exceeds its
separate company regular tax liability. The total alternative minimum tax
liability shown on the Tax Return of the Consolidated Group shall be
apportioned to each such Affiliate according to the ratio of (i) the excess of
its separate company tentative minimum tax over its separate company regular
tax liability to (ii) the total of all such Affiliates' excess separate company
tentative minimum tax over separate company regular tax. For purposes of this
allocation, if an Affiliate has a regular tax net operating loss on a separate
return basis, the alternative minimum tax liability for that Affiliate on a
separate return basis shall be computed on the difference between such
Affiliate's regular tax net operating loss and any smaller alternative tax net
operating loss or any alternative minimum taxable income.
(b) Any minimum tax credit realized in
subsequent years (determined by allocating credits first to the earliest years)
by the Consolidated Group as a result of incurring the alternative minimum tax
liability shall be paid to the Affiliate to which the original alternative
minimum tax liability was allocated. If less than the full minimum tax credit
is realized in a year, the amount realized by each Affiliate which incurred the
original alternative minimum tax liability shall be paid first to the
Affiliates which can utilize the minimum tax credit on a separate return basis
according to the proportion of the original alternative minimum tax liability
borne by each such Affiliate. Any remaining minimum tax credit shall be paid to
the Affiliates which incurred the original alternative minimum tax liability in
proportion to the original alternative minimum tax liability borne by such
Affiliates (and not previously offset by credits).
(c) The consolidated alternative minimum tax,
for stock basis adjustment and earnings and profits purposes, shall be
allocated to each Affiliate under the allocation method set out in Proposed
Regulation Sections 1.1502-55 and 1.1552-1(g) issued on December 30, 1992 (the
"Proposed Regulations"). A portion of the minimum tax credit shall be allocated
to Affiliates who cease to be a member of the Consolidated Group in accordance
with Proposed Regulation Section 1.1502-55(h). However, to the extent such
Affiliate was not allocated a corresponding amount of alternative minimum tax
in an earlier or the same tax year, such Affiliate shall pay to CEI an amount
equal to such excess credit prior to the date the Affiliate leaves the
Consolidated Group. If temporary or final regulations are issued which differ
from the Proposed Regulations, this
5
<PAGE> 6
Agreement shall be amended to reflect such changes to the extent and for such
periods deemed necessary or desirable by CEI.
(d) For purposes of this Agreement, the CRI
Group's share of the alternative minimum tax liability of the Consolidated
Group is the aggregate amount of such liability allocated to the CRI
Affiliates. The CEI Group's allocable share of the alternative minimum tax
liability of the Consolidated Group is the aggregate amount of such liability
allocated to the CEI Affiliates.
3.04. Payment of Consolidated Federal Income Tax. CEI
shall pay all Taxes due with respect to the consolidated federal income tax
liability of the Consolidated Group. Each CEI Affiliate shall pay to CEI an
amount equal to its share of such consolidated federal income tax liability as
determined under Sections 3.02 and 3.03. CRI shall pay to CEI an amount equal
to the CRI Group's share of such consolidated federal income tax liability as
determined under Sections 3.02 and 3.03.
3.05. Tax Deficiencies and Refunds.
(a) If as a result of any examination of, or
amendment to, a Tax Return filed by CEI with respect to any taxable period,
there is an additional amount of Taxes due and payable (a "Deficiency"), or a
refund of Taxes previously paid (whether by payment, credit, offset against
other Taxes due or otherwise) (a "Refund"), any such Deficiency shall be paid
by, and any such Refund shall be payable to, CEI.
(b) Each Affiliate shall pay to CEI an amount
equal to the amount of any Deficiency paid or payable by CEI and allocable to
such Affiliate. CEI shall pay to each Affiliate the amount of any Refund
received by CEI and allocable to such Affiliate.
3.06. Penalties and Interest.
(a) Any interest incurred by the Consolidated
Group as a result of a Deficiency shall be paid by the Affiliate to whom it is
attributable. The amount of interest allocable to each Affiliate shall be
determined and paid as follows:
(i) The total amount of interest incurred
by the Consolidated Group shall be apportioned to and paid by the Affiliates
according to the ratio of the interest that would have been incurred by each
Affiliate if its Taxes were computed on a separate return basis to the total of
all the interest that would have been incurred by the Affiliates so computed.
(ii) An additional amount of interest shall
be allocated to each Affiliate equal to the additional interest,
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<PAGE> 7
if any, that such Affiliate would have paid on a separate return basis over the
allocated interest determined under Section 3.06(a)(i) above. Any amounts so
allocated shall be paid to those other Affiliates whose income or deductions
would have given rise to a refund on a separate return basis, according to the
ratio which the refund payable to the respective Affiliate bears to the total
of all refunds which would have been payable to such Affiliates on a separate
return basis; provided, however, that payment to an Affiliate hereunder shall
not exceed the amount of interest that such Affiliate would have received on a
separate return basis (with any such excess to be retained by the respective
paying Affiliates in proportion to the amounts allocated to them pursuant to
the first sentence of this Section 3.06(a)(ii)).
(iii) Interest computed by an Affiliate
on a separate return basis shall be calculated using the interest rate or rates
applicable to the consolidated Deficiency.
(b) Any interest received by the Consolidated
Group as a result of any Refund shall be allocated to the Affiliate whose
income or deductions gave rise to the Refund. The amount of interest allocable
to each Affiliate shall be determined and paid as follows:
(i) The amount of interest received by the
Consolidated Group shall be apportioned to and received by the Affiliates
according to the ratio of the interest that would have been received by each
Affiliate if its Taxes were computed on a separate return basis to the total of
all the interest that would have been received by the Affiliates so computed.
(ii) Each Affiliate shall be allocated an
additional amount equal to the additional interest, if any, that such Affiliate
would have received on a separate return basis over the allocated interest
determined under Section 3.06(b)(i) above. Any amounts so allocated shall be
paid to such Affiliates by the Affiliates whose income or deductions caused
such interest not to be received by the Consolidated Group; provided, however,
that payment to an Affiliate shall not exceed the amount that such Affiliate
would have received on a separate return basis (with any such excess to be
retained by the respective paying Affiliates in proportion to the amounts
otherwise payable hereunder).
(iii) Interest computed by an Affiliate
on a separate return basis shall be calculated using the interest rate or rates
applicable to the consolidated Refund.
(c) Any penalties incurred by the Consolidated
Group shall be paid by the Affiliate whose income or deductions caused such
penalties. If a penalty was caused by more than one
7
<PAGE> 8
Affiliate, such penalty shall be allocated proportionately to those Affiliates
that would have incurred a penalty on a separate return basis. Any excess
penalty shall be allocated in proportion to the income or deductions of each
Affiliate which caused or contributed to the penalty regardless of whether such
Affiliate's income or deductions exceeded the minimum threshold required for
the penalty to be imposed.
(d) For purposes of this Agreement, the CRI
Group's allocable share of any interest or penalties is the aggregate amount of
interest or penalties allocated to the CRI Affiliates. The CEI Group's
allocable share of any interest or penalties is the aggregate amount of any
interest or penalties allocated to the CEI Affiliates.
3.07. Manner of Payment.
(a) On each date on which a payment of estimated
federal income Tax (relating to a Tax period ending on or before the Public
Offering Date) is due, CRI shall pay to CEI, on behalf of the CRI Affiliates,
an amount calculated by CEI as the estimated Tax payment for the CRI
Affiliates. CEI shall notify CRI of the amount of each such payment at least 3
days prior to the date such payment is due.
(b) CEI shall determine the Tax liability of the
CRI Affiliates under Sections 3.02 and 3.03 promptly following its receipt of
the information required under Section 2.02 to be submitted to it by the CRI
Affiliates. CRI, on behalf of the CRI Affiliates, shall pay to CEI the amount
of the Tax liability of the CRI Affiliates so determined within 5 days
following such determination, offset by any payments previously made pursuant
to Section 3.07(a). An additional computation of the Tax liability of the CRI
Affiliates shall be made when the Tax Return of the Consolidated Group is filed
and any adjustments which require additional payments shall be paid by CRI (or
by the respective CRI Affiliate) within 5 days following the filing of such
return. Any payment not made within the prescribed time period shall thereafter
bear interest at the federal short-term rate established pursuant to Section
6621 of the Code (or any successor provision).
(c) Any payment required to be made pursuant to
Sections 3.04, 3.05, 3.06 or 3.07 with respect to any Tax Return shall be made
by the Affiliate obligated to make such payment (i) in the case of a refund of
Tax, within 15 days after receipt (whether by way of payment, credit, or offset
against any payments due or otherwise) of such refund or (ii) in the case of
the payment of Tax with respect to any such Tax Return, within 5 days after the
later of (x) the payment of such Tax, or (y) the delivery of written demand for
the payment of such Tax to the party obligated to make such payment hereunder.
Any payment
8
<PAGE> 9
described in clause (i) and any demand for payment described in clause (ii)
shall be accompanied by a calculation setting forth the basis for the amount
paid or demanded. Any payment not made within the prescribed time period shall
thereafter bear interest at the federal short-term rate established pursuant to
Section 6621 of the Code.
3.08. Other Tax Returns. For so long as any member of the CRI
Group is included in any other consolidated or combined Tax Return with CEI or
any CEI Affiliate, allocation of Taxes, interest, penalties, and payments shall
be governed by the principles set forth in Sections 3.01 through 3.07.
ARTICLE IV
COOPERATION AND EXCHANGE OF INFORMATION
4.01. Cooperation.
(a) CEI and CRI shall cooperate fully at such
time and to the extent reasonably requested by the other party in connection
with the preparation and filing of any return or the conduct of any audit,
dispute, proceeding, suit or action concerning any issues or any other matter
contemplated hereunder. Such cooperation shall include, without limitation, (i)
the retention and provision on demand of books, records, documentation or other
information relating to any Tax Return until the later of (x) the expiration of
the applicable statute of limitations (giving effect to any extension, waiver,
or mitigation thereof) and (y) in the event any claim has been made under this
Agreement for which such information is relevant, until a Final Determination
is made with respect to such claim; (ii) the provision of additional
information with respect to, and an explanation of the tax practices
(elections, accounting methods, conventions and principles of taxation)
relating to, the material provided under clause (i) of this section; (iii) the
execution of any document that may be necessary or reasonably helpful in
connection with the filing of any Tax Return by any member of the Consolidated
Group, or in connection with any audit, proceeding, suit or action addressed in
the preceding sentence; and (iv) the use of the parties' best efforts to obtain
any documentation from a governmental authority or a third party that may be
necessary or helpful in connection with the foregoing. Each party shall make
its employees and facilities available on a mutually convenient basis to
facilitate such cooperation.
(b) CEI and CRI shall use reasonable efforts to
keep each other advised as to the status of Tax audits and litigation involving
any issue which relates to any Tax of the CRI Group or could give rise to a
liability of the CRI Group (or any CRI Affiliate) under this Agreement (a
"Liability Issue"). CEI and CRI shall each promptly notify the other of any
inquiries
9
<PAGE> 10
by any Tax Authority or any other administrative, judicial or other
governmental authority that relates to any Tax that may be imposed on the other
or any Affiliate of the other that might arise under this Agreement. Without
limiting the foregoing, each CRI Affiliate shall promptly furnish to CEI upon
receipt a copy of any revenue agent's report or similar report, notice of
proposed adjustment, or notice of deficiency received by such Affiliate
relating to any Liability Issue or any adjustment described in Section 4.01(c)
below.
(c) CEI shall advise and consult with CRI with
respect to any proposed Tax adjustments relating to the Consolidated Group that
are the subject of an audit or investigation by any Tax Authority, or are the
subject of litigation, that may affect any Tax or any Tax attribute of any CRI
Affiliate. However, CEI may resolve any proposed Tax adjustments relating to
the Consolidated Group or any Affiliate in the best interests of the
Consolidated Group.
4.02. Contests. Subject to the cooperation provisions in
Section 4.01, CEI shall have full responsibility and discretion in the handling
of any Tax controversy including, without limitation, an audit, a protest to
the Appeals Division of the Internal Revenue Service, and litigation in Tax
Court or any other court of competent jurisdiction (a "Tax Controversy"),
involving a Tax Return of the Consolidated Group. However, upon request by CRI,
and subject to CEI approval and the cooperation provisions in Section 4.01, CRI
may participate, at CRI's expense, in any Tax Controversy with respect to any
item that would give rise to a payment of Tax for which a CRI Affiliate would
be liable, or a refund of Tax for which a CRI Affiliate would be entitled to
receive payment, under Article III hereof, or that may affect any Tax attribute
of any CRI Affiliate.
ARTICLE V
MISCELLANEOUS
5.01. Complete Agreement. This Agreement constitutes the
entire agreement of the parties concerning the subject matter hereof, and
supersedes all other agreements, whether or not written, in respect of any Tax
between or among CEI and any CRI Affiliates. This Agreement may not be amended
except by an agreement in writing, signed by the parties hereto.
5.02. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Georgia, without
regard to the principles of conflict of laws of the State of Georgia.
5.03. Successors and Assigns. A party's rights and
obligations under this Agreement may not be assigned without the prior written
consent of the other party. All of the provisions
10
<PAGE> 11
of this Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns.
5.04. No Third-Party Beneficiaries. This Agreement is solely
for the benefit of the parties to this Agreement and should not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement, claim of
action or other right in excess of those existing without this Agreement.
5.05. Legal Enforceability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions. Any prohibition
or unenforceability of any provision of this Agreement in any jurisdiction
shall not invalidate or render unenforceable the provision in any other
jurisdiction.
5.06. Expenses. Unless otherwise expressly provided in this
Agreement each party shall bear any and all expenses that arise from its
respective obligations under this Agreement. In the event either party to this
Agreement brings an action or proceeding for the breach or enforcement of this
Agreement, the prevailing party in such action or proceeding, whether or not
such action or proceeding proceeds to final judgment, shall be entitled to
recover as an element of its costs, and not as damages, such reasonable
attorneys' fees as may be awarded in the action or proceeding in addition to
whatever other relief to which the prevailing party may be entitled.
5.07. Confidentiality. Each party shall hold and cause its
consultants and advisors to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all information (other than any
information relating solely to the business or affairs of such party)
concerning the other parties hereto furnished to it by such other party or such
other party's representatives pursuant to this Agreement (except to the extent
that such information can be shown to have been (a) previously known by the
party to which it was furnished, (b) in the public domain through no fault of
such party, or (c) later lawfully acquired form other sources not under a duty
of confidentiality by the party to which it was furnished). Each party shall
not release or disclose such information to any other person, except its
auditors, attorneys, financial advisors, bankers and other consultants and
advisors who shall be advised of and agree to be bound by the provisions of
this Section. Each party shall be deemed to have satisfied its obligation to
hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
11
<PAGE> 12
5.08. Term. CEI and CRI have determined that CRI will
cease to be an Affiliate as of the Public Offering Date, and the provisions of
this Agreement shall be interpreted and applied accordingly.
5.09. Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signature thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement the day and year first above written.
COX ENTERPRISES, INC.
On behalf of the CEI Group
By: /ss/ Preston B. Barnett
----------------------------------
Preston B. Barnett, Vice President
COX RADIO, INC.
On behalf of the CRI Group
By: /ss/ Maritza Pichon
---------------------------------
Maritza Pichon, Chief Financial
Officer
12
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the incorporation by reference of our report dated
February 7, 1997 appearing in this Annual Report on Form 10-K of Cox Radio,
Inc. for the year ended December 31, 1996, in Registration Statement No.
333-13281 on Form S-8 of Cox Radio, Inc.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 25, 1997
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